<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
FIRST COASTAL BANCSHARES FIRST COASTAL CAPITAL TRUST
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
CALIFORNIA DELAWARE
(STATE OR JURISDICTION OF INCORPORATION OR ORGANIZATION) (STATE OR JURISDICTION OF INCORPORATION OR ORGANIZATION)
275 MAIN STREET, EL SEGUNDO, CALIFORNIA 90245 275 MAIN STREET, EL SEGUNDO, CALIFORNIA 90245
(310) 322-2222 (310) 322-2222
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE
OFFICES) OFFICES)
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED (ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED
PRINCIPAL PLACE OF BUSINESS) PRINCIPAL PLACE OF BUSINESS)
6712 6726
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
95-4693574 TO BE APPLIED FOR
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
DON M. GRIFFITH
275 MAIN STREET
EL SEGUNDO, CALIFORNIA 90245
(310) 322-2222
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C>
STANLEY F. FARRAR MICHAEL J. O'SULLIVAN
SULLIVAN & CROMWELL MUNGER, TOLLES & OLSON LLP
1888 CENTURY PARK EAST 355 SOUTH GRAND AVENUE, 35TH FLOOR
LOS ANGELES, CALIFORNIA 90067 LOS ANGELES, CALIFORNIA 90071
PHONE: (310) 712-6600 PHONE: (213) 683-9100
FAX: (310) 712-8800 FAX: (213) 687-3702
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As Soon as Practicable after this Registration Statement Becomes Effective
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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- -----------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(2) PER SHARE PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Common Stock of First Coastal Bancshares... 330,000 $7.50 $2,475,000 $ 689
Preferred Securities of First Coastal
Capital Trust............................ 330,000 $20.00 $6,600,000 $1,835
Junior Subordinated Debentures of First
Coastal Bancshares(3).................... $6,600,000 -- -- N/A
Guarantee and certain other back-up
undertakings of First Coastal
Bancshares(4)............................ $6,600,000 -- -- N/A
Units consisting of Common Stock and
Preferred Securities(5).................. 330,000 $27.50 $9,075,000 N/A
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) Includes up to 30,000 additional shares of common stock and 30,000
additional Preferred Securities that may be acquired by the Underwriters to
cover over-allotments, if any. All common stock share and per share amounts
are adjusted to reflect a one-for-five reverse split of the common stock
that occurred on November 24, 1998.
(3) The Junior Subordinated Debentures will be purchased by First Coastal
Capital Trust with the proceeds of the sale of the Preferred Securities.
Such securities may later be distributed for no additional consideration to
the holders of the Preferred Securities of First Coastal Capital Trust upon
its dissolution and the distribution of its assets.
(4) Includes the obligations of First Coastal Bancshares under the Guarantee and
certain other back-up undertakings, consisting of (i) the Junior
Subordinated Debentures, (ii) the Indenture, (iii) the Trust Agreement, and
(iv) the Expense Agreement, which obligations provide, in the aggregate, a
full, irrevocable and unconditional guarantee, on a subordinated basis, as
further described in the Registration Statement. This Registration Statement
is deemed to cover the guarantee resulting from the back-up undertakings. No
separate consideration will be received for the guarantee resulting from the
back-up undertakings, and pursuant to Rule 457(n) of the Securities Act, no
separate fee is payable for the guarantee resulting from the back-up
undertakings.
(5) The units consist of one share of common stock and one Preferred Security. A
separate registration fee is payable on the common stock and Preferred
Securities, and therefore, no registration fee is payable on the units.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
The information in this Prospectus is incomplete and may be changed. We may not
sell these securities until the Registration Statement filed with the Securities
and Exchange Commission is effective. This Prospectus is not an offer to sell
these securities and we are not soliciting an offer to buy these securities in
any state where such offer or sale is prohibited.
PRELIMINARY PROSPECTUS DATED DECEMBER 1, 1998
300,000 Units, each consisting of:
<TABLE>
<S> <C>
one share of and one
FIRST COASTAL BANCSHARES FIRST COASTAL CAPITAL TRUST
Common Stock % Cumulative Preferred Security
$20.00 Liquidation Amount
</TABLE>
CONSIDER CAREFULLY THE
RISK FACTORS BEGINNING
ON PAGE 16 IN THE
PROSPECTUS.
THESE SECURITIES ARE NOT
SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL
DEPOSIT INSURANCE
CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES
AND EXCHANGE COMMISSION
NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED
OR DISAPPROVED THESE
SECURITIES OR PASSED
UPON THE ADEQUACY OR
ACCURACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
WE ARE --
- - FIRST COASTAL BANCSHARES, the bank holding company for First Coastal Bank, a
community bank servicing communities in western Los Angeles County from the
South Bay to the San Fernando Valley,
- - committed to offering personalized financial services to small businesses,
executives and professionals, and
- - using part of the proceeds from this offering to acquire American Independent
Bank, N.A.
FIRST COASTAL CAPITAL TRUST --
- - is sponsored by us for the sole purpose of issuing the Preferred Securities
and will hold our Junior Subordinated Debentures as its only asset.
THE PREFERRED SECURITIES --
- - represent preferred beneficial interests in our Junior Subordinated
Debentures held by First Coastal Capital Trust,
- - pay quarterly distributions at the annual rate of $ per security (or
%), which may be deferred by us for up to 20 consecutive quarters, and
- - may be redeemed by us after December 31, 2001 for any reason, and before then
for the reasons described in this Prospectus.
The common stock and the Preferred Securities must be purchased together
as a Unit in this offering and generally must trade together as a Unit for one
year following the completion of this offering. Our common stock trades from
time to time in unreported private transactions and on the OTC Bulletin Board
under the symbol "FCLA". There is currently no public market for either the
Units or the Preferred Securities. We intend to apply to have the Units and,
upon separation, the Preferred Securities included on the OTC Bulletin Board
under the symbols "FCLAU" and "FCLAT", respectively. Our principal executive
offices, and those of First Coastal Capital Trust, are located at 275 Main
Street, El Segundo, California, 90245, phone number (310) 322-2222.
<TABLE>
<S> <C> <C> <C> <C>
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NET PROCEEDS TO NET PROCEEDS TO
UNDERWRITING FIRST COASTAL FIRST COASTAL
PRICE TO PUBLIC COMMISSION BANCSHARES CAPITAL TRUST
- -----------------------------------------------------------------------------------------------------------------
Per Unit........................... $26.50 - $27.50 $ $ $
- -----------------------------------------------------------------------------------------------------------------
Total Units........................ $ $ $ $
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</TABLE>
The Underwriters named below will underwrite the Units on a firm
commitment basis. The Underwriters may purchase an additional 30,000 Units at
the public offering price within 45 days from the date of this Prospectus to
cover over-allotments. We have agreed to pay the Underwriters a $160,000 non-
accountable expense allowance and to issue to the Underwriters for nominal
consideration 16,500 warrants to purchase our common stock at the greater of
$9.00 per share or 120% of the initial offering price of the common stock.
PEACOCK, HISLOP, STALEY & GIVEN, INC.
WEDBUSH MORGAN SECURITIES
<PAGE> 3
LOS ANGELES COUNTY
LOGO
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE SPECIFICALLY REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT.
YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE
ONLY AS OF THE DATE OF THIS PROSPECTUS. AFTER THE DATE OF THIS PROSPECTUS, OUR
BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY CHANGE
AND THE INFORMATION CONTAINED IN THIS PROSPECTUS MAY NO LONGER BE ACCURATE.
NEITHER WE NOR THE UNDERWRITERS ARE OFFERING TO SELL OR SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION OR TO ANY PERSON WHERE THE OFFER OR
SOLICITATION IS PROHIBITED.
UNTIL , 1999 (90 DAYS AFTER THE DATE ON THE FRONT OF THIS PROSPECTUS)
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE UNDERWRITERS REQUIRE EACH PURCHASER OF UNITS TO MEET ONE OF THE FOLLOWING
MINIMUM SUITABILITY STANDARDS: EITHER (1) THE PURCHASER MUST HAVE A NET WORTH OF
AT LEAST $100,000, EXCLUDING HOME, FURNISHINGS AND AUTOMOBILES; OR (2) THE
PURCHASER MUST HAVE A MINIMUM GROSS INCOME FOR THE LATEST TAX YEAR OF $50,000 OR
MORE, OR JOINT INCOME WITH THE PURCHASER'S SPOUSE OF $100,000 OR MORE.
2
<PAGE> 4
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS
SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN THE SECURITIES. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF INVESTING IN THE SECURITIES
DISCUSSED UNDER "RISK FACTORS". WE HAVE ADJUSTED ALL SHARE AND PER SHARE AMOUNTS
IN THIS PROSPECTUS TO GIVE EFFECT TO A ONE-FOR-FIVE REVERSE SPLIT OF THE COMMON
STOCK (THE "REVERSE STOCK SPLIT"), WHICH OCCURRED ON NOVEMBER 24, 1998. UNLESS
OTHERWISE INDICATED, SHARE AMOUNTS IN THIS PROSPECTUS ASSUME THAT THE
UNDERWRITERS WILL NOT EXERCISE THEIR OVERALLOTMENT OPTION TO PURCHASE ADDITIONAL
UNITS.
FIRST COASTAL BANCSHARES
We are First Coastal Bancshares ("First Coastal"), a growing bank holding
company incorporated under the laws of the State of California. We are the
parent of First Coastal Bank, National Association (the "Bank"), and we conduct
substantially all of our business through the Bank. Since the new management
team led by Don M. Griffith purchased a controlling interest in our predecessor
in August 1996, we have turned a net loss of $124,000 for the year ended
December 31, 1996 to net income of $241,000 for the first nine months of 1998.
In addition, we have more than tripled our total assets from $25.9 million at
December 31, 1996 to $81.1 million at September 30, 1998, with only about 40% of
the increase attributable to our acquisition of Marina Bank in June 1997.
On August 3, 1998, we entered into an agreement to acquire American Independent
Bank, N.A. ("AIB"), for cash. AIB is a community bank with two branches, one in
Gardena, California, and one in Burbank, California. At September 30, 1998, AIB
had total assets of $37.6 million. We will use part of the proceeds from this
offering to fund this acquisition, which we believe will help fuel our growth by
increasing our branch offices to four and our assets on a pro forma combined
basis to $124.4 million.
THE BANK
Our subsidiary, First Coastal Bank, National Association, is a national bank
with branches in the communities of El Segundo and Marina Del Rey, California.
The mission of the Bank is to offer relationship-oriented financial services and
to be a financial institution known for its quality, soundness and integrity.
OUR STRATEGY. Our business strategy is to:
- Cater to small businesses, executives and professionals by offering quality,
personalized financial services which have become less available due to
consolidation in the banking industry.
- Build our deposit base and loan portfolio through service-oriented
relationship banking.
- Selectively acquire or merge with other banks to decrease unit costs and
expand our geographic presence, initially in the South Bay, West Los Angeles
and San Fernando Valley areas of Southern California.
WE SEE OPPORTUNITIES CREATED BY MERGERS IN THE BANKING INDUSTRY. We believe that
the rapid consolidation of banks and the formation of "mega-banks" has caused,
and will continue to cause, small business, executive and professional customers
to seek the service-oriented, customized and quality services which we offer.
According to the FDIC, the five
3
<PAGE> 5
largest financial institutions in Los Angeles County hold more than half of all
deposits in the region. Our Bank has a market share of less than 0.1% of the
large, growing and diverse Los Angeles County market, which in 1997 had over
$100 billion in total banking deposits, a population of over 9.5 million and a
per capita income of over $25,000. We believe our strategy, if successfully
executed, will allow us to grow faster than the overall market. In addition, a
very small shift in our market share represents large potential growth from our
small base.
INTERNAL GROWTH. Our internal growth strategy is primarily focused on "total
relationship banking", which means developing a personalized package of
financial services and providing superior service to customers with high
transactional needs. By focusing on customer relationships, we believe that we
fill a niche neglected by the larger banks.
Our target market consists of small businesses, executives and professionals in
the South Bay, West Los Angeles and San Fernando Valley areas of Southern
California. We have hired, and will continue to hire, highly motivated and
well-compensated business development officers to generate significant deposit
relationships. Our objective is to retain the most effective business
development team of any community bank in Southern California and to support
them with quality financial products and exceptional customer service. In
addition, we have focused on cross-selling financial products, such as money
market and time deposits, to our relationship customers, and we intend to
introduce investment management services in the future. We believe that our
internal growth strategy sets us apart from other community banks in the region.
We recognize that relationship banking may result in slower loan growth than
"loan production" banking, which places a premium on maximizing the number of
outstanding loans. Therefore, we supplement local relationship lending with
loans originated by a select group of low-cost local loan production agents,
which generally consists of well-secured commercial and real estate loans. We
seek to maximize the quality of these loans and will accept a lower fixed-rate
nominal loan yield for higher credit worthiness and security. In addition, we
occasionally purchase out-of-state loan pools consisting of well-seasoned single
family residential loans in order to create geographical diversification and to
generate a higher yield than our securities portfolio. We do not lend to hedge
funds or invest in foreign securities, which we believe minimizes our exposure
to international economic problems.
GROWTH THROUGH ACQUISITIONS. Acquisitions will continue to play a key role in
augmenting internal growth and lowering our unit costs. Due to our small size
and focus, we believe that we have the opportunity to significantly improve our
customer service as well as our operating efficiencies through synergies and
consolidation of administrative and certain routine operations. Our acquisition
objectives are to:
- Increase our return on capital by trimming redundant operations and
thereby lower operating expenses as a percentage of revenues.
- Increase our low-cost deposit base and geographic coverage.
- Leverage cross-selling opportunities and offer improved services to the
customers of the banks we acquire.
OUR EXPERIENCED MANAGEMENT TEAM. Our management team, particularly our Chairman
and Chief Executive Officer, Don M. Griffith, has extensive banking experience
in the Southern California banking market. Mr. Griffith is a third generation
resident of Southern
4
<PAGE> 6
California and was formerly Executive Vice President and Chief Financial Officer
of First Interstate Bancorp. Mr. Griffith has focused on community banking in
our market area since 1993 when he founded Peninsula National Bank to purchase a
failed bank in the Palos Verdes area of Southern California, which subsequently
in turn purchased Bay Cities National Bank in Redondo Beach, California. Mr.
Griffith subsequently sold his interest in Peninsula National Bank and assembled
the present management team for First Coastal. Our three executive officers, Mr.
Griffith, Deborah A. Marsten and James F. Gardunio, have a combined 67 years of
banking and other relevant experience in the Southern California market.
OUR STRONG RECENT DEPOSIT GROWTH AND OUR FINANCIAL SOUNDNESS. We are focused on
building core deposits and have achieved strong internal growth in the last
twelve months. Our demand deposits increased approximately 64% from $13.1
million at September 30, 1997 to $21.5 million at September 30, 1998, and our
money market accounts grew 93%, from $4.1 million to $7.9 million, over the same
period. The Bank is currently considered "well capitalized" under applicable
regulatory standards.
THE TRUST
First Coastal Capital Trust (the "Trust") is a statutory business trust created
under the laws of the state of Delaware. The Trust is our subsidiary because we
hold all of its common securities ("Common Securities"). Investors in this
offering will hold all of the Trust's Preferred Securities. The Trust's business
and affairs are conducted by Wilmington Trust Company, as the Property Trustee
and Delaware Trustee, and two individual Administrators who are officers of
First Coastal.
We formed the Trust for the exclusive purposes of:
(1) Issuing and selling the Preferred Securities,
(2) Using the proceeds from the sale of the Preferred Securities to
acquire our Junior Subordinated Debentures, and
(3) Engaging in only those other activities necessary, advisable or
incidental to these limited purposes (such as registering the transfer of
the Preferred Securities).
Accordingly, our Junior Subordinated Debentures will be the sole assets of the
Trust, and the Trust will depend for its revenues on payments made by us under
the Junior Subordinated Debentures and under an expense agreement.
We will hold Common Securities of the Trust equal to 3% of its total capital.
The Common Securities rank on a parity with the Preferred Securities, and the
Trust will make pro rata payments on the Common Securities simultaneously with
payments on the Preferred Securities, except under certain cases of default
under the Trust Agreement governing the Trust. See "Description of Preferred
Securities -- Priority Over Common Securities."
The Trust has a term of 30 years but may terminate earlier as provided under the
Trust Agreement.
THE PREFERRED SECURITIES
By creating the Trust to issue the Preferred Securities and using the proceeds
to purchase our Junior Subordinated Debentures, we realize two main benefits:
(1) we can, within
5
<PAGE> 7
certain limits, deduct from our taxable income the payments made to you and (2)
we can increase our "Tier 1" capital (a key indicator of financial strength used
by banking regulators). These benefits provide us with a cost-effective means of
raising capital for regulatory purposes.
We will issue debt (in the form of Junior Subordinated Debentures) to the Trust
in exchange for the cash proceeds of the sale of the Preferred Securities. The
Junior Subordinated Debentures will be the sole asset of the Trust, and the
interest rate on the Junior Subordinated Debentures will be the same as the rate
of distributions paid to investors on the Preferred Securities. The interest we
pay on the Junior Subordinated Debentures will be treated as a tax-deductible
interest expense, but will not be taxable to the Trust since the Trust's income
is passed through to its investors. Investors will be required to report this
income on their tax return as interest income. These distributions are not
dividends and accordingly they are not eligible for the dividends-received
deduction. We retain the right to redeem the Preferred Securities at any time if
this tax-advantaged status is lost. We may also redeem the Preferred Securities
any time they lose their treatment as Tier 1 capital or if the Trust is required
to be registered as an "investment company." See "Description of Preferred
Securities -- Redemption."
We may defer the quarterly interest payments on our Junior Subordinated
Debentures for up to 20 consecutive quarters. If we suspend interest payments
the Trust will suspend distributions to holders of the Preferred Securities. See
"Risk Factors -- Risk Factors Relating to the Preferred Securities -- We Have
the Option to Defer Interest Payments."
With important limitations, we guarantee the payment of distributions under the
Preferred Securities. The Preferred Securities are ranked subordinate to
virtually all of our other obligations, and are ranked on a parity with other
trust preferred securities and senior trust common securities which we may
create in the future.
We will present the Preferred Securities on our balance sheet between the
liabilities and shareholders' equity sections and captioned as "Company
Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust
Holding Solely Junior Subordinated Debentures."
6
<PAGE> 8
THE OFFERING
SECURITIES OFFERED
Units........................ 300,000 Units, each consisting of one share of
common stock and one Preferred Security of
$20.00 liquidation amount. The Units will be
represented by two separate certificates, one
representing shares of common stock and one
representing Preferred Securities.
Estimated Offering Price..... Between $26.50 and $27.50 per Unit.
Separation of Units.......... The common stock and the Preferred Securities
will trade together as a Unit and cannot be
separately traded until the earliest to occur
of:
- one year after the closing of this
offering,
- the decision by the Underwriters, in
their sole discretion, to permit
separation earlier than one year after
the closing of this offering,
- a call for redemption of the Preferred
Securities,
- the occurrence of an event of default
under the Indenture governing the Junior
Subordinated Debentures, or
- the dissolution of the Trust.
Rights of Holders............ Holders of Units will be holders of both the
common stock and the Preferred Securities and
will have the same rights, preferences and
privileges as a holder of each security.
COMMON STOCK
Estimated Offering Price..... The offering price of the common stock will be
the difference between the public offering price
of the Units and $20.00, which we expect to be
between $6.50 and $7.50.
Common Stock to be
Outstanding after this
Offering................... Approximately 1,200,669 shares, including
300,000 shares included in the Units. This
figure assumes 11,118 shares of our Series A 10%
Cumulative Convertible Preferred Stock are
converted after we call them for redemption and
the exercise of 225,000 warrants held by
California Community LLC. See "Capitalization"
and "Description of Capital Stock -- Preferred
Stock."
Voting Rights................ Holders of common stock will have one vote per
share.
Dividend Policy.............. The holders of common stock will share ratably
on a per share basis in all dividends and other
distributions declared by our Board of
Directors. We do not
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<PAGE> 9
anticipate paying dividends on the common stock in the foreseeable future.
Ownership Restrictions....... You may not acquire more than 9.9% of our common
stock without, in certain circumstances,
receiving the prior approval of the Federal
Reserve. See "Supervision and Regulation."
PREFERRED SECURITIES
Offering Price and
Liquidation Amount........... $20.00 per Preferred Security.
Distributions................ Each Preferred Security will pay distributions
of $ per year (or % of the Liquidation
Amount). Distributions will accrue from the date
of issuance of the Preferred Securities and will
be cumulative. Distributions will be payable
quarterly in arrears on the last day of March,
June, September and December of each year,
beginning March 31, 1999. Distributions are
subject to deferral as described below. See
"Description of the Preferred
Securities -- Distributions."
Deferral periods............. We may defer payments of interest on the Junior
Subordinated Debentures to the Trust for up to
20 consecutive quarters. If we defer interest
payments, the Trust will not have funds to pay
distributions and, as a result, the Trust will
defer distributions to holders of the Preferred
Securities.
During a deferral period, your distributions
will continue to accrue, and interest on the
unpaid distributions will compound quarterly.
Because of this, you would be required to
include the unpaid distributions and interest in
your gross income for United States federal
income tax purposes and certain state income tax
purposes but you would not receive any cash to
pay tax on this income.
For more information, see:
- "Description of Preferred Securities --
Distributions -- Deferral periods."
- "Certain Federal Income Tax Consequences --
Interest Income"
- "Risk Factors -- Risk Factors Relating to the
Preferred Securities -- We Have the Option to
Defer Interest Payments."
Maturity..................... The Junior Subordinated Debentures will mature
on December 31, 2028, at which date the Trust
must redeem the Preferred Securities at a price
equal to
8
<PAGE> 10
$20.00 per Preferred Security plus all accrued
and unpaid distributions.
Subject to Federal Reserve approval, if then
required, we have the right to shorten the
stated maturity of the Junior Subordinated
Debentures to a date as early as December 31,
2001. If we do this, the Trust will at the new
maturity date redeem the outstanding Preferred
Securities and pay the applicable redemption
price as if the new maturity date were a
redemption date. See "-- Redemption" below for a
description of the redemption prices and
"Description of Junior Subordinated
Debentures -- Stated Maturity."
Redemption................... Subject to Federal Reserve approval, we may
cause the Trust to redeem the Preferred
Securities at the same time and at the same
price which we redeem the Junior Subordinated
Debentures. The Junior Subordinated Debentures
may be redeemed:
(1) On or after December 31, 2001, in whole or
in part, at declining redemption prices set
forth below (expressed as a percentage of
the principal amount) plus accrued and
unpaid dividends:
<TABLE>
<CAPTION>
REDEMPTION DATE REDEMPTION PRICE
--------------- ----------------
<S> <C>
December 31, 2001 through 108%
December 30, 2002
December 31, 2002 through 105%
December 30, 2003
December 31, 2003 through 102%
December 30, 2004
December 31, 2004 and 100%
thereafter
</TABLE>
and,
(2) At any time, in whole (but not in part),
upon the occurrence and during the
continuance of a Tax Event, an Investment
Company Event or a Capital Treatment Event
(each as defined in "Description of Junior
Subordinated Debentures -- Optional
Redemption"), at a price equal to the
principal amount plus all accrued and unpaid
dividends to the redemption date.
For more information, see "Description of the
Preferred Securities -- Redemption" and
"Description of Junior Subordinated
Debentures -- Optional Redemption."
Distribution of Junior
Subordinated Debentures.... With the prior approval of the Federal Reserve,
if then required, we can dissolve the Trust at
any time. If we do
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<PAGE> 11
this, the Trust will redeem the Preferred
Securities by distributing the Junior
Subordinated Debentures to holders of Preferred
Securities and Common Securities. Although the
Junior Subordinated Debentures bear interest at
the same rate as the Preferred Securities, there
are important differences in their terms.
Therefore, we urge you to read carefully the
description of the Junior Subordinated
Debentures under "Description of Junior
Subordinated Debentures."
See also "Risk Factors -- Risk Factors Relating
to the Preferred Securities -- We may dissolve
the Trust and Distribute the Junior Subordinated
Debentures to You" and "Description of the
Preferred Securities -- Exchange of Preferred
Securities for Junior Subordinated Debentures."
Ranking...................... The Preferred Securities will rank on a parity
with the Common Securities of the Trust held by
us. Except in certain cases of default,
distributions will be made simultaneously and
pro rata on the Preferred Securities and Common
Securities. See "Description of the Preferred
Securities -- Priority Over Common Securities."
Our obligations under the Guarantee, the Junior
Subordinated Debentures and other documents
described in this Prospectus are unsecured and
rank subordinate and junior in right of payment
to all current and future senior and
subordinated debt, the amount of which is not
limited. If we cause additional preferred
securities to be issued by trusts similar to the
Trust in the future, these new obligations will
rank on a parity with the Junior Subordinated
Debentures and the Guarantee. See "Description
of Junior Subordinated Debentures --
Subordination" and "Description of Guarantee and
Expense Agreement -- General."
Voting Rights................ The holders of the Preferred Securities will
generally have no voting rights with respect to
the administration, operation or management of
the Trust, except as to issues regarding the
modification of the Preferred Securities, the
acceleration of payments and certain other
matters described in this Prospectus. See
"Description of the Preferred
Securities -- Voting Rights; Amendment of the
Trust Agreement."
Guarantee.................... Pursuant to the Guarantee, we guarantee, on a
subordinated basis, the payments of
distributions and principal to the extent of
funds held by the Trust. However, this guarantee
does not apply during any period in which we
elect to defer distributions on the Junior
Subordinated Debentures.
10
<PAGE> 12
For more information, see:
- "Risk Factors -- Risk Factors Relating to the
Preferred Securities -- Our Obligations to Pay
Interest on the Junior Subordinated Debentures
and Under the Guarantee Are Junior to Our
Other Obligations,"
- "Description of Guarantee and Expense
Agreement," and
- "Relationship Among Preferred Securities,
Junior Subordinated Debenture, Guarantee and
Expense Agreement."
GENERAL
Use of proceeds.............. We intend to use the net proceeds to us from
this offering and the proceeds from the exercise
of warrants held by California Community LLC (1)
to help finance the acquisition of American
Independent Bank, (2) to redeem up to 94,757
shares of our outstanding 10% Series A
Cumulative Convertible Preferred Stock that have
not previously converted into our common stock
and (3) for general working capital purposes.
See "Use of Proceeds".
Listing...................... Our common stock currently trades from time to
time in unreported private transactions and on
the OTC Bulletin Board under the symbol "FCLA".
There is currently no public market for either
the Units or the Preferred Securities. We intend
to apply to have the Units and, upon separation,
the Preferred Securities included for quotation
on the OTC Bulletin Board under the symbols
"FCLAU" and "FCLAT" respectively. The
Underwriters have indicated that they intend to
make a market in the common stock and Units and,
upon separation, the Preferred Securities, but
they are not obligated to do so. See "Risk
Factors -- Risk Factors Relating to First
Coastal -- Our Common Stock, the Units and the
Preferred Securities Have Limited or no
Markets."
Risk Factors................. Before deciding whether a purchase of Units is
suitable for you, please read the discussion
under "Risk Factors" of certain factors you
should consider before buying the Units.
OTHER TRANSACTIONS
Acquisition of American
Independent Bank............. We have agreed to purchase American Independent
Bank, N.A. for approximately $6.4 million in
cash ($7.3 million including expenses and
adjustments). We will
11
<PAGE> 13
use a portion of the proceeds of this offering
to help the Bank pay for this acquisition. We
expect the acquisition to close immediately
following this offering. See "The Proposed
Acquisition of American Independent Bank."
Reverse Stock Split.......... On November 24, 1998, we effected a one-for-five
reverse split of our common stock. All share and
per share amounts in this Prospectus have been
adjusted to give effect to the reverse stock
split.
Redemption of Series A
Preferred Stock............ On or soon after the completion of the offering,
we intend to call for redemption up to 94,757
shares, or approximately 22%, of the 423,500
outstanding shares of our Series A Preferred
Stock. Each share of Series A Preferred Stock is
convertible at the option of the holder into one
share of our common stock. Holders of 11,118
shares of our Series A Preferred Stock have
signed subscription agreements obligating them
to convert their shares of Series A Preferred
Stock into shares of our common stock on or
prior to the redemption date. If no other
holders elect to convert, we will have to pay
approximately $653,000 to redeem the shares of
Series A Preferred Stock. See "Description of
Capital Stock -- Preferred Stock."
Exercise of Warrants......... Our largest shareholder, California Community
LLC, has agreed to exercise warrants to purchase
225,000 shares of our common stock on or prior
to the consummation of the AIB acquisition,
which would result in a payment to us of $1.125
million. See "Beneficial Ownership of Common
Stock -- California Community LLC."
12
<PAGE> 14
SUMMARY HISTORICAL FINANCIAL INFORMATION OF
FIRST COASTAL BANCSHARES AND SUBSIDIARY
The selected financial information below for the nine months ended September 30,
1998 and 1997 is derived from our unaudited financial statements which we
believe reflect all adjustments, consisting of only normal recurring accruals,
necessary for a fair presentation. The selected financial information below for
the years ended December 31, 1997, 1996 and 1995 is derived from our audited
financial statements. This information is only a summary and should be read in
conjunction with our financial statements and related notes presented elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS AT OR FOR THE YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------- ----------------------------------
1998 1997 1997 1996 1995
---------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest Income........................................... $ 3,954 $ 2,159 $ 3,172 $ 2,021 $ 1,806
Interest Expense.......................................... 1,651 584 887 476 412
-------- -------- -------- -------- --------
Net Interest Income....................................... 2,303 1,575 2,285 1,545 1,394
Provision for Loan Losses................................. 10 25 25 39 8
-------- -------- -------- -------- --------
Net Interest Income after Provision for Loan Losses....... 2,293 1,550 2,260 1,506 1,386
Noninterest Income........................................ 416 131 245 264 283
Noninterest Expense....................................... 2,223 1,648 2,350 1,893 1,865
-------- -------- -------- -------- --------
Income before Income Taxes................................ 486 33 155 (123) (196)
Income Taxes.............................................. 245 27 95 1 1
-------- -------- -------- -------- --------
Net Income................................................ $ 241 $ 6 $ 60 $ (124) $ (197)
======== ======== ======== ======== ========
PER SHARE DATA
Net Income -- Basic(1).................................... $ 0.04 $ (0.12) $ (0.15) $ (0.31) $ (0.90)
Book Value(2)............................................. 4.79 4.40 4.65 4.84 5.41
Cash Dividends -- Preferred Stock(3)...................... 214 84 155 N/A N/A
Actual Number of Shares Outstanding....................... 664,551 685,196 677,052 585,196 301,196
Weighted Average Number of Shares Outstanding............. 671,284 620,361 638,990 399,383 218,969
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS(4)
Including Interest on Deposits............................ 1.14x 0.93x 1.00x 0.78x 0.55x
Excluding Interest on Deposits............................ 1.76x 0.64x 1.00x (0.66x) (6.00x)
BALANCE SHEET DATA -- AT PERIOD END
Total Assets.............................................. $ 81,120 $ 48,543 $ 56,129 $ 25,947 $ 24,230
Total Loans............................................... 56,268 35,605 39,992 16,321 14,997
Allowance for Loan Losses (ALLL).......................... 562 721 615 382 333
Investment Securities..................................... 6,077 6,184 10,183 6,934 3,031
Other Real Estate Owned................................... 218 -- 200 51 465
Total Deposits............................................ 72,921 42,287 45,265 22,948 22,486
Total Shareholders' Equity................................ 6,045 5,873 6,010 2,838 1,629
OPERATING RATIOS AND OTHER SELECTED DATA
Return on Average Assets(5)............................... 0.45% 0.02% 0.15% (0.49)% (0.83)%
Return on Average Equity(5)............................... 5.42% 0.20% 1.33% (6.20)% (15.63)%
Operating Efficiency Ratio(7)............................. 82.06% 96.60% 92.89% 104.64% 111.21%
Net Interest Yield(5)(6).................................. 4.75% 6.49% 6.44% 6.75% 6.62%
SELECTED ASSET QUALITY RATIOS -- AT PERIOD END
Nonperforming Loans to Total Loans........................ 2.60% 4.26% 3.13% 6.55% 6.95%
Nonperforming Assets to Total Assets...................... 2.07% 3.12% 2.58% 4.32% 6.22%
ALLL as a Percentage of Nonperforming Loans............... 38.55% 47.56% 49.24% 35.73% 31.93%
ALLL as a Percentage of Total Loans....................... 1.00% 2.02% 1.54% 2.34% 2.22%
TANGIBLE BOOK VALUE AND EARNINGS
Tangible Book Value(8).................................... $ 1,383 $ 930 $ 1,195 $ 2,838 $ 1,629
Tangible Book Value Per Share............................. 2.08 1.36 1.77 4.85 5.41
Tangible Earnings(9)...................................... 341 41 130 (124) (197)
Tangible Earnings Per Share(10)........................... 0.19 (0.07) (0.04) (0.31) (0.90)
</TABLE>
(notes on next page)
13
<PAGE> 15
- -------------------------
(1) These amounts represent net income, less dividends on preferred stock,
divided by the weighted average number of shares outstanding for the
respective years. The effect of outstanding warrants, options and
conversion features of the preferred stock were not included as their
effect would be antidilutive.
(2) Represents total shareholders' equity less liquidation preference of
preferred stock divided by common shares outstanding.
(3) No cash dividends have been paid on the common stock.
(4) For purposes of calculating the ratio of earnings to fixed charges and
preferred stock dividends, earnings consist of income before income taxes,
fixed charges and preferred stock dividends. Fixed charges consist of
interest expense and one-third of rentals.
(5) Calculations are based on average daily balances.
(6) Net interest yield has been calculated by dividing net interest income by
average interest-earning assets.
(7) The operating efficiency ratios have been calculated by dividing
non-interest expense by operating income (net interest income plus non-
interest income).
(8) Tangible book value is equal to shareholders' equity reduced by the
liquidation preference of the preferred stock and goodwill.
(9) Tangible earnings is equal to net income plus goodwill amortization.
(10) Tangible earnings per share is equal to tangible earnings less the
preferred stock dividends divided by the average common shares outstanding.
14
<PAGE> 16
UNAUDITED SUMMARY PRO FORMA FINANCIAL INFORMATION
The following summary unaudited pro forma financial information as of September
30, 1998 combines our historical balance sheets with AIB's as if the acquisition
and offering had been effective on September 30, 1998 and our historical results
of operation with AIB's as if the acquisition and offering had been effective on
January 1, 1997, after giving effect to the purchase accounting adjustments. For
our complete pro forma financial information, see "Unaudited Pro Forma Financial
Information."
The unaudited pro forma combined financial information is intended for
informational purposes and is not necessarily indicative of either (1) the
future financial position or future results of operations of the combined
company, or (2) of the financial position or the results of operations of the
combined company that would have actually occurred had the acquisition been in
effect as of the date or for the periods presented. These unaudited pro forma
combined financial statements should be read in conjunction with, and are
qualified in their entirety by, the unaudited pro forma financial information
and the financial statements, including the accompanying notes, of First Coastal
and AIB appearing elsewhere in this Prospectus. All dollar amounts, except per
share amounts, are presented in thousands.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------
<S> <C>
SUMMARY OF OPERATIONS
Interest Income........................................... $ 6,233
Interest Expense.......................................... 2,644
----------
Net Interest Income....................................... 3,589
Provision for Loan Losses................................. 102
----------
Net Interest Income after Provision for Loan Losses....... 3,487
Noninterest Income........................................ 919
Noninterest Expense....................................... 3,701
----------
Income Before Income Taxes................................ 705
Income Taxes.............................................. 411
----------
Net Income................................................ $ 294
==========
Tangible Net Income....................................... $ 587
PER SHARE DATA
Net Income -- Basic and Diluted........................... $ 0.11
Book Value................................................ $ 5.19
Tangible Net Income....................................... $ 0.35
Tangible Book Value....................................... $ 0.55
Shares Outstanding........................................ 1,200,669
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
Including Interest on Deposits............................ 1.26x
Excluding Interest on Deposits............................ 1.94x
BALANCE SHEET DATA -- AT PERIOD END
Total Assets.............................................. $ 124,416
Total Loans............................................... 77,238
Allowance for Loan Losses................................. 759
Investment Securities..................................... 10,077
Goodwill.................................................. 5,593
Other Real Estate Owned................................... 299
Total Deposits............................................ 106,516
Total Shareholders' Equity................................ $ 8,372
</TABLE>
15
<PAGE> 17
RISK FACTORS
AN INVESTMENT IN THE UNITS INVOLVES A NUMBER OF RISKS, INCLUDING GENERAL MARKET
RISKS, FLUCTUATIONS IN INTEREST RATES, OPERATIONAL RISKS, LEGAL RISKS AND
REGULATORY RISKS. MANY OF THESE RISKS COULD BE SUBSTANTIAL AND ARE INHERENT IN
OUR BUSINESS. IN ADDITION, CERTAIN MATTERS DISCUSSED IN THIS PROSPECTUS MAY BE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE LITIGATION REFORM
ACT OF 1995 AND THEREFORE MAY INVOLVE RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE OUR ACTUAL RESULTS TO BE MATERIALLY DIFFERENT FROM THE RESULTS
EXPRESSED OR IMPLIED BY OUR FORWARD-LOOKING STATEMENTS. THESE STATEMENTS
GENERALLY APPEAR WITH WORDS SUCH AS "ANTICIPATE," "BELIEVE," "ESTIMATE," "MAY,"
"INTEND" AND "EXPECT."
WE SPECIFICALLY CAUTION YOU THAT THE FACTORS LISTED BELOW ARE ONES WE BELIEVE
COULD CAUSE OUR RESULTS TO BE MATERIALLY DIFFERENT FROM WHAT WE EXPECT OR CAUSE
THE TRADING PRICES OF OUR SECURITIES TO DECREASE. YOU SHOULD NOT ASSUME THAT
THESE FACTORS REPRESENT A COMPLETE LIST OF THE GENERAL OR SPECIFIC RISKS THAT
MAY AFFECT US, AND YOU SHOULD RECOGNIZE THAT OTHER FACTORS MAY PRESENT AN EVEN
GREATER RISK TO OUR RESULTS. CAREFULLY CONSIDER THE FOLLOWING INFORMATION,
TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE DECIDING WHETHER
A PURCHASE OF THE UNITS IS SUITABLE FOR YOU.
RISK FACTORS RELATING TO FIRST COASTAL
LOSSES IN OUR RECENT OPERATING HISTORY
Although we recorded net income of $241,000 for the nine months ended September
30, 1998 and $60,000 for the year ended December 31, 1997, we experienced losses
of $124,000 and $197,000 for the years ended December 31, 1996 and 1995,
respectively. We believe these losses were primarily due to unsatisfactory loan
underwriting standards and high overhead expenses under previous management. We
have not yet reached the level of profitability we think is appropriate, and we
have not yet achieved sustained profitability.
Our ability to achieve sustained profitability depends greatly on general market
conditions and our ability to continue to:
- control our level of non-performing assets,
- maintain the adequacy of our loan loss reserve,
- reduce our ratio of noninterest expenses to average earning assets and
- successfully execute our strategic plan, which focuses on internal loan
and deposit growth and making selective acquisitions.
We are working to achieve these goals, but we cannot guarantee that we will be
able to meet them. If we do not, we will be unlikely to achieve sustained
profitability.
WE FACE CERTAIN CAPITAL REQUIREMENTS
Our strategy calls for strong asset and net income growth, both internally and
through acquisitions. Our ability to do this will depend in part on our ability
to continue to meet each of the Federal Reserve's minimum capital adequacy
guidelines. This may, from time to time, require us to raise additional capital
that qualifies as "Tier 1" capital. We cannot assure that such capital will be
available or, if it is, that it will be available on reasonable
16
<PAGE> 18
terms. If we cannot raise the additional capital, or generate it through our
earnings, our ability to grow would be hindered. See "Supervision and
Regulation -- Capital Adequacy."
We believe that a portion of the Preferred Securities will qualify as Tier 1
capital at the holding company based upon current guidelines issued by the
Federal Reserve. However, the Federal Reserve may at any time revise its
guidelines in a manner which would reduce or eliminate the amount of Preferred
Securities that qualify as Tier 1 capital. Currently, the Federal Reserve only
permits 25% of our Tier 1 capital to be in the form of the Preferred Securities,
which would disqualify approximately two-thirds of the Preferred Securities
until such time as our other Tier 1 capital elements increase. If our other
capital elements decrease (e.g., if we sustain losses), an additional portion of
Preferred Securities may no longer count as Tier 1 capital. If all or an
additional portion of the Preferred Securities lose their qualification as Tier
1 capital, we may be required to seek additional capital to meet the Federal
Reserve's capital adequacy guidelines if and when they apply to us on a
consolidated basis.
OUR HOLDING COMPANY STRUCTURE LIMITS OUR LIQUIDITY AND ABILITY TO PAY DIVIDENDS
We operate as a holding company for the Bank. Therefore, substantially all of
our assets and operations are held by or conducted through the Bank. Our
financial performance depends upon dividends, loan repayments and other
intercompany cash flows from the Bank. The payment of dividends and the
repayment of loans and advances by the Bank to us are subject to statutory,
contractual and other restrictions, are dependent upon the earnings of the Bank
and are subject to various business considerations. In addition, in the event of
dissolution or liquidation, the claims of creditors of the Bank, including its
depositors, tax authorities and trade creditors, will generally have priority
over our claims as the parent.
Our ability to obtain funds for cash requirements depends largely on the amount
of dividends which may be declared by the Bank. Under the relevant statute, the
Bank may only pay dividends from its net income, after deducting losses and bad
debts. The Bank is further prohibited from declaring dividends until its capital
surplus account equals the amount of capital stock or until a certain amount of
profits are transferred to the surplus account. In addition, the Office of the
Comptroller of the Currency must approve the payment of dividends by the Bank in
certain cases, and it also has authority to prohibit the payment of dividends
when it determines that such payment would constitute an unsafe and unsound
banking practice. See "Supervision and Regulation -- Dividend Regulation."
Our ability to pay interest on the Junior Subordinated Debentures depends, in
part, on the Bank's ability to achieve operating results consistent with those
shown on our unaudited pro forma financial statements. These pro forma financial
statements are based on certain assumptions and are not necessarily indicative
of our actual future results of operations. See " -- Our Expansion Strategy
Presents Special Risks," "Supervision and Regulation -- Dividend Regulation" and
"Unaudited Pro Forma Financial Information."
NONPERFORMING ASSETS
Nonperforming assets reduce the amount of cash available for our activities,
which in turn hurts our liquidity, earnings and ultimately our capitalization
and our financial performance. We have had a higher level of nonperforming
assets than we like. We believe this was caused by a weak local economy in the
past and unsatisfactory underwriting standards
17
<PAGE> 19
under previous management. Our percentages of non-performing assets to total
assets are shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Percentage of
non-performing assets to
total assets............. 2.07% 2.58% 4.32% 6.22%
</TABLE>
Nonperforming assets consist of loans on nonaccrual, loans past due 90 days or
more, restructured loans and other real estate owned. We continually evaluate
the credit risks of nonperforming assets and other problem loans and believe we
have provided adequately for the credit risks associated with these assets.
However, our loan portfolio is vulnerable to adverse changes in the economy and
other factors, and we therefore cannot guarantee that the level of nonperforming
assets will not rise in the future. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition of First Coastal -- Asset
Quality".
OUR LOAN LOSS RESERVES ARE ONLY ESTIMATES
Any bank that lends money takes a risk that it will not be paid back. Although
we try to limit this risk by adhering to well-defined loan underwriting
standards, we have and will in the future experience loan losses. In our
allowance for loan losses, we attempt to estimate the amount of loan losses we
will incur in the future. We base this estimate on industry standards, our
historical experience, our evaluation of current and predicted economic
conditions and our regular reviews of delinquencies and the quality of the
collateral underlying our loans. Although we believe our allowance for loan
losses is adequate, we can never be sure that actual loan losses in the future
will not exceed the amount we set aside in our allowance today. This could
result from many factors, including an adverse change in general economic
conditions, that are beyond our control. If our estimates today prove to be
incorrect and actual loan losses materially exceed the amounts we set aside in
the allowance, we would have to increase our reserves and thereby reduce our
income. See "Business of First Coastal -- Allowances for Loan Losses".
OUR STRATEGY DEPENDS ON KEY PERSONNEL
Our future success depends substantially on the efforts of our executive
officers, in particular Don M. Griffith, the Chief Executive Officer and the
Chairman of the Board. The loss or interruption of his services would probably
hinder our ability to achieve our growth and operating strategies. Mr. Griffith
is not subject to any employment agreement, although he does beneficially own a
significant amount of our common stock.
CHANGES IN INTEREST RATES MAY AFFECT OUR PROFITABILITY
The Bank derives its income primarily from the differential or "spread" between
the interest earned on loans, securities and other interest-earning assets, and
interest paid on deposits, borrowings and other interest-bearing liabilities. In
general, the wider the spread, the more we earn. Net interest spreads are
affected by the difference between the maturities and repricing characteristics
of interest-earning assets and interest-bearing liabilities. These differences
in turn are affected by changes in general interest rates. We cannot eliminate
the interest rate risk nor can we assure that the steps taken by the Bank will
minimize such risk, especially given recent volatility in the credit markets. In
addition, an increase in the general level of interest rates may make it harder
for our borrowers to pay the interest on and principal of their loans.
Therefore, changes in levels of market interest rates could materially adversely
affect our net interest spread, asset quality, loan origination volume and
overall results of operation. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition of First Coastal -- Net Interest
Income."
18
<PAGE> 20
WE ARE SUBJECT TO EXTENSIVE REGULATION
We are subject to extensive regulation, supervision and examination by
government agencies, principally banking regulators. These agencies have been
granted extensive discretion in connection with their supervisory and
enforcement activities, which are intended primarily for the protection of the
deposit insurance fund and the depositors of the Bank and not our shareholders.
Consequently, these regulatory agencies and their rules often serve to limit our
activities in ways that could be adverse to the interests of our shareholders.
See "Supervision and Regulation."
WE FACE SIGNIFICANT COMPETITION
We operate in the highly competitive western Los Angeles County banking market
and compete not only with other commercial banks, but also with many other
financial competitors, including savings and loans, finance companies, brokerage
firms, insurance companies, credit unions, mortgage banks and other financial
intermediaries.
Most of our significant competitors have substantially greater resources and
capital than we do. Our non-bank competitors also generally operate under fewer
regulatory constraints. As a result, we generally cannot offer our customers
different products or significantly better priced products than our competitors
and we typically have to work harder to compete. See "Business of First
Coastal -- Competition".
OUR LOANS ARE CONCENTRATED IN REAL ESTATE
A significant portion (80% at September 30, 1998) of our loans are secured by
real estate. The properties securing these loans are located in California,
Arizona, Iowa and Maine. Real estate values are generally affected by general
economic and other conditions in the area where the real estate is located,
fluctuations in interest rates and changes in tax and other laws. Any decline in
real estate values could significantly reduce the value of the real estate
collateral securing our real estate loans and could increase the likelihood of
defaults under our real estate loans. This, in turn, would adversely affect our
results of operations and our financial position. See "Business of First
Coastal -- Lending Activities."
WE ARE CURRENTLY CONTROLLED BY ONE STOCKHOLDER
Our biggest stockholder, California Community LLC (the "LLC"), beneficially owns
approximately 78% of our common stock as of September 30, 1998. Even after the
planned distribution by the LLC to its members of its common stock, a relatively
small number of shareholders will still hold a majority of our common stock.
These shareholders may be able to control the outcome of matters requiring a
stockholder vote, including the election of directors, and thereby control our
management and policies. See "Beneficial Ownership of Common Stock -- California
Community LLC."
OUR EXPANSION STRATEGY PRESENTS SPECIAL RISKS
We intend to grow in part by acquiring entire banks and branches of other banks.
For example, in June 1997, we acquired Marina Bank, and we intend to use a
portion of the proceeds from this offering to acquire American Independent Bank,
N.A. In the last few years, many other banks have also sought to grow by
acquiring banking assets. This competition for banking assets has increased the
prices we must pay and has reduced the number of attractive acquisition
opportunities. This in turn reduces our return on investment and our margin for
error.
19
<PAGE> 21
A bank acquisition strategy can be risky. Special acquisition risks include:
- the diversion of management time to integrating the new business,
- unanticipated problems with loans or legal liabilities, and
- difficulties in retaining customers and employees of the acquired banks.
The occurrence of any one of these risks in any acquisition could have a
material adverse effect on our results of operations and our financial
condition, especially given our reduced margin for error.
WE FACE YEAR 2000 ISSUES
Any inability of computer programs to accurately distinguish dates beyond
December 31, 1999, creates potential problems in our own computer systems, the
computer systems of third parties with whom we deal and the computer systems of
our customers. These potential problems could have a material impact on our
ability to conduct our business, and especially to process and account for the
electronic transfer of funds and transactions. Incomplete or untimely resolution
of the Year 2000 issue represents an uncertainty that is reasonably likely to
affect our future financial results, or cause current reported financial
information not to be indicative of future operating results or future financial
conditions. In addition, the Office of the Comptroller of the Currency requires
national banks to become Year 2000 compliant and can penalize those that do not
meet specified goals in a timely manner. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of First
Coastal -- Year 2000 Compliance."
OUR COMMON STOCK, THE UNITS AND THE PREFERRED SECURITIES HAVE LIMITED OR NO
MARKETS
The Units and Preferred Securities are new issues, and prior to this offering,
there has been only a limited public market for our common stock. Although we
intend to file an application to include the Units and, after separation, the
Preferred Securities for quotation on the OTC Bulletin Board, we cannot be sure
that an active public market for the Units, common stock or Preferred Securities
will develop or be sustained after the offering. Although the Underwriters have
indicated to us that they intend to make a market in the common stock and the
Units and, after separation, the Preferred Securities, they will not be
obligated to do so and may discontinue market making at any time. Any reduction
in the number of market makers could adversely affect your ability to sell your
Units, common stock or Preferred Securities. In addition, our requirement that
the common stock and Preferred Securities trade together for one year as a Unit
may depress the price of the common stock and Preferred Securities below the
levels each would trade at separately.
The initial public offering price of the Units has been determined in part by
reference to the trading prices for the few recent reported trades of the common
stock and in part by negotiations between us and the Underwriters. With the
limited trading history of the common stock and our inability to predict where
the Units, common stock and Preferred Securities should trade in the future, we
cannot be sure that the initial public offering price of the Units will, in
fact, be indicative of the trading price of the Units or common stock and
Preferred Securities after the offering. The price of the Units, common stock
and Preferred Securities after this offering may fluctuate widely, depending
upon many factors,
20
<PAGE> 22
some of which have nothing to do with the operating results of First Coastal,
and the Units may trade at prices significantly below the initial public
offering price.
RISK FACTORS RELATING TO THE COMMON STOCK
WE DO NOT INTEND TO PAY DIVIDENDS ON THE COMMON STOCK
We have no intention of paying dividends on our common stock for the foreseeable
future. Even if we intended to pay dividends, our ability to do so would be
substantially restricted. See the second paragraph of "-- Our Holding Company
Structure Limits Our Liquidity and Ability to Pay Dividends."
OUR SHARE PRICE MAY DECLINE DUE TO SHARES ELIGIBLE FOR FUTURE SALE
At the completion of this offering, we will have 964,551 shares of common stock
outstanding. Up to an additional 708,500 shares may be issued if all of the
shares of our Series A 10% Cumulative Convertible Preferred Stock convert into
common stock and all outstanding warrants and stock options are exercised.
Although a total of 805,917 shares of common stock (assuming the conversion of
Series A Preferred Stock and the exercise of stock options and warrants) are
subject to a lock-up for 15 months following this offering, sales of substantial
amounts of common stock, or the possibility of such sales, may "flood the
market" or otherwise adversely affect the price of our common stock and impede
our ability to raise capital through the issuance of equity securities.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
OUR OBLIGATIONS TO PAY INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES AND UNDER
THE GUARANTEE ARE JUNIOR TO OUR OTHER OBLIGATIONS
The Trust cannot pay distributions to holders of the Preferred Securities unless
we make interest payments on the Junior Subordinated Debentures as and when
required. We may make payments on the Junior Subordinated Debentures only with
money remaining after we make payments on our other debt because our obligations
under the Junior Subordinated Debentures are unsecured and rank subordinate and
junior in right of payment to all current and future senior and subordinated
debt, the amount of which is not limited. As of September 30, 1998, we have $1.0
million of indebtedness which is senior to the Junior Subordinated Debentures.
Further, we have no limitations on our ability to issue additional junior
subordinated debentures in connection with any future offerings of preferred
securities, and any such additional debentures would rank on a parity with the
Junior Subordinated Debentures.
WE HAVE THE OPTION TO DEFER INTEREST PAYMENTS
We may defer the payment of interest on the Junior Subordinated Debentures at
any time up to 20 consecutive quarters, provided that no deferral period may
extend beyond the maturity date and provided that we are not in default under
the Indenture governing the Junior Subordinated Debentures. As a consequence of
any such deferral, the Trust will defer distributions on the Preferred
Securities. Our Guarantee does not apply during a deferral period.
Upon the termination of any deferral period and the payment of all interest then
accrued and unpaid, we may elect to begin a new deferral period. There is no
limitation on the number of times that we may elect to begin a deferral period.
See "Description of Preferred Securities -- Distributions -- Deferral periods."
21
<PAGE> 23
HOLDERS OF PREFERRED SECURITIES WILL CONTINUOUSLY ACCRUE UNPAID DISTRIBUTIONS
Each holder of Preferred Securities will be required to accrue and recognize
income (in the form of original issue discount) in respect of its pro rata share
of the interest accruing on the Junior Subordinated Debentures held by the Trust
on a daily basis under the constant yield method, regardless of whether or not
cash is distributed on the Preferred Securities. Accordingly, if we declare a
deferral period, holders would not receive cash to pay the tax on such income
until the end of the deferral period.
A holder who sells Preferred Securities will recognize income on the unpaid
distributions up to the date of sale. Such income will increase a holder's tax
basis in the Preferred Securities, offset by any paid distributions. If we elect
to exercise our deferral right, the market price of the Preferred Securities is
likely to be adversely affected. In the event the sale price does not accurately
reflect the accrual of unpaid distributions, the holder may recognize a capital
loss on the sale but would accrue regular income on the unpaid distributions. In
general, an individual taxpayer may only offset $3,000 of capital losses against
regular income during any year. See "Certain Federal Income Tax
Considerations -- Original Issue Discount" and "-- Sales and Redemption of
Preferred Securities."
WE MAY REDEEM THE PREFERRED SECURITIES UPON THE OCCURRENCE OF CERTAIN EVENTS
Upon the occurrence and during the continuation of a Tax Event, an Investment
Company Event or a Capital Treatment Event, each as defined below, we have the
right to redeem at par the Junior Subordinated Debentures in whole (but not in
part) and therefore cause the Trust to redeem the Preferred Securities. If then
required under applicable guidelines or policies of the Federal Reserve, we will
need the Federal Reserve's approval to do this. See "Description of the
Preferred Securities -- Redemption."
In general, a "Tax Event" means any change in the laws or regulations which
poses a substantial risk that the Preferred Securities might lose their special
tax treatment, an "Investment Company Event" means any change in the laws or
regulations which require the Trust to be registered under the Investment
Company Act and a "Capital Treatment Event" means any change in the laws or
regulations which poses a substantial risk that we will not be able to treat the
Preferred Securities as Tier 1 capital for purposes of the capital adequacy
guidelines of the Federal Reserve. For a more precise definition of these terms,
see "Description of Junior Subordinated Debentures -- Optional Redemption."
POSSIBLE TAX LAW CHANGES AFFECTING PREFERRED SECURITIES
It has been reported that the IRS recently challenged another company's
deduction for interest paid on a debt instrument similar in some respects to the
Junior Subordinated Debentures and issued to an entity similar to the trust.
Based on available information, we do not believe that this challenge will
affect our ability to deduct interest payments on our Junior Subordinated
Debentures. However, you should be aware that further developments favoring the
IRS's challenge, or other unrelated developments, could cause a Tax Event.
In addition, certain legislative proposals were made in 1996 and 1997 which, if
enacted, would have retroactively affected the ability of issuers to deduct
interest paid on securities similar to the Junior Subordinated Debentures. These
proposals were not, however, incorporated into the legislation enacted on August
5, 1997 as the Taxpayer Relief Act of 1997. Nevertheless, there can be no
assurance that other legislation enacted after the date of this Prospectus will
not otherwise adversely affect our ability to deduct the interest payable on the
Junior Subordinated Debentures and thereby result in early redemption for
22
<PAGE> 24
a Tax Event. See "Certain Federal Income Tax Considerations -- Possible Tax Law
Changes."
WE MAY DISSOLVE THE TRUST AND DISTRIBUTE THE JUNIOR SUBORDINATED DEBENTURES TO
YOU
We have the right at any time to dissolve the Trust and cause the Trust to
distribute the Junior Subordinated Debentures to you, subject to the receipt of
any required prior approval of the Federal Reserve. Because you may receive
Junior Subordinated Debentures in liquidation of the Trust, if you choose to
invest in the Preferred Securities you should be prepared to hold the Junior
Subordinated Debentures. Therefore you should carefully review all the
information regarding the Junior Subordinated Debentures contained in this
Prospectus. See "Description of Preferred Securities -- Exchange of Preferred
Securities for Junior Subordinated Debentures" and "Description of Junior
Subordinated Debentures."
WE MAY OPERATE WITH FEW RESTRICTIONS UNDER THE INDENTURE GOVERNING THE JUNIOR
SUBORDINATED DEBENTURES
The Junior Subordinated Notes Indenture and the Trust Agreement governing the
Trust do not limit our operations or provide protection in the event of a
material adverse change in our financial condition or results of operations.
Additionally, these instruments do not limit our ability to incur additional
indebtedness. Therefore, you should not consider these instruments to be a
significant factor in evaluating whether we will be able to comply with our
obligations.
THE PREFERRED SECURITIES HAVE LIMITED VOTING RIGHTS
We will hold all the Common Securities of the Trust. These securities give us
the right to control nearly all aspects of the administration, operation or
management of the Trust, including selection and removal of the Administrators
of the Trust. The Preferred Securities, on the other hand, will generally have
no voting rights. As a holder of the Preferred Securities you will be able to
vote only on matters relating to the modification of the terms of the Preferred
Securities or Junior Subordinated Debentures, the acceleration of payments and
certain other matters described in this Prospectus. In addition, if we default
under the Junior Subordinated Debentures or if the Property Trustee of the Trust
fails to perform certain acts required of it, the holders of a majority of the
outstanding Preferred Securities will be able to remove the Property Trustee and
the trustee under the Indenture. See "Description of Preferred
Securities -- Regarding the Trustees of the Trust -- Removal and Appointment of
Successors" and " -- Voting Rights; Amendment of the Trust Agreement."
USE OF PROCEEDS
The Trust will use all of the proceeds from the sale of Preferred Securities to
purchase our Junior Subordinated Debentures. We estimate that we will have net
proceeds from the sale of our common stock and Junior Subordinated Debentures,
after paying expenses related to this offering, of approximately $7.1 million
(assuming an offering price of $27.00 per Unit). In addition, we expect to
receive $1.1 million from the exercise of warrants held by California Community
LLC. Of this total, we intend to use approximately $6.5 million to
23
<PAGE> 25
help the Bank finance the acquisition of AIB, approximately $653,000 to redeem
94,757 shares of our 10% Series A Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock") and approximately $1.1 million for general working
capital purposes, including a reserve for the payment of interest on the Junior
Subordinated Debentures.
ACCOUNTING TREATMENT
The Trust will be treated as our subsidiary and, accordingly, the accounts of
the Trust will be included in our consolidated financial statements. The
Preferred Securities will be presented as a separate line item in our
consolidated balance sheet under the caption "Company obligated mandatorily
redeemable Preferred Securities of subsidiary trust holding solely Junior
Subordinated Debentures," and appropriate disclosures about the Preferred
Securities, the Guarantee and the Junior Subordinated Debentures will be
included in the notes to our consolidated financial statements. For financial
reporting purposes, we will record distributions payable on the Preferred
Securities and amortization of the capitalized offering costs as expense in our
consolidated statement of income.
24
<PAGE> 26
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1998 and
as adjusted to give effect to:
1. The issuance and sale of 300,000 shares of common stock at an
assumed offering price of $7.00 per share, less underwriting discounts and
expenses,
2. The issuance and sale of $6.0 million aggregate principal amount of
Junior Subordinated Debentures by us to the Trust less underwriting
discounts and expenses,
3. The payment of $6.5 million to the Bank to help it purchase AIB for
approximately $7.3 million, including expenses and adjustments,
4. The assumed conversion of 11,118 shares of our Series A Preferred
Stock into 11,118 shares of our common stock, and the redemption of 94,757
shares of our Series A Preferred Stock for an aggregate of $653,000, and
5. The exercise by California Community LLC of 225,000 warrants to
purchase common stock at $5.00 per share.
For additional information regarding these adjustments, see "Unaudited Pro Forma
Financial Information," "Description of Capital Stock -- Preferred Stock" and
"Beneficial Ownership of Common Stock -- California Community LLC."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
NOTE PAYABLE................................................ $1,000 $ 1,000
COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY JUNIOR
SUBORDINATED DEBENTURES(1)................................ -- 6,000
SHAREHOLDERS' EQUITY:
Preferred Stock; no par value, $6.75 liquidation preference;
5,000,000 shares authorized; 423,500 shares outstanding
(actual); 317,625 shares outstanding (as adjusted)........ 2,658 1,993
Common Stock; 10,000,000 shares authorized and 664,551
shares outstanding (actual); 1,200,669 shares outstanding
(as adjusted)............................................. 3,424 6,474
Retained Earnings........................................... 14 (44)
Accumulated Other Comprehensive Income -- Net Unrealized
Depreciation in Investment Securities Available for
Sale...................................................... (51) (51)
------ -------
TOTAL SHAREHOLDERS' EQUITY........................ 6,045 8,372
------ -------
TOTAL CAPITALIZATION (EXCLUDING DEPOSITS)......... $7,045 $15,372
====== =======
</TABLE>
<TABLE>
<CAPTION>
MINIMUM(2) WELL-CAPITALIZED ACTUAL AS ADJUSTED
---------- ---------------- ------ -----------
<S> <C> <C> <C> <C>
BANK-ONLY REGULATORY CAPITAL
RATIOS:
Total capital to risk-weighted
assets........................ 8% 10% 10.68% 11.46%
Tier 1 capital to risk-weighted
assets........................ 4% 6% 7.73% 9.20%
Tier 1 capital to average total
assets........................ 4% 5% 5.33% 6.23%
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
MINIMUM(2) ACTUAL AS ADJUSTED
---------- ------ -----------
<S> <C> <C> <C>
CONSOLIDATED REGULATORY CAPITAL RATIOS:
Total capital to risk-weighted assets.......... 8% 9.45% 12.72%
Tier 1 capital to risk-weighted assets......... 4% 5.38% 6.60%
Tier 1 capital to average assets............... 4% 3.74% 4.48%
</TABLE>
- -------------------------
(1) The Trust, a wholly-owned subsidiary of First Coastal, will hold, as its
sole asset, $6.8 million principal amount of Junior Subordinated Debentures,
of which $6.6 million will be purchased with the proceeds of the Preferred
Securities issued by the Trust. The remaining $0.2 million of Junior
Subordinated Debentures will be purchased with the proceeds of the Common
Securities issued by the Trust to First Coastal, which will own all of the
Common Securities.
(2) The minimum capital ratios, which currently apply to the Bank, will apply to
First Coastal on a consolidated basis only when our total consolidated
assets exceed $150 million. See "Supervision and Regulation -- Capital
Adequacy" and "Risk Factors -- Risk Factors Relating to First Coastal -- We
Face Certain Capital Requirements."
26
<PAGE> 28
MARKET PRICE OF COMMON STOCK
AND DIVIDEND POLICY
Since June 1997, our common stock has been traded from time to time in
unreported private transactions and on the OTC Bulletin Board under the symbol
"FCLA." Although we are aware of very little trading in our common stock, we
believe our common stock has traded in 1998 at prices ranging from $5.63 to
$8.13 and in 1997 at prices ranging from $5.40 to $6.00 per share (as adjusted
for the Reverse Stock Split). These prices reflect only transactions reported to
us by market makers in our common stock and may not be representative of all
trades during the past year. We have not attempted to verify the accuracy of
sales information reported to us by third parties.
The Underwriting Agreement requires us to apply to have our Units, common stock
and Preferred Securities quoted on the Nasdaq SmallCap Market if in the future
we meet its requirements. Even after the offering and the proposed distribution
by California Community LLC of its common stock to its members, we will not meet
the requirements for listing on the Nasdaq Small Cap Market, primarily because
our non-affiliates will not hold at least one million shares of our common
stock. There can be no assurance that we will ever meet this, or some of the
other requirements of the Nasdaq SmallCap Market.
To date, we have not paid any cash dividends on our common stock and it is
unlikely that we will do so in the foreseeable future. In addition, the ability
of the Bank to pay dividends to us is limited by law. See "Risk Factors -- Risk
Factors Relating to First Coastal -- Our Holding Company Structure Limits our
Liquidity and Ability to Pay Dividends," "Risk Factors -- Risk Factors Relating
to the Common Stock -- We Do Not Intend to Pay Dividends on the Common Stock,"
and "Supervision and Regulation -- Dividend Regulation".
We pay regular dividends on our 423,500 outstanding shares of Series A Preferred
Stock but we intend to call up to 94,757 shares for redemption using a portion
of the proceeds of this offering. Each share of Series A Preferred Stock
currently pays dividends at an annual rate per share of $0.675, or 10% of its
stated liquidation preference. See "Description of Capital Stock -- Preferred
Stock."
27
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF FIRST COASTAL
HISTORY
We specialize in developing personalized banking relationships with small
businesses, executives and professionals in the local community. Over the past
two years, with the arrival of a new management group headed by Don M. Griffith,
we have returned to profitability, turning a net loss of $124,000 for the year
ended December 31, 1996 to net income of $60,000 for the year ended December 31,
1997 and $241,000 for the nine months ended September 30, 1998. In addition, we
have grown our assets from $25.9 million as of December 31, 1996 to $81.1
million as of September 30, 1998, approximately 60% of which was accounted for
by internal growth and 40% by a bank acquisition. We have also agreed to
purchase American Independent Bank, N.A., which would add approximately $37.6
million to our total assets with significant opportunities for cost savings and
growth.
During 1997, we reorganized into a holding company ownership structure by
exchanging the shares of the Bank's capital stock for the capital stock of First
Coastal, and the shareholders of the Bank became shareholders of First Coastal.
There was no cash involved in this transaction, which was accounted for as a
pooling of interest, and our consolidated financial statements contained in this
Prospectus have been restated to give full effect to this transaction.
In June 1997, we acquired Marina Bank for approximately $4.1 million in cash
(including transaction costs). Marina Bank had total assets of approximately
$20.9 million when we acquired it. The acquisition was accounted for using the
purchase method of accounting. Goodwill arising from the transaction totaled
approximately $2.1 million and is being amortized over fifteen years on a
straight-line basis. This acquisition was funded in part by a public offering of
common stock and Series A Preferred Stock totaling $3.1 million, net of all
costs.
As of July 1, 1997, we adjusted our capital accounts through a
quasi-reorganization and thereby eliminated our accumulated deficit and
unrecognized loss on available for sale securities through a reduction of our
capital account by the same amount.
BASIS OF PRESENTATION
The following discussion and analysis is intended to assist in an understanding
of the significant factors that influenced our financial condition at September
30, 1998 as compared to December 31, 1997 and at December 31, 1997 as compared
to December 31, 1996. The following discussion will also analyze our results of
operations for the nine months ended September 30, 1998 as compared to September
30, 1997 and for the year ended December 31, 1997 as compared to December 31,
1996. The discussion and analysis should be read in conjunction with our
financial statements and corresponding notes included in the back part of this
Prospectus.
OVERVIEW OF FIRST NINE MONTHS OF 1998
We earned $241,000 in the first nine months of 1998 compared to $6,000 for the
same period in 1997 and $60,000 for the entire year of 1997. This significant
increase was a
28
<PAGE> 30
combination of the acquisition of Marina Bank in late June of 1997 as well as
aggressive cost and balance sheet management.
During 1998 we also experienced significant asset growth. Total assets increased
$25.0 million from $56.1 million at December 31, 1997 to $81.1 million at
September 30, 1998. This increase was funded by service area deposit growth of
$12.8 million and the acceptance of an additional $14.8 million in brokered
deposits. The increase in assets was primarily due to an increase in loans of
$16.3 million (including $10.5 million in residential loans purchased from other
institutions) and a $11.2 million increase in federal funds, offset by a
reduction of $4.1 million in investment securities.
ASSETS
During the first nine months of 1998 we continued to maximize the leverage of
our capital by increasing total assets $25.0 million to $81.1 million. We
supplemented loan demand in our market area by purchasing loans from other
institutions and investing in federal funds.
From December 31, 1996 to December 31, 1997, we increased our total assets by
$30.2 million from $25.9 million to $56.1 million. This increase was due
primarily to the $20.9 million in assets obtained from the acquisition of Marina
Bank as well as by strong economic growth in the communities we serve. This
asset growth was primarily funded by an increase in deposits of $22.4 million,
comprised of $18.6 million from the acquisition of Marina Bank and $1.3 million
in brokered deposits, as well as the addition of $4.6 million in repurchase
agreements.
29
<PAGE> 31
The following tables present, for the periods indicated, the distribution of
average assets, liabilities and shareholders' equity, as well as the total
dollar amounts of interest income from average interest-earning assets and the
resultant yields, and the dollar amounts of interest expense and average
interest-bearing liabilities, expressed both in dollars and in rates. Nonaccrual
loans are included in the calculation of the average balances of loans, and
interest not accrued is excluded.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1998 1997
----------------------------- -----------------------------
AVERAGE AVERAGE
INTEREST YIELD OR INTEREST YIELD OR
AVERAGE EARNED RATE AVERAGE EARNED RATE
BALANCE OR PAID PAID BALANCE OR PAID PAID
------- -------- -------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Investment Securities....... $ 9,894 $ 480 6.47% $ 7,122 $ 336 6.29%
Federal Funds Sold.......... 6,169 250 5.40% 1,732 71 5.47%
Other Earning Assets........ -- -- -- 37 -- --
Loans....................... 48,599 3,224 8.85% 23,478 1,752 9.95%
------- ------ ------- ------
Total
Interest-Earning
Assets........... 64,662 3,954 8.15% 32,369 2,159 8.89%
Cash and Due From Bank........ 3,384 2,825
Premises and Equipment........ 442 269
OREO.......................... 286 15
Other Assets.................. 3,358 1,379
Allowance for Loan Losses..... (574) (516)
------- -------
Total Assets........ $71,558 $36,341
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW and Money Market........ $12,954 $ 254 2.61% $ 8,953 $ 143 2.13%
Savings..................... 4,032 70 2.31% 3,927 68 2.31%
Time Deposits under
$100,000................. 9,066 360 5.29% 6,644 271 5.44%
Time Deposits of $100,000 or
More..................... 20,254 866 5.70% 2,561 100 5.21%
Borrowed Funds.............. 2,152 101 6.26% 15 2 17.78%
------- ------ ------- ------
Total
Interest-Bearing
Liabilities...... 48,458 1,651 4.54% 22,100 584 3.52%
------ ------
Demand Deposits............... 16,638 9,835
Other Liabilities............. 536 403
Shareholders' Equity.......... 5,926 4,003
------- -------
Total Liabilities
and Shareholders'
Equity........... $71,558 $36,341
======= =======
Net Interest Income........... $2,303 $1,575
====== ======
Net Yield on Interest-Earning
Assets...................... 4.75% 6.49%
==== =====
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
AVERAGE AVERAGE
INTEREST YIELD OR INTEREST YIELD OR
AVERAGE EARNED RATE AVERAGE EARNED RATE
BALANCE OR PAID PAID BALANCE OR PAID PAID
------- -------- -------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Investment Securities........... $ 6,854 $ 428 6.24% $ 2,639 $ 147 5.57%
Federal Funds Sold.............. 2,066 114 5.52% 4,514 233 5.16%
Other Earning Assets............ 28 3 10.71% 105 5 4.76%
Loans........................... 26,554 2,627 9.89% 15,639 1,636 10.46%
------- ------ ------- ------
Total Interest-Earning
Assets..................... 35,502 3,172 8.93% 22,897 2,021 8.83%
Cash and Due From Bank............ 2,829 2,194
Premises and Equipment............ 309 131
OREO.............................. 30 249
Other Assets...................... 1,781 278
Allowance for Loan Losses......... (563) (332)
------- -------
Total Assets................. $39,888 $25,417
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW and Money Market............ $ 9,551 $ 212 2.22% $ 8,086 $ 181 2.24%
Savings......................... 4,045 94 2.32% 3,710 87 2.35%
Time Deposits under $100,000.... 6,297 332 5.27% 3,179 169 5.32%
Time Deposits of $100,000 or
More......................... 4,363 243 5.57% 748 39 5.21%
Borrowed Funds.................. 23 6 26.09% -- --
------- ------ ------- ------
Total Interest-Bearing
Liabilities................ 24,279 887 3.65% 15,723 476 3.03%
------ ------
Demand Deposits................... 10,822 7,443
Other Liabilities................. 289 250
Shareholders' Equity.............. 4,498 2,001
------- -------
Total Liabilities and
Shareholders' Equity....... $39,888 $25,417
======= =======
Net Interest Income............... $2,285 $1,545
====== ======
Net Yield on Interest-Earning
Assets.......................... 6.44% 6.75%
===== =====
</TABLE>
NET INTEREST INCOME
The principal component of our earnings is net interest income. Net interest
income is the difference between the interest we earn on our loans and
investments and the interest we pay on deposits and other interest-bearing
liabilities.
Our net interest income is affected by changes in the amount and mix of our
interest-earning assets and interest-bearing liabilities, referred to as a
"volume change". It is also affected by changes in the yields we earn on
interest-earning assets and rates we pay on interest-bearing deposits and other
borrowed funds, referred to as a "rate change".
31
<PAGE> 33
The following table sets forth changes in interest income and interest expense
for the major categories of our interest-earning assets and interest-bearing
liabilities, and the amount of change attributable to volume and rate changes
for the years indicated. Changes not solely attributable to rate or volume have
been allocated to volume and rate changes in proportion to the relationship of
the absolute dollar amounts of the changes in each.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
OVER YEAR ENDED DECEMBER 31, 1997
NINE MONTHS ENDED OVER
SEPTEMBER 30, 1997 YEAR ENDED DECEMBER 31, 1996
------------------------- ------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE DUE TO CHANGE
------------------------- ------------------------------
VOLUME RATE CHANGE VOLUME RATE CHANGE
------ ----- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment Securities... $ 134 $ 10 $ 144 $ 261 $ 20 $ 281
Federal Funds Sold...... 180 (1) 179 (134) 15 (119)
Other Earning Assets.... -- -- -- (6) 4 (2)
Loans................... 1,802 (330) 1,472 1,084 (93) 991
------ ----- ------ ------ ---- ------
Total Interest
Income....... 2,116 (321) 1,795 1,205 (54) 1,151
INTEREST-BEARING
LIABILITIES:
Interest-Bearing
Demand............... 74 37 111 33 (2) 31
Savings................. 2 -- 2 8 (1) 7
Time Deposits under
$100,000............. 88 1 89 164 (1) 163
Time Deposits $100,000
or More.............. 755 11 766 201 3 204
Borrowed Funds.......... 102 (3) 99 6 -- 6
------ ----- ------ ------ ---- ------
Total Interest
Expense...... 1,021 46 1,067 412 (1) 411
------ ----- ------ ------ ---- ------
Interest Differential or
Net Interest Income..... $1,095 $(367) $ 728 $ 793 $(53) $ 740
====== ===== ====== ====== ==== ======
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
During the first nine months of 1998, our net interest income was $2.3 million
compared to $1.6 million for the same period of 1997. This increase was
primarily due to a significant increase in our average interest-earning assets
partially offset by a decline in the net interest yield on these assets. Our
strategy to maximize the leverage of our capital by significantly increasing
earning assets required us to increase our funding through higher cost sources,
such as brokered time deposits. This narrowed the net yield on our earning
assets from 6.49% as of September 30, 1997 to 4.75% as of September 30, 1998.
We believe this decline in the net yield on interest-earning assets is temporary
and should reverse in future periods. We plan to accomplish this by replacing
our higher-cost brokered deposits and low yielding real estate loans with core
deposits and commercial loans generated from our relationship banking strategy.
32
<PAGE> 34
Interest income increased $1.8 million from $2.2 million for the first nine
months of 1997 to $4.0 million for the same period in 1998 primarily due to the
increase in earning assets noted above. However, the yield on these assets
declined 74 basis points from 8.89% as of September 30, 1997 to 8.15% as of
September 30, 1998. This decline was caused by a significant shift in the mix of
interest-earning assets at the Bank to real estate secured loans. These real
estate loans accounted for a majority of the growth ($25.1 million) in our
average loans. Real estate secured loans generally have lower rates than other
types of lending. This shift contributed to the 110 basis point decrease in
yields on our loan portfolio.
Interest expense increased $1.1 million for the first nine months of 1998 over
the corresponding period of 1997 to $1.7 million. This increase was
significantly impacted by the $23.4 million increase in interest-bearing
liabilities required to fund our asset growth, as discussed above. Of this
increase in interest-bearing liabilities, $16.0 million was from brokered
deposits and other borrowings. The higher rates associated with these funding
sources was the primary reason the overall rates we paid on interest-bearing
liabilities increased by 102 basis points from 3.52% in 1997 to 4.54% as of
September 30, 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO DECEMBER 31, 1996
For the year ended 1997, our net interest income was $2.3 million, an increase
of $740,000 or 47.9% compared to $1.5 million for the year ended 1996. This
increase was comprised of an increase in interest income of $1.2 million reduced
by increased interest expense of $411,000. These increases were primarily the
result of the Marina Bank acquisition.
The increase in our interest income was generated primarily by the increased
volume of average interest-earning assets which were $35.5 million as of
December 31, 1997 compared to $22.9 million as of December 31, 1996. We also
experienced a slight increase in the overall yield on these assets as the yields
increased from 8.83% as of December 31, 1996 to 8.93% as of December 31, 1997.
Our interest expense was also impacted significantly by the acquisition of
Marina Bank and the resulting increase in the volume of average interest-bearing
liabilities which increased from $15.7 million as of December 31, 1996 to $24.3
million as of December 31, 1997. We also experienced a significant increase in
the rate paid on these liabilities to 3.65% as of December 31, 1997 compared to
3.03% as of December 31, 1996. This was primarily due to the increased reliance
of time deposits over $100,000, which equaled 4.8% of total interest-bearing
liabilities as of December 31, 1996 and 18.0% as of December 31, 1997. The rate
paid on these deposits also increased 36 basis points from 5.21% as of December
31, 1996 to 5.57% as of December 31, 1997.
PROVISION FOR LOAN LOSSES
We make provisions for loan losses to bring our total allowance for loan losses
to a level we deem appropriate. We base our determination on such factors as our
historical experience, the volume and type of lending we conduct, the amount of
our nonperforming loans, regulatory policies, general economic conditions, and
other factors related to the collectibility of loans in our portfolio. The
amount we provide for loan losses is charged to earnings. See "Business of First
Coastal -- Asset Quality" and "-- Allowance for Loan Losses". For the nine
months ended September 30, 1998, our provision for loan losses was
33
<PAGE> 35
$10,000 compared to $25,000 for the same period in 1997. For the year ended
1997, our provision was $25,000 compared to $39,000 for 1996.
NONINTEREST INCOME
For the nine months ended September 30, 1998, our noninterest income was
$416,000 compared to $131,000 for the same period in 1997. This increase was
primarily the result of giving full effect during the entire period to the
acquisition of Marina Bank as well as $121,000 of gains recognized in 1998 from
the sale of loans and investments.
Noninterest income remained fairly stable for the year ended 1997 at $245,000
compared to $264,000 in 1996. The $19,000 decrease was comprised of a drop in
the gain from the sale of loans offset by an increase in service charges and
fees resulting from the Marina Bank acquisition.
NONINTEREST EXPENSE
Noninterest expense for the nine months ended September 30, 1998 was $2.2
million, an increase of $600,000 from the $1.6 million for the same period in
1997. This change was comprised of increases in operating costs associated with
the branch acquired in the Marina Bank acquisition and $65,000 in additional
goodwill amortization, also from the Marina Bank acquisition.
For the year ended 1997, noninterest expense was $2.4 million, a $457,000 or 24%
increase from the 1996 amount of $1.9 million. This change was comprised of
increases in operating costs associated with the branch acquired in the Marina
Bank acquisition and $70,000 in goodwill amortization, also from the Marina Bank
acquisition.
INCOME TAXES
During 1996 and the first half of 1997, we recorded income tax expense equal
only to the minimum California franchise tax. Subsequent to the
quasi-reorganization on July 1, 1997, we recorded a $94,000 provision for income
taxes. This resulted in an effective tax rate of approximately 30% on income
before income taxes and non-deductible goodwill. During the nine months ended
September 30, 1998, we recorded a $245,000 provision for income taxes. This
resulted in an effective tax rate of approximately 42% on income before income
taxes and non-deductible goodwill. See also Notes F and M to our consolidated
financial statements included in this Prospectus for more information on income
taxes.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The objective of our asset/liability strategy is to manage liquidity and
interest rate risks to ensure the safety and soundness of our capital base,
while maintaining adequate net interest margins and spreads to provide an
appropriate return to our shareholders.
The Bank's liquidity, which primarily represents our ability to meet
fluctuations in deposit levels and provide for customers' credit needs, is
managed through various funding strategies that reflect the maturity structures
of the sources of funds being gathered and the assets being funded. The Bank's
liquidity is further augmented by payments of principal and interest on loans
and increases in short-term liabilities such as demand deposits, short-term
certificates of deposit, and overnight purchases of federal funds. Short-term
investments, primarily federal funds sold and reverse repurchase lines of credit
provided by our correspondent banks, are the primary means for providing
immediate
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<PAGE> 36
liquidity. In order to meet the Bank's liquidity requirements, we endeavor to
maintain an appropriate liquidity ratio. The liquidity ratio is equivalent to
the sum of cash and noninterest-earning deposits, interest-earning deposits,
federal funds sold, and investment securities, divided by deposits. As of
September 30, 1998, December 31, 1997 and December 31, 1996, the Bank's
liquidity ratio was 29.3%, 29.0% and 41.6%, respectively.
We depend on dividends from the Bank for liquidity to pay interest on our debt,
including the Junior Subordinated Debentures, and to pay any dividends. We
currently have outstanding a $1.0 million seven-year note, which accrues
interest at prime plus 1 1/2% (10% at September 30, 1998). We have pledged all
of the Bank's common stock as collateral for this note. The proceeds from this
note were loaned to the Bank, which invested it in available-for-sale
securities. We currently do not have any lines of credit. The ability of the
Bank to pay dividends to us is limited by federal law. See "Supervision and
Regulation -- Dividend Regulation".
The objectives of interest rate risk management are to control exposure of net
interest income to risks associated with interest rate movements in the market,
to achieve consistent growth in net interest income and to profit from favorable
market opportunities. Even with perfectly matched repricing of assets and
liabilities, risks remain in the form of prepayment of assets, timing lags in
adjusting certain assets and liabilities that have varying sensitivities to
market interest rates and basis risk.
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<PAGE> 37
The table below sets forth the interest rate sensitivity of our interest-earning
assets and interest-bearing liabilities as of September 30, 1998, using the
interest rate sensitivity gap ratio. For purposes of the following table, an
asset or liability is considered rate-sensitive within a specified period when
it can be repriced or matures within its contractual terms.
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPRICING
--------------------------------------------------
OVER THREE
MONTHS OVER
UP TO TO LESS ONE TO OVER
THREE THAN ONE FIVE FIVE
MONTHS YEAR YEAR YEARS TOTAL
------- ---------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment Securities....... $ 345 $ -- $ 3,385 $ 2,347 $ 6,077
Federal Funds Sold.......... 11,550 -- -- -- 11,550
Loans....................... 14,292 7,176 12,834 21,966 56,268
------- -------- ------- ------- -------
$26,187 $ 7,176 $16,219 $24,313 $73,895
======= ======== ======= ======= =======
INTEREST-BEARING LIABILITIES:
Money Market and NOW
Deposits................. $13,869 $ -- $ -- $ -- $13,869
Savings..................... 4,083 -- -- -- 4,083
Time Deposits............... 13,879 19,006 636 -- 33,521
Note Payable................ 1,000 -- -- -- 1,000
------- -------- ------- ------- -------
$32,831 $ 19,006 $ 636 $ -- $52,473
======= ======== ======= ======= =======
Interest Rate Sensitivity
Gap......................... $(6,644) $(11,836) $15,583 $24,313 $21,422
Cumulative Interest Rate
Sensitivity Gap............. $(6,644) $(18,474) $(2,891) $21,422 $21,422
Cumulative Interest Rate
Sensitivity Gap Ratio Based
on Total Assets............. (8.19)% (22.77)% (3.56)% 26.41% 26.41%
</TABLE>
Gap analysis attempts to capture interest rate risk, which is attributable to
the mismatching of interest rate sensitive assets and liabilities. The actual
impact of interest rate movements on our net interest income may differ from
that implied by any gap measurement, depending on the direction and magnitude of
the interest rate movements, the repricing characteristics of various on and
off-balance sheet instruments, as well as competitive pressures. These factors
are not fully reflected in the foregoing gap analysis and, as a result, the gap
report may not provide a complete assessment of our interest rate risk.
A generally negative cumulative gap value means that over the periods indicated
our liabilities will reprice slightly faster than our assets. This means
generally that, in a rising interest rate environment, net interest income can
be expected to decrease and that, in a declining interest rate environment, net
interest income can be expected to increase.
EFFECTS OF INFLATION
The impact of inflation on a financial institution can differ significantly from
that exerted on other companies. Banks, as financial intermediaries, have many
assets and liabilities
36
<PAGE> 38
which may move in concert with inflation both as to interest rates and value.
This is especially true for banks, such as us, with a high percentage of
interest rate-sensitive assets and liabilities. A bank can reduce the impact of
inflation if it can manage its interest rate sensitivity gap. We attempt to
structure our mix of financial instruments and manage our interest rate
sensitivity gap in order to minimize the potential adverse effects of inflation
or other market forces on its net interest income and, therefore, our earnings
and capital.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June of 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
establishing accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on the consistent
application of the financial-components approach. The implementation of this
statement did not have a material effect on our financial condition and results
of operations.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share". This
Statement established new standards for computing and presenting earnings per
share and requires all prior period earnings per share data be restated to
conform with the provisions of the statement. The implementation of this
statement did not have a material effect on our financial condition and results
of operations.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
This statement provides that all enterprises report comprehensive income as a
measure of overall performance. This new standard is effective for 1998 and is
not expected to have a material impact on our financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This statement changes the way public
companies report selected information about segments of their business in their
annual financial statements and require them to report selected segment
information in their quarterly reports issued to shareholders. This new standard
is effective for 1998 and is not expected to have a material impact on our
financial statements.
In February 1998, the FASB issued SFAS 132, "Employer's Disclosures about
Pensions and other Post-Retirement Benefits". This Statement standardizes the
disclosure requirements for pensions and other post-retirement benefits to the
extent practicable. This new standard is effective for 1998 and is not expected
to have a material impact on our financial reporting.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities". This Statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. This new
standard is effective for 2000 and is not expected to have a material impact on
our financial statements.
YEAR 2000 COMPLIANCE
OVERVIEW
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software and/or hardware may recognize a date using "00" as the
year 1900 rather than the year 2000.
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<PAGE> 39
This could result in a system failure or other disruption of operations and
impede normal business activities. In June 1996, the Federal Financial
Institutions Examination Council ("FFIEC") alerted the banking industry of the
serious challenges that would be encountered with Year 2000 issues. The OCC has
also implemented a plan to require compliance with Year 2000 issues and
regularly examines our progress.
OUR STATE OF READINESS
In accordance with OCC guidelines, we have developed a comprehensive plan which
we believe will result in timely and adequate modifications of our systems and
technology to address our Year 2000 issues, which contemplates all system
conversions and testing to be substantially completed by December 31, 1999. We
have completed a top-down assessment of our mission-critical and other systems
for Year 2000 compliance and are currently in the third and fourth of five
phases for compliance, "renovation and validation", as defined by the FFIEC. We
have tested our non-information technology systems, such as microprocessors
controlling our environmental and alarm systems, and found them to be Year 2000
compliant.
To determine the readiness of our customers, we have sent a questionnaire to,
and received responses from, each of our significant borrowers and depositors to
determine the extent of risk created by any failure by them to remediate their
own Year 2000 issues. Each borrower and depositor is categorized according to
their state of readiness based on their response to the questionnaire and our
review of the customer. We have set aside a Year 2000 contingency reserve of
$61,000 for the borrowers with high Year 2000 risk. We have also taken steps to
ensure liquidity for depositors with high Year 2000 risks. We will make a
re-assessment on each customer's risk on a regular basis.
To determine the readiness of our vendors, we have sent out a letter to each
vendor inquiring about their compliance with Year 2000. For those vendors that
have responded that they are Year 2000 compliant and that we have determined to
not have a material impact on the Bank's operations, no further work is
performed. For those vendors that have responded they are working towards Year
2000 compliance and that we have determined to be significant, including mission
critical vendors, we will follow up on a regular basis through 1999. These
vendors have advised us that they expect to be Year 2000 compliant prior to
December 31, 1999. If those vendors do not demonstrate compliance by a certain
date, we will seek other alternatives in accordance with our contingency plan,
which may include seeking replacement vendors.
OUR COSTS AND RISKS
A few of our computer hardware and software applications were modified or
replaced in order to maintain their functionality as the year 2000 approaches.
We have spent approximately $80,000 as of September 30, 1998 to address our Year
2000 issues and estimate our total costs over the three year period 1998 - 2000
to be approximately $125,000, which will come from our general funds. None of
these costs, however, are expected to materially impact our results of
operations in any one reporting period.
Ultimately, the potential impact of the year 2000 issue will depend not only on
the corrective measures we undertake, but also on the way in which the year 2000
issue is addressed by governmental agencies, businesses, and other entities who
provide data to us, receive data from us, or whose financial condition or
operational capability is important to
38
<PAGE> 40
us, such as suppliers or customers. At worst, our customers and vendors will
face severe Year 2000 issues, which may cause borrowers to become unable to
service their loans. We may also be required to replace non-compliant vendors
with more expensive Year 2000-compliant vendors. At this time we cannot
determine the financial effect on us if significant customer and/or vendor
remediation efforts are not resolved in a timely manner.
OUR CONTINGENCY PLANS
We have created a contingency plan which would take effect should there be
circumstances preventing timely implementation. We intend to hire an independent
consultant to review our mission critical systems by the end of the first
quarter of 1999, and if such systems have not become Year 2000 compliant, we
will retain a new vendor to resolve these issues. In addition, for each mission
critical system, we have identified alternate procedures to achieve a successful
resumption of business in case our computer systems, or those of our mission
critical vendors, fail, including developing a manual process for implementing
the system and identifying alternative vendors.
39
<PAGE> 41
BUSINESS OF FIRST COASTAL
GENERAL
We are the parent of First Coastal Bank, National Association (the "Bank"), a
national bank headquartered at 275 Main Street, El Segundo, California, which
commenced operations as a nationally chartered bank on November 29, 1984. We
were incorporated under the laws of the State of California on October 17, 1996,
and we conduct all of our business activities through the Bank. We currently
have no other subsidiaries. The Bank is a member of the Federal Reserve System
and its deposits are insured by the FDIC up to the maximum limits prescribed by
law.
The mission of the Bank is to offer relationship-oriented financial services and
to be a financial institution known for its quality, soundness and integrity.
In this section, the terms "we" and "our" refer to both First Coastal and the
Bank.
OUR BUSINESS STRATEGY
Our business strategy is to:
- Cater to small businesses, executives and professionals by offering quality,
personalized financial services which have become less available due to
consolidation in the banking industry.
- Build our deposit base and loan portfolio through service-oriented
relationship banking.
- Selectively acquire or merge with other banks to decrease unit costs and
expand our geographic presence, initially in the South Bay, West Los Angeles
and San Fernando Valley areas of Southern California.
WE SEE OPPORTUNITIES CREATED BY MERGERS IN THE BANKING INDUSTRY. We believe that
the rapid consolidation of banks and the formation of "mega-banks" has caused,
and will continue to cause, small business, executive and professional customers
to seek the service-oriented, customized and quality services which we offer.
According to the FDIC, the five largest financial institutions in Los Angeles
County hold more than half of all deposits in the region. Our Bank has a market
share of less than 0.1% of the large, growing and diverse Los Angeles County
market, which in 1997 had over $100 billion in total banking deposits, a
population of over 9.5 million and a per capita income of over $25,000. We
believe our strategy, if successfully executed, will allow us to grow faster
than the overall market. In addition, a very small shift in our market share
represents large potential growth from our small base.
INTERNAL GROWTH. Our internal growth strategy is primarily focused on "total
relationship banking", which means developing a personalized package of
financial services and providing superior service to customers with high
transactional needs. By focusing on customer relationships, we believe that we
fill a niche neglected by the larger banks.
Our target market consists of small businesses, executives and professionals in
the South Bay, West Los Angeles and San Fernando Valley areas of Southern
California. We have hired, and will continue to hire, highly motivated and
well-compensated business development officers to generate significant deposit
relationships. Our objective is to retain the most effective business
development team of any community bank in Southern
40
<PAGE> 42
California and to support them with quality financial products and exceptional
customer service. In addition, we have focused on cross-selling financial
products, such as money market and time deposits, to our relationship customers,
and we intend to introduce investment management services in the future. We
believe that our internal growth strategy sets us apart from other community
banks in the region.
We recognize that relationship banking may result in slower loan growth than
"loan production" banking, which places a premium on maximizing the number of
outstanding loans. Therefore, we supplement local relationship lending with
loans originated by a select group of low-cost local loan production agents,
which generally consists of well-secured commercial and real estate loans. We
seek to maximize the quality of these loans and will accept a lower fixed-rate
nominal loan yield for higher credit worthiness and security. In addition, we
occasionally purchase out-of-state loan pools consisting of well-seasoned single
family residential loans in order to create geographical diversification and to
generate a higher yield than our securities portfolio. We do not lend to hedge
funds or invest in foreign securities, which we believe minimizes our exposure
to international economic problems.
GROWTH THROUGH ACQUISITIONS. Acquisitions will continue to play a key role in
augmenting internal growth and lowering our unit costs. Due to our small size
and focus, we believe that we have the opportunity to significantly improve our
customer service as well as our operating efficiencies through synergies and
consolidation of administrative and certain routine operations. Our acquisition
objectives are to:
- Increase our return on capital by trimming redundant operations and thereby
lower operating expenses as a percentage of revenues.
- Increase our low-cost deposit base and geographic coverage.
- Leverage cross-selling opportunities and offer improved services to the
customers of the banks we acquire.
In accordance with this strategy, we are using part of the proceeds from this
offering to acquire American Independent Bank, N.A. See "The Proposed
Acquisition of American Independent Bank."
THE LOS ANGELES COUNTY ECONOMY
We operate primarily in Los Angeles County in the state of California. The
county covers 4,752 square miles and had a mid-1997 population of 9,524,600,
according to the Los Angeles Economic Development Corporation ("LAEDC"). The
county's 1997 population represented 28.9% of California's 1997's population of
32,957,000. The county's population would make it equivalent to the ninth
largest state in the nation, according to LAEDC. The county's population in 2005
is projected to grow to 10,528,000, an increase of 1,003,400 or 10.5% from 1997
to 2005, according to the Center for Continuing Study of the California Economy
("CCSCE").
In 1997, the county's per capita income of $25,368 remained slightly below
1990's per capita income level of $25,514. CCSCE projects the county's per
capita income to rise to between $27,075 to $29,753 in 2005, with a moderate
growth estimated at $28,164.
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<PAGE> 43
LENDING ACTIVITIES
We originate, purchase and sell loans, or participating interests in loans for
our own portfolio and for possible sale in the secondary market. Our loans
include single family residential loans, commercial business, commercial real
estate loans, Small Business Administration ("SBA") loans, and consumer loans.
The following table sets forth the composition of our loan portfolio by type of
loan at the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------
1998 1997 1996
------------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
LOANS:
Commercial................................ $ 4,303 $ 4,574 $ 2,150
Consumer.................................. 3,569 5,210 2,345
Construction Financing.................... 50 67 510
Real Estate -- Residential, 1 to 4
Units.................................. 26,853 13,778 2,460
Real Estate -- Other...................... 21,493 16,363 8,856
------- ------- --------
Total Loans....................... 56,268 39,992 16,321
Net Deferred Loan Costs (Fees).............. 57 (147) (61)
Allowance for Loan Losses................... (562) (615) (382)
------- ------- --------
Net Loans................................... $55,763 $39,230 $ 15,878
======= ======= ========
Commitments:
Standby Letters of Credit................. $ -- $ -- $ 25
Undisbursed Loans and Commitments to Grant
Loans.................................. 1,892 3,009 1,866
------- ------- --------
Total Commitments................. 1,892 3,009 1,866
======= ======= ========
</TABLE>
We make commercial loans to provide working capital, finance the purchase of
equipment and for other business purposes. These loans can be "short-term", with
maturities ranging from thirty days to one year, or "term loans" with maturities
normally ranging from one to twenty-five years. Short-term loans are generally
intended to finance current transactions and typically provide for periodic
principal payments, with interest payable monthly. Term loans normally provide
for floating interest rates, with monthly payments of both principal and
interest.
We make consumer loans to finance automobiles, various types of consumer goods,
and other personal purposes. Consumer loans generally provide for the monthly
payment of principal and interest. Most consumer loans are secured by the
personal property being purchased. At September 30, 1998, 53% of our consumer
loans were secured by automobiles, calculated by principal amount.
We make construction financing loans primarily as interim loans to finance the
construction of commercial and single family residential property. These loans
are typically short term. We do not make loans for speculative or tract housing
construction or for the acquisition of raw land and have made very few
construction loans in general.
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<PAGE> 44
Our 1 - 4 unit residential real estate loans consists primarily of single family
residential loans. We make these loans based on the borrower's cash flow and
secure the loan by a first or second deed of trust on the property. Our general
policy is to restrict our residential loans to no more than 80% of the appraised
value of the property. We offer both fixed and variable rate residential loans
with maturities extending up to 30 years. Additionally, in order to supplement
our loan portfolio and to enhance geographical diversity, we purchase single
family residential loans from other financial institutions. In order to minimize
prepayment risk, we have paid little or no premium for loan pools with the
following criteria:
- well-seasoned and well-collateralized conforming mortgages,
- borrowers with sound credit who demonstrate the ability to service the debt,
and
- a stable and consistent cash flow.
We review each loan within the pool and eliminate those individual loans which
do not meet our underwriting standards. As of December 31, 1997, these pool
loans totaled $8.8 million and were secured by residential properties in
Arizona. As of September 30, 1998, these loans increased to $19.4 million and
were secured by residential properties in Arizona ($9.0 million in loans), Maine
($6.9 million in loans) and Iowa ($3.5 million in loans). We do not service
these loans.
Our other real estate loans consists primarily of commercial and industrial real
estate loans. We make these loans based on the income generating capacity of the
property or the cash flow of the borrower. These loans are secured by the
property. Our general policy is to restrict these loans to no more than 75% of
the lower of the appraised value or the purchase price of the property. We offer
both fixed and variable rate loans with maturities which generally do not exceed
15 years, unless the loans are SBA loans secured by real estate or other
commercial real estate loans easily sold in the secondary market.
We also make SBA-guaranteed loans, the guaranteed portion of which may be resold
in the secondary market. We have in the past sold the guaranteed portion of our
SBA loans in the secondary market but retained the servicing rights for such SBA
loans. At December 31, 1997 and 1996, we serviced approximately $6.1 million and
$5.4 million, respectively, in SBA loans. We categorize SBA loans as Commercial
or Real Estate depending on the underlying collateral.
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<PAGE> 45
Many of our loans have floating rates tied to our base rate or other market rate
indicators, the majority of which are adjusted at least quarterly. The following
table shows the maturity of certain loan categories outstanding as of December
31, 1997:
<TABLE>
<CAPTION>
DUE IN DUE AFTER
ONE YEAR ONE YEAR TO DUE AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
-------- ----------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial........................ $1,740 $ 1,753 $ 1,081 $ 4,574
Consumer.......................... 80 3,959 1,171 5,210
Construction Financing............ 67 -- -- 67
Real Estate....................... 2.189 8,977 18,975 30,141
------ ------- ------- -------
Total................... $4,076 $14,689 $21,227 $39,992
====== ======= ======= =======
Floating Rate..................... $12,867
Fixed Rate........................ 27,125
-------
Total................... $39,992
=======
</TABLE>
ASSET QUALITY
The risk of nonpayment of loans is an inherent feature of the banking business.
That risk varies with the type and purpose of the loan, the collateral which is
utilized to secure payment, and ultimately, the credit worthiness of the
borrower. In order to minimize this credit risk, virtually all loans are
approved by the Loan Committee of the Board of Directors. Our Loan Committee is
comprised of directors and members of our senior management.
We grade our loans from "acceptable" to "loss", depending on credit quality,
with "acceptable" representing loans with an acceptable degree of risk given the
favorable aspects of the credit and with both primary and secondary sources of
repayment. Classified loans or substandard loans are ranked below "acceptable"
loans. As these loans are identified in our review process, we add them to our
internal watchlist and establish loss allowances for them. Additionally, our
loans are examined regularly by the OCC. We do not return a loan to accrual
status until it is brought current with respect to both principal and interest
payments, the loan is performing to current terms and conditions, the interest
rate is commensurate with market interest rates and future principal and
interest payments are no longer in doubt.
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<PAGE> 46
The following table provides information with respect to the components of our
nonperforming assets at the dates indicated:
<TABLE>
<CAPTION>
AT
DECEMBER 31,
AT ---------------
SEPTEMBER 30, 1998 1997 1996
------------------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-Accrual Loans................................. $ 403 $ 137 $ 213
Loans 90 Days Past Due and Still Accruing......... 54 10 --
Restructured Loans................................ 1,001 1,102 856
------ ------ ------
Total Nonperforming Loans............... 1,458 1,249 1,069
Other Real Estate Owned........................... 218 200 51
------ ------ ------
Total Nonperforming Assets.............. $1,676 $1,449 $1,120
====== ====== ======
Non-Accrual Loans as a Percentage of Total
Loans........................................... 0.72% 0.34% 1.31%
Accruing Loans 90 Days Past Due as a Percentage of
Total Loans..................................... 0.10% 0.03% --
Restructured Loans as a Percentage of Total
Loans........................................... 1.78% 2.76% 5.24%
------ ------ ------
Nonperforming Loans as a Percentage of Total
Loans........................................... 2.60% 3.13% 6.55%
====== ====== ======
Allowance for Loan Losses as a Percentage of
Nonperforming Loans............................. 38.55% 49.24% 35.73%
Nonperforming Assets as a Percentage of Total
Assets.......................................... 2.07% 2.58% 4.32%
</TABLE>
Restructured loans are those loans where we have made concessions in interest
rates or repayment terms to assist the borrower. Non-accrual loans are generally
loans which are past due 90 days or are loans that we believe the interest upon
which may not be collectible. At September 30, 1998 and December 31, 1997, the
majority of our non-accrual loans were secured by real estate. We recognized
income of $75,000 for the first nine months of 1998, $130,000 for the year ended
1997 and $76,000 for the year ended 1996 for cash interest payments on
restructured loans. Our interest income would have increased approximately
$23,800 for the first nine months of 1998, $29,000 for the year ended 1997 and
$53,000 for the year ended 1996 had all of these nonperforming loans performed
in accordance with their original terms and conditions.
Other real estate owned is acquired in satisfaction of loan receivables through
foreclosure or other means. We record these properties on an individual asset
basis at the estimated fair value less selling expenses.
45
<PAGE> 47
ALLOWANCE FOR LOAN LOSSES
The following table summarizes, for the periods indicated, changes in our
allowance for loan losses arising from loans charged off, recoveries on loans
previously charged off, additions to the allowance which have been charged to
operating expenses and certain ratios relating to the allowance for loan losses:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE NINE MONTHS DECEMBER 31,
ENDED SEPTEMBER 30, ------------------
1998 1997 1996
-------------------- ----- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES:
Balance at Beginning of Period........... $615 $382 $ 333
Actual Charge-offs:
Commercial............................. 42 192 108
Consumer............................... 93 14 45
Real Estate............................ 1 -- --
---- ---- ------
Total Charge-Offs.............. 136 206 153
---- ---- ------
LESS RECOVERIES:
Commercial............................. 70 3 162
Consumer............................... 3 35 1
Real Estate............................ -- -- --
---- ---- ------
Total Recoveries............... 73 38 163
---- ---- ------
Net Loans Charged Off (Recovered)........ 63 168 (10)
Provision for Loan Losses................ 10 25 39
Allowance on Loans Purchased from Marina
Bank................................... -- 376 --
---- ---- ------
Balance at End of Period................. $562 $615 $ 382
==== ==== ======
RATIOS:
Net Loans Charged Off (Recovered) to
Average Loans.......................... 0.17% 0.63% (0.06%)
Allowance for Loan Losses to Total
Loans.................................. 1.00% 1.54% 2.34%
</TABLE>
We consider our allowance for loan losses to be adequate to provide for losses
inherent in our loans. While we use available information to recognize losses on
loans and leases, future additions to our allowance may be necessary based on
changes in economic conditions. In addition, federal regulators, as an integral
part of their examination process, periodically review our allowance for loan
losses and may recommend additions based upon their evaluation of the portfolio
at the time of their examination. Accordingly, there can be no assurance that
our allowance for loan losses will be adequate to cover future loan losses or
that significant additions to the allowance for loan losses will not be required
in the future. Material additions to the allowance for loan losses would
decrease our earnings and capital and would thereby reduce our ability to pay
distributions on the Preferred Securities and dividends on the common stock,
among other adverse consequences.
46
<PAGE> 48
Our ratio of allowance for loan losses to total loans has declined significantly
from 2.34% in 1996, to 1.54% in 1997 to 1.00% in 1998. This decline is primarily
the result of our significant increase in lower-risk residential loans. These
loans accounted for 15% of our loans at December 31, 1996, 35% at December 31,
1997 and 48% of our loans at September 30, 1998.
The following table summarizes the allocation of the allowance for loan losses
by loan type for the periods indicated (dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
CATEGORY CATEGORY CATEGORY
ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
--------- ---------- --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial............ $103 7.6% $127 11.4% $ 16 13.2%
Consumer.............. 43 6.3% 33 13.0% 18 14.4%
Construction
Financing........... -- 0.1% -- 0.2% 4 3.1%
Real Estate --
Residential, 1 to 4
Units............... 104 47.7% 17 34.5% 15 15.1%
Real
Estate -- Other..... 177 38.3% 411 40.9% 186 54.3%
Unallocated........... 135 N/A 27 N/A 143 N/A
---- ----- ---- ----- ---- -----
$562 100.0% $615 100.0% $382 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
INVESTMENT ACTIVITY
We are required under federal regulations to maintain a minimum amount of liquid
assets and are also permitted to make certain other investments in securities.
We intend to hold securities in our investment portfolio to balance the overall
interest-rate sensitivities of our assets and liabilities.
Our investment decisions are primarily made by Don M. Griffith, our Chief
Executive Officer. Mr. Griffith acts within policies established by the Board of
Directors and reports monthly to the Board. Our investments can include
investment grade corporate securities, AAA-rated mortgage-backed securities,
federally insured certificates of deposit, U.S. treasury obligations and U.S.
Government agency-backed securities. Our goals are to obtain the highest yield
consistent with maintaining a stable overall asset and liability position while
limiting economic risks. In accordance with this policy we actively manage our
investment portfolio, the composition of which may shift substantially over
time. By September 30, 1998, for instance, we had shifted our investment focus
from government-backed securities almost entirely to privately-issued AAA-rated
mortgage-backed securities. Recently we have shifted our investing to
investment-grade corporate securities yielding a higher rate of return. For
further information concerning our investment securities portfolio, see Note B
of the notes to our consolidated financial statements included in this
Prospectus.
47
<PAGE> 49
The following table summarizes the amounts and distribution of our investment
securities held as of the dates indicated, and the weighted average yield as of
September 30, 1998. During 1996, we converted our entire investment portfolio
into the Available-for-Sale category to increase the portfolio's liquidity and
our planning opportunities.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 DECEMBER 31, DECEMBER 31,
-------------------------- 1997 1996
WEIGHTED ----------------- ---------------
BOOK MARKET AVERAGE BOOK MARKET BOOK MARKET
VALUE VALUE YIELD VALUE VALUE VALUE VALUE
------ ------ -------- ------- ------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Agencies:
One to Five Years......... $ -- $ -- -- $ 2,000 $ 2,000 $5,386 $5,363
Over Five to Ten Years.... -- -- -- 2,139 2,139 -- --
------ ------ ------- ------- ------ ------
Total U.S.
Agency......... -- -- -- 4,139 4,139 5,386 5,363
Mortgage-Backed
Securities................ 5,818 5,732 7.1% 5,870 5,875 1,488 1,483
Federal Home Loan Bank
Stock..................... 169 169 5.9%
Federal Reserve Stock....... 176 176 6.0% 169 169 88 88
------ ------ ------- ------- ------ ------
Total............. $6,163 $6,077 7.1% $10,178 $10,183 $6,962 $6,934
====== ====== ======= ======= ====== ======
</TABLE>
DEPOSITS
Deposits are the primary source of funding for our lending and investing needs.
Total deposits were $22.9 million at December 31, 1996, increased to $45.3
million at December 31, 1997 and reached $72.9 million at September 30, 1998.
Our total deposits increased in 1997 primarily from the acquisition of Marina
Bank.
The following table summarizes the distribution of our average deposits and the
average rates we paid for the periods indicated:
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED -------------------------------------
SEPTEMBER 30, 1998 1997 1996
------------------- ----------------- -----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
-------- -------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NOW......................... $ 6,774 1.83% $ 5,874 1.82% $ 5,742 2.04%
Savings Deposits............ 4,032 2.31% 4,045 2.32% 3,710 2.35%
Money Market Accounts....... 6,180 3.47% 3,677 2.85% 2,344 2.73%
TCD Less than $100,000...... 9,066 5.29% 6,297 5.27% 3,179 5.32%
TCD $100,000 or More........ 20,254 5.70% 4,363 5.57% 748 5.21%
------- ------- -------
Total
Interest-Bearing
Deposits....... 46,306 4.46% 24,256 3.64% 15,723 3.03%
Non Interest-Bearing Demand
Deposits.................. 16,638 10,822 7,443
------- ------- -------
Total Deposits.... $62,944 3.28% $35,078 2.51% $23,166 2.05%
======= ======= =======
</TABLE>
48
<PAGE> 50
Included in our time deposits of $100,000 or more are $14.8 million in brokered
deposits at September 30, 1998, which we have used to leverage our capital in
the short term as we generate a more stable relationship-based deposit base.
Brokered deposits can be a useful source of funds to quickly increase a bank's
funding. However, brokered deposits generally require us to pay higher rates
than we do for other deposits. Brokered deposits are also less stable, because
they are less likely to renew when they mature than other time deposits. For
these reasons, as the brokered deposits mature through March 31, 1999, we intend
to replace them with lower rate and more stable internally generated deposits,
which have grown significantly over the past nine months. Nevertheless, there
can be no assurance that we will be able to do so or that we will not accept
brokered deposits in the future.
The scheduled maturity distribution of our time deposits of $100,000 or greater,
as of September 30, 1998, was as follows (dollar amounts in thousands):
<TABLE>
<S> <C>
Three Months or Less.................. $ 9,638
Over Three Months to One Year......... 11,169
Over One Year to Three Years.......... 100
-------
Total....................... $20,907
=======
</TABLE>
At September 30, 1998, one customer relationship accounted for approximately 8%
of our demand deposits in the aggregate through numerous title and escrow
accounts. Subsequent to September 30, 1998, we made a business decision to
terminate this customer relationship in order to further diversify our deposits,
reduce our reliance on any one particular customer and more efficiently deploy
our human resources. We do not believe that the loss of this customer
relationship will significantly increase our overall funding costs or materially
adversely affect our financial position or results of operations.
REPURCHASE AGREEMENTS
We also utilize repurchase agreements from time to time to help achieve our
short-term liquidity goals. As of December 31, 1997, we had entered into
repurchase agreements totaling $4.6 million with two of our correspondent banks.
These agreements matured within 90 days and included interest at 5.9%. At
September 30, 1998, these balances had been paid in full.
EMPLOYEES
As of September 30, 1998, we employed 23 full-time equivalent employees. We
believe that we enjoy satisfactory relations with our employees.
As a method to control costs, we have reduced the number of people we directly
employ by outsourcing certain functions such as data processing, computer
maintenance, credit review, loan documentation and some loan origination
functions to outside vendors, including a company controlled by some of our
executives. See "Certain Transactions".
FACILITIES
We lease our El Segundo headquarters and branch office, consisting of
approximately 5,620 square feet of space, through 2013 for $8,149 per month. One
of our directors is a partner in the lessor. See "Certain Transactions".
49
<PAGE> 51
We own the 2,400 square feet building and lease the land that our Marina del Rey
branch is located upon under a lease that expires in 2000. The current monthly
rent is $5,734 plus property taxes and subject to annual increases equivalent to
the increase in the Consumer Price Index. Upon expiration of the lease, we
expect to move to an upgraded location in the vicinity.
COMPETITION
The banking business in California generally, and our market area specifically,
is highly competitive. A number of major banks have offices in our market area
and currently dominate loan and deposit origination. We compete for deposits and
loans principally with these major banks, as well as with savings and loan
associations, finance companies, credit unions and numerous other financial
institutions located in our market area.
We consider our primary service area to range from the South Bay to the San
Fernando Valley in western Los Angeles County. Our service area includes
numerous branches of larger banks and savings institutions.
Among the advantages which the major banks have over us are their ability to
finance extensive advertising campaigns and to offer the convenience of many
retail outlets. Many of the major banks operating in our service area offer
certain services, such as trust and international banking services, which we do
not offer directly. In addition, these larger banks usually have substantially
higher lending limits than we do.
LEGAL PROCEEDINGS
To the best of our knowledge, there are no pending or threatened legal
proceedings to which we are a defendant which may have a materially adverse
effect upon our business or property. However, the Bank is a plaintiff in
lawsuits to collect delinquent loans. These lawsuits are routine and incidental
to our business.
50
<PAGE> 52
DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
OFFICERS AND DIRECTORS
The directors of First Coastal and the executive officers and significant
employees of First Coastal and the Bank are the following persons:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
NAME(1) AGE TITLE APPOINTED(2)
------- --- ----- ------------
<S> <C> <C> <C>
Don M. Griffith............. 55 Chairman, President and Chief 1996
Executive Officer of First Coastal
and the Bank
Deborah A. Marsten.......... 45 Director, Secretary and Chief 1996
Financial Officer of First Coastal;
Director of the Bank
James F. Gardunio........... 48 Director of First Coastal; Director, 1996
Executive Vice President and Chief
Credit Officer of the Bank
Paul M. Deters.............. 58 Director of First Coastal and the 1983
Bank
Clifford J. Einstein........ 59 Director of First Coastal 1983/1992
Charles R. Fullerton........ 56 Director of First Coastal and the 1996
Bank
Carole J. LaCaze............ 55 Director of First Coastal and the 1996
Bank
Joseph H. Wender............ 54 Director of First Coastal 1997
Gordon Fong................. 31 Senior Vice President and Chief N/A
Financial Officer of the Bank
C. Edward Myska............. 53 Senior Vice President of the Bank N/A
Charles E. Brooks........... 62 (3) (3)
</TABLE>
- -------------------------
(1) The address for each is c/o First Coastal Bank, 275 Main Street, El Segundo,
California 90245.
(2) Indicates the year first appointed to the board of directors of First
Coastal or the Bank.
(3) Mr. Brooks will become Vice-Chairman of the Board for both First Coastal and
the Bank, and Executive Vice President of the Bank, upon the consummation of
the AIB acquisition.
Don M. Griffith is Chairman, President and Chief Executive Officer of First
Coastal and the Bank. Mr. Griffith is also Chief Executive Officer and Manager
of California Community LLC, which bought a majority interest in the Bank in
August, 1996. Mr. Griffith is also the Chairman of DataTech Management, Inc. and
the founder of D.M. Griffith & Co., Inc., an investment firm started with the
financial backing of Kohlberg, Kravis, Roberts & Co. in 1989 to invest in banks
and thrifts. Mr. Griffith was Chairman and Founder of Peninsula National Bank
from 1993 until the sale of his interest in Peninsula in 1995. Mr. Griffith was
previously a director of Palos Verdes National Bank, the predecessor to
Peninsula, which failed in 1993. Mr. Griffith's previous banking experience also
includes work at First Interstate Bancorp from 1979 to 1989, where he was
Executive Vice President and Chief Financial Officer, and Bank of America from
1974 to 1979, where he was in charge of the energy lending unit in Los Angeles.
A Los Angeles native, Mr. Griffith earned an MBA from the Harvard Graduate
School of Business
51
<PAGE> 53
Administration, a MA in Political Science from the University of California,
Berkeley and a BA in Political Science from Stanford.
Deborah A. Marsten is Director, Secretary and Chief Financial Officer of First
Coastal, and Director of the Bank. Ms. Marsten has over 27 years of experience
in banking and related businesses. Ms. Marsten is also a Manager of California
Community LLC and the President and Chief Executive Officer of DataTech
Management, Inc. From 1993 to 1996, Ms. Marsten was a consultant specializing in
bank operations. She was formerly both the Senior Vice President and Chief
Financial Officer of Western United National Bank from 1988 to 1993 and
Brentwood Square Savings and Loan Association from 1985 to 1988, and Vice
President and Cashier of both Mercantile National Bank and First Beverly Bank.
James F. Gardunio is a Director of First Coastal, and Director, Executive Vice
President and Chief Credit Officer of the Bank. From 1996 to 1997 he was Senior
Vice President and Chief Credit Officer of Aames Financial Corporation, a
company that originates, purchases and sells residential home loans. Previously,
Mr. Gardunio was Executive Vice President and Chief Credit Officer of Mercantile
National Bank from 1994 to 1996, Senior Vice President and Chief Credit Officer
of California Federal Bank from 1989 to 1994, as well as Vice President and
Senior Credit Officer of Wells Fargo Bank from 1982 to 1989. Mr. Gardunio is a
graduate of the Stanford University Graduate School of Business.
Paul M. Deters, Director of First Coastal and the Bank, is the Chairman of the
Board of Bussco, Inc. in Torrance, which manufactures electronic components for
the aerospace and computer industries. He is also Chairman and CEO of PDP
International, a manufacturer of electrical products used in the
telecommunications industry. Mr. Deters served as the founding Chairman of the
Bank for ten years.
Clifford J. Einstein, Director of First Coastal, is the Chairman, CEO, Managing
Partner, and Creative Director of Dailey & Associates, a division of Interpublic
Group of Companies, one of the world's largest advertising companies. He has
held these positions since 1994. Mr. Einstein is on the Advisory Board of the
Rape Treatment Center of Santa Monica. He is a member of the Screen Actors
Guild, the Directors Guild of America and of ASCAP, and is a trustee of the
Museum of Contemporary Art.
Charles R. Fullerton, Director of First Coastal and the Bank, is Co-owner and
Chief Financial Officer of Parsec Automation Corp., a software and engineering
service company located in Brea, California. In addition, he is the owner of
Fullerton & Co., a financial advisory firm in Long Beach, California, which
places debt and equity for small and medium sized companies. From 1986 to 1990,
Mr. Fullerton was Managing Director of First Interstate Venture Capital
Corporation, a capital fund that invested in small businesses. He earned his BA
in economics from Stanford University and his MBA from the University of
Southern California.
Carole J. LaCaze, Director of First Coastal and the Bank, is a Partner of LaCaze
Development Company, where she and her husband develop, hold and manage over two
million square feet of retail space in California and Nevada. Mrs. LaCaze
graduated with a BA from UCLA and completed graduate studies in education at
USC. She also serves on the boards of the Little Company of Mary Hospital
Foundation and the Hospice Foundation.
Joseph H. Wender, Director of First Coastal, is a Limited Partner of Goldman,
Sachs & Co., a full-service investment banking and financial services firm, and
works in its
52
<PAGE> 54
Financial Institutions Group. Mr. Wender joined Goldman, Sachs & Co. in 1971 and
rose to the position of Vice-President of the Investment Banking Division in
1975 and Partner in 1982. Mr. Wender is also a director of ISIS Pharmaceuticals
Inc. Mr. Wender is a graduate of Yale Law School and the Harvard Graduate School
of Business.
Gordon Fong is Senior Vice President and Chief Financial Officer of the Bank.
Prior to joining the Bank in September 1997, Mr. Fong was a Manager at Deloitte
& Touche, LLP where he specialized in the audits of community banks in the
Southern California area. Mr. Fong is a Certified Public Accountant and received
his BA from UCLA in Economics/Business.
C. Edward Myska is Senior Vice President of Business Development/Marketing of
the Bank. Mr. Myska has over 25 years of experience in the banking industry.
From 1987 to 1997, Mr. Myska was employed by Marathon National Bank as Senior
Vice President of Business Development. From 1979 to 1987, Mr. Myska was Vice
President of Banking Operations with First Federal Bank. Mr. Myska is a graduate
of California State University, Northridge where he received a BA degree in
Business Management and Sociology.
Charles E. Brooks will become the Vice-Chairman of the Board of First Coastal
and the Bank and Executive Vice President of the Bank upon the consummation of
the acquisition of AIB. Since 1987, Mr. Brooks has been the President and Chief
Executive Officer of AIB. Mr. Brooks has over 40 years of experience in banking,
finance and credit management and was previously Executive Vice President and
Loan Administrator of California Overseas Bank from 1985 to 1987. From 1964 to
1985, Mr. Brooks held various positions at Security Pacific National Bank,
eventually rising to the position of Vice President of the Correspondent Banking
Department. Mr. Brooks is a Director of Community Bankers of Southern
California.
ADMINISTRATORS OF THE TRUST
Gordon Fong and James F. Gardunio will serve as Administrators of the Trust. As
the holder of the Common Securities of the Trust, we have the right to appoint
the Administrators. The rights and duties of the Administrators are set forth in
the Trust Agreement, which is included as an exhibit to the Registration
Statement of which this Prospectus is a part, and generally consist of
administrative and ministerial duties associated with the operation of the
Trust. The Administrators shall not be trustees or, to the fullest extent
permitted by law, fiduciaries with respect to the Trust or the holders of the
Preferred Securities. The Administrators will not receive any additional
compensation for serving as Administrators.
EMPLOYMENT AGREEMENTS
We have entered into a three-year employment agreement with Mr. Gardunio
commencing on July 1, 1997. The agreement entitles Mr. Gardunio to annual
compensation of $100,000 and a signing bonus of $45,000 paid in installments
over the three-year term.
We have also entered into a three-year employment agreement with Mr. Myska
commencing on August 1, 1997. The agreement entitles Mr. Myska to annual
compensation of $80,000 and quarterly commissions based on a percentage of new
deposits Mr. Myska generates for us.
53
<PAGE> 55
Mr. Brooks will be subject to a three-year employment agreement effective upon
the consummation of our acquisition of AIB. Mr. Brooks will be entitled to an
annual base salary of $110,000, the use of an automobile and salary continuation
benefits upon his retirement.
REMUNERATION OF DIRECTORS AND OFFICERS
Our directors and officers receive no additional compensation for serving as
directors and officers of First Coastal. The Bank pays all salary and
compensation. The following table sets forth the aggregate annual remuneration
of certain of our executive officers as of September 30, 1998 for the 1998
fiscal year, and for fiscal years 1997 and 1996. No other officer had annual
salary and bonuses totaling more than $100,000, and none of these officers were
employed by us in fiscal year 1995.
<TABLE>
<CAPTION>
NAME AND ANNUAL
PRINCIPAL POSITION FISCAL YEAR SALARY BONUS
------------------ ----------- -------- -------
<S> <C> <C> <C>
Don M. Griffith, Chairman and Chief 1998 $112,920 --
Executive Officer of the Bank 1997 $112,920 --
1996(1) $ 47,050 --
James F. Gardunio, Executive Vice President 1998 $100,000 $15,000
and Chief Credit Officer of the Bank 1997(2) $ 50,000 $15,000
1996 N/A N/A
C. Edward Myska, Senior Vice President 1998 $ 80,000 $69,429(3)
and Business Development Officer of the Bank 1997(4) $ 33,333 $ 4,450
1996 N/A N/A
</TABLE>
- -------------------------
(1) Mr. Griffith's employment began on August 1, 1996.
(2) Mr. Gardunio's employment began on July 1, 1997.
(3) Consists of performance-based commissions earned to September 30, 1998 and
estimated through the end of the year.
(4) Mr. Myska's employment began on August 1, 1997.
DIRECTOR COMPENSATION
The members of our Board of Directors do not receive any fees for being a
director or attending meetings.
STOCK OPTION PLAN
Our shareholders approved an employee stock option plan in 1996, which provides
for the issuance of up to 85,000 options to directors, officers and key
employees. The exercise price of options issued under our stock option plan must
be at least 100% of the fair market value of the common stock on the date the
options are granted. As of September 30, 1998, options to purchase 60,000 shares
of common stock were outstanding, of which 12,000 are currently exercisable.
We believe that stock options serve as effective performance-based incentives
and expect to have a number of stock options equal to 10 - 15% of our common
stock outstanding at any time. Prior to the completion of this offering, we
intend to amend the stock option plan to increase the number of options eligible
to be issued.
54
<PAGE> 56
Except for our employee stock option plan, we do not have any other long-term
incentive plan. In fiscal year 1997, we granted options to purchase 5,000 shares
of common stock to James F. Gardunio at an exercise price of $5.75 per share.
These options expire November 20, 2007 and were the only options we granted in
fiscal year 1997. The following table sets forth certain information concerning
stock options granted during fiscal year 1998 as of September 30, 1998. No stock
options were exercised during fiscal years 1997 or 1998.
<TABLE>
<CAPTION>
PERCENT OF
OPTIONS TOTAL OPTIONS
GRANTED IN GRANTED IN
NAME OF HOLDER 1998 1998 EXERCISE PRICE EXPIRATION DATE
-------------- ---------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Don M. Griffith...... 25,000 42% $6.25 Feb. 20, 2008
James F. Gardunio.... 5,000 8% $6.25 Feb. 20, 2008
Deborah A. Marsten... 25,000 42% $6.25 Feb. 20, 2008
C. Edward Myska...... 0 0% N/A N/A
</TABLE>
The following table sets forth the total number of exercisable and unexercisable
options at September 30, 1998, and the value of such options.
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
TOTAL EXERCISABLE/ EXERCISABLE/UNEXERCISABLE
UNEXERCISABLE OPTIONS AT OPTIONS AT SEPTEMBER 30,
NAME OF HOLDER SEPTEMBER 30, 1998 1998*
-------------- ------------------------ -------------------------
<S> <C> <C>
Don M. Griffith................ 5,000/20,000 $3,750/$15,000
James F. Gardunio.............. 2,000/8,000 $2,000/$ 8,000
Deborah A. Marsten............. 5,000/20,000 $3,750/$15,000
C. Edward Myska................ 0/0 N/A
</TABLE>
- -------------------------
* Assumes a value of $7.00 per share of common stock.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Section 317 of the California Corporations Code authorizes a court to award, or
a corporation's Board of Directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. Article FIFTH of our Articles of Incorporation
and Section 7.5 of our Bylaws provide for indemnification of our directors,
officers, employees and other agents to the fullest extent permitted by the
California Corporations Code. These documents have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. In addition, we
maintain a directors and officer's liability insurance policy.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
55
<PAGE> 57
BENEFICIAL OWNERSHIP OF COMMON STOCK
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth the shares of Series A Preferred Stock and common
stock beneficially owned as of September 30, 1998 by each of our executive
officers, each of our directors, each person known to us to be the beneficial
owner of more than 5% of the outstanding Series A Preferred Stock or common
stock, and all of our directors and executive officers as a group. Percentage
amounts for the common stock assume the exercise of all stock options and
warrants exercisable by such person within 60 days, the conversion of all shares
of Series A Preferred Stock held by said person, the distribution by California
Community LLC of its shares of our common stock to its members and no exercise
of options or warrants, and no conversion of Series A Preferred Stock, by any
other person.
<TABLE>
<CAPTION>
SERIES A PREFERRED STOCK COMMON STOCK
-------------------------- -----------------------------------
AMOUNT AND PERCENT OF AMOUNT AND PERCENT
NATURE OF CLASS BEFORE NATURE OF OF CLASS PERCENT
NAME AND ADDRESS BENEFICIAL AND AFTER THE BENEFICIAL BEFORE THE AFTER THE
OF BENEFICIAL OWNER OWNERSHIP OFFERING OWNERSHIP OFFERING OFFERING
------------------- ---------- ------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Don M. Griffith(1)........... 3,940(2) *% 697,640(2) 77.6% 56.9%
Paul M. Deters(1)............ 0 0 5,317 * *
Clifford J. Einstein(1)...... 0 0 5,560 * *
Charles R. Fullerton(1)...... 0 0 13,429(3) 1.5 1.1
James F. Gardunio(1)......... 0 0 2,200(4) * *
Carole J. LaCaze(1).......... 0 0 13,429(3) 1.5 1.1
Deborah A. Marsten(1)........ 0 0 18,629(5) 2.1 1.5
Joseph H. Wender(1).......... 4,741 1.1 79,659(6) 8.9 6.5
California Community LLC(7).. 0 0 688,700(9) 77.4 56.5
355 South Grand Ave.,
Suite 4295
Los Angeles, CA 90071
Charles A. Davis(8).......... 13,333 3.1 74,821(10) 8.3 6.1
Stephen Friedman(8).......... 13,333 3.1 74,821(10) 8.3 6.1
John Markham Green(8)........ 13,333 3.1 74,821(10) 8.3 6.1
Charles E. Brooks(11)........ 0 0 0 0 0
All directors and executive
officers as a group........ 8,681 2.1 730,981(12) 80.7 59.1
</TABLE>
- -------------------------
* Less than 1%.
(1) The address for each person is c/o First Coastal Bancshares, 275 Main
Street, El Segundo, California 90245.
(2) Mr. Griffith is the Chief Executive Officer of California Community LLC.
(the "LLC"), which holds 463,700 shares of common stock and warrants to
purchase an additional 225,000 shares of common stock. Mr. Griffith
beneficially owns 13.43% of the LLC's capital units. As the CEO of the LLC,
Mr. Griffith has the power to vote all of the common stock held by the LLC
and is therefore deemed to be a beneficial owner of all of such shares. Mr.
Griffith also beneficially owns 5,000 shares of common stock pursuant to
stock options exercisable within 60 days and 3,940 shares of Series A
Preferred Stock held by his wife. Mr. Griffith does not directly hold any
shares of common stock. Mr. Griffith disclaims ownership of all but 97,492
shares.
56
<PAGE> 58
(3) These individuals do not directly hold any shares of common stock, but
instead each beneficially own 1.95% of the capital units of the LLC, which
represents approximately 13,429 shares of common stock.
(4) Includes 200 shares held directly and 2,000 options to purchase common
stock exercisable within 60 days.
(5) Ms. Marsten beneficially owns of 1.95% of the capital units of the LLC,
which represents approximately 13,429 shares of common stock, and 200
shares of common stock directly. Ms. Marsten also beneficially owns 5,000
shares of common stock pursuant to stock options exercisable within 60
days.
(6) Mr. Wender beneficially owns 7.80% of the capital units of the LLC, which
represents approximately 53,718 shares of common stock, 21,200 shares of
common stock held directly and 4,741 shares of Series A Preferred Stock,
which are convertible into 4,741 shares of common stock.
(7) Controlled by certain directors and executive officers of First Coastal.
(8) The address for each is c/o California Community LLC, 355 South Grand Ave.,
Suite 4295, Los Angeles, CA 90071.
(9) Includes warrants to purchase 225,000 shares of common stock at $5.00 per
share which are exercisable until May 31, 1999.
(10) Each of these individuals beneficially owns 5.85% of the capital units of
the LLC, which represents approximately 40,288 shares of common stock,
21,200 shares of common stock held directly and 13,333 shares of Series A
Preferred Stock, which are convertible into 13,333 shares of common stock.
(11) Mr. Brooks did not hold any shares of First Coastal capital stock as of
September 30, 1998. However, upon the commencement of Mr. Brook's
employment with us following the AIB acquisition, he will receive options
to purchase 8,000 shares of common stock at the then-market price per
share, which expire ten years from their date of issue and of which
one-fifth will be immediately exerciseable.
(12) Includes all shares beneficially owned by the LLC, all shares directly
owned, all shares obtainable upon conversion of shares of Series A
Preferred Stock and all shares which may be purchased upon exercise of
stock options.
CALIFORNIA COMMUNITY LLC
California Community LLC (the "LLC") is a California limited liability company
controlled by Don M. Griffith and Deborah A. Marsten, who are directors and
executive officers of First Coastal. No other investor in the LLC is permitted
to own more than 9.9% of the membership units of the LLC. In August 1996, the
LLC was approved by the Federal Reserve to become a bank holding company and
acquired a majority interest in the Bank. In addition to its ownership of
463,700 shares of our common stock, the LLC holds a total of 225,000 warrants to
purchase our common stock at an exercise price of $5.00 per share, which expire
May 31, 1999.
The LLC has agreed to exercise all of the warrants held by it prior to the
consummation of the acquisition of AIB. The LLC has informed us that prior to
the consummation of the acquisition of AIB, it intends, but is not obligated, to
distribute a significant portion of the common stock then held by it to its
members on a pro rata basis so that the LLC would no longer need to be
registered as a bank holding company. As a result of this planned distribution,
no shareholder of First Coastal would hold a majority of the voting power of our
common stock, although the members of the LLC would individually control
significant blocks of shares.
57
<PAGE> 59
CERTAIN TRANSACTIONS
DataTech Management, Inc. ("DataTech") provides us with loan servicing and
computer hardware and software maintenance services. Two of our executive
officers and directors, Don M. Griffith and Deborah A. Marsten, own DataTech. We
have entered into our agreements with DataTech after arms'-length negotiations,
approval by our disinterested directors and our verification that the prices we
pay are similar to those DataTech charges its other community bank clients. For
the nine months ended September 30, 1998, we have paid fees to DataTech of
approximately $108,000.
One of our directors, Clifford J. Einstein, owns a 25% interest in the lessor of
our headquarters and main branch in El Segundo, California. Mr. Einstein was not
involved in the negotiations on behalf of either party concerning the lease. Our
Board employed an independent real estate appraiser as well as real estate
counsel to evaluate the lease and determined that this office space was obtained
at rates or terms no less favorable to us than would have been obtained from a
non-affiliated person. Rent on this property is $8,149 per month.
58
<PAGE> 60
THE PROPOSED ACQUISITION OF
AMERICAN INDEPENDENT BANK
We have entered into an agreement to acquire American Independent Bank, N.A.
("AIB"), pursuant to which we will acquire all of the outstanding shares of AIB
for approximately $7.3 million, including expenses and adjustments. The proceeds
from this offering will provide all of such funds. Assuming all conditions are
met or waived, including receipt of all required banking regulatory approvals,
we intend to complete the acquisition immediately following consummation of this
offering, and in no event later than February 28, 1999. We filed an application
with the Office of the Comptroller of the Currency on October 13, 1998 for
approval under the Bank Merger Act. In addition, on October 27, 1998, we
obtained a waiver from the Board of Governors of the Federal Reserve System for
approval under the Bank Holding Company Act. The acquisition of AIB has been
approved by our board of directors and AIB's board of directors. AIB's
shareholders approved the acquisition on October 22, 1998. Pursuant to the
Underwriting Agreement, the Underwriters will not be obligated to consummate the
offering until we have received all necessary regulatory approvals for the
acquisition.
AIB is a community bank conducting a general commercial banking business that
serves professionals, individuals and small to medium-sized businesses. As of
September 30, 1998, AIB had total assets of $37.6 million, shareholders' equity
of $3.5 million and deposits of $33.6 million. See the financial statements of
AIB included in the back part of this Prospectus for more information. AIB's two
branches are located at 1644 W. Redondo Beach Boulevard, Gardena, California
90247 and 333 North Glenoaks Boulevard, Burbank, California 91502.
We believe that this acquisition will enable us to better compete in the
marketplace for deposits and loans and provide our existing customers with
better service. For example, our existing customers in the San Fernando Valley
will be able to use the AIB branch in Burbank, California for more convenient
service, and we will be able to lower our courier costs for such customers due
to the closer proximity of the Burbank office. In addition, we will be able to
reduce the combined bank's duplicative administrative costs, consolidate certain
routine operations with low marginal costs and cross-sell financial services to
AIB's customers. We also believe that AIB's customer base and operating
philosophy are similar to ours, which should help facilitate the integration of
our operations.
59
<PAGE> 61
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet as of September 30,
1998 combines our historical balance sheet with AIB's as if the acquisition and
offering had been effective on that date after giving effect to the purchase
accounting adjustments described in the accompanying notes. The unaudited pro
forma combined statements of income combines our results of operations with
AIB's for the nine months ended September 30, 1998 and the year ended December
31, 1997 as if the acquisition and offering had been effective on January 1,
1997 after giving effect to purchase accounting adjustments described in the
notes.
The unaudited pro forma combined financial statements and accompanying notes
reflect the application of the purchase method of accounting. Under this method
of accounting, the purchase price will be allocated to the assets acquired and
liabilities assumed based on their estimated fair values at the effective time
of the acquisition. Deferred tax assets and liabilities will be adjusted for the
difference between the tax basis of the assets and liabilities and their
estimated fair values. The excess, if any, of the total acquisition cost over
the sum of the assigned fair values of the tangible assets acquired less
liabilities assumed is recorded as goodwill. As described in the accompanying
notes, estimates of the fair values of AIB's assets and liabilities have been
combined with the recorded values of our assets and liabilities.
The unaudited pro forma combined balance sheet shows the effect the acquisition
would have had on our asset and liability balances if the transaction had been
consummated as of September 30, 1998. The total acquisition cost of $7.3 million
(including transaction costs, adjustments and fees) is allocated to the various
assets of AIB based upon estimates of fair market values. Goodwill of $3.8
million is shown, representing the excess of acquisition cost over the fair
value of the assets acquired less liabilities assumed.
The unaudited pro forma combined income statements for the nine months ended
September 30, 1998 and the year ended December 31, 1997 show the effect the
acquisition might have had on our historical operations. The pro forma
adjustments include only items that are directly attributable to the
transaction.
The unaudited pro forma combined financial statements are intended for
informational purposes and are not necessarily indicative of the future
financial position or future results of operations of the combined company, or
of the financial position or the results of operations of the combined company
that would have actually occurred had the Acquisition been in effect as of the
date or for the periods presented.
These unaudited pro forma combined financial statements should be read in
conjunction with, and are qualified in their entirety by, our financial
statements and those of AIB, in each case appearing elsewhere in this
Prospectus.
60
<PAGE> 62
ACQUISITION OF AIB BY FIRST COASTAL
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
FIRST COASTAL BANCSHARES AND SUBSIDIARY
----------------------------------------------------
FIRST AMERICAN
COASTAL INDEPENDENT COMBINED
BANCSHARES BANK ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and Due from Banks................... $ 3,710 $ 4,875 $ 8,585
Federal Funds Sold........................ 11,550 7,005 $ (653)(A) 19,749
8,223(B)
(6,376)(C)
-------- ------- ------- ----------
TOTAL CASH AND CASH
EQUIVALENTS.................. 15,260 11,880 1,194 28,334
Investment Securities..................... 6,077 4,000 10,077
Investment in Subsidiary Bank............. --
Note Receivable........................... --
Loans and Leases.......................... 56,325 20,913 77,238
Allowance for Loan and Lease Losses....... (562) (197) (759)
-------- ------- ------- ----------
NET LOANS AND LEASES............ 55,763 20,716 -- 76,479
Premises and Equipment.................... 413 377 790
Other Real Estate Owned................... 218 81 299
Goodwill.................................. 1,803 39 3,751(C) 5,593
Accrued Interest and Other Assets......... 1,586 501 757(B) 2,844
-------- ------- ------- ----------
TOTAL ASSETS.................... $ 81,120 $37,594 $ 5,702 $ 124,416
======== ======= ======= ==========
Demand Deposits........................... $ 21,448 $13,909 $ $ 35,357
Money Market, Savings and NOW Accounts.... 17,952 12,309 30,261
Certificates of Deposit................... 33,521 7,377 40,898
-------- ------- ------- ----------
TOTAL DEPOSITS.................. 72,921 33,595 -- 106,516
Accrued Interest and other Liabilities.... 1,154 488 886(D) 2,528
Long Term Debt............................ 1,000 -- 1,000
Preferred Securities of Subsidiary
Trust................................... -- -- 6,000(B) 6,000
Shareholders' Equity:
Preferred Stock......................... 2,658 -- (665)(A) 1,993
Common Stock............................ 3,424 4,059 70(A) 6,474
2,980(B)
(4,059)(C)
Retained Earnings....................... 14 (548) (58)(A) (44)
548(C)
Net unrealized gain (loss) on
securities........................... (51) (51)
-------- ------- ------- ----------
TOTAL SHAREHOLDERS' EQUITY...... 6,045 3,511 (1,184) 8,372
-------- ------- ------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY......... $ 81,120 $37,594 $ 5,702 $ 124,416
======== ======= ======= ==========
Common Shares Outstanding................. 664,551 1,200,669
</TABLE>
61
<PAGE> 63
ACQUISITION OF AIB BY FIRST COASTAL
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT AMOUNTS)
(A) We believe that approximately 11,118 shares of the Series A Preferred Stock
will convert to common stock. This will result in an increase to common
stock of $70 and the issuance of 11,118 shares of common stock. We will
redeem up to 94,757 shares of Series A Preferred Stock not electing to
convert at $6.89 per share ($653). Retained earnings will be charged for the
excess of the redemption price over the carrying amount of the Series A
Preferred Stock ($58).
(B) We intend to fund the purchase of AIB and redeem our Series A Preferred
Stock through the proceeds from this offering. The following underwriting
commissions and offering expenses are estimates.
<TABLE>
<S> <C>
Proceeds from Sale of Trust Preferred Securities -- 300,000
securities @ $20.00 per security.......................... $6,000
Underwriting Commissions.................................... (407)
Offering Expenses........................................... (350)
Proceeds from Sale of Common Stock -- 300,000 shares @ $7.00
per share................................................. 2,100
Underwriting Commissions.................................... (120)
Offering Expenses........................................... (125)
Exercise of outstanding warrants............................ 1,125
------
Net increase in Common Stock...................... 2,980
------
$8,223
======
</TABLE>
The costs and commissions related to the Preferred Securities will be
capitalized and amortized over the life of the securities. The costs
related to the common stock will be deducted from the proceeds and the net
amount added to common stock.
(C) Goodwill resulting from the acquisition of AIB is computed as follows:
<TABLE>
<S> <C>
Purchase price -- American Independent Bank................. $ 6,376
Net book value -- American Independent Bank................. (3,511)
Legal and Professional Fees................................. 152
Contract cancellation fees, net of taxes.................... 100
Change in control payments, net of taxes.................... 634
-------
Goodwill.................................................... $ 3,751
=======
</TABLE>
(D) The increase in other liabilities is comprised of the following costs that
will be incurred by AIB at or prior to the close:
<TABLE>
<S> <C>
Legal and Professional Fees................................. $152
Contract cancellation fees, net of taxes.................... 100
Change in control payments, net of taxes.................... 634
----
$886
====
</TABLE>
62
<PAGE> 64
ACQUISITION OF AIB BY FIRST COASTAL
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT EPS)
<TABLE>
<CAPTION>
FIRST AMERICAN
COASTAL INDEPENDENT COMBINED
BANCSHARES BANK ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Interest and fees on loans............... $ 3,224 $1,832 $ 5,056
Interest on investment securities........ 480 216 696
Other interest income.................... 250 186 $ 45(A) 481
-------- ------ ----- ----------
Total interest income............... 3,954 2,234 45 6,233
Interest on deposits and other
borrowings............................. 1,651 446 547(B) 2,644
-------- ------ ----- ----------
Net interest income................. 2,303 1,788 (502) 3,589
Provision for credit losses.............. 10 92 102
-------- ------ ----- ----------
Net interest income after provision
for credit losses................. 2,293 1,696 (502) 3,487
Noninterest income....................... 416 503 919
Noninterest expenses:
Salaries and employee benefits......... 954 792 (221)(C) 1,525
Premises and equipment................. 317 220 (32)(D) 505
Goodwill amortization.................. 100 5 188(E) 293
Other expenses......................... 852 931 (405)(F) 1,378
-------- ------ ----- ----------
Total noninterest expenses.......... 2,223 1,948 (470) 3,701
-------- ------ ----- ----------
Income before income taxes.......... 486 251 (32) 705
Income taxes............................. 245 104 62(G) 411
-------- ------ ----- ----------
NET INCOME..................... $ 241 $ 147 $ (94) $ 294
======== ====== ===== ==========
Earnings per share (EPS) data:
Basic earnings per share............... $ 0.04 $ 0.11
Weighted average shares used in
computation......................... 671,284 1,207,402
</TABLE>
- -------------------------
(A) Assumes 5% yield on increase in cash of $1,194 for nine months.
(B) Assumes 11.75% yield on Preferred Securities of $6,000 for nine months plus
the amortization of the capitalized costs related to the Preferred
Securities.
(C) Anticipates $24.5 per month decrease to reflect excess staffing.
(D) Anticipates $3.5 per month decrease to related to excess facilities
(E) Reflects 15 year amortization of $3,751 in Goodwill for nine months
(F) Anticipates $45 per month reduction for expenses duplicated at the Bank.
(G) Assumes a combined federal and state income tax rate of 40%, excluding
nondeductible portion of goodwill.
63
<PAGE> 65
ACQUISITION OF AIB BY FIRST COASTAL
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT EPS)
<TABLE>
<CAPTION>
FIRST AMERICAN
COASTAL INDEPENDENT COMBINED
BANCSHARES BANK ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Interest and fees on loans............. $ 2,627 $2,299 $ 4,926
Interest on investment securities...... 428 307 735
Other interest income.................. 117 162 60(A) 339
-------- ------ ----- ----------
Total interest income................ 3,172 2,768 60 6,000
Interest on deposits and other
borrowings........................... 887 480 731(B) 2,098
-------- ------ ----- ----------
Net interest income.................. 2,285 2,288 (671) 3,902
Provision for credit losses............ 25 -- 25
-------- ------ ----- ----------
Net interest income after provision
for credit losses................. 2,260 2,288 (671) 3,877
Noninterest income..................... 245 650 895
Noninterest expenses:
Salaries and employee benefits....... 1,144 1,068 (294)(C) 1,918
Premises and equipment............... 310 431 (42)(D) 699
Goodwill amortization................ 70 -- 250(E) 320
Other expenses....................... 826 949 (540)(F) 1,235
-------- ------ ----- ----------
Total noninterest expenses........ 2,350 2,448 (626) 4,172
-------- ------ ----- ----------
Income before income taxes........ 155 490 (45) 600
Income taxes........................... 95 188 82(G) 365
-------- ------ ----- ----------
NET INCOME................... $ 60 $ 302 $(127) $ 235
======== ====== ===== ==========
Earnings per share (EPS) data:
Basic earnings (loss) per share(H)... $ (0.15) $ 0.05
Shares used in computation........... 638,990 1,175,108
</TABLE>
- -------------------------
(A) Assumes 5% yield on increase in cash of $1,194.
(B) Assumes 11.75% yield on Preferred Securities of $6,000 plus the amortization
of the capitalized costs related to the Preferred Securities.
(C) Anticipates $24.5 per month decrease to reflect excess staffing.
(D) Anticipates $3.5 per month decrease to related to excess facilities.
(E) Anticipates 15 year amortization of $3,751 in Goodwill.
(F) Reflects $45 per month reduction for expenses duplicated at the Bank.
(G) Assumes a combined federal and state income tax rate of 40%, excluding
nondeductible portion of goodwill.
(H) In computing earnings per share, earnings are reduced by the $58 excess of
the redemption price of the Series A Preferred Stock over the carrying
amount of the Series A Preferred Stock. Had this charge not been included,
basic and diluted earnings per share would have been approximately $0.10 per
share.
64
<PAGE> 66
SUMMARY HISTORICAL FINANCIAL INFORMATION OF
AMERICAN INDEPENDENT BANK, N.A.
The following table presents a summary of selected financial information. This
information is only a summary and should be read in conjunction with AIB's
financial statements and related notes presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- --------------------------
1998 1997 1997 1996 1995
------- ------- ------ ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest Income............................. $ 2,234 $ 2,051 $2,768 $ 2,385 $ 2,303
Interest Expense............................ 446 351 480 440 405
------- ------- ------ ------- -------
Net Interest Income......................... 1,788 1,700 2,288 1,945 1,898
Provision for Loan Losses................... 92 -- -- 35 190
------- ------- ------ ------- -------
Net Interest Income after Provision for Loan
Losses................................... 1,696 1,700 2,288 1,910 1,708
Noninterest Income.......................... 503 43 650 718 752
Noninterest Expense......................... 1,948 1,834 2,448 2,217 2,209
------- ------- ------ ------- -------
Income before Income taxes.................. 251 359 490 411 251
Income Taxes................................ 104 131 188 1 1
------- ------- ------ ------- -------
Net Income.................................. $ 147 $ 228 $ 302 $ 410 $ 250
======= ======= ====== ======= =======
BALANCE SHEET DATA -- AT PERIOD END
Total Assets................................ $37,594 $35,135 33,699 30,120 27,429
Total Loans................................. 20,913 19,695 21,130 19,241 17,185
Allowance for Loan Losses (ALLL)............ 197 267 216 260 319
Investment Securities....................... 4,000 4,590 3,500 4,200 1,700
Federal Funds Sold.......................... 7,005 4,680 3,920 2,000 2,335
Other Real Estate Owned..................... 81 130 130 49 169
Total Deposits.............................. 33,595 31,612 30,206 26,970 24,773
Total Shareholders' Equity.................. 3,511 3,235 3,310 2,996 2,517
OPERATING RATIOS AND OTHER SELECTED DATA
Return on Average Assets(1)(4).............. 0.54% 0.94% 0.90% 1.36% 0.88%
Return on Average Equity(1)(4).............. 5.76% 9.68% 9.56% 14.67% 10.63%
Operating Efficiency Ratio(3)(4)............ 84.96% 83.63% 83.32% 83.25% 83.36%
Net Interest Yield(1)(2).................... 7.65% 8.27% 8.17% 7.72% 7.22%
SELECTED ASSET QUALITY RATIOS -- AT PERIOD END
Nonperforming Loans to Total Loans.......... 3.19% 3.70% 2.88% 3.29% 7.60%
Nonperforming Assets to Total Assets........ 1.98% 2.44% 2.20% 2.27% 5.36%
ALLL as a Percentage of Nonperforming
Loans.................................... 29.66% 36.63% 35.35% 40.94% 24.50%
ALLL as a Percentage of Total Loans......... 0.95% 1.36% 1.02% 1.35% 1.85%
</TABLE>
- -------------------------
(1) Calculations are based on average daily balances.
(2) Net interest yield has been calculated by dividing net interest income by
average interest-earning assets.
(3) The operating efficiency ratios have been calculated by dividing
non-interest expense by operating income (net interest income plus
non-interest income).
(4) Annualized for the nine months ended September 30, 1998.
65
<PAGE> 67
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND
FINANCIAL CONDITION OF AMERICAN INDEPENDENT BANK, N.A.
HISTORY
AIB commenced operations on February 1, 1984 as a national banking association
regulated by the OCC. AIB's deposits are insured up to the maximum legal limits
by the FDIC. AIB is a member of the Federal Reserve System and as such is also
subject to supervision by the Federal Reserve Bank of San Francisco. As of
September 30, 1998, AIB had total assets of approximately $37.6 million, total
deposits of approximately $33.6 million, and shareholders' equity of
approximately $3.5 million.
DISCUSSION OF RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Total assets at September 30, 1998 were $37.6 million, an increase of $3.9
million from the $33.7 million in total assets at December 31, 1997. The
increase in assets was centered in short-term investments as total loans did not
materially change during 1998. The increase in total assets was funded by a $3.4
million increase in deposits which were $33.6 million at September 30, 1998
compared to $30.2 million at December 31, 1997. Management believes this growth
is representative of the improving economy in its primary market area.
Net income was $147,000 for the first nine months of 1998 compared to $228,000
for the same period in 1997. This decrease is comprised of several components.
Net interest income increased $88,000 as a result of the asset growth noted
above, although the net interest yield declined slightly as the majority of the
deposit growth occurred in the interest-bearing categories of deposits and the
asset growth was centered in the lower yielding investment category of assets.
The most significant component of the decline in net income was the provision
for loan losses which was $92,000 for 1998 compared to no provision in 1997.
Noninterest expense also increased primarily from increased equipment
depreciation and maintenance related to the computer conversion in late 1997,
and to a slight degree, costs associated with the Year 2000 compliance issues.
FISCAL YEAR 1997 VERSUS 1996 -- BASIS OF PRESENTATION
The following discussion and analysis is intended to assist in an understanding
of the significant factors that influenced AIB's financial condition at December
31, 1997 as compared to December 31, 1996 as well as the results of operations
for the year ended December 31, 1997 as compared to December 31, 1996. The
discussion and analysis should be read in conjunction with AIB's financial
statements and corresponding notes included elsewhere in this Prospectus.
ASSETS
AIB's total assets increased $2.8 million, or 8.3%, to $36.5 million from
December 31, 1997 to September 30, 1998. AIB had total assets of $33.7 million
as of December 31, 1997, compared to $30.1 million as of December 31, 1996,
representing an increase in total assets of approximately $3.6 million, or
11.9%. This increase in total assets from December 31, 1996 to December 31, 1997
included an increase in net loans of approximately $2 million, or 10.2%. Total
deposits were approximately $30.2 million as of
66
<PAGE> 68
December 31, 1997, compared to $27.0 million as of December 31, 1996,
representing an increase in total deposits of approximately $3.2 million, or
12.0%.
The following table presents, for the periods indicated, the distribution of
average assets, liabilities and shareholders' equity, as well as the total
dollar amounts of interest income from average interest-earning assets and the
resultant yields, and the dollar amounts of interest expense and average
interest-bearing liabilities, expressed both in dollars and in rates. Nonaccrual
loans are included in the calculation of the average balances of loans, and
interest not accrued is excluded.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------------------
AVERAGE
INTEREST YIELD OR
AVERAGE EARNED RATE
BALANCE OR PAID PAID
------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Investment Securities........................... $ 4,325 $ 192 5.92%
Federal Funds Sold.............................. 4,864 186 5.10%
Other Earning Assets............................ 601 24 5.32%
Loans........................................... 21,372 1,832 11.43%
------- ------
Total Interest-Earning Assets........... 31,162 2,234 9.56%
Cash and Due From Bank............................ 4,466
Premises and Equipment............................ 398
OREO.............................................. 85
Other Assets...................................... 437
-------
Total Assets............................ $36,548
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW............................................. $ 3,049 $ 30 1.31%
Money Market.................................... 4,815 94 2.60%
Savings......................................... 3,219 53 2.20%
Time Deposits under $100,000.................... 3,916 147 5.00%
Time Deposits of $100,000 or More............... 3,063 122 5.31%
------- ------
Total Interest-Bearing Liabilities...... 18,062 $ 446 3.29%
------
Demand Deposits................................... 14,819
Other Liabilities................................. 265
Shareholders' Equity.............................. 3,402
-------
Total Liabilities and Shareholders'
Equity............................... $36,548
=======
Net Interest Income............................... $1,788
======
Net Yield on Interest-Earning Assets.............. 7.65%
=====
</TABLE>
67
<PAGE> 69
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
AVERAGE AVERAGE
INTEREST YIELD OR INTEREST YIELD OR
AVERAGE EARNED RATE AVERAGE EARNED RATE
BALANCE OR PAID PAID BALANCE OR PAID PAID
------- -------- -------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-Earning Assets:
Investment Securities.......... $ 4,370 $ 281 6.43% $ 2,552 $ 166 6.50%
Federal Funds Sold............. 3,167 162 5.12% 4,391 229 5.22%
Other Earning Assets........... 437 26 5.95% 625 37 5.92%
Loans.......................... 20,030 2,299 11.48% 17,638 1,953 11.07%
------- ------ ------- ------
Total Interest-Earning
Assets.............. 28,004 2,768 9.88% 25,206 2,385 9.46%
Cash and Due From Bank........... 4,417 4,011
Premises and Equipment........... 341 163
OREO............................. 89 129
Other Assets..................... 637 559
------- -------
Total Assets........... $33,488 $30,068
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-Bearing Liabilities:
NOW............................ $ 3,101 $ 40 1.29% $ 2,868 $ 40 1.39%
Money Market................... 4,441 106 2.39% 4,388 104 2.37%
Savings........................ 3,196 71 2.22% 2,810 62 2.21%
Time Deposits under $100,000... 3,265 158 4.84% 3,035 152 5.01%
Time Deposits of $100,000 or
More........................ 2,075 105 5.06% 1,659 82 4.94%
------- ------ ------- ------
Total Interest-Bearing
Liabilities......... 16,078 480 2.99% 14,760 440 2.98%
------ ------
Demand Deposits.................. 13,988 12,344
Other Liabilities................ 264 174
Shareholders' Equity............. 3,158 2,790
------- -------
Total Liabilities and
Shareholders'
Equity.............. $33,488 $30,068
======= =======
Net Interest Income.............. $2,288 $1,945
====== ======
Net Yield on Interest-Earning
Assets......................... 8.17% 7.72%
===== =====
</TABLE>
NET INTEREST INCOME
AIB's earnings depend primarily upon the difference between total interest
income, consisting of interest earned on its loans, securities and other earning
assets, and total interest expense, consisting of interest accrued on deposits
and other interest bearing
68
<PAGE> 70
liabilities. Net interest income was $2.3 million in 1997, compared to $1.9
million in 1996, reflecting an increase of approximately $343,000, or 18%.
The following table sets forth changes in interest income and interest expense
for each major category of interest-earning asset and interest-bearing
liability, and the amount of change attributable to volume and rate changes for
the years indicated. Changes not solely attributable to rate or volume have been
allocated to volume and rate changes in proportion to the relationship of the
absolute dollar amounts of the changes in each.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
OVER
YEAR ENDED DECEMBER 31, 1996
----------------------------
INCREASE (DECREASE)
DUE TO CHANGE
(DOLLARS IN THOUSANDS)
----------------------------
VOLUME RATE CHANGE
------ ---- ------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment Securities........................... $117 $(2) $115
Federal Funds Sold.............................. (63) (4) (67)
Other Earning Assets............................ (11) -- (11)
Loans........................................... 273 73 346
---- --- ----
Total Interest Income................... 316 67 383
INTEREST-BEARING LIABILITIES:
Interest-Bearing Demand......................... 4 (2) 2
Savings......................................... 9 -- 9
Time Deposits under $100,000.................... 11 (5) 6
Time Deposits $100,000 or More.................. 21 2 23
---- --- ----
Total Interest Expense.................. 45 (5) 40
---- --- ----
Interest Differential or Net Interest Income...... $271 $72 $343
==== === ====
</TABLE>
PROVISION FOR LOAN LOSSES
During 1997, there was no provision for loan losses compared to $35,000 for
1996.
NONINTEREST INCOME
The major component of noninterest income (92% in 1997) consists of service
charges on deposit accounts and fees for other banking transactions. Noninterest
income decreased from approximately $718,000 as of December 31, 1996 to
$650,000, or 9.34%. The primary component of this decrease in noninterest income
was a decrease of approximately $42,000 in the gain on the sale of OREO.
NONINTEREST EXPENSE
AIB's noninterest expense increased from $2.2 million as of December 31, 1996 to
$2.4 million as of December 31, 1997, or 10%. Salary, wages and employee
benefits increased by approximately $75,000, which resulted primarily from an
increase in officers' salary expense due to a slight increase in staff as well
as other moderate increases. Professional fees also increased by approximately
$75,000.
69
<PAGE> 71
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
In the normal course of business, AIB must ensure that sufficient funds are
available to meet customer needs for borrowing and deposit withdrawals. As of
December 31, 1997, AIB had a ratio of total loans to total deposits of 70.0%,
compared to 71.3% the previous year. Liquid assets including securities held to
maturity represented 38.3%, compared to 38.1% of total deposits the previous
year.
The table below sets forth the interest rate sensitivity of AIB's
interest-earning assets and interest-bearing liabilities as of September 30,
1998, using the interest rate sensitivity gap ratio. For purposes of the
following table, an asset or liability is considered rate-sensitive within a
specified period when it can be repriced or matures within its contractual
terms.
<TABLE>
<CAPTION>
ESTIMATED MATURITY OR REPORTING
--------------------------------------------------
THREE
MONTHS
LESS THAN TO LESS ONE TO OVER
THREE THAN ONE FIVE FIVE
MONTHS YEAR YEARS YEARS TOTAL
--------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-Bearing Deposits... $ 396 $ 297 $ -- $ -- $ 693
Investment Securities....... -- -- 4,000 -- 4,000
Federal Funds Sold.......... 7,005 -- -- -- 7,005
Loans....................... 15,385 1,275 3,750 576 20,986
------- ------- ------- ------- -------
22,786 1,572 7,750 576 32,684
INTEREST-BEARING LIABILITIES:
Money Market and NOW........ 9,191 -- -- -- 9,191
Savings..................... 3,118 -- -- -- 3,118
Time Deposits............... 2,834 4,231 312 -- 7,377
------- ------- ------- ------- -------
15,143 4,231 312 -- 19,686
------- ------- ------- ------- -------
INTEREST RATE SENSITIVITY
GAP...................... $ 7,643 $(2,659) $ 7,438 $ 576 $12,998
======= ======= ======= ======= =======
Cumulative Interest Rate
Sensitivity Gap............. $ 7,643 $ 4,984 $12,422 $12,998 $12,998
Cumulative Interest Rate
Sensitivity Gap Ratio Based
on Total Assets............. 20.33% 13.26% 33.04% 34.57% 34.57%
</TABLE>
YEAR 2000 ISSUES
FORMAL AGREEMENT
On July 28, 1998 AIB entered into a Formal Agreement with the OCC relating to
AIB's compliance with the OCC's and FFIEC's rules and regulations pertaining to
Year 2000 compliance. The Agreement required that AIB take various actions to
confirm Year 2000 compliance.
In accordance with the Formal Agreement, AIB submitted to the OCC a written
project plan with applicable deadlines, describing the specific objectives and
actions that will be taken by AIB's board or directors and management to ensure
that each of AIB's
70
<PAGE> 72
information and environmental systems are Year 2000 compliant. The plan includes
a formalized reporting process on a monthly basis to update the AIB's board of
directors on its overall Year 2000 project plan, which has already been
implemented. AIB submitted a testing plan, which includes provisions for the
development of a testing strategy for all mission critical systems that are to
be remediated. Additionally, the plan establishes a process to manage the Year
2000 risk posed by AIB's customers. AIB has also developed and implemented a
Year 2000 customer awareness program.
On October 1, 1998 AIB's formal agreement was terminated by the OCC.
AIB'S STATE OF READINESS
AIB has informed us that it has already completed and has begun to implement its
Year 2000 project plan and is currently in the fourth phase, renovation and
validation. Testing of AIB's mission critical software providers and vendors is
scheduled to be completed within the timeframes dictated by FFIEC regulation.
Additionally, we have been informed that testing has already been completed on
all of AIB's in-house computers and software, and noncompliant computers have
been replaced.
To date, AIB estimates that the total cost to evaluate, assess and remedy its
Year 2000 issues has been less than $70,000. AIB's future costs to complete
evaluation, assessment and remediation of Year 2000 issues, including
replacement if necessary, is expected to be less than $64,000.
Due to our proposed acquisition of AIB, we expect to convert AIB's computer
systems to our computer system. This conversion is likely to occur during the
first or second quarter of 1999. However, we will still have to monitor the Year
2000 preparedness of AIB's customers and vendors if we consummate our
acquisition. AIB has informed us that it has assessed the potential Year 2000
risks relating to its loan customers and depositors and has been promoting
customer awareness of the Year 2000 issue.
71
<PAGE> 73
LENDING ACTIVITIES
The following table sets forth the composition of AIB's loan portfolio by type
of loan at the periods indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------
1998 1997 1996
------------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Loans:
Commercial............................... $ 7,297 $ 7,934 $ 4,881
Consumer................................. 481 2,321 2,196
Construction Financing................... 3,297 2,020 153
Real Estate -- Other..................... 9,911 8,918 12,085
------- ------- -------
Total Loans...................... 20,986 21,193 19,315
Net Deferred Loan Fees and Discounts....... (737) (63) (74)
Allowance for Loan Losses.................. (197) (216) (260)
------- ------- -------
Net Loans.................................. $20,716 $20,914 $ 8,981
======= ======= =======
COMMITMENTS:
Standby Letters of Credit................ $ 20 $ 349 $ --
Undisbursed Loans and Commitments to
Grant Loans........................... 1,689 2,909 3,020
------- ------- -------
Total Commitments................ $ 1,709 $ 3,258 $ 3,020
======= ======= =======
</TABLE>
Many of the loans have floating rates tied to AIB's base rate or other market
rate indicator, the majority of which are adjusted at least quarterly. The
majority of AIB's fixed rate loans mature within five years. This serves to
lessen the risk to AIB from movements in interest rates, particularly rate
increases. The following table shows the maturity of certain loan categories
outstanding as of December 31, 1997:
<TABLE>
<CAPTION>
DUE IN DUE AFTER
ONE YEAR ONE YEAR TO DUE AFTER
OR LESS FIVE YEARS FIVE YEARS TOTAL
-------- ----------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial........................ $5,163 $ 2,416 $ 355 $ 7,934
Consumer.......................... 890 1,395 36 2,321
Construction Financing............ 1,676 344 -- 2,020
Real Estate -- Other.............. 1,227 6,595 1,096 8,918
------ ------- ------ -------
$8,956 $10,750 $1,487 $21,193
====== ======= ====== =======
Floating Rate..................... $15,242
Fixed Rate........................ 5951
-------
$21,193
=======
</TABLE>
72
<PAGE> 74
ASSET QUALITY
The following table provides information with respect to the components of AIB's
nonperforming assets at the dates indicated:
<TABLE>
<CAPTION>
AT
DECEMBER 31,
AT ------------------
SEPTEMBER 30, 1998 1997 1996
------------------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Non-Accrual Loans.................... $ 596 $ 545 $ 525
Accruing Loans 90 Days Past Due and
Still Accruing..................... 4 -- 43
Restructured Loans................... 64 66 67
------ ------ ------
Total Nonperforming
Loans................... 664 611 635
Other Real Estate Owned.............. 81 130 49
------ ------ ------
Total Nonperforming
Assets.................. $ 745 $ 741 $ 684
====== ====== ======
Nonperforming Loans as a Percentage
of Total Loans..................... 3.19% 2.88% 3.29%
Allowance for Loan Losses as a
Percentage of Nonperforming
Loans.............................. 29.66% 35.35% 40.94%
Nonperforming Assets as a Percentage
of Total Assets.................... 1.98% 2.20% 2.27%
</TABLE>
Restructured loans are those loans where concessions in interest rates or
repayment terms have been made to assist the borrower. Non-accrual loans are
generally loans which are past due 90 days or are loans that management believes
the interest upon which may not be collectible. At September 30, 1998, all
non-accrual loans were secured by real estate. AIB recognized income of $0 in
1997 and $79,000 in 1996 for cash interest payments on restructured loans.
Interest income would have increased approximately $48,000 in 1997 and $2,000 in
1996 had all of these nonperforming loans performed in accordance with their
original terms and conditions.
73
<PAGE> 75
ALLOWANCE FOR LOAN LOSSES
The following table summarizes, for the periods indicated, changes in the
allowance for loan losses arising from loans charged off, recoveries on loans
previously charged off, additions to the allowance which have been charged to
operating expenses and certain ratios relating to the allowance for loan losses:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE NINE DECEMBER 31,
MONTHS ENDED ----------------------
SEPTEMBER 30, 1998 1997 1996
------------------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ALLOWANCE FOR LOAN LOSSES:
Balance at Beginning of Period.......... $216 $260 $319
Actual Charge-offs:
Commercial............................ 80 44 81
Credit Cards.......................... 16 9 6
Consumer.............................. 37 6 2
Real Estate........................... -- -- 37
---- ---- ----
Total Charge-Offs............. 133 59 126
---- ---- ----
LESS RECOVERIES:
Commercial............................ 18 10 23
Credit Cards.......................... -- -- 1
Consumer.............................. 1 -- 3
Real Estate........................... 3 5 5
---- ---- ----
Total Recoveries.............. 22 15 32
---- ---- ----
Net Loans Charged Off (Recovered)....... 111 44 94
Provision for Loan Losses............... 92 -- 35
---- ---- ----
Balance at End of Period................ $197 $216 $260
==== ==== ====
RATIOS:
Net Loans Charged Off to Average
Loans................................. 0.69% 0.22% 0.53%
Allowance for Loan Losses to Total
Loans................................. 0.95% 1.02% 1.35%
</TABLE>
74
<PAGE> 76
The following table summarizes the allocation of the allowance for loan losses
by loan type for the periods indicated (dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1997 1996
---------------------- ----------------------
PERCENT OF PERCENT OF
LOANS IN LOANS IN
CATEGORY CATEGORY
ALLOWANCE TO TOTAL ALLOWANCE TO TOTAL
AMOUNT LOANS AMOUNT LOANS
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Construction Financing.................. $ -- 9.5% $ -- 0.8%
Real Estate -- Other.................... 74 42.1 60 62.6
Commercial.............................. 5 37.4 20 25.3
Consumer................................ -- 11.0 -- 11.3
Unallocated............................. 137 N/A 180 N/A
---- ------ ---- ------
$216 100.00% $260 100.00%
==== ====== ==== ======
</TABLE>
INVESTMENT ACTIVITY
The following table summarizes the amounts and distribution of the AIB's
investment securities held as of the dates indicated, and the weighted average
yield as of September 30, 1998 (dollar amounts in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------
WEIGHTED
BOOK MARKET AVERAGE
VALUE VALUE YIELD
----- ------ --------
<S> <C> <C> <C>
HELD-TO MATURITY SECURITIES U.S. AGENCIES:
One to Five Years............................. 4,000 4,026 6.0%
----- -----
Total U.S. Agencies...................... 4,000 4,026 6.0
----- -----
Total Held-to-Maturity Securities........ 4,000 4,026 6.0
===== =====
</TABLE>
75
<PAGE> 77
DEPOSITS
The following table summarizes the distribution of average deposits and the
average rates paid for the period indicated:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
AVERAGE AVERAGE
BALANCE RATE
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
NOW....................................................... $ 3,049 1.31%
Savings Deposits.......................................... 3,219 2.20
Money Market Accounts..................................... 4,815 2.60
TCD Less than $100,000.................................... 3,916 5.00
TCD $100,000 or More...................................... 3,063 5.31
-------
Total Interest-Bearing Deposits................. $18,062 3.29
Non Interest-Bearing Demand Deposits...................... 14,819 --
-------
Total Deposits.................................. $32,881 1.81
=======
</TABLE>
The scheduled maturity distribution of AIB's time deposits of $100,000 or
greater, as of September 30, 1998, were as follows (dollar amounts in
thousands):
<TABLE>
<S> <C>
Three Months or Less................... $1,454
Over Three Months to One Year.......... 1,861
------
Total........................ $3,315
======
</TABLE>
76
<PAGE> 78
SUPERVISION AND REGULATION
The following summarizes certain statutes and regulations affecting us. This is
only a summary, and we do not intend it to replace a review of the actual
statutes and regulations.
THE BANK -- GENERAL
The Bank is regulated by the OCC as a national banking association. The Bank is
also subject to certain FDIC rules and regulations because its deposits are
insured by the FDIC. These regulatory agencies regularly examine the Bank to
ensure its compliance with their rules and regulations.
FIRST COASTAL -- GENERAL
First Coastal is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Bank Holding Company Act"), and as such is
subject to regulation by the Board of Governors of the Federal Reserve System
(the "FRB"). The FRB regularly examines First Coastal and the Bank to ensure
compliance with all applicable laws and regulations.
The Bank Holding Company Act requires us to obtain the FRB's prior approval
before we acquire other banks or bank holding companies. In addition, any entity
that acquires more than 9.9% of our voting securities is generally presumed to
be a bank holding company, and such acquisition would require the prior approval
of the FRB.
CAPITAL ADEQUACY
The OCC has established minimum capital adequacy guidelines for national banks,
and the FRB has established minimum capital adequacy guidelines for bank holding
companies. The FRB's capital adequacy guidelines apply on a consolidated basis
if a bank holding company's consolidated assets are $150 million or more and
apply on a bank-only basis if consolidated assets are under $150 million. Our
consolidated assets on a pro forma basis as of September 30, 1998, after taking
into account the offering and the acquisition of AIB, would have been
approximately $124 million. See "Risk Factors -- Risk Factors Relating to First
Coastal -- We Face Certain Capital Requirements."
Under the capital adequacy guidelines, different categories of assets are
assigned different risk weights, based generally on the perceived credit risk of
the asset. Tier 1 capital generally includes common shareholders' equity,
perpetual preferred stock and minority interests in consolidated subsidiaries.
The FRB has announced that securities having the characteristics of the
Preferred Securities qualify as Tier 1 capital, but only 25% of an institution's
Tier 1 capital may be in the form of such securities. Total capital generally
consists of, in addition to Tier 1 capital, preferred stock not qualifying as
Tier 1 capital, subordinated and other qualifying debt and a portion of the
allowance for loan losses. The Tier 1 component must comprise at least 50% of
qualifying total capital. Risk-based capital ratios are calculated with
reference to risk-weighted assets which include both on and off-balance sheet
exposures. The FRB requires a total capital to risk-weighted assets ratio of at
least 8% and a Tier 1 capital to risk-weighted assets ratio of at least 4%. The
FRB has also adopted a "minimum leverage ratio," which requires a Tier 1 capital
to average total assets ratio of at least 4%. These minimum ratios currently
apply to the Bank and would
77
<PAGE> 79
apply on a consolidated basis to First Coastal only when our consolidated assets
exceed $150 million.
In addition to the FRB's risk-based capital guidelines, the OCC has adopted five
levels of capital for national banks; any national bank with a total capital to
risk-weighted assets ratio of at least 10%, Tier 1 capital to risk-weighted
assets ratio of at least 6% and a Tier 1 capital to average total assets ratio
of at least 5% is considered to be "well capitalized." The Bank is currently
well capitalized, and after consummation of this offering and the acquisition of
AIB, would remain well-capitalized on a pro-forma basis.
The following table sets forth, on a bank-only basis, the above-mentioned
capital ratios as of September 30, 1998 and on a pro forma basis as of September
30, 1998 after taking into account the consummation of the offering and the
acquisition of AIB:
<TABLE>
<CAPTION>
AS OF
BANK-ONLY SEPTEMBER 30,
CAPITAL RATIO: MINIMUM(1) WELL-CAPITALIZED 1998 PRO FORMA
-------------- ---------- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
Total capital to risk-weighted
assets...................... 8% 10% 10.68% 11.46%
Tier 1 capital to
risk-weighted assets........ 4% 6% 7.73% 9.20%
Tier 1 capital to average
total assets................ 4% 5% 5.33% 6.23%
</TABLE>
- -------------------------
(1) These minimum capital ratios are currently applicable on a bank-only basis
and will be applicable on a consolidated basis only when our total assets
exceed $150 million. As of September 30, 1998, on a consolidated basis, our
total capital to risk-weighted assets, Tier 1 capital to risk-weighted
assets and Tier 1 capital to average total assets ratios were 9.45%, 5.38%
and 3.74%, respectively. On a pro forma consolidated basis, after taking
into account the consummation of the offering, the assumed conversion of
11,118 shares of Series A Preferred Stock, the redemption of 94,757 shares
of Series A Preferred Stock and the acquisition of AIB, such ratios as of
September 30, 1998 would have been 12.72%, 6.60% and 4.48%, respectively.
ADDITIONAL REGULATION
We are also subject to federal regulation as to such matters as required
reserves, limitation as to the nature and amount of our loans and investments,
regulatory approval of any consolidation, issuance or retirement by the Bank of
its own securities, limitations upon the payment of dividends and other aspects
of banking operations. In addition, the activities and operations of the Bank
are subject to a number of additional detailed, complex and sometimes
overlapping laws and regulations. These include state usury and consumer credit
laws, laws relating to fiduciaries, the Federal Truth-in-Lending Act and
Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B, the
Fair Credit Reporting Act, the Truth in Savings Act, the Community Reinvestment
Act, antiredlining legislation and antitrust laws.
78
<PAGE> 80
DIVIDEND REGULATION
Our ability to obtain funds for the payment of dividends and for other cash
requirements is largely dependent on the amount of dividends which may be
declared by our subsidiary, the Bank. National banks may not pay dividends from
their capital. All dividends must be paid out of net income, after deducting
losses and bad debts. In addition, the Bank is prohibited from declaring a
dividend on its shares of common stock until:
(1) The surplus fund equals the amount of capital stock or
(2) If the surplus fund does not equal the amount of capital stock,
until an amount equal to one-tenth of the Bank's net income for the
preceding half year is transferred into the surplus fund.
Under this formula, the Bank would be eligible to pay up to approximately
$241,000 in dividends for the nine months ended September 30, 1998.
The approval of the OCC is required prior to the payment of dividends if the
total of all dividends declared by a national bank in any calendar year exceeds
the total of its retained net income for that year combined with its net income
for the two preceding years, less any required transfers to surplus or a fund
for the retirement of any preferred stock. Further, the OCC also has authority
to prohibit the payment of dividends by a national bank when it determines such
payment to be an unsafe and unsound banking practice. A bank may, upon approval
by OCC, be able to undergo a "quasi-reorganization," which would allow the bank
to ignore accumulated losses before the quasi-reorganization. The Bank underwent
a quasi-reorganization in 1997.
The Bank does not have positive retained earnings, and therefore may only pay
dividends to First Coastal out of its current income each year. The Bank has not
historically earned sufficient income to enable it to pay dividends to First
Coastal in amounts necessary to cover dividends on the Series A Preferred Stock
and interest payments on both the $1.0 million note payable and the Junior
Subordinated Debentures. Although our pro forma financial statements indicate
that, following our acquisition of AIB, the Bank will be able to pay sufficient
dividends to First Coastal to enable First Coastal to pay both the dividends and
the interest payments, you should note that these pro forma financial statements
are based on certain assumptions and are not necessarily indicative of our
actual future results of operations.
GOVERNMENT POLICIES AND LEGISLATION
The policies of regulatory authorities, including the OCC, FRB and FDIC, have
had a significant effect on the operating results of commercial banks in the
past and are expected to do so in the future. An important function of the
Federal Reserve System is to regulate aggregate national credit and money supply
through such means as open market dealings in securities, establishment of the
discount rate on member bank borrowings, and changes in reserve requirements
against member bank deposits. Policies of these agencies may be influenced by
many factors, including inflation, unemployment, short-term and long-term
changes in the international trade balance and fiscal policies of the United
States government.
The United States Congress has periodically considered and adopted legislation
which has resulted in further regulation and/or deregulation of both banks and
other financial institutions, including mutual funds, securities brokerage firms
and investment banking firms. No assurance can be given as to whether any
additional legislation will be adopted or as to the effect such legislation
would have on the business of First Coastal or the Bank.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 10,000,000 shares of common stock, no
par value, and 5,000,000 shares of Preferred Stock, no par value, after giving
effect to the Reverse Stock Split. The following summary description of our
capital stock is qualified in its entirety by reference to our Articles of
Incorporation and By-Laws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
COMMON STOCK
As of September 30, 1998, there were 664,551 shares of common stock outstanding,
held of record by 337 stockholders (approximately 365 beneficial owners). The
holders of common stock are entitled to one vote per share on all matters
submitted to a vote of stockholders. Holders of common stock are entitled to
receive ratably such dividends as we may legally declare, subject to dividends
payable on any preferred stock that we issue. We currently do not intend to pay
any dividends on our common stock. In the event of our liquidation, dissolution
or winding up, holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. All the outstanding shares of
common stock are, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.
PREFERRED STOCK
At September 30, 1998, we had 423,500 shares of Series A Preferred Stock
outstanding, held of record by 5 stockholders (approximately 65 beneficial
owners). Without further shareholder approval, we can issue 4,576,500 additional
shares of Preferred Stock in one or more series and fix the powers,
designations, preferences and rights, and qualifications, limitations or
restrictions thereof.
The Series A Preferred Stock is currently our only outstanding series of
preferred stock. The holders of Series A Preferred Stock are entitled to receive
cumulative preferential cash dividends, when and as declared by the Board of
Directors, of 10% of the stated liquidation preference of $6.75 per share per
annum. We currently pay regular dividends to holders of Series A Preferred
Stock.
Under the General Corporation Law of the State of California, we may pay
dividends on the Series A Preferred Stock if (1) our retained earnings equal or
exceed the proposed dividend or (2) the sum of our assets (excluding goodwill
and deferred charges) would be at least 125% of our liabilities (not including
deferred taxes, deferred income and other deferred credits). In the event we do
not pay four quarterly dividends on the Series A Preferred Stock, the holders of
the Series A Preferred Stock would be able to elect two additional directors to
our board until such dividends have been paid.
In the event of our liquidation, dissolution or winding up, the holders of
Series A Preferred Stock are entitled to receive, in preference to any
distribution to the holders of our common stock, the sum of $6.75 per share and
any accrued but unpaid dividends with respect thereto.
Each share of our Series A Preferred Stock is convertible into one share of our
common stock any time at the option of the holder (after giving effect to the
Reverse Stock Split).
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We may redeem our Series A Preferred Stock at any time after receiving the prior
approval of the Federal Reserve. Assuming we receive this approval, we intend to
call up to 94,757 shares of our Series A Preferred Stock for redemption on or
soon after the completion of this offering. Holders of 11,118 shares of our
Series A Preferred Stock have signed conversion agreements obligating them to
convert their shares of Series A Preferred Stock into shares of our common stock
on or prior to the redemption date. We cannot presently predict whether other
holders of our Series A Preferred Stock will also convert their shares rather
than redeem them.
WARRANTS
The LLC currently holds 225,000 warrants to purchase our common stock at $5.00
per share, which expire on May 31, 1999. The LLC has agreed with us that it will
exercise all warrants held by it on or prior to the consummation of the AIB
acquisition. In connection with this agreement, we have amended the terms of the
LLC's warrants to permit them to be exercised earlier than their stated terms.
See "Beneficial Ownership of the Common Stock -- California Community LLC."
In connection with this offering, we have granted the Underwriters a number of
warrants to purchase our common stock. See "Underwriting -- Underwriters'
Warrants."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock and Series A Preferred
Stock is U.S. Stock Transfer Corporation, Glendale, California.
U.S. Stock Transfer Corporation will also serve as transfer agent, registrar and
payment agent for the Units and Preferred Securities until the common stock and
Preferred Securities may trade separately. Thereafter, Wilmington Trust Company
will serve as transfer agent, registrar and payment agent for the Preferred
Securities.
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DESCRIPTION OF UNITS
Each Unit is comprised of one Preferred Security ($20.00 liquidation amount) and
one share of common stock. The Preferred Securities and common stock purchased
in this offering must trade together and cannot trade separately until the
earliest to occur of the following:
(1) One year after the closing of this offering.
(2) The decision by the Underwriters, in their sole discretion, to
permit separation earlier than one year after the closing of this offering.
(3) A call of redemption of the Preferred Securities, whether
pursuant to a Tax Event, Investment Company Event or Capital Treatment
Event.
(4) The occurrence of an Indenture Event of Default (as defined)
under the Indenture governing the Preferred Securities.
(5) The dissolution of the Trust or a distribution of the Junior
Subordinated Debentures.
See "Description of Preferred Securities" and "Description of Junior
Subordinated Debentures."
Purchasers in this offering will receive two certificates: one representing
shares of common stock and one representing Preferred Securities. Each
certificate will contain restrictive legends describing to the foregoing
transfer restrictions. Purchasers will not receive a separate certificate
representing the Units. Except for the requirement that the common stock and
Preferred Securities purchased in this offering be traded as a Unit for a period
of time, holders of Units will be treated as holders of both the common stock
and the Preferred Securities for all purposes. Upon termination of the transfer
restriction period for one of the reasons discussed above, purchasers may
exchange legended certificates for non-legended certificates by presenting them
to the transfer agent and registrar of the Preferred Securities.
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DESCRIPTION OF PREFERRED SECURITIES
This section summarizes the main provisions of the Preferred Securities and the
Trust Agreement governing the Trust, but it does not describe all the
provisions. Consequently, this summary is qualified by reference to the full
text of the Trust Agreement. We have filed with the Securities and Exchange
Commission a form of the Trust Agreement as an exhibit to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Trust will issue the Preferred Securities and the Common Securities under
the Trust Agreement, with a stated liquidation amount of $20.00 per security.
The Common Securities will be issued to us concurrently with the issuance of
Preferred Securities to purchasers in this offering. The Preferred Securities
and the Common Securities (together, the "Trust Securities") will rank on parity
with one another, and all payments in respect of the capital interests of the
Trust will be made on the Preferred Securities and the Common Securities pro
rata, except under certain cases of default under the Trust Agreement.
We will issue the Junior Subordinated Debentures under an indenture between us
and Wilmington Trust Company (the "Indenture") as described in "Description of
Junior Subordinated Debentures". Wilmington Trust Company will also act as
Property Trustee and will hold legal title to the Junior Subordinated Debentures
in trust for the benefit of the holders of the Trust Securities. In addition,
under the Guarantee as described in "Description of Guarantee and Expense
Agreement", we will guarantee, on a subordinated basis, the payment of
distributions and other amounts payable on the Preferred Securities, but only to
the extent that the Trust has funds on hand legally and immediately available to
make those payments. See "Description of Guarantee and Expense Agreement".
DISTRIBUTIONS
Distributions will accumulate on the Preferred Securities from their original
issue date, at the annual rate of % of the liquidation amount (or $ per
Preferred Security). Unless deferred as described below, distributions will be
payable quarterly in arrears on the last day of March, June, September and
December of each year (each, a "Distribution Date"), to the holders of the
Preferred Securities. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
The Trust will have no funds to distribute in respect of the Preferred
Securities other than the payments it receives from us in respect of the Junior
Subordinated Debentures. Consequently, if we defer or for any other reason fail
to make interest payments on the Junior Subordinated Debentures, the Trust will
not have funds available to pay distributions on the Preferred Securities. We
have no current intention to exercise our right to defer interest payments on
the Junior Subordinated Debentures.
DEFERRAL PERIODS. As long as no event of default under the Indenture (an
"Indenture of Default", as described under "Description of Junior Subordinated
Debentures -- Indenture Events of Default") has occurred and is continuing, we
have the right under the Indenture to defer the payment of interest on the
Junior Subordinated Debentures at any time. We may do so in each case for a
period not exceeding 20 consecutive quarters (each, an "deferral period"),
provided that no deferral period may extend beyond the stated maturity of the
Junior Subordinated Debentures. Before a deferral period ends, we may extend it
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further, subject to the limit described above. When a deferral period ends and
we have paid all interest then accrued and unpaid on the Junior Subordinated
Debentures (to the extent permitted by applicable law), we may begin a new
deferral period, so long as no Indenture Event of Default has occurred and is
continuing. There is no particular limit on the number of deferral periods that
we may begin.
If we elect to defer interest payments on the Junior Subordinated Debentures,
the Trust will defer the payment of distributions on the Preferred Securities
during the related deferral period. However, during a deferral period,
distributions will continue to accumulate on the Preferred Securities and (to
the extent permitted by applicable law) additional distributions will accumulate
on each deferred distribution payment at the annual rate of %, compounded
quarterly from the corresponding Distribution Date. The term "distribution",
wherever we use it in this Prospectus, includes any of these additional
distributions. During a deferral period, holders of Preferred Securities will
continue to be required to accrue interest income for United States federal
income tax purposes. See "Certain Federal Income Tax Consequences -- Original
Issue Discount".
Any distributions that would otherwise become due and payable during a deferral
period will not become due and payable until the day after the period ends. If
any Preferred Securities become subject to redemption during a deferral period,
that deferral period will end automatically on the day before the redemption
date.
We must give the Property Trustee and the holders of Preferred Securities notice
of our election to begin a deferral period. In general, each notice must be
given at least one business day before the record date for the distributions
which would have been payable but for the election.
We must notify the holders in the manner described below in "-- Notices".
DEFERRAL PERIOD RESTRICTIONS. The Indenture provides that, during any deferral
period, neither we nor any of our subsidiaries may take any of the following
actions:
- - declare or pay any dividend or other distribution on, or redeem, purchase or
otherwise acquire, any of our capital stock, except as described below, or
- - pay any principal, interest or other amount in respect of, or redeem, purchase
or otherwise acquire, any of our debt securities (including guarantees of
indebtedness for money borrowed) that rank, in right of payment in all
respects, on parity with or junior to the Junior Subordinated Debentures,
except as described below.
The Indenture restriction described above provides for significant exceptions.
Any of the following that would otherwise be covered by this restriction will
nevertheless be permitted:
- - any transaction in which the only consideration given or to be given by us or
any of our subsidiaries is Junior Securities (as defined below),
- - any transaction in connection with or arising from:
-- any employment contract, benefit plan or other similar arrangement with, or
for the benefit of, one or more employees, officers, directors or
consultants of ours,
-- any stockholders' rights plans, and
-- any issuance of Junior Securities as consideration in an acquisition
transaction entered into before the applicable deferral period,
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- - any exchange or conversion of capital stock or indebtedness into or for any of
our Junior Securities, and
- - any purchase of fractional interests in capital stock pursuant to the
provisions of a security being converted into or exchanged for capital stock.
"Junior Securities" means (1) our capital stock, (2) debt securities that rank,
in right of payment in all respects, on parity with or junior to the Junior
Subordinated Debentures and (3) warrants, options and other rights to acquire
capital stock or debt securities of the kind described in clauses (1) and (2).
REDEMPTION
The Preferred Securities will remain outstanding until the Trust redeems them or
distributes the Junior Subordinated Debentures in exchange for the Preferred
Securities. Any redemption of Preferred Securities must occur as described
below. Any exchange distribution must occur as described below in "-- Exchange
of Preferred Securities for Junior Subordinated Debentures".
REDEMPTION OF PREFERRED SECURITIES. If we repay or redeem the Junior
Subordinated Debentures at any time, whether at their stated maturity, upon
acceleration after an Indenture Event of Default or upon optional redemption,
the Trust will be obligated to redeem a like amount of Trust Securities on the
Redemption Date at the Redemption Price paid on the Junior Subordinated
Debentures. In this context, "Redemption Date" means the date on which payment
of the principal of those Junior Subordinated Debentures becomes due under the
Indenture.
REPAYMENT AND REDEMPTION OF JUNIOR SUBORDINATED DEBENTURES. The Junior
Subordinated Debentures will initially have a stated maturity of December 31,
2028, which we may shorten to a date not earlier than December 31, 2001 subject
to certain conditions and any regulatory approval. See "Description of Junior
Subordinated Debentures -- Stated Maturity". If we receive prior approval from
the Federal Reserve (if then required under relevant capital guidelines or
policies), we will also be entitled to redeem the Junior Subordinated Debentures
before their stated maturity, as follows:
(1) On or after December 31, 2001, in whole at any time or in part
from time to time (provided that no partial redemption may occur during a
deferral period).
(2) In whole (but not in part) at any time within 90 days after the
occurrence of a Tax Event, an Investment Company Act Event or a Capital
Treatment Event.
See "Description of Junior Subordinated Debentures -- Optional Redemption" for
the definitions of "Tax Event," "Investment Company Act Event" and "Capital
Treatment Event."
If we elect to redeem the Junior Subordinated Debentures, we will do so at the
Redemption Price, which means:
(a) In the case of redemption pursuant to clause (1) above,
accumulated and unpaid distributions on the Junior Subordinated Debentures
to be redeemed to the
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Redemption Date, plus an amount per debenture as set forth below, expressed as a
percentage of the principal amount:
<TABLE>
<CAPTION>
REDEMPTION DATE REDEMPTION PRICE
--------------- ----------------
<S> <C>
December 31, 2001 through December 30, 2002.... 108%
December 31, 2002 through December 30, 2003.... 105%
December 31, 2003 through December 30, 2004.... 102%
December 31, 2004 and thereafter............... 100%
</TABLE>
(b) In the case of redemption pursuant to clause (2) above, the
principal amount of the Junior Subordinated Debentures, plus accumulated
and unpaid distributions on those debentures to the Redemption Date.
The Indenture provides that, if a Tax Event has occurred and is continuing and
we do not elect to redeem the Junior Subordinated Debentures, we may be required
to pay certain additional sums on the Junior Subordinated Debentures. The
Indenture provisions regarding repayment and redemption of the Junior
Subordinated Debentures, as well as information about the effect that possible
tax law changes may have on the Junior Subordinated Debentures and Preferred
Securities, are addressed in "Description of Junior Subordinated
Debentures--Stated Maturity", "Risk Factors -- Risk Factors Relating to the
Preferred Securities -- Possible Tax Law Changes Affecting the Preferred
Securities" and "Certain Federal Income Tax Considerations -- Possible Tax Law
Changes."
REDEMPTION PROCEDURES. The Property Trustee will give notice of any redemption
of Preferred Securities to the holders of Preferred Securities not less than 30
nor more than 90 days before the Redemption Date, unless the redemption results
from acceleration of the maturity of the Junior Subordinated Debentures and the
Property Trustee cannot reasonably give this notice during this period. In that
case, the Property Trustee will give the notice as soon as practicable. In all
cases, the Property Trustee will give the notice of redemption in the manner
described below under "-- Notices".
Payment of the Redemption Price for any Preferred Securities will be made
against surrender of the certificates representing those Preferred Securities.
Any distribution that is payable on or before the Redemption Date will be
payable to the persons who are the holders of those Preferred Securities on the
record date for the distribution.
If the Property Trustee gives a notice of redemption, it will irrevocably
deposit by 12:00 noon, New York City time, on the Redemption Date, funds
sufficient to pay the Redemption Price for all Preferred Securities to be
redeemed on that date (to the extent the funds are available to the Property
Trustee). If the Property Trustee gives notice of redemption and deposits funds
as required under the Trust Agreement, then upon the date of deposit, all rights
of the holders of the Preferred Securities called for redemption will cease,
except the right of those holders to receive the Redemption Price (but without
interest on that amount), and those Preferred Securities will cease to be
outstanding. If payment of the Redemption Price for any Preferred Securities
called for redemption is improperly withheld or refused and not paid either by
the Trust or by us under the Guarantee, distributions on those Preferred
Securities will continue to accumulate to the date the Redemption Price is
actually paid.
If less than all the Preferred Securities are to be redeemed on a Redemption
Date, the aggregate liquidation amount of Preferred Securities to be redeemed
will be allocated pro
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rata between the holders of the Preferred Securities, based upon their
respective aggregate liquidation amounts. Not more than 60 days prior to the
Redemption Date, the Property Trustee will select the Preferred Securities to be
redeemed from among the outstanding Preferred Securities not previously called
for redemption. The Property Trustee may use any method of selection that it
deems to be fair and appropriate, including any method that involves the
redemption of a portion of the aggregate liquidation amount of any particular
holder's Preferred Securities.
OTHER PURCHASES OF PREFERRED SECURITIES. Subject to applicable law (including
U.S. federal securities laws), we and our subsidiaries may purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
These purchases may occur at any time and from time to time other than during a
deferral period.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
As the holder of the Common Securities, we will have the right at any time, in
our sole discretion, to elect to dissolve the Trust, subject to the prior
approval of the Federal Reserve (if then required). Upon such an election, and
if the liabilities of creditors of the Trust have been satisfied as provided by
applicable law, the Property Trustee will cause a like amount of Junior
Subordinated Debentures to be distributed in exchange for all the outstanding
Preferred Securities and Common Securities, in liquidation of the Trust. In this
context, "like amount" means Junior Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of all outstanding
Trust Securities. See "-- Liquidation Distribution Upon Dissolution".
EXCHANGE PROCEDURES. The Property Trustee will notify holders of Preferred
Securities of any exchange not less than 30 nor more than 90 days before the
Exchange Date, in the manner described below under "-- Notices". On the Exchange
Date, the following shall occur:
- the Preferred Securities will cease to be outstanding,
- any certificate representing Preferred Securities will be deemed to
represent a like amount of Junior Subordinated Debentures, bearing
accrued and unpaid interest in an amount equal to the accumulated and
unpaid distributions on those Preferred Securities, until those
certificates are presented to the paying agent for exchange or transfer,
and
- all rights of the holders of Preferred Securities will cease upon
surrender of the certificates representing their Preferred Securities, as
described above.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Under the Trust Agreement, the Trust will automatically dissolve upon the
occurrence of any of the following events, whichever occurs first:
- the expiration of its term of 30 years,
- certain events of bankruptcy, dissolution or liquidation of a holder of
Common Securities,
- distribution of the Junior Subordinated Debentures in exchange for the
Preferred Securities, after the holders of Common Securities have elected
to dissolve the
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Trust, provided that we receive prior approval from the Federal Reserve
(if then required),
- redemption of all the Preferred Securities, or
- the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If the Trust dissolves while the Preferred Securities are outstanding, the
Property Trustee will liquidate the Trust as expeditiously as the Property
Trustee determines to be possible. The Property Trustee will do so by
distributing to the holders of the Preferred Securities in exchange for their
securities, a like amount of the Junior Subordinated Debentures. However, the
Property Trustee will do so only after satisfying liabilities to creditors of
the Trust as provided by applicable law and only if the Property Trustee
determines that an exchange distribution of this kind is practical.
If the Property Trustee determines that an exchange distribution is not
practical, each holder of outstanding Preferred Securities will be entitled to
receive out of the assets of the Trust available for distribution to holders,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, an amount equal to the Liquidation Distribution. The
"Liquidation Distribution" for any Preferred Securities will equal the aggregate
liquidation amount of those Preferred Securities plus all accrued and unpaid
distributions on them to the date of payment. If the Liquidation Distribution
for all outstanding Preferred Securities can be paid only in part because the
Trust has insufficient assets available to pay it in full, the amounts payable
by the Trust on the Preferred Securities will be paid pro rata, based on their
respective liquidation amounts.
On any liquidation of the Trust, the holders of the Common Securities will be
entitled to receive distributions pro rata with the holders of the Preferred
Securities, unless an event of default under the Trust Agreement, a "Trust Event
of Default," has occurred and is continuing. In that case, the Preferred
Securities will have priority in right of payment over the Common Securities, as
described below under "-- Priority Over Common Securities".
PRIORITY OVER COMMON SECURITIES
Payment of distributions and the Redemption Price will be made in respect of the
Preferred Securities and the Common Securities pro rata, based on the respective
aggregate liquidation amounts of the two classes, except as follows. If a Trust
Event of Default (see the next subsection) has occurred and is continuing, the
Trust will not pay any distribution or Redemption Price, or make any Liquidation
Distribution, in respect of the Common Securities on any day unless the
following have occurred:
- in the case of any distribution to be paid, all accumulated and unpaid
distributions on all outstanding Preferred Securities for all
distribution periods ending on or before the payment day have been paid
(or duly provided for) in cash,
- in the case of any Redemption Price to be paid, the Redemption Price on
all outstanding Preferred Securities called on or before the payment day
for redemption has been paid (or duly provided for) in cash, and
- in the case of a Liquidation Distribution to be made, the Liquidation
Distribution on all outstanding Preferred Securities has been made (or
duly provided for).
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Whenever any distribution or Redemption Price is due and payable in respect of
the Preferred Securities, the Property Trustee will apply all available funds to
the payment of those amounts in full in cash before making any payment in
respect of the Common Securities. The Trust will not make any payment or other
distribution in respect of the Common Securities (including on account of any
purchase or other acquisition) while the Preferred Securities are outstanding,
other than distributions, the Redemption Price and the Liquidation Distribution
on the terms set forth in the Trust Agreement.
If a Trust Event of Default occurs, the holders of the Common Securities will be
deemed to have waived all rights to act with respect to the Trust Event of
Default until all Trust Events of Default have been cured, waived or otherwise
eliminated. Until that time, the Property Trustee will act solely on behalf of
the holders of the Preferred Securities and not on behalf of the holders of the
Common Securities, and only the holders of the Preferred Securities will have
the right to direct the Property Trustee to act on their behalf.
TRUST EVENTS OF DEFAULT
Any one of the following events will be a "Trust Event of Default" under the
Trust Agreement. This will be the case regardless of the reason why the event
occurs, whether it is voluntary or involuntary and whether or not it results
from operation of law, from any judgment, decree or order of any court or from
any order, rule or regulation of any administrative or governmental body:
- the occurrence of an Indenture Event of Default under the Indenture (see
"Description of Junior Subordinated Debentures -- Indenture Events of
Default"),
- default by the Trust in the payment of any distribution when it becomes
due and payable and continuation of the default for 30 days,
- default by the Trust in the payment of any Redemption Price when it
becomes due and payable,
- material default or breach in the performance or under any covenant or
warranty of the Property Trustee or Delaware Trustee under the Trust
Agreement, and continuation of the default or breach for 60 days after a
notice of default has been given; a notice of default may be given only
by the holders of at least 25% in aggregate liquidation amount of the
outstanding Preferred Securities, as provided under the Trust Agreement,
and
- the occurrence of certain events of bankruptcy or insolvency with respect
to the Property Trustee if a successor Property Trustee has not been
appointed within 90 days.
Within five business days after learning about a Trust Event of Default, the
Property Trustee will notify the holders of the outstanding Trust Securities,
unless the Trust Event of Default has been cured or waived. We, as depositor,
and the Administrators are obligated to file annually with the Property Trustee
a certificate as to whether or not we and they are in compliance with all the
conditions and covenants applicable to us and them under the Trust Agreement.
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ENFORCEMENT RIGHTS
If an Indenture Event of Default occurs, the holders of Preferred Securities
must rely on the Property Trustee, as the holder of the Junior Subordinated
Debentures, to enforce on their behalf its rights under the Junior Subordinated
Debentures and the Indenture against us, subject to the following.
RIGHT TO DIRECT PROPERTY TRUSTEE'S ACTIONS. The holders of a majority in
aggregate liquidation amount of outstanding Preferred Securities will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to, or exercising any trust or power conferred on, the Property
Trustee under the Trust Agreement, including the right to direct the Property
Trustee to exercise the remedies available to it as the holder of the Junior
Subordinated Debentures. Accordingly, the Property Trustee will not take any of
the following actions without obtaining the prior approval of the holders of a
majority in aggregate liquidation amount of the outstanding Preferred Securities
(or, in the case of any action that under the Indenture may be taken only with
the prior consent of each affected holder of Junior Subordinated Debentures,
without the prior consent of each holder of outstanding Preferred Securities):
- direct the time, method or place of conducting any proceeding for any remedy
available to, or executing any trust or power conferred on, the trustee
under the Indenture (the "Indenture Trustee") with respect to the Junior
Subordinated Debentures,
- waive any past default that may be waived under the Indenture,
- exercise any right to rescind or annul a declaration that the principal of
all the Junior Subordinated Debentures be due and payable,
- consent to any amendment, modification or termination of the Indenture or
the Junior Subordinated Debentures, if the consent of any holder of Junior
Subordinated Debentures is required under the Indenture, or
- revoke any action previously authorized or approved by the holders of the
Preferred Securities except by or with the subsequent authorization or
approval of the holders of the Preferred Securities.
Before taking any of the actions described above, the Property Trustee must also
obtain an opinion of counsel, experienced in the following matters, to the
effect that the action will not cause the Trust to be classified as an
association taxable as a corporation, or as other than a grantor trust, for U.S.
federal income tax purposes. The Property Trustee will notify the holders of
Preferred Securities of any notice of default with respect to the Junior
Subordinated Debentures, in the manner described below under "-- Notices".
Any required approval of holders of Preferred Securities may be given by written
consent or at a meeting convened for that purpose. The Property Trustee must
cause a notice of any matter upon which holders of Preferred Securities are to
act by written consent, or of any meeting at which holders of Preferred
Securities are entitled to vote, to be given to the holders of Preferred
Securities in the manner described below under "-- Notices". See "-- Voting
Rights; Amendment of Trust Agreement".
RIGHT OF DIRECT ACTION. If an Indenture Event of Default has occurred and is
continuing and is attributable to our failure to pay any interest or principal
on the Junior Subordinated Debentures when due and payable, a holder of
Preferred Securities may
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begin a legal proceeding directly against us for enforcement of payment, to that
holder, of the interest or principal due and payable on Junior Subordinated
Debentures having a principal amount equal to the aggregate liquidation amount
of that holder's Preferred Securities (a "Direct Action"). We may not amend the
Indenture to remove the right of any holder of outstanding Preferred Securities
to bring a Direct Action without the prior written consent of that holder. We
will have the right under the Indenture to set off any payment made to a holder
of Preferred Securities in connection with a Direct Action. Except for the right
to bring a Direct Action, holders of Preferred Securities will not have the
right to exercise directly against us any remedy available to a holder of Junior
Subordinated Debentures.
RIGHT TO ACCELERATE JUNIOR SUBORDINATED DEBENTURES. The holders of certain
minimum percentages of the outstanding Preferred Securities will be entitled to
exercise certain rights of the holders of the Junior Subordinated Debentures
under the Indenture, if the holders of Junior Subordinated Debentures do not do
so. These rights include the right to accelerate the maturity of the Junior
Subordinated Debentures when an Indenture Event of Default has occurred and is
continuing, to annul a declaration of acceleration of the Junior Subordinated
Debentures and to waive certain defaults under the Indenture. See "Description
of Junior Subordinated Debentures -- Indenture Events of Default".
MERGERS, CONSOLIDATIONS AND REPLACEMENTS OF THE TRUST
At our request and with the consent of the Administrators, but without the
consent of any holder of Preferred Securities or any trustee of the Trust, the
Trust may merge with or into, or consolidate or amalgamate with, convert into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, another entity (each, a "Trust Successor
Transaction"), but only if that other entity is a trust organized as such under
the laws of any state in the United States and only if all the following
requirements are met:
- the successor entity (if not the Trust) either (1) expressly assumes all the
obligations of the Trust with respect to the Preferred Securities or (2)
substitutes for the Preferred Securities other securities having
substantially the same terms as the Preferred Securities ("Successor
Securities"), provided that the Successor Securities rank at least as high
as the Preferred Securities rank with regard to the priority in right of
payment of all distributions and other amounts payable upon liquidation,
redemption and otherwise,
- the successor entity (if not the Trust) has a purpose substantially
identical to that of the Trust,
- a trustee of the successor entity (if not the Trust) possessing the same
powers and duties as the Property Trustee is appointed to hold the Junior
Subordinated Debentures,
- the Successor Securities (if any) are listed or included for quotation, or
will be listed or included for quotation upon notification of issuance, on
any national securities exchange or other organization on which the
Preferred Securities are then listed or quoted, if any,
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- the Trust Successor Transaction does not cause the Preferred Securities (or
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization that assigns ratings to the Preferred
Securities,
- the Trust Successor Transaction does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (or
any Successor Securities) in any material respect,
- prior to the Trust Successor Transaction, we and the Trust have received an
opinion from independent counsel to us and the Trust, experienced in the
following matters, to the effect that (1) the Trust Successor Transaction
will not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (or any Successor Securities) in any
material respect and (2) upon completion of the Trust Successor Transaction,
the Trust or the successor entity, as applicable, will not be required to
register as an investment company under the Investment Company Act, and
- we (or any permitted successor), together with our permitted assignees, hold
all the Common Securities of the Trust or all comparable securities of the
successor entity, as applicable, and guarantee the obligations of the
successor entity (if not the Trust) in respect of the Preferred Securities
(or any Successor Securities) at least to the extent provided by the
Guarantee.
Notwithstanding the foregoing, the Trust may not engage in a Trust Successor
Transaction that would cause the Trust or the successor entity, as applicable,
to be classified as an association taxable as a corporation or as other than a
grantor trust, or would cause the Junior Subordinated Debentures or any
Successor Securities to be treated as other than our indebtedness, for U.S.
federal income tax purposes, unless it first obtains the consent of all holders
of outstanding Preferred Securities. Except as permitted under the provisions
described above, the Trust may not engage in any Trust Successor Transaction.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and under "Description of Guarantee and Expense
Agreement -- Amendments, Assignment and Succession", and as otherwise required
by law and the Trust Agreement, the holders of the Preferred Securities will
have no voting rights.
We and the Property Trustee, without the consent of the holders of the Preferred
Securities, may amend the Trust Agreement from time to time to do any of the
following:
- cure any ambiguity, or correct or supplement any provision that may be
inconsistent with any other provision, in the Trust Agreement,
- make any provision with respect to matters or questions arising under the
Trust Agreement that is not inconsistent with the other provisions of the
Trust Agreement, and
- modify, eliminate or add to any provisions of the Trust Agreement to any
extent that may be necessary to ensure that the Trust will not be taxable as
a corporation or be classified as other than a grantor trust, or to ensure
that the Junior Subordinated Debentures are treated as our indebtedness for
U.S. federal income tax purposes, or to ensure that the Trust will not be
required to register as an "investment company" under the Investment Company
Act,
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but only if the amendment does not adversely affect the interests of any holder
of Preferred Securities in any material respect and does not become effective
until notice of the amendment is given to the holders of Preferred Securities.
We and the Property Trustee may also amend the Trust Agreement if (1) the
holders of not less than a majority in aggregate liquidation amount of the
outstanding Preferred Securities consent and (2) the Property Trustee and
Delaware Trustee of the Trust receive an opinion of counsel to the effect that
the amendment or the exercise of any power granted to the Property Trustee and
Delaware Trustee in accordance with the amendment will not result in the Trust
being taxable as a corporation or being classified as other than a grantor
trust, or the Junior Subordinated Debentures being treated as other than our
indebtedness for U.S. federal income tax purposes or being required to register
as an "investment company" under the Investment Company Act. Notwithstanding the
foregoing, each holder of Preferred Securities must consent to any amendment of
the Trust Agreement that (1) changes the amount or timing of any distribution or
other payment, or otherwise adversely affects the amount of any distribution or
other payment required to be made as of a specified date, in respect of that
holder's Preferred Securities or (2) restricts the right of that holder to
institute suit for the enforcement of any payment on those Preferred Securities
on or after the date on which it becomes due and payable.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in the
Trust Agreement.
For the purpose of any vote or consent of holders of Preferred Securities, any
Preferred Securities owned by us, the Property Trustee, the Delaware Trustee or
any affiliate of the foregoing will be treated as if they were not outstanding.
NOTICES
Notices to be given to holders of Preferred Securities may be given by mail to
the respective addresses of the holders as they appear in the security register
and will be deemed duly given when mailed to those addresses. Neither the
failure to give any notice to a particular holder, nor any defect in a notice
given to a particular holder, will affect the sufficiency of any notice given to
another holder.
PAYMENT AND PAYING AGENCY
Payments in respect of any Preferred Securities will be paid by check mailed to
the persons entitled to receive them, at their addresses appearing on the
security register on the relevant record date.
U.S. Stock Transfer Corporation, located in Glendale, California, will serve as
the paying agent until the common stock and Preferred Securities may trade
separately. Thereafter, the Property Trustee will serve as the paying agent.
From time to time, the Property Trustee may select one or more firms to act as
the paying agent or as co-paying agents. Each paying agent must be a bank or
trust company acceptable to the Administrators. A paying agent will be permitted
to resign as paying agent upon 30 days' written notice to
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the Property Trustee and us. In the event there is no paying agent, the Property
Trustee will appoint a firm to act as paying agent.
If any distribution, Redemption Price or other amount is payable in respect of
the Preferred Securities on a day that is not a business day, the payment may be
made on the next succeeding business day.
Any moneys deposited with the Property Trustee or any paying agent, or then held
in trust by us or the Trust, for the payment of any amount due and payable on
any Preferred Securities, and remaining unclaimed for two years after the amount
has become due and payable, will, at our request, be repaid to us. Thereafter,
the holders of those Preferred Securities will look, as a general unsecured
creditor, only to us for payment thereof.
REGISTRAR AND TRANSFER AGENT
U.S. Stock Transfer Corporation will serve as registrar and transfer agent for
the Preferred Securities until the common stock and Preferred Securities may
trade separately. Thereafter, the Property Trustee will act as registrar and
transfer agent for the Preferred Securities. The Property Trustee will exchange
and register transfers of Preferred Securities without charge by or on behalf of
the Trust, but will require payment of any tax or other governmental charge that
may be imposed in connection with the exchange or transfer. If any Preferred
Securities have been called for redemption, the Property Trustee may refuse to
register any transfer of those Preferred Securities.
REGARDING THE TRUSTEES OF THE TRUST
REMOVAL AND APPOINTMENT OF SUCCESSORS. The holders of at least a majority in
aggregate liquidation amount of the outstanding Preferred Securities may remove
either the Property Trustee or the Delaware Trustee, or both of them, if an
Indenture Event of Default has occurred and is continuing, with or without
cause. In no event will the holders of the Preferred Securities have the right
to vote to appoint, remove or replace the Administrators; we have this exclusive
right as the holder of the Common Securities. No resignation or removal of any
trustee of the Trust, and no appointment of a successor trustee, will be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the Trust Agreement.
MERGER, CONSOLIDATION, ETC. If the Property Trustee or the Delaware Trustee
merges, consolidates with or converts into, another entity or another entity
succeeds to all or substantially all the corporate trust business of that
trustee, the other entity will be the successor of that trustee under the Trust
Agreement, but only if that other entity is qualified and eligible to be a
Property Trustee or Delaware Trustee.
DUTIES OF PROPERTY TRUSTEE. The Property Trustee undertakes to perform only
those duties that are specifically set forth in the Trust Agreement, unless a
Trust Event of Default is continuing. In that event, the Property Trustee must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee will have no obligation to exercise any of the powers vested in
it by the Trust Agreement at the request of any holder of Preferred Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that it might incur as a result. If no Trust Event of Default is
continuing and the Property Trustee must decide between alternative causes of
action or construe ambiguous provisions in the Trust Agreement, or is unsure of
the application of any provision of the
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Trust Agreement, and the matter is not one on which the holders of Trust
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee may take any action that it deems to be advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Trust Agreement authorizes and directs the Administrators and the Property
Trustee to conduct the affairs of and to operate the Trust so that the Trust
will not be required to register as an "investment company" under the Investment
Company Act or be classified as an association taxable as a corporation or as
other than a grantor trust for U.S. federal income tax purposes and so that the
Junior Subordinated Debentures will be treated as our indebtedness for U.S.
federal income tax purposes. The Trust Agreement authorizes the Property Trustee
and the holders of Common Securities to take any action, not inconsistent with
applicable law, the certificate of trust of the Trust or the Trust Agreement,
that they (or any successor entity) determine in their discretion to be
necessary or desirable for these purposes, as long as the action does not
adversely affect the interests of the holders of the Preferred Securities in any
material respect. Holders of the Preferred Securities will have no preemptive or
similar rights.
GOVERNING LAW
The Trust Agreement and the Trust Securities provide that they are to be
governed by and construed in accordance with the laws of Delaware.
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DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
This section summarizes the main provisions of the Junior Subordinated
Debentures and the Indenture, but it does not describe all the provisions.
Consequently, this summary is qualified by reference to the full text of the
Indenture. We have filed a form of the Indenture as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
Concurrently with the issuance of the Preferred Securities, we will issue the
Junior Subordinated Debentures under the Indenture, and the Trust will use the
proceeds from the sale of the Preferred Securities, together with the
consideration paid by us for the Common Securities, to purchase the Junior
Subordinated Debentures. The Junior Subordinated Debentures will initially have
an aggregate principal amount equal to the aggregate liquidation amount of
Preferred Securities and Common Securities. Unless the Trust distributes the
Junior Subordinated Debentures in exchange for the Preferred Securities as
described below, the Junior Subordinated Debentures will be held in the name of
the Property Trustee in trust for the benefit of the holders of the Trust
Securities. Wilmington Trust Company will be the trustee under the Indenture
(the "Indenture Trustee").
The Junior Subordinated Debentures will be our general, unsecured obligations
and will be subordinated in right of payment, to the extent and in the manner
set forth in the Indenture, to all of our Senior Indebtedness (see
"-- Subordination"). Because we are a holding company, the Junior Subordinated
Debentures will also effectively be subordinated to all existing and future
liabilities of the Bank and any other subsidiaries we may have.
INTEREST
Interest will accrue on the principal of the Junior Subordinated Debentures from
their original issue date at the annual rate of %. Unless deferred as
described below, interest will be payable quarterly in arrears on the last day
of March, June, September and December of each year (each, an "Interest Payment
Date"), to the persons who are the record holders of the Junior Subordinated
Debentures at the close of business on the 15th day (whether or not a business
day) next preceding the relevant Interest Payment Date. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months.
As long as no Indenture Event of Default has occurred and is continuing, we will
have the right to defer the payment of interest on the Junior Subordinated
Debentures as described in "Description of Preferred
Securities -- Distributions -- Deferral Periods". However, during a deferral
period, interest will continue to accrue on the Junior Subordinated Debentures
and additional interest will accrue on each deferred interest payment at the
annual rate of %, compounded quarterly from the corresponding Interest
Payment Date. The term "interest", wherever we use it in this Prospectus with
respect to the Junior Subordinated Debentures, includes any of this additional
interest. In addition, during any deferral period, the Indenture will prohibit
us and our subsidiaries from taking certain actions described in "Description of
Preferred Securities -- Distributions -- Deferral Period Restrictions".
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Any interest that would otherwise become due and payable in respect of any
Junior Subordinated Debentures during a deferral period will not become due and
payable until the day after the period ends.
If the principal of any Junior Subordinated Debentures becomes due and payable
on a day that would otherwise occur during a deferral period, that period will
end automatically on the next preceding day.
STATED MATURITY
The Junior Subordinated Debentures will initially have a stated maturity of
December 31, 2028. However, we will have the option at any time to shorten the
stated maturity of the Junior Subordinated Debentures to a date not earlier than
December 31, 2001, provided that we would pay any required premium so that the
principal and premium so paid would equal the Redemption Price if the Junior
Subordinated Debentures were redeemed on such date. We would expect to exercise
this option if, for example, a tax development occurred that could adversely
affect our ability to deduct interest payments on the Junior Subordinated
Debentures we determined that shortening the maturity of the Junior Subordinated
Debentures would preserve our tax deduction.
To exercise our option to shorten the stated maturity, we must select a date
when the change is to become effective and must notify the Indenture Trustee,
and the Indenture Trustee must notify the holders of the Junior Subordinated
Debentures in the manner described below under "-- Notices", of the new stated
maturity and the effective date of the change. The notice must be given not less
than 30 days nor more than 90 days before the effective date. Any notice of this
kind will be irrevocable when given.
OPTIONAL REDEMPTION
If we receive prior approval from the Federal Reserve (if then required under
relevant capital guidelines or policies), we will have the option to redeem the
Junior Subordinated Debentures before the stated maturity as follows:
- on or after December 31, 2001, in whole at any time or in part from time
to time (provided that no partial redemption may occur during a deferral
period)
- in whole (but not in part) at any time within 90 days after the
occurrence of a Tax Event, an Investment Company Act Event or a Capital
Treatment Event (as defined below).
The Redemption Prices of the Junior Subordinated Debentures are set forth in
"Description of Preferred Securities -- Redemption -- Repayment and Redemption
of Junior Subordinated Debentures". Unless we default in payment of the
Redemption Price, on and after the redemption date interest will cease to accrue
on the Junior Subordinated Debentures (or portions of them) called for
redemption. We may not elect to redeem any Junior Subordinated Debentures on a
Redemption Date that would occur during a deferral period unless we elect to
redeem all outstanding Junior Subordinated Debentures on that date.
We must give notice of any redemption to the holders of the Junior Subordinated
Debentures not less than 30 days nor more than 90 days before the Redemption
Date, in the manner described below under "-- Notices". In all other respects,
the procedures for redeeming the Junior Subordinated Debentures will be similar
to those for redeeming the
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Preferred Securities. See "Description of Preferred
Securities -- Redemption -- Redemption Procedures".
DEFINITION OF TAX EVENT. "Tax Event" means the receipt by us (and, if the
Preferred Securities are outstanding, the Trust) of an opinion of independent
counsel, experienced in the following matters, to the following effect:
As a result of any Tax Change (as defined below), there is more than an
insubstantial risk that any of the following will occur:
- the Trust is, or will be within 90 days after the date of the opinion of
counsel, subject to U.S. federal income tax with respect to income
received or accrued on the Junior Subordinated Debentures,
- interest payable by us on the Junior Subordinated Debentures is not, or
within 90 days after the opinion of counsel will not be, deductible by
us, in whole or in part, for U.S. federal income tax purposes, or
- the Trust is, or will be within 90 days after the date of the opinion of
counsel, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
As used above, "Tax Change" means any of the following:
- any amendment to or change (including any announced prospective change)
in the laws, or any regulations under the laws, of the United States or
of any political subdivision or taxing authority of or in the United
States, if the amendment or change is enacted, promulgated or announced
on or after the date of this Prospectus, or
- any official administrative pronouncement or any judicial decision,
whether or not the pronouncement or decision is issued to or in
connection with a proceeding involving us or the Trust or is subject to
review or appeal, if the pronouncement or decision is enacted,
promulgated or announced on or after the date of this Prospectus.
For a description of certain tax law developments that could result in a Tax
Event and thus early redemption of the Junior Subordinated Debentures and the
Preferred Securities, see "U.S. Federal Income Tax Consequences -- Possible Tax
Law Changes" and "Risk Factors -- Risk Factors Relating to the Preferred
Securities -- Possible Tax Law Changes Affecting Preferred Securities".
DEFINITION OF "INVESTMENT COMPANY ACT EVENT". "Investment Company Act Event"
means the receipt by us and the Trust of an opinion of counsel, experienced in
the following matters, to the following effect: As a result of the occurrence of
a change (including any announced prospective change) in law or regulation, or a
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulative authority, there is more than an insubstantial risk that
the Trust is or will be considered an "investment company" that is required to
be registered under the Investment Company Act. To be effective for this
purpose, the change, prospective change, pronouncement or decision must become
effective on or after the date of this Prospectus.
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DEFINITION OF "CAPITAL TREATMENT EVENT". "Capital Treatment Event" means the
receipt by us and the Trust of an opinion of counsel, experienced in the
following matters, to the following effect: As a result of the occurrence of a
change (including any announced prospective change) in law or regulation, or a
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulative authority, there is more than an insubstantial risk that we
will not be entitled to treat an amount of Preferred Securities as "Tier 1
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to us, equal
to the lesser of (1) the aggregate Liquidation Amount or (2) 25% of our total
Tier 1 Capital (including such Preferred Securities qualifying as Tier 1
Capital). To be effective for this purpose, the change, prospective change,
pronouncement or decision must become effective on or after the date of this
Prospectus.
PAYMENT OF ADDITIONAL SUMS. If a Tax Event has occurred and is continuing and we
do not elect to redeem the Junior Subordinated Debentures and thereby cause a
mandatory redemption of the Preferred Securities (and we do not elect to
liquidate the Trust and cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in exchange for their
securities), the Preferred Securities will remain outstanding and we will be
obligated to pay Additional Sums on the Junior Subordinated Debentures.
"Additional Sums" means such additional amounts as may be necessary so that the
amount of distributions that are due and payable by the Trust on the outstanding
Preferred Securities and Common Securities at any time will not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of the Tax Event.
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
As described under "Description of Preferred Securities -- Exchange of Preferred
Securities for Junior Subordinated Debentures", we, as the holder of the Trust's
Common Securities, may elect to terminate the Trust and cause the Trust to
distribute the Junior Subordinated Debentures to the holders of the Trust
Securities in exchange for these securities. If we do this, we will be obligated
to use our best efforts to list or include for quotation the Junior Subordinated
Debentures on any stock exchange or organization on which the Preferred
Securities are then listed or quoted (if any). We can give no assurance as to
the market price of any Junior Subordinated Debentures that may be distributed
to the holders of the Preferred Securities.
MODIFICATION OF INDENTURE
From time to time we and the Indenture Trustee may, without the consent of the
holders of the Junior Subordinated Debentures, amend, waive or supplement the
Indenture for specified purposes. These include curing ambiguities, defects or
inconsistencies (provided that doing so does not adversely affect the interests
of the holders of the Junior Subordinated Debentures or the Preferred Securities
in any material respect) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act.
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The Indenture also permits us and the Indenture Trustee, with the consent of the
holders of a majority in principal amount of the outstanding Junior Subordinated
Debentures, to modify the Indenture in any manner whatsoever, provided that no
modification may do any of the following, without the consent of the holder of
each outstanding Junior Subordinated Debentures that would be affected by the
modification:
- change the stated maturity of the Junior Subordinated Debentures (except
to shorten it as permitted by the Indenture), reduce the principal amount
of the Junior Subordinated Debentures, or reduce the rate or extend the
time of payment of interest on the Junior Subordinated Debentures (except
for any permitted deferral in connection with a deferral period), and
- reduce the percentage of principal amount of the outstanding Junior
Subordinated Debentures, the holders of which are required to consent to
any modification of the Indenture.
As long as the Preferred Securities are outstanding, the Property Trustee, as
the holder of the Preferred Securities, will not be permitted to consent to any
modification, waiver or termination of the Indenture without obtaining the
consent of the holders of Preferred Securities as required under the Trust
Agreement. See "Description of Preferred Securities -- Enforcement Rights".
INDENTURE EVENTS OF DEFAULT
Each of the following events will be an "Indenture Event of Default". This will
be the case regardless of the reason why the event occurs, whether it is
voluntary or involuntary and whether or not it results from operation of law,
from any judgment, decree or order of any court, from any order, rule or
regulation of any administrative or governmental body or by reason of the
subordination provisions:
- failure to pay any interest or Additional Sum on the Junior Subordinated
Debentures when due and continuation of the default for 30 days (a
permitted deferral during a deferral period will not be a default),
- failure to pay any principal of the Junior Subordinated Debentures when
due, whether at maturity or upon redemption,
- failure to observe or perform any other covenant in the Indenture in any
material respect for 90 days after written notice has been given to us by
the Indenture Trustee or the holders of at least 25% in aggregate
principal amount of the outstanding Junior Subordinated Debentures, and
- certain events in bankruptcy, insolvency or reorganization affecting us.
If an Indenture Event of Default has occurred and is continuing, either the
Indenture Trustee or the holders of not less than 25% in aggregate principal
amount of the outstanding Junior Subordinated Debentures may declare the
principal of all Junior Subordinated Debentures to be due and payable
immediately. If the Preferred Securities are outstanding and the Indenture
Trustee or those holders of Junior Subordinated Debentures fail to exercise this
right, the holders of at least 25% in aggregate liquidation amount of the
outstanding Preferred Securities may do so. The holders of a majority in
aggregate principal amount of the outstanding Junior Subordinated Debentures may
annul any declaration of acceleration if (a) we have paid or deposited with the
Indenture Trustee
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a sum sufficient to pay all overdue installments of interest, principal which
has become due other than by declaration of acceleration, and all sums owed to
the Indenture Trustee, and (b) all Events of Default, other than the non-payment
of principal that has become due solely by such acceleration, have been cured or
waived as provided below. If the holders of Junior Subordinated Debentures do
not exercise this right, the holders of a majority in aggregate liquidation
amount of the outstanding Preferred Securities may do so.
The holders of a majority in aggregate principal amount of the outstanding
Junior Subordinated Debentures or Preferred Securities may waive any default
under the Indenture other than:
- a default in the payment of principal or interest (and any Additional
Sum), unless the default has been cured and a sum sufficient to pay all
matured installments of interest and principal (and any Additional Sum)
due otherwise than by acceleration has been deposited with the Indenture
Trustee, and
- a default in respect of a covenant that under the Indenture cannot be
modified or amended without the consent of the holder of each affected
Junior Subordinated Debentures.
The holders of a majority in aggregate principal amount of outstanding Junior
Subordinated Debentures will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee.
This right, as well as the rights of the holders of Junior Subordinated
Debentures with regard to acceleration, annulment and waiver described above,
will be subject to the enforcement rights of the holders of Preferred Securities
when the Preferred Securities are outstanding. See "Description of Preferred
Securities -- Enforcement Rights". We will be obligated to provide the Indenture
Trustee (and, if the Preferred Securities are outstanding, the Property Trustee)
annually a certificate as to whether or not we are in compliance with the
provisions of the Indenture applicable to us.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that we may not consolidate with, or merge with or into,
or convey, transfer or lease its properties and assets substantially as an
entirety to, any other entity (a "Successor Transaction"), unless the following
conditions (among others) are satisfied:
- the successor entity (if not us) must be organized under the laws of the
United States or any state or the District of Columbia, and must
expressly assume our obligations to pay the interest and principal in
respect of the Junior Subordinated Debentures and to perform every
covenant provided for in the Indenture, and
- immediately after giving effect to the transaction, no Indenture Event of
Default (and no event that, after notice or lapse of time or both, would
become an Indenture Event of Default) shall have occurred and be
continuing.
If the conditions referred to above are satisfied, no consent of the holders of
Junior Subordinated Debentures or Preferred Securities will be required in
connection with a Successor Transaction. Also, the conditions referred to above
will apply only with respect to a Successor Transaction. Other transactions,
including transactions that involve our change of control or an acquisition by
us of the stock or assets of another entity, would not be subject to these
conditions.
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The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures (or Preferred Securities) protection in the event of a
highly leveraged or other transaction involving us that may adversely affect the
interests of those holders.
SATISFACTION AND DISCHARGE
The Indenture provides that, except as noted below, the Indenture will cease to
be of further effect, and we will be deemed to have satisfied and discharged the
Indenture, when the following conditions (among others) have been satisfied:
(1) all Junior Subordinated Debentures have been delivered to the
Indenture Trustee for cancellation, or
(2) (a) all Junior Subordinated Debentures not previously delivered to
the Indenture Trustee for cancellation have become due and payable or will
become due and payable at their stated maturity or on a Redemption Date
within one year, and
(b) we deposit with the Indenture Trustee, in trust funds
sufficient to pay the entire indebtedness on those Junior Subordinated
Debentures not previously delivered for cancellation, for the principal
and interest (including any Additional Sums) to the date of the deposit
(for Junior Subordinated Debentures that have become due and payable) or
to the stated maturity or the Redemption Date, as the case may be (for
Junior Subordinated Debentures that have not become due and payable).
We will remain obligated to provide for registration of transfer and exchange
and notices of redemption and in certain other ministerial respects.
SUBORDINATION
To the extent set forth in the Indenture, the Junior Subordinated Debentures
will be subordinated in right of payment to all of our Senior Indebtedness
(defined below). The subordination provisions will have the following effects
(among others).
If we default in the payment of any principal, interest or other amount payable
in respect of any Senior Indebtedness when the same becomes due and payable
(whether at maturity, on redemption, by declaration of acceleration or
otherwise), then, unless and until that default has been cured or waived or has
otherwise ceased to exist, or all Senior Indebtedness has been paid, we may not
make or agree to make any payment in respect of the Junior Subordinated
Debentures, or in respect of any redemption, repayment, retirement, purchase or
other acquisition of the Junior Subordinated Debentures. This prohibition would
apply to payments of principal, interest and Additional Sums in respect of any
Junior Subordinated Debentures, as well as to payments in respect of any
acquisition or retirement of Junior Subordinated Debentures, whether the
payments are made directly or indirectly and whether they are made in cash,
property, securities, by set-off or otherwise.
In addition, if any of the following events occurs, all Senior Indebtedness
(including any interest that accrues after the commencement of any proceedings)
must be paid in full
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before any payment or distribution may be made, directly or indirectly and
whether in cash, securities or other property, on account of the Junior
Subordinated Debentures:
- the commencement of any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relating to us, our creditors or our property,
- the commencement of any proceeding for the liquidation, dissolution or
other winding up of us, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings,
- any assignment by us for the benefit of creditors, or
- any other marshalling of our assets.
In any such event, any payment or distribution on account of the Junior
Subordinated Debentures, whether in cash, securities or other property, that
would otherwise (but for the subordination provisions) be payable or deliverable
in respect of the Junior Subordinated Debentures will be paid or delivered
directly to the holders of Senior Indebtedness in accordance with the priorities
then existing among those holders, until all Senior Indebtedness (including any
post-commencement interest) has been paid in full.
In the event of any proceeding described above, after payment in full of all
sums owing with respect to Senior Indebtedness, the holders of Junior
Subordinated Debentures, together with the holders of any of our obligations
ranking on a parity with the Junior Subordinated Debentures, will be entitled to
be paid from our remaining assets the amounts at the time due and owing on the
Junior Subordinated Debentures and those other obligations before any payment or
other distribution, whether in cash, securities or other property, will be made
on account of any of our capital stock or any of our obligations ranking junior
in right of payment to the Junior Subordinated Debentures.
If any holder of Junior Subordinated Debentures receives any payment or
distribution on account of the Junior Subordinated Debentures (or receives any
security), whether in cash, securities or other property, before all the Senior
Indebtedness has been paid in full, or otherwise in contravention of any of the
subordination provisions, the holder must pay over or deliver the payment or
distribution to the holders of the Senior Indebtedness at the time outstanding
(in accordance with the priorities then existing among them) for application to
the payment of all Senior Indebtedness remaining unpaid, to the extent necessary
to pay all the Senior Indebtedness in full.
If we become insolvent, then by reason of the subordination provisions, holders
of Senior Indebtedness may receive more, ratably, and holders of the Junior
Subordinated Debentures may receive less, ratably, than our other creditors.
The term "Senior Indebtedness" means any of our obligations to our creditors,
whether existing now or incurred in the future, as well as any other obligation,
unless in the instrument creating or evidencing the obligation or pursuant to
which the obligation is outstanding, it is provided that the obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
debt that is ranked on a parity with, or subordinated to, the Junior
Subordinated Debentures.
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However, Senior Indebtedness shall not include:
- any debt that, when incurred and without respect to any election under
Section 1111(b) of the Bankruptcy Reform Act of 1978, was without
recourse to us,
- our debt to any of our subsidiaries,
- debt to any of our employees,
- trade accounts payable by us, and
- accrued liabilities arising out of our ordinary course of business.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that we may incur in the future.
PAYMENT AND PAYING AGENTS
Unless the Junior Subordinated Debentures have been distributed in exchange for
the Preferred Securities, payments in respect of the Junior Subordinated
Debentures will be made to or upon the order of the Property Trustee. If in the
future the Junior Subordinated Debentures have been distributed in exchange for
the Preferred Securities, payments in respect of the Junior Subordinated
Debentures will be made in accordance with provisions similar to those
applicable to payments in respect of the Preferred Securities. See "Description
of Preferred Securities -- Payment and Paying Agents".
NOTICES
Notices to holders of Junior Subordinated Debentures under the Indenture will
also be given to the holders of the Preferred Securities in accordance with
provisions similar to those described in "Description of Preferred
Securities -- Notices" and to the Property Trustee. If in the future the Junior
Subordinated Debentures have been distributed in exchange for the Preferred
Securities, notices to holders of Junior Subordinated Debentures will be given
to those holders in accordance with the provisions for notices to Preferred
Securities holders referred to above.
REGARDING THE INDENTURE TRUSTEE
The Indenture Trustee will have all the duties and responsibilities specified
with respect to an indenture trustee under the Trust Indenture Act. Subject to
those provisions, the Indenture Trustee will have no obligation to exercise any
of the powers vested in it by the Indenture at the request of any holder of
Junior Subordinated Debentures, unless offered reasonable indemnity by such
holder against the costs, expenses and liabilities that might be incurred. The
Indenture Trustee will not be required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties if
it reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
GOVERNING LAW
The Indenture provides that the Indenture and the Junior Subordinated Debentures
are to be governed by and construed in accordance with New York law.
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DESCRIPTION OF GUARANTEE AND EXPENSE AGREEMENT
This section summarizes the main provisions of the Guarantee Agreement (the
"Guarantee") and the Agreement as to Expenses and Liabilities (the "Expense
Agreement"), but it does not describe all the provisions. Consequently, this
summary is qualified by reference to the full text of the Guarantee and the
Expense Agreement. We have filed forms of the Guarantee and the Expense
Agreement as exhibits to the Registration Statement of which this Prospectus is
a part.
GENERAL
We will execute the Guarantee when the Preferred Securities are issued.
Wilmington Trust Company will act as trustee ("Guarantee Trustee") under the
Guarantee for the purpose of compliance with the Trust Indenture Act, and the
Guarantee will be qualified as an indenture under the Trust Indenture Act. The
Guarantee Trustee will hold the Guarantee (as defined below) for the benefit of
the holders of the Preferred Securities.
Under the Guarantee, we will irrevocably agree to pay in full, on a subordinated
basis and to the extent described below, to the holders of the Preferred
Securities, the Guarantee Payments as and when due, regardless of any defense,
right of set-off or counterclaim that the Trust may have or assert other than
the defense of payment. The following payments in respect of the Preferred
Securities, to the extent not paid by or on behalf of the Trust, are "Guarantee
Payments":
- - any accumulated and unpaid distributions required to be paid on the Preferred
Securities, to the extent that the Trust has funds legally and immediately
available to pay them,
- - any Redemption Price required to be paid on the Preferred Securities, to the
extent that the Trust has funds legally and immediately available to pay it,
and
- - upon a voluntary or involuntary termination, winding-up or liquidation of the
Trust (unless the Junior Subordinated Debentures are distributed to holders of
the Preferred Securities in exchange for these securities), the lesser of (1)
the liquidation amount for the Preferred Securities plus accumulated and
unpaid dividends and (2) the amount of assets of the Trust remaining available
for distribution to holders of Preferred Securities after satisfaction of
liabilities to creditors of the Trust as required by applicable law.
We may satisfy our obligation to make a Guarantee Payment by paying the required
amounts directly to the holders of the Preferred Securities, or by causing the
Trust to pay them to the holders.
We will be required to make payments under the Guarantee only to the extent that
the Trust has funds sufficient to make payments in respect of its obligations
under the Preferred Securities. If and to the extent we do not make payments on
the Junior Subordinated Debentures, the Trust will not be able to make payments
on the Preferred Securities and will not have funds available to do so. However,
through the Guarantee, the Trust Agreement, the Junior Subordinated Debentures,
the Indenture and the Expense Agreement, taken together, we have fully,
irrevocably and unconditionally guaranteed all the Trust's obligations under the
Preferred Securities on a subordinated basis. See "Relationship Among Preferred
Securities, Junior Subordinated Debentures, Guarantee and Expense Agreement".
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STATUS OF THE GUARANTEE
The Guarantee will be a general unsecured obligation of ours and will be
subordinated in right of payment to all Senior Indebtedness in the same manner
as the Junior Subordinated Debentures. Because we are a holding company, our
obligations under the Guarantee, like our obligations under the Junior
Subordinated Debentures, will also be effectively subordinated to all our
existing and future liabilities of the Bank and any other subsidiaries we may
have. See "Risk Factors -- Risks Relating to Preferred Securities -- Our
Obligation to Pay Interest on the Junior Subordinated Debentures and the
Guarantee are Junior to our Other Obligations", and "Description of Junior
Subordinated Debentures -- Subordination".
AMENDMENTS, ASSIGNMENT AND SUCCESSION
The Guarantee may not be amended without the prior approval of the holders of a
majority in the aggregate liquidation amount of the outstanding Preferred
Securities, other than in ways that do not adversely affect the rights of
holders of the Preferred Securities in any material respect (in which case no
approval will be required). The manner of obtaining any such approval will be
similar to the manner in which any approval to amend the Trust Agreement may be
obtained. See "Description of Preferred Securities -- Voting Rights; Amendment
of the Trust Agreement".
Any permitted successor to our obligations under the Indenture will also succeed
to our obligations under the Guarantee. See "Description of Junior Subordinated
Debentures -- Consolidation, Merger and Sale of Assets". The Guarantee will bind
our successors, assigns, receivers, trustees and representatives and will inure
to the benefit of the holders of the outstanding Preferred Securities.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur if we fail to make any
Guarantee Payment when obligated to do so, or if we fail to perform any other
obligation and the default remains unremedied for 30 days. The holders of a
majority in aggregate liquidation amount of the outstanding Preferred Securities
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee.
The Guarantee will guarantee payment and not collection. This means that any
holder of outstanding Preferred Securities may begin a legal proceeding directly
against us to enforce its rights under the Guarantee without first beginning a
legal proceeding against the Trust, the Guarantee Trustee or any other party.
We, as guarantor, will be obligated to file annually with the Guarantee Trustee
a certificate as to our compliance with all the conditions and covenants
applicable to us under the Guarantee.
REGARDING THE GUARANTEE TRUSTEE
The Guarantee Trustee undertakes to perform only those duties that are
specifically set forth in the Guarantee, except that, after a default by us
under the Guarantee, it must exercise the same degree of care and skill as a
prudent person would exercise or use in the
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conduct of his or her own affairs. Subject to this provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that it
might incur as a result.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force or effect (1) when the
Guarantee Payments have been paid in full by us, the Trust or both or (2) when
the Junior Subordinated Debentures are distributed to the holders of the
Preferred Securities in exchange for their securities. Until that time, the
Guarantee will remain in full force and effect. In addition, the Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the Preferred Securities must restore payment of any sums
paid to it under the Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee provides that it is to be governed by and construed in accordance
with New York law.
THE EXPENSE AGREEMENT
We will execute the Expense Agreement when the Preferred Securities are issued.
In the Expense Agreement, we will irrevocably and unconditionally guarantee to
each entity to whom the Trust becomes indebted or liable, the full payment of
all the Trust's costs, expenses and liabilities, other than the obligations of
the Trust to pay amounts due to the holders of the Common Securities or
Preferred Securities pursuant to the terms of those securities. The Expense
Agreement will be enforceable by third parties.
Our obligations under the Expense Agreement will be subordinated in right of
payment to the same extent as the Guarantee. Our obligations under the Expense
Agreement will be subject to provisions regarding amendment, termination,
assignment, succession and governing law similar to those applicable to the
Guarantee.
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RELATIONSHIP AMONG PREFERRED SECURITIES,
JUNIOR SUBORDINATED DEBENTURES, GUARANTEE
AND EXPENSE AGREEMENT
FULL AND UNCONDITIONAL GUARANTEE
Taken together, we believe that our obligations under the Trust Agreement, the
Junior Subordinated Debentures, the Indenture, the Guarantee and Expense
Agreement provide a full, irrevocable and unconditional guarantee of the Trust's
obligations under the Preferred Securities on a subordinated basis. No single
document standing alone or operating in conjunction with fewer than all the
other documents provides this guarantee. It is only the combined operation of
these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Preferred
Securities. However, it must be emphasized that this guarantee does not apply
during a interest deferral period.
If and to the extent that we do not make payments on the Junior Subordinated
Debentures, the Trust will not have funds available for payments on the
Preferred Securities. The Guarantee will not apply to payment of any amounts due
on the Preferred Securities when the Trust does not have available funds to pay
those amounts. In that event, the remedy of a holder of Preferred Securities is
to exercise its right of Direct Action -- that is, to begin a legal proceeding
directly against us for enforcement of our obligations under Junior Subordinated
Debentures having a principal amount equal to the liquidation amount of the
Preferred Securities held by the holder.
If we make payment on the Junior Subordinated Debentures and the Trust has funds
available to make payments on the Preferred Securities but fails to do so, a
holder of Preferred Securities may begin a legal proceeding against us to
enforce our obligations under the Guarantee to make these payments. In the event
that the Trust receives payments on the Junior Subordinated Debentures, but
these funds are unavailable for payment on the Preferred Securities because of
claims made by creditors of the Trust, we would be obligated under the Expense
Agreement to pay those claims.
Our obligations under the Junior Subordinated Debentures are subordinated in
right of payment to all of our Senior Indebtedness in the manner described in
"Description of Junior Subordinated Debentures -- Subordination". Our
obligations under the Guarantee and the Expense Agreement are subordinated in
right of payment to all Senior Indebtedness in the same manner as the Junior
Subordinated Debentures.
SUFFICIENCY OF PAYMENTS
As long as payments are made when due on the Junior Subordinated Debentures,
those payments should be sufficient to fund distributions and other amounts
payable on the Preferred Securities, primarily because:
- the aggregate principal amount of the Junior Subordinated Debentures will
equal the aggregate liquidation amount of the Preferred Securities and
the Common Securities,
- the interest rate, Interest Payment Dates and other payment dates for the
Junior Subordinated Debentures will match the distribution rate,
Distribution Dates and other payment dates for the Preferred Securities,
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- the Expense Agreement provides that we will pay any and all costs,
expenses and liabilities of the Trust, other than the Trust's obligations
under the Trust Securities, and
- the Trust Agreement provides that the Trust will not engage in any
activity that is not consistent with the limited purposes of the Trust.
Notwithstanding anything to the contrary in the Indenture, we have the right to
set off any payment we make under the Guarantee in respect of the Preferred
Securities against any payment we are otherwise required to make under the
Indenture in respect of the Junior Subordinated Debentures.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of Preferred Securities may begin a legal proceeding directly against
us to enforce its right of Direct Action under the Indenture without first
beginning a legal proceeding against the Trust, the Property Trustee or any
other party. A holder of Preferred Securities may also begin a legal proceeding
directly against us to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other party.
A default or event of default under any of our Senior Indebtedness would not be
a default with respect to the Preferred Securities or the Junior Subordinated
Debentures. However, in the event of a payment default under, or acceleration
of, any of our Senior Indebtedness, the subordination provisions of the
Indenture, the Guarantee Agreement and the Expense Agreement provide that no
payments may be made in respect of the Junior Subordinated Debentures, the
Guarantee or the Expense Agreement until the Senior Indebtedness has been paid
in full or any payment default under that debt has been cured or waived. This in
turn may trigger a default under the Indenture. See "Description of Junior
Subordinated Debentures -- Subordination".
LIMITED PURPOSE OF TRUST
The Preferred Securities evidence a preferred undivided beneficial interest in
the assets of the Trust, and the Trust exists solely to issue and sell the
Preferred Securities and Common Securities, invest the sale proceeds in the
Junior Subordinated Debentures and engage only in such other activities as may
be necessary or incidental to those activities. A principal difference between
the rights of a holder of Preferred Securities against the Trust and those of a
holder of Junior Subordinated Debentures against us is that a holder of Junior
Subordinated Debentures is entitled to receive all amounts payable on the
Preferred Securities from us, while a holder of Preferred Securities is entitled
to receive these amounts from the Trust (or from us under the Guarantee).
RIGHTS UPON DISSOLUTION
Upon any voluntary or involuntary dissolution, winding-up or liquidation of the
Trust, the holders of Preferred Securities will be entitled to receive a like
amount of Junior Subordinated Debentures in exchange for their Preferred
Securities, subject to prior satisfaction of liabilities to creditors of the
Trust as required by applicable law. If the Property Trustee determines that a
distribution of Junior Subordinated Debentures is not practical, the holders of
Preferred Securities will be entitled to receive a liquidation
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distribution out of the assets held by the Trust after satisfaction of those
liabilities. See "Description of Preferred Securities -- Liquidation
Distribution Upon Dissolution".
Upon any voluntary or involuntary liquidation or bankruptcy affecting us, the
Property Trustee, as registered holder of the Junior Subordinated Debentures,
would be our creditor subordinated in right of payment to all Senior
Indebtedness as set forth in the Indenture. However, the Property Trustee would
be entitled to receive payment in full of all amounts payable with respect to
the Junior Subordinated Debentures before any holders of our capital stock
receive payments or distributions.
In light of the effective guarantee provided by the combined operation of the
documents described above and the subordinated status of the obligations they
evidence, the positions of a holder of Preferred Securities and a holder of
Junior Subordinated Debentures, relative to other creditors and to our
stockholders, in the event of our liquidation or bankruptcy, should be
substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax consequences
of the purchase, ownership and disposition of Preferred Securities and common
stock. This summary only addresses the tax consequences to a person that
acquires Units at their original offering price and that is (1) an individual
citizen or resident of the United States, (2) a corporation organized in or
under the laws of the United States or any state thereof or the District of
Columbia, (3) an estate the income of which is subject to U.S. federal income
tax without regard to its source or (4) a trust if a United States court is able
to exercise primary supervision over administration of the trust and one or more
United States persons have authority to control all substantial decisions of the
trust (collectively, a "U.S. Holder"). This summary also does not address the
tax consequences to (1) persons that are not United States Holders, (2) persons
that may be subject to special treatment under U.S. federal income tax law, such
as banks, insurance companies, thrift institutions, regulated investment
companies, real estate investment trusts, tax-exempt organizations, traders in
securities that elect to mark to market and dealers in securities or currencies,
(3) persons that will hold Preferred Securities or common stock as part of a
position in a "straddle" or as part of a "hedging", "conversion" or other
integrated investment transaction for United States federal income tax purposes,
(4) persons whose functional currency is not the U.S. dollar or (5) persons that
do not hold Preferred Securities or common stock as capital assets.
The statements of law or legal conclusion set forth in this summary constitute
the opinion of Sullivan & Cromwell, special counsel to First Coastal and the
Trust. This summary is based upon the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, Internal Revenue Service rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change at any time. Such changes may be applied retroactively in a manner that
could cause the tax consequences to vary substantially from the consequences
described below. In particular, a decision by the Tax Court in the Enron
Corporation case could adversely affect our ability to deduct interest on the
Junior Subordinated Debentures, which may in turn permit us to cause a
redemption of the Preferred Securities. See "-- Possible Tax Law Changes." The
authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the federal income tax
treatment of the purchase, ownership and disposition of Preferred Securities and
common stock may differ from the treatment described below.
YOU ARE ADVISED TO CONSULT WITH YOUR OWN TAX ADVISORS IN LIGHT OF YOUR OWN
PARTICULAR CIRCUMSTANCES AS TO THE U.S. FEDERAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF PREFERRED SECURITIES AND COMMON STOCK, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
CLASSIFICATION OF THE UNITS
Each Unit will be treated for federal income tax purposes as having been issued
as part of an "investment unit" consisting of a Preferred Security and a share
of common stock. The purchase price for a Unit will be allocated between the
Preferred Security and common stock based upon their relative fair market
values.
Based on our determination of the relative fair market values of the common
stock and Preferred Securities at the time of issuance, we plan to treat each
Preferred Security as issued for $20.00 and each share of common stock as issued
for an amount equal to the
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excess of the purchase price for the Unit over $20.00. Under the applicable
Regulations, our allocation of the issue price of the Unit will be binding on
all holders of the Units, unless a holder of a Unit explicitly discloses (on a
form prescribed by the Internal Revenue Service ("IRS") and attached to the
holder's timely filed federal income tax return for the tax year that includes
that acquisition date of the Unit) that the holder's allocation of the issue
price of the Unit is different from the our allocation. The allocation made by
us is not, however, binding on the IRS.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES AND THE TRUST
We will treat the Junior Subordinated Debentures as indebtedness, and the
balance of this discussion is based on the assumption that such treatment will
be respected for federal income tax purposes.
Under current law and assuming full compliance with the terms of the Trust
Agreement, the Indenture and certain other documents, the Trust will not be
taxable as a corporation for U.S. federal income tax purposes. As a result, each
beneficial owner of Preferred Securities (a "Securityholder") will be required
to include in its gross income its pro rata share of the original issue discount
("OID") accrued with respect to the Junior Subordinated Debentures, whether or
not cash is actually distributed to the Securityholders. See "-- Original Issue
Discount".
ORIGINAL ISSUE DISCOUNT
Under the Indenture, we have the right to defer the payment of interest on the
Junior Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each deferral period,
provided that no deferral period may extend beyond the Stated Maturity of the
Junior Subordinated Debentures.
Under federal income tax regulations, all interest payable on the Junior
Subordinated Debentures will be treated as OID, unless the Indenture or the
Junior Subordinated Debentures contain terms or conditions that make the
exercise of the deferral option remote. Because we do not have a policy of
paying dividends on our common stock, the covenant in the Indenture prohibiting
us from paying dividends during a Deferral Period does not, by itself, provide
an effective deterrent to our exercise of the deferral option. Although we do
not intend to defer interest payments and believe that any deferral would
significantly harm our ability to raise capital in the future, Sullivan &
Cromwell, special counsel to First Coastal and the Trust, is unable to conclude
as a matter of law that the Indenture or the Junior Subordinated Debentures
contain terms or conditions that make the exercise of the deferral option
remote. Accordingly, all interest payable on the Junior Subordinated Debentures
will be treated as OID for federal income tax purposes.
A Securityholder will recognize income (in the form of OID) on a daily basis
under a constant yield method over the term of the Junior Subordinated
Debentures (including during any deferral period), regardless of the receipt of
cash with respect to the period to which such income is attributable.
(Subsequent uses of the term "interest" in this summary shall include income in
the form of OID.) Assuming that our allocation of the issue price for the Units
as described above is respected, the amount of OID that accrues in any quarterly
period will approximately equal the amount of the interest that accrues on the
Junior Subordinated Debentures in that quarterly period at the stated interest
rate. A
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U.S. Holder would generally be required to accrue an amount of OID in excess of
the stated interest rate on the Junior Subordinated Debentures if the IRS treats
the Preferred Securities as issued for an amount less than $20.00 and would
generally be required to accrue an amount of OID that is below the stated
interest rate on the Junior Subordinated Debentures if the IRS treats the
Preferred Securities as issued for an amount in excess of $20.00.
In the event that we exercise our option to defer interest payments on the
Junior Subordinated Debentures, each Securityholder will include interest in
gross income in advance of the receipt of cash, and any Securityholder who
disposes of the Preferred Securities prior to the record date for the payment of
Distributions following such deferral period will include interest in gross
income but will not receive any cash related thereto from the Trust. Any amount
of OID included in a Securityholder's gross income (whether or not during the
deferral period) will increase such Securityholder's tax basis in its Preferred
Securities, and the amount of distributions received by a Securityholder will
reduce such Securityholder's tax basis in its Preferred Securities.
Because income on the Preferred Securities will constitute interest, corporate
United States Holders of the Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income taken into account with
respect to the Preferred Securities.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF PREFERRED
SECURITIES UPON LIQUIDATION OF THE TRUST
Under current law, a distribution by the Trust of the Junior Subordinated
Debentures as described under the caption "Description of Preferred
Securities -- Exchange of Preferred Securities for Junior Subordinated
Debentures" will be non-taxable and will result in the Securityholder receiving
directly its pro rata share of the Junior Subordinated Debentures previously
held indirectly through the Trust, with a holding period and aggregate tax basis
equal to the holding period and aggregate tax basis such Securityholder had in
its Preferred Securities before such distribution. If, however, the liquidation
of the Trust were to occur because the Trust is subject to U.S. federal income
tax with respect to income accrued or received on the Junior Subordinated
Debentures, the distribution of Junior Subordinated Debentures to a
Securityholder by the Trust would be a taxable event to the Trust and each
Securityholder, and each Securityholder would recognize gain or loss as if the
Securityholder had exchanged its Preferred Securities for the Junior
Subordinated Debentures it received upon the liquidation of the Trust. A
Securityholder will include original issue discount in income in respect of
Junior Subordinated Debentures received from the Trust in the manner described
above under "-- Original Issue Discount".
SALE OR REDEMPTION OF PREFERRED SECURITIES
A Securityholder that sells Preferred Securities (including through a redemption
for cash) will recognize gain or loss equal to the difference between its
adjusted tax basis in the Preferred Securities and the amount realized on the
sale or redemption of such Preferred Securities. A Securityholder's adjusted tax
basis in the Preferred Securities generally will be the portion of the purchase
price for the Units that is allocated to the Preferred Securities (determined in
the manner described above), increased by OID previously includible in such
Securityholder's gross income to the date of disposition and decreased by
payments received on the Preferred Securities. Such gain or loss generally will
be a capital gain or loss and generally will be long-term capital gain or loss
if the Preferred
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Securities have been held for more than one year. Long-term capital gain of a
non-corporate Securityholder is generally subject to a maximum tax rate of 20%.
If we exercise our option to defer any payment of interest on the Junior
Subordinated Debentures, the Preferred Securities may trade at a price that does
not accurately reflect the value of accrued but unpaid interest with respect to
the underlying Junior Subordinated Debentures. A Securityholder who disposes of
its Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income, but may not receive the cash related thereto. However, such
Securityholder will add such amount to its adjusted tax basis in the Preferred
Securities. To the extent the selling price is less than the Securityholder's
adjusted tax basis, such Securityholder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for U.S. federal income tax purposes.
If a Tax Event caused the Junior Subordinated Debentures to be treated as
equity, it is possible that an exercise of our right to shorten the maturity of
the Junior Subordinated Debentures following such Tax Event would be a taxable
disposition to Securityholders if such shortening caused the Junior Subordinated
Debentures to be re-classified as debt.
FIRST COASTAL COMMON STOCK
A U.S. Holder will include in ordinary income (except as discussed below with
respect to corporations) the gross amount of any distribution made with respect
to its common stock to the extent such distribution is made out of our current
or accumulated earnings and profits as determined for United States federal
income tax purposes. Distributions in excess of current and accumulated earnings
and profits will be treated as a return of capital to the extent of the U.S.
Holder's basis in its common stock and thereafter as capital gain.
A U.S. Holder that is a corporation will, subject to generally applicable
limitations, be entitled to a dividends-received deduction in an amount equal to
70% of the amount of any dividend received with respect to its common stock. If
a dividend is deemed to be "extraordinary" under Section 1059 of the Code, a
corporate stockholder may be required to reduce its basis in the stock by the
nontaxed portion of the dividend.
A U.S. Holder that sells common stock (including through a redemption for cash)
will recognize gain or loss equal to the difference between its tax basis in the
stock and the amount realized on the sale of the stock. A U.S. Holder's tax
basis in its common stock generally will be the portion of the purchase price
for the Units that is allocated to the stock (determined in the manner described
above). Such gain or loss generally will be a capital gain or loss and generally
will be long-term capital gain or loss if the common stock has been held for
more than one year. Long-term capital gain of a non-corporate U.S. Holder is
generally subject to a maximum tax rate of 20%.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of OID accrued on the Preferred Securities, or dividends paid on the
common stock, held by U.S. Holders (other than corporations and other exempt
United States Holders) will be reported to the IRS. "Backup" withholding at a
rate of 31% will apply to payments of dividends and interest to a non-exempt
U.S. Holder unless the U.S. Holder furnishes its taxpayer identification number
in the manner prescribed in applicable
114
<PAGE> 116
Treasury regulations, certifies that such number is correct, certifies as to no
loss of exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Preferred Securities or common
stock to or through the United States office of a broker is subject to
information reporting and backup withholding unless the U.S. Holder establishes
an exemption from information reporting and backup withholding.
Any amounts withheld from a U.S. Holder under the backup withholding rules will
be allowed as a refund or a credit against such U.S. Holder's U.S. federal
income tax liability, provided the required information is furnished to the IRS.
POSSIBLE TAX LAW CHANGES
You should be aware that Enron Corporation has filed a petition in U.S. Tax
Court challenging the proposed disallowance by the IRS of the deduction of
interest expense on securities issued by Enron Corporation in 1993 and 1994 that
are similar to, but different in a number of respects from, the Junior
Subordinated Debentures. It is possible that a decision in that case could give
rise to a Tax Event, which would permit us to cause a redemption of the
Preferred Securities, as described more fully under "Description of Preferred
Securities -- Redemption". You also should be aware that legislation has been
proposed by the Clinton Administration in the past that, if enacted, would have
denied an interest expense deduction to issuers of instruments such as the
Junior Subordinated Debentures. No such legislation is currently pending. There
can be no assurance, however, that similar legislation will not ultimately be
enacted into law, or that other developments will not occur on or after the date
hereof that would adversely affect the tax treatment of the Junior Subordinated
Debentures or the Trust. Changes of that kind also could give rise to a Tax
Event.
115
<PAGE> 117
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
(together, "benefit plans") subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), should consider the fiduciary standards of
ERISA in the context of the plan's particular circumstances before authorizing
an investment in the Units. Among other factors, the fiduciary should consider
whether the investment would satisfy the prudence and diversification
requirements of ERISA and would be in accordance with the documents governing
the benefit plan.
In addition, a fiduciary of a benefit plan and individuals purchasing Units for
their individual retirement accounts or Keogh plans (also "benefit plans")
should consider whether an investment in the Units might constitute or give rise
to a prohibited transaction under ERISA and the Code. Section 406 of ERISA and
Section 4975 of the Code prohibit benefit plans from engaging in certain
transactions involving "plan assets" with persons who are "parties in interest"
under ERISA or "disqualified persons" under the Code with respect to the benefit
plan. A violation of these rules may result in an substantial excise tax or
other liabilities, unless exemptive relief is available under an applicable
statutory or administrative exemption. Employee benefit plans which are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) generally are not subject to ERISA
requirements.
Under a regulation issued by the U.S. Department of Labor, the Units would not
be deemed to be "plan assets" if, immediately after this offering, either (1)
less than 25% of the Preferred Securities were held by benefit plans and
entities holding assets deemed to be "plan assets" of any benefit plan
(together, "Benefit Plan Investors"), or (2) if the Units were "publicly offered
securities" for purposes of the regulation. No assurance can be given by the
Underwriters that the value of the Units held by Benefit Plan Investors will be
less than 25% of the total value of the Units at the completion of this
offering. The Underwriters will not monitor or take any other measures with
respect to the satisfaction of this exception. Furthermore, we do not anticipate
that the Units would qualify as "publicly offered securities" for purposes of
the regulation.
First Coastal or the Bank could be considered as a "party in interest" or
"disqualified person" with respect to benefit plans which we directly or
indirectly service or act as a custodian or fiduciary. Because the Units may be
deemed as "plan assets," as described above, such benefit plans should not
purchase Units unless the purchaser is eligible for exemption under Prohibited
Transaction Class Exemption ("PTCE") 84-14, for certain transactions determined
by independent qualified professional asset managers, PTCE 90-1, for certain
transactions involving insurance company pooled separate accounts, PTCE 91-38,
for certain transactions involving bank collective investment funds, PTCE 95-60
for certain transactions involving insurance company general accounts, and PTCE
96-23, for certain transactions determined by in-house asset managers.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that benefit plans
considering the purchase of Units consult with their counsel regarding the
consequences under ERISA of the acquisition of Units.
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<PAGE> 118
UNDERWRITING
GENERAL
Based on the terms and conditions of an Underwriting Agreement, we and the Trust
have agreed to sell to each of the Underwriters named below, and each of the
Underwriters has severally agreed to purchase from us and the Trust, the number
of Units set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER UNITS
----------- ---------
<S> <C>
Peacock, Hislop, Staley & Given, Inc. .............. 150,000
Wedbush Morgan Securities Inc. ..................... 150,000
-------
Total..................................... 300,000
=======
</TABLE>
The Underwriters must purchase all of the Units, if any Units are purchased.
We and the Trust have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to any payments the Underwriters may be required to make.
We will pay all expenses, estimated to be $315,000, associated with the offer
and sale of the Units, including the Trust's expenses. In addition, we have paid
a $25,000 non-accountable expense allowance to the Underwriters and, at the
closing of this offering, will pay an additional $135,000 non-accountable
expense allowance to the Underwriters.
In connection with the offer and sale of the Preferred Securities, the
Underwriters have advised us that they will comply with Rule 2810 under the NASD
Conduct Rules. As a result, purchasers in this offering must meet the minimum
suitability standards set forth on the inside front cover of this Prospectus.
COMMISSIONS AND DISCOUNTS
The Underwriters will offer the Units directly to the public at $ per Unit.
The Underwriters may also offer the Units to certain securities dealers at the
public offering price less a concession of $ per Unit. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per Unit
to certain brokers and dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
Since the Trust will use the proceeds from the sale of the Preferred Securities
portion of each Unit to purchase our Junior Subordinated Debentures, we have
agreed to pay the Underwriters an underwriting commission of $ per Unit
(or a total of $ million).
OVER-ALLOTMENT OPTION
The Underwriters have an option to purchase up to 30,000 additional Units at the
public offering price to cover over-allotments. The Underwriters can exercise
this option during the 45 day period following the date of this Prospectus. If
the Underwriters exercise this option, each Underwriter will have a firm
commitment, subject to some conditions, to purchase approximately the same
percentage of any additional Units as the percentage of Units initially offered
that the Underwriter has agreed to purchase.
117
<PAGE> 119
DETERMINATION OF OFFERING PRICE
Prior to this offering, our common stock has been traded from time to time in
unreported private transactions and on the OTC Bulletin Board and there has been
no market for the Units or the Preferred Securities. The public offering price
of the Units has therefore been determined through negotiations between us and
the Underwriters. Among the factors considered in determining such prices were
the historical trading prices of the our common stock, prevailing market and
economic conditions, our revenues and earnings, estimates of our business
potential and prospects, the present state of our business operations, an
assessment of our management, and consideration of the above factors in relation
to market valuation of companies in related businesses and other factors deemed
relevant. The public offering price of the Units does not necessarily bear any
direct relation to the current market price of the our common stock or our asset
value or net book value per share. There can be no assurance that the price at
which the Units will sell in the public market after this offering will not be
lower than the initial public offering price. See "Risk Factors -- Risk Factors
Relating to First Coastal -- Our Common Stock, the Units and the Preferred
Securities Have Limited or No Markets".
UNDERWRITERS' WARRANTS
At the closing of this offering, we will issue to the Underwriters, for a price
of $16.50, warrants to purchase 16,500 shares of our common stock. These
warrants will not be exercisable for one year after the closing of this
offering, and then may be exercised for a period of four years. The exercise
price of the warrants will be the greater of $9.00 per share or 120% of the
initial offering price of the common stock. The warrants will contain
anti-dilution provisions designed to adjust the number of shares issuable upon
exercise upon the occurrence of certain events, such as a recapitalization of
First Coastal or a split of our common stock.
Under certain circumstances, including a demand by the Underwriters, we will be
required to register with the SEC the shares of common stock issuable upon
exercise of the warrants. This would permit the Underwriters to sell these
shares publicly. We must also bear the costs of registration.
For the period during which the warrants are exercisable, the Underwriters or
their transferees will have the opportunity to profit from an increase in the
market value of our common stock, with a resulting dilution in the interests of
our other shareholders. The holders of the warrants can be expected to exercise
their warrants at a time when we would, in all likelihood, either not need the
additional capital or be able to obtain any needed capital by issuing our common
stock or other securities on terms more favorable to us than those provided for
in the warrants. These circumstances may adversely affect the terms on which we
can obtain additional financing.
NO SALES OF SIMILAR SECURITIES
First Coastal, the Trust and the Bank have agreed not to issue or sell any
shares of their common or preferred stock for a period of 15 months following
the date of this Prospectus, except (1) if the Underwriters consent in writing,
(2) for shares of common stock issued on conversion of our outstanding Series A
Preferred Stock, (3) for shares of common stock issued pursuant to the exercise
of currently outstanding First Coastal options or warrants and (4) as may be
necessary or reasonably desirable in order to comply with the
118
<PAGE> 120
requirements of appropriate banking regulators. In addition, each executive
officer, director and significant shareholder of First Coastal, the Trust and
the Bank (including the LLC) has agreed not to sell or otherwise dispose of any
shares of First Coastal common stock or preferred stock held by him or her for a
period of 15 months following the date of this Prospectus, except if the
Underwriters consent in writing. The members of the LLC will be bound by a
similar agreement upon any distribution of the First Coastal common stock held
by it to its members.
PRICE STABILIZATION AND SHORT POSITIONS
In connection with the sale of the Units, SEC rules permit the Underwriters to
engage in transactions that stabilize the price of the Units. These transactions
may include purchases for the purpose of fixing or maintaining the price of the
Units.
The Underwriters may create a short position in connection with the offering.
This means that they may sell a larger number of the Units than is shown on the
cover page of this Prospectus. If they create a short position, the Underwriters
may purchase Units in the open market to reduce the short position.
If the Underwriters purchase Units to stabilize the price or to reduce their
short position, the price of the Units could be higher than it might be if they
had not made such purchases. The Underwriters make no representation or
prediction about any effect that the purchases may have on the price of the
Units.
The Underwriters may suspend any of these activities at any time.
PENALTY BIDS
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that, if the Underwriters purchase Units in
the open market to reduce their short position or to stabilize the price of the
Units, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those Units as part of this
offering. Any imposition of a penalty bid may have the effect of reducing sales
of the Units, which may cause the price of the Units to be higher that it might
be if the Underwriters had not imposed any penalty bids.
INTERESTS OF THE UNDERWRITERS
E*Capital Corporation, the parent company of Wedbush Morgan Securities, one of
our Underwriters, is an investor in California Community LLC, our controlling
stockholder. E*Capital owns about 4.835% of the economic interests of the LLC,
which would in turn represent approximately 3.5% of our total voting power if
the LLC distributed to its members on a pro rata basis the shares of our common
stock (including shares received upon the exercise of its warrants) held by it.
See "Beneficial Ownership of Common Stock -- California Community LLC."
119
<PAGE> 121
VALIDITY OF THE SECURITIES
The validity of the shares of common stock, the Junior Subordinated Debentures
and the Guarantee, as well as certain matters relating to United States federal
income tax consequences, will be passed upon for us by Sullivan & Cromwell, 1888
Century Park East, Los Angeles, California 90067. Sullivan & Cromwell
represented the LLC in connection with its investment in First Coastal. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Munger, Tolles & Olson LLP, 355 South Grand Avenue, 35th Floor,
Los Angeles, California 90071. Certain matters of Delaware law relating to the
validity of the Preferred Securities and the formation of the Trust will be
passed upon by Richards, Layton & Finger, P.A., special Delaware counsel to us
and the Trust. Sullivan & Cromwell and Munger, Tolles & Olson LLP may rely on
the opinions of Richards, Layton & Finger, P.A. as to certain matters of
Delaware law.
EXPERTS
Our financial statements for the years ended December 31, 1997 and December 31,
1996, as well as AIB's financial statements for the year ended December 31,
1997, have been audited by Vavrinek, Trine, Day & Co., LLP, independent
certified public accountants, to the extent set forth in their reports included
elsewhere in this Prospectus, and have been included in reliance upon their
authority as experts in accounting and auditing. The financial statements of AIB
for the year ended December 31, 1996 have been audited by McGladrey & Pullen,
LLP, independent certified public accountants, to the extent set forth in their
report included elsewhere in this Prospectus, and have been included in reliance
upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Upon consummation of this offering, we will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and we will be required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any documents filed by us at the public reference facilities of
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Our
filings with the SEC are also available to the public at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or may be accessed electronically without fees by means
of the SEC's web site on the Internet at http://www.sec.gov. Please call the SEC
at 1-800-SEC-0330 for more information on the public reference rooms and their
copy charges. Regardless of whether we are subject to the informational
requirements of the Exchange Act, we intend to furnish our stockholders with
annual reports containing audited financial statements for each fiscal year and
to distribute quarterly reports for the first three quarters of each fiscal year
containing unaudited summary financial information.
We have filed with the SEC a Registration Statement on Form SB-2. This
Prospectus is a part of the Registration Statement and does not contain all of
the information in the Registration Statement. Wherever a reference is made in
this Prospectus to a contract or other document of us or the Trust, please be
aware that such reference is not necessarily complete and that you should refer
to the exhibits that are a part of the Registration Statement for a copy of the
contract or other document. You may review a copy of the
120
<PAGE> 122
Registration Statement at the SEC's public reference room in Washington, D.C.,
as well as through the SEC's Internet site.
The Bank and AIB submit quarterly to the FDIC, on behalf of the OCC, certain
unaudited reports called "Consolidated Reports of Condition and Income" (each, a
"Call Report"). The publicly available portions of the Call Reports are on file
with, and publicly available at, the FDIC, 550 17th Street, N.W., Washington,
D.C. 20429, and at the FDIC's website at www.FDIC.gov. The Call Reports are
prepared in accordance with regulatory instructions issued by the Federal
Financial Institutions Examination Council. Because of the special supervisory,
regulatory and economic policy needs served by the Call Reports, such regulatory
instructions do not in all cases follow generally accepted accounting principles
or the opinions and statements of the Accounting Principles Board of the
American Institute of Certified Public Accountants or the Financial Accounting
Standards Board. While the Call Reports are supervisory and regulatory
documents, not primarily accounting documents, and do not provide a complete
range of financial disclosure about the Bank or AIB, the Call Reports
nevertheless provide important information concerning the financial condition
and results of operations of the Bank and AIB.
AIB also voluntarily files Exchange Act reports with the OCC, including annual
reports, quarterly reports and proxy statements. You may obtain copies of these
reports and other information by contacting the Disclosure Officer,
Communications Division, of the OCC at 250 E Street, S.W., Washington, D.C.
20219.
121
<PAGE> 123
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FIRST COASTAL BANCSHARES AND
SUBSIDIARY
Independent Auditors' Report... F-2
Consolidated Balance Sheets as
of September 30, 1998
(Unaudited), December 31,
1997 and 1996................ F-3
Consolidated Statements of
Operations for the nine
months ended September 30,
1998 and 1997 (unaudited) and
the years ended December 31,
1997 and 1996................ F-4
Statements of Changes in
Shareholders' Equity for the
nine months ended September
30, 1998 (unaudited) and the
years ended December 31, 1997
and 1996..................... F-5
Statements of Cash Flows for
the nine months ended
September 30, 1998 and 1997
(unaudited) and the years
ended December 31, 1997 and
1996......................... F-6
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notes to Financial
Statements................... F-7
AMERICAN INDEPENDENT BANK, N.A.
Independent Auditors'
Reports...................... F-24
Balance Sheets as of September
30, 1998 (Unaudited),
December 31, 1997 and 1996... F-26
Statements of Income for the
nine months ended September
30, 1998 and 1997 (unaudited)
and the years ended December
31, 1997 and 1996............ F-27
Statements of Changes in
Stockholders' Equity for the
nine months ended September
30, 1998 (unaudited) and the
years ended December 31, 1997
and 1996..................... F-28
Statements of Cash Flows for
the nine months ended
September 30, 1998 and 1997
(unaudited) and the years
ended December 31, 1997 and
1996......................... F-29
Notes to Financial
Statements................... F-30
</TABLE>
F-1
<PAGE> 124
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of First Coastal Bancshares
We have audited the accompanying consolidated balance sheets of First Coastal
Bancshares and Subsidiary (the "Company") as of December 31, 1997 and 1996 and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Coastal
Bancshares and Subsidiary as of December 31, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
VAVRINEK, TRINE, DAY & CO., LLP
January 23, 1998, except for Note Q
which is dated November 24, 1998
Laguna Hills, California
F-2
<PAGE> 125
FIRST COASTAL BANCSHARES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 (UNAUDITED), DECEMBER 31, 1997 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997 1996
------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks..................................... $ 3,710 $ 2,629 $ 1,836
Federal Funds Sold.......................................... 11,550 325 675
------- ------- -------
CASH AND CASH EQUIVALENTS.......................... 15,260 2,954 2,511
Interest-Bearing Deposits................................... -- -- 99
Investment Securities Available for Sale -- Note B:......... 6,077 10,183 6,934
Loans -- Note C:
Commercial................................................ 4,303 4,574 2,150
Real Estate -- Construction............................... 50 67 510
Real Estate -- Residential, 1 to 4 Units.................. 26,853 13,778 2,460
Real Estate -- Other...................................... 21,493 16,363 8,856
Consumer.................................................. 3,569 5,210 2,345
------- ------- -------
TOTAL LOANS........................................ 56,268 39,992 16,321
Net Deferred Loan Costs (Fees)............................ 57 (147) (61)
Allowance for Loan Losses................................. (562) (615) (382)
------- ------- -------
NET LOANS.......................................... 55,763 39,230 15,878
Premises and Equipment, Net -- Note D....................... 413 455 160
Other Real Estate Owned, Net................................ 218 200 51
Goodwill, Net -- Note L..................................... 1,803 1,956 --
Net Deferred Tax Asset -- Note F............................ 635 400 --
Accrued Interest and Other Assets........................... 951 751 314
------- ------- -------
$81,120 $56,129 $25,947
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits -- Note E:
Noninterest-Bearing Demand................................ $21,448 $13,598 $ 6,887
Money Market and NOW...................................... 13,869 11,034 7,426
Savings................................................... 4,083 4,120 3,628
Time Deposits Under $100,000.............................. 12,614 10,970 3,609
Time Deposits $100,000 and Over........................... 20,907 5,543 1,398
------- ------- -------
TOTAL DEPOSITS..................................... 72,921 45,265 22,948
Repurchase Agreements....................................... -- 4,550 --
Long-Term Debt.............................................. 1,000
Accrued Interest and Other Liabilities...................... 1,154 304 161
------- ------- -------
TOTAL LIABILITIES.................................. 75,075 50,119 23,109
Commitments and Contingencies -- Note G
Shareholders' Equity -- Notes H and J:
Preferred Stock -- Series A, Authorized 5,000,000 Shares;
Issued and Outstanding 423,500 Shares at December 31,
1997. Liquidation Value of $2,859
Plus Accumulated Dividends -- Note I.................... 2,658 2,658 --
Common Stock -- Authorized 10,000,000 Shares; Issued and
Outstanding 677,052 at December 31, 1997 and 585,196 at
December 31, 1996....................................... 3,424 3,360 2,926
Surplus................................................... -- -- 2,702
Accumulated Deficit....................................... -- -- (2,762)
Retained Earnings (Accumulated Deficit) Since July 1,
1997.................................................... 14 (13) --
Accumulated Other Comprehensive Income --
Net Unrealized Appreciation (Depreciation) on Investment
Securities Available for Sale......................... (51) 5 (28)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY......................... 6,045 6,010 2,838
------- ------- -------
$81,120 $56,129 $25,947
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 126
FIRST COASTAL BANCSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- ---------------
1998 1997 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans................................ $3,224 $1,752 $2,627 $1,636
Interest on Investment Securities......................... 480 336 428 147
Other Interest Income..................................... 250 71 117 238
------ ------ ------ ------
TOTAL INTEREST INCOME............................. 3,954 2,159 3,172 2,021
INTEREST EXPENSE
Interest on Money Market and NOW.......................... 254 143 212 181
Interest on Savings....................................... 70 68 94 87
Interest on Time Deposits................................. 1,226 371 575 208
Other Interest Expense.................................... 101 2 6 --
------ ------ ------ ------
TOTAL INTEREST EXPENSE............................ 1,651 584 887 476
------ ------ ------ ------
NET INTEREST INCOME............................... 2,303 1,575 2,285 1,545
PROVISION FOR LOAN LOSSES......................... 10 25 25 39
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES......................................... 2,293 1,550 2,260 1,506
NONINTEREST INCOME
Service Charges and Fees.................................. 295 131 209 147
Gain on Sale of Loans..................................... 95 -- 27 105
Gain on Sale of Investment Securities..................... 26
Available for Sale..................................... -- -- 5 --
Other Income.............................................. -- -- 4 12
------ ------ ------ ------
416 131 245 264
NONINTEREST EXPENSE
Salaries and Employee Benefits............................ 954 771 1,144 924
Occupancy -- Note G....................................... 225 157 233 168
Furniture and Equipment................................... 92 49 77 50
Data Processing........................................... 193 165 237 198
Promotional............................................... 45 51 64 84
Professional.............................................. 152 84 91 111
Office.................................................... 124 105 149 99
Other Real Estate Owned................................... 2 -- 1 38
Goodwill Amortization..................................... 100 35 70 --
Other Expenses............................................ 336 231 284 221
------ ------ ------ ------
2,223 1,648 2,350 1,893
------ ------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES................. 486 33 155 (123)
Income Taxes -- Note F............................ 245 27 95 1
------ ------ ------ ------
NET INCOME (LOSS)................................. $ 241 $ 6 $ 60 $ (124)
====== ====== ====== ======
Per Share Data -- Note K:
Net Income (Loss) -- Basic................................ $ 0.04 $(0.12) $(0.15) $(0.31)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 127
FIRST COASTAL BANCSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT ACCUMULATED
SINCE OTHER
PREFERRED COMMON ACCUMULATED JULY 1, COMPREHENSIVE
STOCK STOCK DEFICIT 1997 INCOME TOTAL
--------- ------- ----------- ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996.............. $ -- $ 4,266 $(2,638) $ -- $ -- $1,628
Issuance of Common Stock -- Note J...... 1,420 1,420
Cost of Issuance of Common Stock........ (58) (58)
COMPREHENSIVE INCOME:
Net Loss.............................. (124) (124)
Net Unrealized Depreciation on
Investment Securities Available for
Sale............................... (28) (28)
------ ------- ------- ----- ---- ------
TOTAL COMPREHENSIVE INCOME.... (152)
------ ------- ------- ----- ---- ------
Balance at December 31, 1996............ -- 5,628 (2,762) -- (28) 2,838
Proceeds From Stock Offering............ 2,699 535 3,234
Cost of Stock Offering.................. (141) (141)
Quasi-Reorganization -- Note M.......... (2,861) 2,850 11 --
Dividends Paid on Preferred Stock....... (155) (155)
Repurchase of Common Stock.............. (51) (51)
Redemption of Preferred Stock........... (41) (6) (47)
Recognition of Deferred Tax Assets
Generated Prior to
Quasi-Reorganization.................. 250 250
COMPREHENSIVE INCOME:
Net Income (Loss)..................... (88) 148 60
Net Unrealized Appreciation on
Investment Securities Available for
Sale............................... 22 22
------ ------- ------- ----- ---- ------
TOTAL COMPREHENSIVE INCOME.... 82
------ ------- ------- ----- ---- ------
Balance at December 31, 1997............ 2,658 3,360 -- (13) 5 6,010
Repurchase of Common Stock.............. (80) (80)
Dividends Paid on Preferred Stock....... (214) (214)
Recognition of Deferred Tax Assets
Generated Prior to
Quasi-Reorganization.................. 144 144
COMPREHENSIVE INCOME:
Net Income............................ 241 241
Net Unrealized Depreciation on
Investment Securities Available for
Sale............................... (56) (56)
------ ------- ------- ----- ---- ------
TOTAL COMPREHENSIVE INCOME.... 185
------ ------- ------- ----- ---- ------
BALANCE AT SEPTEMBER 30, 1998
(UNAUDITED)........................... $2,658 $ 3,424 $ -- $ 14 $(51) $6,045
====== ======= ======= ===== ==== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 128
FIRST COASTAL BANCSHARES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1998 1997 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss)..................................... $ 241 $ 6 $ 60 $ (124)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Used by Operating Activities:
Depreciation and Amortization...................... 194 66 153 43
Provision for Loan Losses.......................... 10 25 25 39
Net Losses on Other Real Estate Owned.............. -- -- -- (2)
Discount and Premium on Investment Securities...... 36 18 22 (4)
Gain on Sale of Investment Securities.............. (26) -- (5) --
Gain on Loan Sales................................. -- -- (27) (105)
Loans Originated for Sale.......................... -- -- (354) (1,536)
Proceeds from Loan Sales........................... -- -- 381 1,641
Deferred Income Taxes.............................. (235) 147 95 --
Other Items -- Net................................. 597 210 (376) --
-------- ------- -------- -------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES.................................. 817 472 (26) (48)
INVESTING ACTIVITIES
Net Change in Interest-Bearing Deposits............... -- 396 396 99
Purchases of Available-for-Sale Securities............ (10,134) (797) (7,180) (7,919)
Proceeds from Sale and Maturities of
Available-for-Sale Securities...................... 14,139 2,448 4,913 1,004
Purchases of Held-to-Maturity Securities.............. -- -- -- (2,011)
Proceeds from Maturities of Held-to-Maturity
Securities......................................... -- -- -- 5,000
Net Increase in Loans................................. (16,317) (3,043) (7,151) (1,416)
Proceeds from Sale of Other Real Estate Owned......... 41 -- -- 531
Investment in Other Real Estate Owned................. -- -- -- (25)
Net Cash Used in Purchase of Marina Bank.............. -- (1,325) (1,325) --
Purchases of Premises and Equipment................... (52) (138) (255) (54)
-------- ------- -------- -------
NET CASH USED BY INVESTING ACTIVITIES......... (12,323) (2,459) (10,602) (4,791)
FINANCING ACTIVITIES
Net Change in Demand Deposits and Savings Accounts.... 10,648 (410) 432 (993)
Net Change in Time Deposits........................... 17,008 1,113 3,249 1,455
Increase in Other Borrowings.......................... (3,550) -- 4,550 --
Dividends Paid........................................ (214) (84) (155) --
Repurchase of Preferred and Common Stock.............. (80) (98) (98) --
Proceeds from Stock Offering -- Net................... -- 3,093 3,093 1,362
-------- ------- -------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES..... 23,812 3,614 11,071 1,824
-------- ------- -------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 12,306 1,627 443 (3,015)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR........................................ 2,954 2,511 2,511 5,526
-------- ------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR...... $ 15,260 $ 4,138 $ 2,954 $ 2,511
======== ======= ======== =======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for Interest................ $ 1,398 $ 563 $ 870 $ 474
Cash Paid During the Year for Income Taxes............ $ 1 $ 1 $ 1 $ 1
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 129
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First Coastal
Bancshares (the "Company") and its wholly-owned subsidiary, First Coastal Bank,
N.A. (the "Bank").
NATURE OF OPERATIONS
The Bank operates two branches in El Segundo and Marina Del Rey, California. The
Bank's primary source of revenue is providing loans to clients, who are
predominately small and middle-market businesses and individuals.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents includes cash on
hand, amounts due from banks and federal funds sold. Cash flows from loans,
deposits and federal funds sold are reported net.
The Company maintains amounts due from banks which exceed federally insured
limits. The Company has not experienced any losses in such accounts.
INVESTMENT SECURITIES AVAILABLE FOR SALE
Available-for-sale securities consist of bonds and certain equity securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of capital until
realized.
Gains and losses on the sale of available-for-sale securities are determined
using the specific-identification method.
Premiums and discounts are recognized in interest income using the interest
method over the period to maturity.
LOANS
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
unpaid principal
F-7
<PAGE> 130
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
balances reduced by any charge-offs, allowance for loan losses, and net of any
deferred fees or costs on originated loans, or unamortized premiums or discounts
on purchased loans.
Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield of the related loan.
The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash payments are
received.
For impairment recognized in accordance with Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118,
the entire change in the present value of expected cash flows is reported as
either provision for loan losses in the same manner in which impairment
initially was recognized, or as a reduction in the amount of provision for loan
losses that otherwise would be reported.
ALLOWANCE FOR LOAN LOSSES
The allowance for possible loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic evaluation
of the adequacy of the allowance is based on the Bank's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral, and current economic conditions.
OTHER REAL ESTATE OWNED
Real estate properties acquired through, or in lieu of, loan foreclosure are
initially recorded at fair value at the date of foreclosure establishing a new
cost basis. After foreclosure, valuations are periodically performed by
management and the real estate is carried at the lower of cost, or fair value
minus estimated costs to sell. Revenue and expenses from operations and changes
in the valuation allowance are included in other expenses.
PREMISES AND EQUIPMENT
Bank premises, furniture and equipment, and leasehold improvements are carried
at cost, less accumulated depreciation and amortization.
INCOME TAXES
Deferred tax assets and liabilities are reflected at currently enacted income
tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
F-8
<PAGE> 131
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
In the ordinary course of business, the Bank has entered into off-balance sheet
financial instruments consisting of commitments to extend credit. Such financial
instruments are recorded in the financial statements when they are funded or
related fees are incurred or received.
EARNINGS PER SHARES (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 in the issuance of common stock that then shared
in the earnings of the Company.
RECLASSIFICATIONS
Certain reclassifications were made to prior year's presentation to conform to
the current year. These classifications are of a normal recurring nature.
CURRENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
This statement, which is effective for the year ending December 31, 1998,
establishes standards of disclosure and financial statement display for
reporting comprehensive income and its components.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This statement changes current practice
under SFAS No. 14 by establishing a new framework on which to base segment
reporting (referred to as the management approach) and also requires certain
related disclosures about products and services, geographic areas and major
customers. The disclosures are required for the year ending December 31, 1998.
F-9
<PAGE> 132
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE B -- INVESTMENT SECURITIES
Debt and equity securities have been classified in the balance sheets according
to management's intent. The carrying amount of securities and their approximate
fair values at December 31 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES DECEMBER 31,
1997:
U.S. Government and Agency Securities.... $ 4,139 $ 1 $ (1) $ 4,139
Mortgage-Backed Securities............... 5,870 7 (2) 5,875
Federal Reserve Stock.................... 169 -- -- 169
------- --- ---- -------
$10,178 $ 8 $ (3) $10,183
======= === ==== =======
AVAILABLE-FOR-SALE SECURITIES DECEMBER 31,
1996:
U.S. Government and Agency Securities.... $ 5,386 $-- $(23) $ 5,363
Mortgage-Backed Securities............... 1,488 -- (5) 1,483
Federal Reserve Stock.................... 88 -- -- 88
------- --- ---- -------
$ 6,962 $-- $(28) $ 6,934
======= === ==== =======
</TABLE>
Investment securities carried at $5,270 on December 31, 1997 were pledged to
secure public deposits and other purposes as required by law. During 1997,
investment securities totaling $1,349 were sold generating gross gains of $5.
The amortized cost and estimated fair value of all debt securities as of
December 31, 1997 by contractual maturity are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -------
<S> <C> <C>
Due from One Year to Five Years................... $ 2,000 $ 2,000
Over Five Years to Ten Years...................... 2,139 2,139
Mortgage-Backed Securities........................ 5,870 5,875
Federal Reserve Stock............................. 169 169
------- -------
$10,178 $10,183
======= =======
</TABLE>
NOTE C -- LOANS
The Bank's loan portfolio consists primarily of loans to borrowers within Los
Angeles county. Although the Bank seeks to avoid concentrations of loans to a
single industry or based upon a single class of collateral, real estate and real
estate associated businesses are among the principal industries in the Bank's
market area and, as a result, the Bank's loan and collateral portfolios are, to
some degree, concentrated in those industries.
F-10
<PAGE> 133
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE C -- LOANS (CONTINUED)
The Bank also originates SBA loans which may be sold to institutional investors.
At December 31, 1997 and 1996 the Bank was servicing approximately $6,130 and
$5,434, respectively, in loans previously sold.
A summary of the changes in the allowance for loan losses as of December 31
follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Balance at Beginning of Year.......................... $ 382 $ 333
Additions to the Allowance Charged to Expense......... 25 39
Recoveries on Loans Charged Off....................... 38 163
Allowance on Loans Purchased from Marina Bank -- Note
L................................................... 376 --
----- -----
821 535
Less Loans Charged Off................................ (206) (153)
----- -----
$ 615 $ 382
===== =====
</TABLE>
The following is a summary of the investment in impaired loans, the related
allowance for loan losses, and income recognized thereon as of December 31:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Recorded Investment in Impaired Loans................ $1,443 $1,068
====== ======
Related Allowance for Loan Losses.................... $ 207 $ 70
====== ======
Average Recorded Investment in Impaired Loans........ $1,318 $ 631
====== ======
Interest Income Recognized for Cash Payments......... $ 130 $ 76
====== ======
</TABLE>
Loans having carrying values of $197 were transferred to other real estate owned
in 1997 and loans totaling $183 were made to facilitate the sale of other real
estate owned.
In the ordinary course of business, the Bank has granted loans to certain
executive officers, directors and employees with which they are associated. In
the Bank's opinion, all loans and loan commitments to such parties are made on
substantially the same terms, including interest rate and collateral, as those
prevailing at the time for comparable transactions with other persons.
The following is a summary of the activity in these loans:
<TABLE>
<CAPTION>
1997 1996
----- ----
<S> <C> <C>
Balance at Beginning of Year........................... $ 187 $213
Principal Repayments................................... (187) (26)
Advances............................................... 150 --
----- ----
Balance at End of Year................................. $ 150 $187
===== ====
</TABLE>
F-11
<PAGE> 134
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE D -- PREMISES AND EQUIPMENT
A summary of premises and equipment as of December 31 follows:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Leasehold Improvements.............................. $ 770 $ 355
Furniture, Fixtures, and Equipment................ 1,057 650
------- ------
1,827 1,005
Less Accumulated Depreciation and Amortization.... (1,372) (845)
------- ------
$ 455 $ 160
======= ======
</TABLE>
NOTE E -- DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
Within One Year....................... $14,632
One to Five Years..................... 1,881
-------
$16,513
=======
</TABLE>
NOTE F -- INCOME TAXES
The provisions for income taxes included in the consolidated statements of
operations consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current:
Federal........................ $-- $--
State.......................... 1 1
--- --
1 1
Deferred......................... 94 --
--- --
$95 $1
=== ==
</TABLE>
F-12
<PAGE> 135
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE F -- INCOME TAXES (CONTINUED)
Temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities that give rise to significant portions of the
potential deferred tax asset at December 31 relate to the following:
<TABLE>
<CAPTION>
1997 1996
---- -----
<S> <C> <C>
Deferred Tax Assets:
Allowance for Loan Losses Due to Tax Limitations..... $128 $ 73
Premises and Equipment Due to Depreciation
Difference........................................ -- 7
Net Loss Carryforwards............................... 609 349
Other Assets......................................... 33 25
---- -----
770 454
Valuation Allowance.................................... (222) (384)
Deferred Tax Liabilities:
Cash Basis Reporting for Tax Purposes................ (148) (70)
---- -----
Net Deferred Taxes..................................... $400 $ --
==== =====
</TABLE>
The valuation allowance relates to unrecognized tax benefits acquired from
Marina Bank of $158 and unrecognized tax benefits present in the Company when it
completed the quasi-reorganization. Accordingly, these benefits, when, and if,
recognized will be credited to Goodwill for items related to Marina Bank and
Common Stock for items related to the Company.
During 1997, the Company adjusted the valuation allowance for $97 for items
related to Marina Bank (credited to Goodwill) and $250 for items related to the
Company (credited to Common Stock). As of December 31, 1997, the valuation
allowance was comprised of $61 relating to items acquired from Marina Bank and
$161 for items relating to the Company before the quasi-reorganization. If
recognized, these amounts will be credited to Goodwill and Common Stock,
respectively.
The Bank has net operating loss carryforwards of approximately $1,692 and $465
for federal income and state franchise tax purposes, respectively. Net operating
loss carryforwards, to the extent not used, will expire in varying amounts
through 2012.
Due to ownership changes that have occurred at the Bank, the net loss
carryforwards reported, and the related deferred tax assets, have been reduced
to those allowable under Internal Revenue Code Section 382.
F-13
<PAGE> 136
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE F -- INCOME TAXES (CONTINUED)
A comparison of the federal statutory income tax rates to the Company's
effective income tax rates follow:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
AMOUNT RATE AMOUNT RATE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Federal Tax Rate............................. $ 53 34.0% $(42) (34.0)%
California Franchise Taxes, Net of Federal
Tax Benefit................................ 17 11.0 (4) (3.3)
Change in Valuation Allowance................ 27 17.4 36 29.3
Nondeductible Goodwill Amortization.......... 24 15.5 -- --
Other Items -- Net........................... (26) (16.6) 11 8.8
---- ----- ---- -----
Company's Effective Rate..................... $ 95 61.3% $ 1 0.8%
==== ===== ==== =====
</TABLE>
NOTE G -- COMMITMENTS AND CONTINGENCIES
The Bank leases its El Segundo facility from a partnership which includes a
director of the Bank. The lease expires in 2003 and includes two five-year
options to renew. The rent through July of 1998 is $8,149 per month with a
provision calling for market rent thereafter.
At December 31, 1997, approximate future minimum annual rental payments under
noncancellable operating lease agreements are as follows:
<TABLE>
<CAPTION>
EL MARINA
SEGUNDO DEL REY TOTAL
------- ------- -----
<S> <C> <C> <C>
1998................................. $ 98 $ 66 $164
1999................................. 98 66 164
2000................................. 98 66 164
2001................................. 98 -- 98
2002................................. 98 -- 98
Thereafter........................... 41 -- 41
---- ---- ----
Total Minimum Payments Required...... $531 $198 $729
==== ==== ====
</TABLE>
Total rent expense included in the statements of operations is approximately
$133 for 1997 and $103 for 1996.
In the normal course of business, the Bank enters into financial commitments to
meet the financing needs of its customers. These financial commitments include
commitments to extend credit. Those instruments involve to varying degrees,
elements of credit and interest rate risk not recognized in the statement of
financial position.
The Bank's exposure to credit loss in the event of nonperformance on commitments
to extend credit is represented by the contractual amount of those instruments.
The Bank
F-14
<PAGE> 137
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE G -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
uses the same credit policies in making commitments as it does for loans
reflected in the financial statements.
As of December 31, 1997, the Bank had commitments to extend credit of $3,009
whose contractual amount represents credit risk.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
amounts do not necessarily represent future cash requirements. The Bank
evaluates each customer's credit worthiness on a case-by-case basis. The amount
of collateral obtained if deemed necessary by the Bank is based on management's
credit evaluation of the customer.
The Bank is involved in various litigation which has arisen in the ordinary
course of its business. In the opinion of management, the disposition of such
pending litigation will not have a material effect on the Bank's financial
statements.
NOTE H -- STOCK OPTION PLAN
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized for its stock option plan. Had
compensation costs for this plan been determined based on the fair value at the
grant dates consistent with the method of SFAS No. 123, the impact would not
have materially affected net income.
In 1984, the Bank adopted a stock option plan under which the Bank's common
shares may be issued to officers and key employees at not less than 100% of fair
market value at the date the options were granted. This plan expired in 1994.
During 1996, all outstanding options (10,000 at $27.50 per share) were
forfeited.
In 1996, the Bank adopted a stock option plan under which 85,000 of the common
shares may be issued to directors, officers and key employees at not less than
100% of fair market value at the date the options are granted. Upon formation of
the Company, this plan converted to the stock option plan of the Company.
During 1997, the Company granted options for 5,000 shares at an exercise price
of $5.75, of which 1,000 were exercisable at December 31, 1997. These options
expire in 2002. The fair value of these options was $1.40, estimated on the date
of grant using the Black-Scholes option pricing model and assuming a risk free
rate of 5.81%, disregarding any volatility and an expected life of 5 years.
NOTE I -- PREFERRED STOCK
During 1997, the Company issued 430,000 shares of Series A 10% Cumulative
Convertible Preferred Stock. The Preferred Stock is perpetual in duration and is
senior to the Common Stock with respect to dividends and upon liquidation,
dissolution or winding-up. The liquidation preference is $6.75 per share, plus
any dividends accrued and unpaid.
F-15
<PAGE> 138
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE I -- PREFERRED STOCK (CONTINUED)
Holders of Preferred Stock have the right, at their option, to convert their
shares of Preferred Stock into shares of Common Stock at an exchange ratio of
one share of Common Stock per share of Preferred Stock. The Preferred Stock may
be redeemed by the Company after June 30, 1998. The redemption price is equal to
$6.89 until July 14, 2000, $6.82 until July 14, 2001 and $6.75 thereafter.
NOTE J -- PRIVATE PLACEMENT CAPITAL OFFERINGS
During 1995, the Bank entered into an Agreement for Stock Purchase with an
investor group to sell a maximum of 450,000 shares at a price of $5.00 per
share. The investor group purchased 166,000 of these shares in 1995 and 284,000
in 1996. The Bank also issued to the investor group warrants to purchase 225,000
shares at $5.00 per share. The warrants expire May 31, 1999 and are now
exercisable in the Common Stock of the Company.
NOTE K -- EARNINGS PER SHARE (EPS)
The following is a reconciliation of net income (loss) and shares outstanding to
the income (loss) and number of shares used to compute EPS:
<TABLE>
<CAPTION>
1997 1996
---------------- -----------------
INCOME SHARES INCOME SHARES
------ ------- ------ --------
<S> <C> <C> <C> <C>
Net Income as Reported........................ $ 60 -- $(124) --
Shares Outstanding at Year End................ -- 677,052 -- 585,196
Impact of Weighting Shares Traded During the
Year........................................ -- (38,062) -- (185,813)
Dividends on Preferred Stock.................. (155) -- -- --
----- ------- ----- --------
Used in Basic EPS................... $ (95) 638,990 $(124) 399,383
===== ======= ===== ========
</TABLE>
The effect of outstanding warrants, options and conversion features of the
preferred stock were not included as their effect would be antidilutive due to
the loss used for basic EPS.
NOTE L -- MERGER WITH MARINA BANK
On June 26, 1997, the Company acquired 100% of the outstanding common stock of
Marina Bank (MB) for approximately $4,126 in cash (including transaction costs).
MB had total assets of approximately $20,864. The acquisition was accounted for
using the purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16. "Business Combinations". Under this method of accounting,
the purchase price was allocated to the assets acquired and deposits and
liabilities assumed based on their fair values as of the acquisition date, which
were not materially different from their book values. The financial statements
include the operations of MB from the date of the acquisition. Goodwill arising
from the transaction totaled approximately $2,083 and is being amortized over
fifteen years on a straight-line basis.
F-16
<PAGE> 139
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE L -- MERGER WITH MARINA BANK (CONTINUED)
The following table sets forth selected unaudited pro forma combined financial
information of the Company and MB for the years ended December 31, 1997 and
1996. The pro forma operating data reflects the effect of the acquisition of MB
as if it was consummated at the beginning of each year presented. The pro forma
results are not necessarily indicative of the results that would have occurred
had the acquisition been in effect for the full years presented, nor are they
necessarily indicative of the results of future operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Interest and Noninterest Income...................... $4,472 $4,960
Net Loss............................................. $ (523) $ (177)
Net Loss Per Share -- Basic.......................... $(1.30) $(0.75)
</TABLE>
These proforma disclosures include adjustment to interest income from the
payment of the purchase price in cash, goodwill amortization and adjustments to
net income per share to reflect the issuance of preferred and common stock to
fund the purchase. No adjustments have been reflected in these amounts for the
expected cost savings to be derived from this merger.
NOTE M -- QUASI-REORGANIZATION AND HOLDING COMPANY FORMATION
With the consent of the Office of the Comptroller of the Currency (the "OCC")
and the Company's shareholders, the Company adjusted its capital accounts
through a quasi-reorganization. As of July 1, 1997, the Company eliminated its
accumulated deficit and unrecognized loss on available for sale securities
through a reduction of its capital account by the same amount.
F-17
<PAGE> 140
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE M -- QUASI-REORGANIZATION AND HOLDING COMPANY FORMATION (CONTINUED)
The results of operations of the Company for the periods before and after the
quasi-reorganization are summarized as follows:
<TABLE>
<CAPTION>
UNAUDITED
-----------------------------------
JANUARY 1, 1997 JULY 1, 1997 FOR THE
THROUGH THROUGH YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1997 DECEMBER 31, 1997
--------------- ----------------- -----------------
<S> <C> <C> <C>
Interest Income.................. $1,127 $2,045 $3,172
Interest Expense................. 293 594 887
------ ------ ------
Net Interest Income.............. 834 1,451 2,285
Provision for Loan Losses........ 25 -- 25
------ ------ ------
Net Interest Income After
Provision for Loan Losses...... 809 1,451 2,260
Noninterest Income............... 70 175 245
Noninterest Expenses............. 966 1,384 2,350
------ ------ ------
Income (Loss) Before Income
Taxes.......................... (87) 242 155
Income Tax Provision............. 1 94 95
------ ------ ------
Net Income (Loss)................ $ (88) $ 148 $ 60
====== ====== ======
EPS -- Basic..................... $(0.15) $ -- $(0.15)
</TABLE>
During 1997, First Coastal Bancshares acquired First Coastal Bank, N.A. by
issuing 430,000 shares of preferred stock and 685,196 shares of common stock for
all outstanding shares of the Bank's preferred and common stock. There was no
cash involved in this transaction. The acquisition was accounted for as a
pooling of interest and the consolidated financial statements contained herein
have been restated to give full affect to this transaction.
F-18
<PAGE> 141
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE N -- CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY
First Coastal Bancshares operates First Coastal Bank. The earnings of the
subsidiary are recognized on the equity method of accounting. Condensed
financial statements of the parent company only are presented below:
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS:
Cash............................................ $ 163
Investment in First Coastal Bank, N.A........... 5,817
Other Assets.................................... 101
------
$6,081
======
LIABILITIES:
Other Liabilities............................... $ 71
------
TOTAL LIABILITIES....................... 71
SHAREHOLDERS' EQUITY............................ 6,010
------
$6,081
======
</TABLE>
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1997
------------
<S> <C>
INCOME:
Dividends from Subsidiary....................... $149
----
TOTAL INCOME............................ 149
EXPENSES:
Other........................................... 3
----
TOTAL EXPENSES.......................... 3
----
INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARY...................................... 146
EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARY...... 2
----
NET INCOME.............................. $148
====
</TABLE>
F-19
<PAGE> 142
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE N -- CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY (CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31,
1997
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $148
Noncash Items Included in Net Income:
Equity in Income of Subsidiary......................... (151)
Change in Other Assets and Liabilities................. (36)
----
NET CASH USED IN OPERATING ACTIVITIES............. (39)
CASH FLOWS FROM INVESTING ACTIVITY:
Dividends and Capital Infusion Received from Subsidiary... 384
----
NET CASH PROVIDED BY INVESTING ACTIVITIES......... 384
CASH FLOWS FROM FINANCING ACTIVITIES:
Shares Retired............................................ (98)
Dividends Paid............................................ (84)
----
NET CASH USED IN FINANCING ACTIVITIES............. (182)
----
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 163
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR............. --
----
CASH AND CASH EQUIVALENTS AT ENDING OF YEAR................. $163
====
</TABLE>
NOTE O -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Fair value estimates are made at a
specific point in time based on relevant market information and information
about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the entire
holdings of a particular financial instrument. Because no market value exists
for a significant portion of the financial instruments, fair value estimates are
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature, involve uncertainties and
matters of judgment and, therefore, cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on financial instruments both on and off the
balance sheet without attempting to estimate the value of anticipated future
business, and the value of assets and liabilities that are not considered
financial instruments. Additionally, tax
F-20
<PAGE> 143
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE O -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
consequences related to the realization of the unrealized gains and losses can
have a potential effect on fair value estimates and have not been considered in
many of the estimates.
The following methods and assumptions were used to estimate the fair value of
significant financial instruments:
FINANCIAL ASSETS
The carrying amounts of cash and due from banks, federal funds sold and
interest-bearing deposits, are considered to approximate fair value due to the
short-term nature of these financial instruments. The fair values of investment
securities available for sale are generally based on quoted market prices. The
fair value of loans are estimated using a combination of techniques, including
discounting estimated future cash flows and quoted market prices of similar
instruments where available.
FINANCIAL LIABILITIES
The carrying amounts of deposit liabilities payable on demand and other borrowed
funds are considered to approximate fair value due to the short-term nature of
these financial instruments. For fixed maturity deposits, fair value is
estimated by discounting estimated future cash flows using rates currently
offered for deposits of similar remaining maturities.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements. The fair value of these
financial instruments are not material.
The estimated fair value of financial instruments at December 31 are summarized
as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and Due From Banks............. $ 2,629 $ 2,629 $ 1,836 $ 1,836
Federal Funds Sold.................. $ 325 $ 325 $ 675 $ 675
Interest-Bearing Deposits........... $ -- $ -- $ 99 $ 99
Investment Securities............... $10,183 $10,183 $ 6,994 $ 6,994
Loans............................... $39,230 $39,277 $15,878 $15,783
FINANCIAL LIABILITIES:
Deposits............................ $45,265 $45,271 $22,948 $22,947
Repurchase Agreements............... $ 4,550 $ 4,550 $ -- $ --
</TABLE>
F-21
<PAGE> 144
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE P -- REGULATORY MATTERS
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory -- and possibly additional
discretionary -- actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and the Bank must meet specific capital guidelines that involve
quantitative measures of the Company's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1997, that the Company and the Bank meet all capital adequacy requirements to
which it is subject.
As of December 31, 1997, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action (there are no conditions or
events since that notification that management believes have changed the Bank's
category). To be categorized as well-capitalized, the Bank must maintain minimum
ratios as set forth in the table below. The following table also sets forth the
Bank's actual capital amounts and ratios (dollar amounts in thousands):
<TABLE>
<CAPTION>
AMOUNT OF CAPITAL REQUIRED
-------------------------------
TO BE
ADEQUATELY TO BE WELL-
ACTUAL CAPITALIZED CAPITALIZED
-------------- -------------- --------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total Capital (to Risk-Weighted
Assets)........................ $4,372 10.8% $3,240 8.0% $4,050 10.0%
Tier 1 Capital (to Risk-Weighted
Assets)........................ $3,864 9.5% $1,620 4.0% $2,430 6.0%
Tier 1 Capital (to Average
Assets)........................ $3,864 7.8% $1,994 4.0% $2,493 5.0%
AS OF DECEMBER 31, 1996:
Total Capital (to Risk-Weighted
Assets)........................ $3,095 17.1% $1,451 8.0% $1,813 10.0%
Tier 1 Capital (to Risk-Weighted
Assets)........................ $2,866 15.8% $ 725 4.0% $1,088 6.0%
Tier 1 Capital (to Average
Assets)........................ $2,866 10.7% $1,069 4.0% $1,337 5.0%
</TABLE>
F-22
<PAGE> 145
FIRST COASTAL BANCSHARES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE P -- REGULATORY MATTERS (CONTINUED)
The Company is subject to similar requirements administered by its primary
regulator, the Federal Reserve Board. Its total capital to risk-weighted assets,
Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets was
11.3%, 6.2% and 5.0%, respectively, at December 31, 1997.
The Bank is restricted as to the amount of dividends which can be paid.
Dividends declared by national banks that exceed the net income (as defined) for
the current year plus retained net income for the preceding two years must be
approved by the OCC. The Bank may not pay dividends that would result in its
capital levels being reduced below the minimum requirements shown above.
Banking regulations require that all banks maintain a percentage of their
deposits in cash or as reserves at the Federal Reserve Bank. These reserve
requirements were approximately $770 and $785 at December 31, 1997 and 1996,
respectively.
NOTE Q -- SUBSEQUENT EVENTS
On August 3, 1998, the Company entered into an agreement to purchase American
Independent Bank, N.A. (AIB) for approximately $6.4 million. AIB had total
assets of $33.7 million, total deposits of $30.2 million and stockholders'
equity of $3.3 million as of December 31, 1997. The purchase is subject to AIB
shareholder approval as well as approval of the OCC and FRB.
During 1998, the Company's shareholders approved a one-for-five split of its
common stock. All per share data in these financial statements and notes has
been adjusted for this split.
F-23
<PAGE> 146
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
American Independent Bank, N.A.
We have audited the accompanying balance sheet of American Independent Bank,
N.A. as of December 31, 1997, and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Independent Bank, N.A.
as of December 31, 1997, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
VAVRINEK, TRINE, DAY & CO., LLP
January 29, 1998
Laguna Hills, California
F-24
<PAGE> 147
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
American Independent Bank, N.A.
Gardena, California
We have audited the accompanying balance sheet of American Independent Bank,
N.A. as of December 31, 1996, and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Independent Bank, N.A.
as of December 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
McGLADREY & PULLEN, LLP
Pasadena, California
January 24, 1997
F-25
<PAGE> 148
AMERICAN INDEPENDENT BANK, N.A.
BALANCE SHEETS
SEPTEMBER 30, 1998 (UNAUDITED), DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997 1996
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks (Note 2)................... $ 4,181,972 $ 3,730,909 $ 3,585,311
Federal funds sold................................. 7,005,000 3,920,000 2,000,000
Interest-bearing deposits in other financial
institutions..................................... 693,000 396,000 495,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS................ 11,879,972 8,046,909 6,080,311
Securities held to maturity (Note 3)............... 4,000,000 3,500,000 4,200,000
Loans, net (Notes 4, 5, and 10).................... 20,716,025 20,913,707 18,980,786
Leasehold improvements and equipment, net (note
6)............................................... 376,944 361,441 212,796
Other real estate owned............................ 80,994 129,529 48,535
Accrued interest receivable........................ 225,946 237,521 181,009
Prepaid expenses and other assets (Notes 3 and
8)............................................... 314,148 510,323 416,501
----------- ----------- -----------
$37,594,029 $33,699,430 $30,119,938
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits (Note 7):
Demand........................................ $13,908,467 $12,700,891 $12,877,298
Savings and NOW............................... 12,309,142 11,391,666 9,068,923
Other time.................................... 7,377,288 6,113,917 5,024,127
----------- ----------- -----------
TOTAL DEPOSITS........................... 33,594,897 30,206,474 26,970,348
Accrued interest payable and other liabilities
(Note 8)...................................... 488,099 182,823 153,425
----------- ----------- -----------
TOTAL LIABILITIES........................ 34,082,996 30,389,297 27,123,773
Commitments and Contingencies (Note 9)
Stockholders' Equity (Notes 11, 13 and 14)
Common stock, $1 par value; authorized 6,500,000
shares; issued and outstanding 890,689 shares
in 1997; and 885,048 shares in 1996........... 910,689 890,689 885,048
Surplus.......................................... 3,148,200 3,114,200 3,107,598
Accumulated deficit.............................. (547,856) (694,756) (996,481)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............... 3,511,033 3,310,133 2,996,165
----------- ----------- -----------
$37,594,029 $33,699,430 $30,119,938
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 149
AMERICAN INDEPENDENT BANK, N.A.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest and fees on loans........... $1,832,357 $1,726,095 $2,298,700 $1,952,969
Interest on investment securities and
deposits in other financial
institutions....................... 216,502 241,164 307,025 203,076
Interest on federal funds sold....... 185,581 83,642 162,133 229,102
---------- ---------- ---------- ----------
2,234,440 2,050,901 2,767,858 2,385,147
Interest expense on deposits......... 446,338 350,706 480,074 440,184
---------- ---------- ---------- ----------
NET INTEREST INCOME........ 1,788,102 1,700,195 2,287,784 1,944,963
Provision for loan losses (Note 5)... 92,500 -- -- 35,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES.................. 1,695,602 1,700,195 2,287,784 1,909,963
Other income:
Service charges and other fees..... 438,833 454,597 595,588 583,231
Other.............................. 64,460 38,654 54,798 134,260
---------- ---------- ---------- ----------
503,293 493,251 650,386 717,491
---------- ---------- ---------- ----------
Other expenses:
Salary, wages and employees
benefits........................ 792,166 814,755 1,068,293 992,507
Occupancy expenses (Note 9)........ 220,058 218,385 298,437 303,463
Data processing.................... 151,396 168,888 216,699 201,929
Equipment rentals, depreciation and
maintenance..................... 146,284 90,762 133,080 98,049
Professional fees.................. 162,057 163,169 208,642 133,107
Other.............................. 475,823 378,420 523,152 487,850
---------- ---------- ---------- ----------
1,947,784 1,834,379 2,448,303 2,216,905
---------- ---------- ---------- ----------
INCOME BEFORE INCOME
TAXES................... 251,111 359,067 489,867 410,549
Income taxes (Note 8)................ 104,211 130,847 188,142 800
---------- ---------- ---------- ----------
NET INCOME................. $ 146,900 $ 228,220 $ 301,725 $ 409,749
========== ========== ========== ==========
PER SHARE DATA -- NOTE 12
Net income -- Basic................ $ 0.16 $ 0.26 $ 0.34 $ 0.47
Net income -- Diluted.............. $ 0.15 $ 0.26 $ 0.34 $ 0.47
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 150
AMERICAN INDEPENDENT BANK, N.A.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK SURPLUS DEFICIT TOTAL
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........... $862,048 $3,061,598 $(1,406,230) $2,517,416
Exercise of warrants at $3.00 per
share (Note 14)............... 23,000 46,000 69,000
Net income....................... 409,749 409,749
-------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1996......... 885,048 3,107,598 (996,481) 2,996,165
Exercise of warrants at $3.50 per
share (Note 14)............... 641 1,602 2,243
Exercise of stock options........ 5,000 5,000 10,000
Net income....................... 301,725 301,725
-------- ---------- ----------- ----------
BALANCE, DECEMBER 31, 1997......... 890,689 3,114,200 (694,756) 3,310,133
Exercise of stock options........ 20,000 34,000 54,000
Net income....................... 146,900 146,900
-------- ---------- ----------- ----------
BALANCE, SEPTEMBER 30, 1998........ $910,689 $3,148,200 $ (547,856) $3,511,033
======== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 151
AMERICAN INDEPENDENT BANK, N.A.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.............................. $ 146,900 $ 228,220 $ 301,725 $ 409,749
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, amortization and
accretion.......................... 82,567 65,302 92,485 72,471
Provision for loan losses............ 92,500 -- -- 35,000
(Gain) loss on sale of other real
estate owned, net.................. 640 -- -- (25,895)
Increase (decrease) in unearned net
loan fees.......................... 9,675 (7,463) (11,605) 10,652
(Increase) decrease in accrued
interest receivable................ 11,575 (37,293) (56,512) (75,063)
(Increase) decrease in prepaid
expenses and other assets.......... 196,175 (106,899) (92,087) (41,089)
Increase in accrued interest payable
and other liabilities.............. 305,276 135,700 27,663 15,011
----------- ----------- ----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.................... 845,308 277,567 261,669 400,836
Cash Flows from Investing Activities:
Net (increase) decrease in
interest-bearing deposits in other
financial institutions............... (297,000) 99,000 99,000 397,000
Net (increase) decrease in federal funds
sold................................. (3,085,000) (2,680,000) (1,920,000) 335,000
Purchase of securities held to
maturity............................. (3,000,000) (1,500,000) (2,000,000) (6,000,000)
Proceeds from maturities or calls of
securities held to maturity.......... 2,500,000 1,200,000 2,700,000 3,500,000
Net increase in loans................... 95,507 (520,606) (2,002,310) (2,205,309)
Proceeds from the sale of other real
estate owned......................... 47,895 -- -- 249,640
Purchase of leasehold improvements and
equipment............................ (98,070) (233,752) (241,130) (109,749)
Payments on other real estate
acquired............................. -- -- -- (57,730)
----------- ----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES.................... (3,836,668) (3,635,358) (3,364,440) (3,891,148)
Cash Flows from Financing Activities:
Net increase in deposits................ 3,388,423 4,641,402 3,236,126 2,197,092
Proceeds from exercise of stock
options.............................. 54,000 10,000 10,000 --
Proceeds from exercise of warrants...... -- -- 2,243 69,000
----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES.................... 3,442,423 4,651,402 3,248,369 2,266,092
INCREASE (DECREASE) IN CASH AND
DUE FROM BANKS................ 451,063 1,293,611 145,598 (1,224,220)
Cash and Due From Banks
Beginning............................... 3,730,909 3,585,311 3,585,311 4,809,531
----------- ----------- ----------- -----------
Ending.................................. $ 4,181,972 $ 4,878,922 $ 3,730,909 $ 3,585,311
=========== =========== =========== ===========
Supplemental Schedule of Noncash Investing
and Financing Activities
Other real estate acquired in settlement
of loans................................ $ -- $ 80,994 $ 80,994 $ 45,296
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 152
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
American Independent Bank, N.A. provides a full range of banking services to its
commercial and consumer customers through two branches located in the cities of
Gardena and Burbank, California.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
CASH AND DUE FROM BANKS
For the purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks (including cash items in the process of
clearing). Cash flows from loans originated by the Bank, deposits and federal
funds sold are reported net.
The Bank maintains amounts due from banks which exceed federally insured limits.
The Bank has not experienced any losses in such accounts.
During 1997 and 1996, the Bank paid interest and income taxes as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Interest................. $425,409 $421,251
Income taxes............. $100,800 $ 800
</TABLE>
SECURITIES HELD TO MATURITY
Securities held to maturity are those debt securities the Bank has both the
ability and intent to hold to maturity, regardless of changes in market
condition, liquidity needs or changes in general economic conditions. These
securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by the interest method over their contractual
lives.
The sale of a security within three months of its maturity date or after at
least 85% of the principal outstanding has been collected is considered a
maturity for purposes of classification and disclosure.
LOANS
Loans are stated at the amount of unpaid principal, reduced by unearned discount
and fees and an allowance for possible loan losses.
The allowance for loan losses is maintained at a level management considers
adequate to provide for losses that can be reasonable anticipated. The allowance
is increased, when required, by provisions charged to operating expense and
reduced by net charge-offs. The
F-30
<PAGE> 153
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Bank makes continuous credit reviews of the loan portfolio and considers current
economic conditions, historical loan loss experience and other factors in
determining the adequacy of the allowance. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions. In addition, the Office of
the Comptroller of the Currency (OCC), as an integral part of its examination
process, reviews the allowance for loans losses. This agency may require
additions to the allowance based on their judgment about information available
at the time of their examination.
Impaired loans are measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when it is
probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with the terms of the loan agreement. The
amount of impairment, if any, and any subsequent changes are included in the
allowance for loan losses.
INTEREST AND FEES ON LOANS
Interest on loans is accrued daily on the outstanding balances. Accrual of
interest on impaired loans is discontinued when, in management's opinion, the
borrower may be unable to meet payments as they become due. When the accrual of
interest is discontinued, all unpaid accrued interest is reversed. Interest
income is subsequently recognized only to the extent cash payments are received.
Loan origination fees and certain direct loan origination costs are being
deferred and the net amount amortized as an adjustment of the related loans'
yield. The Bank is generally amortizing these amounts over the contractual life
of the loan.
LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are stated at cost less accumulated
depreciation. Depreciation of equipment is computed on the straight-line method
over the estimated useful lives of the assets.
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Furniture and equipment................ 5 - 10
Automobiles............................ 4 - 5
</TABLE>
Improvements to leased property are amortized over the lesser of the life of the
lease or life of the improvements.
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) represents acquired through foreclosure or other
proceedings. OREO is held for sale and is recorded at the lower of the recorded
amount of the loan or fair value of the properties less estimated costs of
disposal. Any write-down to
F-31
<PAGE> 154
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
fair value at the time of transfer to OREO is charges to the allowance for loan
losses. Property is evaluated regularly to ensure the recorded amount is
supported by its current fair value. Valuation allowances to reduce the carrying
amount to fair value less estimated costs to dispose are recorded in other
expenses.
COST IN EXCESS OF NET ASSETS ACQUIRED
The cost in excess of the fair value of net assets acquired is being amortized
over a period of ten years. As of December 31, 1997 and 1996, the remaining
unamortized balance is approximately $44,000 and $50,000, respectively.
INCOME TAXES
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards. Deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
COMPREHENSIVE INCOME
The Bank has no items of other comprehensive income. Accordingly, total
comprehensive income is the same as net income and no separate statement of
comprehensive income is provided.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 specifies the disclosure of the estimated fair value of financial
instruments. The Bank's estimated fair value amounts are reflected in Note 15
and have been determined by the Bank using available market information and
appropriate valuation methodologies.
However, considerable judgment is required to develop the estimates of fair
value. Accordingly, the estimates presented in Note 15 are not necessarily
indicative of the amounts the Bank could have realized in a current market
exchange as of December 31, 1997 and 1996. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since the balance sheet date
and, therefore, current estimates of fair value may differ significantly from
the amounts presented in the accompanying Notes.
F-32
<PAGE> 155
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARES (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 in the issuance of common stock that then shared
in the earnings of the entity.
RECLASSIFICATIONS
Certain reclassifications were made to prior years' presentations to conform to
the current year. These reclassifications are of a normal recurring nature.
CURRENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income". This statement, which is effective for the
year ending December 31, 1998, establishes standards of disclosure and financial
statement display for reporting comprehensive income and its components.
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement changes current practice under SFAS 14 by establishing a new framework
on which to base segment reporting (referred to as the management approach) and
also requires certain related disclosures about products and services,
geographic areas and major customers. The disclosures are required for the year
ending December 31, 1998.
NOTE 2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain reserve balances in cash with the Federal
Reserve Bank of San Francisco. The total of those reserve balances was
approximately $100,000 and $139,000 at December 31, 1997 and 1996, respectively.
NOTE 3. SECURITIES HELD TO MATURITY
The amortized cost and fair value of securities being held to maturity as of
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997
-------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government agencies (mature in
1998 - 2000)...................... $3,500,000 $319 $(1,875) $3,498,444
========== ==== ======= ==========
</TABLE>
F-33
<PAGE> 156
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. SECURITIES HELD TO MATURITY (CONTINUED)
<TABLE>
<CAPTION>
1996
-------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government agencies (mature in
1998 - 2001)...................... $4,200,000 $844 $(21,036) $4,179,808
========== ==== ======== ==========
</TABLE>
Investment securities with an amortized cost of $600,000 at December 31, 1997
and 1996, respectively, are pledged as collateral or for other purposes as
required or permitted by law. Federal Reserve bank stock of $94,150 and $80,600
as of December 31, 1997 and 1996, respectively, is included in prepaid expenses
and other assets.
NOTE 4. LOANS
The Bank's loan portfolio consists primarily of loans to borrowers within the
Los Angeles County area of Southern California. Although the Bank seeks to avoid
concentrations of loans to a single industry or based upon a single class of
collateral, real estate and real estate associated businesses are among the
principal industries in the Bank's market area and, as a result, the Bank's loan
and collateral portfolios are, to some degree, concentrated in those industries.
The composition of loans at December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Commercial.................................... $ 7,934,564 $ 4,881,022
Real estate -- construction................... 2,019,668 153,593
Real estate -- other.......................... 8,917,906 12,084,627
Consumer...................................... 2,320,605 2,196,236
----------- -----------
21,192,743 19,315,478
Less:
Allowance for loan losses................... (216,202) (260,253)
Unearned net loan fees...................... (62,834) (74,439)
----------- -----------
$20,913,707 $18,980,786
=========== ===========
</TABLE>
IMPAIRED LOANS
Information about impaired loans as of and for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Impaired loans..................................... $545,000 $525,000
======== ========
Related allowance for loan losses.................. $ 68,000 $ 28,000
======== ========
Average balance.................................... $422,000 $730,000
======== ========
Interest income recognized......................... None $ 79,000
======== ========
</TABLE>
F-34
<PAGE> 157
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LOANS (CONTINUED)
The Bank is not committed to lend additional funds to debtors whose loans have
been modified.
NOTE 5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Balance, beginning................................. $260,253 $318,701
Charge-offs, net................................. (44,051) (93,448)
Provision for loan losses........................ -- 35,000
-------- --------
Balance, ending.................................... $216,202 $260,253
======== ========
</TABLE>
NOTE 6. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
The major classes of leasehold improvements and equipment and the total
accumulated depreciation and amortization at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Leasehold improvement............................ $ 129,582 $ 115,187
Furniture and equipment.......................... 604,785 345,378
Automobiles...................................... 67,533 66,335
Construction in progress......................... -- 33,755
--------- ---------
801,900 560,655
Less accumulated depreciation and amortization... (440,459) (347,859)
--------- ---------
$ 361,441 $ 212,796
========= =========
</TABLE>
NOTE 7. DEPOSITS
At December 31, 1997, the scheduled maturities of time deposits are as follows:
<TABLE>
<S> <C>
Due in one year............................................ $5,876,666
Due in one year or more.................................... 237,251
----------
$6,113,917
==========
</TABLE>
F-35
<PAGE> 158
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- ----
<S> <C> <C>
Current:
Federal.............................................. $ 9,142 $ --
State................................................ 15,000 800
-------- ----
24,142 800
Deferred............................................... 164,000 --
-------- ----
$188,142 $800
======== ====
</TABLE>
Net deferred tax assets (liabilities) consists of the following components as of
December 31:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Deferred tax liability:
Cash basis of accounting........................ $(117,000) $(78,000)
Allowance for loan losses....................... (9,000) --
--------- --------
(126,000) (78,000)
Deferred tax assets:
Net operating loss and tax credit
carryforward................................. 36,000 122,000
Allowance for loan losses....................... -- 38,000
Valuation allowance for other real estate
owned........................................ 8,000 8,000
Other........................................... 30,000 22,000
--------- --------
74,000 190,000
--------- --------
Net deferred tax assets (liabilities)............. $ (52,000) $112,000
========= ========
</TABLE>
As of December 31, 1997, the Bank has federal tax net operating losses of
approximately $69,000 available to offset future taxable income expiring in
2006. The use of this net operating loss is restricted to approximately $7,000
per year until 2006, as it was acquired as part of the acquisition of Burbank
National Bank.
NOTE 9. COMMITMENTS AND CONTINGENCIES
CONTINGENCIES
In the normal course of business, the Bank is involved in various legal
proceedings. In the opinion of management, any liability resulting from such
proceedings would not have a material adverse effect on the financial
statements.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit. Those instruments
involve, to varying
F-36
<PAGE> 159
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the balance sheets.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments. At December 31, 1997
and 1996, the Bank had firm loan commitments of $2,909,000 and $3,020,000,
respectively. In addition, the Bank had standby letters of credit of $349,000
outstanding as of December 31, 1997. The bank does not anticipate any material
losses as a result of these commitments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since some of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation of the counterparty. Collateral held represents real estate
and certificates of deposit.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. Collateral held varies
as specified above and is required in instances which the Bank deems necessary.
LEASE COMMITMENT AND RENT EXPENSE
The Bank leases office facilities under lease agreements which require monthly
rental payment of $19,728 plus normal repairs and maintenance, property taxes
and insurance. One of the facilities is leased from a director. The monthly
rental payments to the director are $9,381 ($112,572 per year) and the lease
expires in January 2004.
F-37
<PAGE> 160
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At December 31, 1997, the future lease rentals payable under noncancellable
lease commitments for land and buildings having an initial or remaining term of
more than one year are as follows:
<TABLE>
<CAPTION>
YEARS ENDING AMOUNT
------------ ----------
<S> <C>
1998............................... $ 222,000
1999............................... 222,000
2000............................... 222,000
2001............................... 223,000
2002............................... 237,000
Thereafter......................... 629,000
----------
$1,755,000
==========
</TABLE>
Total rent expense included in the statements of income is approximately
$227,400 and $236,700 for the years ended December 31, 1997 and 1996,
respectively.
NOTE 10. TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with directors, principal
officers, their immediate families and affiliated companies in which whey are
principal stockholders (commonly referred to as related parties). In
management's opinion, these loans and transactions were on the same terms as
those prevailing at the time for comparable loans and transactions with
nonrelated parties. Total loans to related parties were approximately $167,000
and $282,000 at December 31, 1997 and 1996, respectively. Non of these loans are
past due, nonaccrual or restructured to provide a reduction or deferral of
interest or principal because of a deterioration in the financial position of
the borrower. There were not loans to a related party that were considered
classified loans at December 31, 1997 and 1996.
F-38
<PAGE> 161
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. STOCK OPTIONS
The Bank has adopted a stock option plan for officers, directors and key
employees. Option prices may not be less than 100% of the fair market value at
the date of the grant. Options granted under the stock option plan expire not
more than ten years after the date of grant and must be fully paid when
exercised.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------- --------
<S> <C> <C>
Options outstanding at January 1, 1995 issued at
$2.00 - $3.43 per share............................ 84,512 $2.87
Options granted at $3.00 per share................... 57,500 3.00
Options canceled..................................... (18,000) 3.00
-------
Options outstanding at December 31, 1996, issued at
$2.00 - $3.43 per share............................ 124,012 2.91
Options granted at $3.00 - $3.75 per share........... 20,000 3.32
Options exercised.................................... (5,000) 2.00
-------
Options outstanding at December 31, 1997 issued at
$2.70 - $3.75 per share............................ 139,012 3.00
=======
</TABLE>
All stock options outstanding at December 31, 1997 were exercisable with a
weighted-average remaining contractual life of 5.5 years.
The Bank applies APB Opinion 25, Accounting for Stock Issued to Employees, and
related Interpretation in accounting for its plans. Accordingly, no compensation
cost has been recognized. The Bank has elected not to adopt FASB Statement No.
123, "Accounting for Stock-Based Compensation". Had compensation cost for the
Bank's stock option plan been determined based on the fair value at the grant
dates for awards under this plan consistent with the method of Statement No.
123, the Bank's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C> <C>
Net income........................... As reported $301,725 $409,749
Pro forma 266,618 336,749
Per share data -- basic.............. As reported 0.34 0.47
Pro forma 0.30 0.39
Net income -- diluted................ As reported 0.34 0.47
Pro forma 0.30 0.38
</TABLE>
The pro forma compensation cost was recognized for the fair value of the stock
options granted, which was estimated using the Black-Scholes model with the
following assumptions: expected volatility of 25% and risk-free interest rate of
5.81% in 1997 and 5.78% in 1996. The weighted average fair value of these stock
options granted in 1997 and 1996 was $1.67 and $1.53, respectively.
F-39
<PAGE> 162
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. EARNINGS PER SHARE
The following is a reconciliation of net income and shares outstanding to the
income and number of share used to compute EPS (Amounts in thousands except
number of shares):
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
INCOME SHARES INCOME SHARES
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Income as Reported.................... $301,725 $409,749
Shares Outstanding at Year End............ 890,689 885,048
Impact of Weighting Shares Purchased
During the Year......................... (2,483) (20,801)
-------- ------- -------- -------
USED IN BASIC EPS......................... 301,725 888,206 409,749 864,247
Dilutive Effect of Outstanding Stock
Options................................. 3,803 13,432
-------- ------- -------- -------
USED IN DILUTIVE EPS...................... $301,725 892,009 $409,749 877,679
======== ======= ======== =======
</TABLE>
Warrants to purchase 43,177 and 43,818 shares of common stock at $3.50 and $3.00
per share were outstanding during 1997 and 1996, respectively, but were not
included in the computation of diluted EPS because the exercise price was
greater than the average market price and considered antidilutive.
NOTE 13. RESTRICTIONS ON RETAINED EARNINGS AND REGULATORY MATTERS
The Bank is restricted as to the amount of dividends which can be paid.
Dividends declared by national banks that exceed the net income (as defined) for
the current year plus retained net income for the preceding two years must be
approved by the Comptroller of the Currency. Regardless of formal regulatory
restriction, the Bank may not pay dividends that would result in its capital
levels being reduced below the minimum requirements shown below. Also, the Bank
is prohibited from paying dividends unless it has positive retained earnings.
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirement can
initiate certain mandatory -- and possible additional discretionary -- actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve qualitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
F-40
<PAGE> 163
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. RESTRICTIONS ON RETAINED EARNINGS AND REGULATORY MATTERS (CONTINUED)
As of December 31, 1997, the most recent notification from the Comptroller of
the Currency categorized the Bank as well-capitalized under the regulatory
framework for prompt corrective action (there are no conditions or events since
that notification that management believes have changed the Bank's category). To
be categorized as well-capitalized, the Bank must maintain minimum ratios as set
forth in the table below. The following table also sets forth the Bank's actual
capital amounts and ratios:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED
UNDER
FOR CAPITAL PROMPT
ADEQUACY CORRECTIVE
ACTUAL PURPOSES ACTION PROVISION
---------------- ---------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
($000S) % ($000S) % ($000S) %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
Total Capital (to Risk
Weighted Assets)........ $3,478 14.7% $1,889 8.0% $2,361 10.0%
Tier 1 Capital (to Risk
Weighted Assets)........ $3,262 13.8% $ 944 4.0% $1,417 6.0%
Tier 1 Capital (to Average
Assets)................. $3,262 9.1% $1,435 4.0% $1,794 5.0%
AS OF DECEMBER 31, 1996
Total Capital (to Risk
Weighted Assets)........ $3,195 15.2% $1,684 8.0% $2,105 10.0%
Tier 1 Capital (to Risk
Weighted Assets)........ $2,946 14.0% $ 842 4.0% $1,263 6.0%
Tier 1 Capital (to Average
Assets)................. $2,946 9.4% $1,252 4.0% $1,565 5.0%
</TABLE>
NOTE 14. STOCK OFFERING AND WARRANTS
In September 1995, the Bank completed the sale of 66,818 shares of common stock
at $3.00 per share through a stock offering. The Bank's common stock has a $1.00
par value per share and the remaining proceeds are recorded as surplus net of
related costs. The Bank incurred $102,310 of costs associated with the offering,
net of interest earned on impounded funds.
Under terms of the offering, each share purchased entitles the stockholder to
one warrant to purchase one share of common stock. The warrant is exercisable
over a five-year period commencing upon the sale of the common stock with
exercise prices as follows: for the first year, from the completion of the sale
to the end of the first year, $3.00 per share; for the second year, $3.50 per
share; for the third year, $4.00 per share; for the fourth year, $4.50 per
share; and for the fifth year, $5.00 per share. During 1997, warrants were
exercised for 641 shares at $3.50. In 1996, warrants were exercised for 23,000
shares at
F-41
<PAGE> 164
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. STOCK OFFERING AND WARRANTS (CONTINUED)
$3.00 per share. As of December 31, 1997, warrants for 43,177 shares of common
stock are outstanding.
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Fair value estimates are made at a
specific point in time based on relevant market information and information
about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the entire
holdings of a particular financial instrument. Because no market value exists
for a significant portion of the financial instruments, fair value estimates are
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature, involve uncertainties and
matters of judgment and, therefore, cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on financial instruments both on and off the
balance sheet without attempting to estimate the value of anticipated future
business, and the value of assets and liabilities that are not considered
financial instruments. Additionally, tax consequences related to the realization
of the unrealized gains and losses can have a potential effect on fair value
estimates and have not been considered in many of the estimates.
The following methods and assumptions were used to estimate the fair value of
significant financial instruments:
FINANCIAL ASSETS
The carrying amounts of cash, short term investments, due from customers on
acceptances, and Bank acceptances outstanding are considered to approximate fair
value. Short term investments include federal funds sold, securities purchased
under agreements to resell, and interest bearing deposits with Banks. The fair
values of investment securities, including available for sale, are generally
based on quoted market prices. The fair value of loans are estimated using a
combination of techniques, including discounting estimated future cash flows and
quoted market prices of similar instruments where available.
FINANCIAL LIABILITIES
The carrying amounts of deposit liabilities payable on demand, commercial paper,
and other borrowed funds are considered to approximate fair value. For fixed
maturity deposits, fair value is estimated by discounting estimated future cash
flows using currently offered rates for deposits of similar remaining
maturities. The fair value of long term debt is based on rates currently
available to the Bank for debt with similar terms and remaining maturities.
F-42
<PAGE> 165
AMERICAN INDEPENDENT BANK, N.A.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
The fair value of commitments to extend credit and standby letters of credit is
estimated using the fees currently charged to enter into similar agreements. The
fair value of these financial instruments is not material.
The estimated fair value of the Bank's financial instruments at December 31,
1997 and 1996 is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks................... $ 3,731 $ 3,731 $ 3,585 $ 3,585
Interest-bearing deposits in other
financial institutions................. 396 396 495 495
Federal funds sold........................ 3,920 3,920 2,000 2,000
Securities held to maturity............... 3,500 3,498 4,200 4,180
Loans, net................................ 20,914 20,956 18,981 18,878
Accrued interest receivable............... 238 238 181 181
Financial liabilities:
Deposits.................................. 30,206 30,206 26,970 26,970
Accrued interest payable.................. 87 87 95 95
</TABLE>
F-43
<PAGE> 166
- ---------------------------------------------------------
- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 16
Risk Factors Relating to First Coastal..... 16
Losses in our Recent Operating History... 16
We Face Certain Capital Requirements..... 16
Our Holding Company Structure Limits our
Liquidity and Ability to Pay
Dividends.............................. 17
Nonperforming Assets..................... 17
Our Loan Loss Reserves Are Only
Estimates.............................. 18
Our Strategy Depends on Key Personnel.... 18
Changes in Interest Rates May Affect our
Profitability.......................... 18
We are Subject to Extensive Regulation... 19
We Face Significant Competition.......... 19
Our Loans Are Concentrated in Real
Estate................................. 19
We are Currently Controlled by One
Stockholder............................ 19
Our Expansion Strategy Presents Special
Risks.................................. 19
We Face Year 2000 Issues................. 20
Our Common Stock, the Units and the
Preferred Securities Have Limited or No
Markets................................ 20
Risk Factors Relating to the Common
Stock.................................... 21
We Do Not Intend to Pay Dividends on the
Common Stock........................... 21
Our Share Price May Decline Due to Shares
Eligible for Future Sale............... 21
Risk Factors Relating to the Preferred
Securities............................... 21
Our Obligations to Pay Interest on the
Junior Subordinated Debentures and
Under the Guarantee are Junior to our
Other Obligations...................... 21
We Have the Option to Defer Interest
Payments............................... 21
Holders of Preferred Securities Will
Continuously Accrue Unpaid
Distributions.......................... 22
We May Redeem the Preferred Securities
Upon the Occurrence of Certain
Events................................. 22
Possible Tax Law Changes Affecting
Preferred Securities................... 22
We May Dissolve the Trust and Distribute
the Junior Subordinated Debentures to
You.................................... 23
We May Operate with Few Restrictions
Under the Indenture Governing the
Junior Subordinated Debentures......... 23
The Preferred Securities Have Limited
Voting Rights.......................... 23
Use of Proceeds.............................. 23
Accounting Treatment......................... 24
Capitalization............................... 25
Market Price of Common Stock and Dividend
Policy..................................... 27
Management's Discussion and Analysis of
Results of Operations and Financial
Condition of First Coastal................. 28
Business of First Coastal.................... 40
Directors, Officers and Significant
Employees.................................. 51
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
<TABLE>
Remuneration of Directors and Officers. 54
<S> <C>
Beneficial Ownership of Common Stock......... 56
Certain Transactions......................... 58
The Proposed Acquisition of American
Independent Bank........................... 59
Unaudited Pro Forma Financial Information.... 60
Summary Historical Financial Information of
American Independent Bank, N.A............. 65
Management's Discussion and Analysis of
Results of Operations and Financial
Condition of American Independent Bank,
N.A........................................ 66
Supervision and Regulation................... 77
Description of Capital Stock................. 80
Description of Units......................... 82
Description of Preferred Securities.......... 83
Description of Junior Subordinated
Debentures................................. 96
Description of Guarantee and Expense
Agreement.................................. 105
Relationship Among Preferred Securities,
Junior Subordinated Debentures, Guarantee
and Expense Agreement...................... 108
Certain Federal Income Tax Consequences...... 111
ERISA Considerations......................... 116
Underwriting................................. 117
Validity of the Securities................... 120
Experts...................................... 120
Where You Can Find More Information.......... 120
Index to Financial Statements................ F-1
</TABLE>
------------------------
[LOGO]
300,000 Units, each consisting of:
one share of
FIRST COASTAL BANCSHARES
Common Stock
and one
FIRST COASTAL CAPITAL TRUST
% Cumulative Preferred Security
$20.00 Liquidation Amount
---------------
PROSPECTUS
---------------
PEACOCK, HISLOP, STALEY
& GIVEN, INC.
WEDBUSH MORGAN SECURITIES
, 1998
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 167
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a court to award, or
a corporation's Board of Directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933 (the "Securities Act"). Article FIFTH
of the Articles of Incorporation and Section 7.5 of the small business issuer's
Bylaws provide for indemnification of its directors, officers, employees and
other agents to the fullest extent permitted by the California Corporations
Code. First Coastal also maintains a directors' and officers' liability
insurance policy.
Insofar as indemnification for liabilities arising under Securities Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of issuance and distribution are as follows:
<TABLE>
<S> <C>
Legal fees........................... $180,000
Blue Sky filing fees................. 10,000
Printing and EDGAR................... 40,000
SEC filing fee....................... 2,524
Accounting........................... 50,000
Trustee Fees......................... 15,000
Underwriters' Expense Allowance...... 160,000
Miscellaneous........................ 17,476
--------
Total...................... $475,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
(a) On August 1, 1996, California Community LLC purchased from Brian Pratt and
certain other shareholders (the "Pratt Group") 250,000 shares of Common Stock,
200,000 options (described in Section (b) below) and 125,000 warrants to
purchase Common Stock at $5.00 per share, together with the Pratt Group's other
rights, for $1,715,000. The shares purchased from the Pratt Group were exempt
from registration under Sections 3(a)(2), 4(1) and 4(2) of the Securities Act.
(b) First Coastal Bank, National Association, the predecessor of the small
business issuer, issued 50,000 shares of Common Stock and 25,000 warrants on
August 31, 1996, and 150,000 shares of Common Stock and 75,000 warrants on
December 9, 1996, to California Community LLC, pursuant to options owned by
California Community LLC to purchase one share of Common Stock and one-half of a
warrant for $5.00. The shares issued to California Community LLC upon the
exercise of options were exempt from registration under Sections 3(a)2 and 4(2)
of the Securities Act.
II-1
<PAGE> 168
(c) On June 16, 1997, First Coastal Bank, National Association sold 100,000
shares of common stock and 430,000 shares of Series A Preferred Stock through a
public offering underwritten by Peacock, Hislop, Staley & Given, Inc. The
offering was exempt from registration pursuant to Section 3(a)(2) and Regulation
A of the Securities Act. The common stock was sold for an aggregate purchase
price of $575,000, less an underwriting discount of $40,000, and the preferred
stock was sold for an aggregate purchase price of $2,902,500, less an
underwriting discount of $202,100.
(d) On June 23, 1997, the small business issuer issued 685,196 shares of common
stock and 430,000 shares of Series A Preferred Stock in exchange for all of the
common stock and preferred stock of First Coastal Bank, National Association.
The exchange transaction was exempt from registration under Section 3(a)(12) of
the Securities Act.
ITEMS 27. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1 Form of Underwriting Agreement among First Coastal
Bancshares, First Coastal Capital Trust and Peacock, Hislop,
Staley & Given, Inc. and Wedbush Morgan Securities Inc.
2 Agreement and Plan of Reorganization among First Coastal
Bank, First Coastal Bancshares and American Independent
Bank, N.A.
3.1 Articles of Incorporation of First Coastal Bancshares
3.2 Bylaws of First Coastal Bancshares
3.3 Form of Trust Agreement of First Coastal Capital Trust
4.1 Form of Indenture relating to the Junior Subordinated
Debentures
4.2 Form of Specimen of Junior Subordinated Debenture
5.1 Opinion of Sullivan & Cromwell
5.2 Opinion of Richards, Layton & Finger, P.A.
8.1 Opinion of Sullivan & Cromwell as to tax matters
10.1 Form of Agreement as to Expenses and Liabilities
10.2 Form of Guarantee Agreement
10.3 Stock Option Plan
10.4 Employment Agreement of James F. Gardunio
10.5 Employment Agreement of C. Edward Myska
10.6 Credit Analysis Agreement with DataTech Management, Inc.
10.7 Loan Documentation Agreement with DataTech Management, Inc.
10.8 Loan Servicing Agreement with DataTech Management, Inc.
10.9 Form of Conversion Agreement relating to conversion of
Series A Preferred Stock
10.10 Subscription Agreement relating to California Community
LLC's exercise of its warrants
10.11 Employment Agreement with Charles E. Brooks
10.12 Form of Underwriters' Warrant
</TABLE>
II-2
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
21 Subsidiaries
23.1 Consent of Vavrinek, Trine, Day & Co., LLP
23.2 Consent of Sullivan & Cromwell (included in its opinions
filed as Exhibits 5.1 and 8)
23.3 Consent of Richards, Layton & Finger, P.A. (included in its
opinion filed as Exhibit 5.2)
23.4 Consent of McGladrey & Pullen, LLP
24 Powers of Attorney (included in signature page on Part II)
25.1 Statement of Eligibility of Trustee of the Preferred
Securities on Form T-1
25.2 Statement of Eligibility of Trustee of the Junior
Subordinated Debentures on Form T-1
25.3 Statement of Eligibility of Trustee of the Guarantee on Form
T-1
27 Financial Data Schedule
</TABLE>
ITEM 28. UNDERTAKINGS
(1) The small business issuer will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(3) The small business issuer will:
(i) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or
(4), or 497(h) under the Securities Act as part of this registration
statement as the time the Commission declared it effective.
(ii) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-3
<PAGE> 170
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, each
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this Registration
Statement to be signed on its behalf by the undersigned, in the city of El
Segundo, state of California, on December 1, 1998.
<TABLE>
<S> <C>
FIRST COASTAL CAPITAL TRUST FIRST COASTAL BANCSHARES
By: First Coastal Bancshares, as
Depositor
By: /s/ DON M. GRIFFITH
By: /s/ DON M. GRIFFITH ----------------------------------
---------------------------------- Name: Don M. Griffith
Name: Don M. Griffith Title:
Title: Chairman and Chief
Chairman and Chief Executive Officer
Executive Officer
</TABLE>
We, the undersigned officers and directors of First Coastal Bancshares, do
hereby constitute and appoint Don M. Griffith and Deborah A. Marsten, and each
of them, our true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, for each of us and in each of our names,
places and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
subsequently filed registration statements, including any amendments thereto,
for the same offering that are to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as each of us might or could do in person, hereby ratifying
and confirming all that each of said attorneys-in-fact and agents, or his/her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ DON M. GRIFFITH Chief Executive December 1, 1998
- ------------------------------------------------ Officer, Chairman
Don M. Griffith and Director
/s/ DEBORAH A. MARSTEN Chief Financial December 1, 1998
- ------------------------------------------------ Officer,
Deborah A. Marsten Secretary and
Director
/s/ JAMES F. GARDUNIO Director December 1, 1998
- ------------------------------------------------
James F. Gardunio
</TABLE>
II-4
<PAGE> 171
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ PAUL M. DETERS Director December 1, 1998
- ------------------------------------------------
Paul M. Deters
/s/ CLIFFORD J. EINSTEIN Director December 1, 1998
- ------------------------------------------------
Clifford J. Einstein
/s/ CHARLES R. FULLERTON Director December 1, 1998
- ------------------------------------------------
Charles R. Fullerton
/s/ CAROLE J. LACAZE Director December 1, 1998
- ------------------------------------------------
Carole J. LaCaze
/s/ JOSEPH H. WENDER Director December 1, 1998
- ------------------------------------------------
Joseph H. Wender
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1
FIRST COASTAL BANCSHARES
FIRST COASTAL CAPITAL TRUST
330,000 Units
Each Unit consisting of:
One Share of Common Stock of First Coastal Bancshares
and One__% Cumulative Preferred Security of First Coastal Capital Trust
UNDERWRITING AGREEMENT
[_________], 199[__]
PEACOCK, HISLOP, STALEY & GIVEN, INC.
WEDBUSH MORGAN SECURITIES INC.
As Representatives of the Several Underwriters
c/o Peacock, Hislop, Staley & Given, Inc.
2999 North 44th Street, Suite 100
Phoenix, Arizona 85018
Ladies and Gentlemen:
First Coastal Bancshares, a California corporation ("First Coastal"), and
First Coastal Capital Trust (the "Trust" and, together with First Coastal, the
"Offerors"), confirm their agreement (the "Agreement") with each of the
Underwriters listed on Schedule I hereto (the "Underwriters"), for whom Peacock,
Hislop, Staley & Given, Inc. and Wedbush Morgan Securities Inc. are acting as
representatives (in such capacity, the "Representatives"), with respect to the
issuance and sale by the Offerors and the purchase by the Underwriters, acting
severally and not jointly, of the respective number set forth in Schedule I of
330,000 Units, each Unit consisting of (a) one share of common stock, without
par value (the "Common Shares"), of First Coastal and (b) one [__]% Cumulative
Preferred Security, liquidation amount $20.00 (the "Preferred Security"), of the
Trust.
The aggregate of 300,000 Units are referred to in this Agreement as the
"Firm Units." Pursuant to Section 2 of this Agreement, the Offerors have agreed
to grant the Underwriters an option to purchase up to an additional 30,000 Units
(the "Option Units" and, together with the Firm Units, the "Units").
The Offerors propose that the Preferred Securities be issued pursuant to
an Amended and Restated Trust Agreement (the "Trust Agreement") among Wilmington
Trust Company, as property trustee (the "Property Trustee") and Delaware
trustee, the administrators named therein (the "Administrators"), First Coastal
and the holders from time to time of undivided beneficial interests in the
assets of the Trust. The Preferred Securities will be guaranteed by First
Coastal (the "Guarantee") with respect to distributions and to payments upon
liquidation, redemption and otherwise pursuant to the Guarantee Agreement (the
"Guarantee Agreement")
<PAGE> 2
between Wilmington Trust Company, as guarantee trustee (the "Guarantee
Trustee") and First Coastal. First Coastal also will, pursuant to the Agreement
as to Expenses and Liabilities (the "Expense Agreement") between First Coastal
and the Trust, guarantee the full payment of any cost, expense or liabilities of
the Trust, other than payments to holders of Preferred Securities pursuant to
the terms of the Preferred Securities. The proceeds from the sale of the
Preferred Securities in the Offering will be combined with the proceeds from the
sale by the Trust to First Coastal of the Trust's common securities (the "Trust
Common Securities") and will be used by the Trust to purchase [__]% Junior
Subordinated Debentures due December 31, 2028 (the "Junior Subordinated
Debentures") issued by First Coastal pursuant to an indenture (the "Indenture")
between First Coastal and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee").
The Units, the Preferred Securities, the Common Shares, the Trust Common
Securities, the Guarantee and the Junior Subordinated Debentures are hereinafter
collectively referred to as the "Securities." The Indenture, the Trust
Agreement, the Guarantee Agreement, the Expense Agreement and this Agreement are
hereinafter referred to collectively as the "Operative Documents." The offering
of the Securities pursuant to this Agreement is referred to as the "Offering."
The Offerors have filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (File No. 333-[______])
containing a preliminary prospectus relating to the Offering under the
Securities Act of 1933, as amended (the "Securities Act"), and have filed such
amendments thereto and such amended preliminary prospectuses as may have been
required by the Commission on or prior to the date hereof. Promptly after
execution and delivery of this Agreement, the Offerors will file such additional
amendments to the registration statement and such amended prospectuses relating
to the Offering (pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the rules and regulations of the Commission thereunder
(the "Exchange Act Regulations"), the Securities Act, the rules and regulations
of the Commission under the Securities Act (the "Securities Act Regulations") or
otherwise) as may hereafter be required by the Commission or pursuant to the
terms of this Agreement. Such registration statement, as amended, at the time
such registration statement becomes effective and, in the event any
post-effective amendment thereto becomes effective prior to the Closing Date, at
the time such post-effective amendment becomes effective (including all
financial statements, schedules and exhibits thereto and the information, if
any, deemed to be a part thereof pursuant to Rule 430A(b) of the Securities Act
Regulations), as from time to time amended or supplemented pursuant to the
Exchange Act, the Exchange Act Regulations, the Securities Act, the Securities
Act Regulations or otherwise, is referred to herein as the "Registration
Statement." Any registration statement increasing the size of the Offering filed
pursuant to Rule 462(b) of the Securities Act Regulations is referred to herein
as a "Rule 426(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final prospectus, including all financial statements, schedules and exhibits
thereto, is referred to herein as the "Prospectus," except that if any revised
prospectus relating to the Offering shall be provided to the Underwriters by the
Offerors for use in the Offering which differs from the prospectus relating to
the Offering on file at the Commission at the time of such use (whether or not
such revised prospectus is required to be filed by the Offerors pursuant to Rule
424(b) of the Securities Act Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriters for such use. The term
<PAGE> 3
"Preliminary Prospectus" means the preliminary prospectus dated [______], 1998
distributed by the Underwriters prior to the date hereof.
The Offerors understand that the Underwriters propose to make the Offering
of the Securities as soon as the Representatives deem advisable after the
Registration Statement becomes effective and after the Trust Agreement, the
Indenture and the Guarantee Agreement have been qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act").
1. REPRESENTATIONS AND WARRANTIES. The Offerors jointly and severally
represent and warrant to each Underwriter as of the date hereof and as of each
Closing Date, and agree with each Underwriter that:
(a) Registration Statement. The Offerors meet the requirements for
use of Form SB-2 under the Securities Act. The Offerors have filed the
Registration Statement with the Commission. The Registration Statement and
any post-effective amendment thereto, each in the form heretofore
delivered to the Representatives, have been declared effective by the
Commission in such form. Other than such Registration Statement and any
such post-effective amendment, no document with respect to the
Registration Statement has been filed with the Commission. No stop order
suspending the effectiveness of the Registration Statement, or any
amendment thereto and no cease and desist order or temporary order under
Section 8A of the Securities Act has been issued, and no proceeding for
either such purpose has been instituted or is pending or threatened by the
Commission. No order preventing or suspending the use of any Prospectus or
any Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Securities Act and the
Securities Act Regulations and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in the Preliminary Prospectus in reliance
upon and in conformity with information furnished in writing to the
Offerors by or on behalf of the Representatives specifically for use in
connection with the preparation of the Preliminary Prospectus.
(b) Accuracy of Information. The Registration Statement conforms,
and the Prospectus and any Rule 462(b) Registration Statement and any
further amendment or supplement to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Securities Act and the Securities Act Regulations and will not, as of
the effective date of each of such Registration Statements and any
amendment thereto, and as of the applicable filing date of the Prospectus
and any amendment or supplement thereto, and as of each Closing Date
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in the Registration
Statement or Prospectus in reliance upon and in conformity with
information furnished in writing to the Offerors by or on behalf of the
Representatives
<PAGE> 4
specifically for use in connection with the preparation of the
Registration Statement or Prospectus.
(c) Independent Accountants. Vavrinek, Trine, Day & Co. LLP, the
accountants who examined the financial statements of First Coastal and,
for the year ended December 31, 1997, and subsequent periods, American
Independent Bank, N.A. ("AIB"), in each case filed as part of the
Registration Statement and the Prospectus, are, and were during the
periods covered in such financial statements, independent certified public
accountants with respect to First Coastal and AIB within the meaning of
the Securities Act and the Securities Act Regulations. McGladrey & Pullen,
LLP, the accountants who examined the financial statements of AIB for the
year ended December 31, 1996 filed as part of the Registration Statement
and the Prospectus, were during the period covered in such financial
statements, independent certified public accountants with respect to AIB
within the meaning of the Securities Act and the Securities Act
Regulations.
(d) Financial Statements. The consolidated financial statements of
First Coastal and its subsidiaries, together with the related notes
thereto, included in the Registration Statement and the Prospectus
(collectively, the "Financial Statements") present fairly the consolidated
financial position and the consolidated results of operations,
stockholders' equity and cash flows of First Coastal and its subsidiaries
as at the dates and for the respective periods specified therein. The
Financial Statements are accurate, complete and correct in all material
respects, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Securities Act
Regulations and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved. The summaries of the Financial Statements and the tables
included in the Preliminary Prospectus and the Prospectus are accurate and
correct, fairly present the information purported to be shown thereby as
at the dates and for the periods indicated and are consistent with the
Financial Statements to the extent they are derived from the Financial
Statements.
(e) Absence of Changes. Subsequent to the dates as of which
information is given in the Registration Statement and the Prospectus,
except as otherwise set forth in the Registration Statement or the
Prospectus, respectively, (i) there has been no material adverse change,
or development reasonably likely to result in a material adverse change,
in the financial condition, earnings, business, assets or results of
operations of First Coastal, the Trust or First Coastal Bank, National
Association (the "Bank"), whether or not arising from transactions in the
ordinary course of business, (ii) neither First Coastal, the Trust nor the
Bank has incurred any material liabilities or obligations, direct or
contingent, or entered into any transaction not in the ordinary course of
business, or declared or paid any dividends or made any distribution of
any kind with respect to its capital stock, and (iii) there has not been
any change in the capital stock, or any material change in the short-term
or long-term debt, or any issuance of options, warrants, convertible
securities or other rights to purchase capital stock, of First Coastal,
the Trust or the Bank.
(f) Incorporation and Authority of First Coastal. First Coastal has
been duly incorporated and is validly existing as a corporation in good
standing under the
<PAGE> 5
laws of the State of California, with full corporate power and authority
to own its properties and conduct its business as described in the
Registration Statement and the Prospectus and to enter into and perform
its obligations under the Operative Documents, as applicable, and the
Securities; First Coastal is duly qualified to do business as a foreign
corporation and is in good standing under the laws of the State of
California and each other jurisdiction in which the conduct of its
business or ownership or lease of its properties requires such
qualification and where the failure to be so qualified would, individually
or in the aggregate, have a material adverse effect on the financial
condition, earnings, business, assets or results of operations of First
Coastal; and First Coastal is duly registered as a bank holding company
with the Board of Governors of the Federal Reserve System (the "FRB")
under the Bank Holding Company Act of 1956, as amended (the "BHC Act") and
all of the activities of First Coastal are among those permitted to bank
holding companies under applicable law, including, but not limited to, the
BHC Act and regulations thereunder.
(g) Organization and Authority of the Bank. The Bank has been duly
organized and is validly existing as a national banking association in
good standing, with the corporate authority to own its properties and
conduct its business as described in the Prospectus, and is duly qualified
to do business as a foreign corporation, or is exempt from such
qualification, and is in good standing under the corporation and banking
laws of each jurisdiction in which the conduct of its business or
ownership or lease of its properties requires such qualification and where
the failure to be so qualified would, individually or in the aggregate,
have a material adverse effect on the financial condition, earnings,
business, assets or results of operations of the Bank; the Bank is a
member in good standing of the Federal Reserve System (the "FRS"), the
deposit accounts maintained at the Bank are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the fullest extent permitted by law, and
no proceedings for the termination or revocation of such membership or
insurance are pending or, to the knowledge of the Bank, threatened.
(h) Organization and Authority of the Trust. The Trust has been duly
created and is validly existing in good standing as a business trust under
the Business Trust Act of the State of Delaware with the power and
authority to own property and to conduct its business as described in the
Registration Statement and the Prospectus and to enter into and perform
its obligations under the Operative Documents, as applicable, and the
Securities; the Trust is duly qualified to transact business and is in
good standing in the State of California and in each other jurisdiction in
which the conduct of its business or ownership or lease of its properties
requires such qualification and where the failure to be so qualified
would, individually or in the aggregate, have a material adverse effect on
the financial condition, earnings, business, assets or results of
operations of the Trust; the Trust is not a party to or otherwise bound by
any agreement other than those described in the Registration Statement and
the Prospectus; and based on expected operations and current law the Trust
is and will be classified for United States federal income tax purposes as
a grantor trust and not as an association taxable as a corporation.
(i) Capital Stock of First Coastal. First Coastal's authorized
equity capitalization is as set forth in the Prospectus. All of the
outstanding shares of capital
<PAGE> 6
stock of First Coastal have been duly authorized and validly issued, are
fully paid and non-assessable, have been issued in compliance with all
applicable federal and state securities laws, and were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities. The holders of First Coastal capital
stock are not subject to personal liability by reason of being such
holders. Except as otherwise stated in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of capital stock of
First Coastal pursuant to the Articles of Incorporation or Bylaws of First
Coastal or any agreement or other instrument to which First Coastal is a
party or by which First Coastal is bound. Neither the offering nor the
sale of the Securities gives or will give rise to any rights for or
relating to the registration of any shares of capital stock or other
securities of First Coastal (not including the Securities) under the
Securities Act or under the securities or Blue Sky laws of any state that
have not been satisfied or waived prior to the date hereof. Except as
stated in the Prospectus, there are no options, warrants, agreements,
contracts or other rights in existence to purchase or acquire from First
Coastal any shares of capital stock of First Coastal.
(j) Capital Stock of the Bank. First Coastal has no subsidiaries
other than the Bank and the Trust. First Coastal owns beneficially and of
record all of the issued and outstanding capital stock of the Bank, free
and clear of any mortgage, pledge, lien, encumbrance or claim, except as
described in the Prospectus and as provided by 12 U.S.C. Section 55. All
of the issued and outstanding shares of capital stock of the Bank have
been duly and validly authorized and issued and are fully paid and
nonassessable, and except as disclosed in the Prospectus, there are no
outstanding options, warrants or other rights which require the issuance
or sale of, and no commitment, plan or arrangement to issue, any capital
stock of the Bank, or any security convertible into or exchangeable for
any such stock.
(k) Common Shares. The Common Shares offered hereby have been duly
and validly authorized and, when issued and delivered to the Underwriters
pursuant to this Agreement, will be fully paid and nonassessable, free and
clear of all liens, security interests, claims and encumbrances and
restrictions on transfer (except restrictions on transfer, if any, imposed
by the securities or Blue Sky laws of any state). The Common Shares will
conform in all material respects to the description thereof contained in
the Prospectus and the issuance of the Common Shares hereunder will not be
subject to preemptive or other similar rights (contractual or other). The
certificates representing the Common Shares are in valid and sufficient
form.
(l) Trust Common Securities. The Trust Common Securities have been
duly authorized by the Trust Agreement and, when issued and delivered by
the Trust to First Coastal against payment therefor as described in the
Registration Statement and the Prospectus, will be validly issued
undivided beneficial interests in the assets of the Trust entitled to the
benefits of the Trust Agreement. The Trust Common Securities will conform
in all material respects to the description thereof contained in the
Prospectus and the issuance of the Trust Common Securities will not be
subject to preemptive or other similar rights (contractual or other). At
each Closing Date all of the issued and outstanding Trust Common
Securities will be directly owned by First
<PAGE> 7
Coastal free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equitable right. Upon issuance, the certificate
representing the Trust Common Securities will be in valid and sufficient
form.
(m) Preferred Securities. As of each Closing Date the Preferred
Securities will have been duly authorized by the Trust Agreement and, when
issued and delivered against payment therefor in accordance with the Trust
Agreement, as provided herein, will be validly issued, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust
entitled to the benefits of the Trust Agreement. The Preferred Securities
will conform in all material respects to the description thereof contained
in the Prospectus and the issuance of the Preferred Securities will not be
subject to preemptive or other similar rights (contractual or other). Upon
issuance, the certificates representing the Preferred Securities will be
in valid and sufficient form.
(n) Representatives' Warrants. First Coastal has full corporate
power and authority to authorize, issue and sell the Representatives'
Warrants (as defined in Section 5(q)) on the terms and conditions set
forth in this Agreement, and has taken all corporate action necessary
therefor. No consent, approval, authorization or other order of any
regulatory authority is required for such authorization, issue or sale,
except as may be required under the Securities Act or state Blue Sky laws.
As of the Closing Date, the Representatives' Warrants shall have been duly
authorized, executed and delivered by First Coastal to the Representatives
and will be the legal, valid and binding obligations of First Coastal
enforceable in accordance with their terms, subject to the Enforceability
Exceptions (as defined below). The holders of the Representatives'
Warrants will, upon their exercise, be entitled to purchase Common Shares
in accordance with the terms and conditions set forth in the form of
Representatives' Warrant attached to this Agreement as Exhibit A. The
Common Shares issuable upon exercise of the Representatives' Warrants will
upon such issuance be duly and validly authorized, fully paid and
nonassessable. First Coastal has duly authorized and reserved for issuance
such number of Common Shares as are initially issuable upon exercise of
the Representatives' Warrants.
(o) Legal Compliance. (i) At all times, each of First Coastal, the
Trust and the Bank has conducted its businesses in compliance in all
material respects with all applicable federal and state laws, rules,
regulations, decisions, directives and orders (including, without
limitation, the Federal Deposit Insurance Act, as amended, and the rules
and regulations of the FDIC, FRB and the Office of the Comptroller of the
Currency ("OCC")), and (ii) each of First Coastal, the Trust and the Bank
holds all licenses, certificates, permits and other governmental
authorizations required for the conduct of its business as now being
conducted and as described in the Prospectus, and all such licenses,
certificates, permits and other governmental authorizations are in full
force and effect, and each of First Coastal, the Trust and the Bank is in
all material respects complying therewith. No such license, certificate,
permit or other governmental authorization contains a materially
burdensome restriction not adequately described in the Prospectus.
(p) No Breach or Violation. Neither First Coastal, the Trust nor the
Bank is (i) in violation of its articles of incorporation, declaration of
trust, articles of
<PAGE> 8
association, bylaws or other similar charter documents, (ii) in breach or
violation of or in default under the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement or other evidence of
indebtedness or other agreement, obligation, condition, covenant or
instrument to which First Coastal, the Trust or the Bank is a party or is
bound, or by which any of its property may be subject, where any such
default, breach or violation would have, individually or in the aggregate,
a material adverse effect on the financial condition, earnings, business,
assets or results of operations of First Coastal, the Trust or the Bank,
on the performance of this Agreement or any other Operative Document, or
on the consummation of the transactions contemplated hereby and thereby,
or (iii) in breach or violation of or in default under any statute, law,
decree, order, rule or regulation applicable to First Coastal, the Trust
or the Bank of any court or regulatory, administrative or governmental
agency, body or authority having jurisdiction over First Coastal, the
Trust or the Bank or their property, where any such default, breach or
violation would have, individually or in the aggregate, a material adverse
effect on the financial condition, earnings, business, assets or results
of operations of First Coastal, the Trust or the Bank, on the performance
of this Agreement or any other Operative Document, or on the consummation
of the transactions contemplated hereby and thereby.
(q) No Conflicts. Neither the execution, delivery and performance of
this Agreement or any of the Operative Documents nor the consummation of
the transactions contemplated hereby, thereby or in the Prospectus,
including, without limitation, the issuance, sale and delivery of the
Securities, will (i) conflict with, or result in a breach or violation of,
or constitute a default (or an event which with notice or lapse of time,
or both, would constitute a default) or require consent under, or result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of First Coastal, the Trust or the Bank pursuant to,
the terms of any indenture, contract, mortgage, lease, deed of trust, note
agreement, loan agreement or other agreement or instrument to which First
Coastal, the Trust or the Bank is a party or by which First Coastal, the
Trust or the Bank or any of their material properties or assets may be
bound, (ii) violate or conflict with any provision of the charter,
articles of association or bylaws of First Coastal, the Trust or the Bank
or any statute, law, judgment, decree, order, rule or regulation
applicable to First Coastal, the Trust or the Bank of any court,
regulatory, administrative or governmental agency or body, arbitrator or
authority having jurisdiction over First Coastal, the Trust or the Bank or
any of its property (including, without limitation, the applicable rules
and regulations of the FDIC, FRB and OCC).
(r) Litigation. Except as stated in the Prospectus, there is no
litigation or legal, regulatory, administrative or other governmental
action, suit or proceeding, or, to the knowledge of the Offerors,
investigation, by or before any court, regulatory, administrative or
governmental agency, arbitrator, body or authority pending or, to the
knowledge of the Offerors, threatened against, or involving any of the
properties or business of, First Coastal, the Trust or the Bank that, if
determined adversely to First Coastal, the Trust or the Bank, would,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), earnings, business, prospects, assets,
or results of operations of First Coastal, the Trust or the Bank, and no
such litigation, action, suit or proceeding, or, to the knowledge of the
Offerors,
<PAGE> 9
investigation, against, or involving any of the properties or business of,
First Coastal, the Trust or the Bank is pending or, to the knowledge of
the Offerors, threatened that would or would be reasonably likely to have
an adverse effect upon the performance of this Agreement or the other
Operative Documents or the consummation of the transactions hereby and
thereby contemplated. No person has sought to obtain review of any
transaction contemplated hereby or by any Operative Document or otherwise
challenged any aspect of the offer, sale or issuance of the Securities,
and, to the knowledge of the Offerors, no such review or challenge is
threatened by any regulatory, administrative or governmental authority or
any other person or entity.
(s) Real and Personal Property. Except as otherwise set forth in the
Prospectus or such as are not material to the business, financial
condition or results of operation of First Coastal, the Trust or the Bank,
each of First Coastal, the Trust and the Bank has good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions
(except liens for taxes not yet due and payable), to all real and personal
property described in the Prospectus as being owned by it. Except as
otherwise set forth in the Prospectus or such as are not material to the
financial condition, earnings, business, assets or results of operations
of First Coastal, the Trust or the Bank, each of First Coastal, the Trust
and the Bank has valid and binding leases to the real and personal
property described in the Prospectus as being under lease to it, and each
enjoys peaceful and undisturbed possession under all such leases to which
it is a party as lessee with such exceptions as do not materially
interfere with the use of the leased property made by First Coastal, the
Trust or the Bank.
(t) Insurance. First Coastal, the Trust and the Bank maintain
insurance in accordance with the practice and custom for bank holding
companies, financing subsidiaries and banks.
(u) Fees and Commissions. Other than as contemplated by this
Agreement, neither First Coastal, the Trust nor the Bank has incurred any
liability for any finder's or broker's fee or agent's commission in
connection with the execution and delivery of this Agreement or any other
Operative Document, the consummation of the transactions contemplated
hereby or thereby or the introduction of the Offerors to the Underwriters.
(v) Investment Company. Neither First Coastal, the Trust nor the
Bank is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or an "investment adviser" within the meaning of the
Investment Advisers Act of 1940, as amended.
(w) Taxes. Each of First Coastal, the Trust and the Bank has filed
all necessary federal, state and foreign income and franchise tax returns
required to be filed and paid all taxes shown as due thereon, except where
the failure to file or pay would not have a material adverse effect upon
the financial condition, earnings, business, assets or results of
operations of First Coastal, the Trust or the Bank; no tax deficiency has
been asserted or threatened against First Coastal, the Trust or the Bank
<PAGE> 10
which would materially adversely affect the financial condition, earnings,
business, assets or results of operations of First Coastal, the Trust or
the Bank.
(x) Intellectual Property. Each of First Coastal and the Bank own or
possess adequate rights to use all patents, patent applications,
trademarks, service marks, tradenames, trademark registrations, service
mark registrations, franchises, copyrights and licenses necessary for the
conduct of its business as currently carried on and as described in the
Prospectus; neither First Coastal, the Bank nor any partnership or joint
venture in which First Coastal or the Bank is a partner or participant has
received any notice of conflict with the asserted rights of others in
respect thereof, and the Offerors are not aware of any presently existing
facts or circumstances that could reasonably be expected to result in such
a conflict.
(y) Labor Relations. No labor dispute with the employees of First
Coastal or the Bank exists or, to the knowledge of the Offerors, is
imminent; and the Offerors have no knowledge of any existing or imminent
labor dispute or disturbance by the employees of any of principal
suppliers, depositors, borrowers or customers of First Coastal or the Bank
reasonably likely to result in a material adverse change in the financial
condition, earnings, business, assets or results of operations of First
Coastal, the Trust or the Bank.
(z) Underwriting Agreement. This Agreement has been duly and validly
authorized, executed and delivered by each of First Coastal and the Trust.
(aa) No Consent. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement or any of the other Operative
Documents by First Coastal or the Trust or for the consummation of the
transactions contemplated hereby or thereby, including, without
limitation, the issuance, sale and delivery of the Securities, except such
as may be required under the securities or Blue Sky laws of any state in
connection with the purchase and distribution of the Securities as
contemplated in this Agreement and the other Operative Documents, and such
others (specified in writing to the Representatives) as have been obtained
or made.
(bb) Regulatory Reports. Each report filed by First Coastal or the
Bank with the FDIC, FRB or OCC between July 1, 1996, and the date of this
Agreement, as of the date such report was filed, conformed in all material
respects with the applicable requirements of the FDIC, FRB and OCC.
(cc) Internal Controls. Each of First Coastal, the Trust and the
Bank maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principals and
to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing
assets at reasonable
<PAGE> 11
intervals and appropriate action is taken with respect to any differences.
(dd) Related Transactions. Except as stated in the Prospectus,
neither First Coastal, the Trust nor the Bank is a party to any contract
or agreement (whether oral or written) with any affiliate, director or
officer of First Coastal, the Trust, the Bank or any of their
subsidiaries.
(ee) Operative Documents. Each of the Operative Documents (other
than this Agreement) has been duly authorized, executed and delivered by
each Offeror that is a party thereto, and will, at each Closing Date, be a
valid and binding obligation of each Offeror that is a party thereto,
enforceable against such Offeror in accordance with its terms, except to
the extent that enforcement thereof may be limited by the receivership,
conservatorship and supervisory powers of bank regulatory agencies
generally as well as to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws affecting creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity) and the
availability of equitable remedies (collectively, the "Enforceability
Exceptions").
(ff) Trust Indenture Act. Each of the Trust Agreement, the Guarantee
Agreement and the Indenture shall have been duly qualified under the 1939
Act as of each Closing Date.
(gg) Junior Subordinated Debentures. The Junior Subordinated
Debentures have been duly authorized by First Coastal and, at each Closing
Date, will have been duly executed by First Coastal and, when
authenticated in the manner provided in the Indenture and delivered
against payment therefor as described in the Registration Statement and
the Prospectus will constitute legally valid and binding obligations of
First Coastal, enforceable against First Coastal in accordance with their
terms, except as enforcement thereof may be limited by the Enforceability
Exceptions; and the Junior Subordinated Debentures will be in the form
contemplated by, and entitled to the benefits of, the Indenture and will
conform in all material respects to the description thereof in the
Prospectus; and the issuance of the Junior Subordinated Debentures will
not be subject to preemptive or similar rights.
(hh) Administrators. Each of the Administrators of the Trust is an
officer of First Coastal and has been duly authorized by First Coastal to
execute and deliver the Trust Agreement.
(ii) Descriptions of Securities and Operative Documents. The
Securities and the Operative Documents conform in all material respects to
the summary descriptions thereof contained in the Registration Statement
and the Prospectus.
(jj) Stabilization, Other Securities Sales. Neither First Coastal,
the Trust or the Bank has (i) taken or will take, directly or indirectly,
any action which constitutes, or which is designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation
of the price of the Securities and (ii) since the filing of the
Registration Statement, except for the marketing of the Securities and the
<PAGE> 12
payment to the Underwriters of the compensation contemplated by Section 2
of this Agreement, (A) sold, bid for, purchased or paid anyone any
compensation for soliciting purchases of the Securities or (B) paid or
agreed to pay to any person any compensation for soliciting another person
to purchase any securities of First Coastal, the Trust or the Bank.
2. PURCHASE AND SALE.
(a) On the basis of the representations, warranties and agreements
contained in this Agreement, and subject to the terms and conditions hereof, the
Offerors agree to issue and sell to each Underwriter, severally and not jointly,
and each Underwriter, severally and not jointly, agrees to purchase from the
Offerors the number of Firm Units set forth on Schedule I opposite the name of
such Underwriter, plus any additional Units the Underwriter may become obligated
to purchase pursuant to the provisions of Section 9 hereof, at a price of
$[_____] per Unit payable as follows: $20.00 per Unit to the Trust for each
Preferred Security and $[____] per Unit to First Coastal for each Common Share.
In addition, as compensation to the Underwriters for their commitments hereunder
and in view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase Junior Subordinated Debentures of First
Coastal, First Coastal hereby agrees to pay at each Closing Date to the
Representatives in immediately available funds, for the accounts of the several
Underwriters, $[_____] per Preferred Security to be delivered by the Trust
hereunder at such Closing Date or, if agreed by the Representatives and First
Coastal, by deduction from the amount payable by the Underwriters to the Trust
in respect of the Preferred Securities being purchased on such date.
(b) In addition, on the basis of the representations, warranties and
agreements contained in this Agreement, and subject to the terms and conditions
hereof, the Offerors hereby grant an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 33,000 Optional Units
at the purchase price per Unit to be paid for the Firm Units, for use solely in
covering any over-allotments made by the Representatives for the account of the
Underwriters in the sale and distribution of the Firm Units. The option granted
hereunder may be exercised at any time on one or more occasions within 45 days
after the first date that any of the Units are released by the Representatives
for sale to the public, upon notice by the Representatives to First Coastal
setting forth the aggregate number of Optional Units as to which the
Underwriters are exercising the option and the time of delivery. Such time of
delivery shall be determined by the Representative, but if at any time other
than the Initial Closing Date shall not be earlier than three nor later than
five full business days after delivery of such notice of exercise. The number of
Optional Units to be purchased by each Underwriter shall be determined by
multiplying the number of Optional Units to be sold by the Offerors pursuant to
such notice of exercise by a fraction, the numerator of which is the number of
Firm Units to be purchased by such Underwriter as set forth opposite its name in
Schedule I and the denominator of which is 330,000 (subject to such adjustments
to eliminate any fractional share purchases as the Representatives in their
discretion may make). The manner of payment for and delivery of the Optional
Units shall be the same as for the Firm Units purchased from the Offerors as
specified in the three preceding paragraphs. At any time before lapse of the
option, the Representatives may cancel such option by giving written notice of
such cancellation to First Coastal. If the option is canceled or expires
unexercised in whole or in part, the Offerors will deregister under the
Securities Act the number of Optional Units as to which the option has
<PAGE> 13
not been exercised.
3. DELIVERY AND PAYMENT. The initial delivery of the certificates
representing the Common Shares and Preferred Securities underlying the Units and
payment therefor shall be made at 10:00 a.m., Los Angeles Time, on [_______],
199[__], or such later time as the Representatives and First Coastal shall
determine, which date and time may be postponed as provided in Section 9 hereof
(such initial date and time of delivery and payment called the "Initial Closing
Date"). Delivery of the certificates of Common Shares and Preferred Securities
underlying the Units shall be made for the account of the respective
Underwriters against payment by the Underwriters of the purchase price thereof
by wire transfer of same day funds in Los Angeles, California to First Coastal
and the Trust in the amounts specified in Section 2(a). Delivery of the
certificates of Common Shares and Preferred Securities underlying the Units
shall be made at the offices of Munger, Tolles & Olson LLP, 355 South Grand
Avenue, Los Angeles, California, or such location as the Representatives may
designate at least one business day in advance of any Closing Date. The Initial
Closing Date and the subsequent closing dates, if any, for delivery and payment
of the certificates of Common Shares and Preferred Securities underlying the
Option Units shall be collectively referred to herein as the "Closing Date."
4. OFFERING BY UNDERWRITERS. It is understood that the Underwriters
propose to offer the Units for sale to the public as set forth in the
Prospectus. The Underwriters will, and hereby agree to, cooperate with the
Offerors to prevent any person from acquiring more than 9.9% of the outstanding
Common Shares, and use all reasonable efforts to implement and comply with
procedures prescribed by the Offerors or agents thereof to prevent any such
acquisition.
5. COVENANTS OF THE OFFERORS. The Offerors jointly and severally covenant
and agree with each Underwriter that:
(a) Registration Statement and Prospectus. The Offerors will make no
further amendment or any supplement to the Registration Statement or the
Prospectus prior to any Closing Date which is reasonably disapproved by
the Representatives after reasonable notice thereof. The Offerors will
notify the Representatives immediately and confirm the notice in writing
(i) when any post-effective amendment to the Registration Statement (and
any other amendment thereto) has been declared effective by the
Commission, (ii) of the transmittal to the Commission for filing of any
amendment or supplement to the Prospectus, (iii) of the receipt by the
Offerors of any comments from the Commission or any state securities
commission with respect to the transactions contemplated by this
Agreement, (iv) of any request by the Commission or any state securities
commission for any amendment or supplement to the Registration Statement
or the Prospectus, or for additional information, (v) of the issuance by
the Commission or any state securities commission or court of competent
jurisdiction of any order suspending either the Offering or the use of
either the Preliminary Prospectus or the Prospectus or of the threat of
any such action by any such entity, (vi) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration
Statement or any amendment thereto or of the receipt by the Offerors of
any notification with respect to the suspension of the registration
qualification or exemption of the Units for offering or sale in any
jurisdiction, or the initiation or threatening of
<PAGE> 14
any proceeding for such purpose. The Offerors will use their best efforts
to prevent the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or
suspending any such registration, qualification of exemption, and if such
an order is issued, the Offerors promptly will use their best efforts to
obtain its withdrawal.
(b) Amendments to Registration Statement. The Offerors will give the
Representatives notice of their intention to file or prepare any amendment
or supplement to the Registration Statement or any filing under Rule
462(b) or any amendment or supplement to the Prospectus (whether, in the
case of the Registration Statement and the Prospectus, by the filing of
documents pursuant to the Exchange Act, the Securities Act or otherwise
and, in the case of the Prospectus, by amending or supplementing the
Prospectus then being used by the Underwriters) and will furnish the
Representatives with copies of any such amendment or supplement or other
document proposed to be filed a reasonable amount of time prior to such
proposed filing and will not file any such amendment or supplement or
other document or use any such prospectus to which the Representatives or
counsel to the Underwriters shall reasonably object.
(c) Required Amendments to the Registration Statement. If, at any
time during the period when the Underwriters are engaged in marketing or
sales efforts relating to the Securities or when a Prospectus is required
to be delivered in connection with the distribution of the Securities, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
or if it shall be necessary to amend or supplement the Registration
Statement or the Prospectus to comply with applicable law, the Offerors
promptly will prepare, subject to paragraph (b) of this Section 5, an
amendment or supplement which will correct such statement or omission or
effect such compliance.
(d) Copies of the Registration Statement. The Offerors have
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, copies of the Registration Statement as
originally filed and of each amendment thereto including exhibits filed
therewith and copies of all consents and certificates of experts, and will
also deliver to the Representatives a copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for
each of the Underwriters.
(e) Copies of the Prospectus. The Offerors have delivered or will
deliver to each Underwriter, without charge, from time to time until the
effective date of the Registration Statement, as many copies of each
Preliminary Prospectus as such Underwriter may reasonably request, and the
Offerors hereby consent to the use of such copies for purposes permitted
by the Securities Act. The Offerors will furnish to each Underwriter,
without charge, from time to time during the period when the Prospectus is
required to be delivered under the Securities Act or the Exchange Act,
such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request for the purposes contemplated by
the Securities
<PAGE> 15
Act or the Exchange Act or the respective applicable rules and regulations
of the Commission thereunder.
(f) Rule 430A Compliance. If, at the time that the Registration
Statement or a post-effective amendment thereto becomes effective, any
information shall have been omitted therefrom in reliance upon Rule 430A
of the Securities Act Regulations, then immediately following
effectiveness, the Offerors will prepare, and file or transmit for filing
with the Commission in accordance with such Rule 430A and Rule 424(b) of
the Securities Act Regulations, copies of an amended Prospectus, or, if
required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted and will use its best efforts to cause any such post-effective
amendment to be declared effective as promptly as practicable.
(g) Qualification under State Securities Laws. The Offerors will use
their best efforts to qualify the Securities for sale, to the extent that
exemptions from qualification requirements are not available, under the
securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably designate, will maintain such qualifications in effect so
long as required for the distribution of the Securities and will file such
consents to service of process or other documents as may be necessary in
order to effect such qualifications. The Offerors will file such
statements and responses as may be required by the laws of each
jurisdiction in which the Securities have been qualified as above
provided. In the event of any action suspending any such qualification,
the Offerors will promptly notify the Representatives and promptly use
their reasonable efforts to obtain withdrawal or reversal of any such
action.
(h) Payment of Expenses. Whether or not the transactions
contemplated hereby are consummated or this Agreement is terminated, First
Coastal will pay or cause to be paid the following fees, disbursements and
expenses customarily incurred in an offering of trust preferred securities
and common stock: (i) the preparation, printing or other production and
filing of documents with respect to the transaction (including the
Operative Documents) and any costs of preparation, printing and filing of
the Registration Statement originally filed with respect to the Securities
and any amendment thereto, any Rule 462(b) Registration Statement, and the
Prospectus and any amendment or supplement thereto, this Agreement and any
blue sky memoranda; (ii) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents in such quantities as
the Underwriters may reasonably request; (iii) filing fees, costs and
expenses incurred in connection with obtaining regulatory approvals (or
obtaining confirmation that any such approval is not required); (iv)
filing fees, costs and expenses incurred in qualifying the offering under
the "Blue Sky" laws of such states as, in the opinion of the
Representatives, are desirable for a proper distribution of, or secondary
offering of, the Securities, including the reasonable fees and expenses of
counsel to the Underwriters; (v) the fees and disbursements of the
counsel, the accountants and any other experts or advisors retained by the
Offerors; (vi) the costs of preparing and engraving certificates
representing the Securities; (vii) any transfer agent fees and all
transfer taxes and registrar fees; (viii) the filing fees of the
Commission and the National Association of Securities Dealers, Inc.
relating to the Securities; (ix) the fees and expenses of listing the
Securities on a stock exchange or
<PAGE> 16
qualifying the Securities for inclusion on the Nasdaq SmallCap Market or
other quotation service; (x) the fees and expenses of the trustees
appointed under the Operative Documents, including the fees an
disbursements of counsel for such trustees in connection with the
Operative Document; (xi) the travel and lodging expenses of employees of
the Offerors who participate in the advertising and marketing of the
Securities; and (xii) all other costs and expenses incident to the
performance of the obligations of the Offerors hereunder which are not
otherwise specifically provided for in this Section.
(i) Earnings Statements. Each of the Offerors will make generally
available to its security holders as soon as practicable, but not later
than 90 days after the close of the period covered thereby, an earnings
statement (in form complying with the provisions of Rule 158 of the
Securities Act Regulations) covering a 12-month period beginning not later
than the first day of the Offeror's fiscal quarter next following the
"effective date" (as defined in said Rule 158) of the Registration
Statement.
(j) Information to the Representatives. During the period of two
years after the date hereof, the Offerors will promptly furnish to the
Representatives copies of (i) all reports or other communications
(financial or otherwise) furnished generally to stockholders of the
Offerors, or furnished to or filed with the Commission or any other
supervisory or regulatory authority pursuant to the Exchange Act or the
requirements of any national securities exchange or system on which any
class of securities of the Offerors is listed or quoted, and (ii) such
additional information concerning the businesses and financial condition
of the Offerors as the Representatives may from time to time reasonably
request. If, and so long as, First Coastal has active subsidiaries, such
financial reports will be on a consolidated basis to the extent the
accounts of First Coastal and its subsidiaries are consolidated in reports
furnished to its shareholders generally or to the Commission. To the
extent such reports or communications are not otherwise available to the
public, the Representatives will keep such information confidential
(unless otherwise agreed by First Coastal) and will not disseminate such
information.
(k) Compliance with Securities Laws. During any period when the
Underwriter is engaged in sales efforts relating to the Securities or when
a Prospectus is required to be delivered in connection with the
distribution of the Securities, the Offerors will comply, so far as they
are able and at their own expense, with all requirements imposed upon them
by the Securities Act and the Exchange Act and the Securities Act
Regulations and the Exchange Act Regulations of the Commission promulgated
under such statutes, including, without limitation, Regulation M under the
Exchange Act, so far as necessary to permit the continuance of sales of or
dealing in the Securities during such period in accordance with the
provisions hereof and the Prospectus.
(l) Lock-Up Agreement. Except as may be necessary or reasonably
desirable in order to comply with the requirements of appropriate banking
regulators, neither First Coastal, the Trust, the Bank nor any of their
subsidiaries will, for a period
<PAGE> 17
of fifteen (15) months following the date hereof, without the written
consent of the Representatives, offer for sale, sell or contract to sell,
grant any option for the sale or otherwise issue or dispose of, directly
or indirectly, or announce the offering of, any shares of common stock or
any shares of preferred stock, or any securities convertible into or
exchangeable for, or any options or rights to purchase or acquire, shares
of common stock or preferred stock, of First Coastal, the Trust, the Bank
or any of their subsidiaries, except for (i) the issuance of the
Securities hereunder, (ii) the issuance of Common Shares upon conversion
of the outstanding shares of the Series A 10% Cumulative Convertible
Preferred Stock (the "Series A Preferred"), (iii) the issuance of Common
Shares pursuant to the exercise of First Coastal options or warrants
outstanding on the date hereof, (iv) the issuance of stock options
pursuant to First Coastal's 1996 Stock Option Plan, as it may be amended
from time to time, in an amount equal to or less than those issued in
fiscal year 1998 through the date of this Agreement, and (v) the issuance
to Charles E. Brooks of up to 8,000 stock options pursuant to his
employment agreement with First Coastal.
(m) Transfer Agent. Prior to the Initial Closing Date, the Offerors
shall retain as a transfer agent for the Common Shares and the Preferred
Securities U.S. Stock Transfer Corporation. So long as any of the
Securities are outstanding, the Offerors shall continue to maintain a
transfer agent, which may be either U.S. Stock Transfer Corporation or a
replacement transfer agent selected by the Offerors and reasonably
acceptable to the Representatives. The Representatives consent to the
appointment of Wilmington Trust Company as the transfer agent for the
Preferred Securities when the Preferred Securities may be traded
separately from the Common Shares.
(n) Redemptions and Dividends. Neither Offeror will acquire any of
its capital stock prior to any Closing Date nor will any Offeror declare
or pay any dividend or make any other distribution upon its capital stock
payable to the shareholders of record on a date between the date hereof
and any Closing Date, except as disclosed in the Prospectus and except for
regular cash dividends on First Coastal's Series A Cumulative Convertible
Preferred Stock.
(o) Use of Proceeds. The Trust will apply the net proceeds from the
sale of the Preferred Securities and First Coastal will apply the net
proceeds from the sale of the Common Shares and the Junior Subordinated
Debentures for the purposes set forth under "Use of Proceeds" in the
Preliminary Prospectus and the Prospectus.
(p) Fees and Commissions. Neither Offeror will incur any liability
for any finder's or broker's fee or agent's commission in connection with
the execution and delivery of this Agreement or any other Operative
Document or the consummation of the transactions contemplated hereby and
thereby.
(q) Representatives' Warrants. Simultaneously with the purchase and
payment by the Underwriters of the Units on the Initial Closing Date,
First Coastal shall sell, at a price of $0.001 per warrant, and issue and
deliver to the Representatives 16,500 warrants, in the form attached to
this Agreement as Exhibit A (the "Representatives' Warrants"), to purchase
an aggregate of 16,500 shares of First
<PAGE> 18
Coastal common stock (equal to five percent of the number of Units
purchased by the Underwriters on the Initial Closing Date) at a price per
share equal to the greater of (i) 120% of the initial public offering
price per share allocated to the Common Shares and (ii) $9.00. The
Representatives' Warrants will be not be exercisable for the first year
following the Initial Closing Date, and shall thereafter be exercisable
for four years.
(r) Application to Nasdaq. Following the Closing Date, First Coastal
shall use its best efforts to meet the minimum corporate governance
requirements for quotation of the Units, the Common Shares and the
Preferred Securities on the Nasdaq SmallCap Market. If and when First
Coastal meets such requirements and the other requirements for quotation,
First Coastal shall take such action, including the filing of required
applications and payment of required fees, to ensure that the Units, the
Common Shares and the Preferred Securities are included for quotation on
the Nasdaq SmallCap Market.
(s) Application for Secondary Market Exemptions. As of the first
date that First Coastal and its securities are eligible, First Coastal
will apply to the Department of Corporations of the State of California to
have the Units, the Common Shares and the Preferred Securities listed as
"Eligible Securities" for purposes of secondary market exemptions in the
State of California. First Coastal will take such other similar steps as
are reasonably necessary to obtain exemptions for secondary trading of the
Units, the Common Shares and the Preferred Securities in the State of
Arizona and other United States jurisdictions in which the securities
trade on the secondary market.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters under this Agreement are subject to the accuracy, as of the
date hereof and each Closing Date, of and compliance with all representations,
warranties and agreements of the Offerors contained herein, to the accuracy of
the statements of the Offerors made in any certificates delivered pursuant to
the provisions hereof, to the performance by the Offerors of their obligations
hereunder and to the following additional conditions:
(a) Registration Statement. The Registration Statement, including
any Rule 462(b) Registration Statement, shall be effective at the time of
execution of this Agreement. If required, the Prospectus that constitutes
a part of the Registration Statement and any amendment or supplement
thereto shall have been filed with the Commission in the manner and within
the time period required by Rule 424(b) under the Securities Act; no stop
order suspending the effectiveness of the Registration Statement or any
amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of
the Offerors or Representatives, shall be contemplated by the Commission;
and the Offerors shall have complied with any request of the Commission
for additional information (to be included in the Registration Statement
or the Prospectus or otherwise).
(b) No Untrue Statement or Omission. The Representatives shall not
have advised the Offerors that the Registration Statement or the
Prospectus, or any amendment thereof or supplement thereto, contains an
untrue statement of fact which, in the
<PAGE> 19
Representatives' opinion, is material, or omits to state a fact which, in
the Representatives' opinion, is material and is required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(c) Absence of Changes. Except as contemplated in the Prospectus,
since the respective dates as of which information is given in the
Prospectus, (i) neither First Coastal, the Trust nor the Bank shall have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transaction not in the ordinary course of
business, or declared or paid any dividends or made any distribution of
any kind with respect to its capital stock, (ii) there shall not have been
any change in the capital stock, or any material change in the short-term
or long-term debt, or any issuance of options, warrants, convertible
securities or other rights to purchase capital stock, of First Coastal,
the Trust or the Bank, and (iii) there shall not have been any material
adverse change, or development reasonably likely to result in a material
adverse change (whether or not arising from transactions in the ordinary
course of business), in the financial condition, earnings, business,
assets or results of operations of First Coastal, the Trust or the Bank,
that in the Representatives' judgment, makes it impractical or inadvisable
to offer or deliver the Securities on the terms and in the manner
contemplated in the Prospectus.
(d) Opinion of Counsel to the Offerors. On each Closing Date, there
shall have been furnished to the Underwriters the opinion of Sullivan &
Cromwell, special counsel for the Offerors, dated such Closing Date and
addressed to the Underwriters, to the effect that:
(i) First Coastal has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of California, with full corporate power and authority to
conduct its business as described in the Prospectus. The Bank has
been duly organized and is validly existing as a national banking
association in good standing under the applicable laws with full
power and authority to conduct its business as described in the
Prospectus. All of the outstanding shares of capital stock of the
Bank have been duly authorized and validly issued, are fully paid
and nonassessable, and are owned by First Coastal free and clear of
all liens, encumbrances, security interests and claims, except as
set forth in the Prospectus and 12 U.S.C. Section 55.
(ii) First Coastal is duly registered as a bank holding
company with the FRB under the BHC Act. The Bank is a member in good
standing of the FRS and is an institution with deposit accounts
insured by the FDIC to the fullest extent permitted by law. No
proceedings for the termination or revocation of First Coastal's
registration or the Bank's membership or insurance are, to the best
knowledge of such counsel, pending or threatened.
(iii) First Coastal's authorized equity capitalization is as
set forth in the Prospectus, and all of the issued and outstanding
shares of capital stock of First Coastal have been duly authorized
and validly issued and are fully paid and nonassessable. The Common
Shares offered hereby have been duly and validly authorized and,
when issued and delivered to and paid for by the
<PAGE> 20
Underwriters pursuant to this Agreement, will be fully paid and
nonassessable and free and clear of all liens, security interests,
claims and encumbrances and restrictions on transfer. Except as
otherwise stated in the Prospectus, there are no preemptive rights
or other rights to subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of capital stock of First
Coastal pursuant to the Articles of Incorporation or Bylaws of First
Coastal or, to the knowledge of such counsel, any agreement or other
instrument to which First Coastal is a party or by which First
Coastal is bound. To the best knowledge of such counsel, neither the
offering nor the sale of the Securities gives or will give rise to
any rights for or relating to the registration of any shares of
capital stock or other securities of First Coastal (not including
the Securities) under the Securities Act that have not been
satisfied or waived prior to the date hereof. To the best knowledge
of such counsel, except as stated in the Prospectus, there are no
options, warrants, agreements, contracts or other rights in
existence to purchase or acquire from First Coastal any shares of
capital stock of First Coastal.
(iv) Each of the Trust Agreement, the Guarantee Agreement and
the Indenture has been duly qualified under the 1939 Act.
(v) First Coastal has the full corporate power and authority
to execute and deliver each Operative Document to which it is a
party and to perform its obligations thereunder. Each of the
Operative Documents to which First Coastal is a party has been duly
authorized, executed and delivered by First Coastal, and each
Operative Document to which First Coastal is a party (other than
this Agreement) is a valid and legally binding obligation of First
Coastal enforceable in accordance with its terms, except to the
extent that enforcement may be limited by the Enforceability
Exceptions.
(vi) The Junior Subordinated Debentures have been duly
authorized, executed, authenticated, issued and delivered, are
entitled to the benefits of the Indenture, and constitute valid and
legally binding obligations of First Coastal enforceable in
accordance with their terms, except to the extent that enforcement
may be limited by the Enforceability Exceptions.
(vii) Under current U.S. federal income tax law, (A) the Trust
will be classified as a grantor trust and not as an association
taxable as a corporation; [(B) the Junior Subordinated Debentures
should be classified as indebtedness of First Coastal]; and (C) the
discussions in the Prospectus under "ERISA Considerations" and
"Certain Federal Income Tax Consequences" are fair and accurate
summaries of the matters addressed therein, based upon the
assumptions stated or referred to therein.
(viii) Neither the execution, delivery and performance of this
Agreement nor the consummation of any of the transactions
contemplated hereby, including, without limitation, the issuance,
sale and delivery of the Securities, will conflict with, result in a
breach or violation of, or constitute a
<PAGE> 21
default under the Articles of Incorporation or Bylaws of First
Coastal or any other document filed as an exhibit to the
Registration Statement.
(ix) To the best knowledge of such counsel, no charge,
investigation, action, suit or proceeding before or by any
regulatory, administrative or governmental agency, arbitrator, body
or authority is pending or threatened that might affect the
performance of this Agreement or the consummation of the
transactions herein contemplated or, except as disclosed in the
Prospectus, that would or would be reasonably likely to have,
individually or in the aggregate, a material adverse effect upon the
financial condition, earnings, business, assets or results of
operations of First Coastal or the Trust; provided that in the case
of suits against AIB, such suits are limited to those originating in
Los Angeles County.
(x) All regulatory consents, authorizations, approvals, orders
and filings required to be obtained or made by First Coastal and the
Trust under the Federal laws of the United States and the laws of
the State of California for the issuance, sale and delivery of the
Securities by First Coastal and the Trust have been obtained or made
by First Coastal and the Trust.
(xi) Neither First Coastal nor the Trust is not an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or an
"investment adviser" within the meaning of the Investment Advisers
Act of 1940, as amended.
In rendering such opinion, as to matters of fact, to the extent they deem
proper, such counsel may rely on certificates of officers of First Coastal
and trustees of the Trust, concerning matters within the respective areas
of responsibility of any such officer and trustee, and of public
officials, all of which shall be attached to such opinion.
On each Closing Date, there shall also have been furnished to the
Underwriters a letter from such counsel to the effect that, in the course
of a review of the Registration Statement and the Prospectus, and
discussions with representatives of the Underwriters, the Offerors and
their accountants, considered in light of such counsel's understanding of
applicable law and experience gained under their practice, the
Registration Statement, as of its effective date, and the Prospectus, as
of its date, appeared on their face to be appropriately responsive in all
material respects to the requirements of the Securities Act and the
Securities Act Regulations, and that nothing came to the attention of such
counsel during the course of its review that caused it to believe that the
Registration Statement, as of its effective date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus, as of its date or as of the Closing
Date, contained any untrue statement of a material fact or omitted to
state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Such letter may state that (A) such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Statement or the Prospectus, except
for those made under the captions, "Description of
<PAGE> 22
Capital Stock," "Description of Units," "Description of Preferred
Securities," "Description of Junior Subordinated Debentures," "Description
of Guarantee and Expense Agreement" and "Relationship Among Preferred
Securities, Junior Subordinated Debentures, Guarantee and Expense
Agreement," to the extent they describe the terms of securities or
agreements referenced therein, and "Underwriting" to the extent it
describes the terms of this Agreement, and (B) such counsel does not
express any opinion or belief as to the financial data contained in the
Registration Statement or Prospectus. Such counsel shall also state that,
to the best knowledge of such counsel, no action prohibiting the use of
the Prospectus or any amendment thereof or supplement thereto or
suspending the public offering of the Securities has been taken by the
Commission or any other regulatory authority, and no proceedings for that
purpose have been instituted or threatened.
(e) Opinion of Special Delaware Counsel to the Offerors. On each
Closing Date, there shall have been furnished to the Underwriters the
opinion of Richards, Layton & Finger, P.A., special Delaware counsel for
the Offerors, dated such Closing Date and addressed to the Underwriters,
to the effect that:
(i) The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust
Act and, under the Trust Agreement and the Delaware Business Trust
Act, has the trust power and authority to conduct its business as
described in the Prospectus.
(ii) The Trust Agreement is a legal, valid and binding
agreement of First Coastal and the Administrators thereunder, and is
enforceable against First Coastal and the Administrators in
accordance with its terms, except to the extent that enforcement may
be limited by (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance or transfer and
other similar laws relating to or affecting the rights and remedies
of creditors generally, (ii) principles of equity, including
applicable law relating to fiduciary duties (regardless of whether
considered and applied in a proceeding in equity or at law), and
(iii) the effect of applicable public policy on the enforceability
of provisions relating to indemnification or contribution.
(iii) Under the Delaware Business Trust Act and the Trust
Agreement, the execution and delivery of this Agreement by the
Trust, and the performance by the Trust of its obligations
hereunder, have been authorized by all requisite trust action on the
part of the Trust.
(iv) The Preferred Securities have been duly authorized by the
Trust Agreement. The Preferred Securities, when duly issued in
accordance with the Trust Agreement and delivered against payment
thereof in accordance with the Trust Agreement and this Agreement,
will be validly issued and, subject to the qualifications set forth
herein, fully paid and nonasssessable undivided beneficial interests
in the assets of the Trust and will entitle the Preferred Security
holders to the benefits of the Trust Agreement. The Preferred
Security holders, as beneficial owners of the Trust, will be
entitled to
<PAGE> 23
the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred
Security holders may be obligated, pursuant to the Trust Agreement,
(i) to provide indemnity and security in connection with and pay
taxes or government charges arising from the transfer of
certificates evidencing the Preferred Securities (the "Preferred
Securities Certificates") and the issuance of replacement Preferred
Security Certificates, and (ii) to provide security and indemnity in
connection with requests of or directions to the Property Trustee to
exercise its rights and powers under the Trust Agreement. The forms
of certificates to evidence the Preferred Securities and Trust
Common Securities comply with the Trust Agreement and comply with
all applicable requirements, if any, of the Delaware Business Trust
Act.
(v) The Common Securities have been duly authorized by the
Trust Agreement and are duly and validly issued undivided beneficial
interests in the assets of the Trust and are entitled to the
benefits of the Trust Agreement.
(vi) The issuance of the Preferred Securities and the Trust
Common Securities is not subject to pre-emptive rights under the
Trust Agreement or the Delaware Business Trust Act.
(vii) The issuance and sale by the Trust of the Preferred
Securities and the Trust Common Securities, the execution, delivery
and performance by the Trust of this Agreement, and the consummation
of the transactions contemplated by this Agreement, do not violate
the Trust Agreement or any applicable Delaware law, rule or
regulation.
(f) Opinion of Counsel to the Underwriters. On each Closing Date,
there shall have been furnished to the Underwriters such opinion or
opinions from Munger, Tolles & Olson LLP, dated such Closing Date and
addressed to the Underwriters, with respect to such matters as the
Underwriters may reasonably require, and the Offerors shall have furnished
to such counsel such documents as they reasonably request for the purpose
of enabling them to pass upon such matters.
(g) Certificates. On each Closing Date, there shall have been
furnished to the Underwriters certificates, dated such closing date,
signed by the Chairman, President and Chief Executive Officer and the
Executive Vice President, Chief Financial Officer and Secretary of First
Coastal, and by each of the Administrators of the Trust, to the effect
that each has carefully examined the Registration Statement, the
Preliminary Prospectus, the Prospectus (including any amendment thereof or
supplement thereto), this Agreement and the other Operative Documents and
that:
(i) The representations and warranties of the Offerors in this
Agreement are true and correct on and as of the date of such
certificate, with the same force and effect as if made on the date
of such certificate, and the Offerors have complied with all the
agreements and satisfied all the conditions on their part to be
performed or satisfied at or prior to such date;
<PAGE> 24
(ii) No action prohibiting the use of the Prospectus or any
amendment thereof or supplement thereto or suspending or prohibiting
the public offering of the Securities has been taken by the
Commission or any other body or authority, and no proceedings for
such purposes have been instituted or, to such officers' knowledge,
threatened; and
(iii) As of its respective dates, the Registration Statement
and the Prospectus, and each amendment thereof and supplement
thereto, conform or will conform in all material respects with all
applicable requirements of the Commission and neither the
Registration Statement nor the Prospectus (including any amendment
thereof and supplement thereto) contains any untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
since the date of the Prospectus, there has occurred no event
required to be set forth in an amendment of or supplement to the
Registration Statement or the Prospectus in order to prevent the
Registration Statement or the Prospectus from containing any untrue
statement of a material fact or from omitting to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading which has not been so set forth; since the
respective dates as of which information is given in the Prospectus,
except as disclosed in the Prospectus, there has been no material
adverse change, or development involving a prospective material
adverse change, in the financial condition, earnings, business,
assets or results of operations of First Coastal, the Trust or the
Bank, whether or not arising from transactions in the ordinary
course of business, neither First Coastal, the Trust nor the Bank
has incurred any material liabilities or obligations, direct or
contingent, or entered into any material transaction not in the
ordinary course of business, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock,
and there has not been any change in the capital stock, or any
material change in the short-term or long-term debt, or any issuance
of options, warrants, convertible securities or other rights to
purchase capital stock, of First Coastal, the Trust or the Bank, and
except as disclosed in the Prospectus, there is not pending, or, to
the knowledge of such officers and trustees, threatened or
contemplated, any action, suit or proceeding to which First Coastal,
the Trust or the Bank is a party, or, to the knowledge of such
officers and trustees, to which First Coastal, the Trust or the Bank
is reasonably likely to be made a party, before or by any court or
governmental agency, authority or body, or any arbitrator, which
might result in any material adverse change in the financial
condition, earnings, business, assets or results of operations of
First Coastal, the Trust or the Bank.
(h) Accountants' Comfort Letter. At the time of the execution of
this Agreement, the Underwriters shall have received from Vavrinek, Trine,
Day & Co. LLP a letter, dated such date, in form and substance reasonably
satisfactory to the Underwriters, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements
<PAGE> 25
and certain financial information of First Coastal and AIB contained in
the Prospectus.
(i) Bring-down Comfort Letter. At each Closing Date, the
Underwriters shall have received from Vavrinek, Trine, Day & Co. LLP a
letter, dated as of such Closing Date, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (h) of
this Section, except that the specified date referred to shall be a date
not more than three business days prior to such Closing Date.
(j) NASD Review. At the date of this Agreement and at each Closing
Date, the NASD, upon review of the terms of the public offering of the
Securities, shall not have objected to such offering, such terms or the
Underwriters' participation in such offering.
(k) Blue Sky Qualifications. The Securities will be qualified in
such states as the Representatives may reasonably request and each such
qualification shall be in effect and not subject to any stop order or
other proceeding on any Closing Date.
(l) Lockup Letters. The Representatives shall have received from
each person who is an executive officer or director of First Coastal
and/or the Bank and from each person owning five percent or more of any
class of First Coastal's capital stock a written agreement, in the form
attached hereto as Exhibit B, to the effect that such person will not, for
a period of fifteen (15) months following the date hereof, without the
written consent of the Representatives, offer for sale, sell or contract
to sell, grant any option for the sale or otherwise dispose of, directly
or indirectly, or announce the disposition of, any shares of common stock
or any shares of preferred stock, or any securities convertible into or
exchangeable for, or any options or rights to purchase or acquire, shares
of common stock or preferred stock, of First Coastal, the Trust or the
Bank.
(m) Acquisition of AIB. The acquisition of AIB by First Coastal
shall have been approved by the shareholders of AIB, First Coastal shall
have received all required bank regulatory approvals, and all other
conditions precedent to each party's obligations to consummate the
acquisition of AIB by First Coastal and shall have been satisfied or
waived in writing. The AIB acquisition agreement shall have been duly
amended to change the January 15, 1999 financing deadline to February 28,
1999 and shall not have been terminated by either party, or otherwise
amended in any material respect.
(n) Reverse Stock Split. First Coastal shall have effected a
one-for-five reverse split of its outstanding Common Shares.
(p) Conversion Agreement. First Coastal shall have entered into a
Conversion Agreement with Joseph H. Wender, Charles A. Davis, Stephen
Friedman and John Markham Green obligating each to convert all shares of
Series A Preferred held by them on or before the Initial Closing Date, and
such agreements shall remain in full force and effect.
<PAGE> 26
(q) Subscription Agreement. California Community LLC shall have
entered into a Subscription Agreement with First Coastal obligating it to
exercise all warrants to purchase First Coastal common stock held by it on
or before the closing of the AIB acquisition and such agreement shall
remain in full force and effect as of each Closing Date.
(r) Further Assurances. On or prior to each Closing Date, the
Offerors shall have furnished to the Underwriters and their counsel such
further information, certificates and documents as the Underwriters or
their counsel or they may reasonably request.
7. REPRESENTATIVES' EXPENSES.
(a) Expense Allowance. At the Initial Closing Date, First Coastal shall
pay the Representatives for their expenses incurred in connection with the
Offering, on a non-accountable basis, an amount equal to $160,000 less $25,000
advanced by First Coastal to the Representatives prior to the Initial Closing
Date. Such expense allowance may be deducted by the Representatives from the
amount due to First Coastal for the purchase of Common Shares pursuant to
Section 2(a) hereof. Nothing in this Section 7(a) shall reduce or otherwise
affect the obligation of First Coastal to pay the expenses described in Section
5(h), including expenses that may be incurred by the Representatives or their
counsel on behalf of First Coastal.
(b) Reimbursement of Representatives' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof (other than
Section 6(j) or 6(k)) is not satisfied, or because of termination of this
Agreement pursuant to Section 10 hereof, or because of any refusal, inability or
failure on the part of the Offerors to perform any agreement herein or comply
with any provision hereof other than by reason of a default by the Underwriters,
First Coastal will reimburse the Representatives upon demand for all
out-of-pocket expenses (including, without limitation, all reasonable fees and
disbursements of Underwriter's counsel) that shall have been incurred by them in
connection with the preparation of this Agreement and the proposed placement and
sale of the Securities.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) Indemnification of Underwriters. The Offerors agree jointly and
severally to indemnify and hold harmless the Underwriters and each person who
controls any Underwriter within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus, the Registration Statement, any statement or
communication issued by either of the Offerors in connection with the offering
of the Securities, or in the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not
<PAGE> 27
misleading, and agree to reimburse promptly each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the Offerors will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Offerors by the
Representatives on behalf of the Underwriters specifically for use in connection
with the preparation thereof, and (ii) such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any
person controlling such Underwriter) from whom the person asserting any such
loss, claim, damage or liability purchased the Securities that are the subject
thereof if such person did not receive a copy of the Prospectus (or the
Prospectus as amended or supplemented) at or prior to the confirmation of the
sale of such Securities to such person and the untrue statement or omission or
alleged untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented).
(b) Indemnification of Offerors. Each Underwriter severally and not
jointly agrees to indemnify and hold harmless the Offerors, each of their
directors, officers and Administrators, and each person who controls an Offeror
within the meaning of either the Securities Act or the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Securities Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Prospectus, the
Registration Statement, any statement or communication issued by either of the
Offerors in connection with the offering of the Securities, or in the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Preliminary Prospectus, the Registration Statement, any statement or
communication issued by the Offerors in connection with the offering of the
Securities, or in the Prospectus, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information related to
the Underwriter furnished to the Offerors by the Representatives specifically
for use in the preparation of the documents referred to in the foregoing
indemnity, and will reimburse the Offerors and any such controlling persons for
any legal or other expenses reasonably incurred by the Offerors or any such
controlling person in connection with investigating or defending against any
such loss, claim, liability or action. This indemnity agreement will be in
addition to any liability which the Underwriters may otherwise have. The
Offerors acknowledge that the statements set forth in the [____] paragraph under
the heading "Underwriting" in the Prospectus constitute the only information
furnished in writing by or on behalf of any Underwriter for inclusion in any of
the documents referred to in the foregoing indemnity, and the Underwriters
confirm that such statements are correct.
(c) Procedures. Promptly after receipt by an indemnified party (including
any controlling person) under this Section 8 of notice of the commencement of
any action, such
<PAGE> 28
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified part, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by the Representatives in the case of
paragraph (a) of this Section 8, representing the indemnified party under such
paragraph (a) who are parties to such action), (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized the
employment of separate counsel for the indemnified party at the expense of the
indemnifying party, and except that, if clause (i) or (iii) is applicable, such
liability shall be only in respect of the counsel referred to in such clause (i)
or (iii). Any indemnifying party shall not be obligated under any settlement
agreement relating to any action under this Section 8 to which it has not agreed
in writing.
(d) Contribution. In order to provide for just and equitable contribution
in circumstances under which the indemnification provided for in this Section 8
is for any reason insufficient to hold harmless, or is held to be unavailable in
respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Offerors on the one hand and the
Underwriters on the other hand from the offering of the Securities pursuant to
this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or if the indemnified party failed to provide notice
in accordance with subsection (c) above, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Offerors, on the one hand, and the Underwriters, on
the other hand, in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant considerations. The relative benefits received by the Offerors on the
one hand and the Underwriters on the other hand in connection with the offering
of the Securities pursuant to this Agreement shall be deemed to be in the same
<PAGE> 29
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Offerors and the total commission received by the Underwriters in this
offering, bear to the aggregate initial offering price of the Securities. The
relative fault of the Offerors, on the one hand, and the Underwriters, on the
other hand, shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Offerors, on the one hand, or the Underwriters, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Offerors and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
8 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities purchased by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each officer, director and Administrator
of an Offeror, and each person, if any, who controls an Offeror within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Offeror. The Underwriters'
respective obligations to contribute pursuant to this Section 8 are several in
proportion to the number of Securities set forth opposite their respective names
in Schedule I hereto and not joint.
9. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail at any Closing Date to purchase the Securities which it
or they are obligated to purchase under this Agreement at such Closing Date (the
"Defaulted Securities"), the Underwriters shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other Underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Underwriters shall not have completed
such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
total number of Securities to be purchased hereunder, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective purchasing obligations hereunder bear to
<PAGE> 30
the purchasing obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
Securities to be purchased hereunder, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default. In the event of any such
default which does not result in a termination of this Agreement, either the
Underwriters or the Offerors shall have the right to postpone the Closing Date
for a period not exceeding seven days in order to effect any required changes in
the Prospectus or in any other documents or arrangements. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 9.
10. TERMINATION. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Offerors at
any time prior to the Closing Date, if prior to such time (a) a banking
moratorium shall have been declared either by Federal or California State
authorities or (b) there shall have occurred any outbreak or material escalation
of major hostilities in which the United States is involved or other substantial
calamity or crisis the effect of which on the financial markets of the United
States is such as to make it, in the Representatives' judgment, impracticable to
proceed with the completion of the sale of and the payment for the Securities.
Any termination of this Agreement pursuant to this Section 10 shall be without
liability of any party to any other party, except as specified in Section 7 and
except that the provisions of Section 8 hereof shall be effective at all times.
11. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective agreements,
representations, warranties, indemnities, and other statements of the Offerors
and their officers and trustees and of the Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Underwriters or the Offerors or
any of the officers, trustees, directors or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment of the Securities.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. NOTICES. All communications hereunder will be in writing, effective
only on receipt, and addressed as follows: (i) if to the Offerors, First Coastal
Bancshares, 275 Main Street, El Segundo, California 90245, Attention: Don M.
Griffith, with a copy to Sullivan & Cromwell, 1888 Century Park East, Los
Angeles, California 90067, Attention: Stanley F. Farrar; and (ii) if to the
Representatives, Peacock, Hislop, Staley & Given, Inc., 2999 North 44th Street,
Suite 100, Phoenix, Arizona 85018, Attention: Thomas L. Thomas, Managing
Director, and Wedbush Morgan Securities Inc., 1000 Wilshire Boulevard, Suite
900, Los Angeles, California 90017, Attention: Barton I. Gurewitz, Managing
Director, with a copy to Munger, Tolles & Olson LLP, 355 South Grand Avenue, Los
Angeles, California 90071, Attention: Michael J. O'Sullivan, or in any case to
such other address as the person to be notified may have requested in writing.
13. SUCCESSORS. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors and controlling persons referred to in Section 8 hereof. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person other than the persons mentioned in the
<PAGE> 31
preceding sentence any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person.
14. APPLICABLE LAW. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of California.
15. COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
in various counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument. This Agreement may also
be executed either manually or by facsimile, and both types of signatures shall
be of equal force and effect.
16. AGREEMENT SUPERSEDES. This Agreement shall supersede all prior
agreements and understandings between the parties respecting the subject matter
hereof. This Agreement may not be changed or terminated orally by or on behalf
of any party.
17. HEADINGS. The Section and paragraph headings in this Agreement are
provided for convenience only and will not affect the construction or
interpretation of this Agreement.
<PAGE> 32
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among First
Coastal, the Trust and the Underwriters.
Very truly yours,
FIRST COASTAL BANCSHARES
By:
---------------------------------
Name: Don M. Griffith
Title: Chairman, President and
Chief Executive Officer
FIRST COASTAL CAPITAL TRUST
By: First Coastal Bancshares,
as Depositor
By:
---------------------------------
Name: Don M. Griffith
Title: Chairman, President and
Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PEACOCK, HISLOP, STALEY & GIVEN, INC.
By:
---------------------------------
Name: Thomas L. Thomas
Title: Managing Director
WEDBUSH MORGAN SECURITIES INC.
By:
---------------------------------
Name: Barton I. Gurewitz
Title: Managing Director
For themselves and as Representatives
of the Underwriters named in
Schedule I hereto
<PAGE> 33
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Number of Option
Units to be Units to be
Underwriter Offered for Sale Offered for Sale
----------- ---------------- ----------------
<S> <C> <C>
Peacock, Hislop, Staley & Given, Inc. 150,000 15,000
Wedbush Morgan Securities Inc. 150,000 15,000
------- ------
Total 300,000 30,000
</TABLE>
<PAGE> 34
EXHIBIT A
Form of Representatives' Warrant
<PAGE> 35
EXHIBIT B
Form of Lock-Up Agreement
<PAGE> 1
EXHIBIT 2
AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
FIRST COASTAL BANCSHARES,
FIRST COASTAL BANK, N.A.
AND
AMERICAN INDEPENDENT BANK, N.A.
AUGUST 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I Page No.
THE CONSOLIDATION AND RELATED TRANSACTIONS.....................................1
1.1 Creation of FCB Interim.................................................1
1.2 Consolidation...........................................................1
(a) Consolidation of FCB Interim and AIB.............................1
(b) Effect on FCB Interim Shares.....................................2
(c) Effect on AIB Shares.............................................2
1.3 The Merger..............................................................2
(a) Merger of Consolidated Bank into FCB.............................2
(b) Effect on FCB Shares.............................................2
(c) Effect on Consolidated Bank Stock................................2
1.4 Dissenting Shares.......................................................3
1.5 Aggregate Purchase Price and Per Share Purchase Price...................3
1.6 Delivery of Cash........................................................3
1.7 Effect of the Consolidation.............................................4
1.8 Effect of the Merger....................................................4
1.9 Name of Consolidated Bank...............................................4
1.10 Articles of Association and Bylaws of Consolidated Bank.................4
1.11 Directors and Officers of Consolidated Bank.............................4
1.12 Name of Surviving Bank..................................................5
1.13 Articles of Association and Bylaws of Surviving Bank....................5
1.14 Directors and Officers of Surviving Bank................................5
1.15 Directors' Agreements...................................................5
1.16 Cooperation; Best Efforts...............................................5
ARTICLE II
THE CLOSING....................................................................6
2.1 Closing Date............................................................6
2.2 Execution of Consolidation Agreement and Merger
Agreement...............................................................6
2.3 Documents to be Delivered...............................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIB..........................................6
3.1 Organization, Standing and Power of AIB.................................6
3.2 Capitalization..........................................................7
3.3 Subsidiaries............................................................7
3.4 AIB Financial Statements................................................7
3.5 Authority...............................................................8
3.6 Insurance...............................................................9
3.7 Books and Records.......................................................9
3.8 Title to Assets........................................................10
3.9 Environmental Liabilities..............................................10
3.10 Litigation.............................................................12
3.11 Taxes..................................................................12
3.12 Compliance with Laws and Regulations...................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.13 Performance of Obligations.............................................13
3.14 Employees..............................................................14
3.15 Brokers and Finders....................................................14
3.16 Material Understandings................................................14
3.17 Absence of Certain Changes.............................................15
3.18 Licenses and Permits...................................................17
3.19 Loans..................................................................17
3.20 Employee Benefit Plans and Employment and Labor
Contracts..............................................................17
3.21 Investments............................................................20
3.22 Operational Losses.....................................................20
3.23 Powers of Attorney.....................................................20
3.24 Loan Servicing Portfolio...............................................20
3.25 Proxy Statement........................................................20
3.26 Accuracy of Information Furnished......................................21
3.27 Effective Date of Representation and Warranties........................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BANCORP AND FCB.............................21
4.1 Organization, Standing and Power of Bancorp............................21
4.2 Capitalization of Bancorp..............................................21
4.3 Organization, Standing and Power of FCB................................21
4.4 Capitalization of FCB..................................................22
4.5 Financial Statements...................................................22
4.6 Authority..............................................................22
4.7 Information Furnished by Bancorp.......................................23
4.8 Accuracy of Information Furnished......................................23
4.9 Effective Date of Representations and Warranties.......................24
4.10 Compliance With Laws and Regulations...................................24
4.11 Performance of Obligations.............................................24
4.12 Absence of Certain Changes.............................................24
4.13 Licenses and Permits...................................................24
4.14 Capital Raising........................................................25
4.15 .......................................................................25
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME OF
CONSOLIDATION.................................................................25
5.2 Affirmative Conduct of AIB Prior to the Effective
Time of the Consolidation..............................................28
5.3 Access to Information..................................................30
5.4 Review by Accountants..................................................30
5.5 Termination of AIB Stock Option Plan...................................31
5.6 Termination of AIB Employee Plans......................................31
5.7 Shareholders' Meeting..................................................31
5.8 Affirmative Conduct of Bancorp and FCB.................................31
(a) Satisfaction of Conditions......................................31
(b) Notice of Changes...............................................31
(d) Regulatory Applications.........................................32
(e) Additional FCB Financial Statements.............................32
(f) Raising Capital to Consummate the Consolidation.................32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
5.9 Corporate Action.......................................................32
5.10 Necessary Consents.....................................................32
5.11 Environmental Assessment Report........................................32
5.12 Access to Information..................................................33
ARTICLE VI
CONDITIONS PRECEDENT TO THE TRANSACTIONS......................................33
6.1 General Conditions.....................................................33
(a) Shareholder Approval............................................33
(b) No Proceedings..................................................33
(c) Regulatory Approvals............................................33
6.2 Conditions to Obligations of Bancorp and FCB...........................33
(a) Representations and Warranties; Performance of
Covenants.......................................................33
(b) Authorization of Merger.........................................33
(c) Regulatory Approvals............................................34
(d) Third Party Consents............................................34
(e) Absence of Material Adverse Changes.............................34
(f) Termination of Stock Option Plans...............................34
(g) Shareholders' Agreements........................................34
(h) Officers' Certificate...........................................34
(i) Tax Matters.....................................................34
(j) Validity of Transactions........................................34
6.3 Conditions to Obligations of AIB.......................................35
(a) Representations and Warranties; Performance of
Covenants.......................................................35
(b) Authorization of Merger.........................................35
(c) Officers' Certificate...........................................35
(d) Validity of Transactions........................................35
(e) Necessary Capital...............................................35
ARTICLE VII
EMPLOYEE BENEFITS.............................................................35
7.1 Surviving Bank Employee Benefits.......................................35
7.2 Employees of AIB.......................................................35
7.3 Chief Executive of AIB.................................................36
ARTICLE VIII
TERMINATION...................................................................36
8.1 Termination of this Agreement..........................................36
8.2 Immaterial Breach......................................................38
8.3 Effect of Termination..................................................38
ARTICLE IX
GENERAL PROVISIONS............................................................38
9.1 .......................................................................38
(a) Compensation to Bancorp and FCB.................................38
9.2 Expenses...............................................................39
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
9.3 Notices................................................................39
9.4 Successors and Assigns.................................................40
9.5 Effect of Representations and Warranties...............................40
9.6 Third Party Beneficiaries..............................................40
9.7 Counterparts...........................................................40
9.8 Governing Law..........................................................40
9.9 Captions...............................................................40
9.10 Waiver and Modification................................................41
9.11 Knowledge..............................................................41
9.12 Attorneys' Fees........................................................41
9.13 Entire Agreement.......................................................41
9.14 Severability...........................................................41
9.15 Effect of Disclosure...................................................41
9.16 Publicity..............................................................42
Exhibits
"A" - Agreement of Consolidation
"B" - Agreement of Merger
"C" - Shareholders' Agreement
"D" - First Amendment to Executive's Employment Contract
Schedules
3.1 - AIB's Articles of Incorporation and Bylaws
3.2 - Capitalization
3.3 - Subsidiaries
3.4 - AIB Financial Statements
3.5 - Authority
3.6 - Insurance
3.8 - Title to Assets
3.9 - Environmental Liabilities
3.10 - Litigation
3.11 - Taxes
3.12 - Compliance with Laws and Regulations
3.13 - Performance of Obligations
3.14 - Employees
3.15 - Brokers and Finders
3.16 - Material Understandings
3.17 - Absence of Certain Changes
3.19 - Loans
3.20 - Employee Benefit Plans
3.21 - Investments
3.22 - Operational Losses
3.23 - Powers of Attorney
3.24 - Loan Servicing Portfolio
4.1 - Bancorp's Article of Incorporation and Bylaws
4.3 - FCB's Articles of Association and Bylaws
4.6 - Authority
4.10 - Compliance with Laws and Regulations
4.11 - Performance of Obligations
4.12 - Absence of Certain Changes
</TABLE>
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of August 3, 1998 by and among FIRST COASTAL BANCSHARES, a
California corporation ("Bancorp"); FIRST COASTAL BANK, NATIONAL ASSOCIATION, a
national banking association ("FCB"); and AMERICAN INDEPENDENT BANK, N.A., a
national banking association ("AIB").
R E C I T A L S
A. Bancorp, FCB and AIB desire to enter into this Agreement which
contemplates the acquisition of AIB by FCB.
B. This Agreement provides for the completion of the acquisition of AIB
by FCB through the merger (the "Consolidation") of AIB with an interim national
bank which shall be a wholly-owned subsidiary of FCB ("FCB Interim"), to be
followed immediately by the merger (the "Merger") of the survivor thereof with
and into FCB (both the Consolidation and the Merger are sometimes hereinafter
referred to collectively as the "Acquisition"), under the applicable laws of the
State of California and the United States and in accordance with the agreement
of consolidation ("Consolidation Agreement") to be entered into by and between
FCB Interim and AIB and the agreement of merger ("Merger Agreement") to be
entered into by and among AIB, FCB and Bancorp substantially in the form of
Exhibits "A" and "B" hereto, respectively.
In consideration of the mutual covenants, agreements, representations
and warranties contained herein, and intending to be legally bound, the parties
hereto agree as follows:
ARTICLE I
THE CONSOLIDATION AND RELATED TRANSACTIONS
1.1 CREATION OF FCB INTERIM. As soon as practicable, FCB shall organize
FCB Interim as an interim national bank wholly owned by FCB.
1.2 CONSOLIDATION. The Consolidation shall become effective (the
"Effective Time of the Consolidation") on the date and time specified in a
certificate to be issued by the Office of the Comptroller of the Currency
("OCC") approving the Acquisition. At the Effective Time of the Consolidation
and pursuant to the terms of this Agreement and the Consolidation Agreement, the
following transactions will be deemed to have occurred simultaneously:
(a) CONSOLIDATION OF FCB INTERIM AND AIB. FCB Interim and AIB
will merge, and the separate corporate existence of FCB Interim shall cease. AIB
as the bank surviving the consolidation is sometimes referred to herein as the
"Consolidated Bank."
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(b) EFFECT ON FCB INTERIM SHARES. Each share of the common stock
of FCB Interim ("FCB Interim Stock") issued and outstanding immediately prior to
the Effective Time of the Consolidation, on and after the Effective Time of the
Consolidation, pursuant to the Consolidation Agreement and without any further
action on the part of FCB or FCB Interim, shall be converted into one share of
common stock of the Consolidated Bank (the "Consolidated Bank Stock"). Each
outstanding stock certificate which prior to the Effective Time of the
Consolidation represented shares of FCB Interim Stock automatically and for all
purposes shall be deemed to represent the number of shares of Consolidated Bank
Stock into which the shares of FCB Interim Stock represented by such certificate
have been converted as provided in this Subarticle 1.2(b).
(c) EFFECT ON AIB SHARES. Each share of the common stock of AIB
("AIB Stock") issued and outstanding immediately prior to the Effective Time of
the Consolidation, except for Dissenting Shares (as defined in Subarticle 1.4
hereof), on and after the Effective Time of the Consolidation, pursuant to the
Consolidation Agreement and without any further action on the part of AIB or the
holders of AIB Stock, automatically shall be canceled and cease to be an issued
and outstanding share of AIB Stock and shall be converted into the right to
receive the Per Share Purchase Price (as defined in Subarticle 1.5 hereof).
Certificates formerly evidencing shares of AIB Stock shall be surrendered for
payment to the Exchange Agent (as defined in Subarticle 1.6 hereof) in
accordance with Subarticle 1.6.
1.3 THE MERGER. The Merger shall become effective (the "Effective
Time of the Merger") on the date and time specified in a certificate to be
issued by the OCC approving the Acquisition. At the Effective Time of the
Merger, and pursuant to this Agreement and the Merger Agreement, the following
transactions will be deemed to have occurred simultaneously:
(a) MERGER OF CONSOLIDATED BANK INTO FCB. AIB, as the
Consolidated Bank, shall be merged with and into FCB, and the separate corporate
existence of the Consolidated Bank shall cease. FCB as the bank surviving the
Merger is sometimes referred to herein as the "Surviving Bank."
(b) EFFECT ON FCB SHARES. Each share of common stock of FCB
("FCB Stock") issued and outstanding immediately prior to the Effective Time of
the Merger shall, on and after the Effective Time of the Merger remain issued
and outstanding and shall automatically and for all purposes be deemed to
represent one share of common stock of the Surviving Bank ("Surviving Bank
Stock").
(c) EFFECT ON CONSOLIDATED BANK STOCK. Subject to Subarticle 1.4
hereof, each share of Consolidated Bank Stock outstanding immediately prior to
the Effective Time of the Merger, pursuant to the Merger Agreement and without
further action on the part of Bancorp, FCB, AIB or the former holders of AIB
Stock, automatically shall be canceled and cease to be an issued and outstanding
share of Consolidated Bank Stock.
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1.4 DISSENTING SHARES. Each outstanding share of AIB Stock whose holder
has lawfully dissented from the Consolidation in accordance with Section 215(a)
of The National Bank Act, or any other applicable statutes, shall be entitled to
such per share compensation as provided by applicable law.
1.5 AGGREGATE PURCHASE PRICE AND PER SHARE PURCHASE PRICE. The aggregate
amount payable in cash pursuant to Subarticle 1.2(c) for all of the outstanding
shares of AIB Stock shall be equal to $6,616,000 plus or minus the dollar amount
of any increase or decrease in AIB's shareholders equity to the end of the month
immediately preceding the Closing as measured against AIB's shareholders equity
on March 31, 1998. For purposes of this Agreement, AIB's shareholders equity
shall be increased or decreased in accordance with generally accepted accounting
principles, taking into account net earnings or losses and including expenses
related to any commissions due to Jim Miller and/or Brookstreet Securities
arising out of, or in connection with the transactions contemplated herein, and
including only the after-tax impact, on the Surviving Bank, from the payment of
monies necessary to cancel outstanding stock options as required under Article
5.5 hereof and to cancel any outstanding warrants but excluding up to $16,000
for the cost of a "peace of mind" policy for the benefit of AIB's directors and
the cost of any legal and/or accounting services needed in connection with the
termination of AIB's 401(K) plan should the parties decide to terminate the
401(K) plan (the "Aggregate Purchase Price"). The amount payable pursuant to
Subarticle 1.2(c) for each outstanding share of AIB Stock (the "Per Share
Purchase Price") shall be equal to the quotient obtained by dividing (i) the
Aggregate Purchase Price, by (ii) the total number of shares of AIB Stock
outstanding immediately prior to the Effective Time of the Consolidation
(including Dissenting Shares).
1.6 DELIVERY OF CASH. Immediately prior to the Effective Time of the
Consolidation, FCB shall deliver or cause to be delivered to U.S. Stock Transfer
(the "Exchange Agent"), an amount of cash equal to the Aggregate Purchase Price.
Delivery to the holders of AIB Stock of the cash to which they are entitled will
subsequently be promptly made by the Exchange Agent against delivery of share
certificates formerly evidencing AIB Stock (duly executed and in proper form for
transfer) to the Exchange Agent in accordance with this Subarticle 1.6 and the
terms and conditions of an agreement to be entered into by and between FCB and
the Exchange Agent (the "Exchange Agent Agreement"). A copy of the Exchange
Agent Agreement will be provided to AIB and its counsel for approval prior to
consummation of the Merger, which approval shall not be unreasonably withheld.
As soon as practicable after the Effective Time of the Consolidation,
the Exchange Agent will send a notice and transmittal form to each holder of a
certificate previously representing shares of AIB Stock advising such holders of
the applicable terms of the conversion effected by the Consolidation and the
procedure for surrendering to the Exchange Agent such certificate for conversion
into cash. Each holder of such certificates, upon surrender of the same to the
Exchange Agent in accordance with such transmittal form, shall be entitled to
receive the consideration provided for in Subarticle 1.2(c) hereof, with the
exception of holders of Dissenting Shares. If the consideration for shares of
AIB Stock provided
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for in Subarticle 1.2(c) is to be delivered to any person other than the
registered holder of said shares surrendered for exchange, the amount of any
stock transfer tax or similar taxes (whether imposed on the registered holder or
such person) payable on account of the transfer to such person shall be paid to
the Exchange Agent by such person, or the Exchange Agent may refuse to make such
exchange unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
1.7 EFFECT OF THE CONSOLIDATION. By virtue of the Consolidation and at
the Effective Time of the Consolidation, all of the rights, privileges, powers
and franchises and all property and assets of every kind and description of FCB
Interim and AIB shall be vested in and be held and enjoyed by the Consolidated
Bank, without further act or deed, and all the estates and interests of every
kind of FCB Interim and AIB, including all debts due to either of them, shall be
as effectively the property of the Consolidated Bank as they were of FCB Interim
and AIB, and the title to any real estate vested by deed or otherwise in either
FCB Interim or AIB shall not revert or be in any way impaired by reason of the
Consolidation; and all rights of creditors and liens upon any property of FCB
Interim and AIB shall be preserved unimpaired, and all debts, liabilities and
duties of FCB Interim and AIB shall be debts, liabilities and duties of the
Consolidated Bank and may be enforced against it to the same extent as if such
debts, liabilities and duties had been incurred or contracted by it, and none of
such debts, liabilities or duties shall be expanded, increased, broadened or
enlarged by reason of the Consolidation.
1.8 EFFECT OF THE MERGER. By virtue of the Merger and at the Effective
Time of the Merger, all of the rights, privileges, powers and franchises and all
property and assets of every kind and description of the Consolidated Bank and
FCB shall be vested in and be held and enjoyed by the Surviving Bank, without
further act or deed, and all the estates and interests of every kind of the
Consolidated Bank and FCB, including all debts due to either of them, shall be
as effectively the property of the Surviving Bank as they were of the
Consolidated Bank and FCB, and the title to any real estate vested by deed or
otherwise in either the Consolidated Bank or FCB shall not revert or be in any
way impaired by reason of the Merger; and all rights of creditors and liens upon
any property of the Consolidated Bank and FCB shall be preserved unimpaired, and
all debts, liabilities and duties of the Consolidated Bank and FCB shall be
debts, liabilities and duties of the Surviving Bank and may be enforced against
it to the same extent as if such debts, liabilities and duties had been incurred
or contracted by it, and none of such debts, liabilities or duties shall be
expanded, increased, broadened or enlarged by reason of the Merger.
1.9 NAME OF CONSOLIDATED BANK. The name of the Consolidated Bank shall
be "American Independent Bank N.A."
1.10 ARTICLES OF ASSOCIATION AND BYLAWS OF CONSOLIDATED BANK. The
Articles of Association and Bylaws of FCB Interim as in effect immediately prior
to the Effective Time of the Consolidation shall be the Articles of Association
and Bylaws of the Consolidated Bank.
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1.11 DIRECTORS AND OFFICERS OF CONSOLIDATED BANK. The directors of FCB
Interim at the Effective Time of the Consolidation and Charles E. Brooks shall
be the directors of the Consolidated Bank until heir successors have been chosen
and qualified in accordance with the Articles of Association and the Bylaws of
the Consolidated Bank. The officers of FCB Interim at the Effective Time of the
Consolidation together with Charles E. Brooks shall be the officers of the
Consolidated Bank until they resign or are replaced or terminated by the Board
of Directors of the Consolidated Bank or otherwise in accordance with the
Consolidated Bank's Articles of Association or Bylaws.
1.12 NAME OF SURVIVING BANK. The name of the Surviving Bank shall be
"First Coastal Bank, National Association."
1.13 ARTICLES OF ASSOCIATION AND BYLAWS OF SURVIVING BANK. The Articles
of Association set forth on Attachment "A" to the Merger Agreement shall be the
Articles of Association of the Surviving Bank. The Bylaws of FCB as in effect
immediately prior to the Effective Time of the Merger shall continue to be the
Bylaws of the Surviving Bank.
1.14 DIRECTORS AND OFFICERS OF SURVIVING BANK. The directors of FCB at
the Effective Time of the Merger and Charles E. Brooks, as Vice Chairman of the
Board, shall be the directors of the Surviving Bank until their successors have
been chosen and qualified in accordance with the Articles of Association and
Bylaws of the Surviving Bank. The officers of FCB at the Effective Time of the
Merger together with Charles E. Brooks shall be the officers of the Surviving
Bank until they resign or are replaced or terminated by the Board of Directors
of the Surviving Bank or otherwise in accordance with the Surviving Bank's
Articles of Association or Bylaws.
1.15 DIRECTORS' AGREEMENTS. Concurrently with the execution of this
Agreement, AIB shall cause each of its directors to enter into an agreement
substantially in the form of Exhibit "C" hereto, pursuant to which each director
shall agree to vote or cause to be voted all shares of AIB Stock with respect to
which such director has voting power on the date hereof or hereafter acquired to
approve the transactions contemplated hereby and all requisite matters related
thereto.
1.16 COOPERATION; BEST EFFORTS. Each of the parties, consistent with the
fiduciary duties of the directors to such party, will use its best efforts to
consummate the transactions contemplated by this Agreement and cooperate in any
action necessary or advisable to facilitate such consummation including, without
limitation, making all filings required in order to obtain any necessary
consents or comply with law and providing any information required in connection
therewith. Should the structure of the transactions contemplated by this
Agreement result in the recognition of any gain or loss to Bancorp, FCB or AIB
(but excluding AIB's shareholders) the parties will cooperate fully to
restructure the transaction so as to avoid such tax consequence, provided that
the economic benefit to AIB's shareholders remains unchanged.
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ARTICLE II
THE CLOSING
2.1 CLOSING DATE. The consummation of the transactions contemplated by
this Agreement (the "Closing"), unless another date or place is agreed in
writing by the parties hereto, shall take place at the main office of First
Coastal Bank, N.A., 275 Main Street, El Segundo, California 90245, within
fifteen (15) days following the last to occur of (i) the receipt of all
approvals and consents specified in Articles V and VI hereof, (ii) the
expiration of the applicable waiting period under the Bank Merger Act, and (iii)
the date on which all conditions specified in Article VI hereof have been
satisfied (the "Closing Date"); provided, however, that if the parties cannot
agree on the Closing Date, the Closing Date shall be the last business day in
such fifteen (15) day period.
2.2 EXECUTION OF CONSOLIDATION AGREEMENT AND MERGER AGREEMENT. Prior to
the Closing Date, and as soon as practicable after execution of this Agreement,
the Consolidation Agreement and the Merger Agreement shall be executed by the
parties thereto (both such agreements as amended, if necessary, to conform to
any requirements of any regulatory authority having authority over the
Consolidation and the Merger) and, together with all requisite certificates as
are required by applicable law, shall be submitted to the appropriate bank
regulatory authorities.
2.3 DOCUMENTS TO BE DELIVERED. At the Closing the parties shall deliver,
or cause to be delivered, such documents or certificates as may be necessary, in
the reasonable opinion of counsel for any of the parties, to effectuate the
transactions contemplated by this Agreement. If, at any time after the Effective
Time of the Consolidation, the Consolidated Bank or the Surviving Bank or their
successors or assigns shall determine that any further conveyance, assignment or
other documents or any further action is necessary or desirable to further
effectuate the transactions set forth herein or contemplated hereby, the
officers and directors of the parties hereto shall execute and deliver, or cause
to be executed and delivered, all such documents as may be reasonably required
to effectuate such transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIB
AIB represents and warrants to Bancorp and FCB as follows:
3.1 ORGANIZATION, STANDING AND POWER OF AIB. AIB is a national banking
association, duly organized and existing in good standing under the laws of the
United States of America, and is authorized by the Office of the Comptroller of
the Currency to conduct a general banking business. AIB is a member of the
Federal Reserve System and its deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") in the manner and to the extent provided by law.
AIB has all requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as presently conducted.
Neither the scope of the
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business of AIB nor the location of any of its properties requires that it be
licensed to do business in any jurisdiction other than the State of California.
Schedule 3.1 sets forth true and correct copies of AIB's Articles of Association
and Bylaws, as amended and in effect as of the date hereof.
3.2 CAPITALIZATION. As of the date of this Agreement, the authorized
capitalization of AIB consists of Six Million, Five Hundred Thousand (6,500,000)
shares of common stock, $1.00 par value. As of the date of this Agreement, there
are 910,289 shares of Common Stock issued and outstanding. All of the
outstanding shares of AIB Stock are validly issued, fully paid and nonassessable
(except as provided for in 12 USC 55). Except for employee stock options
covering 139,012 shares of AIB Stock granted pursuant to AIB's Stock Option Plan
and warrants to purchase 43,177 shares of AIB stock, there are no outstanding
options, warrants, commitments, agreements or other rights in or with respect to
the unissued shares of, or any other securities convertible into, AIB Stock
(collectively, "Stock Equivalents"). Schedule 3.2 sets forth the name of each
holder of a AIB employee stock option, the number of shares of AIB Stock covered
by each such holder's option, the name of each warrant holder, the number of
shares of AIB stock entitled to be purchased by each warrant holder, the
exercise price per share and the expiration date of each such holder's option or
warrant.
3.3 SUBSIDIARIES. Except as set forth on Schedule 3.3, AIB does not own,
directly or indirectly (except as pledgee pursuant to loans which are not in
default), the outstanding stock or other voting interests in any corporation,
partnership, joint venture or other entity.
3.4 AIB FINANCIAL STATEMENTS. AIB has delivered to Bancorp and FCB (to
the extent they are available) audited balance sheets of AIB as of December 31,
1997, 1996 and 1995 the related statements of operations, changes in
shareholders' equity and statements of cash flow for the periods then ended, and
the related notes and related accountant's opinions thereon (the "AIB Financial
Statements"). The AIB Financial Statements (i) present fairly the financial
condition of AIB as of the respective dates indicated and the results of
operations, the changes in stockholders' equity and cash flows for the
respective periods indicated; (ii) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with past
practices; (iii) contain and reflect reserves for all material accrued
liabilities and for all reasonably anticipated losses, including but not limited
to adequate reserves for loan and lease losses; and (iv) are based on the books
and records of AIB. AIB is not subject to any liability (whether accrued,
absolute, contingent or otherwise), except as reflected in the AIB Financial
Statements or as otherwise disclosed in writing to FCB prior to the execution of
this Agreement. AIB does not know of any basis for the assertion against it of
any liability, obligation or claim (including, without limitation, that of any
regulatory authority) that might result in or cause a Material Adverse Change in
the Business Condition of AIB (as that term is defined below) which is not
fairly reflected in the AIB Financial Statements delivered to Bancorp and FCB or
otherwise disclosed on Schedule 3.4.
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For purposes of this Agreement, "Material Adverse Change in the Business
Condition of AIB" shall mean a reduction of ten percent (10%) or more in AIB's
stockholders' equity from the amount of stockholders' equity of AIB which
existed as of March 31, 1998, except that the following fees and costs shall not
be included in the calculation of shareholders' equity for purposes of this
paragraph: (i) any and all costs and expenses relating to this transaction,
including legal and accounting fees and costs, financial advisory and investment
banking fees and costs, fees and costs of consultants, and costs of proxy
statements and shareholder action on the Merger, (ii) any costs associated with
year 2000 safety and soundness issues, and (iii) payment of, or accrued
liabilities for, the amounts necessary to cause the cancellation of any
outstanding stock options pursuant to Article 5.5 hereof. For purposes of this
paragraph, such Material Adverse Change in the Business Condition of AIB may
result from, among other things, threatened or pending litigation, a substantial
deterioration in AIB's loan portfolio, or regulatory enforcement proceedings,
order or directives that are materially burdensome to AIB, except that the
Agreement between AIB and the Office of the Comptroller of the Currency
regarding Year 2000 safety and soundness issues dated July 28, 1998 is not and
will not be deemed to be a Material Adverse Change in the Business Condition of
AIB.
For purposes of this Agreement, AIB's financial statements, including
allowance for loan and lease losses and stockholders' equity, shall have been,
or shall be, prepared in all material respects in accordance with Generally
Accepted Accounting Principals ("GAAP"). If the parties disagree on whether
AIB's financial statements, including its allowance for loan and lease losses
and stockholders' equity, are or were prepared in accordance with GAAP, the
parties shall attempt to hire an independent "Big Six" Accounting firm, or other
independent expert agreed to between the parties, to resolve any remaining items
that have not been agreed upon, and the opinion of such accounting firm or other
expert shall be binding on the parties for purposes of this Agreement. The
parties shall cooperate fully with each other and the accounting firms or other
expert, and the partes will equally split the cost.
3.5 AUTHORITY. The execution and delivery by AIB of this Agreement and
the Consolidation Agreement and, subject to the requisite approval of the
shareholders of AIB, the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of AIB. This Agreement is, and the Consolidation Agreement
will be upon the due execution and delivery, valid and binding obligations of
AIB, enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally and by general
equitable principles. Except as set forth on Schedule 3.5, neither the execution
and delivery by AIB of this Agreement or the Consolidation Agreement, nor the
consummation of the transactions contemplated herein or therein, nor compliance
by AIB with any of the provisions hereof or thereof, will (i) conflict with or
result in a breach of any provision of its Articles of Association or Bylaws;
(ii) constitute a breach of, or result in a default (or give rise to any rights
of termination, cancellation or acceleration, or any right to acquire any
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<PAGE> 14
securities or assets) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, franchise, license, permit, agreement or other
instrument, or obligation or other Understanding (as that term is defined below)
to which AIB is a party, or by which AIB or any of its properties or assets is
bound, except where such breach or default, individually or in the aggregate,
would not cause a Material Adverse Change in the Business Condition of AIB; or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to AIB or any of its properties or assets, except where such
violation, individually or in the aggregate, would not cause a Material Adverse
Change in the Business Condition of AIB. As used herein, the term
"Understanding" means any contract, agreement, understanding, commitment or
offer, whether written or oral, which is binding upon or may become binding upon
a party if accepted by another person. No consent or approval of, notice to or
filing with any governmental authority having jurisdiction over any aspect of
the business or assets of AIB, and no consent or approval of or notice to any
other person or entity, is required in connection with the execution and
delivery by AIB of this Agreement or the Consolidation Agreement or the
consummation by AIB of the transactions contemplated hereby or thereby, except
(a) approval of this Agreement and the Consolidation Agreement by the
shareholders of AIB and FCB Interim, (b) such approvals of this Agreement, the
Consolidation Agreement, the Merger Agreement and the transactions contemplated
herein as may be required by the OCC pursuant to the applicable requirements of
the National Bank Act and the Bank Merger Act and/or the Board of Governors of
the Federal Reserve System (the "FRB") as may be required under the Bank Holding
Company Act of 1956, as amended; and (c) as set forth on Schedule 3.5.
3.6 INSURANCE. AIB has in full force and effect policies of insurance
(including, without limitation, a banker's blanket bond, fire, third party
liability, use and occupancy) with respect to its assets and business and
against casualties and contingencies and of such amounts, types and forms as are
adequate and appropriate to cover such assets and businesses and as are usual
and customary in the banking industry or other industries of which AIB is a part
or as are required by any agreement, contract or other Understanding to which
AIB is subject. Except for expirations in the ordinary course, all such policies
and bonds will remain in full force and effect through and after the Effective
Time of the Consolidation. To the best of AIB's knowledge, AIB is not in default
under any policy of insurance or bond such that it might be canceled. Set forth
on Schedule 3.6 is a summary of all policies of insurance (other than title or
credit insurance) carried and owned by AIB showing the name of the insurance
company, a description of the coverage, the amounts, the deductible feature, the
annual premiums and the expiration dates. If any such policy is changed,
terminated or modified following the date of this Agreement, such termination,
change or modification shall be promptly disclosed to Bancorp and FCB in
writing.
3.7 BOOKS AND RECORDS. The minute books of AIB accurately reflect, in
all material aspects, all actions duly taken by the shareholders of AIB, boards
of directors of AIB and committees thereof, and true and correct copies of its
Articles of Association Bylaws and all amendments thereto. AIB is not conducting
any business which has not been properly
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authorized by the Board of Directors of AIB where such activity would require
Board approval in accordance with AIB's Articles of Association or Bylaws or any
applicable law, rule, regulation or published interpretative opinion.
3.8 TITLE TO ASSETS.
(a) AIB has good and marketable title to all material properties
and assets, owned or purported to be owned by it, free and clear of all
mortgages, liens, encumbrances, pledges, charges or restrictions of any kind or
nature, except for (i) mortgages, liens, encumbrances, pledges, charges or
restrictions reflected on the AIB Financial Statements; (ii) liens for current
taxes not yet due and payable; (iii) liens incurred or assets sold or
transferred in the ordinary course of business since the date of the most recent
AIB Financial Statements and which do not materially impair the business of AIB
or materially detract from the usefulness of the properties subject thereto;
(iv) restrictions imposed by laws or regulations; (v) easements or restrictions
which are neither individually or in the aggregate material to AIB; or (vi) such
matters as are disclosed on Schedule 3.8.
(b) Schedule 3.8 contains a list of all real property and all
material interests in real property (other than mortgages or deeds of trust on
properties securing loans made by AIB in the ordinary course of its business)
owned by AIB, including without limitation, all leaseholds, options to purchase
real property and leases under which AIB is the lessor. Schedule 3.8 also
contains true, correct and complete copies of all leases to which AIB is a party
and an accurate summary of all material commitments which AIB has to improve
real estate owned by it. Schedule 3.8 also contains true, correct and complete
copies of title policies for all properties described as owned by AIB. AIB
enjoys peaceful and undisturbed possession under all material leases to which it
is a party, and all of such leases are valid and in full force and effect. To
the best knowledge of AIB, none of such leases contain any unusual provision
which now or in the future may cause a Material Adverse Change on the Business
Condition of AIB.
3.9 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.9(a), to the best of its
knowledge AIB is conducting and has conducted its business, and has used and is
using its properties, whether currently owned, operated or leased, or owned,
operated or leased by AIB at any time in the past, and all properties in which
AIB has a security interest have been used and are being used, in compliance
with all applicable Environmental Laws (as that term is defined below).
For purposes of this Agreement, "Environmental Law" shall mean
any federal, state, county, or local statute, law, ordinance, rule, regulation,
common law, order, consent, decree, permit, judicial or administrative decision
or directive of the United States or other jurisdiction whether now existing or
as hereinafter promulgated, issued or enacted relating to: (i) pollution or
protection of the environment, including natural resources; (ii) exposure of
persons, including employees,
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to Hazardous Substances (as that term is defined below) or other products,
materials or chemicals; (iii) protection of the public health or welfare from
the effects of products, by-products, wastes, emissions, discharges or releases
of chemical or other substances from industrial or commercial activities; or
(iv) regulation of the manufacture, use or introduction into commerce of
substances, including, without limitation, their manufacture, formulation,
packaging, labeling, distribution, transportation, handling, storage and
disposal. For the purposes of this definition, the term "Environmental Law"
shall include, without limiting the foregoing, the following statutes, as
amended from time to time: (1) the Clean Air Act, as amended, 42 U.S.C Section
7401 et seq.; (2) the Federal Water Pollution Control Act, as amended, 33 U.S.C.
Section 1251 et seq.; (3) the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901 et seq.; (4) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (including the
Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 2601 et
seq.; (5) the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601
et seq.; (6) the Occupational Safety and Health Act, as amended, 29 U.S.C.
Section 651; (7) the Emergency Planning and Community Right-To-Know Act of 1986,
42 U.S.C. Section 1101 et seq.; (8) the Mine Safety and Health Act of 1977, as
amended, 30 U.S.C. Section 801 et seq.; (9) the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq.; and (10) all comparable state and local laws, laws
of other applicable jurisdictions or orders and regulations including, but not
limited to, the Carpenter-Presley-Tanner Hazardous Substance Account Act, Cal.
Health & Safety Code Section 25300 et seq.
(b) To the best of its knowledge, neither AIB nor any property
currently owned, operated or leased by AIB or which has been in the past owned,
operated or leased by AIB, or in which AIB has a security interest or any entity
in which AIB has participated in management, is subject to any existing, pending
or, to the best of AIB's knowledge, threatened investigation, action or
proceeding, including any notice of violation, by any governmental authority
regarding contamination of any part of the property or infractions of or
liability under any Environmental Law.
(c) Except as set forth on Schedule 3.9(c), to the best of AIB's
knowledge there are no Hazardous Substances (as that term is defined below)
presently located on, under or about any property which is currently owned,
operated or leased by AIB, or has been owned, operated or leased by AIB, or in
which AIB has a security interest. There has not been any generation, use,
handling, transportation, treatment or disposal of any Hazardous Substances in
connection with the conduct of the business of AIB that has or might result in
any liability under any Environmental Law.
(d) Except as set forth in Schedule 3.9(d), to the best of AIB's
knowledge no property owned or operated by AIB contains or has contained any
asbestos, underground storage tanks or lead-based paint or plumbing products and
has not been used in the past as a gas station, automotive service center or dry
cleaning facility.
For purposes of this Agreement, "Hazardous Substances" shall
mean (i) substances that are defined or listed in, or otherwise classified
pursuant to, or the use or disposal of which are regulated by, any Environmental
Law as "hazardous substances," "hazardous materials,"
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"hazardous wastes," "toxic substances," or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or "EP toxicity;" (ii) oil or petroleum derived from substances and drilling
fluids, produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal resources;
(iii) any flammable substances or explosives, any radioactive materials, any
hazardous wastes or substances, any toxic wastes or substances or any other
materials or pollutants which pose a hazard to any property or to individuals or
entities on or about such property; and (iv) asbestos in any form or electrical
equipment which contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million, any lead paint,
plumbing or any other substance which is or may be regulated under any
Environmental Law.
3.10 LITIGATION. Except as set forth on Schedule 3.10, there is no
private or governmental suit, claim, action or proceeding pending nor, to the
best of AIB's knowledge, any private or governmental suit, claim, action or
proceeding threatened or which reasonably should be expected to be threatened,
against AIB or against any of its respective directors, officers or employees
relating to the performance of their duties in such capacities or against or
affecting any properties of AIB. Additionally, except as provided on Schedule
3.10(a), there are no judgments, decrees, stipulations or orders against AIB
enjoining it or any of its directors, officers or employees in respect of, or
the effect of which is to prohibit, any business practice or the acquisition of
any property or the conduct of business in any area or affecting in any manner
AIB's ability to consummate the transactions contemplated by this Agreement.
Schedule 3.10(b) contains summary reports of AIB's attorneys on all pending
litigation to which AIB is a party and which names AIB as a defendant or
cross-defendant. Schedule 3.10(c) contains a true, correct and complete list of
all litigation in which AIB is a named party based upon reasonable investigation
of the records of the Superior Courts of the Counties of Los Angeles, Orange,
Riverside, San Bernardino and San Diego and the U.S. District Court for the
Central and Southern Districts of California.
3.11 TAXES.
(a) For purposes of this Agreement, the following
terms shall have the respective meanings set forth below:
(i) "Tax" (including with correlative meaning, the term "Taxes"
and "Taxable") means, with respect to AIB, any federal, state, local, foreign or
other material tax or governmental charge together with any interest and any
penalty, addition to Tax or additional amount imposed by any Taxing Authority
(as that term is defined below) due from or allocable under any applicable law
or agreement to AIB.
(ii) "Taxable Year" means, with respect to any Tax of AIB, the
calendar or fiscal year, or shorter period, for which the Tax is computed and
the Return (as that term is defined below) for such Tax is made.
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(iii) "Taxing Authority" means any governmental
authority (domestic or foreign) responsible for the imposition of any such Tax.
(iv) "Short Period" means, with respect to any Taxable
Year of AIB which begins before the Closing Date and ends thereafter, the
portion thereof beginning with the first day of such year and ending on the
Closing Date.
(b) Except as set forth on Schedule 3.11 hereto, (i) all Tax
returns, reports, statements or other material forms (collectively "Returns")
which have been required to be filed with any Taxing Authority by or on behalf
of AIB have been filed in accordance with all applicable laws; (ii) the Returns
were prepared in accordance with the appropriate books of account and correctly
reflect the facts regarding the income, business, assets, operations, activities
and status of AIB and any other information required to be shown therein; (iii)
all Taxes have been paid in a timely manner; (iv) AIB has made provision on the
AIB Financial Statements for all Taxes payable for any Taxable Year which has
ended for which no Return has yet been filed; (v) the charges, accruals and
reserves for Taxes reflected on the books of AIB and the AIB Financial
Statements are adequate to cover the Tax liabilities accruing or payable in
respect of Taxable Years ending on or before the Closing Date and any Short
Period; (vi) all Returns with respect to federal income taxes filed with respect
to Taxable Years of AIB through the Taxable Year ended December 31, 1993 have
been examined and closed or are Returns with respect to which the period during
which any Tax due may be properly assessed under applicable law has expired
without extension or waiver; (vii) AIB is not delinquent in the payment of any
Tax or has requested any extension of time within which to file any Return,
which Return has not since been filed; (viii) no deficiency for any Tax or claim
for additional Taxes by any Taxing Authority has been proposed, asserted or
assessed in writing against AIB for which AIB could be liable; (ix) AIB has not
granted any extension or waiver of the limitation period applicable to any
Returns, which extension or waiver is currently in effect; (x) there is no
audit, action, suit, proceeding or, to the best knowledge of AIB, any
investigation now pending against or with respect to AIB in respect of any Tax
or assessment; and (xi) there are no liens for Taxes upon the assets of AIB
except liens for current Taxes not yet due.
(c) AIB (i) is not a party to any agreement providing for the
allocation or sharing of any Tax; (ii) is not required to include in income any
adjustment pursuant to Section 481(a) of the United States Internal Revenue of
1986, as amended, and any regulations promulgated thereunder (the "Code"), by
reason of a voluntary change in accounting method initiated by AIB (nor does AIB
have any knowledge that the Internal Revenue Service has proposed any such
adjustment or change of accounting method) or (iii) has not filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply.
3.12 COMPLIANCE WITH LAWS AND REGULATIONS. Except as set forth on
Schedule 3.12, AIB is not in default under or in breach of any law, ordinance,
regulation, order, judgment or decree applicable to it which has been
promulgated by any governmental agency having authority over it or any
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of its material assets where such default or breach would or could cause a
Material Adverse Change in the Business Condition of AIB.
3.13 PERFORMANCE OF OBLIGATIONS. Except as set forth on Schedule 3.13,
AIB has performed in all material respects all of the obligations required to
be performed by it to date, and it is not in default under or in breach of any
term or provision of any agreement, contract, lease, indenture, covenant or any
other Understanding to which it is a party or is subject or is otherwise bound,
and no event has occurred which, with the giving of notice or the passage of
time or both, would constitute such default or breach, except where such breach
or default would or could not cause a Material Adverse Change in the Business
Condition of AIB. No party with whom AIB has an agreement or other Understanding
which is of material importance to AIB is in default thereunder, except as set
forth on Schedule 3.13.
3.14 EMPLOYEES. Except as set forth on Schedule 3.14, there are no
material controversies pending or, to the best knowledge of AIB, threatened
between AIB and any of its current or former employees. Except as disclosed in
the AIB Financial Statements or on Schedule 3.14 or Schedule 3.20, all sums due
for employee compensation and benefits have been duly and adequately paid or
accrued. Except as set forth on Schedule 3.14 or Schedule 3.20, the consummation
of the transactions contemplated by this Agreement will not (either alone or
upon the occurrence of any additional or further acts or events) result in any
payment (whether of severance pay, golden parachute or similar payment, or
otherwise) becoming due to any AIB officer or employee. AIB is not a party to
any collective bargaining agreement with respect to any of its employees or any
labor organization to which its employees or any of them belong. To the best
knowledge of AIB, no union is attempting to represent any employees of AIB as a
collective bargaining agent.
3.15 BROKERS AND FINDERS. Except as set forth in Schedule 3.15, AIB is
not a party to any agreement or other Understanding with any broker or finder
relating to the transactions contemplated hereby, and neither the execution of
this Agreement nor the consummation of the transactions contemplated hereby will
result in any liability to any broker or finder acting on behalf of AIB.
3.16 MATERIAL UNDERSTANDINGS. Schedule 3.16 sets forth true, correct and
complete copies or lists or descriptions of the following agreements and other
Understandings of AIB as of the date hereof:
(a) Every agreement, contract or other Understanding (other than
agreements with respect to deposits or loans or leases) of AIB which is to be
performed in whole or in part at or after the date of this Agreement, which is
not cancelable by AIB without penalty on not more than thirty (30) days' notice,
and which (i) involves aggregate future payments by or to AIB of more than
$25,000; (ii) involves material obligations to be performed later than one year
from the date hereof; (iii) otherwise materially affects AIB; or (iv) was not
entered into in the ordinary course of business;
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(b) Any loan, agreement, letter of credit, pledge, security
agreement, lease (excluding leases of real property listed on Schedule 3.8),
guarantee, commitment or subordination agreement or other similar or related
type of Understanding involving an amount in excess of $25,000 as to which AIB
is a debtor, pledgor, lessee, guarantor or obligor;
(c) Any Understanding dealing with advertising, brokerage,
licensing, dealership, representative or agency relationships in excess of
$25,000;
(d) Any written correspondent banking contracts;
(e) Any Understanding (other than this Agreement) for the sale
of its assets in excess of $25,000 in amount, or with recourse or for the grant
of any preferential right to purchase any of its assets, properties or rights in
excess of $25,000 in amount, or any Understanding which requires the consent of
any third party to the transfer and assignment of any assets, properties or
rights in excess of $25,000 in amount;
(f) Any Understanding which has a value in excess of $25,000 to
purchase, sell or provide services, materials, supplies, merchandise, facilities
or equipment and which is not terminable without penalty on not more than thirty
(30) days' notice;
(g) Any Understanding for any one capital expenditure or series
of capital expenditures in excess of $25,000 in amount;
(h) Any Understanding to make, renew or extend the term of a
loan (not fully disbursed or funded as of June 30, 1998) to any person or to any
affiliate of such person, which undisbursed or unfunded amounts, when aggregated
with all outstanding indebtedness of such person or any affiliate of such
person, would exceed $100,000;
(i) Any Understanding of any kind, except for deposit
relationships, with any director or officer of AIB or with any affiliate or any
member of the immediate family of any such director or officer. The term
"immediate family" as used herein and throughout this Agreement shall mean a
person's spouse, parents, in-laws, children and siblings;
(j) Any Understanding for the employment of any officer or
employee of AIB which is not terminable by AIB without liability on not more
than thirty (30) days' notice;
(k) Any Understanding which would be terminable other than by
AIB as a result of the consummation of the transactions contemplated by this
Agreement; or
(l) Any contract of participation with any other bank or lender
in any loan in excess of $25,000.
3.17 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 3.17,
since December 31, 1997 the business of AIB has been
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conducted diligently and only in the ordinary course, in the same manner as
theretofore conducted, and there has not been:
(a) Any adverse circumstance or development which could
reasonably be seen to create a risk of a Material Adverse Change in the Business
Condition of AIB;
(b) Any damage, destruction or loss to property (whether or not
covered by insurance) individually or in the aggregate which would reasonably be
seen to create a risk of a Material Adverse Change in the Business Condition of
AIB;
(c) Any material agreement, contract or other Understanding
which AIB has entered into or to which it is or was a party which has been
terminated or amended other than in the ordinary course of business;
(d) Any capital expenditure exceeding individually or in the
aggregate $10,000;
(e) Any labor trouble, dispute or problem of any character
involving employees of AIB;
(f) Any change in accounting methods or practices by AIB;
(g) Any material revaluation by AIB of any of its assets;
(h) Any increase in the salary schedule, compensation, rate,
fees or commissions, or the declaration, payment, commitment or obligation of
any kind directly or indirectly for the payment by AIB of a bonus or other
additional salary, compensation, fee or commission to any person, except for
additional sums or increases paid in accordance with employment agreements or
other Understandings disclosed on Schedule 3.16 or 3.20 or paid in a manner
consistent with past practice in accordance with policies disclosed to FCB in
writing prior to the date hereof;
(i) Any sale, assignment or transfer of any asset except in the
usual and ordinary course of business;
(j) Any mortgage, pledge or encumbrance of any asset of AIB
other than liens for taxes not yet due, and except as set forth on Schedule 3.8;
(k) Any waiver or release of any right or claim of AIB except in
the usual and ordinary course of business;
(l) Any declaration, setting aside or payment of any dividend or
distribution with respect to AIB Stock, the issuance of any shares of AIB Stock
(including by means of the exercise of employee stock options) or Stock
Equivalents of AIB, or any contract, agreement or other
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Understanding obligating AIB to issue or sell any AIB Stock or Stock
Equivalents;
(m) Any material change in the composition of AIB's deposits,
including, but not limited to, a material increase in the level of brokered
deposits;
(n) Any material increase in AIB's non-deposit liabilities,
including, but not limited to, a material increase in federal funds purchased;
or
(o) Any agreement, contract or other Understanding, other than
this Agreement, by which AIB will or could be obligated to take or engage in any
action described in (a) through (n) above.
3.18 LICENSES AND PERMITS. AIB has all licenses and permits which are
necessary for the conduct of its businesses, and such licenses and permits are
in full force and effect. The properties and operations of AIB are and have been
maintained and conducted, in all material respects, in compliance with all
applicable laws and regulations.
3.19 LOANS. All loans of AIB are in all material respects legal,
enforceable and authorized under applicable federal and state laws and
regulations. Except as set forth on Schedule 3.19, no loans held by AIB were, at
June 30, 1998, (i) more than sixty (60) days past due with respect to any
scheduled payment of principal or interest; (ii) classified as "Loss,"
"Doubtful," "Substandard" or "Special Mention" by federal banking regulators or
are required to be so classified by AIB in accordance with applicable bank
regulatory standards; (iii) on a non-accrual status in accordance with AIB's
loan review procedures; and (iv) "troubled debt restructurings" as that term is
defined in Financial Accounting Standard No. 15. Schedule 3.19 contains true,
correct and complete copies of past due loan reports of AIB for the period
January 1, 1997 through June 30, 1998 and also contains the current past due
loan report of AIB. To the best knowledge of AIB, such reports accurately and
completely describe all delinquent or past due loans during said period. Except
as described on Schedule 3.19, AIB has not been, during 1997 or 1998, advised in
writing or, to the best of AIB's knowledge, orally, by the OCC, the FDIC, any
other regulatory agency or any external auditor engaged by AIB that any of its
assets have been improperly classified or that any other asset of AIB may be
required to be adversely classified or designated.
3.20 EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AND LABOR CONTRACTS.
(a) Schedule 3.20 sets forth a list of and briefly describes all
employee benefit plans and employment agreements in which AIB participates, or
by which it is bound, including, without limitation, (i) any profit sharing,
deferred compensation, bonus, stock option, stock purchase, pension, retainer
consulting, retirement, welfare or incentive plan or agreement whether legally
binding or not; (ii) any plan providing for "fringe benefits" to its employees,
including but not limited to vacation, sick leave, medical, hospitalization,
life insurance and other
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insurance plans, and related benefits; (iii) any written employment agreement
and any other employment agreement not terminable at will; or (iv) any other
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA")) (the plans and agreements
referred to in the preceding clauses (i) to (iv) are hereinafter referred to
collectively as "Employee Plans"). Except as set forth on Schedule 3.20, to the
best of AIB's knowledge (w) there are no negotiations, demands, or proposals
that are pending or threatened that concern matters now covered, or that would
be covered, by any employment agreements or employee benefit plans; (x) AIB is
in compliance with the material reporting and disclosure requirements of Part 1
of Subtitle IB of ERISA and the corresponding provisions of the Code to the
extent applicable to the Employee Plans; (y) AIB has performed all of its
obligations under all Employee Plans required to be performed heretofore; and
(z) there are no actions, suits or claims (other than routine claims for
benefits) pending or, to the best knowledge of AIB, threatened against any
Employee Plan or the assets of such Plan, and to the best knowledge of AIB, no
facts exist which could give rise to any actions, suits or claims (other than
routine claims for benefits) against such Plans or the assets of such Plans.
(b) Each Employee Plan that is an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) ("Pension Plan") described
on Schedule 3.20 has been duly authorized by the Board of Directors of AIB. Each
Pension Plan and associated trust intended to be qualified under Section 401(a)
and to be exempt from tax under Section 501(a) of the Code, respectively, has
either received a favorable determination letter from the Internal Revenue
Service, has applied for such a determination letter or will apply for such a
determination letter before the expiration of the remedial amendment period set
forth in Section 401(b) of the Code, as the Internal Revenue Service may extend
such period, and, to the best knowledge of AIB, no event has occurred that will
or could give rise to disqualification of any Pension Plan which is intended to
be qualified under Section 401(a) of the Code or loss of the exemption from tax
of any such trust which is intended to be exempt from tax under Section 501(a)
of the Code. No event has occurred that will or could subject any Pension Plan
to tax under Section 511 of the Code. No Pension Plan has engaged in a merger or
consolidation with any other employee pension benefit plan or received a
transfer of assets or liabilities from any other plan. No prohibited transaction
(within the meaning of Section 409 or 502(i) of ERISA or Section 4975 of the
Code) or party-in-interest transaction (within the meanings of Section 406 of
ERISA) has occurred with respect to any Employee Plan which could subject AIB to
an excise tax or penalty. To the best knowledge of AIB, no employee of AIB has
engaged in any transactions which could require AIB to indemnify such person
against liability. All costs of Employee Plans have been provided for on the
basis of consistent methods in accordance with sound actuarial assumptions and
practices. No Pension Plan has incurred any "accumulated funding deficiency" (as
defined in Section 302(2) of ERISA), whether or not waived, taking into account
contributions made within the period described in Section 412(c)(10) of the
Code; nor are there any unfunded amounts under any Pension Plan which is
required to be funded under Part 3 of Subtitle IB of ERISA and Section 412 of
the Code; nor has AIB failed to make any contributions or pay any amount due and
owing as required by law or the terms of any Employee Plan.
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(c) AIB does not sponsor or participate in, and has not
sponsored or participated in, any Pension Plan to which Section 4021 of ERISA
applies that would create a liability to AIB under Title IV of ERISA.
(d) AIB does not sponsor or participate in, and has not
sponsored or participated in, any Pension Plan that is a "multiemployer plan"
(within the meaning of Section 3(37) of ERISA) that would subject AIB to any
liability with respect to any such Plan.
(e) To the knowledge of AIB, all group health plans of AIB
(including any plans of affiliates of AIB that must be taken into account under
Section 162(i) or (k) of the Code as in effect immediately prior to the
Technical and Miscellaneous Revenue Act of 1988 and Section 4980B of the Code)
have been operated in compliance with the group health plan continuation
coverage requirements of Section 4980B of the Code to the extent such
requirements are applicable.
(f) To the knowledge of AIB, there have been no acts or
omissions by AIB that have given rise to or may give rise to fines, penalties,
taxes, or related charges under Sections 502(c) or (i) or 4071 of ERISA or
Chapter 43 of the Code which could be imposed on AIB.
(g) Except as described in Subarticle 3.20(j), AIB does not
maintain any Employee Plan pursuant to which any benefit or other payment will
be required to be made by AIB pursuant to which any other benefit will accrue or
vest in any director, officer or employee of AIB, or pursuant to which any
payment or benefit will be accelerated or increased in either case as a result
of the consummation of the transactions contemplated by the Agreement.
(h) No "reportable event," as defined in Section 4043 of ERISA,
has occurred with respect to any of the Pension Plans.
(i) AIB does not have any obligation for retiree health and life
benefits under any Employee Plan, except as set forth on Schedule 3.20. AIB may
amend or terminate any such Employee Plan at any time without incurring any
liability thereunder.
(j) All amendments required to bring each of the Employee Plans
into conformity with all of the provisions of ERISA and the Code and all other
applicable laws, rules and regulations have been made, or will be made before
the expiration of the applicable remedial amendment period set forth under
Section 401(b) of the Code, as such period may be extended by the Internal
Revenue Service.
(k) AIB has delivered to Bancorp a list setting forth the name
of each director, officer, employee, agent or representative of AIB and every
other person entitled to receive any benefit or any payment of any amount under
any existing employment agreement, severance plan or other Employee Plan or
Understanding as a result of the consummation of any transaction contemplated by
this Agreement, and with respect to such person, the nature of such benefit or
the amount of such payment, the event triggering the benefit or payment, and the
date of, and parties to, such
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employment agreement, severance or other Employee Plan or Understanding. AIB had
delivered to Bancorp true and correct copies of all documents with respect to
the Employee Plans referred to in this Subarticle 3.20, including all amendments
and supplements thereto, and all related summary plan descriptions. AIB has
delivered to Bancorp true and correct copies, with respect to each Employee Plan
(to the extent applicable), of (i) a copy of the Form 5500 which was filed in
each of the three most recent plan years, including without limitation, all
schedules thereto, and all financial statements with attached opinions of
independent accountants to the extent required; (ii) the most recent
determination letter from the Internal Revenue Service; (iii) the statement of
assets and liabilities as of the most recent valuation date; and (iv) the
statement of changes in fund balance and in financial position or the statement
of changes in net assets available for benefits under each of said plans for the
most recently ended plan year. The documents referred to in subdivisions (iii)
and (iv) fully present the financial condition of each of said plans as of and
at such dates and the results of operations of each such plans, all in
accordance with generally accepted accounting principles or on the cash method
of accounting applied on a consistent basis.
3.21 INVESTMENTS. Except for investments that have matured or been sold,
Schedule 3.21 sets forth all of the investments reflected on the balance sheet
of AIB dated December 31, 1997 contained in the AIB Financial Statements and all
of the investments made since December 31, 1997. Except as set forth on Schedule
3.21, all such investments are legal investments under applicable laws, rules
and regulations and none of such investments is subject to any contractual,
statutory or other restriction that would materially impair the ability of the
entity holding such investment to dispose freely of any such investment at any
time, except restrictions on the public distribution or transfer of such
investments under the Securities Act of 1933, as amended, or state securities
laws.
3.22 OPERATIONAL LOSSES. Except as set forth on Schedule 3.22, since
December 31, 1997, to the best knowledge of AIB, no event has occurred, and no
action has been taken or omitted to be taken by any employee of AIB that has
resulted in the incurrence by AIB of an Operational Loss (as that term is
defined below) or, to the best knowledge of AIB, that reasonably might be
expected to result in the incurrence by AIB of an Operational Loss after
December 31, 1997, which, net of any insurance proceeds payable in respect
thereof, would exceed $5,000 by itself or $10,000 when aggregated with all other
Operational Losses during such period. For purposes of this Agreement,
"Operational Loss" means any loss exceeding $5,000 resulting from cash
shortages, lost or misposted items, disputed clerical and accounting errors,
forged checks, payment of checks over stop payment orders, counterfeit money,
wire transfers made in error, theft, robberies, defalcations, check kiting,
fraudulent use of credit cards or electronic teller machines, civil money
penalties, fines, litigation, claims, arbitration awards or other similar acts
or occurrences.
3.23 POWERS OF ATTORNEY. Except as set forth on Schedule 3.23, AIB has
not granted any person a power of attorney or similar authorization that is
presently in effect or outstanding.
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3.24 LOAN SERVICING PORTFOLIO. Except as set forth on Schedule 3.24,
AIB services no loans owned in whole or in part by other persons, except for
collection services undertaken for customers who otherwise have a banking
relationship with AIB.
3.25 PROXY STATEMENT. The proxy statement and/or any other materials or
documents (collectively, the "Proxy Materials"), to be used in connection with
the shareholders' meeting required pursuant to Subarticle 5.7 hereof, with
respect to all information set forth therein relating to AIB, the Consolidation
and the Merger and in respect to this Agreement, the Consolidation Agreement and
the Merger Agreement, at the time of mailing to shareholders and at the time of
the shareholders' meeting, shall:
(a) comply in all material respects with the provisions of all
applicable laws and regulations; and
(b) except with respect to any information regarding Bancorp or
FCB supplied to AIB by FCB for inclusion in the Proxy Materials, not contain any
statement which, at the time and in light of the circumstances under which it is
made, is false or misleading with respect to any material fact or not omit to
state any material fact necessary in order to make the statements therein not
false or misleading.
3.26 ACCURACY OF INFORMATION FURNISHED. To the best of AIB's knowledge,
no statement, representation or warranty made by AIB in this Agreement or any
certificate, agreement, schedule or other document furnished or to be furnished
in connection with the transactions contemplated by this Agreement contains or
will contain any untrue statement of a material fact nor omits to state any
material fact necessary in order to make such representation, warranty or
statement not misleading.
3.27 EFFECTIVE DATE OF REPRESENTATION AND WARRANTIES. Each
representation and warranty of AIB set forth in this Agreement shall be deemed
to be made on and as of the date hereof and (as updated as required by
Subarticle 5.2(n) hereof) as of the Effective Time of the Consolidation unless
the parties hereto agree in writing to a different effective date of any such
representation or warranty.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BANCORP AND FCB
Bancorp and FCB represent and warrant to AIB as follows:
4.1 ORGANIZATION, STANDING AND POWER OF BANCORP. Bancorp is duly
organized and existing in good standing as a corporation under the laws of the
State of California and is authorized to be a bank holding company. Bancorp has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as presently conducted.
Neither the scope of the business of Bancorp nor the location of any of its
properties requires that it be licensed to do business in any
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jurisdiction other than the State of California. Schedule 4.1 sets forth true
and correct copies of Bancorp's Articles of Incorporation and Bylaws.
4.2 CAPITALIZATION OF BANCORP. As of the date of this Agreement, the
authorized capital of Bancorp consists of 5,000,000 shares of common stock, no
par value, and 5,000,000 shares of serial preferred stock. 3,323,857 shares of
Bancorp's common stock and 423,500 shares of Bancorp's preferred stock is
currently outstanding. Except for employee stock options covering 300,000 shares
of Bancorp's common stock there are no outstanding options or warrants covering
Bancorp's common stock. No shares of Bancorp stock, either common or preferred,
are currently issued or outstanding.
4.3 ORGANIZATION, STANDING AND POWER OF FCB. FCB is a national
association, duly organized and existing in good standing as an association
under the laws of the United States, and is authorized by the OCC to conduct a
general banking business. FCB is a member of the Federal Reserve System, and its
deposits are insured by the FDIC in the manner and to the extent provided by
law. FCB has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted. Neither the scope of the business of FCB, nor the location of any of
its properties requires that it be licensed to do business in any jurisdiction
other than the State of California. Schedule 4.3 sets forth true and correct
copies of FCB's Articles of Association and Bylaws, as amended and in effect as
of the date hereof.
4.4 CAPITALIZATION OF FCB. As of the date of this Agreement, the
authorized capitalization of FCB consists of 10,000,000 shares of common stock,
$1.00 par value, and 5,000,000 shares of preferred stock. As of the date of this
Agreement, 100,000 shares of common and no shares of preferred are issued and
outstanding (the "FCB Stock"). All of the outstanding shares of FCB Stock are
validly issued, fully paid and nonassessable (except as provided for in 12
U.S.C. Section 55).
4.5 FINANCIAL STATEMENTS. FCB has delivered to AIB audited balance
sheets of FCB (to the extent they are available) as of December 31, 1997, 1996,
1995, and 1994, the related statements of operations, changes in shareholders'
equity and statements of cash flow for the periods then ended, and the related
notes and related accountants opinions thereon (the "FCB Financial Statements").
The FCB Financial Statements (i) present fairly the financial condition of FCB
as of the respective dates indicated and the results of operations, the changes
in shareholders' equity and cash flows for the respective periods indicated;
(ii) have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with past practices; (iii) contain and
reflect reserves for all material accrued liabilities and for all reasonably
anticipated losses, including but not limited to adequate reserves for loan and
lease losses; and (iv) are based on the books and records of FCB. Bancorp has
delivered to AIB audited balance sheets of Bancorp (to the extent they are
available) as of December 31, 1997, and 1996, the related statements of
operations, changes in shareholders' equity and statements of cash flow for the
periods then ended and the related notes and related accountants opinions
thereon
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(the "Bancorp Financial Statements"). The Bancorp Financial Statements (i)
present fairly the financial condition of Bancorp as of the respective dates
indicated and the results of operations, the changes in shareholders' equity and
cash flows for the respective periods indicated; (ii) have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with past practices; (iii) contain and reflect reserves for all
material accrued liabilities and for all reasonably anticipated losses,
including but not limited to adequate reserves for loan and lease losses; and
(iv) are based on the books and records of Bancorp.
4.6 AUTHORITY. The execution and delivery by Bancorp and FCB of this
Agreement and the execution and delivery of the Consolidation Agreement and the
Merger Agreement by FCB Interim and FCB, respectively, and, subject to any
requisite approval of the shareholders of FCB and FCB Interim, the consummation
of the transactions contemplated hereby and thereby have been or will be duly
and validly authorized by all necessary corporate action on the part of Bancorp,
FCB and FCB Interim. This Agreement is, and the Consolidation and Merger
Agreements will be upon the due execution and delivery thereof, valid and
binding obligations of Bancorp, FCB and FCB Interim, enforceable in accordance
with their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally and by general equitable principles. Neither the execution
and delivery by Bancorp or FCB of this Agreement, nor the execution and delivery
of the Consolidation Agreement or the Merger Agreement by FCB Interim and FCB,
respectively, nor the consummation of the transactions contemplated herein or
therein, nor compliance by Bancorp, FCB or FCB Interim with any of the
provisions hereof or thereof, will (i) conflict with or result in a breach of
any provision of the Articles of Incorporation or Bylaws of Bancorp or the
Articles of Association or Bylaws of FCB or FCB Interim; (ii) constitute a
breach of, or result in a default (or give rise to any rights of termination,
cancellation or acceleration, or any right to acquire any securities or assets)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, franchise, license, permit, agreement or other instrument, or
obligation or other Understanding to which Bancorp or FCB is a party, or by
which Bancorp, FCB or any of their respective properties or assets is bound,
except where such breach or default, individually or in the aggregate, would not
have a material adverse effect on the financial condition or results of
operations of Bancorp or FCB taken as a whole; or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Bancorp, FCB or
any of their respective properties or assets, except where such violation,
individually or in the aggregate, would not have a material adverse effect on
the financial condition or results of operations of Bancorp or FCB taken as a
whole. No consent or approval of, notice to or filing with any governmental
authority having jurisdiction over any aspect of the business or assets of
Bancorp or FCB, and no consent or approval of or notice to any other person or
entity, is required in connection with the execution and delivery by Bancorp or
FCB of this Agreement, or the execution and delivery of the Consolidation
Agreement and the Merger Agreement by FCB Interim and FCB, respectively, or the
consummation by Bancorp, FCB or FCB Interim of the transactions contemplated
hereby or thereby, except (a) approval of this Agreement, the Consolidation
Agreement and the Merger Agreement by the shareholders of AIB,
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FCB and FCB Interim, (b) such approvals of this Agreement, the Consolidation
Agreement, the Merger Agreement and the transactions contemplated herein as may
be required by the OCC pursuant to the applicable requirements of the National
Bank Act and the Bank Merger Act, (c) such approvals of the FRB as may be
required of Bancorp, and (d) as set forth on Schedule 4.6.
4.7 INFORMATION FURNISHED BY BANCORP. No information relating to Bancorp
or FCB furnished to AIB by Bancorp or FCB for inclusion in the Proxy Statement
referred to in Subarticle 3.25 of this Agreement, or any amendment or supplement
thereto, or the applications referred to in Subarticle 5.8(d), including all
amendments and supplements thereto, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
4.8 ACCURACY OF INFORMATION FURNISHED. No statement, representation or
warranty by Bancorp or FCB in this Agreement or any certificate, agreement,
schedule or other document furnished or to be furnished in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of a material fact nor omits to state any material fact necessary in
order to make such representation, warranty or statement not misleading. There
is no fact that Bancorp or FCB has not disclosed in writing to AIB that can
reasonably be expected to adversely affect the ability of Bancorp or FCB to
fully perform under this Agreement or the transactions contemplated hereby.
4.9 EFFECTIVE DATE OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty of Bancorp and FCB set forth in this Agreement shall
be deemed to be made on and as of the date hereof (unless expressly stated in
any such representation or warranty to the contrary) and (as updated by Bancorp
or FCB on or before the Effective Time of the Consolidation) as of the Effective
Time of the Consolidation, unless the parties agree in writing to a different
effective date of any such representation or warranty.
4.10 COMPLIANCE WITH LAWS AND REGULATIONS. Except as set forth on
Schedule 4.10, neither FCB nor Bancorp is in default under or in breach of any
law, ordinance, regulation, order, judgment or decree applicable to it which has
been promulgated by any governmental agency having authority over it or any of
its material assets where such default or breach would or could result in a
reduction of ten percent (10.0%) or more in their respective shareholders'
equity from the amount of shareholders' equity as of March 31, 1998 (such
reduction is hereinafter referred to "Material Adverse Change in the Business
Condition of FCB or Bancorp" or both, as applicable.)
4.11 PERFORMANCE OF OBLIGATIONS. Except as set forth on Schedule 4.11,
both FCB and Bancorp have performed in all material respects all of the
obligations required to be performed by it to date, and it is not in default
under or in breach of any term or provision of any agreement, contract, lease,
indenture, covenant or any other Understanding to which it is a party or is
subject or is otherwise bound, and no event has occurred which, with the giving
of notice or the passage of time or both, would con-
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stitute such default or breach, except where such breach or default would or
could not cause a Material Adverse Change in the Business Condition of FCB or
Bancorp. No party with whom either FCB or Bancorp has an agreement or other
Understanding which is of material importance to FCB or Bancorp is in default
thereunder, except as set forth on Schedule 4.11.
4.12 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 4.12,
since December 31, 1997, the business of FCB and the business of Bancorp have
been conducted diligently, and only in the ordinary course, and there has not
been any adverse circumstance or development which could reasonably be seen to
create a risk of a Material Adverse Change in the Business Condition of either
FCB or Bancorp.
4.13 LICENSES AND PERMITS. Both FCB and Bancorp have all licenses and
permits which are necessary for the conduct of their respective businesses, and
such licenses and permits are in full force and effect. The properties and
operations of both FCB and Bancorp are and have been maintained and conducted,
in all material respects, in compliance with all applicable laws and
regulations.
4.14 CAPITAL RAISING. FCB and Bancorp will proceed promptly and
diligently to raise any capital necessary to consummate the Consolidation.
4.15 REGULATORY APPROVALS. To the best knowledge of Bancorp and/or FCB,
Bancorp and/or FCB has no reason to believe that it would not receive all
required approvals from the OCC and/or FRB of any application to consummate the
transactions contemplated by this Agreement without the imposition of a
materially burdensome condition in connection with the approval of any such
application.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME OF CONSOLIDATION
5.1 LIMITATION ON AIB'S CONDUCT PRIOR TO THE EFFECTIVE TIME OF THE
CONSOLIDATION. Between the date hereof and the Effective Time of the
Consolidation, AIB agrees to conduct its business only in its normal and
customary manner and in accordance with sound banking or other customary
practices, and AIB shall not, without prior written consent of either Bancorp or
FCB (which consent shall not be unreasonably withheld):
(a) Declare, set aside or pay any dividend or make any other
distribution upon, or purchase or redeem any shares of, AIB Stock;
(b) Except as may be required to effectuate the transactions
contemplated herein, change its charter documents or other governing
instruments;
(c) Except as otherwise expressly provided for in this
Agreement, adopt, amend or terminate any Employee Plan, employment contract,
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agency or correspondent agreement, or any other Understanding of any such type;
(d) Make any loan, loan commitment or renewal or extension
thereof ("Loan"), to any borrower which would, when aggregated with all
outstanding loans, commitments for loans or renewals or extensions thereof made
by AIB to such person and any affiliate or immediate family member of such
person, exceed $150,000. For the purposes of this Subarticle 5.1(d)(i), no prior
written approval of FCB will be required, if FCB's representative is in
attendance at any Loan Committee Meeting of AIB where such loan is reviewed or
approved and FCB's representative does not voice an objection to such loan. The
parties agree that AIB shall give notice of all loan committee meetings to FCB
and FCB will use its best efforts to have a representative present at all such
loan committee meetings;
(e) Directly or indirectly, entertain, solicit or encourage or
participate in any discussions or negotiations with, or provide any information
(other than publicly available information) to, any person or other entity or
group (other than Bancorp, FCB and either of its representatives) concerning any
Acquisition Proposal (as that term is defined below) other than the Acquisition
Proposal set forth in this Agreement, or authorize or knowingly permit any of
its representatives to do so, except such actions that a majority of the Board
of Directors of AIB, upon the written opinion of AIB's counsel, determines to be
required by applicable law or necessary to fulfill the fiduciary duties of its
directors with respect to an unsolicited bona fide written offer from a third
party. AIB shall notify Bancorp and FCB immediately by telephone with written
confirmation if any such inquiry or Acquisition Proposal is received by AIB,
including the terms thereof. For purposes of this Subarticle 5.1(e),
"Acquisition Proposal" means: (i) any proposal pursuant to which any person or
other entity or group, other than Bancorp, FCB or FCB Interim, would acquire or
participate in a merger or other business combination involving AIB; (ii) any
proposal by which any person or other entity or group, other than Bancorp, FCB
or FCB Interim, would acquire the right to vote nine and nine-tenths percent
(9.9%) or more of the capital stock of AIB entitled to vote thereon for the
election of directors, other than persons designated as proxy holders by the
Board of Directors of AIB; (iii) any proposal to acquire, or acquisition of,
the assets of AIB other than in the ordinary course of business; or (iv) any
proposal to acquire, or acquisition of, five percent (5%) or more of the
outstanding capital stock of AIB other than as contemplated by this Agreement;
(f) Make any investment in the stock or equity of any business
entity, except as it relates to a foreclosure or realization upon any security
interest in the usual and ordinary course of its business;
(g) Sell or dispose of any of its assets in excess of $25,000 in
value, except in the usual and ordinary course of its business;
(h) Make any one capital expenditure or series of capital
expenditures, the aggregate amount of which is, in excess of $25,000;
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(i) Issue or sell or obligate itself to issue or sell any shares
of AIB Stock or any other securities, including without limitation any capital
notes, or any Stock Equivalent;
(j) File, withdraw or fail to renew any applications for
additional branches or to relocate operations from existing locations;
(k) Create or incur any liabilities in excess of $25,000 other
than liabilities incurred in the ordinary course of business or as contemplated
or permitted by or in connection with the creation or performance of this
Agreement;
(l) Create or incur or suffer to exist any mortgage, lien,
pledge, security interest, charge, encumbrance or restriction of any kind
against or in respect of any property or right of AIB securing any obligation in
excess of $25,000, except for pledges or security interests given in connection
with the acceptance of repurchase agreements or government deposits or to
secure borrowings from the Federal Reserve Bank;
(m) Make or become a party to any contract, commitment or other
Understanding in excess of $25,000, or renew, extend, amend or modify any
contract, commitment or other Understanding in excess of $25,000, except in the
usual and ordinary course of business or as otherwise contemplated or permitted
by this Agreement;
(n) Discharge or satisfy any mortgage, lien, charge or
encumbrance other than as a result of the payment of liabilities in accordance
with the terms thereof, or except in the ordinary course of business, if the
cost to AIB to discharge or satisfy any such mortgage, lien, charge or
encumbrance is in excess of $25,000;
(o) Pay any obligation or liability, absolute or contingent, in
excess of $25,000, except liabilities reflected on the AIB Financial Statements,
or obligations or liabilities arising in the ordinary course of business since
the date of the most recent AIB Financial Statements, or in connection with the
transactions contemplated hereunder;
(p) Institute, settle or agree to settle any claim, action or
proceeding involving an expenditure by AIB in excess of $25,000 before any
court, arbitrator or governmental body;
(q) Invest in any real estate;
(r) Enter into or amend any continuing contract or other
Understanding or series of related contracts or Understandings in excess of
$25,000 for the purchase of materials, supplies, equipment or services which
cannot be terminated upon delivery of not more than thirty (30) days' written
notice without cause and without payment of any amount as a penalty, bonus,
premium or other compensation for such termination;
(s) Enter into or amend any contract, agreement or other
Understanding with any officer or other employee, director or prin-
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cipal shareholder of AIB or any affiliate of such person, including but not
limited to an Understanding regarding an increase in salary or compensation;
(t) Change any of its basic policies and practices with respect
to liquidity management and cash flow planning, marketing, deposit origination,
lending, budgeting, profit and tax planning, personnel practices, accounting or
any other material aspect of its business or operations, except such change as
may be required in the reasonable opinion of AIB's management to respond to
economic or market conditions or as may be required by the rules of the American
Institute of Certified Public Accountants or Financial Accounting Standards
Board or by applicable governmental authorities;
(u) Knowingly default in any material respect under any
Understanding to which AIB is a party, and which, individually or together with
other Understandings with respect to which a default by AIB exists, would or
could cause a Material Adverse Change in Business Condition of AIB;
(v) Issue or permit to be issued to any shareholder of AIB Stock
a new certificate representing shares of AIB Stock because such certificate has
been lost or stolen unless such shareholder obtains an indemnity bond in form
and substance and with a surety satisfactory to AIB and FCB;
(w) Breach or violate any applicable law, rule or regulation
pertaining to the conduct of its business or its assets or any covenant,
contract, debenture or Understanding to which it is a party where such breach or
violation would or could cause a Material Adverse Change in the Business
Condition of AIB;
(x) Make any investment (i) in excess of $100,000, with the
exception of federal funds sold; and (ii) which has a maturity greater than one
year from the date of purchase; or
(y) Enter into any Understanding which would or could result in
the taking of any action or the occurrence of any event described in clauses (a)
through (x) above.
Bancorp and FCB shall be deemed to have given its consent to any action
or event described in this Subarticle 5.1, if within five (5) business days (or
two (2) business days in the case of matters described in clause (d) above) of
Bancorp's or FCB's receipt of written notice of a request for prior written
consent, AIB shall not have received written notice of objection from either
Bancorp or FCB.
5.2 AFFIRMATIVE CONDUCT OF AIB PRIOR TO THE EFFECTIVE TIME OF THE
CONSOLIDATION. Between the date hereof and the Effective Time of the
Consolidation, AIB shall:
(a) Use its best efforts, or cooperate with others, to
expeditiously bring about the satisfaction of the conditions specified in
Article VI hereof;
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(b) Use and devote its best efforts consistent with this
Agreement to maintain and preserve intact its present business organization and
to maintain and preserve its relationships and goodwill with account holders,
borrowers, employees and others having business relationships with it;
(c) Advise Bancorp and FCB promptly in writing of any Material
Adverse Change in the Business Condition of AIB which becomes known to AIB, or
of any matter which would make the representations and warranties set forth in
Article III hereof not true and correct in all material respects at any time up
to and including the Effective Time of the Consolidation;
(d) Use its best efforts to keep in full force and effect all of
the existing permits and licenses of AIB;
(e) Use its best efforts to maintain insurance coverage at least
equal to that now in effect on all its properties, on all properties for which
it is responsible and on its business operations, and carry the same coverage
for public liability, personal injury and property damage and all risks covered
by its banker's blanket bond and notify Bancorp and FCB in writing promptly of
any facts or circumstances which could affect the ability of AIB or the
Surviving Bank to maintain such insurance coverage that is now in effect;
(f) Perform its material contractual obligations and not become
in material default on any thereof;
(g) Duly observe and materially conform to all lawful
requirements applicable to its business;
(h) Carefully prepare and file all federal, state and local tax
returns regarding AIB if required to be filed by it between the date hereof and
the Effective Time of the Consolidation and furnish copies thereof to Bancorp
and FCB;
(i) Furnish Bancorp and FCB with such financial and other
information with respect to AIB and its respective properties, business and
operations as in the reasonable opinion of Bancorp and FCB, counsel for Bancorp
and FCB and counsel for AIB shall be necessary in order to prepare the
applications for and to obtain the approvals, consents and authorizations
referred to in Articles V and VI hereof; such information will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the information not misleading;
(j) Maintain its assets and properties in good condition and
repair, normal wear and tear excepted;
(k) Promptly advise Bancorp and FCB in writing of any event
or any other transaction within AIB's knowledge whereby any person or related
group of persons acquires, directly or indirectly, record or beneficial
ownership or control of five percent (5%) or more of the
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outstanding AIB Stock prior to the record date fixed for the AIB's shareholders'
meeting or any adjourned meeting thereof to approve this Agreement;
(l) Furnish to Bancorp and FCB monthly unaudited balance sheets
and income statements and loan delinquency reports of AIB, identical to those
provided to the Board of Directors of AIB, within five (5) days after each
meeting of the Board of Directors of AIB, which unaudited balance sheets and
income statements shall in all respects satisfy the requirements hereunder with
respect to the AIB Financial Statements;
(m) Furnish to Bancorp and FCB all information and documents
regarding AIB which are provided to members of AIB's Board of Directors or any
committee thereof within five (5) days after each meeting of the Board of
Directors of AIB, subject to rights of privacy, fiduciary obligations and
material subject to the attorney-client privilege;
(n) No later than the 15th day of each calendar month between
the date hereof and the Effective Time of the Consolidation, amend or supplement
the Schedules prepared and delivered pursuant to Article III to ensure that the
information set forth in such Schedules accurately reflects the then-current
status of AIB. AIB shall further amend or supplement the Schedules on the
Closing Date if necessary to reflect any additional changes in the status of
AIB;
(o) Charge off all loans, receivables and other assets, to the
extent such are deemed uncollectible in accordance with generally accepted
accounting principles, applicable law or regulation, or charge off such portion
of loans classified as "loss," "doubtful" or "substandard" as directed by any
regulatory authority; and maintain the reserve for loan and lease losses at a
level which is adequate to provide for all known and reasonably expected losses
on loans outstanding and other inherent risks in AIB's loan portfolio;
(p) As soon as available, deliver to Bancorp and FCB any AIB
Financial Statements not previously delivered pursuant to Subarticle 3.4 hereof;
and
(q) Without limiting the generality of any of the foregoing,
furnish to Bancorp and FCB copies of the written results of any external audit
or other review of AIB, within five (5) days after receipt of the same by AIB.
5.3 ACCESS TO INFORMATION. AIB shall afford Bancorp, FCB and their
respective representatives, counsel, accountants, agents and employees access
during normal business hours to all of AIB's business, operations, properties,
books, files and records and will do everything reasonably necessary to enable
Bancorp, FCB and their respective representatives, counsel, accountants, agents
and employees to make a complete examination of the financial statements,
business, assets and properties of AIB and the condition thereof and to update
such examination at such intervals as FCB shall deem appropriate. Such access
shall include reasonable access by FCB's accountants to auditors' work papers
with respect
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to the business and properties of AIB, other than books, records and documents
covered by the attorney-client privilege, or which are attorneys' work product.
Such examination shall be conducted in cooperation with the officers of AIB and
in such a manner as to minimize, to the extent possible consistent with the
conducting of a comprehensive examination, any disruption of, or interference
with, the normal business operations of AIB. No such examination, however, shall
constitute a waiver or relinquishment on the part of Bancorp or FCB to rely upon
the representations and warranties made by AIB herein or pursuant hereto;
provided, that Bancorp and FCB shall promptly disclose to AIB any fact or
circumstance either may discover which either of them believes renders any
representation or warranty made by AIB hereunder incorrect in any respect.
Bancorp, FCB and their respective agents will hold in strict confidence all
documents and information concerning AIB so obtained except to the extent that
such documents or information are a matter of public record or require
disclosure in the Proxy Materials or any of the applications required to be
filed with any governmental or regulatory agency to obtain the approvals and
consents specified in Article VI hereof and, if the transactions contemplated
herein are not consummated, such confidence shall be maintained and all such
documents shall be returned to AIB.
5.4 REVIEW BY ACCOUNTANTS. Promptly upon request of Bancorp or FCB, AIB
will request its accountants to permit FCB's accountants to review and examine
the work papers of AIB's accountants relating to AIB, the AIB Financial
Statements or other financial statements delivered to Bancorp and FCB hereunder,
and any tax return filed by AIB with any tax agency and to review and examine
the work papers of AIB's accountants relating to any future audits or reviews of
AIB.
5.5 TERMINATION OF AIB STOCK OPTION PLAN. AIB shall take all steps
necessary to cause the AIB Stock Option Plan and all options granted thereunder,
including paying the optionee for the economic value of such options based upon
Per Share Purchase Price, to be terminated as of or prior to the Effective Time
of the Consolidation and will grant no additional options under such plan prior
to the Effective Time of the Consolidation.
5.6 TERMINATION OF AIB EMPLOYEE PLANS. Unless otherwise agreed to
between the parties, AIB shall take all steps necessary to cause the termination
of all AIB Employee Plans without any liability (accrued, contingent or
otherwise) to the Consolidated Bank, Bancorp or the Surviving Bank.
5.7 SHAREHOLDERS' MEETING. AIB shall, as soon as practicable after
execution of this Agreement, cause a meeting of its shareholders to be duly held
upon requisite notice for the purpose of:
(a) approving the Consolidation, the Consolidation Agreement,
the transactions contemplated therein and requisite matters incident thereto;
and
(b) conducting such other business as its Board of Directors
deems advisable and proper in connection therewith.
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AIB, through its Board of Directors, shall recommend that its
shareholders approve the Consolidation, the Consolidation Agreement, the
transactions contemplated therein and all requisite matters incident thereto,
and it will, subject to the fiduciary duty of its directors, use its best
efforts to obtain the affirmative vote of the holders of the largest possible
percentage of its outstanding common stock.
5.8 AFFIRMATIVE CONDUCT OF BANCORP AND FCB. Between the date hereof and
the Closing Date:
(a) SATISFACTION OF CONDITIONS. Bancorp and FCB shall use and
shall cause FCB Interim to use its best efforts, or cooperate with others, to
expeditiously bring about the satisfaction of the conditions specified in
Article VI hereof.
(b) NOTICE OF CHANGES. Bancorp or FCB shall advise AIB promptly,
plans for raising capital, in writing of any change known to Bancorp or FCB in
the capital structure, financial condition or business prospects of FCB or
Bancorp taken as a whole or of any other change known to Bancorp or FCB
respecting the financial condition of Bancorp and FCB taken as a whole that
could in either case reasonably be expected to materially adversely affect
Bancorp's or FCB's ability to consummate the Acquisition, or of any matter which
would make the representations and warranties set forth in Article IV hereof not
true and correct in any material respect on the Closing Date.
(c) FCB INTERIM. FCB shall cause FCB Interim to be duly
organized as an interim national bank, with all necessary power to own, lease
and operate its properties and assets, if any, and to carry on any business it
then may conduct. FCB shall also cause FCB Interim to obtain shareholder
approval of the Consolidation. As soon as reasonably practicable following the
execution of this Agreement, FCB shall cause FCB Interim to execute the
Consolidation Agreement in the form and having the substance of Exhibit "A"
hereto.
(d) REGULATORY APPLICATIONS. Bancorp and FCB shall proceed
expeditiously in making application for all necessary regulatory approvals
required as a condition precedent to the consummation of the Acquisition,
including the approval of the OCC. AIB agrees to cooperate fully in the
preparation of such applications.
(e) ADDITIONAL FCB FINANCIAL STATEMENTS. As soon as available,
FCB and Bancorp shall deliver to AIB any FCB Financial Statements not previously
delivered pursuant to Subarticle 4.5 hereof.
(f) RAISING CAPITAL TO CONSUMMATE THE CONSOLIDATION. FCB shall
raise or receive additional equity capital in such amounts as are necessary to
consummate the consolidation.
5.9 CORPORATE ACTION. The parties shall each take or cause to be taken
all necessary corporate action required to carry out the transactions
contemplated in this Agreement, the Consolidation Agreement and the Merger
Agreement.
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5.10 NECESSARY CONSENTS. In addition to the regulatory approvals
referred to in Subarticle 5.8 hereof, the parties hereto shall each apply for
and diligently seek to obtain all other third party consents or approvals which
may be necessary for the consummation of the transactions contemplated hereby,
including, without limitation, the written consent of any lessors of real and
personal property which property cannot be assigned without the written consent
of such lessors.
5.11 ENVIRONMENTAL ASSESSMENT REPORT. Within sixty (60) days of the date
of this Agreement, AIB shall deliver to Bancorp and FCB a Phase I environmental
assessment report (the "Phase I Report") on each parcel of real property owned
or leased by AIB, with the exception of any real property for which AIB is a
lessee and the lessor (who shall be credit-worthy) fully indemnified AIB for any
claims or losses relating to Hazardous Substances on such premises or breaches
of any applicable Environmental Law pursuant to an agreement in form and
substance reasonably satisfactory to FCB. Each Phase I Report shall be current
within 60 days of its delivery and in form and substance reasonably satisfactory
to Bancorp. Bancorp and FCB shall promptly review each Phase I Report and within
five (5) business days of receipt thereof, will give written notice to AIB if
Bancorp and FCB determine that the findings of the Phase I Report constitute a
material breach by AIB of any of its representations, warranties, commitments or
agreements under this Agreement. The failure of Bancorp or FCB to give such
notice shall be deemed acceptance of the Phase I Report by Bancorp and FCB.
5.12 ACCESS TO INFORMATION. Bancorp and FCB shall afford AIB and its
representatives, counsel, accountants, agents and employees access, during
normal business hours, to such books and records of FCB and Bancorp as AIB shall
request in order for AIB to monitor the progress being made by FCB and /or
Bancorp to consummate the transactions contemplated by this Agreement as well as
FCB's and Bancorp's ability to consummate such transactions.
ARTICLE VI
CONDITIONS PRECEDENT TO THE TRANSACTIONS
6.1 GENERAL CONDITIONS. The obligations of each of the parties hereto to
consummate the transactions contemplated herein are further subject to the
satisfaction, on or before the Closing Date, of the following conditions
precedent:
(a) SHAREHOLDER APPROVAL. The respective parties shall have
received all requisite approvals of the shareholders of FCB, FCB Interim and
AIB.
(b) NO PROCEEDINGS. No legal, administrative, arbitration,
investigatory or other proceeding by any governmental authority shall have been
instituted or threatened and, at what would otherwise have been the Effective
Time of the Consolidation, remain pending by or before a court or any
governmental authority to restrain or prohibit the transactions contemplated
hereby.
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(c) REGULATORY APPROVALS. To the extent required by applicable
law or regulation, all approvals or consents of any governmental authority,
including, without limitation, those of the OCC and the FRB shall have been
obtained or made for the transactions contemplated hereby and the applicable
waiting period under the Bank Merger Act shall have expired. All other statutory
or regulatory requirements for the valid completion of the transactions
contemplated hereby shall have been satisfied.
6.2 CONDITIONS TO OBLIGATIONS OF BANCORP AND FCB. The obligations of
Bancorp and FCB to effect the transactions contemplated hereby shall be subject
to the following conditions, any of which may be waived in writing by either
Bancorp or FCB:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS.
Each of the representations and warranties of AIB set forth herein (or as
updated in accordance with Subarticle 5.2(n)) shall be true and correct as of
the Effective Time of the Consolidation in all material respects, as if made on
such date; and AIB shall have performed in all material respects all of the
covenants to be performed by it on or prior to the Effective Time of the
Consolidation.
(b) AUTHORIZATION OF MERGER. All action necessary to authorize
the execution, delivery and performance of this Agreement, the Consolidation
Agreement and the Merger Agreement by AIB and the consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken by the Board of Directors and shareholders of AIB, including, without
limitation, approval by a vote of the holders of at least a majority of the AIB
Stock, and AIB shall have full power and right to consolidate with FCB Interim
pursuant to the Consolidation Agreement and to merge with FCB pursuant to the
Merger Agreement.
(c) REGULATORY APPROVALS. Any governmental approvals referred to
in Subarticle 6.1(c) and any other subarticle of this Agreement shall have been
granted without the imposition of conditions that either Bancorp or FCB
reasonably and in good faith concludes would be materially burdensome.
(d) THIRD PARTY CONSENTS. Bancorp, FCB, FCB Interim and AIB
shall have obtained all consents of other parties to its material mortgages,
notes, leases, franchises, agreements, licenses and permits as may be necessary
to permit the transactions contemplated herein to be consummated, without
default, acceleration, breach or loss of rights or benefits thereunder.
(e) ABSENCE OF MATERIAL ADVERSE CHANGES. As of the Closing Date
there shall not exist any Material Adverse Change in the Business Condition of
AIB.
(f) TERMINATION OF STOCK OPTION PLANS. AIB shall have caused the
AIB Stock Option Plans to be terminated as of the Effective Time of the
Consolidation and shall have obtained the consents or agreements and otherwise
shall have complied with the terms of Subarticles 5.5 and 5.6 hereof.
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(g) SHAREHOLDERS' AGREEMENTS. Each of the directors of AIB shall
have entered into a Shareholders' Agreement in substantially the form attached
hereto as Exhibit "C" in all cases concurrently with the execution of this
Agreement, and each such director shall have performed in all material respects
the obligations to be performed by him under such agreements.
(h) OFFICERS' CERTIFICATE. There shall have been delivered to
Bancorp and FCB on the Closing Date a certificate executed by the President and
Chief Executive Officer and by the Chief Financial Officer of AIB certifying, to
the best of their knowledge, compliance with all of the provisions of
Subarticles 6.2(a), (b), (d), (e), (f) and (g).
(i) TAX MATTERS. Bancorp and FCB shall have received an opinion
from a law firm mutually acceptable to AIB and FCB as of the Effective Time of
the Consolidation, or a ruling from the Internal Revenue Service substantially
to the effect that, under the Code, the Acquisition will not result in the
recognition of any gain or loss to Bancorp, FCB or AIB (but excluding AIB's
shareholders).
(j) VALIDITY OF TRANSACTIONS. The validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to
Bancorp or FCB hereunder, shall be subject to the approval, to be reasonably
exercised, of Horgan, Rosen, Beckham & Coren, L.L.P., counsel for Bancorp and
FCB.
(k) PHASE I REPORTS. AIB shall have delivered Phase I Reports to
Bancorp and FCB in accordance with Section 5.11.
6.3 CONDITIONS TO OBLIGATIONS OF AIB. The obligations of AIB to effect
the transactions contemplated hereby shall be subject to the following
conditions, any of which may be waived in writing by AIB:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF COVENANTS.
Each of the representations and warranties of Bancorp and FCB set forth herein
shall be true and correct as of the Effective Time of the Consolidation in all
material respects, as if made on such date; and Bancorp and FCB shall have
performed in all material respects all of the covenants to be performed by them
on or prior to the Effective Time of the Consolidation.
(b) AUTHORIZATION OF MERGER. All actions necessary to authorize
the execution, delivery and performance of this Agreement, the Consolidation
Agreement and the Merger Agreement by Bancorp, FCB and FCB Interim and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Boards of Directors of Bancorp, FCB and FCB
Interim and the shareholders of FCB and FCB Interim, and FCB Interim shall have
full power and right to consolidate with AIB pursuant to the Consolidation
Agreement.
(c) OFFICERS' CERTIFICATE. There shall have been delivered to
AIB on the Closing Date a certificate executed by the Chief Executive Officer
and the Chief Financial Officer of both Bancorp and FCB
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certifying, to the best of their knowledge, compliance with all of the
provisions of Sections 6.3(a) and (b).
(d) VALIDITY OF TRANSACTIONS. The validity of all transactions
herein contemplated, as well as the form and substance of all opinions,
certificates, instruments of transfer and other documents to be delivered to AIB
hereunder, shall be subject to the approval, to be reasonably exercised, of
Knecht & Hansen, counsel for AIB.
(e) NECESSARY CAPITAL. FCB shall have received or raised the
capital necessary to consummate the consolidation in accordance with Section
5.8(f) hereof on or before January 15, 1999.
ARTICLE VII
EMPLOYEE BENEFITS
7.1 SURVIVING BANK EMPLOYEE BENEFITS. All employee benefits and benefit
programs of Bancorp in effect at and as of the Effective Time of the
Consolidation shall become the sole employee benefits and benefit programs of
the Surviving Bank. AIB shall have terminated its Employee Plans prior to the
Effective Time of the Consolidation, and, no such employee plans shall become
plans of the Surviving Bank or Bancorp.
7.2 EMPLOYEES OF AIB. Bancorp and FCB covenant and agree that the
Surviving Bank shall, without obligation to employ, make a reasonable effort to
employ all officers and employees of AIB at the Effective Time of the
Consolidation. Any officer or employee of AIB at the Effective Time of the
Consolidation who is not either (i) employed by the Surviving Bank or (ii)
covered by an Employment Contract, shall be entitled to severance pay equal to
one month's salary, as that salary was in effect on March 31, 1998, (or portion
thereof) for each year (or portion thereof) of service with AIB but not to
exceed an amount equal to six (6) months' salary. At and as of the Effective
Time of the Consolidation, any persons who are officers or other employees of
AIB immediately prior to the Effective Time of the Consolidation and who become
officers and employees of the Surviving Bank shall be entitled, other than for
purposes of benefit accrual, to carry over to FCB service credit and seniority
for time employed by AIB, consistent with such service, to participate in all
employee benefits and benefit programs of the Surviving Bank in accordance with
the terms of such employee benefit programs. Such participation shall commence
at and as of the Effective Time of the Consolidation if permitted by the terms
of such employee benefit programs, or as soon thereafter as permitted by the
terms of such employee benefit programs; provided, however, that officers and
other employees of AIB who, immediately before the Effective Time of the
Consolidation, had not yet completed the waiting period or service requirement
for eligibility in AIB's employee welfare benefit plans (as such term is defined
in Section 3(1) of ERISA) shall not be entitled to participate in FCB's employee
welfare benefit plans until they would have completed such waiting period or
service requirement, taking into account their service with AIB before the
Effective Time of the Consolidation and their service with the Surviving Bank
after the Effective Time of the Consolidation.
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7.3 CHIEF EXECUTIVE OF AIB. Bancorp and FCB covenant and agree that the
Surviving Bank shall, effective immediately with the Merger, be bound by the
terms and conditions of the amended employment agreement between FCB and Charles
E. Brooks ("Executive"), a copy of which is attached hereto as Exhibit D,
providing for a three year term, at the same salary level as in effect on March
31, 1998, and other terms and conditions as set forth therein, including but not
limited to retirement compensation to begin on the later of Executive's 65th
birthday, or retirement from the bank and continuing for ten years with
retirement benefits equal to fifty percent (50%) of Executive's salary in effect
on March 31, 1998. In addition, the contract will provide for stock options
covering 40,000 shares (adjusted for any splits, reverse splits or stock
dividends effective after June 30, 1998) of Bancorp's common stock.
ARTICLE VIII
TERMINATION
8.1 TERMINATION OF THIS AGREEMENT.
(a) This Agreement may be terminated upon the occurrence of any
of the following:
(i) By Bancorp or FCB immediately upon the expiration
of thirty (30) days from the date that Bancorp or FCB has given notice to AIB of
a breach or default by AIB in the performance of any covenant, agreement,
representation, warranty, duty or obligation hereunder, which breach or default
causes a Material Adverse Change in the Business Condition of AIB or has a
material adverse effect upon the transactions contemplated hereby; provided,
however, that no such termination shall be effective if, within said 30-day
period, AIB shall have substantially corrected and cured the grounds for the
termination as set forth in said notice of termination;
(ii) By AIB immediately upon the expiration of thirty
(30) days from the date that AIB has given notice to Bancorp and FCB of a breach
or default by either Bancorp or FCB in the performance of any covenant,
agreement, representation, warranty, duty or obligation hereunder which breach
or default has a material adverse effect on Bancorp, FCB, their respective
financial conditions or on the transactions contemplated hereby; provided,
however, that no such termination shall be effective if, within said 30-day
period, Bancorp or FCB, as applicable, shall have substantially corrected and
cured the grounds for the termination as set forth in said notice of
termination;
(iii) By Bancorp, FCB or AIB upon the expiration of
thirty (30) days after the OCC, or any other applicable regulatory authority
denies or refuses to grant the approvals, consents or authorizations required to
be obtained in order to consummate the transactions covered and contemplated by
this Agreement unless, within said 30-day period, the parties hereto agree to
resubmit the application to the regulatory authority which has denied or refused
to grant such approval, consent, authorization or ruling, as the case may be;
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(iv) By any of Bancorp, FCB or AIB upon the failure to
satisfy any of the conditions specified in Subarticle 6.1;
(v) By Bancorp or FCB upon the failure to satisfy any
of the conditions specified in Subarticle 6.2 other than 6.2(i);
(vi) By AIB upon the failure to satisfy any of the
conditions specified in Subarticle 6.3;
(vii) By Bancorp or FCB at any time prior to the
Effective Time of the Consolidation, if (A) the Board of Directors of AIB
approves a transaction (or AIB executes a letter of intent or other
Understanding) pursuant to which any person or entity or related group of
persons or entities acquires, directly or indirectly, record or beneficial (as
defined in Rule 13d-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended) ownership or control of 25% or more of the currently
outstanding shares of AIB Stock; or (B) any person or entity or related group of
persons or entities seeks to acquire 25% or more of the outstanding shares of
AIB Stock by tender offer or otherwise, and the Board of Directors of AIB does
not advise its shareholders that it does not support such tender offer or
acquisition and that it does support the Acquisition;
(viii) By Bancorp or FCB immediately upon the failure
of the shareholders of AIB to approve this Agreement and the Consolidation
Agreement;
(ix) By Bancorp, FCB and AIB, upon the mutual consent
of such parties; or
(x) By Bancorp or FCB upon the failure to satisfy the
condition of Subarticle 6.2(i).
(b) This Agreement shall be terminated if the Closing has not
occurred by February 28, 1999, unless mutually extended by the parties hereto.
8.2 IMMATERIAL BREACH. Notwithstanding anything to the contrary
contained herein, no party hereto shall have the right to terminate this
Agreement on account of its own breach or due to any immaterial breach by any
other party hereto of any covenant, agreement, representation, warranty, duty or
obligation hereunder.
8.3 EFFECT OF TERMINATION. No termination of this Agreement under this
Article VIII for any reason or in any manner shall release, or be construed as
so releasing, any party hereto from its obligations pursuant to Subarticles 5.3
or 9.1 hereof or from any liability or damage to any other party hereto arising
out of, in connection with or otherwise relating to, directly or indirectly,
said party's material breach, default or failure in performance of any of its
covenants, agreements, duties or obligations arising hereunder, or any breaches
of any representation or warranty contained herein arising prior to the date of
termination of this Agreement; provided, however, that no party hereto shall be
liable for any immaterial breach as delineated in Subarticle 8.2 hereof, no
party shall be liable for the failure to obtain any required shareholder or
regulatory approvals, and
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no party hereto shall be liable for termination of this Agreement pursuant to
Subarticle 8.1(a)(i) or pursuant to Subarticle 8.1(a)(ii) solely with respect to
a material breach of a representation or warranty made pursuant to Article III
or Article IV, if such representation or warranty was accurate as of the date
hereof or as of the Closing Date.
ARTICLE IX
GENERAL PROVISIONS
9.1 (a) COMPENSATION TO BANCORP AND FCB. (i) In the event that this
Agreement is terminated by Bancorp or FCB pursuant to Subarticle 8.1(a)(i),
then AIB shall forthwith pay jointly to Bancorp and FCB, immediately upon
demand, the aggregate sum of $150,000, plus actual out-of-pocket costs incurred
by FCB or Bancorp in connection with the Merger but not to exceed $100,000, for
a total amount not to exceed $250,000, which amount the parties hereto agree and
stipulate is reasonable and full liquidated damages and reasonable compensation
to Bancorp and FCB for their involvement in the transactions contemplated by
this Agreement to the date of such notice of termination and is not a penalty or
forfeiture.
(ii) In the event that this Agreement is terminated by
Bancorp or FCB pursuant to Subarticle 8.1(a)(vii), then AIB shall forthwith pay
jointly to Bancorp and FCB, immediately upon demand, the aggregate sum of
$600,000, which amount the parties hereto agree and stipulate is reasonable and
full liquidated damages and reasonable compensation to Bancorp and FCB for their
involvement in the transactions contemplated by this Agreement to the date of
such notice of termination and is not a penalty or forfeiture.
(b) COMPENSATION TO AIB. (i) In the event that this Agreement is
terminated by AIB pursuant to Subarticle 8.1(a)(ii), then FCB shall forthwith
pay to AIB, immediately upon demand, the aggregate sum of $150,000, plus
action-of-pocket costs incurred by AIB in connection with the Merger but not to
exceed $100,000, for a total amount not to exceed $250,000, which amount the
parties hereto agree and stipulate is reasonable and full liquidated damages and
reasonable compensation to AIB for its involvement in the transactions
contemplated by this Agreement to the date of such notice of termination and is
not a penalty or forfeiture.
(ii) In the event that this Agreement is terminated by
Bancorp or FCB pursuant to Subarticle 8.1(a)(x), then FCB shall forthwith pay to
AIB, immediately upon demand, the aggregate sum of One Hundred Twenty-Five
Thousand Dollars ($125,000) which amount the parties hereto agree and stipulate
is reasonable and full liquidated damages and reasonable compensation to AIB or
its involvement in the transactions contemplated by this Agreement to the date
of such notice of termination and is not a penalty or forfeiture.
9.2 EXPENSES. Each party hereto shall pay its own costs and expenses,
including, without limitation, those of its attorneys and accountants, incurred
in connection with this Agreement, the Consolidation
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Agreement, the Merger Agreement and the transactions covered and contemplated
hereby and thereby.
9.3 NOTICES. All notices, demands or other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered in
person (professional courier acceptable) or by United States mail, certified or
registered, with return receipt requested, by facsimile (with written
confirmation of receipt), or otherwise actually delivered, as follows:
(a) If to Bancorp or FCB:
First Coastal Bank
275 Main Street
El Segundo, California 90245
Attention: Mr. Don M. Griffith
Chairman of the Board
With a copy to:
Horgan, Rosen, Beckham & Coren, L.L.P.
21700 Oxnard Street, Suite 1400
Woodland Hills, California 91367
Attention: Gary M. Horgan, Esq.
(b) If to AIB:
American Independent Bank N.A.
1644 W. Redondo Beach Blvd.
Gardena, California 90247
Attention: Charles E. Brooks
President and
Chief Executive Officer
With a copy to:
Knecht & Hansen
1301 Dove Street, Suite 900
Newport Beach, California 92660
Attention: Loren P. Hansen, Esq.
The persons or address to which mailings or deliveries shall be made may change
from time to time by notice given pursuant to the provisions of this Subarticle
9.3. Any notice, demand or other communication given pursuant to the provisions
of this Subarticle 9.3 shall be deemed to have been given on the date actually
delivered or three days following the date mailed or upon written confirmation
of receipt of facsimile transmission, as the case may be.
9.4 SUCCESSORS AND ASSIGNS. All terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective transferees, successors and assigns; provided, however, that, except
as otherwise contemplated herein, this Agreement and all rights, privileges,
duties and obligations of the parties hereto may not be assigned or delegated by
any party hereto without the prior written consent of the other parties to this
Agreement.
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9.5 EFFECT OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Agreement or in any Schedule shall terminate
immediately after the Effective Time of the Consolidation.
9.6 THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit, or create any right or cause of action in or on
behalf of, any person other than the parties hereto. As used in this Agreement,
the term party or parties shall refer only to AIB, Bancorp, FCB or FCB Interim
or any of them.
9.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
9.8 GOVERNING LAW. This Agreement is made and entered into in the State
of California, and the laws of that state, except to the extent superseded by
provisions of Title 12 of the United States Code, shall govern the validity and
interpretation hereof and the performance of the parties hereto of their
respective duties and obligations hereunder.
9.9 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
9.10 WAIVER AND MODIFICATION. No waiver of any term, provision or
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such term, provision or condition of this Agreement. This Agreement, the
Consolidation Agreement and the Merger Agreement, when duly executed and
delivered, may be modified or amended by action of the Boards of Directors of
Bancorp, FCB, FCB Interim or AIB to the extent permitted by law without action
by their respective shareholders. This Agreement may be modified or amended only
by an instrument of equal formality signed by the parties or their duly
authorized agents.
9.11 KNOWLEDGE. In all representations and warranties concerning the
knowledge or notice of AIB, Bancorp or FCB, wherever included herein, there
shall be imputed to AIB, Bancorp or FCB the knowledge and notice of their
respective executive officers and directors.
9.12 ATTORNEYS' FEES. In the event any of the parties to this Agreement
brings an action or suit against any other party by reason of any breach of any
covenant, agreement, representation, warranty or other provision hereof, or any
breach of any duty or obligation created hereunder by such other party, the
prevailing party in whose favor final judgment is entered shall be entitled to
have and recover of and from the losing party all reasonable costs and expenses
incurred or sustained by such prevailing party in connection with such suit or
action, including, without limitation, legal fees and court costs (whether or
not taxable as such).
9.13 ENTIRE AGREEMENT. The making, execution and delivery of this
Agreement by the parties hereto have been induced by no representations,
statements, warranties or agreements other than those herein expressed. This
Agreement embodies the entire understanding of the parties and there are no
further or other agreements or understandings,
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written or oral, in effect among the parties relating to the subject matter
hereof, unless expressly referred to by reference herein.
9.14 SEVERABILITY. Whenever possible, each provision of this Agreement
and every related document shall be interpreted in such manner as to be valid
under applicable law. However, if any provision of any of the foregoing shall be
invalid or prohibited under said applicable law, it shall be construed,
interpreted and limited to effectuate its purpose to the maximum legally
permissible extent. If it cannot be so construed and interpreted so as to be
valid under such law, such provision shall be ineffective to the extent of such
invalidity or prohibition without invalidating the remainder of such provision
or the remaining provisions of this Agreement, and this Agreement shall be
construed to the maximum extent possible to carry out its terms without such
invalid or unenforceable provision or portion thereof.
9.15 EFFECT OF DISCLOSURE. Any list, statement, document, writing or
other information set forth in, referenced to or attached to any Schedule or
Exhibit delivered pursuant to any provision of this Agreement shall be deemed to
constitute disclosure for purposes of any other Schedule or Exhibit required to
be delivered pursuant to any other provision of this Agreement.
9.16 PUBLICITY. The parties hereto agree that they will coordinate on
any publicity concerning this Agreement, and the transactions contemplated
hereby. No party shall issue any press release, publicity statement or other
public notice relating in any way to this Agreement or any of the transactions
contemplated hereby without obtaining the prior consent of the others, which
consent shall not be unreasonably withheld.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the day and year first above written.
FIRST COASTAL BANCSHARES,
A CALIFORNIA CORPORATION
By: /s/ DON M. GRIFFITH
---------------------------------
Don M. Griffith
Chairman of the Board
FIRST COASTAL BANK, N.A.
By: /s/ DON M. GRIFFITH
---------------------------------
Don M. Griffith
Chairman of the Board
AMERICAN INDEPENDENT BANK N.A.
By: /s/ CHARLES E. BROOKS
---------------------------------
Charles E. Brooks
Chairman, President and
Chief Executive Officer
By: /s/ TIFFANY DIETZ
---------------------------------
Tiffany Dietz
Assistant Secretary
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EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
First Coastal Bancshares
FIRST. The name of the corporation is First Coastal Bancshares.
SECOND. The purpose of the corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust company
business or the practice of a profession permitted to be incorporated by the
California Corporations Code.
THIRD. The name of the corporation's initial agent for service of
process in the State of California is CT Corporation System.
FOURTH. (a) The corporation is authorized to issue two classes of
shares, each without par value, designated "Preferred Stock" and "Common Stock",
respectively. The number of shares of Preferred Stock authorized to be issued is
5,000,000 and the number of shares of Common Stock authorized to be issued is
5,000,000.
(b) The Preferred Stock may be divided into such number of
series as the board of directors may determine. The board of directors is
authorized to determine and alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, and to fix the number of shares of any series of Preferred Stock and the
designation of any such series of Preferred Stock. The board of directors,
within the
<PAGE> 2
limits and restrictions stated in any resolution or resolutions of the board of
directors originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
FIFTH. (a) The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
(b) The corporation is authorized to indemnify its agents to the
fullest extent permissible under California law. For purposes of this provision,
the term "agent" has the meaning set forth from time to time in Section 317 of
the California Corporations Code.
(c) Any amendment, repeal or modification of any provision of this
Article Fifth shall not adversely affect any right of protection of an agent of
this corporation existing at the time of such amendment, repeal or modification.
IN WITNESS WHEREOF, I have executed these Articles of Incorporation
this 17th day of October, 1996.
/s/ Gregory H. Cooper
-----------------------------------------
Gregory H. Cooper,
Incorporator
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<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
FIRST COASTAL BANCSHARES
The undersigned certify that:
1. They constitute a majority of the directors of FIRST COASTAL
BANCSHARES, a California corporation.
2. Article FOURTH of the Articles of Incorporation of this
corporation is amended to read as follows:
FOURTH. (a) The corporation is authorized to issue two classes of
shares, each without par value, designated "Preferred Stock" and
"Common Stock," respectively. The number of shares of Preferred
Stock authorized to be issued is 5,000,000 and the number of shares
of Common Stock authorized to be issued is 50,000,000.
3. No shares have been issued.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
DATE: March 6, 1997
/s/ Don M. Griffith
-----------------------------------------
Don M. Griffith
/s/ Deborah A. Marsten
-----------------------------------------
Deborah A. Marsten
<PAGE> 4
CERTIFICATE OF DETERMINATION OF THE
SERIES A 10% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF FIRST COASTAL BANCSHARES
Don M. Griffith and Deborah A. Marsten hereby certify that:
1. They are the President and Secretary, respectively, of First Coastal
Bancshares, a California corporation (the "Company").
2. The following resolution has been duly adopted by the Board of
Directors of the Company:
RESOLVED, that there shall be a series of preferred stock designated
as the Series A 10% Cumulative Convertible Preferred Stock (the "Series
A"). The Series A shall be perpetual. Each share of Series A shall be
identical in all respects with the other shares of Series A. Additional
rights, privileges and restrictions of the Series A shall be as follows:
1. Number of Shares. The authorized number of shares of Series A
shall initially be 430,000, which number may from time to time be
increased (but not in excess of the total number of authorized shares of
preferred stock) by the Board of Directors, with the approval of the
shareholders, or decreased (but not below the number of shares then
outstanding) by the Board of Directors.
2. Dividends. The holders of Series A shall be entitled to receive,
when and as declared by the Board of Directors, but only out of funds
legally available therefor, cumulative cash dividends at an annual rate of
ten percent (10%) of the liquidation preference of $6.75 per share.
Dividends shall be payable quarterly in arrears on the fifteenth days of
January, April, July and October, or if such date is not a business day,
on the next business day, in each year with respect to the quarterly
dividend period (or portion thereof) ending on the day preceding such
respective dividend payment date, to shareholders of record on the
respective date, not exceeding fifty days preceding such dividend payment
date, fixed for the purpose by the Board of Directors in advance of
payment of each particular dividend. The first such dividend payment date
shall be October 15, 1997.
Dividends on the shares of Series A shall begin to accrue and shall
be cumulative from the date of issue of such shares of Series A.
So long as any share of Series A remains outstanding, no dividend
whatever shall be paid or declared and no distribution made on any Junior
Stock (as defined in paragraph 7) other than a dividend payable in Junior
Stock, and no shares of Junior Stock shall be purchased, redeemed or
otherwise acquired for consideration by the Company, directly or
indirectly (other than as a result of a reclassification of Junior Stock,
or the exchange or conversion of one Junior Stock for or into another
Junior Stock, or other than through the use of the proceeds of a
substantially contemporaneous sale of other Junior Stock), unless (i) all
dividends on the preferred stock of all series accrued for all past
quarter-yearly
<PAGE> 5
dividend periods shall have been paid and the full dividend thereon for
the then current quarter-yearly dividend period shall have been paid or
declared and set apart for payment and (ii) all prior sinking fund
requirements with respect to all series of preferred stock shall have been
complied with. Subject to the foregoing, and not otherwise, such dividends
(payable in cash, stock or otherwise) as may be determined by the Board of
Directors may be declared and paid on any Junior Stock from time to time
out of any funds legally available therefor, and the Series A shall not be
entitled to participate in any such dividends, whether payable in cash,
stock or otherwise.
3. Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, the
holders of Series A shall be entitled, before any distribution or payment
is made to the holders of any Junior Stock, to be paid in full the
liquidation preference of $6.75 per share, together with accrued dividends
to such distribution or payment date whether or not earned or declared.
If such payment shall have been made in full to all holders of
preferred stock, the remaining assets of the Company shall be distributed
among the holders of Junior Stock, according to their respective rights
and preferences and in each case according to their respective numbers of
shares. For the purposes of this paragraph 3, the consolidation or merger
of the Company with any other entity shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company only if the Company
is the surviving or continuing entity.
4. Redemption. If all quarterly dividends have been paid on all
outstanding shares of Series A, after July 15, 1998, the Company, at the
option of the Board of Directors and with the approval of the Board of
Governors of the Federal Reserve System, if such approval is required in
order for the Series A to qualify as "Tier 2 Capital," may redeem the
whole or any part of the shares of Series A at the time outstanding, at
any time or from time to time, upon notice given as hereinafter specified,
at the redemption price in effect at the redemption date as provided in
this paragraph 4, together with accrued dividends to the redemption date.
The redemption price for shares of Series A shall be $6.89 per share if
the date designated for redemption is after July 15, 1998 and on or before
July 14, 2000, $6.82 per share if thereafter and on or before July 14,
2001 and $6.75 per share if thereafter.
Notice of every redemption of shares of Series A shall be mailed by
first class mail, postage prepaid, addressed to the holders of record of
the shares to be redeemed at their respective last addresses as they shall
appear on the books of the Company. Such mailing shall be at least 30 days
and not more than 60 days prior to the date fixed for redemption. Any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the shareholder receives
such notice, and failure duly to give such notice by mail, or any defect
in such notice, to any holder of shares of Series A designated for
redemption shall not affect the validity of the proceedings for the
redemption of any other shares of Series A.
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<PAGE> 6
In case of redemption of a part only of the shares of Series A at
the time outstanding, the redemption may be either pro rata or by lot. The
Board of Directors shall have full power and authority, subject to the
provisions herein contained, to prescribe the terms and conditions upon
which shares of the Series A shall be redeemed from time to time.
If notice of redemption shall have been duly given, and if, on or
before the redemption date specified therein, all funds necessary for such
redemption shall have been set aside by the Company, separate and apart
from its other funds, in trust for the pro rata benefit of the holders of
the shares called for redemption, so as to be and continue to be available
therefor, then, notwithstanding that any certificate for shares so called
for redemption shall not have been surrendered for cancellation, all
shares so called for redemption shall no longer be deemed outstanding on
and after such redemption date, and all rights with respect to such shares
shall forthwith on such redemption date cease and terminate, except only
the right of the holders thereof to receive the amount payable on
redemption thereof, without interest.
Any funds so set aside by the Company which shall not be required
for such redemption because of the exercise of any right of conversion or
exchange subsequent to the date such funds are set aside shall be released
to the Company forthwith. Any funds so set aside and unclaimed at the end
of three years from such redemption date shall, to the extent permitted by
law, be released to the Company, after which repayment the holders of the
shares so called for redemption shall look only to the Company for payment
thereof.
5. Conversion. The holders of shares of Series A shall have the
right, at their option, to convert such shares into common stock of the
Company at any time on and subject to the following terms and conditions:
a. The shares of Series A shall be convertible at the
principal office of the Company, and at such other office or
offices, if any, as the Board of Directors may designate, into fully
paid and non-assessable shares (calculated as to each conversion to
the nearest 1/100th of a share) of common stock of the Company, at
the conversion price, adjusted as hereinafter provided, in effect at
the time of conversion, each share of Series A being taken at $6.75
for the purpose of such conversion. The price at which common stock
shall be delivered upon conversion (herein called the "conversion
price") shall initially be equal to $1.35 per share of such common
stock. The number of shares of common stock each share of Series A
may be converted into shall be determined by dividing $6.75 by the
applicable conversion price of the common stock.
b. In order to convert shares of Series A into common stock
the holder thereof shall surrender at the office hereinabove
mentioned the certificate or certificates therefor, duly endorsed or
assigned to the Company or in blank, and give written notice to the
Company at said office that he elects to convert such
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<PAGE> 7
shares. Upon conversion no allowance or adjustment shall be made for
dividends on either class of stock.
Shares of Series A shall be deemed to have been converted
immediately prior to the close of business on the day of the
surrender of such shares for conversion in accordance with the
foregoing provisions, and the person or persons entitled to receive
the common stock issuable upon such conversions shall be treated for
all purposes as the record holder or holders of such common stock at
such time. As promptly as practicable on or after the conversion
date, the Company shall issue and shall deliver at said office (or
by mail if so requested by the person converting), a certificate or
certificates for the number of full common stock issuable upon such
conversion, together with payment in lieu of any fraction of a
share, as hereinafter provided, to the person or persons entitled to
receive the same. In case shares of Series A are called for
redemption, the right to convert such shares shall cease and
terminate at the close of business on the fifth full business day
prior to the date fixed for redemption, unless default shall be made
in payment of the redemption price.
c. No fractional common stock shall be issued upon conversion
of shares of Series A, but, instead of any fraction which would
otherwise be issuable in respect of the aggregate number of shares
of Series A surrendered for conversion at one time by the same
holder, the Company shall pay a cash adjustment in an amount equal
to the same fraction of the conversion price on the date on which
the certificate or certificates for such shares were duly
surrendered for conversion, or, if such date is not a day on which
both the Company and U.S. Stock Transfer Corp., or any successor
thereto (the "Transfer Agent") are open for business, on the next
day both the Company and the Transfer agent are open for business.
d. The conversion price shall be reduced in certain instances
as provided in clauses (i), (ii), (vi) and (viii) below, and shall
be increased in certain instances as provided in clauses (ii) and
(viii) below.
i. In case the conversion price in effect immediately
prior to the close of business on any day shall exceed by 25
cents or more the amount determined at the close of business
on such day by dividing:
(1) an amount equal to (a) the number of shares
of the Company's common stock outstanding on the date of
the issuance of the Series A, multiplied by the
conversion price, plus (b) the aggregate of the amount
of all consideration received by the Company upon the
issuance of Additional Common Stock (as here inafter
defined), minus (c) all dividends and other
distributions on common stock of the Company, other than
in cash out of its earned surplus or in common stock of
the Company, which have been paid or made after the date
of the issuance of the Series A, by,
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<PAGE> 8
(2) the sum of (a) the number of shares of the
Company's common stock outstanding on the date of the
issuance of the Series A and (b) the number of shares of
Additional Common Stock which shall have been issued,
the conversion price shall be reduced, effective immediately
prior to the opening of business on the next succeeding day,
by an amount equal to the amount by which such conversion
price shall exceed the amount so determined. The foregoing
amount of 25 cents (or such amount as theretofore adjusted)
shall be subject to adjustment as provided in clauses (vii)
and (viii) below, and such amount (or such amount as
theretofore adjusted) is referred to in such paragraphs as the
"Differential Amount".
ii. The term "Additional Common Stock" as used herein
shall mean all common stock issued by the Company after the
date of the issuance of the Series A (including shares deemed
to be "Additional Common Stock" pursuant to clause (viii)
below,) whether or not subsequently reacquired or retired by
the Company, other than:
(1) shares issued upon conversion of shares of
Series A;
(2) shares issued (a) upon exercise of options
granted or to be granted pursuant to stock option plans
approved by common stock holders or distributed as
compensation pursuant to any restricted stock plan in
existence on the date of the issuance of the Series A or
(b) pursuant to warrants in existence on the date of the
issuance of the Series A; and
(3) shares issued by way of dividend or other
distribution on common stock excluded from the
definition of Additional Common Stock by the foregoing
subclauses (1) or (2) or this subclause (3) or on common
stock resulting from any subdivision or combination of
common stock so excluded.
The sale or other disposition of common stock or other
securities held in the treasury of the Company on the date of
the issuance of the Series A shall be deemed the issuance
Additional Common Stock, but if any such shares or other
shares are reacquired or acquired after such date and,
thereafter are sold or otherwise disposed of, such disposition
shall not be deemed an issuance thereof.
In case the Company shall issue any security convertible
into Additional Common Stock or any right, option or warrant
to purchase Additional Common Stock, the Company shall be
deemed to have issued the maximum number of common stock into
which such convertible security may be converted or the
maximum number of common stock
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<PAGE> 9
issuable upon the exercise of such right, option or warrant
immediately prior to the close of business on the later of the
date of issuance of such convertible security, right, option
or warrant or the date as of which the conversion right or
purchase right to which such security is entitled first became
exercisable and for a consideration determined as provided in
clauses (iii), (iv), (v) and (vi) below on the assumption that
such common stock are all issued at the minimum conversion
price or at the minimum purchase price and that the Company
received any consideration payable in connection therewith. If
no minimum price is specified in any right, option or warrant
and such common stock are to be issued at a purchase price
related to the market value of the common stock, the purchase
price shall be deemed to be the market value of the common
stock at the later of the date such right, option or warrant
is granted or the date it first became exercisable. In the
case of any security convertible into Additional Common Stock
or any right, option or warrant to purchase Additional Common
Stock which is not outstanding on the date of issuance of the
Series A, on the termination of the right to convert such
security or the expiration of any right, option or warrant to
purchase Additional Common Stock, the conversion price shall
be readjusted to such conversion price as would have been
obtained had the adjustments made upon the issuance of such
convertible security, right, option or warrant been made upon
the basis of the issuance, and on the dates and for the prices
at which issued, of only the number of common stock actually
issued upon the conversion of such convertible security or the
exercise of such right, option or warrant. Except as provided
in the preceding sentence, no adjustment of the conversion
price shall be made as a result of the actual issuance of
common stock upon exercise of the right to convert another
security into common stock or upon the exercise of any right,
option or warrant to purchase common stock.
iii. In case of the issuance of Additional Common Stock
for a consideration, part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to
be the amount of cash received by the Company for such shares
(or, if such Additional Common Stock are offered by the
Company for subscription, the subscription price, or, if such
Additional Common Stock are sold to underwriters or dealers
for public offering without a subscription offering, the
initial public offering price), without deducting therefrom
any compensation or discount in the sale, underwriting or
purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in
connection therewith.
iv. In case of the issuance (otherwise than as a
dividend or other distribution on any shares of the Company or
upon conversion or exchange of other securities of the
Company) of Additional Common Stock for a consideration, part
or all of which shall be other than cash, the
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<PAGE> 10
amount of the consideration therefor other than cash shall be
deemed to be the value of such consideration as determined by
the Board of Directors, irrespective of the accounting
treatment thereof. The reclassification of securities other
than common stock into securities including common stock shall
be deemed to involve the issuance for a consideration other
than cash of such common stock immediately prior to the close
of business on the date fixed for the determination of
shareholders entitled to receive such common stock.
v. Additional Common Stock issuable by way of dividend
or other distribution on any class of capital stock of the
Company shall be deemed to have been issued without
consideration, and, except as otherwise provided in clause
(vii) below, shall be deemed to have been issued immediately
prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such
dividend or other distribution.
A dividend or other distribution in cash or in property
(including any dividend or other distribution in securities
other than common stock) shall be deemed to have been paid or
made immediately prior to the close of business on the date
fixed for the determination of shareholders entitled to
receive such dividend or other distribution and the amount of
such dividend or other distribution in property shall be
deemed to be the value of such property as of the date of the
adoption of the resolution declaring such dividend or other
distribution, as determined by the Board of Directors at or as
of that date. In the case of any such dividend or other
distribution on common stock which consists of securities
which are convertible into or exchangeable for common stock,
such securities shall be deemed to have been issued for a
consideration equal to the value thereof as so determined.
If, upon the payment of any dividend or other
distribution in cash or in property (excluding common stock
but including all other securities), outstanding common stock
are canceled or required to be surrendered for cancellation,
on a pro rata basis, the excess of the number of common stock
outstanding immediately prior thereto over the number to be
outstanding immediately thereafter (less that portion of such
excess attributable to the cancellation of shares excluded
from the definition of Additional Common Stock by subclauses
(1), (2) or (3) of clause (ii) above), shall be deducted from
the sum computed pursuant to subclause (2) of clause (i) above
for the purposes of all determinations under such clause (i)
made immediately prior to the close of business on the date
fixed for the determination of shareholders entitled to
receive such dividend or other distribution and at any time
thereafter.
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The reclassification (including any reclassification
upon a consolidation or merger in which the Company is the
continuing Company, but excluding any reclassification of
securities in connection with a transaction whereby the Series
A will be exchanged pursuant to paragraph 7) of common stock
into securities including securities other than common stock
shall be deemed to involve (a) a distribution on common stock
of such securities other than common stock made immediately
prior to the close of business on the effective date of the
reclassification, and (b) a combination or subdivision, as the
case may be, of the number of common stock outstanding
immediately prior to such reclassification into the number
outstanding immediately thereafter.
The issuance by the Company of rights or warrants to
subscribe for or purchase securities of the Company shall not
be deemed to be a dividend or distribution of any kind.
vi. In case of the issuance of Additional Common Stock
upon conversion or exchange of other securities of the
Company, the amount of the consideration received by the
Company for such Additional Common Stock shall be deemed to be
the total of (a) the amount of the consideration, if any,
received by the Company upon the issuance of such other
securities, plus (b) the amount of the consideration, if any,
other than such other securities, received by the Company
(except in adjustment of interest or dividends) upon such
conversion or exchange. In determining the amount of the
consideration received by the Company upon the issuance of
such other securities (a) the amount of the consideration in
cash and other than cash shall be determined pursuant to
clauses (iii), (iv) and (v) above, and (b) if securities of
the same class or series of a class as such other securities
were issued for different amounts of consideration, or if some
were issued for no consideration, then the amount of the
consideration received by the Company upon the issuance of
each of the securities of such class or series, as the case
may be, shall be deemed to be the average amount of the
consideration received by the Company upon the issuance of all
the securities of such class or series, as the case may be.
vii. In case Additional Common Stock is issued as a
dividend or other distribution on any class of capital stock
of the Company, the conversion price and the Differential
Amount in effect at the opening of business on the day
following the date fixed for determination shall be reduced by
multiplying each of them by a fraction of which the numerator
shall be the number of common stock outstanding at the close
of business on the date fixed for such determination and the
denominator shall be the sum of such number and the number of
shares constituting such dividend or other distribution, such
reductions to become effective immediately after the opening
of business on the day following the date fixed for such
determination. In the event of any such dividend or other
distribution, the
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<PAGE> 12
Additional Common Stock issued in connection therewith shall
be deemed to have been issued immediately after the opening of
business on the day following the date fixed for such
determination. For the purposes of this clause (vii), the
number of shares of common stock at any time outstanding shall
not include shares held in the treasury of the Company. So
long as any share of Series A is outstanding, the Company
shall not pay any dividend or make any distribution on common
stock held in the treasury of the Company.
viii. In case outstanding common stock shall be
subdivided into a greater number of common stock, the
conversion price and the Differential Amount in effect at the
opening of business on the day following the day upon which
such subdivision becomes effective shall each be
proportionately reduced, and conversely, in case outstanding
common stock shall each be combined into a smaller number of
common stock, the conversion price and the Differential Amount
in effect at the opening of business on the day following the
day upon which such combination becomes effective shall each
be proportionately increased, such reductions or increases as
the case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective. In the
event of any such subdivision, the number of shares of common
stock outstanding immediately thereafter, to the extent of the
excess thereof over the number outstanding immediately prior
thereto (less that portion of such excess attributable to the
subdivision of shares excluded from the definition of
Additional Common Stock by subclauses (1), (2) or (3) of
clause (ii) above), shall be deemed to be "Additional Common
Stock" and to have been issued immediately after the opening
of business on the day following the day upon which such
subdivision shall have become effective and without
consideration. In the event of any such combination, the
excess of the number of common stock outstanding immediately
prior thereto over the number outstanding immediately
thereafter (less that portion of such excess attributable to
the combination of shares excluded from the definition of
Additional Common Stock by subclauses (1), (2), (3) or (4) of
clause (ii) above) shall be deducted from the sum computed
pursuant to subclause (2) of clause (i) above for the purposes
of all determinations under such clause (i) made on any day
after the day upon which such combination becomes effective.
Common stock held in the treasury of the Company on the date
of the issuance of the Series A and so held continuously
thereafter shall not be considered outstanding for the
purposes of this clause (viii), but shares acquired for the
treasury thereafter shall be considered outstanding for such
purposes.
ix. The Board of Directors may make such adjustments to
the conversion price, in addition to those required by this
subdivision (d), as shall be determined by the Board, as
evidenced by a Board resolution, to
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<PAGE> 13
be advisable in order to avoid taxation as far as practicable
of any dividend of stock or stock rights or of any event
treated as such for Federal income tax purposes to the
recipients. The Board of Directors shall have the power to
resolve any ambiguity or correct any error in this subdivision
(d) and its action in so doing, as evidenced by a Board
resolution, shall be final and conclusive.
e. Whenever the conversion price is adjusted as herein
provided:
i. The Company shall compute the adjusted conversion
price and shall cause to be prepared a certificate signed by
the Company's secretary setting forth the adjusted conversion
price and a brief statement of the facts requiring such
adjustment and the computation thereof; such certificate shall
forthwith be filed with the Transfer Agent for the Series A;
and
ii. A notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price
shall, as soon as practicable, be mailed to the holders of
record of outstanding shares of the Series A.
f. In case:
i. The Company shall declare a dividend or other
distribution on its common stock, other than in cash;
ii. The Company shall authorize the issuance to all
holders of its common stock of rights or warrants entitling
them to subscribe for or purchase any common stock or any
other subscription rights or warrants; or
iii. Of any reclassification of the capital stock of the
Company (other than a subdivision or combination of its
outstanding common stock), or of any consolidation or merger
to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale,
lease, exchange or other disposition of all or substantially
all the property and assets of the Company; or
iv. Of the voluntary or involuntary liquidation,
dissolution or winding up of the Company;
then the Company shall cause to be mailed to the Transfer
Agent for the Series A and to the holders of record of the
outstanding shares of Series A, at least 20 days (or 10 days
in any case specified in clause (i) or (ii) above) prior to
the applicable record or effective date hereinafter specified,
a notice stating (x) the date as of which the holders of
record of common
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<PAGE> 14
stock to be entitled to such dividend, distribution, rights or
warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, lease,
exchange, disposition, liquidation, dissolution or winding up
is expected to become effective, and the date as of which it
is expected that holders of record of common stock shall be
entitled to exchange their shares for securities or other
property, if any, deliverable upon such reclassification,
consolidation, merger, sale, lease, exchange, disposition,
liquidation, dissolution or winding up. The failure to give
the notice required by this subdivision (f), or any defect
therein, shall not affect the legality or validity of any such
dividend, distribution, right, warrant, reclassification,
consolidation, merger, sale, lease, exchange, disposition,
liquidation, dissolution or winding up, or the vote on any
action authorizing such.
v. The Company shall at all times reserve and keep
available out of its authorized but unissued common stock, for
the purpose of issuance upon conversion of the Series A, the
full number of common stock then deliverable upon the
conversion of all shares of Series A then outstanding.
vi. The Company will pay any and all taxes that may be
payable in respect of the issuance or delivery of common stock
on conversion of Series A. The Company shall not, however, be
required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of common stock
in a name other than that in which the Series A so converted
were registered, and no such issuance or delivery shall be
made unless and until the person requesting such issuance has
paid to the Company the amount of any such tax or has
established to the satisfaction of the Company that such tax
has been paid.
g. For the purpose of this paragraph 5, the term "common
stock" shall include any shares of the Company of any class or
series which has no preference or priority in the payment of
dividends or in the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. However,
common stock issuable upon conversion of Series A shall include only
shares of the class designated as common stock as of the original
date of issuance of the Series A, or shares of the Company of any
classes or series resulting from any reclassification or
reclassifications thereof and which have no preference or priority
in the payment of dividends or in the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up
of the Company and which are not subject to redemption by the
Company, provided that if at any time there shall be more than one
such resulting class or series, the shares of each such class and
series then so issuable shall be substantially in the proportion
which the total number of shares of such class and series resulting
from all such reclassifications bears
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<PAGE> 15
to the total number of shares of all such classes and series
resulting from all such reclassifications.
h. The certificate of any independent firm of public
accountants of recognized standing selected by the Board of
Directors shall be presumptive evidence of the correctness of any
computation made under this paragraph 5.
6. Voting Rights. Except as hereinafter provided or as otherwise
prescribed by applicable law, the holders of Series A shall not have any
voting rights.
a. If and whenever four quarterly dividends (whether or not
consecutive) payable on any series of preferred stock shall be in
arrears and unpaid in whole or in part whether or not earned or
declared, the number of directors then constituting the Board of
Directors shall be increased by two and the holders of shares of
Series A, together with the holders of shares of every other series
of preferred stock similarly entitled to vote for the election of
two additional directors, voting separately as a class, regardless
of series, shall be entitled to elect the two additional directors
at any annual meeting of shareholders or special meeting held in
place thereof, or at a special meeting of the holders of such series
of the preferred stock called as hereinafter provided. So long as
any shares of the Series A are outstanding, and the right to vote
for two additional directors is not currently exercised, the
Company's bylaws shall provide for a range of directors, and the
number of directors constituting the Board of Directors shall always
be at least two less than the maximum allowed by the Company's
bylaws. Whenever all arrears in dividends on the preferred stock
then outstanding shall have been paid and dividends thereon for the
current quarterly dividend period shall have been paid or declared
and set apart for payment, then the right of the holders of such
series of the preferred stock to elect such additional two directors
shall cease (but subject always to the same provisions for the
vesting of such voting rights in the case of any similar future
arrearages in dividends), and the terms of office of all persons
elected as directors by the holders of such series of the preferred
stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly. At any time after such
voting power shall have been so vested in the holders of shares of
Series A and of any other series of preferred stock, the secretary
of the Company may, and upon the written request of any holder of
Series A (addressed to the secretary at the principal office of the
Company) shall, call a special meeting of the holders of the Series
A, and of other series of preferred stock similarly entitled to
vote, for the election of the two directors to be elected by them as
herein provided, with such call to be made by notice similar to that
provided in the by-laws for a special meeting of the shareholders or
as required by law. If any such special meeting required to be
called as above provided shall not be called by the secretary within
20 days after receipt of any such request, then any holder of shares
of Series A may call such meeting, upon the notice above provided,
and for that purpose shall have access to the stock books of the
Company. The directors elected at any such special
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<PAGE> 16
meeting shall hold office until the next annual meeting of the
shareholders or special meeting held in place thereof if such office
shall not have previously terminated as above provided. In case any
vacancy shall occur among the directors elected by the holders of
such series of the preferred stock, a successor shall be elected by
the Board of Directors to serve until the next annual meeting of the
shareholders or special meeting held in place thereof upon the
nomination of the then remaining director elected by the holders of
such series or the successor of such remaining director. If the
holders of shares of Series A become entitled under the foregoing
provisions to elect or participate in the election of two directors
as a result of dividend arrearages, this shall not affect the right
of such holders to vote as stated in subdivision (b) of this
paragraph 6.
b. So long as any shares of Series A are outstanding, in
addition to any other vote or consent of shareholders required by
law or by the Articles of Company the consent of the holders of at
least a majority of the shares of Series A and of all other series
of preferred stock similarly entitled to vote upon the matters
specified in this paragraph 6, at the time outstanding, acting as a
single class regardless of series, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called
for the purpose, shall be necessary for effecting or validating:
i. Any amendment, alteration or repeal of any of the
provisions of the Articles of Company, or of the by-laws, of
the Company, which affects adversely the voting powers, rights
or preferences of the holders of preferred stock; provided,
however, that the amendment of the provisions of the Articles
of Company so as to authorize or create, or to increase the
authorized amount of, any Junior Stock or any shares of any
class ranking on a parity with Preferred stock shall not be
deemed to affect adversely the voting powers, rights or
preferences of the holders of Preferred stock, and provided
further that if any such amendment, alteration or appeal would
affect adversely any voting powers, rights or preferences of
the Series A which are not enjoyed by some or all of the other
series otherwise entitled to vote in accordance with this
clause (i), the consent of the holders of at least a majority
of the Series A and of all other series similarly affected,
similarly given, shall be required in lieu of the consent of
the holders of at least a majority of the Shares of Series A
and of all other series of the preferred stock otherwise
entitled to vote in accordance with this paragraph 6.
ii. The authorization or creation of, or the increase in
the authorized amount of, any shares of any class or any
security convertible into shares of any class ranking prior to
the preferred stock in the distribution of assets on any
liquidation, dissolution or winding up of the Company or in
the payment of dividends; or
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<PAGE> 17
iii. The merger or consolidation of the Company with or
into any other entity, unless the resulting entity will
thereafter have no class of shares and no other securities
either authorized or outstanding ranking prior to Series A in
the distribution of its assets on liquidation, dissolution or
winding up or in the payment of dividends, except the same
number of shares and the same amount of other securities with
the same rights and preferences as the shares and securities
of the Company respectively authorized and outstanding
immediately preceding such merger or consolidation, and each
holder of shares of Series A immediately preceding such merger
or consolidation shall receive the same number of shares, with
the same rights and preferences, of the resulting entity;
provided, however, that no such consent of the holders of Series A
shall be required if, at or prior to the time when such amendment,
alteration or repeal is to take effect or when the issuance of any
such prior shares or convertible security is to be made, or when
such consolidation or merger, purchase or redemption is to take
effect, as the case may be, provision is made for the redemption of
all shares of Series A at the time outstanding.
7. Definitions. As used herein with respect to Series A, the
following terms shall have the following meanings:
a. The term "Junior Stock" shall mean the common stock and any
other class or series of shares of the Company hereafter authorized
over which Series A has preference or priority in the payment of
dividends or in the distribution of assets on any liquidation,
dissolution or winding up of the Company.
b. The term "accrued dividends", with respect to any share of
any class or series, shall mean an amount computed at the annual
dividend rate for the class or series of which the particular share
is a part, from the date on which dividends on such share became
cumulative to and including the date to which such dividends are to
be accrued, less the aggregate amount of all dividends theretofore
paid thereon.
8. Miscellaneous. The shares of Series A shall not have any
relative, participating, optional or other special rights and powers other
than as set forth herein.
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3. The number of authorized shares of Series A is 430,000, none of which
are issued or outstanding.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
June 20, 1997
/s/ Don M. Griffith
--------------------------------
Don M. Griffith
/s/ Deborah A. Marsten
--------------------------------
Deborah A. Marsten
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<PAGE> 19
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION OF
FIRST COASTAL BANCSHARES
Don M. Griffith and Deborah A. Marsten certify that:
1. They are the President and Chief Financial Officer, respectively, of
First Coastal Bancshares, a California Corporation (the "Corporation").
2. Paragraph (a) of Article Fourth of the Corporation's Articles of
Incorporation shall be amended to read in full as follows:
"FOURTH. (a) The corporation is authorized to issue two classes
of shares, each without par value, designated "Preferred Stock" and
"Common Stock," respectively. The number of shares of Preferred Stock
authorized to be issued is 5,000,000 and the number of shares of
Common Stock authorized to be issued is 10,000,000. Upon the amendment
of this article to read as herein set forth every five outstanding
shares of Common Stock is combined, reconstituted, and converted into
one share of Common Stock."
3. The foregoing amendment to the Articles of Incorporation, amending
Paragraph (a) of Article Fourth, has been duly approved by the Corporation's
Board of Directors by Unanimous Written Consent on November 9, 1998.
4. As of November 12, 1998, there were 3,322,757 shares of Company
Common Stock outstanding and entitled to vote with respect to the foregoing
amendment.
5. The foregoing amendment to the Articles of Incorporation, amending
Paragraph (a) of Article Fourth, has been duly approved by Action by Written
Consent of Shareholders on November 12, 1998, by a majority of the outstanding
voting shares of the Corporation, in accordance with Section 903(a)(2) of the
Corporation Code of California.
/s/ DON M. GRIFFITH
------------------------------
Don M. Griffith, President
/s/ DEBORAH A. MARSTEN
------------------------------
Deborah A. Marsten,
Chief Financial Officer
The undersigned declared under penalty of perjury under the laws of the
State of California that the matters set forth in the foregoing Certificated
are true and correct of their own knowledge.
Executed at El Segundo, California on November 12, 1998
/s/ DON M. GRIFFITH
------------------------------
Don M. Griffith, President
/s/ DEBORAH A. MARSTEN
------------------------------
Deborah A. Marsten,
Chief Financial Officer
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
FIRST COASTAL BANCSHARES
ARTICLE I
Shareholders
Section 1.1. Annual Meetings. An annual meeting of shareholders
shall be held for the election of directors on a date and at a time and place
either within or without the State of California fixed by resolution of the
Board of Directors. Any other proper business may be transacted at the annual
meeting, except as limited by the notice requirements of subdivisions (a) and
(d) of Section 601 of the California General Corporation Law.
Section 1.2. Special Meetings. Special meetings of the
shareholders may be called at any time by the Board of Directors, the Chairman
of the Board or the holders of shares entitled to cast not less than ten percent
of the votes at the meeting, such meeting to be held on a date and at a time and
place either within or without the State of California as may be stated in the
notice of the meeting.
Section 1.3. Notice of Meetings. Whenever shareholders are
required or permitted to take any action at a meeting a written notice of the
meeting shall be given not less than ten nor more than sixty days before the
date of the meeting to each shareholder entitled to vote thereat. Such notice
shall state the place, date and hour of the meeting, and (i) in the case of a
special meeting, the general nature of the business to be transacted, and no
other business may be transacted, or (ii) in the case of the annual meeting,
those matters which the Board, at the time of the mailing of the notice, intends
to present for action by the shareholders. The notice of any meeting at which
directors are to be elected shall include a list of the names of the nominees
intended at the time of the mailing of the notice to be presented by the Board
for election.
Notice of a shareholders' meeting or any report shall be given
either personally or by first-class mail or other means of written
communication, addressed to the shareholder at the address of such shareholder
appearing on the books of the corporation or given by the shareholder to
<PAGE> 2
the corporation for the purpose of notice; or if no such address appears or is
given, at the place where the principal executive office of the corporation is
located or by publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located. The notice or
report shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any notice or report in accordance with the provisions
of this by-law, executed by the Secretary, Assistant Secretary or any transfer
agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the shareholder at the
address of such shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
or report to the shareholder at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available for the shareholder upon written demand of the shareholder at
the principal executive office of the corporation for a period of one year from
the date of the giving of the notice or report to all other shareholders.
Except as otherwise prescribed by the Board of Directors in
particular instances and except as otherwise provided by subdivision (c) of
Section 601 of the California General Corporation Law, the Secretary shall
prepare and give, or cause to be prepared and given, the notice of meetings of
shareholders.
Section 1.4. Adjournments. When a shareholders' meeting is
adjourned to another time or place, except as otherwise provided in this Section
1.4, notice need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than 45 days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
Section 1.5. Validating Meeting of Shareholders; Waiver of
Notice. The transactions of any meeting of shareholders, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after
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<PAGE> 3
regular call and notice, if a quorum is present either in person or by proxy,
and if, either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. All
such waivers, consents and approvals shall be filed with the corporate records
or made a part of the minutes of the meeting. Attendance of a person at a
meeting shall constitute a waiver of notice of and presence at such meeting,
except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by law to be included in the
notice but not so included, if such objection is expressly made at the meeting.
Neither the business to be transacted at nor the purpose of any regular or
special meeting of shareholders need be specified in any written waiver of
notice, consent to the holding of the meeting or approval of the minutes
thereof, except as required by subdivision (f) of Section 601 of the California
General Corporation Law.
Section 1.6. Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of the
shareholders. If a quorum is present, the affirmative vote of a majority of the
shares represented and voting at the meeting (which shares voting affirmatively
also constitute a majority of the required quorum) shall be the act of the
shareholders, unless the vote of a majority or higher percentage of all
outstanding shares is required by law or by the articles of incorporation, and
except as otherwise provided in this Section 1.6. The shareholders present at a
duly called or held meeting at which a quorum is present may continue to
transact business until adjournment notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum. In the absence of a quorum, any meeting of shareholders may
be adjourned from time to time by the vote of a majority of the shares
represented either in person or by proxy, but no other business may be
transacted, except as provided in this Section 1.6.
Section 1.7. Organization. Meetings of shareholders shall be
presided over by the Chairman of the Board of Directors, if any, or in the
absence of the Chairman of the Board by the Vice Chairman of the Board, if any,
or in the absence of the Vice Chairman of the Board by a Managing Director, or
in the absence of the foregoing persons by a
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<PAGE> 4
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary, an Assistant Secretary, shall act as secretary of the
meeting, or in their absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
Section 1.8. Voting. Unless otherwise provided in the articles
of incorporation, each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote of shareholders.
Any holder of shares entitled to vote on any matter may vote part
of the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, other than elections to office, but,
if the shareholder fails to specify the number of shares such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares such shareholder is entitled to
vote.
Except as otherwise provided in the articles of incorporation and
subject to the requirements of this Section 1.8, every shareholder entitled to
vote at any election of directors may cumulate such shareholder's votes and give
one candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are normally
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be entitled
to cumulate votes unless such candidate or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. In any
election of directors, the candidates receiving the highest number of votes of
the shares entitled to be voted for them up to the number of directors to be
elected by such shares are elected. Elections for directors need not be by
ballot unless a shareholder demands election by ballot at the meeting and before
the voting begins.
Section 1.9. Shareholder's Proxies. Every person entitled to
vote shares may authorize another person or persons to act by proxy with respect
to such shares. Any proxy purporting to be executed in accordance with the
provisions of Section 705 of the California General Corporation Law shall be
presumptively valid. No proxy
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<PAGE> 5
shall be valid after the expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy continues in full force and
effect until revoked by the person executing it prior to the vote pursuant
thereto, except as otherwise provided in this Section 1.9. Such revocation may
be effected by a writing delivered to the corporation stating that the proxy is
revoked or by a subsequent proxy executed by the person executing the prior
proxy and presented to the meeting, or as to any meeting by attendance at such
meeting and voting in person by the person executing the proxy. A proxy is not
revoked by the death or incapacity of the maker unless, before the vote is
counted, written notice of such death or incapacity is received by the
corporation. A proxy may be made irrevocable under the circumstances set forth
in subdivision (e) of Section 705 of the California General Corporation Law. Any
form of proxy distributed to ten or more shareholders shall conform to the
requirements of Section 604 of the California General Corporation Law.
Section 1.10. Inspectors. In advance of any meeting of
shareholders the Board of Directors may appoint inspectors of election to act at
the meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any meeting of shareholders may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election (or
persons to replace those who so fail or refuse) at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders.
The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously as
is practical. If there are three inspectors of election, the decision, act or
certificate of a majority is effective in all respects as the
5
<PAGE> 6
decision, act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.
Section 1.11. Fixing Date for Determination of Shareholders of
Record. In order that the corporation may determine the shareholders entitled to
notice of any meeting or to vote or to express consent to corporate action in
writing without a meeting or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days prior to the date of such meeting nor more than sixty days prior to any
other action.
If no record date is fixed: (1) the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held; (2) the record
date for determining shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board has been taken,
shall be the day on which the first written consent is given; and (3) the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto or
the sixtieth day prior to the date of such other action, whichever is later. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless the
Board fixes a new record date for the adjourned meeting, but the Board shall fix
a new record date if the meeting is adjourned for more than 45 days from the
date set for the original meeting.
Section 1.12. Consent of Shareholders in Lieu of Meeting. Except
as otherwise provided in the articles of incorporation or in this Section 1.12,
any action which may be taken at any annual or special meeting of the
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
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<PAGE> 7
Directors may not be elected by written consent except by
unanimous consent of all shares entitled to vote for the election of directors.
Notwithstanding the foregoing sentence, except for vacancies created by removal,
shareholders may fill any vacancy in the Board of Directors not filled by the
Board of Directors by electing a director through written consent of a majority
of outstanding shares entitled to vote.
Any shareholder giving a written consent, or such shareholder's
proxyholder, or a transferee of the shares or a personal representative of such
shareholder or its respective proxyholder, may revoke the consent by a writing
received by the corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed with
the Secretary of the corporation, but may not do so thereafter. Such revocation
is effective upon its receipt by the Secretary of the corporation.
Unless all shareholders entitled to vote consent in writing,
notice of any shareholder approval without a meeting shall be given as provided
in subdivision (b) of Section 603 of the California General Corporation Law, or
any successor thereof.
Any form of written consent distributed to ten or more
shareholders shall conform to the requirements of Section 604 of the California
General Corporation Law, or any successor thereof.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and affairs of
the Corporation shall be managed by, and all corporate powers shall be exercised
by or under, the direction of the Board of Directors, except as otherwise
provided in these by-laws or in the articles of incorporation. The Board shall
consist of not less than seven (7) and not more than thirteen (13) members. The
exact number of directors shall be fixed and may from time to time be changed by
a resolution adopted by a majority of the authorized number of directors. The
maximum and minimum number of directors may be changed only by a duly adopted
amendment to the articles of incorporation or by an amendment to this Section
2.1 approved by a majority of the outstanding shares entitled to vote. An
amendment that would reduce the minimum number of directors to a number
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<PAGE> 8
less than five cannot be adopted if the votes cast against its adoption at a
shareholders meeting or the shares not consenting to such an action by written
consent are equal to more than one-sixth (16 2/3%) of the outstanding shares
entitled to vote. Directors must be shareholders.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. At each annual meeting of shareholders, directors shall be elected to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified. Any
director may resign effective upon giving written notice to the Chairman of the
Board, the Secretary or the Board of Directors of the corporation, unless the
notice specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
Any or all of the directors may be removed without cause if such
removal is approved by a majority of the outstanding voting shares, except that
no director may be removed (unless the entire Board of Directors is removed)
when the votes cast against removal, or not consenting in writing to such
removal, would be sufficient to elect such director if voted cumulatively at an
election at which the same total number of votes were cast (or, if such action
is taken by written consent, all shares entitled to vote were voted) and the
entire number of directors authorized at the time of the director's most recent
election were then being elected.
Any reductions in the authorized number of directors does not
remove any director prior to the expiration of such director's term in office.
A vacancy in the Board of Directors shall be deemed to exist (a)
if a director dies, resigns, or is removed by the shareholders or an appropriate
court, as provided in Sections 303 or 304 of the California General Corporation
Law; (b) if the Board of Directors declares vacant the office of a director who
has been convicted of a felony or declared of unsound mind by an order of court;
(c) if the authorized number of directors is increased; or (d) if at any
shareholders' meeting at which one or more directors are elected the
shareholders fail to elect the full authorized number of directors to be voted
for at that meeting. Unless otherwise provided in the articles of incorporation
or these by-laws and except for a vacancy caused by the removal of a director,
vacancies on the Board
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<PAGE> 9
may be filled by appointment by the Board. A vacancy on the Board caused by the
removal of a director may be filled only by the shareholders, except that a
vacancy created by the Board declaring an office of a director vacant because a
director has been convicted of a felony or declared of unsound mind by an order
of court may be filled by the Board.
The shareholders may elect a director at any time to fill a
vacancy not filled by the Board of Directors.
If the number of directors then in office is less than a quorum,
vacancies on the Board of Directors may be filled by the unanimous written
consent of the directors then in office, the affirmative vote of a majority of
the directors then in office at a meeting held pursuant to notice or waivers of
notice complying with Section 2.4 hereof or a sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such places within or without the State
of California and at such times as the Board may from time to time determine.
Section 2.4. Special Meetings; Notice of Meetings; Waiver of
Notice. Special meetings of the Board of Directors may be held at any time or
place within or without the State of California whenever called by the Chairman
of the Board, by the Vice Chairman of the Board, if any, or by any two
directors. Special meetings shall be held on four days' notice by mail or 48
hours' notice delivered personally or by telephone, telegraph or any other means
of communication authorized by Section 307 of the California General Corporation
Law. Notice delivered personally or by telephone may be transmitted to a person
at the director's office who can reasonably be expected to deliver such notice
promptly to the director.
Notice of a meeting need not be given to any director who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. A notice, or
waiver of notice, need not specify the purpose of any regular or special meeting
of the Board.
Section 2.5. Participation in Meetings by Conference Telephone
Permitted. Members of the Board, or
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any committee designated by the Board, may participate in a meeting of the Board
or of such committee, as the case may be, through the use of conference
telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another, and participation in a
meeting pursuant to this Section 2.5 shall constitute presence in person at such
meeting.
Section 2.6. Quorum; Adjournment; Vote Required for Action. At
all meetings of the Board of Directors one-third of the authorized number of
directors or three directors, whichever is larger, shall constitute a quorum for
the transaction of business. Subject to the provisions of Sections 310 and
317(e) of the California General Corporation Law, every act or decision done or
made by a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board unless the articles of incorporation or
these by-laws shall require a vote of a greater number.
A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. If the meeting is
adjourned for more than 24 hours, notice of any adjournment to another time or
place shall be given prior to the time of the adjourned meeting to the directors
who were not present at the time of the adjournment.
Section 2.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in their
absence by a chairman chosen at the meeting. The Secretary, or in the absence of
the Secretary an Assistant Secretary, shall act as secretary of the meeting, but
in the absence of the Secretary and any Assistant Secretary the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Any action
required or permitted to be taken by the Board of Directors, or any committee
thereof, may be taken without a meeting if all members of the Board or of such
committee, as the case may be, shall individually or collectively consent in
writing to such action. Such written consent or consents shall be filed with the
minutes of the proceedings of the Board. Such action by written consent shall
have the same force and effect as a unanimous vote of such directors.
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Section 2.9. Compensation of Directors. The Board of Directors
shall have the authority to fix the compensation of directors for services in
any capacity.
ARTICLE III
Executive and Other Committees
Section 3.1. Executive and Other Committees of Directors. The
Board of Directors, by resolution adopted by a majority of the authorized number
of directors, may designate an executive committee and other committees, each
consisting of two or more directors, to serve at the pleasure of the Board, and
each of which, to the extent provided in the resolution, shall have all the
authority of the Board, except that no such committee shall have power or
authority with respect to the following matters:
(1) The approval of any action for which the California General
Corporation Law also requires the approval of the shareholders or of the
outstanding shares;
(2) The filling of vacancies in the Board or in any committee
thereof;
(3) The fixing of compensation of the directors for serving on
the Board or on any committee thereof;
(4) The amendment or repeal of the by-laws, or the adoption of
new by-laws;
(5) The amendment or repeal of any resolution of the Board which,
by its terms, shall not be so amendable or repealable;
(6) The making of distributions to shareholders, except at a rate
or in a periodic amount or within a price range set forth in the
articles or determined by the Board of Directors;
(7) The appointment of other committees of the Board or the
members thereof;
(8) The removal or indemnification of any
director; or
(9) The changing of the number of authorized directors on the
Board.
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<PAGE> 12
The Board of Directors may designate one or more directors as
alternate members of any such committee, who may replace any absent member or
members at any meeting of such committee.
Unless the Board of Directors otherwise provides, each committee
designated by the Board may adopt, amend and repeal rules for the conduct of its
business. In the absence of a provision by the Board of Directors or a
provision in the rules of such committee to the contrary, each committee shall
conduct its business in the same manner as the Board of Directors conducts its
business pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after the
annual meeting of shareholders in each year, the Board of Directors shall elect
a Chairman of the Board, a Secretary and a Chief Financial Officer, and it may,
if it so determines, elect from among its members a Vice Chairman of the Board.
The Board may also elect one or more Managing Directors, one or more Assistant
Secretaries, and such other officers as the Board may deem desirable or
appropriate and may give any of them such further designations or alternate
titles as it considers desirable. Any number of offices may be held by the same
person.
Section 4.2. Term of Office; Resignation; Removal; Vacancies.
Except as otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the first meeting of
the Board after the annual meeting of shareholders next succeeding his or her
election, and until his or her successor is elected and qualified or until his
or her earlier resignation or removal. Any officer may resign at any time upon
written notice to the Board or to the Chairman of the Board or the Secretary of
the corporation. Such resignation shall take effect at the time specified
therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the corporation by
death, resignation, removal
12
<PAGE> 13
or otherwise may be filled for the unexpired portion of the term by the Board at
any regular or special meeting.
Section 4.3. Powers and Duties. The officers of the corporation
shall have such powers and duties in the management of the corporation as shall
be stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Secretary shall have the duty to record the proceedings of the
meetings of the shareholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board may require any officer, agent or
employee to give security for the faithful performance of his or her duties.
ARTICLE V
Forms of Certificates; Loss
and Transfer of Shares
Section 5.1. Forms of Certificates. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board of Directors, if any,
and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or
an Assistant Secretary, of the corporation, certifying the number of shares and
the class or series of shares owned by such shareholder. If such certificate is
manually signed by one officer or manually countersigned by a transfer agent or
by a registrar, any other signature on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The corporation may issue a new share certificate
or a new certificate for any other security in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the corporation may require the owner of the lost, stolen or destroyed
certificate, or such owner's legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it
(including any expense or liability) on account of the
13
<PAGE> 14
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
ARTICLE VI
Records and Reports
Section 6.1. Shareholder Records. The corporation shall keep at
its principal executive office or at the office of its transfer agent or
registrar a record of the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders holding at least five percent in
the aggregate of the outstanding voting shares of the corporation, or a
shareholder who otherwise is authorized by subdivision (a) of Section 1600 of
the California General Corporation Law, may inspect and copy the record of
shareholders' names and addresses and shareholdings during usual business
hours, on five days' prior written demand on the corporation, or obtain from the
corporation's transfer agent, on written demand and tender of the transfer
agent's usual charges for this service, a list of the names and addresses of
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which a list has been
compiled or as of a specified date later than the date of demand. This list
shall be made available within five days after the demand is received or the
date specified therein as the date as of which the list is to be compiled. The
record of shareholders shall also be open to inspection on the written demand of
any shareholder or holder of a voting trust certificate, at any time during
usual business hours, for a purpose reasonably related to the holder's interests
as a shareholder or holder of a voting trust certificate. Any inspection and
copying under this section may be made in person or by an agent or attorney of
the shareholder or holder of a voting trust certificate making the demand.
Section 6.2. By-laws. The corporation shall keep at its principal
executive office, or if its principal executive office is not in the State of
California, at its principal business office in this state, the original or a
copy of the by-laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California and the
corporation has no principal business office in this state, the Secretary shall,
upon the written request of any share-
14
<PAGE> 15
holder, furnish to that shareholder a copy of the by-laws as amended to date.
Section 6.3. Minutes and Accounting Records. The minutes of
proceedings of the shareholders, the Board of Directors, and committees of the
Board, and the accounting books and records shall be kept at the principal
executive office of the corporation, or at such other place or places as
designated by the Board of Directors. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
a form capable of being converted into written form. The minutes and accounting
books and records shall be open to inspection upon the written demand of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or holder of a voting trust certificate. The
inspection may be made in person or by an agent or attorney, and shall include
the right to copy and make extracts. These rights of inspection shall extend to
the records of each subsidiary of the corporation.
Section 6.4. Inspection by Directors. Every director shall have
the absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. This inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the right
to copy and make extracts of documents.
Section 6.5. Annual Report to Shareholders. Inasmuch as, and for
as long as, there are fewer than 100 shareholders, the requirement of an annual
report to shareholders referred to in Section 1501 of the California General
Corporation Law is expressly waived. However, nothing in this provision shall be
interpreted as prohibiting the Board of Directors from issuing annual or other
periodic reports to the shareholders, as the Board considers appropriate.
If at any time and for as long as, the number of shareholders
shall exceed 100, the Board of Directors shall cause an annual report to be sent
to the shareholders not later than 120 days after the close of the fiscal year
adopted by the corporation. This report shall be sent at least 15 days (if
third-class mail is used, 35 days) before the annual meeting of shareholders to
be held during the next fiscal year and in the manner specified for giving
notice to shareholders in these by-laws. The annual report shall contain a
balance sheet as of the end of the fiscal
15
<PAGE> 16
year and an income statement and a statement of changes in financial position
for the fiscal year prepared in accordance with generally accepted accounting
principles applied on a consistent basis and accompanied by any report of
independent accountants, or, if there is no such report, the certificate of an
authorized officer of the corporation that the statements were prepared without
audit from the corporation's books and records.
Section 6.6. Financial Statements. The corpora tion shall keep a
copy of each annual financial statement, quarterly or other periodic income
statement, and accompanying balance sheets prepared by the corporation on file
in the corporation's principal office for 12 months; these documents shall be
exhibited at all reasonable times, or copies provided, to any shareholder on
demand.
If no annual report for the last fiscal year has been sent to
shareholders, on written request of any shareholder made more than 120 days
after the close of the fiscal year the corporation shall deliver or mail to the
shareholder, within 30 days after receipt of the request, a balance sheet as of
the end of that fiscal year and an income statement and statement of changes in
financial condition for that fiscal year.
A shareholder or shareholders holding five percent or more of the
outstanding shares of any class of the corporation may request in writing an
income statement for the most recent three-month, six-month, or nine-month
period (ending more than 30 days before the date of the request) of the current
fiscal year, and a balance sheet of the corporation as of the end of that
period. If such documents are not already prepared, the Chief Financial Officer
shall cause them to be prepared and shall deliver the documents personally or
mail them to the requesting shareholders within 30 days after receipt of the
request. A balance sheet, income statement, and statement of changes in
financial position for the last fiscal year shall also be included, unless the
corporation has sent the shareholders an annual report for the last fiscal year.
Quarterly income statements and balance sheets referred to in
this Section 6.6 shall be accompanied by the report thereon, if any, of any
independent accountant engaged by the corporation or the certificate of an
authorized corporate officer stating that the financial statements were prepared
without audit from the corpora tion's books and records.
16
<PAGE> 17
Section 6.7. Form of Records. Any records maintained by the
corporation in the regular course of its business, with the exception of minutes
of the proceedings of the shareholders, and of the Board of Directors and its
committees, but including the corporation's stock ledger and books of account,
may be kept on, or be in the form of magnetic tape, photographs,
microphotographs or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
ARTICLE VII
Miscellaneous
Section 7.1. Principal Executive or Business Offices. The Board of
Directors shall fix the location of the principal executive office of the
corporation at any place either within or without the State of California. If
the principal executive office is located outside California and the corporation
has one or more business offices in California, the Board shall designate one of
these offices as the corporation's principal business office in California.
Section 7.2. Fiscal Year. The fiscal year of the corporation
shall be determined by the Board of Directors.
Section 7.3. Seal. The corporation may have a corporate seal
which shall have the name of the corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 7.4. Interested Directors; Quorum. No contract or
transaction between the corporation and one or more of its directors or between
the corporation and any other corporation, firm or association in which one or
more of its directors are directors, or have a financial interest, shall be void
or voidable solely for this reason, or solely because such director or directors
are present at the meeting of the Board of Directors or committee thereof which
authorizes, approves or ratifies the contract or transaction, or solely because
his or her or their votes are counted for such purpose, if: (1) the material
facts as to his or her relationship or interest and as to the contract
17
<PAGE> 18
or transaction are fully disclosed or are known to the shareholders and such
contract or transaction is approved by the shareholders in good faith with the
shares owned by the interested director or directors not being entitled to vote
thereon; (2) the material facts as to his or her relationship or interest and as
to the contract or transaction are fully disclosed or are known to the Board or
the committee, and the Board or committee authorizes, approves or ratifies the
contract or transaction in good faith by a vote sufficient without counting the
vote of the interested director or directors and the contract or transaction is
just and reasonable as to the corporation at the time it was authorized,
approved or ratified; or (3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified, by the Board,
a committee thereof or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board or of
a committee which authorizes the contract or transaction.
Section 7.5. Indemnification. The corporation shall, to the maximum
extent and in the manner permitted by the California General Corporation Law
(the "Code"), indemnify each of its directors and officers against expenses (as
defined in subdivision (a) of Section 317 of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in subdivision (a) of Section 317 of the Code),
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 7.5, a "director" or "officer" of the
corporation includes any person (i) who is or was a director or officer of the
corporation, (ii) who is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) who was a director or officer of a corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
The corporation shall have the power, to the extent and in the
manner permitted by the Code, to indemnify each of its employees and agents
(other than directors and officers) against expenses (as defined in subdivision
(a) of Section 317 of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in subdivision (a) of Section 317 of the Code), arising by reason of the
fact that such person is or was an agent of the corporation. For purposes of
this Section 7.5, an "employee" or "agent" of the corporation includes any
person (i) who is or was an
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employee or agent of the corporation, (ii) who is or was serving at the request
of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (iii) who was an employee or agent
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
Section 7.6. Amendment of By-Laws. To the extent permitted by law these
by-laws may be amended or repealed, and new by-laws adopted, by the Board of
Directors. The shareholders entitled to vote, however, retain the right to adopt
additional by-laws and may amend or repeal any by-law whether or not adopted by
them.
19
<PAGE> 1
EXHIBIT 3.3
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
FIRST COASTAL BANCSHARES,
as Depositor
WILMINGTON TRUST COMPANY,
as Property Trustee
and
as Delaware Trustee
THE ADMINISTRATORS NAMED HEREIN,
and the several Holders of the Trust Securities
______________________
Dated as of_________, 199__
______________________
FIRST COASTAL CAPITAL TRUST
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I.
DEFINED TERMS
SECTION 1.1. Definitions...................................................................1
ARTICLE II.
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name.........................................................................10
SECTION 2.2. Office of the Delaware Trustee; Principal Place of Business..................11
SECTION 2.3. Initial Contribution of Trust Property; Organizational Expenses..............11
SECTION 2.4. Issuance of the Preferred Securities.........................................11
SECTION 2.5. Issuance of the Common Securities; Subscription and Purchase of Debentures...11
SECTION 2.6. Continuation of Trust........................................................12
SECTION 2.7. Authorization to Enter into Certain Transactions.............................12
SECTION 2.8. Assets of Trust..............................................................15
SECTION 2.9. Title to Trust Property......................................................16
ARTICLE III.
PAYMENT ACCOUNT
SECTION 3.1. Payment Account..............................................................16
ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions................................................................16
SECTION 4.2. Redemption...................................................................17
SECTION 4.3. Subordination of Common Securities...........................................19
SECTION 4.4. Payment Procedures...........................................................20
SECTION 4.5. Withholding Tax..............................................................20
SECTION 4.6. Tax Returns and Reports......................................................20
SECTION 4.7. Payment of Taxes, Duties, Etc. of the Issuer Trust...........................21
SECTION 4.8. Payments under Indenture or Pursuant to Direct Actions.......................21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V.
SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership............................................................21
SECTION 5.2. The Securities Certificates..................................................21
SECTION 5.3. Execution and Delivery of Securities Certificates............................22
SECTION 5.4. Book-Entry Preferred Securities..............................................22
SECTION 5.5. Registration of Transfer and Exchange of Preferred Securities Certificates...24
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Securities Certificates.................25
SECTION 5.7. Persons Deemed Holders.......................................................25
SECTION 5.8. Access to List of Holders' Names and Addresses...............................26
SECTION 5.9. Maintenance of Office or Agency..............................................26
SECTION 5.10. Appointment of Paying Agents.................................................26
SECTION 5.11. Ownership of Common Securities by Depositor..................................26
SECTION 5.12. Notices to Clearing Agency...................................................27
SECTION 5.13. Rights of Holders; Waivers of Past Defaults..................................27
ARTICLE VI.
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights.................................................29
SECTION 6.2. Notice of Meetings...........................................................30
SECTION 6.3. Meetings of Holders of the Preferred Securities..............................30
SECTION 6.4. Voting Rights................................................................31
SECTION 6.5. Proxies, etc.................................................................31
SECTION 6.6. Holder Action by Written Consent.............................................31
SECTION 6.7. Record Date for Voting and Other Purposes....................................31
SECTION 6.8. Acts of Holders..............................................................31
SECTION 6.9. Inspection of Records........................................................32
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee and the Delaware
Trustee......................................................................33
SECTION 7.2. Representations and Warranties of Depositor..................................34
ARTICLE VIII.
THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities..........................................34
SECTION 8.2. Certain Notices..............................................................36
SECTION 8.3. Certain Rights of Property Trustee...........................................36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities.......................38
SECTION 8.5. May Hold Securities..........................................................38
SECTION 8.6. Compensation; Indemnity; Fees................................................38
SECTION 8.7. Corporate Property Trustee Required; Eligibility of Issuer Trustees and
Administrators...............................................................39
SECTION 8.8. Conflicting Interests........................................................40
SECTION 8.9. Co-Trustees and Separate Trustee.............................................40
SECTION 8.10. Resignation and Removal; Appointment of Successor............................42
SECTION 8.11. Acceptance of Appointment by Successor.......................................43
SECTION 8.12. Merger, Conversion, Consolidation or Succession to Business..................43
SECTION 8.13. Preferential Collection of Claims Against Depositor or Issuer Trust..........43
SECTION 8.14. Property Trustee May File Proofs of Claim....................................44
SECTION 8.15. Reports by Property Trustee..................................................44
SECTION 8.16. Reports to the Property Trustee..............................................45
SECTION 8.17. Evidence of Compliance with Conditions Precedent.............................45
SECTION 8.18. Number of Issuer Trustees....................................................45
SECTION 8.19. Delegation of Power..........................................................46
SECTION 8.20. Appointment of Administrators................................................46
ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.............................................46
SECTION 9.2. Early Termination............................................................47
SECTION 9.3. Termination..................................................................47
SECTION 9.4. Liquidation..................................................................47
SECTION 9.5. Mergers, Consolidations, Conversions, Amalgamations or Replacements of
Issuer Trust.................................................................49
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders..............................................50
SECTION 10.2. Agreed Tax Treatment of Issuer Trust and Trust Securities....................50
SECTION 10.3. Amendment....................................................................50
SECTION 10.4. Separability.................................................................51
SECTION 10.5. Governing Law................................................................51
SECTION 10.6. Payments Due on Non-Business Day.............................................52
SECTION 10.7. Successors...................................................................52
SECTION 10.8. Headings.....................................................................52
SECTION 10.9. Reports, Notices and Demands.................................................52
SECTION 10.10. Agreement Not to Petition....................................................53
SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture Act.......................53
SECTION 10.12. Acceptance of Terms of Trust Agreement, Guarantee Agreement and
Indenture....................................................................53
</TABLE>
iii
<PAGE> 5
Exhibit A Certificate of Trust
Exhibit B Form of Common Securities Certificate
Exhibit C Form of Preferred Securities Certificate
iv
<PAGE> 6
AMENDED AND RESTATED TRUST AGREEMENT, dated as of _______, 1998, among
(i) First Coastal Bancshares, a California corporation (including any successors
or assigns, the "Depositor"), (ii) Wilmington Trust Company, a Delaware banking
corporation, as property trustee (in such capacity, the "Property Trustee" and,
in its separate corporate capacity and not in its capacity as Property Trustee,
the "Bank"), (iii) Wilmington Trust Company, a Delaware banking corporation
organized under the laws of the State of Delaware, as Delaware trustee (in such
capacity, the "Delaware Trustee") (the Property Trustee and the Delaware Trustee
being referred to jointly as the "Issuer Trustees"), (iv) Gordon Fong and James
F. Gardunio, as Administrators, and (v) the several Holders, as hereinafter
defined.
WITNESSETH
WHEREAS, the Depositor, an Administrator and the Delaware Trustee have
heretofore duly declared and created a business trust pursuant to the Delaware
Business Trust Act by entering into a Trust Agreement, dated as of _________,
1998 (the "Original Trust Agreement"), and by the execution and filing by the
Delaware Trustee with the Secretary of State of the State of Delaware of the
Certificate of Trust, filed on _______, 1998, attached as Exhibit A; and
WHEREAS, the Depositor, the Administrators and the Issuer Trustees
desire to amend and restate the Original Trust Agreement in its entirety as set
forth herein to provide for, among other things, (i) the issuance of the Common
Securities by the Issuer Trust to the Depositor, (ii) the issuance and sale of
the Preferred Securities by the Issuer Trust pursuant to the Underwriting
Agreement, (iii) the acquisition by the Issuer Trust from the Depositor of all
of the right, title and interest in the Debentures, and (iv) the appointment of
the Administrators;
NOW THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each party, for the benefit of the
other parties and for the benefit of the Holders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I.
DEFINED TERMS
SECTION 1.1. Definitions.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(b) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
<PAGE> 7
(c) The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the
meanings assigned to them in accordance with United States generally
accepted accounting principles;
(e) Unless the context otherwise requires, any reference to an
"Article", a "Section" or an "Exhibit" refers to an Article, a Section
or an Exhibit, as the case may be, of or to this Trust Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and
other words of similar import refer to this Trust Agreement as a whole
and not to any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8.
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Additional Sums" has the meaning specified in Section 10.6 of the
Indenture.
"Additional Taxes" has the meaning specified in Section 1.1 of the
Indenture.
"Administrators" means each Person appointed in accordance with Section
8.20 solely in such Person's capacity as Administrator of the Issuer Trust and
not in such Person's individual capacity, or any successor Administrator
appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Book-Entry Capital Security, the rules and procedures
of the Clearing Agency for such Book-Entry Capital Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having jurisdiction in the
premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjudication or composition of or in respect of such Person under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law, or appointing a
2
<PAGE> 8
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such Person or of any substantial part of its property or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of
a petition or answer or consent seeking reorganization or relief under
any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or similar official) of such Person or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate
action by such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 10.10.
"Board of Directors" means the board of directors of the Depositor or
the Executive Committee of the board of directors of the Depositor (or any other
committee of the board of directors of the Depositor performing similar
functions) or a committee designated by the board of directors of the Depositor
(or any such committee), comprised of two or more members of the board of
directors of the Depositor or officers of the Depositor, or both.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Depositor to have been duly adopted
by the Depositor's Board of Directors, or such committee of the Board of
Directors or officers of the Depositor to which authority to act on behalf of
the Board of Directors has been delegated and to be in full force and effect on
the date of such certification, and delivered to the Issuer Trustees.
"Book-Entry Preferred Securities Certificate" means a Preferred
Securities Certificate evidencing ownership of Book-Entry Preferred Securities.
"Book-Entry Preferred Security" means a Preferred Security, the
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 5.4.
"Business Day" means a day other than (a) a Saturday or Sunday, (b) a
day on which banking institutions in Los Angeles, California are authorized or
required by law or executive order to remain closed or (c) a day on which the
Property Trustee's Corporate Trust Office or the corporate trust office of the
Debenture Trustee is closed for business.
"Capital Treatment Event" means the receipt by the Issuer Trust of an
Opinion of Counsel experienced in such matters to the effect that, as a result
of the occurrence of a change (including any announced prospective change) in
law or regulation or a change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Depositor will not be entitled to treat an amount
equal to the Liquidation Amount of such Preferred Securities as "Tier 1
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Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve, as then in effect and applicable to the
Corporation, which change or proposed change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Preferred Securities of such Issuer Trust.
"Certificate Depository Agreement" means any agreement among the Issuer
Trust, the Depositor and the Clearing Agency relating to the Trust Securities
Certificate.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act of 1934, as amended. DTC
will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" has the meaning specified in the Underwriting Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Securities and Exchange Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Common Securities Certificate" means a certificate evidencing ownership
of Common Securities, substantially in the form attached as Exhibit B.
"Common Security" means an undivided beneficial interest in the assets
of the Issuer Trust, having a Liquidation Amount of $20.00 and having the rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution to the extent provided herein.
"Corporate Trust Office" means (i) when used with respect to the
Property Trustee, the principal office of the Property Trustee, which at the
time of the execution of this Trust Agreement is located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890; Attention: Corporate
Trust Administration.
"Debenture Event of Default" means any "Event of Default" specified in
Section 5.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption of such Debentures
under the Indenture, including any date fixed for redemption pursuant to the
occurrence of a Tax Event, Capital Treatment Event or an Investment Company
Event (each as defined in the Indenture).
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"Debenture Trustee" means the Person identified as the "Trustee" in the
Indenture, solely in its capacity as Trustee pursuant to the Indenture and not
in its individual capacity, or its successor in interest in such capacity, or
any successor Trustee appointed as provided in the Indenture.
"Debentures" means the Depositor's ______% Junior Subordinated
Debentures issued pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means either or both (as
the context requires) of (i) Preferred Securities Certificates issued as Global
Preferred Securities as provided in Section 5.2 or 5.4, and (ii) Preferred
Securities Certificates issued in certificated, fully registered form as
provided in Section 5.2, 5.4 or 5.5.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., or any successor statute
thereto, in each case as amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee"
in the preamble to this Trust Agreement, solely in its capacity as Delaware
Trustee of the trust heretofore created and continued hereunder and not in its
individual capacity, or its successor in interest in such capacity, or any
successor Delaware trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" means amounts payable in respect of the Trust Securities
as provided in Section 4.1.
"DTC" means The Depository Trust Company or any successor thereto.
"Early Termination Event" has the meaning specified in Section 9.2.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any successor statute thereto, in each case as amended from time to time.
"Event of Default" means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Issuer Trust in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a
period of 30 days; or
(c) default by the Issuer Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
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(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in this Trust Agreement
(other than those specified in clause (b) or (c) above) and continuation
of such default or breach for a period of 60 days after there has been
given, by registered or certified mail, to the Issuer Trustees and to
the Depositor by the Holders of at least 25% in aggregate Liquidation
Amount of the Outstanding Preferred Securities a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee if a successor Property Trustee has not been appointed within 90
days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, and any
successor statute thereto, in each case as amended from time to time.
"Expense Agreement" means the Agreement as to Expenses and Liabilities,
dated as of the Closing Date, between the Depositor, in its capacity as holder
of the Common Securities, and the Issuer Trust, as amended from time to time.
"Expiration Date" has the meaning specified in Section 9.1.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Global Preferred Security" means a Preferred Securities Certificate
evidencing ownership of Book-Entry Preferred Securities.
"Guarantee Agreement" means the Guarantee Agreement executed and
delivered by the Depositor and Wilmington Trust Company, as guarantee trustee,
contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the holders of the Preferred Securities, as amended from time to
time.
"Holder" means a Person in whose name a Trust Security or Trust
Securities are registered in the Securities Register; any such Person being a
beneficial owner within the meaning of the Delaware Business Trust Act.
"Indenture" means the Junior Subordinated Indenture, dated as of
________, 1998, between the Depositor and the Debenture Trustee, as trustee, as
amended or supplemented from time to time.
"Investment Company Act" means the Investment Company Act of 1940, or
any successor statute thereto, in each case as amended from time to time.
"Issuer Trust" means the Delaware business trust known as "First Coastal
Capital Trust" which was created on __________, 1998 under the Delaware Business
Trust Act pursuant to the Original Trust Agreement and the filing of the
Certificate of Trust, and continued pursuant to this Trust Agreement.
"Issuer Trustees" has the meaning specified in the preamble to this
Trust Agreement.
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"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (a) with respect to a redemption of any Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed in accordance with the
Indenture, the proceeds of which will be used to pay the Redemption Price of
such Trust Securities, (b) with respect to a distribution of Debentures to
Holders of Trust Securities in connection with a dissolution or liquidation of
the Issuer Trust, Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the Holder to whom such Debentures are
distributed, and (c) with respect to any distribution of Additional Amounts to
Holders of Trust Securities, Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities in respect of which such distribution
is made.
"Liquidation Amount" means the stated amount of $20 per Trust Security.
"Liquidation Date" means the date on which the Debentures are to be
distributed to Holders of Trust Securities in connection with a dissolution and
liquidation of the Issuer Trust pursuant to Section 9.4.
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"Majority in Liquidation Amount of the Preferred Securities" or
"Majority in Liquidation Amount of the Common Securities" means, except as
provided by the Trust Indenture Act, Preferred Securities or Common Securities,
as the case may be, representing more than 50% of the aggregate Liquidation
Amount of all then Outstanding Preferred Securities or Common Securities, as the
case may be.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Depositor, and delivered to the Issuer Trustees. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Agreement shall include:
(a) a statement by each officer signing the Officers' Certificate that
such officer has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers'
Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
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"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for or an employee of the Depositor or any Affiliate of the Depositor.
"Original Trust Agreement" has the meaning specified in the recitals to
this Trust Agreement.
"Outstanding", when used with respect to Trust Securities, means, as of
the date of determination, all Trust Securities theretofore executed and
delivered under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Property Trustee or
delivered to the Property Trustee for cancellation;
(b) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property
Trustee or any Paying Agent; provided that, if such Trust Securities are
to be redeemed, notice of such redemption has been duly given pursuant
to this Trust Agreement; and
(c) Trust Securities that have been paid or in exchange for or in lieu
of which other Trust Securities have been executed and delivered
pursuant to Sections 5.4, 5.5, 5.6 and 5.11;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Preferred Securities have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Preferred Securities owned by the Depositor, any Issuer Trustee, any
Administrator or any Affiliate of the Depositor, any Issuer Trustee or any
Administrator shall be disregarded and deemed not to be Outstanding, except that
(a) in determining whether any Issuer Trustee or any Administrator shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Preferred Securities that such Issuer Trustee or
such Administrator, as the case may be, knows to be so owned shall be so
disregarded, and (b) the foregoing shall not apply at any time when all of the
Outstanding Preferred Securities are owned by the Depositor, one or more of the
Issuer Trustees, one or more of the Administrators and/or any such Affiliate.
Preferred Securities so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Administrators the pledgee's right so to act with respect to such Preferred
Securities and that the pledgee is not the Depositor or any Affiliate of the
Depositor.
"Owner" means each Person who is the beneficial owner of Book-Entry
Preferred Securities as reflected in the records of the Clearing Agency or, if a
Clearing Agency Participant is not the Owner, then as reflected in the records
of a Person maintaining an account with such Clearing Agency (directly or
indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.10 and shall initially be U.S. Stock Transfer Corporation.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee in its trust department or with
any federally insured depositary institution for the benefit of the Holders in
which all amounts paid in respect of the Debentures will be held and from which
the Property Trustee, through the Paying Agent, shall make payments to the
Holders in accordance with Sections 4.1 and 4.2.
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"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, company,
limited liability company, trust, unincorporated association, or government or
any agency or political subdivision thereof, or any other entity of whatever
nature.
"Preferred Security" means an undivided beneficial interest in the
assets of the Issuer Trust, having a Liquidation Amount of $20 and having the
rights provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution to the extent provided herein.
"Preferred Securities Certificate" means a certificate evidencing
ownership of Preferred Securities, substantially in the form attached as Exhibit
C.
"Property Trustee" means the Person identified as the "Property Trustee"
in the preamble to this Trust Agreement, solely in its capacity as Property
Trustee of the Issuer Trust and not in its individual capacity, or its successor
in interest in such capacity, or any successor property trustee appointed as
herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Debenture Redemption Date and the stated maturity
of the Debentures shall be a Redemption Date for a Like Amount of Trust
Securities.
"Redemption Price" means, with respect to any Trust Security, the
Liquidation Amount of such Trust Security, plus accumulated and unpaid
Distributions to the Redemption Date, plus the related amount of the premium, if
any, paid by the Depositor upon the concurrent redemption of a Like Amount of
Debentures.
"Relevant Trustee" has the meaning specified in Section 8.10.
"Responsible Officer", when used with respect to the Property Trustee,
means any officer assigned to the Corporate Trust Office, including any managing
director, vice president, assistant vice president, assistant treasurer,
assistant secretary or any other officer of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of this Trust
Agreement, and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, and any successor
statute thereto, in each case as amended from time to time.
"Securities Certificate" means any one of the Common Securities
Certificates or the Preferred Securities Certificates.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 5.5.
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"Separation Time" means the date that the Preferred Securities and the
common stock of the Depositor may trade separately and is not required to be
traded as a unit, which date is set forth in the legend in the Form of Preferred
Securities Certificate.
"Successor Preferred Securities" of any particular Preferred Securities
Certificate means every Preferred Securities Certificate issued after, and
evidencing all or a portion of the same beneficial interest in the Issuer Trust
as that evidenced by, such particular Preferred Securities Certificate; and, for
the purposes of this definition, any Preferred Securities Certificate executed
and delivered under Section 5.6 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Preferred Securities Certificate shall be deemed to
evidence the same beneficial interest in the Issuer Trust as the mutilated,
destroyed, lost or stolen Preferred Securities Certificate.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including (i) all exhibits, and (ii) for all
purposes of this Trust Agreement and any such modification, amendment or
supplement, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this Trust Agreement and any such modification, amendment or
supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that if
the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any cash on deposit in,
or owing to, the Payment Account, and (c) all proceeds and rights in respect of
the foregoing and any other property and assets for the time being held or
deemed to be held by the Property Trustee pursuant to the trusts of this Trust
Agreement.
"Trust Security" means any one of the Common Securities or the Preferred
Securities.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
________, 1998, among the Issuer Trust, the Depositor and the Underwriters named
therein, as the same may be amended from time to time and includes the
Underwriting Agreement incorporated therein by reference.
"Vice President," when used with respect to the Depositor, means any
duly appointed vice president, whether or not designated by a number or a word
or words added before or after the title "vice president."
ARTICLE II.
CONTINUATION OF THE ISSUER TRUST
SECTION 2.1. Name.
The trust continued hereby shall be known as "First Coastal Capital
Trust", as such name may be modified from time to time by the Administrators
following written notice to the Holders of Trust
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Securities and the Issuer Trustees, in which name the Administrators and the
Issuer Trustees may conduct the business of the Issuer Trust, make and execute
contracts and other instruments on behalf of the Issuer Trust and sue and be
sued.
SECTION 2.2. Office of the Delaware Trustee; Principal Place of
Business.
The address of the Delaware Trustee in the State of Delaware is 1100
North Market Street, Rodney Square North, Wilmington, Delaware 19890; Attention:
Corporate Trust Administration, or such other address in the State of Delaware
as the Delaware Trustee may designate by written notice to the Holders, the
Depositor, the Property Trustee and the Administrators. The principal executive
office of the Issuer Trust is 275 Main Street, El Segundo, California 90245,
Attention: Secretary.
SECTION 2.3. Initial Contribution of Trust Property; Organizational
Expenses.
The Property Trustee acknowledges receipt from the Depositor in
connection with the Original Trust Agreement of the sum of $10, which
constituted the initial Trust Property. The Depositor shall pay organizational
expenses of the Issuer Trust as they arise or shall, upon request of any Issuer
Trustee, promptly reimburse such Issuer Trustee for any such expenses paid by
such Issuer Trustee. The Depositor shall make no claim upon the Trust Property
for the payment of such expenses.
SECTION 2.4. Issuance of the Preferred Securities.
The Depositor, both on its own behalf and on behalf of the Issuer Trust
pursuant to the Original Trust Agreement, executed and delivered the
Underwriting Agreement. Contemporaneously with the execution and delivery of
this Trust Agreement, the Property Trustee shall deliver to the underwriters,
Preferred Securities Certificates, registered in the names requested by the
underwriters, evidencing an aggregate of 300,000 Preferred Securities having an
aggregate Liquidation Amount of $6,000,000, against receipt of the aggregate
purchase price of such Preferred Securities of $6,000,000 by the Property
Trustee.
If the underwriters exercise their over-allotment option in accordance
with the Underwriting Agreement, on the subsequent Closing Date, the Property
Trustee shall deliver to the underwriters Preferred Securities Certificate,
registered in the names requested by the underwriters, evidencing up to an
aggregate of 30,000 Preferred Securities having an aggregate Liquidation Amount
of up to $600,000, against receipt of the aggregate purchase price of such
Preferred Securities equal to the aggregate Liquidation Amount by the Property
Trustee.
SECTION 2.5. Issuance of the Common Securities; Subscription and
Purchase of Debentures.
Contemporaneously with the execution and delivery of this Trust
Agreement, the Property Trustee shall deliver to the Depositor Common Securities
Certificates, registered in the name of the Depositor, evidencing an aggregate
of 9,279 Common Securities having an aggregate Liquidation Amount of $185,580,
against receipt of the aggregate purchase price of such Common Securities of
$185,580, to the Property Trustee. Contemporaneously therewith, an
Administrator, on behalf of the Issuer Trust, shall subscribe for and purchase
from the Depositor Debentures, registered in the name of the Property Trustee,
not in its individual capacity but solely as Property Trustee, on behalf of the
Issuer Trust and having an aggregate principal amount equal to $6,185,580, and,
in satisfaction of the purchase
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price for such Debentures, the Property Trustee, on behalf of the Issuer Trust,
shall deliver to the Depositor the sum of $6,185,580 (being the sum of the
amounts delivered to the Property Trustee pursuant to (i) the second sentence of
Section 2.4, and (ii) the first sentence of this Section 2.5).
If the underwriters exercise their over-allotment option in accordance
with the Underwriting Agreement, on the subsequent Closing Date, the Property
Trustee shall deliver to the Depositor a Common Securities Certificate,
registered in the name of Depositor, evidencing up to an aggregate of 930 Common
Securities having an aggregate Liquidation Amount of $18,600, against receipt of
the aggregate purchase price of such Common Securities equal to the aggregate
Liquidation Amount by the Property Trustee. Contemporaneously therewith, an
Administrator, on behalf of the Issuer Trust, shall subscribe for and purchase
from the Depositor Debentures, registered in the name of the Property Trustee,
not in its individual capacity but solely as Property Trustee, on behalf of the
Issuer Trust and having an aggregate principal amount up to $618,600, and, in
satisfaction of the purchase price for such Debentures, the Property Trustee, on
behalf of the Issuer Trust, shall deliver to the Depositor the sum equal to the
aggregate principal amount of the Debentures so purchased.
SECTION 2.6. Continuation of Trust.
The exclusive purposes and functions of the Issuer Trust are (a) to
issue and sell Trust Securities and use the proceeds from such sale to acquire
the Debentures, and (b) to engage in only those activities necessary, or
incidental thereto. The Depositor hereby appoints the Issuer Trustees as
trustees of the Issuer Trust, to have all the rights, powers and duties to the
extent set forth herein, and the Issuer Trustees hereby accept such appointment.
The Property Trustee hereby declares that it will hold the Trust Property upon
and subject to the conditions set forth herein for the benefit of the Issuer
Trust and the Holders. The Administrators shall have only those ministerial
duties set forth herein with respect to accomplishing the purposes of the Issuer
Trust and shall not be trustees or, to the fullest extent permitted by law,
fiduciaries with respect to the Issuer Trust or the Holders. The Property
Trustee shall have the right and power to perform those duties assigned to the
Administrators. The Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrators set forth
herein. The Delaware Trustee shall be one of the trustees of the Issuer Trust
for the sole and limited purpose of fulfilling the requirements of Section 3807
of the Delaware Business Trust Act and for taking such actions as are required
to be taken by a Delaware trustee under the Delaware Business Trust Act.
SECTION 2.7. Authorization to Enter into Certain Transactions.
(a) The Issuer Trustees and the Administrators shall conduct the affairs
of the Issuer Trust in accordance with the terms of this Trust Agreement.
Subject to the limitations set forth in paragraph (b) of this Section, and in
accordance with the following provisions (i) and (ii), the Issuer Trustees and
the Administrators shall have the authority to enter into all transactions and
agreements determined by the Issuer Trustees or the Administrators to be
appropriate in exercising the authority, express or implied, otherwise granted
to the Issuer Trustees or the Administrators, as the case may be, under this
Trust Agreement, and to perform all acts in furtherance thereof, including the
following:
(i) Each Administrator shall have the power and authority to act
on behalf of the Issuer Trust with respect to the following matters:
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(A) the issuance and sale of the Trust Securities;
(B) to cause the Issuer Trust to enter into, and to
execute, deliver and perform on behalf of the Issuer Trust, the
Expense Agreement and the Certificate Depository Agreement and
such other agreements as may be necessary or desirable in
connection with the purposes and function of the Issuer Trust;
(C) assisting in the registration of the Preferred
Securities under the Securities Act, and under applicable state
securities or blue sky laws and the qualification of this Trust
Agreement as a trust indenture under the Trust Indenture Act;
(D) assisting in the listing of the Preferred Securities
upon such securities exchange or exchanges as shall be determined
by the Depositor, with the registration of the Preferred
Securities under the Exchange Act, and with the preparation and
filing of all periodic and other reports and other documents
pursuant to the foregoing;
(E) assisting in the sending of notices (other than
notices of default) and other information regarding the Trust
Securities and the Debentures to the Holders in accordance with
this Trust Agreement;
(F) the consent to the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance with
this Trust Agreement (which consent shall not be unreasonably
withheld);
(G) execution of the Trust Securities on behalf of the
Trust in accordance with this Trust Agreement;
(H) execution and delivery of closing certificates, if
any, pursuant to the Underwriting Agreement and application for a
taxpayer identification number for the Issuer Trust;
(I) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware.
(J) unless otherwise required by the Trust Indenture Act,
to execute on behalf of the Issuer Trust (either acting alone or
together with any or all of the Administrators) any documents
that the Administrators have the power to execute pursuant to
this Trust Agreement; and
(K) the taking of any action incidental to the foregoing
as the Issuer Trustees may from time to time determine is
necessary or advisable to give effect to the terms of this Trust
Agreement.
(ii) The Property Trustee shall have the power, duty and
authority to act on behalf of the Issuer Trust with respect to the
following matters:
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(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and any other
payments made in respect of the Debentures and the holding of
such amounts in the Payment Account;
(D) the distribution through the Paying Agent of amounts
distributable to the Holders in respect of the Trust Securities;
(E) the exercise of all of the rights, powers and
privileges of a holder of the Debentures;
(F) the sending of notices of default and other
information regarding the Trust Securities and the Debentures to
the Holders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in accordance
with the terms of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, the
winding up of the affairs of and liquidation of the Issuer Trust
and the preparation, execution and filing of the certificate of
cancellation with the Secretary of State of the State of
Delaware;
(I) after an Event of Default (other than under paragraph
(b), (c), (d) or (e) of the definition of such term if such Event
of Default is by or with respect to the Property Trustee) the
taking of any action incidental to the foregoing as the Property
Trustee may from time to time determine is necessary or advisable
to give effect to the terms of this Trust Agreement and protect
and conserve the Trust Property for the benefit of the Holders
(without consideration of the effect of any such action on any
particular Holder); and
(J) any of the duties, liabilities, powers or the
authority of the Administrators set forth in Section
2.7(a)(i)(E), (F) and (J) herein; and in the event of a conflict
between the action of the Administrators and the action of the
Property Trustee, the action of the Property Trustee shall
prevail.
(b) So long as this Trust Agreement remains in effect, the Issuer Trust
(or the Issuer Trustees or Administrators acting on behalf of the Issuer Trust)
shall not undertake any business, activities or transaction except as expressly
provided herein or contemplated hereby. In particular, neither the Issuer
Trustees nor the Administrators shall (i) acquire any investments or engage in
any activities not authorized by this Trust Agreement, (ii) sell, assign,
transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected to
cause the Issuer Trust to become taxable as a corporation or classified as other
than a grantor trust for United States federal income tax purposes, (iv) take or
consent to any action that would cause the Junior Subordinated Debentures to be
treated as other than indebtedness of the Depositor for United States federal
income tax
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purposes, (v) incur any indebtedness for borrowed money or issue any other debt,
or (vi) take or consent to any action that would result in the placement of a
Lien on any of the Trust Property. The Property Trustee shall defend all claims
and demands of all Persons at any time claiming any Lien on any of the Trust
Property adverse to the interest of the Issuer Trust or the Holders in their
capacity as Holders.
(c) In connection with the issue and sale of the Preferred Securities,
the Depositor shall have the right and responsibility to assist the Issuer Trust
with respect to, or effect on behalf of the Issuer Trust, the following (and any
actions taken by the Depositor in furtherance of the following prior to the date
of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Issuer Trust with the
Commission and the execution on behalf of the Issuer Trust of a
registration statement on the appropriate form in relation to the
Preferred Securities, including any amendments thereto and the taking of
any action necessary or desirable to sell the Preferred Securities in a
transaction or a series of transactions pursuant thereto;
(ii) the determination of the States or other jurisdictions, if
any, in which to take appropriate action to qualify or register for sale
all or part of the Preferred Securities and the determination of any and
all such acts, other than actions that must be taken by or on behalf of
the Issuer Trust, and the advice to the Issuer Trust of actions they
must take on behalf of the Issuer Trust, and the preparation for
execution and filing of any documents to be executed and filed by the
Issuer Trust or on behalf of the Issuer Trust, as the Depositor deems
necessary or advisable in order to comply with the applicable laws of
any such States in connection with the sale of the Preferred Securities;
(iii) the preparation for filing by the Issuer Trust and
execution on behalf of the Issuer Trust of any application to the New
York Stock Exchange or any other national stock exchange, the Nasdaq
National Market or Small Cap Market or the OTC Bulletin Board for
listing upon notice of issuance of any Preferred Securities;
(iv) the preparation for filing by the Issuer Trust with the
Commission and the execution on behalf of the Issuer Trust of any
registration statement on Form 8-A relating to Preferred Securities
under Section 12(b) or 12(g) of the Exchange Act, including any
amendments thereto;
(v) the negotiation of the terms of, and the execution and
delivery of, the Underwriting Agreement providing for the sale of the
Preferred Securities; and
(vi) the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the Administrators
and the Issuer Trustees are authorized and directed to conduct the affairs of
the Issuer Trust and to operate the Issuer Trust so that the Issuer Trust will
not be deemed to be an "investment company" required to be registered under the
Investment Company Act, and will not be taxable as a corporation or classified
as other than a grantor trust for United States federal income tax purposes and
so that the Debentures will be treated as indebtedness of the Depositor for
United States federal income tax purposes. In this connection, each
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Administrator, the Property Trustee and the Holders of at least a Majority in
Liquidation Amount of the Common Securities are authorized to take any action,
not inconsistent with applicable law, the Certificate of Trust or this Trust
Agreement, that such Administrator, the Property Trustee or Holders of Common
Securities determine in their discretion to be necessary or desirable for such
purposes, as long as such action does not adversely affect in any material
respect the interests of the Holders of the Outstanding Preferred Securities. In
no event shall the Administrator take any action pursuant to the preceding
sentence or any other provision herein that would constitute discretionary
control over the assets of the Trust for purposes of Section 3(21) of ERISA. In
no event shall the Administrators or the Issuer Trustees be liable to the Issuer
Trust or the Holders for any failure to comply with this section that results
from a change in law or regulation or in the interpretation thereof.
SECTION 2.8. Assets of Trust.
The assets of the Issuer Trust shall consist of the Trust Property.
SECTION 2.9. Title to Trust Property.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee in trust for the benefit of the Issuer Trust and the
Holders in accordance with this Trust Agreement.
ARTICLE III.
PAYMENT ACCOUNT
SECTION 3.1. Payment Account.
(a) On or prior to the Closing Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and its agents shall have
exclusive control and sole right of withdrawal with respect to the Payment
Account for the purpose of making deposits in and withdrawals from the Payment
Account in accordance with this Trust Agreement. All monies and other property
deposited or held from time to time in the Payment Account shall be held by the
Property Trustee in the Payment Account for the exclusive benefit of the Holders
and for distribution as herein provided, including (and subject to) any priority
of payments provided for herein.
(b) The Property Trustee shall deposit in the Payment Account, promptly
upon receipt, all payments of principal of or interest on, and any other
payments or proceeds with respect to, the Debentures. Amounts held in the
Payment Account shall not be invested by the Property Trustee pending
distribution thereof.
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ARTICLE IV.
DISTRIBUTIONS; REDEMPTION
SECTION 4.1. Distributions.
(a) The Trust Securities represent undivided beneficial interests in the
Trust Property, and Distributions (including of Additional Amounts) will be made
on the Trust Securities at the rate and on the dates that payments of interest
(including any Additional Interest, as defined in the Indenture) are made on the
Debentures. Accordingly:
(i) Distributions on the Trust Securities shall be cumulative,
and shall accumulate whether or not there are funds of the Trust
available for the payment of Distributions. Distributions shall
accumulate from the Closing Date, and, except as provided in clause (ii)
below, shall be payable quarterly in arrears on the last day of March,
June, September and December of each year, commencing on March 31, 1999.
If any date on which a Distribution is otherwise payable on the Trust
Securities is not a Business Day, then the payment of such Distribution
shall be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), in
each case with the same force and effect as if made on the date on which
such payment was originally payable (each date on which distributions
are payable in accordance with this Section 4.1(a), a "Distribution
Date").
(ii) In the event (and to the extent) that the Depositor
exercises its right under the Indenture to defer the payment of interest
on the Debentures, quarterly Distributions on the Preferred Securities
shall be deferred.
(iii) Distributions shall accumulate in respect of the Preferred
Securities at a rate of ____% per annum of the Liquidation Amount of the
Trust Securities. The amount of Distributions payable for any period
less than a full Distribution period shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days
elapsed in a partial month in a period. Distributions payable for each
full Distribution period will be computed by dividing the rate per annum
by four. The amount of Distributions payable for any period shall
include any Additional Amounts in respect of such period.
(iv) Distributions on the Trust Securities shall be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Issuer Trust has funds
then on hand and available in the Payment Account for the payment of
such Distributions.
(b) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities at the close of business on the relevant
record date, which shall be at the close of business on the fifteenth day
(whether or not a Business Day) next preceding the relevant Distribution Date.
SECTION 4.2. Redemption.
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(a) On each Debenture Redemption Date and on the stated maturity of the
Debentures, the Issuer Trust will be required to redeem a Like Amount of Trust
Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 90 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price or if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the
estimate of the Redemption Price provided pursuant to (and as defined
in) the Indenture together with a statement that it is an estimate and
that the actual Redemption Price will be calculated on the third
Business Day prior to the Redemption Date (and if an estimate is
provided, a further notice shall be sent of the actual Redemption Price
on the date that such Redemption Price is calculated);
(iii) the CUSIP number or CUSIP numbers of the Preferred
Securities affected;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the aggregate Liquidation Amount of the
particular Trust Securities to be redeemed;
(v) that on the Redemption Date the Redemption Price will become
due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accumulate on and after said date,
except as provided in Section 4.2(d) below; and
(vi) the place or places where the Trust Securities are to be
surrendered for the payment of the Redemption Price.
The Issuer Trust in issuing the Trust Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall indicate the
"CUSIP" numbers of the Trust Securities in notices of redemption and related
materials as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Trust Securities or as contained in any notice of redemption and
related materials.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the proceeds from the contemporaneous
redemption of Debentures. Redemptions of the Trust Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the extent
that the Issuer Trust has funds then on hand and available in the Payment
Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of
any Preferred Securities, then, by 12:00 noon, New York City time, on the
Redemption Date, subject to Section 4.2(c), the Property Trustee will, with
respect to Book-Entry Preferred Securities, irrevocably deposit with the
Clearing Agency for such Book-Entry Preferred Securities, to the extent
available therefor, funds sufficient to pay the applicable Redemption Price and
will give such Clearing Agency irrevocable
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instructions and authority to pay the Redemption Price to the Holders of the
Preferred Securities. With respect to Preferred Securities that are not
Book-Entry Preferred Securities, the Property Trustee, subject to Section
4.2(c), will irrevocably deposit with the Paying Agent or Paying Agents, to the
extent available therefor, funds sufficient to pay the applicable Redemption
Price and will give the Paying Agent or Paying Agents irrevocable instructions
and authority to pay the Redemption Price to the Holders of the Preferred
Securities upon surrender of their Preferred Securities Certificates.
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date for any Trust Securities called for redemption shall be payable
to the Holders of such Trust Securities as they appear on the Securities
Register on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required, then
upon the date of such deposit, all rights of Holders holding Trust Securities so
called for redemption will cease, except the right of such Holders to receive
the Redemption Price and any Distribution payable in respect of the Trust
Securities on or prior to the Redemption Date, but without interest, and such
Securities will cease to be Outstanding. In the event that any date on which any
Redemption Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (without any interest or other payment in respect of any
such delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day, in each
case, with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of any Trust Securities called for
redemption is improperly withheld or refused and not paid either by the Issuer
Trust or by the Depositor pursuant to the Guarantee Agreement, Distributions on
such Trust Securities will continue to accumulate, as set forth in Section 4.1,
from the Redemption Date originally established by the Issuer Trust for such
Trust Securities to the date such Redemption Price is actually paid, in which
case the actual payment date will be the date fixed for redemption for purposes
of calculating the Redemption Price.
(e) Subject to Section 4.3(a), if less than all the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated pro
rata to the Common Securities and the Preferred Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed shall be selected on a pro rata basis based upon their
respective Liquidation Amounts not more than 60 days prior to the Redemption
Date by the Property Trustee from the Outstanding Preferred Securities not
previously called for redemption, provided if the Preferred Securities are in
book-entry-only form, such selection shall be made in accordance with the
customary procedures for the Clearing Agency for the Preferred Securities. The
Property Trustee shall promptly notify the Securities Registrar in writing of
the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of
Preferred Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the aggregate
Liquidation Amount of Preferred Securities that has been or is to be redeemed.
SECTION 4.3. Subordination of Common Securities.
(a) Payment of Distributions (including any Additional Amounts) on, the
Redemption Price of, and the Liquidation Distribution in respect of the Trust
Securities, as applicable, shall be made, subject to Section 4.2(e), pro rata
among the Common Securities and the Capital Securities based on the Liquidation
Amount of the Trust Securities; provided, however, that if on any Distribution
Date,
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Redemption Date or Liquidation Date any Event of Default resulting from a
Debenture Event of Default specified in Section 5.1(1) or 5.1(2) of the
Indenture shall have occurred and be continuing, no payment of any Distribution
(including any Additional Amounts) on, Redemption Price of, or Liquidation
Distribution in respect of any Common Security, and no other payment on account
of the redemption, liquidation or other acquisition of Common Securities, shall
be made unless payment in full in cash of all accumulated and unpaid
Distributions (including any Additional Amounts) on all Outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all Outstanding Preferred Securities then called for redemption, or in
the case of payment of the Liquidation Distribution the full amount of such
Liquidation Distribution on all Outstanding Preferred Securities, shall have
been made or provided for, and all funds immediately available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions (including any Additional Amounts) on, or the Redemption Price of,
the Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Debenture Event of Default, the Holders of the Common Securities shall have
no right to act with respect to any such Event of Default under this Trust
Agreement until the effect of all such Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until all
such Events of Default under this Trust Agreement with respect to the Preferred
Securities have been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the Holders of the Preferred Securities
and not on behalf of the Holders of the Common Securities, and only the Holder
of all the Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
SECTION 4.4. Payment Procedures.
Payments of Distributions (including any Additional Amounts) or of the
Redemption Price, Liquidation Amount or any other amounts in respect of the
Preferred Securities shall be made by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register or, if
the Preferred Securities are held by a Clearing Agency, such Distributions shall
be made to the Clearing Agency in immediately available funds, which shall
credit the relevant Person's accounts at such Clearing Agency on the applicable
Distribution Dates. Payments in respect of the Common Securities shall be made
in such manner as shall be mutually agreed between the Property Trustee and the
Holder of all the Common Securities.
SECTION 4.5. Withholding Tax.
The Administrators, on behalf of the Issuer Trust, shall comply with all
withholding and backup withholding tax requirements under United States federal,
state and local law. The Issuer Trust shall request, and the Holders shall
provide to the Issuer Trust, such forms or certificates as are necessary to
establish an exemption from withholding and backup withholding tax with respect
to each Holder, and any representations and forms as shall reasonably be
requested by the Issuer Trust to assist it in determining the extent of, and in
fulfilling, its withholding and backup withholding tax obligations. The
Administrators shall file required forms with applicable jurisdictions and,
unless an exemption from withholding and backup withholding tax is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Issuer Trust is required to
withhold and pay over any amounts to any authority with respect to Distributions
or allocations to any Holder, the amount withheld shall be deemed to be a
Distribution in the amount of the
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withholding to the Holder. In the event of any claimed overwithholding, Holders
shall be limited to an action against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual Distributions made, the
Issuer Trust may reduce subsequent Distributions by the amount of such required
withholding.
SECTION 4.6. Tax Returns and Reports.
The Administrators shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Issuer Trust. In this regard, the Administrators shall (a) prepare and file (or
cause to be prepared and filed) all Internal Revenue Service forms and returns
required to be filed in respect of the Issuer Trust in each taxable year of the
Issuer Trust, and (b) prepare and furnish (or cause to be prepared and
furnished) to each Holder all Internal Revenue Service forms and returns
required to be provided by the Issuer Trust. The Administrators shall provide
the Depositor and the Property Trustee with a copy of all such returns and
reports promptly after such filing or furnishing.
On or before December 15 of each year during which any Preferred
Securities are outstanding, the Administrators shall furnish to the Property
Trustee such information as may be reasonably requested by the Property Trustee
in order that the Property Trustee may prepare the information which it is
required to report for such year on internal Revenue Service Forms 1096 and 1099
pursuant to Section 6049 of the Internal Revenue Code of 1986, as amended. Such
information shall include the amount of original issue discount includible in
income for each outstanding Preferred Security during such year.
SECTION 4.7. Payment of Taxes, Duties, Etc. of the Issuer Trust.
Upon receipt under the Debentures of Additional Sums, the Property
Trustee shall promptly pay any Additional Taxes imposed on the Issuer Trust by
the United States or any other taxing authority.
SECTION 4.8. Payments under Indenture or Pursuant to Direct Actions.
Any amount payable hereunder to any Holder of Preferred Securities shall
be reduced by the amount of any corresponding payment such Holder (or Owner with
respect thereto) has directly received pursuant to Section 5.8 of the Indenture
or Section 5.13 of this Trust Agreement.
ARTICLE V.
SECURITIES CERTIFICATES
SECTION 5.1. Initial Ownership.
Upon the creation of the Issuer Trust and the contribution by the
Depositor referred to in Section 2.3 and until the issuance of the Trust
Securities, and at any time during which no Trust Securities are Outstanding,
the Depositor shall be the sole beneficial owner of the Issuer Trust.
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SECTION 5.2. The Securities Certificates.
(a) The Preferred Securities Certificates shall be issued in minimum
denominations of $20 Liquidation Amount and integral multiples of $20 in excess
thereof, and the Common Securities Certificates shall be issued in denominations
of $20 Liquidation Amount and integral multiples thereof. The Securities
Certificates shall be executed on behalf of the Issuer Trust by manual or
facsimile signature of at least one Administrator; provided that if the
signature of the Administrator on a Preferred Securities Certificate is a
facsimile, the Securities Certificate must be manually countersigned by the
Property Trustee or the Securities Registrar. Securities Certificates bearing
the signatures of individuals who were, at the time when such signatures shall
have been affixed, authorized to sign on behalf of the Issuer Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Securities Certificates or did not hold
such offices at the date of delivery of such Securities Certificates. A
transferee of a Trust Securities Certificate shall become a Holder, and shall be
entitled to the rights and subject to the obligations of a Holder hereunder,
upon due registration of such Trust Securities Certificate in such transferee's
name pursuant to Section 5.5.
(b) Upon their original issuance, Preferred Securities Certificates
shall be issued in the form of definitive Preferred Securities Certificates.
(c) A single Common Securities Certificate representing the Common
Securities shall be issued to the Depositor in the form of a definitive Common
Securities Certificate.
SECTION 5.3. Execution and Delivery of Securities Certificates.
At each Closing Date, the Administrators shall cause Securities
Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and
2.5, to be executed on behalf of the Issuer Trust in accordance with Section 5.2
and delivered to or upon the written order of the Depositor, executed by an
authorized officer thereof, without further corporate action by the Depositor,
in authorized denominations.
SECTION 5.4. Book-Entry Preferred Securities.
(a) Each Global Preferred Security issued under this Agreement shall be
registered in the name of the Clearing Agency or a nominee thereof and delivered
to such Clearing Agency or a nominee thereof or custodian therefor, and each
such Global Preferred Security shall constitute a single Preferred Securities
Certificate for all purposes of this Agreement.
(b) Notwithstanding any other provision in this Trust Agreement, no
Global Preferred Security may be exchanged in whole or in part for Preferred
Securities Certificates registered, and no transfer of a Global Preferred
Security in whole or in part may be registered, in the name of any Person other
than the Clearing Agency for such Global Preferred Security or a nominee thereof
unless (i) the Clearing Agency advises the Property Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Global Preferred Security, and the
Administrators, on behalf of the Issuer Trust, is unable to locate a qualified
successor, (ii) the Administrators on behalf of the Issuer Trust at their option
advise the Depositary in writing that they elect to terminate the book-entry
system through the Clearing Agency, or (iii) a Debenture Event of
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Default has occurred and is continuing. Upon the occurrence of any event
specified in clause (i), (ii) or (iii) above, the Administrators shall notify
the Clearing Agency and instruct the Clearing Agency to notify all Owners of
Book-Entry Preferred Securities, the Delaware Trustee and the Administrators of
the occurrence of such event and of the availability of the Definitive Preferred
Securities Certificates to Owners of the Preferred Securities requesting the
same.
(c) If any Global Preferred Security is to be exchanged for other
Preferred Securities Certificates or canceled in part, or if any other Preferred
Securities Certificate is to be exchanged in whole or in part for Book-Entry
Preferred Securities represented by a Global Preferred Security, then either (i)
such Global Preferred Security shall be so surrendered for exchange or
cancellation as provided in this Article V or (ii) the aggregate Liquidation
Amount represented by such Global Preferred Security shall be reduced, subject
to Section 5.2, or increased by an amount equal to the Liquidation Amount
represented by that portion of the Global Preferred Security to be so exchanged
or canceled, or equal to the Liquidation Amount represented by such other
Preferred Securities Certificates to be so exchanged for Book-Entry Preferred
Securities represented thereby, as the case may be, by means of an appropriate
adjustment made on the records of the Securities Registrar, whereupon the
Property Trustee, in accordance with the Applicable Procedures, shall instruct
the Clearing Agency or its authorized representative to make a corresponding
adjustment to its records. Upon surrender to the Administrators or the
Securities Registrar of the Global Preferred Security or Securities by the
Clearing Agency, accompanied by registration instructions, the Administrators,
or any one of them, shall execute the Definitive Preferred Securities
Certificates in accordance with the instructions of the Clearing Agency. None of
the Securities Registrar, the Issuer Trustees or the Administrators shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be fully protected in relying on, such instructions. Upon the
issuance of Definitive Preferred Securities Certificates, the Issuer Trustees
and Administrators shall recognize the Holders of the Definitive Preferred
Securities Certificates as Holders. The Definitive Preferred Securities
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Administrators, as evidenced
by the execution thereof by the Administrators or any one of them.
(d) Every Preferred Securities Certificate executed and delivered upon
registration or transfer of, or in exchange for or in lieu of, a Global
Preferred Security or any portion thereof, whether pursuant to this Article V or
Article IV or otherwise, shall be executed and delivered in the form of, and
shall be, a Global Preferred Security, unless such Preferred Securities
Certificate is registered in the name of a Person other than the Clearing Agency
for such Global Preferred Security or a nominee thereof.
(e) The Clearing Agency or its nominee, as registered owner of a Global
Preferred Security, shall be the Holder of such Global Preferred Security for
all purposes under this Agreement and the Global Preferred Security, and Owners
with respect to a Global Preferred Security shall hold such interests pursuant
to the Applicable Procedures. The Securities Registrar and the Property Trustee
shall be entitled to deal with the Clearing Agency for all purposes of this
Trust Agreement relating to the Global Preferred Securities (including the
payment of the Liquidation Amount of and Distributions on the Book-Entry
Preferred Securities represented thereby and the giving of instructions or
directions by Owners of Book-Entry Preferred Securities represented thereby) as
the sole Holder of the Book-Entry Preferred Securities represented thereby and
shall have no obligations to the Owners thereof. None of the Property Trustee
nor the Securities Registrar shall have any liability in respect of any
transfers effected by the Clearing Agency.
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The rights of the Owners of the Book-Entry Preferred Securities shall be
exercised only through the Clearing Agency and shall be limited to those
established by law, the Applicable Procedures and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants, provided that,
solely for the purpose of determining whether the Holders of the requisite
amount of Preferred Securities have voted on any matter provided for in this
Trust Agreement, so long as Definitive Preferred Security Certificates have not
been issued, the Issuer Trustees may conclusively rely on, and shall be fully
protected in relying on, any written instrument (including a proxy) delivered to
the Property Trustee by the Clearing Agency setting forth the Owners' votes or
assigning the right to vote on any matter to any other Persons either in whole
or in part. Pursuant to the Certificate Depository Agreement, unless and until
Definitive Preferred Securities Certificates are issued pursuant to Section
5.4(b), the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments on the Preferred
Securities to such Clearing Agency Participants, and none of the Depositor, the
Administrators or the Issuer Trustees shall have any responsibility or
obligation with respect thereto.
SECTION 5.5. Registration of Transfer and Exchange of Preferred
Securities Certificates.
(a) The Property Trustee shall keep or cause to be kept, at its
Corporate Trust Office or at the office or agency maintained pursuant to Section
5.9, a register or registers (the "Securities Register") in which the registrar
and transfer agent with respect to the Trust Securities (the "Securities
Registrar"), subject to such reasonable regulations as it may prescribe, shall
provide for the registration of Preferred Securities Certificates and Common
Securities Certificates (subject to Section 5.11 in the case of the Common
Securities Certificates) and registration of transfers and exchanges of
Preferred Securities Certificates as herein provided. U.S. Stock Transfer
Corporation of Glendale, California is hereby appointed Securities Registrar for
the purpose of registering Preferred Securities Certificates and (subject to
Section 5.11) Common Securities Certificates and transfers and exchanges thereof
as provided herein until the Separation Time. Thereafter, the Property Trustee
shall be appointed as Securities Registrar.
Upon surrender for registration of transfer of any Preferred Securities
Certificate at the office or agency maintained pursuant to Section 5.9, the
Administrators or any one of them shall execute and deliver to the Property
Trustee, and the Property Trustee shall deliver, in the name of the designated
transferee or transferees, one or more new Preferred Securities Certificates in
authorized denominations of a like aggregate Liquidation Amount as may be
required by this Trust Agreement dated the date of execution by such
Administrator.
The Securities Registrar shall not be required, (i) to issue, register
the transfer of or exchange any Preferred Security during a period beginning at
the opening of business 15 days before the day of selection for redemption of
such Preferred Securities pursuant to Article IV and ending at the close of
business on the day of mailing of the notice of redemption, or (ii) to register
the transfer of or exchange any Preferred Security so selected for redemption in
whole or in part, except, in the case of any such Preferred Security to be
redeemed in part, any portion thereof not to be redeemed.
Every Preferred Securities Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Securities
Registrar duly executed by the Holder or such Holder's attorney duly authorized
in writing. Each Preferred Securities Certificate surrendered for registration
of transfer or
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exchange shall be canceled and subsequently disposed of by the Property Trustee
in accordance with such Person's customary practice.
No service charge shall be made for any registration of transfer or
exchange of Preferred Securities Certificates, but the Issuer Trust may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Preferred Securities
Certificates.
(b) Notwithstanding any other provision of this Agreement, transfers and
exchanges of Preferred Securities Certificates and beneficial interests in a
Global Preferred Security of the kinds specified in this Section 5.5(b) shall be
made only in accordance with this Section 5.5(b).
(i) Non-Global Preferred Security to Global Preferred Security.
If the Holder of a Preferred Securities Certificate (other than a Global
Preferred Security) wishes at any time to transfer all or any portion of
such Preferred Securities Certificate to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Global
Preferred Security, such transfer may be effected only in accordance
with the provisions of this clause (b)(i) and subject to the Applicable
Procedures. Upon receipt by the Securities Registrar of (A) such
Preferred Securities Certificate as provided in Section 5.5(a) and
instructions satisfactory to the Securities Registrar directing that a
beneficial interest in the Global Preferred Security of a specified
number of Preferred Securities not greater than the number of Preferred
Securities represented by such Preferred Securities Certificate be
credited to a specified Clearing Agency Participant's account, then the
Securities Registrar shall cancel such Preferred Securities Certificate
(and issue a new Preferred Securities Certificate in respect of any
untransferred portion thereof) as provided in Section 5.5(a) and
increase the aggregate Liquidation Amount of the Global Preferred
Security by the Liquidation Amount represented by such Preferred
Securities so transferred as provided in Section 5.4(c).
(ii) Non-Global Preferred Security to Non-Global Preferred
Security. A Preferred Securities Certificate that is not a Global
Preferred Security may be transferred, in whole or in part, to a Person
who takes delivery in the form of another Preferred Securities
Certificate that is not a Global Preferred Security as provided in
Section 5.5(a).
(iii) Exchanges between Global Preferred Security and Non-Global
Preferred Security. A beneficial interest in a Global Preferred Security
may be exchanged for a Preferred Securities Certificate that is not a
Global Preferred Security as provided in Section 5.4.
SECTION 5.6. Mutilated, Destroyed, Lost or Stolen Securities
Certificates.
If (a) any mutilated Securities Certificate shall be surrendered to the
Securities Registrar, or if the Securities Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Securities
Certificate, and (b) there shall be delivered to the Securities Registrar and
the Administrators such security or indemnity as may be required by them to save
each of them harmless, then in the absence of notice that such Securities
Certificate shall have been acquired by a bona fide purchaser, the
Administrators, or any one of them, on behalf of the Issuer Trust shall execute
and make available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Securities Certificate, a new Securities
Certificate of like class, tenor and denomination. In connection with the
issuance of any
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new Securities Certificate under this Section 5.6, the Administrators or the
Securities Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Securities Certificate issued pursuant to this Section 5.6 shall
constitute conclusive evidence of an undivided beneficial interest in the assets
of the Issuer Trust corresponding to that evidenced by the lost, stolen or
destroyed Securities Certificate, as if originally issued, whether or not the
lost, stolen or destroyed Securities Certificate shall be found at any time.
SECTION 5.7. Persons Deemed Holders.
The Issuer Trustees, the Administrators and the Securities Registrar
shall each treat the Person in whose name any Securities Certificate shall be
registered in the Securities Register as the owner of such Securities
Certificate for the purpose of receiving Distributions and for all other
purposes whatsoever, and none of the Issuer Trustees, the Administrators and the
Securities Registrar shall be bound by any notice to the contrary.
SECTION 5.8. Access to List of Holders' Names and Addresses.
Each Holder and each Owner shall be deemed to have agreed not to hold
the Depositor, the Property Trustee, the Delaware Trustee or the Administrators
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 5.9. Maintenance of Office or Agency.
The Property Trustee shall designate, with the consent of the
Administrators, which consent shall not be unreasonably withheld, an office or
offices or agency or agencies where Preferred Securities Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Issuer Trustees in respect of the Trust Securities
Certificates may be served. The Property Trustee initially designates the U.S.
Stock Transfer Corporation, 1745 Gardena Avenue, Suite 200, Glendale, California
91204 until the Separation Time, and thereafter, the Corporate Trust Office, as
its office and agency for the purpose of registration of transfer or exchange.
The Property Trustee initially designates the Corporate Trust Office as its
office and agency for the purpose of serving notices or demands. The Property
Trustee shall give prompt written notice to the Depositor, the Administrators
and to the Holders of any change in the location of the Securities Register or
any such office or agency.
SECTION 5.10. Appointment of Paying Agents.
The Paying Agent or Paying Agents shall make Distributions to Holders
from the Payment Account and shall report the amounts of such Distributions to
the Property Trustee and the Administrators. Any Paying Agent shall have the
revocable power to withdraw funds from the Payment Account solely for the
purpose of making the Distributions referred to above. The Property Trustee may
revoke such power and remove the Paying Agent in its sole discretion. The Paying
Agent shall initially be U.S. Stock Transfer Corporation until the Separation
Time, and thereafter shall be the Bank. Any Person acting as Paying Agent shall
be permitted to resign as Paying Agent upon 30 days' written notice to the
Administrators and the Property Trustee. If the Paying Agent shall resign or its
authority to act be revoked, the Property Trustee shall appoint a successor that
is reasonably acceptable to the Administrators to act as Paying Agent. Such
successor Paying Agent or any additional Paying Agent shall execute and deliver
to the Issuer Trustees an instrument in which such successor Paying Agent or
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additional Paying Agent shall agree with the Issuer Trustees that as Paying
Agent, such successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Holders in trust for the benefit of
the Holders entitled thereto until such sums shall be paid to such Holders. The
Paying Agent shall return all unclaimed funds to the Property Trustee and upon
removal of a Paying Agent such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of Sections 8.1, 8.3 and 8.6
herein shall apply to the Bank also in its role as Paying Agent, if the Bank
shall act as Paying Agent and, to the extent applicable, to any other paying
agent appointed hereunder. Any reference in this Agreement to the Paying Agent
shall include any co-paying agent unless the context requires otherwise.
SECTION 5.11. Ownership of Common Securities by Depositor.
At each Closing Date, the Depositor shall acquire, and thereafter shall
retain, beneficial and record ownership of the Common Securities. Neither the
Depositor nor any successor Holder of the Common Securities may transfer less
than all the Common Securities, and the Depositor or any such successor Holder
may transfer the Common Securities only (i) in connection with Section 8.1 of
the Indenture, or (ii) to the Depositor or an Affiliate of the Depositor in
compliance with applicable law (including the Securities Act, and applicable
state securities and blue sky laws), and in either case only upon an effective
assignment and delegation by the Holder of all the Common Securities to its
transferee of all of its rights and obligations under the Expense Agreement. To
the fullest extent permitted by law, any attempted transfer of the Common
Securities other than as set forth in the immediately preceding sentence shall
be void. The Administrators shall cause each Common Securities Certificate
issued to the Depositor to contain a legend stating substantially "THIS
CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF THE
DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST
AGREEMENT AND ONLY IN CONNECTION WITH A SIMULTANEOUS DELEGATION AND ASSIGNMENT
OF THE EXPENSE AGREEMENT REFERRED TO THEREIN."
SECTION 5.12. Notices to Clearing Agency.
To the extent that a notice or other communication to the Holders is
required under this Trust Agreement, if the Preferred Securities are represented
by a Global Preferred Security, the Administrators and the Issuer Trustees shall
give all such notices and communications specified herein to be given to the
Clearing Agency, and shall have no obligations to the Owners.
SECTION 5.13. Rights of Holders; Waivers of Past Defaults.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.9, and
the Holders shall not have any right or title therein other than the undivided
beneficial interest in the assets of the Issuer Trust conferred by their Trust
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Issuer Trust except as described below. The
Trust Securities shall be personal property giving only the rights specifically
set forth therein and in this Trust Agreement. The Trust Securities shall have
no preemptive or similar rights and when issued and delivered to Holders against
payment of the purchase price therefor will be fully paid and nonassessable by
the Issuer Trust. The Holders of the Trust Securities, in their capacities as
such, shall be entitled to the same limitation of personal liability
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extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
(b) For so long as any Preferred Securities remain Outstanding, if, upon
a Debenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have the right to make such declaration by a notice in writing
to the Property Trustee, the Depositor and the Debenture Trustee; and upon any
such declaration such principal amount of and the accrued interest on all of the
Debentures shall become immediately due and payable, provided that the payment
of principal and interest on such Debentures shall remain subordinated to the
extent provided in the Indenture.
At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Property Trustee fails to annul any such declaration and waive
such default, the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, by written notice to the Property Trustee, the Depositor
and the Debenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Depositor has paid or deposited with the Debenture
Trustee a sum sufficient to pay
(A) all overdue installments of interest on all of the
Debentures,
(B) any accrued Additional Interest on all of the
Debentures,
(C) the principal of (and premium, if any, on) any
Debentures that have become due otherwise than by such
declaration of acceleration and interest and Additional Interest
thereon at the rate borne by the Debentures, and
(D) all sums paid or advanced by the Debenture Trustee
under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Debenture Trustee and the
Property Trustee, their agents and counsel; and
(ii) all Events of Default with respect to the Debentures, other
than the non-payment of the principal of the Debentures that has become
due solely by such acceleration, have been cured or waived as provided
in Section 5.13 of the Indenture.
The Holders of at least a Majority in Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default or Event of Default under the Indenture,
except a default or Event of Default in the payment of principal or interest
(unless such default or Event of Default has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default or
Event of Default in respect of a covenant or provision that under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Debenture. No such rescission shall affect any subsequent default or
impair any right consequent thereon.
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Upon receipt by the Property Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, by Holders of any part of the
Preferred Securities a record date shall be established for determining Holders
of Outstanding Preferred Securities entitled to join in such notice, which
record date shall be at the close of business on the day the Property Trustee
receives such notice. The Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to join in such notice,
whether or not such Holders remain Holders after such record date; provided,
that, unless such declaration of acceleration, or rescission and annulment, as
the case may be, shall have become effective by virtue of the requisite
percentage having joined in such notice prior to the day that is 90 days after
such record date, such notice of declaration of acceleration, or rescission and
annulment, as the case may be, shall automatically and without further action by
any Holder be canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder, or a proxy of a Holder, from giving, after expiration of such
90-day period, a new written notice of declaration of acceleration, or
rescission and annulment thereof, as the case may be, that is identical to a
written notice that has been canceled pursuant to the proviso to the preceding
sentence, in which event a new record date shall be established pursuant to the
provisions of this Section 5.13(b).
(c) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon a Debenture Event of Default specified in Section 5.1(1)
or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have the
right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of any
amounts payable in respect of Debentures having an aggregate principal amount
equal to the aggregate Liquidation Amount of the Preferred Securities of such
Holder (a "Direct Action"). Except as set forth in Section 5.13(b) and this
Section 5.13(c), the Holders of Preferred Securities shall have no right to
exercise directly any right or remedy available to the holders of, or in respect
of, the Debentures.
(d) Except as otherwise provided in paragraphs (a), (b) and (c) of this
Section 5.13, the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default or Event of Default and its consequences.
Upon such waiver, any such default or Event of Default shall cease to exist, and
any default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Trust Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
ARTICLE VI.
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. Limitations on Voting Rights.
(a) Except as expressly provided in this Trust Agreement and in the
Indenture and as otherwise required by law, no Holder of Preferred Securities
shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Issuer Trust or the obligations
of the parties hereto, nor shall anything herein set forth, or contained in the
terms of the Securities Certificates, be construed so as to constitute the
Holders from time to time as partners or members of an association.
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(b) So long as any Debentures are held by the Property Trustee on behalf
of the Issuer Trust, the Property Trustee shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercise any trust or power conferred on the Property Trustee with
respect to the Debentures, (ii) waive any past default that may be waived under
Section 5.13 of the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Debentures shall be due and payable,
or (iv) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of at least a Majority in
Liquidation Amount of the Preferred Securities, provided, however, that where a
consent under the Indenture would require the consent of each Holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior written consent of each Holder of Preferred
Securities. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred Securities,
except by a subsequent vote of the Holders of the Preferred Securities. The
Property Trustee shall notify all Holders of the Preferred Securities of any
notice of default received with respect to the Debentures. In addition to
obtaining the foregoing approvals of the Holders of the Preferred Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall, at the
expense of the Depositor, obtain an Opinion of Counsel experienced in such
matters to the effect that such action shall not cause the Issuer Trust to be
taxable as a corporation or classified as other than a grantor trust for United
States Federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or
the Issuer Trustees otherwise propose to effect, (i) any action that would
adversely affect in any material respect the powers, preferences or special
rights of the Preferred Securities, whether by way of amendment to the Trust
Agreement or otherwise, or (ii) the dissolution, winding-up or termination of
the Issuer Trust, other than pursuant to the terms of this Trust Agreement, then
the Holders of Outstanding Preferred Securities as a class will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of the Holders of at least a Majority in
Liquidation Amount of the Preferred Securities. Notwithstanding any other
provision of this Trust Agreement, no amendment to this Trust Agreement may be
made if, as a result of such amendment, it would cause the Issuer Trust to be
taxable as a corporation or classified as other than a grantor trust for United
States Federal income tax purposes.
SECTION 6.2. Notice of Meetings.
Notice of all meetings of the Holders of the Preferred Securities,
stating the time, place and purpose of the meeting, shall be given by the
Property Trustee pursuant to Section 10.8 to each Holder of Preferred
Securities, at such Holder's registered address, at least 30 days and not more
than 90 days before the meeting. At any such meeting, any business properly
before the meeting may be so considered whether or not stated in the notice of
the meeting. Any adjourned meeting may be held as adjourned without further
notice.
SECTION 6.3. Meetings of Holders of the Preferred Securities.
No annual meeting of Holders is required to be held. The Property
Trustee, however, shall call a meeting of the Holders of the Preferred
Securities to vote on any matter upon the written request of the Holders of at
least 25% in aggregate Liquidation Amount of the Outstanding Preferred
Securities and the
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Administrators or the Property Trustee may, at any time in their discretion,
call a meeting of the Holders of the Preferred Securities to vote on any matters
as to which such Holders are entitled to vote.
The Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, present in person or by proxy, shall constitute a quorum
at any meeting of the Holders of the Preferred Securities.
If a quorum is present at a meeting, an affirmative vote by the Holders
present, in person or by proxy, holding Preferred Securities representing at
least a majority of the aggregate Liquidation Amount of the Preferred Securities
held by the Holders present, either in person or by proxy, at such meeting shall
constitute the action of the Holders of the Preferred Securities, unless this
Trust Agreement requires a greater number of affirmative votes.
SECTION 6.4. Voting Rights.
Holders shall be entitled to one vote for each $20 of Liquidation Amount
represented by their Outstanding Trust Securities in respect of any matter as to
which such Holders are entitled to vote.
SECTION 6.5. Proxies, etc.
At any meeting of Holders, any Holder entitled to vote thereat may vote
by proxy, provided that no proxy shall be voted at any meeting unless it shall
have been placed on file with the Property Trustee, or with such other officer
or agent of the Issuer Trust as the Property Trustee may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
resolution of the Property Trustee, proxies may be solicited in the name of the
Property Trustee or one or more officers of the Property Trustee. Only Holders
of record shall be entitled to vote. When Trust Securities are held jointly by
several Persons, any one of them may vote at any meeting in person or by proxy
in respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be executed
by or on behalf of a Holder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger. No proxy shall be valid more than three years after its date of
execution.
SECTION 6.6. Holder Action by Written Consent.
Any action that may be taken by Holders at a meeting may be taken
without a meeting and without notice if Holders holding at least a Majority in
Liquidation Amount of all Preferred Securities entitled to vote in respect of
such action (or such larger proportion thereof as shall be required by any other
provision of this Trust Agreement) shall consent to the action in writing. Any
action that may be taken by the Holders of all the Common Securities may be
taken if such Holders shall consent to the action in writing.
SECTION 6.7. Record Date for Voting and Other Purposes.
For the purposes of determining the Holders who are entitled to notice
of and to vote at any meeting or to vote by written consent, or to participate
in any distribution on the Trust Securities in respect of which a record date is
not otherwise provided for in this Trust Agreement, or for the purpose of any
other action, the Administrators or Property Trustee may from time to time fix a
date, not more
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than 90 days prior to the date of any meeting of Holders or the payment of a
distribution or other action (including action to be taken by written consent),
as the case may be, as a record date for the determination of the identity of
the Holders of record for such purposes.
SECTION 6.8. Acts of Holders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Holders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as otherwise expressly provided herein,
such action shall become effective when such instrument or instruments are
delivered to the Property Trustee. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Trust Agreement and (subject to Section
8.1) conclusive in favor of the Issuer Trustees and the Administrators, if made
in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof of such signer's
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner that any Issuer Trustee or Administrator receiving the same deems
sufficient.
The ownership of Trust Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Trust Security shall bind every future Holder
of the same Trust Security and the Holder of every Trust Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Issuer
Trustees, the Administrators or the Issuer Trust in reliance thereon, whether or
not notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
If any dispute shall arise among the Holders, the Administrators or the
Issuer Trustees with respect to the authenticity, validity or binding nature of
any request, demand, authorization, direction, consent, waiver or other Act of
such Holder or Issuer Trustee under this Article VI, then the determination of
such matter by the Property Trustee shall be conclusive with respect to such
matter.
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SECTION 6.9. Inspection of Records.
Upon reasonable written notice to the Administrators and the Property
Trustee, the records of the Issuer Trust shall be open to inspection by any
Holder during normal business hours for any purpose reasonably related to such
Holder's interest as a Holder.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the Property Trustee and
the Delaware Trustee.
The Property Trustee and the Delaware Trustee, each severally on behalf
of and as to itself, hereby represents and warrants for the benefit of the
Depositor and the Holders that:
(a) the Property Trustee is a Delaware banking corporation, duly
organized, validly existing and in good standing under the laws of the
State of Delaware;
(b) the Property Trustee has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this
Trust Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Trust Agreement;
(c) the Delaware Trustee is a Delaware banking corporation duly
organized, validly existing and in good standing in the State of
Delaware;
(d) the Delaware Trustee has full corporate power, authority and
legal right to execute, deliver and perform its obligations under this
Trust Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and the Delaware Trustee and
constitutes the valid and legally binding agreement of each of the
Property Trustee and the Delaware Trustee enforceable against each of
them in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(f) the execution, delivery and performance of this Trust
Agreement has been duly authorized by all necessary corporate or other
action on the part of the Property Trustee and the Delaware Trustee and
does not require any approval of stockholders of the Property Trustee
and the Delaware Trustee and such execution, delivery and performance
will not (i) violate the Charter or By-laws of the Property Trustee or
the Delaware Trustee, (ii) to the best of each of the Property Trustee's
and the Delaware Trustee's knowledge, violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or
result in the creation or imposition of,
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any Lien on any properties included in the Trust Property pursuant to
the provisions of, any indenture, mortgage, credit agreement, license or
other agreement or instrument to which the Property Trustee or the
Delaware Trustee is a party or by which it is bound, or (iii) violate
any applicable law, governmental rule or regulation of the United States
or the State of Delaware, as the case may be, governing the banking,
trust or general powers of the Property Trustee or the Delaware Trustee
(as appropriate in context) or any order, judgment or decree applicable
to the Property Trustee or the Delaware Trustee;
(g) neither the authorization, execution or delivery by the
Property Trustee or the Delaware Trustee of this Trust Agreement nor the
consummation of any of the transactions by the Property Trustee or the
Delaware Trustee (as appropriate in context) contemplated herein
requires the consent or approval of, the giving of notice to, the
registration with or the taking of any other action with respect to any
governmental authority or agency under any existing law of the United
States or the State of Delaware governing the banking, trust or general
powers of the Property Trustee or the Delaware Trustee, as the case may
be; and
(h) there are no proceedings pending or, to the best of each of
the Property Trustee's and the Delaware Trustee's knowledge, threatened
against or affecting the Property Trustee or the Delaware Trustee in any
court or before any governmental authority, agency or arbitration board
or tribunal that, individually or in the aggregate, would materially and
adversely affect the Issuer Trust or would question the right, power and
authority of the Property Trustee or the Delaware Trustee, as the case
may be, to enter into or perform its obligations as one of the Issuer
Trustees under this Trust Agreement.
SECTION 7.2. Representations and Warranties of Depositor.
The Depositor hereby represents and warrants for the benefit of the
Holders that:
(a) the Securities Certificates issued at each Closing Date on
behalf of the Issuer Trust have been duly authorized and will have been
duly and validly executed, issued and delivered by the Issuer Trustees
pursuant to the terms and provisions of, and in accordance with the
requirements of, this Trust Agreement and the Holders will be, as of
each such date, entitled to the benefits of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges
payable by the Issuer Trust (or the Issuer Trustees on behalf of the
Issuer Trust) under the laws of the State of Delaware or any political
subdivision thereof in connection with the execution, delivery and
performance by either Issuer Trustee of this Trust Agreement.
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ARTICLE VIII.
THE ISSUER TRUSTEES; THE ADMINISTRATORS
SECTION 8.1. Certain Duties and Responsibilities.
(a) The duties and responsibilities of the Issuer Trustees and the
Administrators shall be as provided by this Trust Agreement and, in the case of
the Property Trustee, by the Trust Indenture Act. Notwithstanding the foregoing,
but subject to Section 8.1(c), no provision of this Trust Agreement shall
require any of the Issuer Trustees or Administrators to expend or risk its or
their own funds or otherwise incur any financial liability in the performance of
any of its or their duties hereunder, or in the exercise of any of its or their
rights or powers, if it or they shall have reasonable grounds for believing that
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Trust Agreement relating to the
conduct or affecting the liability of or affording protection to the Issuer
Trustees or the Administrators shall be subject to the provisions of this
Section 8.1. Nothing in this Trust Agreement shall be construed to release an
Administrator from liability for his or her own negligent action, its own
negligent failure to act, or his or her own wilful misconduct. To the extent
that, at law or in equity, an Issuer Trustee or Administrator has duties and
liabilities relating to the Issuer Trust or to the Holders, such Issuer Trustee
or Administrator shall not be liable to the Issuer Trust or to any Holder for
such Issuer Trustee's or Administrator's good faith reliance on the provisions
of this Trust Agreement. The provisions of this Trust Agreement, to the extent
that they restrict the duties and liabilities of the Issuer Trustees and
Administrators otherwise existing at law or in equity, are agreed by the
Depositor and the Holders to replace such other duties and liabilities of the
Issuer Trustees and Administrators.
(b) All payments made by the Property Trustee or a Paying Agent in
respect of the Trust Securities shall be made only from the revenue and proceeds
from the Trust Property and only to the extent that there shall be sufficient
revenue or proceeds from the Trust Property to enable the Property Trustee or a
Paying Agent to make payments in accordance with the terms hereof. Each Holder,
by its acceptance of a Trust Security, agrees that it will look solely to the
revenue and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that neither the Issuer Trustees nor
the Administrators are personally liable to it for any amount distributable in
respect of any Trust Security or for any other liability in respect of any Trust
Security. This Section 8.1(b) does not limit the liability of the Issuer
Trustees expressly set forth elsewhere in this Trust Agreement or, in the case
of the Property Trustee, in the Trust Indenture Act.
(c) If an Event of Default has occurred and is continuing, the Property
Trustee shall enforce this Trust Agreement for the benefit of the Holders.
(d) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee or the Delaware Trustee from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(i) the Property Trustee shall not be liable for any error of
judgment made in good faith by an authorized officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
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(ii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of at least a Majority in Liquidation
Amount of the Preferred Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the
Property Trustee under this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures and
the Payment Account shall be to deal with such Property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Trust Agreement and the
Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree with the
Depositor; and money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
maintained by the Property Trustee pursuant to Section 3.1 and except to
the extent otherwise required by law;
(v) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrators or the Depositor with their
respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the default or misconduct of any other Issuer
Trustee, the Administrators or the Depositor; and
SECTION 8.2. Certain Notices.
Within five Business Days after the occurrence of any Event of Default
actually known to a Responsible Officer of the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in Section
10.8, notice of such Event of Default to the Holders, the Administrators and the
Depositor, unless such Event of Default shall have been cured or waived.
Within five Business Days after the receipt of notice of the Depositor's
exercise of its right to defer the payment of interest on the Debentures
pursuant to the Indenture, the Property Trustee shall transmit, in the manner
and to the extent provided in Section 10.8, notice of such exercise to the
Holders and the Administrators, unless such exercise shall have been revoked.
SECTION 8.3. Certain Rights of Property Trustee.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting in good faith upon any
resolution, Opinion of Counsel, certificate, written representation of a
Holder or transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
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(b) if (i) in performing its duties under this Trust Agreement
the Property Trustee is required to decide between alternative courses
of action, (ii) in construing any of the provisions of this Trust
Agreement the Property Trustee finds the same ambiguous or inconsistent
with any other provisions contained herein, or (iii) the Property
Trustee is unsure of the application of any provision of this Trust
Agreement, then, except as to any matter as to which the Holders of the
Preferred Securities are entitled to vote under the terms of this Trust
Agreement, the Property Trustee shall deliver a notice to the Depositor
requesting the Depositor's opinion as to the course of action to be
taken and the Property Trustee shall take such action, or refrain from
taking such action, as the Property Trustee shall deem advisable and in
the best interests of the Holders, in which event the Property Trustee
shall have no liability except for its own bad faith, negligence or
wilful misconduct;
(c) any direction or act of the Depositor or the Administrators
contemplated by this Trust Agreement shall be sufficiently evidenced by
an Officers' Certificate;
(d) any direction or act of an Administrator contemplated by this
Trust Agreement shall be sufficiently evidenced by a certificate
executed by such Administrator and setting forth such direction or act;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or re-registration
thereof;
(f) the Property Trustee may consult with counsel (which counsel
may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees) and the advice of such counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice; the Property Trustee shall
have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the
request or direction of any of the Holders pursuant to this Trust
Agreement, unless such Holders shall have offered to the Property
Trustee security or indemnity reasonably satisfactory to it against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction; provided that, nothing
contained in this Section 8.3(g) shall be taken to relieve the Property
Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Trust Agreement;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to
do so by one or more Holders, but the Property Trustee may make such
further inquiry or investigation into such facts or matters as it may
see fit;
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(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through its agents, attorneys, custodians or nominees, provided that the
Property Trustee shall be responsible for its own negligence, bad faith
or wilful misconduct with respect to selection of any agent, attorney,
custodian or nominee appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders (which instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would be
entitled to direct the Property Trustee under the terms of the Trust
Securities in respect of such remedy, right or action), (ii) may refrain
from enforcing such remedy or right or taking such other action until
such instructions are received and (iii) shall be fully protected in
acting in accordance with such instructions;
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this Trust
Agreement; and
(l) when the Property Trustee incurs expenses or renders services
in connection with a Bankruptcy Event, such expenses (including legal
fees and expenses of its counsel) and the compensation for such services
are intended to constitute expenses of administration under any
bankruptcy law or law relating to creditors rights generally.
No provision of this Trust Agreement shall be deemed to impose any duty
or obligation on any Issuer Trustee or Administrator to perform any act or acts
or exercise any right, power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in which such Person shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to any Issuer Trustee or Administrator
shall be construed to be a duty.
SECTION 8.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities Certificates shall
be taken as the statements of the Issuer Trust, and the Issuer Trustees and the
Administrators do not assume any responsibility for their correctness. The
Issuer Trustees and the Administrators shall not be accountable for the use or
application by the Depositor of the proceeds of the Debentures.
SECTION 8.5. May Hold Securities.
The Administrators, any Issuer Trustee or any other agent of any Issuer
Trustee or the Issuer Trust, in its individual or any other capacity, may become
the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13,
and except as provided in the definition of the term "Outstanding" in Article I,
may otherwise deal with the Issuer Trust with the same rights it would have if
it were not an Administrator, Issuer Trustee or such other agent.
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SECTION 8.6. Compensation; Indemnity; Fees.
The Depositor agrees:
(a) to pay to each Issuer Trustee and Paying Agent from time to
time such reasonable compensation for all services rendered by them
hereunder as may be agreed by the Depositor and such Issuer Trustee or
Paying Agent, as the case may be, from time to time (which compensation
shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
each Issuer Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by each Issuer Trustee and
Paying Agent in accordance with any provision of this Trust Agreement
(including the reasonable compensation and the expenses and
disbursements of their agents and counsel), except any such expense,
disbursement or advance as may be attributable to their negligence, bad
faith or wilful misconduct; and
(c) to the fullest extent permitted by applicable law, to
indemnify and hold harmless (i) each Issuer Trustee, (ii) each
Administrator, (iii) each Paying Agent, (iv) any Affiliate of any Issuer
Trustee, (v) any officer, director, shareholder, employee,
representative or agent of any Issuer Trustee, and (vi) any employee or
agent of the Issuer Trust (referred to herein as an "Indemnified
Person") from and against any loss, damage, liability, tax (other than
income, franchise or other taxes imposed on amounts paid pursuant to (a)
or (b) hereof), penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the
creation, operation or termination of the Issuer Trust or any act or
omission performed or omitted by such Indemnified Person in good faith
on behalf of the Issuer Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on
such Indemnified Person by this Trust Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Indemnified Person by reason of
negligence, bad faith or wilful misconduct with respect to such acts or
omissions.
The provisions of this Section 8.6 shall survive the termination of this
Trust Agreement and the removal or resignation of any Issuer Trustee.
No Issuer Trustee or Paying Agent may claim any Lien on any Trust
Property as a result of any amount due pursuant to this Section 8.6.
The Depositor, any Administrator, any Issuer Trustee (subject to Section
8.8) and any Paying Agent may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Issuer Trust, and the Issuer Trust and the
Holders of Trust Securities shall have no rights by virtue of this Trust
Agreement in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Issuer Trust, shall not be deemed wrongful or improper. Neither
the Depositor, any Administrator, any Paying Agent nor any Issuer Trustee shall
be obligated to present any particular investment or other opportunity to the
Issuer Trust even if such opportunity is of a character that, if presented to
the Issuer Trust, could be taken by the Issuer Trust, and the Depositor, any
Administrator, any Issuer Trustee or any Paying Agent shall have the right to
take for its own account
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(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Issuer Trustee or Paying Agent
may engage or be interested in any financial or other transaction with the
Depositor or any Affiliate of the Depositor, or may act as depository for,
trustee or agent for, or act on any committee or body of holders of, securities
or other obligations of the Depositor or its Affiliates.
In the event that the Property Trustee is also acting as Paying
Agent or Securities Registrar hereunder, the rights and protections afforded to
the Property Trustee pursuant to this Article VIII shall also be afforded to
such Paying Agent or Securities Registrar.
SECTION 8.7. Corporate Property Trustee Required; Eligibility of Issuer
Trustees and Administrators.
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that is
a national or state chartered bank and eligible pursuant to the Trust Indenture
Act to act as such, and that has at the time of such appointment a combined
capital and surplus of at least $50,000,000 and at the time of appointment shall
have unsecured securities rated in one of the three highest rating categories by
a nationally recognized statistical rating agency. If any such Person publishes
reports of condition at least annually, pursuant to law or to the requirements
of its supervising or examining authority, then for the purposes of this Section
8.7 and to the extent permitted by the Trust Indenture Act, the combined capital
and surplus of such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Property Trustee with respect to the Trust Securities shall cease
to be eligible in accordance with the provisions of this Section 8.7, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article. At the time of appointment, the Property Trustee must have
securities rated in one of the three highest rating categories by a nationally
recognized statistical rating organization.
(b) There shall at all times be one or more Administrators hereunder
with respect to the Trust Securities. Each Administrator shall be either a
natural person who is at least 21 years of age or a legal entity that shall act
through one or more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware, or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law and that shall
act through one or more persons authorized to bind such entity.
SECTION 8.8. Conflicting Interests.
(a) If the Property Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
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(b) The Guarantee Agreement and the Indenture shall be deemed to be
specifically described in this Trust Agreement for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
SECTION 8.9. Co-Trustees and Separate Trustee.
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property may
at the time be located, the Property Trustee shall have power to appoint, and
upon the written request of the Property Trustee, the Depositor and the
Administrators shall for such purpose join with the Property Trustee in the
execution, delivery, and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Property Trustee
either to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section 8.9. Any co-trustee
or separate trustee appointed pursuant to this Section 8.9 shall either be (i) a
natural person who is at least 21 years of age and a resident of the United
States, or (ii) a legal entity with its principal place of business in the
United States that shall act through one or more persons authorized to bind such
entity.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) The Trust Securities shall be executed by one or more
Administrators, and the Trust Securities shall be delivered by the
Property Trustee, and all rights, powers, duties, and obligations
hereunder in respect of the custody of securities, cash and other
personal property held by, or required to be deposited or pledged with,
the Property Trustee specified hereunder shall be exercised solely by
the Property Trustee and not by such co-trustee or separate trustee.
(b) The rights, powers, duties, and obligations hereby conferred
or imposed upon the Property Trustee in respect of any property covered
by such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular
act is to be performed, the Property Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(c) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may
accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section 8.9, and, in case a Debenture Event of
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Default has occurred and is continuing, the Property Trustee shall have
power to accept the resignation of, or remove, any such co-trustee or
separate trustee without the concurrence of the Depositor. Upon the
written request of the Property Trustee, the Depositor shall join with
the Property Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate
trustee so resigning or removed may be appointed in the manner provided
in this Section 8.9.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Property
Trustee or any other trustee hereunder.
(e) The Property Trustee shall not be liable by reason of any act
of a co-trustee or separate trustee.
(f) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate
trustee.
SECTION 8.10. Resignation and Removal; Appointment of Successor.
No resignation or removal of any Issuer Trustee (the "Relevant Trustee")
and no appointment of a successor Issuer Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Issuer
Trustee in accordance with the applicable requirements of Section 8.11.
Subject to the immediately preceding paragraph, the Relevant Trustee may
resign at any time by giving written notice thereof to the Holders and by
appointing a successor Relevant Trustee. The Relevant Trustee shall appoint a
successor by requesting from at least three Persons meeting the eligibility
requirements its expenses and charges to serve as the Relevant Trustee on a form
provided by the Administrators, and selecting the Person who agrees to the
lowest expenses and charges. If the instrument of acceptance by the successor
Issuer Trustee required by Section 8.11 shall not have been delivered to the
Relevant Trustee within 60 days after the giving of such notice of resignation,
the Relevant Trustee may petition, at the expense of the, in the case of the
Property Trustee, Depositor, any court of competent jurisdiction for the
appointment of a successor Relevant Trustee.
The Property Trustee or the Delaware Trustee, or both of them, may be
removed by Act of the Holders of at least a Majority in Liquidation Amount of
the Preferred Securities, delivered to the Relevant Trustee (in its individual
capacity and, in the case of the Property Trustee, on behalf of the Issuer
Trust) (i) for cause (including upon the occurrence of an Event of Default
described in subparagraph (d) of the definition thereof with respect to the
Relevant Trustee), or (ii) if a Debenture Event of Default shall have occurred
and be continuing at any time.
If a resigning Issuer Trustee shall fail to appoint a successor, or if
an Issuer Trustee shall be removed or become incapable of acting as Issuer
Trustee, or if a vacancy shall occur in the office of any Issuer Trustee for any
cause, the Holders of the Preferred Securities, by Act of the Holders of not
less than 25% in aggregate Liquidation Amount of the Preferred Securities then
Outstanding delivered to such Relevant Trustee, may appoint a successor Relevant
Trustee or Trustees, and such successor Issuer Trustee shall comply with the
applicable requirements of Section 8.11. If no successor Relevant Trustee
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shall have been so appointed by the Holders of the Preferred Securities and
accepted appointment in the manner required by Section 8.11, any Holder, on
behalf of such Holder and all others similarly situated, or any other Issuer
Trustee, may petition any court of competent jurisdiction for the appointment of
a successor Relevant Trustee.
The Property Trustee shall give notice of each resignation and each
removal of an Issuer Trustee and each appointment of a successor Issuer Trustee
to all Holders in the manner provided in Section 10.8 and shall give notice to
the Depositor and to the Administrators. Each notice shall include the name of
the successor Relevant Trustee and the address of its Corporate Trust Office if
it is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, if any Delaware Trustee who is a natural person dies or becomes, in
the opinion of the Holders of the Common Securities, incompetent or
incapacitated, the vacancy created by such death, incompetence or incapacity may
be filled by the Property Trustee following the procedures regarding expenses
and charges set forth above (with the successor being a Person who satisfies the
eligibility requirement for the Delaware Trustee set forth in Section 8.7).
SECTION 8.11. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Relevant Trustee,
the retiring Relevant Trustee and each successor Relevant Trustee with respect
to the Trust Securities shall execute and deliver an amendment hereto wherein
each successor Relevant Trustee shall accept such appointment and which (a)
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Issuer Trust, and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Issuer Trust by more than one Relevant
Trustee, it being understood that nothing herein or in such amendment shall
constitute such Relevant Trustees co-trustees and upon the execution and
delivery of such amendment the resignation or removal of the retiring Relevant
Trustee shall become effective to the extent provided therein and each such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Relevant Trustee; but, on request of the Issuer Trust or any successor Relevant
Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver
to such successor Relevant Trustee all Trust Property, all proceeds thereof and
money held by such retiring Relevant Trustee hereunder with respect to the Trust
Securities and the Trust.
Upon request of any such successor Relevant Trustee, the Issuer Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Relevant Trustee all such rights, powers and
trusts referred to in the first or second preceding paragraph, as the case may
be.
No successor Relevant Trustee shall accept its appointment unless at the
time of such acceptance such successor Relevant Trustee shall be qualified and
eligible under this Article.
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SECTION 8.12. Merger, Conversion, Consolidation or Succession to
Business.
Any Person into which the Property Trustee or the Delaware Trustee may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Relevant
Trustee shall be a party, or any Person, succeeding to all or substantially all
the corporate trust business of such Relevant Trustee, shall be the successor of
such Relevant Trustee hereunder, provided that such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.
SECTION 8.13. Preferential Collection of Claims Against Depositor or
Issuer Trust.
If and when the Property Trustee shall be or become a creditor of the
Depositor or the Issuer Trust (or any other obligor upon the Preferred
Securities), the Property Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of claims against the Depositor or
the Issuer Trust (or any such other obligor).
SECTION 8.14. Property Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Issuer Trust or any other obligor upon the Trust
Securities or the property of the Issuer Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable and irrespective of whether
the Property Trustee shall have made any demand on the Issuer Trust for the
payment of any past due Distributions) shall be entitled and empowered, to the
fullest extent permitted by law, by intervention in such proceeding or
otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Property Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of
the Property Trustee, its agents and counsel) and of the Holders allowed
in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement adjustment or compensation affecting the
Trust Securities or the rights of any Holder thereof or to authorize the
Property Trustee to vote in respect of the claim of any Holder in any such
proceeding.
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SECTION 8.15. Reports by Property Trustee.
(a) Not later than 60 days after December 31 of each year, commencing
with the first December 31 after the Closing Date, the Property Trustee shall
transmit to all Holders in accordance with Section 10.9, and to the Depositor, a
brief report, dated as of the immediately preceding December 31 with respect to:
(i) its eligibility under Section 8.7 or, in lieu thereof, if to
the best of its knowledge it has continued to be eligible under said
Section, a written statement to such effect;
(ii) a statement that the Property Trustee has complied with all
of its obligations under this Trust Agreement during the twelve-month
period (or, in the case of the initial report, the period since the
Closing Date) ending with such December 31 or, if the Property Trustee
has not complied in any material respect with such obligations, a
description of such noncompliance; and
(iii) any change in the property and funds in its possession as
Property Trustee since the date of its last report and any action taken
by the Property Trustee in the performance of its duties hereunder which
it has not previously reported and which in its opinion materially
affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to Holders such
reports concerning the Property Trustee and its actions under this Trust
Agreement as may be required pursuant to the Trust Indenture Act at the times
and in the manner provided pursuant thereto.
(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Property Trustee with each national stock exchange,
the Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Trust Securities are listed or
traded, if any, with the Commission and with the Depositor.
SECTION 8.16. Reports to the Property Trustee.
Each of the Depositor and the Administrators on behalf of the Issuer
Trust shall provide to the Property Trustee such documents, reports and
information as required by Section 314 of the Trust Indenture Act (if any) and
the compliance certificate required by Section 314(a) of the Trust Indenture Act
in the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act. The Depositor and the Administrators shall annually file with the
Property Trustee a certificate specifying whether such Person is in compliance
with all of the terms and covenants applicable to such Person hereunder.
SECTION 8.17. Evidence of Compliance with Conditions Precedent.
Each of the Depositor and the Administrators shall provide to the
Property Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Trust Agreement that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) of the Trust
Indenture Act shall be given in the form of an Officers' Certificate.
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SECTION 8.18. Number of Issuer Trustees.
(a) The number of Issuer Trustees shall be two, provided that the
Property Trustee and the Delaware Trustee may be the same Person.
(b) If an Issuer Trustee ceases to hold office for any reason, a vacancy
shall occur. The vacancy shall be filled with an Issuer Trustee appointed in
accordance with Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of an Issuer Trustee shall not
operate to annul, dissolve or terminate the Issuer Trust.
SECTION 8.19. Delegation of Power.
(a) Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.7(a); and
(b) The Administrators shall have power to delegate from time to time to
such of their number the doing of such things and the execution of such
instruments either in the name of the Issuer Trust or the names of the
Administrators or otherwise as the Administrators may deem expedient, to the
extent such delegation is not prohibited by applicable law or contrary to the
provisions of this Trust Agreement.
SECTION 8.20. Appointment of Administrators.
(a) The Administrators shall initially be Gordon Fong and James
Gardunio, and their successors shall be appointed by the Holders of a Majority
in Liquidation Amount of the Common Securities and may resign or be removed by
the Holders of a Majority in Liquidation Amount of the Common Securities at any
time. Upon any resignation or removal, the Depositor shall appoint a successor
Administrator. Each Administrator shall sign an agreement agreeing to comply
with the terms of this Trust Agreement. If at any time there is no
Administrator, the Property Trustee or any Holder who has been a Holder of Trust
Securities for at least six months may petition any court of competent
jurisdiction for the appointment of one or more Administrators.
(b) Whenever a vacancy in the number of Administrators shall occur,
until such vacancy is filled by the appointment of an Administrator in
accordance with this Section 8.20, the Administrators in office, regardless of
their number (and notwithstanding any other provision of this Agreement), shall
have all the powers granted to the Administrators and shall discharge all the
duties imposed upon the Administrators by this Trust Agreement.
(c) Notwithstanding the foregoing or any other provision of this Trust
Agreement, if any Administrator who is a natural person dies or becomes, in the
opinion of the Holder of a Majority in Liquidation Amount the Common Securities,
incompetent or incapacitated, the vacancy created by such death, incompetence or
incapacity may be filled by the unanimous act of the remaining Administrators,
if there were at least two of them prior to such vacancy, and by the Depositor,
if there were not two such Administrators immediately prior to such vacancy
(with the successor being a Person who satisfies the eligibility requirement for
Administrators set forth in Section 8.7).
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ARTICLE IX.
TERMINATION, LIQUIDATION AND MERGER
SECTION 9.1. Dissolution Upon Expiration Date.
Unless earlier dissolved, the Issuer Trust shall automatically dissolve
on January 15, 2029 (the "Expiration Date"). Thereafter, the affairs of the
Issuer Trust shall be wound up and the Trust Property shall be distributed in
accordance with Section 9.4.
SECTION 9.2. Early Termination.
The first to occur of any of the following events is an "Early
Termination Event" the occurrence of which shall cause a dissolution of the
Trust:
(a) the occurrence of a Bankruptcy Event in respect of, or the
dissolution or liquidation of, the Depositor, in its capacity as the
Holder of the Common Securities, unless the Depositor shall transfer the
Common Securities as provided by Section 5.11, in which case this
provision shall refer instead to any such successor Holder of the Common
Securities;
(b) the written direction to the Property Trustee from the Holder
of the Common Securities at any time to dissolve the Issuer Trust and to
distribute the Debentures to Holders in exchange for the Preferred
Securities (which direction is optional and wholly within the discretion
of the Holder of the Common Securities);
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all the Debentures; and
(d) the entry of an order for dissolution of the Issuer Trust by
a court of competent jurisdiction.
SECTION 9.3. Termination.
The respective obligations and responsibilities of the Issuer Trustees,
the Administrators and the Issuer Trust created and continued hereby shall
terminate upon the latest to occur of the following: (a) the distribution by the
Property Trustee to Holders of all amounts required to be distributed hereunder
upon the liquidation of the Issuer Trust pursuant to Section 9.4, or upon the
redemption of all of the Trust Securities pursuant to Section 4.2; (b) the
payment of any expenses owed by the Issuer Trust; and (c) the discharge of all
administrative duties of the Administrators, including the performance of any
tax reporting obligations with respect to the Issuer Trust or the Holders.
SECTION 9.4. Liquidation.
(a) If an Early Termination Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Issuer Trust shall be
liquidated by the Property Trustee as expeditiously as the Property Trustee
determines to be possible by distributing, after satisfaction of liabilities to
creditors
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<PAGE> 53
of the Issuer Trust as provided by applicable law, to each Holder a Like Amount
of Debentures, subject to Section 9.4(d). Notice of liquidation shall be given
by the Property Trustee by first-class mail, postage prepaid mailed not less
than 30 nor more than 60 days prior to the Liquidation Date to each Holder of
Trust Securities at such Holder's address appearing in the Securities Register.
All such notices of liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Securities
Certificates not surrendered for exchange will be deemed to represent a
Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Securities Certificates for Debentures, or if
Section 9.4(d) applies receive a Liquidation Distribution, as the
Property Trustee (after consultation with the Administrators) shall deem
appropriate.
(b) Except where Section 9.2(c) or 9.4(d) applies, in order to effect
the liquidation of the Issuer Trust and distribution of the Debentures to
Holders, the Property Trustee, either itself acting as exchange agent or through
the appointment of a separate exchange agent, shall establish a record date for
such distribution (which shall be not more than 45 days prior to the Liquidation
Date) and, establish such procedures as it shall deem appropriate to effect the
distribution of Debentures in exchange for the Outstanding Securities
Certificates.
(c) Except where Section 9.2(c) or 9.4(d) applies, after the Liquidation
Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii)
certificates representing a Like Amount of Debentures will be issued to Holders
of Securities Certificates, upon surrender of such Certificates to the exchange
agent for exchange, (iii) the Depositor shall use its best efforts to have the
Debentures listed on the New York Stock Exchange or on such other exchange,
interdealer quotation system or self-regulatory organization on which the
Preferred Securities are then listed, (iv) Securities Certificates not so
surrendered for exchange will be deemed to represent a Like Amount of Debentures
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on such Securities Certificates until such certificates are
so surrendered (and until such certificates are so surrendered, no payments of
interest or principal will be made to Holders of Securities Certificates with
respect to such Debentures) and (v) all rights of Holders holding Trust
Securities will cease, except the right of such Holders to receive Debentures
upon surrender of Securities Certificates.
(d) If, notwithstanding the other provisions of this Section 9.4,
whether because of an order for dissolution entered by a court of competent
jurisdiction or otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, or if an Early
Termination Event specified in clause (c) of Section 9.2 occurs, the Trust
Property shall be liquidated, and the Issuer Trust shall be wound-up by the
Property Trustee in such manner as the Property Trustee determines. In such
event, Holders will be entitled to receive out of the assets of the Issuer Trust
available for distribution to Holders, after satisfaction of liabilities to
creditors of the Issuer Trust as provided by applicable law, an amount equal to
the Liquidation Amount per Trust Security plus accumulated and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such winding up, the Liquidation Distribution can
be paid only
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in part because the Issuer Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Issuer Trust on the Trust
Securities shall be paid on a pro rata basis (based upon Liquidation Amounts).
The Holder of the Common Securities will be entitled to receive Liquidation
Distributions upon any such winding-up pro rata (determined as aforesaid) with
Holders of all Securities, except that, if a Debenture Event of Default
specified in Section 5.1(1) or 5.1(2) of the Indenture has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities as provided in Section 4.3.
SECTION 9.5. Mergers, Consolidations, Conversions, Amalgamations or
Replacements of Issuer Trust.
The Issuer Trust may not merge with or into, consolidate, convert into,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except pursuant to this
Article IX. At the request of the Holders of the Common Securities, with the
consent of the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, the Issuer Trust may merge with or into, consolidate,
convert into, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (A)
expressly assumes all of the obligations of the Issuer Trust with respect to the
Preferred Securities, or (B) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities have the same
priority as the Preferred Securities with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) a trustee of such successor
entity possessing the same powers and duties as the Property Trustee is
appointed to hold the Debentures, (iii) such merger, consolidation, conversion,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization that then assigns a
rating to the Preferred Securities, (iv) the Successor Securities are listed, or
any Successor Securities will be listed upon notice of issuance, on any national
securities exchange or interdealer quotation system on which the Preferred
Securities are then listed, if any, (v) such merger, consolidation, conversion,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of the Preferred
Securities (including any Successor Securities) in any material respect, (vi)
such successor entity has a purpose substantially identical to that of the
Issuer Trust, (vii) prior to such merger, consolidation, conversion,
amalgamation, replacement, conveyance, transfer or lease, the Property Trustee
has received an Opinion of Counsel to the effect that (A) such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
Holders of the Preferred Securities (including any Successor Securities) in any
material respect, and (B) following such merger, consolidation, conversion,
amalgamation, replacement, conveyance, transfer or lease, neither the Issuer
Trust nor such successor entity will be required to register as an "investment
company" under the Investment Company Act, and (viii) the Depositor or its
permitted transferee owns all of the common securities of such successor entity
and guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee Agreement.
Notwithstanding the foregoing, the Issuer Trust shall not, except with the
consent of Holders of all of the Preferred Securities, consolidate, convert
into, amalgamate, merge with or into, or be replaced by or convey, transfer or
lease its properties and assets substantially as an entirety to any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it if such consolidation, conversion, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer Trust or the successor
entity to be taxable as a
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corporation or classified as other than a grantor trust for United States
federal income tax purposes or cause the Junior Subordinated Debentures to be
treated as other than indebtedness of the Corporation for United States federal
income tax purposes.
ARTICLE X.
MISCELLANEOUS PROVISIONS
SECTION 10.1. Limitation of Rights of Holders.
Except as set forth in Section 9.2, the death, incapacity, dissolution,
bankruptcy or termination of any Person having an interest, beneficial or
otherwise, in Trust Securities shall not operate to terminate this Trust
Agreement, nor dissolve, terminate or annul the Issuer Trust, nor entitle the
legal representatives or heirs of such Person or any Holder for such person, to
claim an accounting, take any action or bring any proceeding in any court for a
partition or winding up of the arrangements contemplated hereby, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.
SECTION 10.2. Agreed Tax Treatment of Issuer Trust and Trust Securities.
The parties hereto and, by its acceptance or acquisition of a Trust
Security or a beneficial interest therein the Holder of, and any person that
acquires a beneficial interest in, such Trust Security intend and agree to treat
the Issuer Trust as a grantor trust for United States federal, state and local
tax purposes, and to treat the Trust Securities (including but not limited to
all payments and proceeds with respect to such Trust Securities) as undivided
beneficial ownership interests in the Trust Property (and payments and proceeds
therefrom, respectively) for United States federal, state and local tax
purposes. The provisions of this Trust Agreement shall be interpreted to further
this intention and agreement of the parties.
SECTION 10.3. Amendment.
(a) This Trust Agreement may be amended from time to time by the
Property Trustee and the Holder of all the Common Securities, without the
consent of any Holder of the Preferred Securities, (i) to cure any ambiguity,
correct or supplement any provision herein that may be inconsistent with any
other provision herein, or to make any other provisions with respect to matters
or questions arising under this Trust Agreement, which shall not be inconsistent
with the other provisions of this Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of this Trust Agreement to such extent as shall be
necessary to ensure that the Issuer Trust will not be taxable as a corporation
or will be classified as other than a grantor trust for United States federal
income tax purposes at all times that any Trust Securities are Outstanding or to
ensure that the Junior Subordinated Debentures are treated as indebtedness of
the Corporation for United States federal income tax purposes, or to ensure that
the Issuer Trust will not be required to register as an "investment company"
under the Investment Company Act; provided, however, that in the case of either
clauses (i) or (ii) such action shall not adversely affect in any material
respect the interests of any Holder and any such amendments of this Trust
Agreement shall become effective when notice thereof is given to the Holders.
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(b) Except as provided in Section 10.2(c) hereof, any provision of this
Trust Agreement may be amended by the Property Trustee, the Delaware Trustee and
the Holder of all of the Common Securities and with (i) the consent of Holders
of at least a Majority in Liquidation Amount of the Preferred Securities, and
(ii) receipt by the Issuer Trustees of an Opinion of Counsel to the effect that
such amendment or the exercise of any power granted to the Issuer Trustees or
the Administrators in accordance with such amendment will not cause the Issuer
Trust to be taxable as a corporation or classified as other than a grantor trust
for United States federal income tax purposes or affect the treatment of the
Junior Subordinated Debentures as indebtedness of the Corporation for United
States federal income tax purposes or affect the Issuer Trust's exemption from
status as an "investment company" under the Investment Company Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Holder (such consent being
obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may
not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date,
or (ii) restrict the right of a Holder to institute suit for the enforcement of
any such payment on or after such date; and notwithstanding any other provision
herein, without the unanimous consent of the Holders (such consent being
obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of
this Section 10.2 may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Issuer Trustee shall enter into or consent to any amendment to this Trust
Agreement that would cause the Issuer Trust to fail or cease to qualify for the
exemption from status as an "investment company" under the Investment Company
Act or to be taxable as a corporation or to be classified as other than a
grantor trust for United States federal income tax purposes or that would cause
the Junior Subordinated Debentures to fail or cease to be treated as
indebtedness of the Corporation for United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor and the Administrators, this Trust
Agreement may not be amended in a manner that imposes any additional obligation
on the Depositor or the Administrators.
(f) If any amendment to this Trust Agreement is made, the Administrators
or the Property Trustee shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be
required to enter into any amendment to this Trust Agreement that affects its
own rights, duties or immunities under this Trust Agreement. The Property
Trustee shall be entitled to receive an Opinion of Counsel and an Officers'
Certificate stating that any amendment to this Trust Agreement is in compliance
with this Trust Agreement and all conditions precedent herein provided for
relating to such action have been met.
SECTION 10.4. Separability.
If any provision in this Trust Agreement or in the Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
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SECTION 10.5. Governing Law.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE
HOLDERS, THE ISSUER TRUST, THE DEPOSITOR, THE ISSUER TRUSTEES AND THE
ADMINISTRATORS WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS PROVISIONS. THE PROVISIONS
OF SECTION 3540 AND 3561 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO
THIS TRUST.
SECTION 10.6. Payments Due on Non-Business Day.
If the date fixed for any payment on any Trust Security shall be a day
that is not a Business Day, then such payment need not be made on such date but
may be made on the next succeeding day that is a Business Day (except as
otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and
effect as though made on the date fixed for such payment, and no Distributions
shall accumulate on such unpaid amount for the period after such date.
SECTION 10.7. Successors.
This Trust Agreement shall be binding upon and shall inure to the
benefit of any successor to the Depositor, the Issuer Trust, the Administrators
and any Issuer Trustee, including any successor by operation of law. Except in
connection with transactions permitted under Article VIII of the Indenture and
pursuant to which the assignee agrees in writing to perform the Depositor's
obligations hereunder, the Depositor shall not assign its obligations hereunder.
SECTION 10.8. Headings.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 10.9. Reports, Notices and Demands.
Any report, notice, demand or other communication that by any provision
of this Trust Agreement is required or permitted to be given or served to or
upon any Holder or the Depositor may be given or served in writing by deposit
thereof, first-class postage prepaid, in the United States mail, hand delivery
or facsimile transmission, in each case, addressed, (a) in the case of a Holder
of Preferred Securities, to such Holder as such Holder's name and address may
appear on the Securities Register; and (b) in the case of the Holder of all the
Common Securities or the Depositor, to First Coastal Bancshares, 275 Main
Street, El Segundo, California 90245, Attention: Chief Financial Officer,
facsimile no.: 310-322-2411, or to such other address as may be specified in a
written notice by the Holder of all the Common Securities or the Depositor, as
the case may be, to the Property Trustee. Such notice, demand or other
communication to or upon a Holder shall be deemed to have been sufficiently
given or made, for all purposes, upon hand delivery, mailing or transmission.
Such notice, demand or other communication to or upon the Depositor shall be
deemed to have been sufficiently given or made only upon actual receipt of the
writing by the Depositor.
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Any notice, demand or other communication that by any provision of this
Trust Agreement is required or permitted to be given or served to or upon the
Issuer, the Property Trustee, the Delaware Trustee, the Administrators or the
Trust shall be given in writing by deposit thereof, first-class postage prepaid,
in the U.S. mail, hand delivery or facsimile transmission, addressed to such
Person as follows: (a) with respect to the Property Trustee and Delaware
Trustee, to 1100 North Market Street, Rodney Square North, Wilmington, Delaware
19890, Attention: Corporate Trust Administration, facsimile no.:
[______________] ; (b) with respect to the Administrators, to them at the
address above for notices to the Depositor, marked "Attention: Administrators of
First Coastal Capital Trust"; and (c) with respect to the Issuer Trust, to its
principal office specified in Section 2.1, with a copy to the Property Trustee.
Such notice, demand or other communication to or upon the Issuer Trust, the
Property Trustee or the Administrators shall be deemed to have been sufficiently
given or made only upon actual receipt of the writing by the Issuer Trust, the
Property Trustee or such Administrator.
SECTION 10.10.Agreement Not to Petition.
Each of the Issuer Trustees and the Depositor agree for the benefit of
the Holders that, until at least one year and one day after the Issuer Trust has
been terminated in accordance with Article IX, they shall not file, or join in
the filing of, a petition against the Issuer Trust under any bankruptcy,
insolvency, reorganization or other similar law (including the United States
Bankruptcy Code) (collectively, "Bankruptcy Laws") or otherwise join in the
commencement of any proceeding against the Issuer Trust under any Bankruptcy
Law. If the Depositor takes action in violation of this Section 10.9, the
Property Trustee agrees, for the benefit of Holders, that at the expense of the
Depositor, it shall file an answer with the bankruptcy court or otherwise
properly contest the filing of such petition by the Depositor against the Issuer
Trust or the commencement of such action and raise the defense that the
Depositor has agreed in writing not to take such action and should be estopped
and precluded therefrom and such other defenses, if any, as counsel for the
Issuer Trustee or the Issuer Trust may assert.
SECTION 10.11. Trust Indenture Act; Conflict with Trust Indenture Act.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust Agreement and shall, to
the extent applicable, be governed by such provisions of the Trust Indenture
Act.
(b) The Property Trustee shall be the only Issuer Trustee that is a
trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with the
duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act
through operation of Section 318(c) thereof, such imposed duties shall control.
If any provision of this Trust Agreement modifies or excludes any provision of
the Trust Indenture Act which may be so modified or excluded, the latter
provision shall be deemed to apply to this Trust Agreement as so modified or
excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Issuer Trust.
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SECTION 10.12. Acceptance of Terms of Trust Agreement, Guarantee
Agreement and Indenture.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN
BY OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE HOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY
OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT, THE GUARANTEE AGREEMENT
AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS, THE TAX
TREATMENT PROVISION AND OTHER TERMS OF THE GUARANTEE AGREEMENT AND THE
INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE ISSUER TRUST, SUCH HOLDER
AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE
BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE ISSUER TRUST AND SUCH HOLDER AND
SUCH OTHERS.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Trust Agreement as of the day and year first above written.
FIRST COASTAL BANCSHARES,
as Depositor
By: ____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY
as Property Trustee
By: ____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY
as Delaware Trustee and not
its individual capacity
By: ____________________________________
Name:
Title:
GORDON FONG
as Administrator
________________________________________
JAMES F. GARDUNIO
as Administrator
________________________________________
<PAGE> 61
Exhibit A
CERTIFICATE OF TRUST
OF
FIRST COASTAL CAPITAL TRUST
This Certificate of Trust of First Coastal Capital Trust (the
"Trust"), dated _____, 1998, is being duly executed and filed on behalf of the
Trust by the undersigned, as trustee, to form a business trust under the
Delaware Business Trust Act (12 Del. C. (S) 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed by this
Certificate of Trust is First Coastal Capital Trust.
2. Delaware Trustee. The name and business address of the trustee
of the Trust in the State of Delaware is Wilmington Trust Company, 1100 North
Market Street, Rodney Square North, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective
upon its filing.
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Trust in accordance with Section 3811(a)(1) of the Act.
WILMINGTON TRUST COMPANY, not
in its individual capacity but solely
as trustee
By:_____________________________________
Name:
Title:
A-1
<PAGE> 62
Exhibit B
[FORM OF COMMON SECURITIES CERTIFICATE]
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT TO THE DEPOSITOR OR AN AFFILIATE OF
THE DEPOSITOR IN COMPLIANCE WITH APPLICABLE LAW AND SECTION 5.11 OF THE TRUST
AGREEMENT AND ONLY IN CONNECTION WITH A SIMULTANEOUS DELEGATION AND ASSIGNMENT
OF THE EXPENSE AGREEMENT REFERRED TO THEREIN
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
First Coastal Capital Trust
___% Common Securities
(liquidation amount $20 per Common Security)
First Coastal Capital Trust, a statutory business trust created under
the laws of the State of Delaware (the "Issuer Trust"), hereby certifies that
First Coastal Bancshares (the "Holder") is the registered owner of all the
common securities of the Issuer Trust representing undivided common beneficial
interests in the assets of the Issuer Trust and designated the Common Securities
(liquidation amount $20 per Common Security) (the "Common Securities"). Except
in accordance with Section 5.11 of the Trust Agreement (as defined below) the
Common Securities are not transferable and any attempted transfer hereof other
than in accordance therewith shall be void. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Trust Agreement of the Issuer Trust, dated as
of ________, 1998, as the same may be amended from time to time (the "Trust
Agreement"), among First Coastal Bancshares, as Depositor, Wilmington Trust
Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee, the
Administrators named therein and the Holders of Trust Securities, including the
designation of the terms of the Common Securities as set forth therein. The
Issuer Trust will furnish a copy of the Trust Agreement to the Holder without
charge upon written request to the Issuer Trust at its principal place of
business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
This Common Securities Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
Terms used but not defined herein have the meanings set forth in the
Trust Agreement.
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IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust has
executed this certificate this __ day of _______, 1998.
FIRST COASTAL CAPITAL TRUST CAPITAL TRUST
By: _____________________________________
Name:
Administrator
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Exhibit C
[FORM OF PREFERRED SECURITIES CERTIFICATE]
THIS PREFERRED SECURITY HAS BEEN ISSUED AS A UNIT WITH THE COMMON STOCK
OF FIRST COASTAL BANCSHARES AND MUST TRADE TOGETHER WITH THE COMMON STOCK OF
FIRST COASTAL BANCSHARES UNTIL THE EARLIEST TO OCCUR OF THE FOLLOWING: (a) ONE
YEAR AFTER THE CLOSING DATE (AS DEFINED IN THE TRUST AGREEMENT), (b) A CALL OF
REDEMPTION OF THE PREFERRED SECURITIES, (c) THE OCCURRENCE OF A DEBENTURE EVENT
OF DEFAULT (AS DEFINED IN THE TRUST AGREEMENT), (d) THE DISSOLUTION OF THE
TRUST OR A DISTRIBUTION OF THE DEBENTURES (AS DEFINED IN THE TRUST AGREEMENT) OR
(e) THE DECISION BY THE UNDERWRITERS, IN THEIR SOLE DISCRETION, TO PERMIT
SEPARATION EARLIER THAN ONE YEAR AFTER THE CLOSING DATE.
CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES
CUSIP NO.
_______________
CERTIFICATE EVIDENCING PREFERRED SECURITIES
OF
FIRST COASTAL CAPITAL TRUST
____% CUMULATIVE PREFERRED SECURITIES
(LIQUIDATION AMOUNT $20 PER PREFERRED SECURITY)
First Coastal Capital Trust, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that
_____________________________ (the "Holder") is the registered owner of
__________________(____) Preferred Securities of the Trust representing an
undivided preferred beneficial interest in the assets of the Trust and
designated the First Coastal Capital Trust ____% Cumulative Preferred
Securities, (liquidation amount $20 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer as provided in Section
5.5 of the Trust Agreement (as defined below). The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Securities are set forth in, and this certificate and the Preferred
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Trust Agreement of the Issuer Trust, dated as
of ___ __, 1998, as the same may be amended from time to time (the "Trust
Agreement"), among First Coastal Bancshares, as Depositor, Wilmington Trust
Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee, the
Administrators named therein, and the
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<PAGE> 65
Holders of Trust Securities, including the designation of the terms of the
Preferred Securities as set forth therein. The Holder is entitled to the
benefits of the Guarantee Agreement entered into by First Coastal Bancshares, a
California corporation, and Wilmington Trust Company, as Guarantee Trustee,
dated as of____ __, 199__, as may be amended from time to time (the "Guarantee
Agreement"), to the extent provided therein. The Trust will furnish a copy of
the Trust Agreement and the Guarantee Agreement to the Holder without charge
upon written request to the Issuer Trust at its principal place of business or
registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
This Preferred Securities Certificate shall be governed by and construed
in accordance with the laws of the State of Delaware.
All capitalized terms used but not defined in this Preferred Securities
Certificate are used with the meanings specified in the Trust Agreement,
including the Exhibits thereto.
IN WITNESS WHEREOF, one of the Administrators of the Issuer Trust has
executed this certificate this __ day of ____, 199__.
FIRST COASTAL CAPITAL TRUST
By: ____________________________________
Name:
Administrator
[PROPERTY TRUSTEE] [SECURITIES REGISTRAR]
[By:________________________________
Name:
Title: ]
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints _______________________________________________________
________________________________________________________________________________
agent to transfer this Preferred Security Certificate on the books of the Issuer
Trust. The agent may substitute another to act for him or her.
Date: ________________
Signature: ___________________________________________________________________
(Sign exactly as your name appears on the other side of
this Preferred Security Certificate)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
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EXHIBIT 4.1
================================================================================
FIRST COASTAL BANCSHARES
to
WILMINGTON TRUST COMPANY,
as Trustee
______________________
JUNIOR SUBORDINATED INDENTURE
Dated as of __________, 199_
______________________
================================================================================
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions....................................................................1
SECTION 1.2. Compliance Certificate and Opinions...........................................10
SECTION 1.3. Forms of Documents Delivered to Trustee.......................................10
SECTION 1.4. Acts of Holders...............................................................11
SECTION 1.5. Notices, Etc. to Trustee and Corporation......................................13
SECTION 1.6. Notice to Holders; Waiver.....................................................13
SECTION 1.7. Conflict with Trust Indenture Act.............................................14
SECTION 1.8. Effect of Headings and Table of Contents......................................14
SECTION 1.9. Successors and Assigns........................................................14
SECTION 1.10. Separability Clause...........................................................14
SECTION 1.11. Benefits of Indenture.........................................................14
SECTION 1.12. Governing Law.................................................................14
SECTION 1.13. Non-Business Days.............................................................14
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally...............................................................15
SECTION 2.2. Form of Face of Security......................................................15
SECTION 2.3. Form of Reverse of Security...................................................18
SECTION 2.4. Additional Provisions Required in Global Security.............................21
SECTION 2.5. Form of Trustee's Certificate of Authentication...............................21
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms...............................................................22
SECTION 3.2. Denominations.................................................................25
SECTION 3.3. Execution, Authentication, Delivery and Dating................................25
SECTION 3.4. Temporary Securities..........................................................26
SECTION 3.5. Global Securities.............................................................26
SECTION 3.6. Registration, Transfer and Exchange Generally.................................28
SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities..............................29
SECTION 3.8. Payment of Interest and Additional Interest; Interest Rights Preserved........30
SECTION 3.9. Persons Deemed Owners.........................................................31
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SECTION 3.10. Cancellation..................................................................32
SECTION 3.11. Computation of Interest.......................................................32
SECTION 3.12. Deferrals of Interest Payment Dates...........................................32
SECTION 3.13. Right of Set-Off..............................................................33
SECTION 3.14. Agreed Tax Treatment..........................................................34
SECTION 3.15. Shortening or Extension of Stated Maturity....................................34
SECTION 3.16. CUSIP Numbers.................................................................34
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.......................................35
SECTION 4.2. Application of Trust Money....................................................36
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.............................................................36
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment............................37
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee...............38
SECTION 5.4. Trustee May File Proofs of Claim..............................................39
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities....................40
SECTION 5.6. Application of Money Collected................................................40
SECTION 5.7. Limitation on Suits...........................................................40
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest;
Direct Action by Holders of Preferred Securities..............................41
SECTION 5.9. Restoration of Rights and Remedies............................................41
SECTION 5.10. Rights and Remedies Cumulative................................................41
SECTION 5.11. Delay or Omission Not Waiver..................................................42
SECTION 5.12. Control by Holders............................................................42
SECTION 5.13. Waiver of Past Defaults.......................................................42
SECTION 5.14. Undertaking for Costs.........................................................43
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.......................................43
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ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities...........................................43
SECTION 6.2. Notice of Defaults............................................................44
SECTION 6.3. Certain Rights of Trustee.....................................................45
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities........................46
SECTION 6.5. May Hold Securities...........................................................46
SECTION 6.6. Money Held in Trust...........................................................46
SECTION 6.7. Compensation and Reimbursement................................................46
SECTION 6.8. Disqualification; Conflicting Interests.......................................47
SECTION 6.9. Corporate Trustee Required; Eligibility.......................................47
SECTION 6.10. Resignation and Removal; Appointment of Successor.............................48
SECTION 6.11. Acceptance of Appointment by Successor........................................49
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business...................50
SECTION 6.13. Preferential Collection of Claims Against Corporation.........................50
SECTION 6.14. Appointment of Authenticating Agent...........................................50
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION
SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of Holders.................52
SECTION 7.2. Preservation of Information, Communications to Holders........................52
SECTION 7.3. Reports by Trustee............................................................53
SECTION 7.4. Reports by Corporation........................................................53
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms......................54
SECTION 8.2. Successor Corporation Substituted.............................................54
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures without Consent of Holders............................55
SECTION 9.2. Supplemental Indentures with Consent of Holders...............................56
SECTION 9.3. Execution of Supplemental Indentures..........................................57
SECTION 9.4. Effect of Supplemental Indentures.............................................57
SECTION 9.5. Conformity with Trust Indenture Act...........................................58
SECTION 9.6. Reference in Securities to Supplemental Indentures............................58
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest....................................58
SECTION 10.2. Maintenance of Office or Agency...............................................58
SECTION 10.3. Money for Security Payments to be Held in Trust...............................59
SECTION 10.4. Statement as to Compliance....................................................60
SECTION 10.5. Waiver of Certain Covenants...................................................60
SECTION 10.6. Additional Sums...............................................................60
SECTION 10.7. Additional Covenants..........................................................61
SECTION 10.8. Original Issue Discount.......................................................62
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.................................................62
SECTION 11.2. Election to Redeem; Notice to Trustee.........................................62
SECTION 11.3. Selection of Securities to be Redeemed........................................63
SECTION 11.4. Notice of Redemption..........................................................63
SECTION 11.5. Deposit of Redemption Price...................................................64
SECTION 11.6. Payment of Securities Called for Redemption...................................64
SECTION 11.7. Right of Redemption of Securities Initially Issued to an Issuer Trust.........65
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ARTICLE XII
SINKING FUNDS
SECTION 12.1. Applicability of Article......................................................65
SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities.........................66
SECTION 12.3. Redemption of Securities for Sinking Fund.....................................66
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness................................67
SECTION 13.2. No Payment When Senior Indebtedness in Default; Payment Over of Proceeds
Upon Dissolution, Etc.......................................................68
SECTION 13.3. Payment Permitted If No Default..............................................69
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness......................69
SECTION 13.5. Provisions Solely to Define Relative Rights..................................70
SECTION 13.6. Trustee to Effectuate Subordination..........................................70
SECTION 13.7. No Waiver of Subordination Provisions........................................70
SECTION 13.8. Notice to Trustee............................................................71
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating Agent...............71
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.....................72
SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness; Preservation of
Trustee's Rights.............................................................72
SECTION 13.12. Article Applicable to Paying Agents..........................................72
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JUNIOR SUBORDINATED INDENTURE, dated as of __________, 199_, between
FIRST COASTAL BANCSHARES, a California corporation (the "Corporation"), having
its principal office at 275 Main Street, El Segundo, California 90245, and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee (the
"Trustee").
RECITALS OF THE CORPORATION
WHEREAS, the Corporation has duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to time of its unsecured
junior subordinated debt securities in series (hereinafter called the
"Securities") of substantially the tenor hereinafter provided, including
Securities issued to evidence loans made to the Corporation of the proceeds from
the issuance from time to time by one or more business trusts (each an "Issuer
Trust") of undivided preferred beneficial interests in the assets of such Issuer
Trusts (the "Preferred Securities") and undivided common beneficial interests in
the assets of such Issuer Trusts (the "Common Securities" and, collectively with
the Preferred Securities, the "Trust Securities"), and to provide the terms and
conditions upon which the Securities are to be authenticated, issued and
delivered; and
WHEREAS, all things necessary to make this Indenture a valid agreement
of the Corporation, in accordance with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of any
series thereof, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the singular;
(2) All other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation";
<PAGE> 8
(4) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles;
(5) Whenever the context may require, any gender shall be deemed
to include the others;
(6) Unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(7) The words "hereby", "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and which shall accrue at the rate
per annum specified or determined as specified in such Security.
"Additional Sums" has the meaning specified in Section 10.6.
"Additional Taxes" means, in the case of Securities of a series
initially issued to an Issuer Trust, taxes, duties or other governmental charges
imposed on the Issuer Trust as a result of a Tax Event (which, for the sake of
clarity, does not include amounts required to be deducted or withheld by the
Issuer Trust from payments made by the Issuer Trust to or for the benefit of the
Holder of, or any person that acquires a beneficial interest in, the
Securities).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, the First Coastal Capital
Trust to which the Securities have been issued will not be deemed to be an
Affiliate of the Corporation. For the purposes of this definition, "control"
when used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, in each case to the
extent applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Bankruptcy Code" means Title 11 of the United States Code or any
successor statute thereto, in each case as amended from time to time.
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"Board of Directors" means either the board of directors of the
Corporation or any executive committee or other committee of that board duly
authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Corporation to have been duly adopted
by the Board of Directors, or officers of the Corporation to which authority to
act on behalf of the Board of Directors has been delegated, and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in Los Angeles, California are authorized or
required by law or executive order to remain closed, or (iii) a day on which the
Corporate Trust Office of the Trustee, or, with respect to the Securities of a
series initially issued to an Issuer Trust for so long as such Securities are
held by such Issuer Trust, the "Corporate Trust Office" (as defined in the
related Trust Agreement) of the Property Trustee or the Delaware Trustee under
the related Trust Agreement, is closed for business.
"Capital Treatment Event" means the receipt by an Issuer Trust of an
Opinion of Counsel (as defined in the relevant Trust Agreement) experienced in
such matters to the effect that, as a result of the occurrence of a change
(including any announced prospective change) in law or regulation or a change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount of Preferred Securities as
"Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable to
the Corporation, equal to the lesser of (1) the aggregate Liquidation Amount of
the Preferred Securities or (2) 25% of our total Tier 1 Capital (including such
Preferred Securities qualifying as Tier 1 Capital) which change or proposed
change becomes effective or would become effective, as the case may be, on or
after the date of the issuance of the Preferred Securities of such Issuer Trust.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"Common Securities" has the meaning specified in the first recital of
this Indenture.
"Common Stock" means the common stock, without par value, of the
Corporation.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of this Indenture is located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration.
"corporation" includes a corporation, association, company, limited
liability company, joint-stock company or business trust.
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"Corporation" means the Person named as the "Corporation" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Corporation" shall mean such successor corporation.
"Corporation Request" and "Corporation Order" mean, respectively, the
written request or order signed in the name of the Corporation by its Chairman
of the Board of Directors, its Vice Chairman of the Board of Directors, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Debt" means, with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent and without
duplication, (i) every obligation of such Person for money borrowed; (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such Person;
(vi) all indebtedness of the Corporation, whether incurred on or prior to the
date of this Indenture or thereafter incurred, for claims in respect of
derivative products, including interest rate, foreign exchange rate and
commodity forward contracts, options and swaps and similar arrangements; and
(vii) every obligation of the type referred to in clauses (i) through (vi) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable for,
directly or indirectly, as obligor or otherwise.
"Defaulted Interest" has the meaning specified in Section 3.8.
"Delaware Trustee" means, with respect to any Issuer Trust, the Person
identified as the "Delaware Trustee" in the related Trust Agreement, solely in
its capacity as Delaware Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor Delaware trustee appointed as therein provided.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Corporation pursuant to
Section 3.1 with respect to such series (or any successor thereto).
"Discount Security" means any security that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2.
"Distributions," with respect to the Trust Securities issued by an
Issuer Trust, means amounts payable in respect of such Trust Securities as
provided in the related Trust Agreement and referred to therein as
"Distributions."
"Dollar" or "$" means the currency of the United States of America that,
as at the time of payment, is legal tender for the payment of public and private
debts.
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"Event of Default", unless otherwise specified with respect to a series
of Securities as contemplated by Section 3.1, has the meaning specified in
Article V.
"Exchange Act" means the Securities Exchange Act of 1934 or any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4.
"Extension Period" has the meaning specified in Section 3.12.
"Global Security" means a Security in the form prescribed in Section 2.4
evidencing all or part of a series of Securities, issued to the Depositary or
its nominee for such series, and registered in the name of such Depositary or
its nominee.
"Guarantee Agreement" means, with respect to any Issuer Trust, the
Guarantee Agreement executed by the Corporation for the benefit of the Holders
of the Preferred Securities issued by such Issuer Trust as modified, amended or
supplemented from time to time.
"Holder" means a Person in whose name a Security is registered in the
Securities Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of each particular series of Securities established
as contemplated by Section 3.1.
"Interest Payment Date" means, as to each series of Securities, the
Stated Maturity of an installment of interest on such Securities.
"Investment Company Act" means the Investment Company Act of 1940 or any
successor statute thereto, in each case as amended from time to time.
"Investment Company Event" means the receipt by an Issuer Trust of an
Opinion of Counsel (as defined in the relevant Trust Agreement) experienced in
such matters to the effect that, as a result of the occurrence of a change
(including any announced prospective change) in law or regulation or a change
(including any announced prospective change) in interpretation or application of
law or regulation by any legislative body, court, governmental agency or
regulatory authority, there is more than an insubstantial risk that such Issuer
Trust is or will be considered an "investment company" that is required to be
registered under the Investment Company Act, which change or prospective change
becomes effective or would become effective, as the case may be, on or after the
date of the issuance of the Preferred Securities of such Issuer Trust.
"Issuer Trust" has the meaning specified in the first recital of this
Indenture.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security or any installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
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"Notice of Default" means a written notice of the kind specified in
Section 5.1(3).
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Corporation and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel experienced in
matters of the kind described in the definition of Tax Event, who may be counsel
for or an employee of the Corporation or any Affiliate of the Corporation.
"Original Issue Date" means the date of issuance specified as such in
each Security.
"Outstanding" means, when used in reference to any Securities, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for whose payment money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent in
trust for the Holders of such Securities; and
(iii) Securities in substitution for or in lieu of which other
Securities have been authenticated and delivered or that have been paid
pursuant to Section 3.7, unless proof satisfactory to the Trustee is
presented that any such Securities are held by Holders in whose hands
such Securities are valid, binding and legal obligations of the
Corporation;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Corporation or any other obligor upon the Securities or any Affiliate of
the Corporation or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities that a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned that
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Corporation or
any other obligor upon the Securities or any Affiliate of the Corporation or
such other obligor. Upon the written request of the Trustee, the Corporation
shall furnish to the Trustee promptly an Officers' Certificate listing and
identifying all Securities, if any, known by the Corporation to be owned or held
by or for the account of the Corporation, or any other obligor on the Securities
or any Affiliate of the Corporation or such obligor, and subject to the
provisions of Section 6.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Securities not listed therein are Outstanding for the
purpose of any such determination. Notwithstanding anything herein to the
contrary, Securities of any series initially issued to an Issuer Trust that are
owned by such Issuer Trust shall be deemed to be Outstanding notwithstanding the
ownership by the Corporation or an Affiliate of any beneficial interest in such
Issuer Trust.
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"Paying Agent" means U.S. Stock Transfer Corporation or any Person
authorized by the Corporation to pay the principal of (or premium, if any) or
interest on, or other amounts in respect of, any Securities on behalf of the
Corporation.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of (and premium, if any) and interest on
the Securities of such series are payable pursuant to Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security. For the purposes of this definition, any security
authenticated and delivered under Section 3.7 in lieu of a mutilated, destroyed,
lost or stolen Security shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Security.
"Preferred Securities" has the meaning specified in the first recital of
this Indenture.
"Proceeding" has the meaning specified in Section 13.2.
"Property Trustee" means, with respect to any Issuer Trust, the Person
identified as the "Property Trustee" in the related Trust Agreement, solely in
its capacity as Property Trustee of such Issuer Trust under such Trust Agreement
and not in its individual capacity, or its successor in interest in such
capacity, or any successor property trustee appointed as therein provided.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture or the terms of such Security.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of such series, the date that
is fifteen days next preceding such Interest Payment Date (whether or not a
Business Day).
"Responsible Officer", when used with respect to the Trustee, means any
officer assigned to the Corporate Trust Office, including any managing director,
vice president, principal, assistant vice president, assistant treasurer, any
assistant secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Rights Plan" means a plan of the Corporation providing for the issuance
by the Corporation to all holders of its Common Stock of rights entitling the
holders thereof to subscribe for or purchase shares
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of any class or series of capital stock of the Corporation which rights (i) are
deemed to be transferred with such shares of such Common Stock, and (ii) are
also issued in respect of future issuances of such Common Stock, in each case
until the occurrence of a specified event or events.
"Securities" or "Security" means any debt securities or debt security,
as the case may be, authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 or any successor
statute thereto, in each case as amended from time to time.
"Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.6.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Corporation whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Corporation, whether incurred on or prior to the date of this
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities or
to other Debt that is pari passu with, or subordinated to, the Securities,
provided, however, that Senior Indebtedness shall not be deemed to include (a)
any Debt of the Corporation that, when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without
recourse to the Corporation, (b) any Debt of the Corporation to any of its
Subsidiaries, (c) Debt to any employee of the Corporation, (d) any Securities,
(e) trade accounts payable of the Corporation, and (f) accrued liabilities
arising in the ordinary course of business of the Corporation.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.8.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof (or premium, if any) or interest (including any
Additional Interest) thereon, means the date specified pursuant to the terms of
such Security as the fixed date on which the principal of such Security or such
installment of principal (or premium, if any) or interest (including any
Additional Interest) is due and payable, as such date may, in the case of the
stated maturity of the principal on any security, be shortened or extended as
provided pursuant to the terms of such Security and this Indenture and, in the
case of any installment of interest, subject to the deferral of any such date in
the case of any Extension Period.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Corporation or by one or
more other Subsidiaries, or by the Corporation and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.7 in exchange for or
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<PAGE> 15
in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Tax Event" means the receipt by an Issuer Trust of an Opinion of
Counsel to the effect that, as a result of (a) any amendment to or change
(including any announced prospective change) in the laws or any regulations
thereunder of the United States or any political subdivision or taxing authority
thereof or therein, or (b) any judicial decision or any official administrative
pronouncement (including any private letter ruling, technical advice memorandum
or field service advice) or regulatory procedure (an "Administrative Action"),
regardless of whether such judicial decision or Administrative Action is issued
to or in connection with a proceeding involving the Corporation or the Issuer
Trust and whether or not subject to review or appeal, which amendment, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case, on or after the date hereof, there is more than an insubstantial risk that
(i) the Issuer Trust is, or will be within 90 days of the date of such Opinion
of Counsel, subject to United States Federal income tax with respect to income
received or accrued on the Securities, (ii) interest payable by the Corporation
or original issue discount accruing on the Securities is not, or within 90 days
of the date of such opinion, will not be, deductible by the Corporation, in
whole or in part, for United States Federal income tax purposes, or (iii) the
Issuer Trust is, or will be within 90 days of the date of such opinion, subject
to more than a de minimis amount of other taxes, duties or other governmental
charges.
"Trust Agreement" means, with respect to any Issuer Trust, the trust
agreement or other governing instrument of such Issuer Trust.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument, solely in its capacity as such and not in its individual
capacity, until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder and, if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the first recital of
this Indenture.
"Vice President," when used with respect to the Corporation, means any
duly appointed vice president, whether or not designated by a number or a word
or words added before or after the title "vice president."
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Corporation to the Trustee to
take any action under any provision of this Indenture, the Corporation shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent (including covenants compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent (including covenants
compliance with which constitutes a condition precedent), if any, have been
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complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.4) shall include:
(1) a statement by each individual signing such certificate or opinion
that such individual has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions of such individual contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he or she has
made such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of such individual, such
condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Corporation may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his or her certificate or opinion is based
are erroneous. Any such certificate or Opinion of Counsel may be based, insofar
as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Corporation stating that the
information with respect to such factual matters is in the possession of the
Corporation, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given to or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Corporation. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Corporation, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Where such execution is by a Person acting in other than his or her individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his or her authority.
(c) The fact and date of the execution by any Person of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.
(d) The ownership of Securities shall be proved by the Securities
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Corporation in
reliance thereon, whether or not notation of such action is made upon such
Security.
(f) The Corporation may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
give, make or take any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series, provided that the
Corporation may not set a record date for, and the provisions of this paragraph
shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next succeeding paragraph.
If any record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date, provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
(as defined below) by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Corporation from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal
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amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Corporation, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 1.6.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2), or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date, provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Corporation's expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Corporation in writing and to each
Holder of Securities of the relevant series in the manner set forth in Section
1.6.
With respect to any record date set pursuant to this Section, the party
hereto that sets such record date may designate any day as the "Expiration Date"
and from time to time may change the Expiration Date to any earlier or later
day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto that set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 1.5. Notices, Etc. to Trustee and Corporation.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder, any holder of Preferred Securities or the
Corporation shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
Office, or
(2) the Corporation by the Trustee, any Holder or any holder of
Preferred Securities shall be sufficient for every purpose (except as otherwise
provided in Section 5.1) hereunder if in writing and mailed, first class,
postage prepaid, to the Corporation addressed to it at the address of its
principal office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the Corporation.
SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Securities
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. If, by reason of the suspension
of or irregularities in regular mail service or for any other reason, it shall
be impossible or impracticable to mail notice of any event to Holders when said
notice is required to be given pursuant to any provision of this Indenture or of
the relevant Securities, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 1.7. Conflict with Trust Indenture Act.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through operation of Section 318(c) thereof, such imposed duties
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Corporation shall
bind its successors and assigns, whether so expressed or not.
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SECTION 1.10. Separability Clause.
If any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Indebtedness, the Holders of the Securities and,
to the extent expressly provided in Sections 5.1, 5.2, 5.8, 5.9, 5.11, 5.13, 9.1
and 9.2, the holders of Preferred Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.13. Non-Business Days.
If any Interest Payment Date, Redemption Date or Stated Maturity of any
Security shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or the Securities) payment of interest or principal (and
premium, if any) or other amounts in respect of such Security need not be made
on such date, but may be made on the next succeeding Business Day (and no
interest shall accrue in respect of the amounts whose payment is so delayed for
the period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, until such next succeeding Business Day) except
that, if such Business Day falls in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day (in each case
with the same force and effect as if made on the Interest Payment Date or
Redemption Date or at the Stated Maturity).
ARTICLE II
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities of each series and the Trustee's certificate of
authentication shall be in substantially the forms set forth in this Article, or
in such other form or forms as shall be established by or pursuant to a Board
Resolution or in one or more indentures supplemental hereto, in each case with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
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action shall be certified by the Secretary or an Assistant Secretary of the
Corporation and delivered to the Trustee at or prior to the delivery of the
Corporation Order contemplated by Section 3.3 with respect to the authentication
and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.
SECTION 2.2. Form of Face of Security.
FIRST COASTAL BANCSHARES
[TITLE OF SECURITY]
No. $
FIRST COASTAL BANCSHARES, a corporation organized and existing under the
laws of California (hereinafter called the "Corporation", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________, or registered assigns, the
principal sum of __________ Dollars on __________ __,[if the Security is a
Global Security, then insert, if applicable--, or such other principal amount
represented hereby as may be set forth in the records of the Securities
Registrar hereinafter referred to in accordance with the Indenture,] [; provided
that the Corporation may shorten the Stated Maturity of the principal of this
Security to a date not earlier than_________, or extend the Stated Maturity to a
date not later than _______, at any time on one or more occasions, subject to
certain conditions specified in Section 3.15 of the Indenture.] The Corporation
further promises to pay interest on said principal sum from , or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, [quarterly] [semi-annually] [if applicable, insert--(subject to deferral as
set forth herein)] in arrears on [insert applicable Interest Payment Dates] of
each year, commencing __________, __, at the rate of ___% per annum, [if
applicable insert--together with Additional Sums, if any, as provided in Section
10.6 of the Indenture] until the principal hereof is paid or duly provided for
or made available for payment [if applicable, insert-- ; provided that any
overdue principal, premium or Additional Sums and any overdue installment of
interest shall bear Additional Interest at the rate of ___% per annum (to the
extent that the payment of such interest shall be legally enforceable),
compounded [quarterly] [semi-annually], from the dates such amounts are due
until they are paid or made available for payment, and such interest shall be
payable on demand]. The amount of interest payable for any period less than a
full interest period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual days elapsed in a partial month in such period. The
amount of interest payable for any full interest period shall be computed by
dividing the applicable rate per annum by [four/two]. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest installment [if applicable insert--,
which shall be the [____________ or ____________] (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date]. Any such
interest not so
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punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
[If applicable, insert--So long as no Event of Default has occurred and
is continuing, the Corporation shall have the right, at any time during the term
of this Security, from time to time to defer the payment of interest on this
Security for up to ____ consecutive [quarterly] [semi-annual] interest payment
periods with respect to each deferral period (each an "Extension Period") [If
applicable, insert--, during which Extension Periods the Corporation shall have
the right to make partial payments of interest on any Interest Payment Date,
and] at the end of which the Corporation shall pay all interest then accrued and
unpaid including any Additional Interest, as provided below; provided, however,
that no Extension Period shall extend beyond the Stated Maturity of the
principal of this Security [If Stated Maturity can be shortened or extended,
insert--, as then in effect,] and no such Extension Period may end on a date
other than an Interest Payment Date; and provided, further, however, that during
any such Extension Period, the Corporation shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock, or
(ii) make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any debt securities of the Corporation that rank
pari passu in all respects with or junior in interest to this Security (other
than (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Corporation in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of any one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Corporation (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of an exchange or conversion of any class or series of the Corporation's
capital stock (or any capital stock of a Subsidiary of the Corporation) for any
class or series of the Corporation's capital stock or of any class or series of
the Corporation's indebtedness for any class or series of the Corporation's
capital stock, (c) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any Rights Plan, or the issuance of
rights, stock or other property under any Rights Plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks pari passu with or junior to
such stock). Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest, provided that no
Extension Period shall exceed ____ consecutive [quarterly] [semi-annual]
interest payment periods, extend beyond the Stated Maturity of the principal of
this Security or end on a date other than an Interest Payment Date. Upon the
termination of any such Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Corporation may elect to begin a new Extension Period, subject to the
above conditions. No interest shall be due and payable during an Extension
Period,
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<PAGE> 23
except at the end thereof, but each installment of interest that would otherwise
have been due and payable during such Extension shall bear Additional Interest
(to the extent that the payment of such interest shall be legally enforceable)
at the rate of ____% per annum, compounded [monthly] [quarterly] [semi-annually]
and calculated as set forth in the first paragraph of this Security, from the
dates on which amounts would otherwise have been due and payable until paid or
made available for payment. The Corporation shall give the Holder of this
Security and the Trustee notice of its election to begin any Extension Period at
least one Business Day prior to the next succeeding Interest Payment Date on
which interest on this Security would be payable but for such deferral [if
applicable, insert--or so long as such Securities are held by [insert name of
applicable Issuer Trust], at least one Business Day prior to the earlier of (i)
the next succeeding date on which Distributions on the Capital Securities of
such Issuer Trust would be payable but for such deferral, and (ii) the date on
which the Property Trustee of such Issuer Trust is required to give notice to
holders of such Capital Securities of the record date or the date such
Distributions are payable].
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Corporation maintained for
that purpose in the [insert Place of Payment], in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts [if applicable, insert--; provided, however, that at
the option of the Corporation payment of interest may be made (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register, or (ii) by wire transfer in immediately
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register].
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such actions as may be necessary or appropriate to effectuate the subordination
so provided, and (c) appoints the Trustee his or her attorney-in-fact for any
and all such purposes. Each Holder hereof, by his or her acceptance hereof,
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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<PAGE> 24
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
duly executed under its corporate seal.
FIRST COASTAL BANCSHARES
By: ___________________________________
Name:
Title:
Attest:
__________________________________
[Secretary or Assistant Secretary]
SECTION 2.3. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities of the
Corporation (herein called the "Securities"), issued and to be issued in one or
more series under the Junior Subordinated Indenture, dated as of ________, 199_
(herein called the "Indenture"), between the Corporation and Wilmington Trust
Company, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the
Corporation, the Trustee, the holders of Senior Indebtedness and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof [if applicable, insert--, limited in aggregate principal amount
to $________].
All terms used in this Security that are defined in the Indenture [if
applicable, insert--or in the Amended and Restated Trust Agreement, dated as of
_________, ____ (as modified, amended or supplemented from time to time, the
"Trust Agreement"), relating to [insert name of Issuer Trust] (the "Issuer
Trust") among the Corporation, as Depositor, the Trustees named therein and the
Holders from time to time of the Trust Securities issued pursuant thereto, shall
have the meanings assigned to them in the Indenture [if applicable, insert--or
the Trust Agreement, as the case may be].
[If applicable, insert--The Corporation may at any time, at its option,
on or after _________, ____, and subject to the terms and conditions of Article
XI of the Indenture, redeem this Security in whole at any time or in part from
time to time, at [if applicable, insert-- the following Redemption Prices
(expressed as percentages of the principal amount hereof): If redeemed during
the 12-month period beginning _____________,
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<PAGE> 25
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount
hereof, together, in the case of any such redemption, with accrued interest [if
applicable, insert--, including any Additional Interest,] to but excluding the
date fixed for redemption,] [a Redemption Price equal to 100% of the principal
amount hereof, together, in the case of any such redemption, with accrued
interest [if applicable, insert--, including any Additional Interest,] to but
excluding the date fixed for redemption.]
[If applicable, insert--In addition, upon the occurrence and during the
continuation of a Tax Event, Capital Treatment Event or an Investment Company
Event in respect of the Issuer Trust, the Corporation may, at its option, at any
time within 90 days of the occurrence and during the continuation of such Tax
Event or Investment Company Event, as the case may be redeem this Security, in
whole but not in part, subject to the terms and conditions of Article XI of the
Indenture, at a redemption price equal to [insert formula].
[If the Security is subject to redemption of any kind, insert--In the
event of redemption of this Security in part only, a new Security or Securities
of this series for the unredeemed portion hereof will be issued in the name of
the Holder hereof upon the cancellation hereof.]
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Corporation with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Corporation and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Corporation and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Corporation with certain provisions of the Indenture
and certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
[If the Security is not a Discount Security, insert--As provided in and
subject to the provisions of the Indenture, if an Event of Default with respect
to the Securities of this series at the time Outstanding occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securities of this
series may declare the principal amount of all the Securities of this series to
be due and payable immediately, by a notice in writing to the Corporation (and
to the Trustee if given by Holders) [if applicable, insert--, provided
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<PAGE> 26
that, if upon an Event of Default, the Trustee or such Holders fail to declare
the principal of all the Outstanding Securities of this series to be immediately
due and payable, the holders of at least 25% in aggregate Liquidation Amount of
the Capital Securities then Outstanding shall have the right to make such
declaration by a notice in writing to the Corporation and the Trustee]; and upon
any such declaration the principal amount of and the accrued interest (including
any Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIII of the Indenture.]
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest [insert if applicable--including any Additional Interest)] on
this Security at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Corporation maintained under Section 10.2 of the
Indenture for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Corporation and the
Securities Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $________ and any integral multiple of
$____________ in excess thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Securities of this series are
exchangeable for a like aggregate principal amount of Securities of this series
and of like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security be overdue, and neither the
Corporation, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Corporation and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
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<PAGE> 27
SECTION 2.4. Additional Provisions Required in Global Security.
Unless otherwise specified as contemplated by Section 3.1, any Global
Security issued hereunder shall, in addition to the provisions contained in
Sections 2.2 and 2.3, bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR
A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND
MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE
OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
SECTION 2.5. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated:
____________________,
as Trustee
By: ___________________________________
Authorized officer
ARTICLE III
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities that may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.3,
set forth or determined in the manner provided in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of a series:
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<PAGE> 28
(a) the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;
(b) the limit, if any, upon the aggregate principal amount of the
Securities of such series that may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 3.4, 3.6, 3.7, 9.6 or 11.6
and except for any Securities that, pursuant to Section 3.3, are deemed
never to have been authenticated and delivered hereunder); provided,
however, that the authorized aggregate principal amount of such series
may be increased above such amount by a Board Resolution to such effect;
(c) the Person to whom any interest on a Security of the series
shall be payable, if other than the Person in whose name that security
(or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest;
(d) the Stated Maturity or Maturities on which the principal of
the Securities of such series is payable or the method of determination
thereof, and any dates on which or circumstances under which, the
Corporation shall have the right to extend or shorten such Stated
Maturity or Maturities;
(e) the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates and extent to
which Additional Interest, if any, shall be payable in respect of any
Securities of such series, the date or dates from which any such
interest or Additional Interest shall accrue, the Interest Payment Dates
on which such interest shall be payable, the right, pursuant to Section
3.12 or as otherwise set forth therein, of the Corporation to defer or
extend an Interest Payment Date, and the Regular Record Date for the
interest payable on any Interest Payment Date or the method by which any
of the foregoing shall be determined;
(f) the place or places where the principal of (and premium, if
any) and interest (including any Additional Interest) on the Securities
of such series shall be payable, the place or places where the
Securities of such series may be presented for registration of transfer
or exchange, any restrictions that may be applicable to any such
transfer or exchange in addition to or in lieu of those set forth
herein, and the place or places where notices and demands to or upon the
Corporation in respect of the Securities of such series may be made;
(g) the period or periods within or the date or dates on which,
if any, the price or prices at which and the terms and conditions upon
which the Securities of such series may be redeemed, in whole or in
part, at the option of the Corporation, and if other than by a Board
Resolution, the manner in which any election by the Corporation to
redeem such Securities shall be evidenced;
(h) the obligation or the right, if any, of the Corporation to
redeem, repay or purchase the Securities of such series pursuant to any
sinking fund, amortization or analogous provisions, or at the option of
a Holder thereof, and the period or periods within which, the price or
prices at which, the currency or currencies (including currency unit or
units) in which and the other terms and conditions upon which Securities
of the series shall be redeemed, repaid or purchased, in whole or in
part, pursuant to such obligation;
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<PAGE> 29
(i) the denominations in which any Securities of such series
shall be issuable, if other than denominations of $20 and any integral
multiple thereof;
(j) if other than Dollars, the currency or currencies (including
any currency unit or units) in which the principal of (and premium, if
any) and interest and Additional Interest, if any, on the Securities of
the series shall be payable, or in which the Securities of the series
shall be denominated and the manner of determining the equivalent
thereof in Dollars for purposes of the definition of Outstanding;
(k) the additions, modifications or deletions, if any, in the
Events of Default or covenants of the Corporation set forth herein with
respect to the Securities of such series;
(l) if other than the principal amount thereof, the portion of
the principal amount of Securities of such series that shall be payable
upon declaration of acceleration of the Maturity thereof;
(m) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to
be the principal amount of such Securities as of any such date for any
purpose thereunder or hereunder, including the principal amount thereof
which shall be due and payable upon any Maturity other than the Stated
Maturity or which shall be deemed to be Outstanding as of any date prior
to the Stated Maturity (or, in any such case, the manner in which such
amount deemed to be the principal amount shall be determined);
(n) the additions or changes, if any, to this Indenture with
respect to the Securities of such series as shall be necessary to permit
or facilitate the issuance of the Securities of such series in bearer
form, registrable or not registrable as to principal, and with or
without interest coupons;
(o) any index or indices used to determine the amount of payments
of principal of and premium, if any, on the Securities of such series or
the manner in which such amounts will be determined;
(p) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositaries for such
Global Securities, the form of any legend or legends that shall be borne
by any such Global Security in addition to or in lieu of that set forth
in Section 2.4 and any circumstances in addition to or in lieu of those
set forth in Section 3.6 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and any
transfer of such Global Security in whole or in part may be registered,
in the name or names of Persons other than the Depositary for such
Global Security or a nominee thereof;
(q) the appointment of any Paying Agent or agents for the
Securities of such series;
(r) the terms of any right to convert or exchange Securities of
such series into any other securities or property of the Corporation,
and the additions or changes, if any, to this Indenture with respect to
the Securities of such series to permit or facilitate such conversion or
exchange;
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<PAGE> 30
(s) if such Securities are to be issued to an Issuer Trust, the
form or forms of the Trust Agreement, Guarantee Agreement and Expense
Agreement relating thereto;
(t) if other than as set forth herein, the relative degree, if
any, to which the Securities of the series shall be senior to or be
subordinated to other series of Securities in right of payment, whether
such other series of Securities are Outstanding or not;
(u) any addition to or change in the Events of Default which
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to Section 5.2;
(v) any addition to or change in the covenants set forth in
Article X which applies to Securities of the series; and
(w) any other terms of the Securities of such series (which terms
shall not be inconsistent with the provisions of this Indenture, except
as permitted by Section 9.1(6)).
All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided herein or in or
pursuant to such Board Resolution and set forth, or determined in the manner
provided, in such Officers' Certificate or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Corporation
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII.
SECTION 3.2. Denominations.
The Securities of each series shall be in registered form without
coupons and shall be issuable in denominations of $20 and any integral multiple
of $20 in excess thereof, unless otherwise specified as contemplated by Section
3.1.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Corporation by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced or impressed thereon
and attested by its Secretary or one of its Assistant Secretaries. The signature
of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities. At any time and from
time to time after the execution and delivery of this Indenture, the
Corporation may deliver Securities of any series executed by
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<PAGE> 31
the Corporation to the Trustee for authentication, together with a Corporation
Order for the authentication and delivery of such Securities, and the Trustee in
accordance with the Corporation Order shall authenticate and deliver such
Securities. If the form or terms of the Securities of the series have been
established by or pursuant to one or more Board Resolutions as permitted by
Sections 2.1 and 3.1, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 2.1, that such form
has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 3.1, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Corporation in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Corporation, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties,
indemnities or immunities under the Securities and this Indenture or otherwise
in a manner that is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.1 or the Corporation Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Corporation, and the Corporation shall deliver such Security to the Trustee for
cancellation as provided in Section 3.10, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
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<PAGE> 32
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Corporation may execute, and upon Corporation Order the Trustee shall
authenticate and deliver, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Securities of such series in lieu
of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Corporation will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Corporation designated for that
purpose without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations having the same
Original Issue Date and Stated Maturity and having the same terms as such
temporary Securities. Until so exchanged, the temporary Securities of any series
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of such series.
SECTION 3.5. Global Securities.
(a) Each Global Security issued under this Indenture shall be registered
in the name of the Depositary designated by the Corporation for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall constitute a
single Security for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary advises the Trustee in writing that such
Depositary is no longer willing or able to properly discharge its
responsibilities as Depositary with respect to such Global Security, and the
Corporation is unable to locate a qualified successor, (ii) the Corporation
executes and delivers to the Trustee a Corporation Order stating that the
Corporation elects to terminate the book-entry system through the Depositary, or
(iii) there shall have occurred and be continuing an Event of Default.
(c) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Securities Registrar for exchange or cancellation as provided
in this Article III. If any Global Security is to be exchanged for other
Securities or cancelled in part, or if another Security is to be exchanged in
whole or in part for a beneficial interest in any Global Security, then either
(i) such Global Security shall be so surrendered for exchange or cancellation as
provided in this Article III or (ii) the principal amount thereof shall be
reduced, subject to Section 3.6(b)(v), or increased by an amount equal to the
portion thereof to be so exchanged or cancelled, or equal to the principal
amount of such other Security to be so exchanged for a beneficial interest
therein, as the case may be, by means of an appropriate adjustment made on the
records of the Securities Registrar, whereupon the Trustee, in accordance with
the Applicable Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding
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adjustment to its records. Upon any such surrender or adjustment of a Global
Security by the Depositary, accompanied by registration instructions, the
Trustee shall, subject to Section 3.5(b) and as otherwise provided in this
Article III, authenticate and deliver any Securities issuable in exchange for
such Global Security (or any portion thereof) in accordance with the
instructions of the Depositary. The Trustee shall not be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be fully
protected in relying on, such instructions.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article III, Section 9.6 or 11.6 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.
(e) Securities distributed to holders of Book-Entry Preferred Securities
(as defined in the applicable Trust Agreement) upon the dissolution of an Issuer
Trust shall be distributed in the form of one or more Global Securities
registered in the name of a Depositary or its nominee, and deposited with the
Securities Registrar, as custodian for such Depositary, or with such Depositary,
for credit by the Depositary to the respective accounts of the beneficial owners
of the Securities represented thereby (or such other accounts as they may
direct). Securities distributed to holders of Preferred Securities other than
Book-Entry Preferred Securities upon the dissolution of an Issuer Trust shall
not be issued in the form of a Global Security or any other form intended to
facilitate book-entry trading in beneficial interests in such Securities.
(f) The Depositary or its nominee, as the registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security shall be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members.
Neither the Trustee nor the Securities Registrar shall have any liability in
respect of any transfers effected by the Depositary.
(g) The rights of owners of beneficial interests in a Global Security
shall be exercised only through the Depositary and shall be limited to those
established by law and agreements between such owners and the Depositary and/or
its Agent Members.
SECTION 3.6. Registration, Transfer and Exchange Generally.
The Corporation shall cause to be kept at the Corporate Trust Office of
the Trustee a register in which, subject to such reasonable regulations as it
may prescribe, the Corporation shall provide for the registration of Securities
and of transfers of Securities. Such register is herein sometimes referred to as
the "Securities Register." The Trustee is hereby appointed "Securities
Registrar" for the purpose of registering Securities and transfers of Securities
as herein provided.
Upon surrender for registration of transfer of any Security at the
offices or agencies of the Corporation designated for that purpose the
Corporation shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of the
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same series of any authorized denominations of like tenor and aggregate
principal amount, of the same Original Issue Date and Stated Maturity and having
the same terms.
At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of like tenor and
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any securities are so surrendered for exchange,
the Corporation shall execute, and the Trustee shall authenticate and deliver,
the Securities that the Holder making the exchange is entitled to receive.
All Securities issued upon any transfer or exchange of Securities shall
be the valid obligations of the Corporation, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
Every Security presented or surrendered for transfer or exchange shall
(if so required by the Corporation or the Trustee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Corporation and the Securities Registrar, duly executed by the Holder thereof or
such Holder's attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange
of Securities, but the Corporation may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture shall
be registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security
shall constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part may
be registered, in the name of any Person other than the Depositary for
such Global Security or a nominee thereof unless (A) such Depositary (i)
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (ii) has ceased to be a clearing
agency registered under the Exchange Act at a time when the Depositary
is required to be so registered to act as depositary, in each case
unless the Company has approved a successor Depositary within 90 days,
(B) there shall have occurred and be continuing an Event of Default with
respect to such Global Security, (C) the Company in its sole discretion
determines that such Global Security will be so exchangeable or
transferable or (D) there shall exist such circumstances, if any, in
addition to or in lieu of the foregoing as have been specified for this
purpose as contemplated by Section 3.1.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
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(4) Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security or
any portion thereof, whether pursuant to this Section, Section 3.4, 3.6,
9.6 or 11.6 or otherwise, shall be authenticated and delivered in the
form of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary for such
Global Security or a nominee thereof.
Neither the Corporation nor the Trustee shall be required, pursuant to
the provisions of this Section, (i) to issue, register the transfer of or
exchange any Security of any series during a period beginning at the opening of
business 15 days before the day of selection for redemption of Securities of
that series pursuant to Article XI and ending at the close of business on the
day of mailing of the notice of redemption, or (ii) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except,
in the case of any such Security to be redeemed in part, any portion thereof not
to be redeemed.
SECTION 3.7. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee together with
such security or indemnity as may be required by the Corporation or the Trustee
to save each of them harmless, the Corporation shall execute and the Trustee
shall authenticate and deliver in exchange therefor a new Security of the same
series, of like tenor and aggregate principal amount, having the same Original
Issue Date and Stated Maturity, and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Corporation and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Corporation or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Corporation shall execute and upon its written request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series, of like tenor and aggregate
principal amount, having the same Original Issue Date and Stated Maturity, as
such destroyed, lost or stolen Security, and bearing a number not
contemporaneously outstanding.
If any such mutilated, destroyed, lost or stolen Security has become or
is about to become due and payable, the Corporation in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Corporation, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of the same series duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.8. Payment of Interest and Additional Interest; Interest
Rights Preserved.
Interest and Additional Interest on any Security of any series that is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date, shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest in respect of Securities of such series, except
that, unless otherwise provided in the Securities of such series, interest and
any Additional Interest payable on the Stated Maturity of the principal of a
Security shall be paid to the Person to whom principal is paid. The initial
payment of interest on any Security of any series that is issued between a
Regular Record Date and the related Interest Payment Date shall be payable as
provided in such Security or in the Board Resolution pursuant to Section 3.1
with respect to the related series of Securities.
Any interest on any Security that is due and payable, but is not timely
paid or duly provided for, on any Interest Payment Date for Securities of such
series (herein called "Defaulted Interest"), shall forthwith cease to be payable
to the registered Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such Defaulted Interest may be paid by the Corporation, at
its election in each case, as provided in Clause (1) or (2) below:
(1) The Corporation may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series in respect of which
interest is in default (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Corporation shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the date of the proposed
payment, and at the same time the Corporation shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest, which shall be
not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Corporation of such Special Record Date and, in the name and at the expense of
the Corporation, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class, postage
prepaid, to each Holder of a Security of such series at the address of such
Holder as it appears in the Securities Register not less than 10 days prior to
such Special Record Date. The Trustee may, in its discretion, in the name and at
the expense of the Corporation, cause a similar notice to be published at least
once in a newspaper, customarily published in the English language on each
Business Day and of general circulation in the City of Los Angeles, California,
but such publication shall not be a condition precedent to the establishment of
such Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered on such Special Record Date and shall no longer be payable pursuant
to the following Clause (2).
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(2) The Corporation may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of the series in respect of which interest is
in default may be listed and, upon such notice as may be required by such
exchange (or by the Trustee if the Securities are not listed), if, after notice
given by the Corporation to the Trustee of the proposed payment pursuant to this
Clause, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, that were carried by such other Security.
SECTION 3.9. Persons Deemed Owners.
The Corporation, the Trustee and any agent of the Corporation or the
Trustee shall treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of and
(subject to Section 3.8) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Corporation, the Trustee nor any agent of the Corporation or the Trustee shall
be affected by notice to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Corporation,
the Trustee and any agent of the Corporation or the Trustee as the owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Corporation, the Trustee or any agent of the
Corporation or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
SECTION 3.10. Cancellation.
All Securities surrendered for payment, redemption, transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee, and any such Securities and Securities surrendered directly to the
Trustee for any such purpose shall be promptly canceled by it. The Corporation
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder that the Corporation may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities shall
be destroyed by the Trustee and the Trustee shall deliver to the Corporation a
certificate of such destruction.
SECTION 3.11. Computation of Interest.
Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series for any
partial period shall be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in any partial month in such
period, and interest on the Securities of each series for a full period shall be
computed by dividing the rate per annum by the number of interest periods that
together constitute a full twelve months.
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SECTION 3.12. Deferrals of Interest Payment Dates.
If specified as contemplated by Section 2.1 or Section 3.1 with respect
to the Securities of a particular series, so long as no Event of Default has
occurred and is continuing, the Corporation shall have the right, at any time
during the term of such series, from time to time to defer the payment of
interest on such Securities for such period or periods as may be specified as
contemplated by Section 3.1 (each, an "Extension Period"), during which
Extension Periods the Corporation shall, if so specified as contemplated by
Section 3.1, have the right to make partial payments of interest on any Interest
Payment Date. No Extension Period shall end on a date other than an Interest
Payment Date. At the end of any such Extension Period the Corporation shall pay
all interest then accrued and unpaid on the Securities (together with Additional
Interest thereon, if any, at the rate specified for the Securities of such
series to the extent permitted by applicable law); provided, however, that no
Extension Period shall extend beyond the Stated Maturity of the principal of the
Securities of such series; and provided further, however that during any such
Extension Period, the Corporation shall not, and shall not permit any Subsidiary
to, (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Corporation's
capital stock, or (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Corporation
that rank pari passu in all respects with or junior in interest to the
Securities of such series (other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Corporation in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of any one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Corporation (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a Subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series of
the Corporation's capital stock, (c) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any Rights Plan, or the
issuance of rights, stock or other property under any Rights Plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock), or (iii) make any guarantee payments with respect to
any guarantee by the Corporation of the debt securities of any Subsidiary of the
Corporation if such guarantee ranks pari passu with a junior in interest to the
securities of such series (other than (a) dividends or distributions in Common
Stock, (b) any declaration of a dividend in connection with the implementation
of a Rights Plan, or the issuance of any Common Stock of any class or series of
preferred stock of the Corporation under any Rights Plan in the future or the
redemption or repurchase of any rights pursuant thereto, and (c) purchases of
Common Stock related to the issuance of Common Stock or rights under any of the
Corporation's (or its subsidiaries') benefit plans for their directors, officers
or employees. Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest, provided that no
Extension Period shall exceed the period or periods specified in such
Securities, extend beyond the Stated Maturity of the principal of such
Securities or end on a date other than an Interest Payment Date. Upon the
termination of any such Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Corporation may elect to begin a new Extension Period, subject to the
above
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conditions. No interest or Additional Interest shall be due and payable during
an Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension Period
shall bear Additional Interest as and to the extent as may be specified as
contemplated by Section 3.1. The Corporation shall give the Holders of the
Securities of such series and the Trustee written notice of its election to
begin any such Extension Period at least one Business Day prior to the next
succeeding Interest Payment Date on which interest on Securities of such series
would be payable but for such deferral or, with respect to any Securities of a
series issued to an Issuer Trust, so long as any such Securities are held by
such Issuer Trust, at least one Business Day prior to the earlier of (i) the
next succeeding date on which Distributions on the Preferred Securities of such
Issuer Trust would be payable but for such deferral, and (ii) the date on which
the Property Trustee of such Issuer Trust is required to give notice to any
securities exchange or other applicable self-regulatory organization or to
holders of such Preferred Securities of the record date or the date such
Distributions are payable.
The Trustee shall promptly give notice of the Corporation's election to
begin any such Extension Period to the Holders of the Outstanding Securities of
such series.
SECTION 3.13. Right of Set-Off.
With respect to the Securities of a series initially issued to an Issuer
Trust, notwithstanding anything to the contrary herein, the Corporation shall
have the right to set off any payment it is otherwise required to make in
respect of any such Security to the extent the Corporation has theretofore made,
or is concurrently on the date of such payment making, a payment under the
Guarantee Agreement relating to such Security or to a holder of Preferred
Securities pursuant to an action undertaken under Section 5.8 of this Indenture.
SECTION 3.14. Agreed Tax Treatment.
Each Security issued hereunder shall provide that the Corporation and,
by its acceptance or acquisition of a Security or a beneficial interest therein,
the Holder of, and any Person that acquires a direct or indirect beneficial
interest in, such Security, intend and agree to treat such Security as
indebtedness of the Corporation for United States Federal, state and local tax
purposes and, with respect to Securities of a series issued to an Issuer Trust,
to treat Preferred Securities of such Issuer Trust (including but not limited to
all payments and proceeds with respect to such Preferred Securities) as an
undivided beneficial ownership interest in the Securities (and payments and
proceeds therefrom, respectively) for United States Federal, state and local tax
purposes. The provisions of this Indenture shall be interpreted to further this
intention and agreement of the parties.
SECTION 3.15. Shortening or Extension of Stated Maturity.
If specified as contemplated by Section 2.1 or Section 3.1 with respect
to the Securities of a particular series, the Corporation shall have the right
to (i) shorten the Stated Maturity of the principal of the Securities of such
series at any time to any date not earlier than the first date on which the
Corporation has the right to redeem the Securities of such series, provided that
the repayment of principal shall include any premium so that the total repayment
equals the redemption price applicable on such Stated Maturity and (ii) extend
the Stated Maturity of the principal of the Securities of such series at any
time at its election for one or more periods, but in no event to a date later
than the 49th Anniversary of
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the First Interest Payment Date following the Original Issue Date of the
Securities of such series; provided that, if the Company elects to exercise its
right to extend the Stated Maturity of the principal of the Securities of such
series pursuant to clause (ii), above, at the time such election is made and at
the time of extension (A) the Company is not in bankruptcy, otherwise insolvent
or in liquidation, (B) the Company is not in default in the payment of any
interest or principal on such Securities, (C) in the case of any series of
Securities issued to an Issuer Trust, such Issuer Trust is not in arrears on
payments of Distributions on the Preferred Securities issued by an Issuer Trust
and no deferred Distributions are accumulated and (D) such Securities are rated
not less than BBB- by S&P or Baa3 by Moody's or the equivalent by any other
nationally recognized statistical rating organization. In the event the
Corporation elects to shorten or extend the Stated Maturity of any series of
Securities, it shall give notice to the Trustee, and the Trustee shall give
notice of such shortening or extension to the Holders, no less than 30 and no
more than 90 days prior to the effectiveness thereof.
SECTION 3.16. CUSIP Numbers.
The Corporation in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption and other similar or related materials as a convenience to
Holders; provided that any such notice or other materials may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or other materials
and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such redemption shall not be affected by any defect
in or omission of such numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Corporation Request, cease to be of further
effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for and as otherwise provided
in this Section 4.1) and the Trustee, on demand of and at the expense of the
Corporation, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 3.7 and (ii)
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Corporation and thereafter
repaid to the Corporation or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
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(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year of the date of deposit, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at
the expense, of the Corporation,
and the Corporation, in the case of subclause (B)(i), (ii) or (iii)
above, has deposited or caused to be deposited with the Trustee as trust
funds in trust for such purpose an amount in the currency or currencies
in which the Securities of such series are payable sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium,
if any) and interest (including any Additional Interest) to the date of
such deposit (in the case of Securities that have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may
be;
(2) the Corporation has paid or caused to be paid all other sums payable
hereunder by the Corporation; and
(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Corporation to the Trustee under Section 6.7, the obligations
of the Trustee to any Authenticating Agent under Section 6.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of Clause
(1) of this Section, the obligations of the Trustee under Section 4.2 and the
last paragraph of Section 10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by the Trustee, in accordance with the provisions of the Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Corporation acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest (including any Additional Interest) for the payment of which
such money or obligations have been deposited with or received by the Trustee.
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ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default", wherever used herein with respect to the Securities
of any series, means any one of the following events that has occurred and is
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) except as may be specified pursuant to
Section 3.1:
(1) default in the payment of any interest upon any Security of that
series, including any Additional Interest in respect thereof, when it becomes
due and payable, and continuance of such default for a period of 30 days
(subject to the deferral of any due date in the case of an Extension Period); or
(2) default in the payment of the principal of (or premium, if any, on)
any Security of that series at its Maturity; or
(3) failure on the part of the Corporation duly to observe or perform
any other of the covenants or agreements on the part of the Corporation in the
Securities of that series or in this Indenture, and continuance of such default
or breach for a period of 90 days after the date on which written notice of such
failure, requiring the Corporation to remedy the same, shall have been given to
the Corporation by the Trustee by registered or certified mail or to the
Corporation and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securities of that series; or
(4) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Corporation a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization of the Corporation under the
Bankruptcy Code or any other similar applicable Federal or State law, which
decree or order shall have continued undischarged and unstayed for a period of
60 days; or the entry of a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of the Corporation or of its property, or for the
winding up or liquidation of its affairs, which decree or order shall have
continued undischarged and unstayed for a period of 60 days; or
(5) the commencement by the Corporation of voluntary proceedings to be
adjudicated a bankrupt, or consent by the Corporation to the filing of a
bankruptcy proceeding against it, or the filing by the Corporation of a petition
or answer or consent seeking reorganization under the Bankruptcy Code, or
consent by the Corporation to the filing of any such petition, or the consent by
the Corporation to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of its property, or the making by
the Corporation of an assignment for the benefit of creditors; or
(6) any other Event of Default provided with respect to Securities of
that series.
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SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(4) or 5.1(5)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
Securities of that series to be due and payable immediately, by a notice in
writing to the Corporation (and to the Trustee if given by Holders), provided
that, in the case of the Securities of a series issued to an Issuer Trust, if,
upon an Event of Default, the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of such series fail to declare
the principal of all the Outstanding Securities of such series to be immediately
due and payable, the holders of at least 25% in aggregate Liquidation Amount (as
defined in the related Trust Agreement) of the related series of Preferred
Securities issued by such Issuer Trust then outstanding shall have the right to
make such declaration by a notice in writing to the Corporation and the Trustee;
and upon any such declaration such principal amount (or specified portion
thereof) of and the accrued interest (including any Additional Interest) on all
the Securities of such series shall become immediately due and payable. If an
Event of Default specified in Section 5.1(4) or 5.1(5) with respect to
Securities of any series at the time Outstanding occurs, the principal amount of
all the Securities of such series (or, if the Securities of such series are
Discount Securities, such portion of the principal amount of such Securities as
may be specified by the terms of that series) shall automatically, and without
any declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable. Payment of principal and interest (including any
Additional Interest) on such Securities shall remain subordinated to the extent
provided in Article XIII notwithstanding that such amount shall become
immediately due and payable as herein provided.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series, by written notice to the Corporation and
the Trustee, may rescind and annul such declaration and its consequences if:
(1) the Corporation has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue installments of interest on all Securities of
such series,
(B) any accrued Additional Interest on all Securities of such
series,
(C) the principal of (and premium, if any, on) any Securities of
such series that have become due otherwise than by such
declaration of acceleration and interest and Additional Interest
thereon at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel; and
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(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series that
has become due solely by such acceleration, have been cured or waived as
provided in Section 5.13.
In the case of Securities of a series initially issued to an Issuer
Trust, if the Holders of such Securities fail to annul such declaration and
waive such default, the holders of a majority in aggregate Liquidation Amount
(as defined in the related Trust Agreement) of the related series of Preferred
Securities issued by such Issuer Trust then outstanding shall also have the
right to rescind and annul such declaration and its consequences by written
notice to the Corporation and the Trustee, subject to the satisfaction of the
conditions set forth in Clauses (1) and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Corporation covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Security of any series when such
interest becomes due and payable and such default continues for a period of 30
days, or
(2) default is made in the payment of the principal of (and premium, if
any, on) any Security at the Maturity thereof,
the Corporation will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest), and, in addition thereto, all amounts owing the Trustee
under Section 6.7.
If the Corporation fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Corporation or any other obligor upon such Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Corporation or any other obligor upon the Securities,
wherever situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
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SECTION 5.4. Trustee May File Proofs of Claim.
In case of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Corporation or any other obligor upon the Securities
or the property of the Corporation or of such other obligor or their creditors,
(a) the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Corporation for the payment of
overdue principal (and premium, if any) or interest (including any
Additional Interest)) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest (including any
Additional Interest) owing and unpaid in respect to the
Securities and to file such other papers or documents as may be
necessary or advisable and to take any and all actions as are
authorized under the Trust Indenture Act in order to have the
claims of the Holders and any predecessor to the Trustee under
Section 6.7 allowed in any such judicial proceedings; and
(ii) in particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same in
accordance with Section 5.6; and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee
for distribution in accordance with Section 5.6, and in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor
Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
SECTION 5.5. Trustee May Enforce Claim Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of all the amounts owing the Trustee and any
predecessor Trustee under Section 6.7, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee with
respect to a series of Securities pursuant to this Article shall be applied in
the following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money or property on account of principal (or premium,
if any) or interest (including any Additional Interest), upon presentation of
the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee;
SECOND: Subject to Article XIII, to the payment of the amounts then due
and unpaid upon Securities of such series for principal (and premium, if any)
and interest (including any Additional Interest) in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such series of
Securities for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7. Limitation on Suits.
No Holder of any Securities of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
or for the appointment of a receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) or for any other remedy hereunder,
unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.
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SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest; Direct Action by Holders of Preferred Securities.
Notwithstanding any other provision in this Indenture, the Holder of any
Security of any series shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Sections 3.8 and 3.12) interest (including any Additional Interest)
on such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder. In the case of Securities of a series issued
to an Issuer Trust, any registered holder of the series of Preferred Securities
issued by such Issuer Trust shall have the right, upon the occurrence of an
Event of Default described in Section 5.1(1) or 5.1(2), to institute a suit
directly against the Corporation for enforcement of payment to such holder of
principal of (premium, if any) and (subject to Sections 3.8 and 3.12) interest
(including any Additional Interest) on the Securities having a principal amount
equal to the aggregate Liquidation Amount (as defined in the related Trust
Agreement) of such Preferred Securities held by such holder.
SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities issued
by any Issuer Trust has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee, such Holder or such
holder of Preferred Securities, then and in every such case the Corporation, the
Trustee, such Holders and such holder of Preferred Securities shall, subject to
any determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, such Holder and such holder of Preferred Securities shall continue as
though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.7, no
right or remedy herein conferred upon or reserved to the Trustee or the Holders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Security with
respect to the Securities of the related Series or any holder of any Preferred
Security to exercise any right or remedy accruing upon any Event of Default with
respect to the Securities of the related series shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein.
Every right and remedy given by this Article or by law to the Trustee or
to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
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SECTION 5.12. Control by Holders.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee, with
respect to the Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have the
right to decline to follow such direction if a Responsible Officer or Officers
of the Trustee shall, in good faith, determine that the proceeding so directed
would be unjustly prejudicial to the Holders not joining in any such direction
or would involve the Trustee in personal liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series affected thereby and, in the case of
any Securities of a series initially issued to an Issuer Trust, the holders of a
majority in aggregate Liquidation Amount (as defined in the related Trust
Agreement) of the Preferred Securities issued by such Issuer Trust may waive any
past default hereunder and its consequences with respect to such series except a
default:
(1) in the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security of such series (unless such
default has been cured and the Corporation has paid to or deposited with the
Trustee a sum sufficient to pay all matured installments of interest (including
any Additional Interest) and all principal of (and premium, if any, on) all
Securities of that series due otherwise than by acceleration), or
(2) in respect of a covenant or provision hereof that under Article IX
cannot be modified or amended without the consent of each Holder of any
Outstanding Security of such series affected.
Any such waiver shall be deemed to be on behalf of the Holders of all
the Securities of such series or, in the case of a waiver by holders of
Preferred Securities issued by such Issuer Trust, by all holders of Preferred
Securities issued by such Issuer Trust.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
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SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in aggregate principal amount of the Outstanding
Securities of any series, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
(including any Additional Interest) on any Security on or after the respective
Stated Maturities expressed in such Security.
SECTION 5.15. Waiver of Usury, Stay or Extension Laws.
The Corporation covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Corporation (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions that by any provisions hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their
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exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of Holders pursuant to Section 5.12 relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture
with respect to the Securities of a series.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder with respect to the
Securities of any series, the Trustee shall transmit by mail to all Holders of
Securities of such series, as their names and addresses appear in the Securities
Register, notice of such default, unless such default shall have been cured or
waived; provided, however, that, except in the case of a default in the payment
of the principal of (or premium, if any) or interest (including any Additional
Interest) on any Security of such series, the Trustee shall be fully protected
in withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of Securities of such series; and
provided, further, that, in the case of any default of the character specified
in Section 5.1(3), no such notice to Holders of Securities of such series shall
be given until at least 30 days after the occurrence thereof. For the purpose of
this Section, the term "default" means any event that is, or after notice or
lapse of time or both would become, an Event of Default with respect to
Securities of such series.
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SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, Security or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request or direction of the Corporation mentioned herein shall
be sufficiently evidenced by a Corporation Request or Corporation Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, indenture,
Security or other paper or document, but the Trustee in its discretion may make
such inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Corporation,
personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent, attorney, custodian or
nominee appointed with due care by it hereunder.
(h) in the event that the Trustee is also acting as Paying Agent,
Authenticating Agent or Transfer Agent and Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VI shall also be
afforded such Paying Agent or Transfer Agent and Registrar.
(i) the Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Indenture.
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(j) the Trustee shall not be charged with knowledge of any Event of
Default unless either (1) a Responsible Officer of the Trustee shall have actual
knowledge or (2) the Trustee shall have received notice thereof from the Company
or a Holder.
(k) no permissive power or authority available to the Trustee shall be
construed as a duty.
SECTION 6.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Corporation, and neither the Trustee nor any Authenticating Agent assumes
any responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Corporation of the Securities or the proceeds thereof.
SECTION 6.5. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Securities
Registrar or any other agent of the Corporation, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.8 and 6.13, may otherwise deal with the Corporation with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent,
Securities Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Corporation.
SECTION 6.7. Compensation and Reimbursement.
The Corporation agrees
(1) to pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder in such amounts as the Corporation and the
Trustee shall agree from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee and its officers, directors, agents and
employees for, and to hold it harmless against, any loss, liability or expense
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel) incurred without negligence or bad faith, arising out of or
in connection with the acceptance or administration of this trust or the
performance of its duties hereunder,
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including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. This indemnification shall survive the termination of this
Indenture or the earlier resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or 5.1(5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
SECTION 6.8. Disqualification; Conflicting Interests.
(a) The Trustee for the Securities of any series issued hereunder shall
be subject to the provisions of Section 310(b) of the Trust Indenture Act.
Nothing herein shall prevent the Trustee from filing with the Commission the
application referred to in the second to last paragraph of said Section 310(b).
(b) The Trust Agreement and the Guarantee Agreement with respect to each
Issuer Trust shall be deemed to be specifically described in this Indenture for
the purposes of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under the laws of the
United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by Federal, State, Territorial or District
of Columbia authority, or
(b) a corporation or other Person organized and doing business under the
laws of a foreign government that is permitted to act as Trustee pursuant to a
rule, regulation or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision or examination by
authority of such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination applicable to United
States institutional trustees, in either case having a combined capital and
surplus of at least $50,000,000, subject to supervision or examination by
Federal or State authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purposes of this Section 6.9,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.9, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article VI.
Neither the Corporation nor any Person directly or indirectly controlling,
controlled by or under common control with the Corporation shall serve as
Trustee for the Securities of any series issued hereunder.
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SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Corporation. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of such series, delivered to the
Trustee and to the Corporation.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Corporation or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Corporation or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Corporation, acting pursuant to the authority of
a Board Resolution, may remove the Trustee with respect to the Securities of all
series issued hereunder, or (ii) subject to Section 5.14, any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
such Holder and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to the Securities of
all series issued hereunder and the appointment of a successor Trustee or
Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause with
respect to the Securities of one or more series, the Corporation, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of such series delivered to the Corporation and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee with respect to the Securities of such
series and supersede the successor Trustee appointed by the Corporation. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Corporation or the Holders and accepted appointment in the
manner hereinafter provided, any Holder
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who has been a bona fide Holder of a Security of such series for at least six
months may, subject to Section 5.14, on behalf of such Holder and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Corporation shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of Securities of such series as their names and addresses appear in
the Securities Register. Each notice shall include the name of the successor
Trustee with respect to the Securities of such series and the address of its
Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Corporation and to the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Corporation or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Corporation,
the retiring Trustee and each successor Trustee with respect to the Securities
of one or more series shall execute and deliver an instrument in writing or an
indenture supplemental hereto wherein each successor Trustee shall accept such
appointment and which (1) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Securities of that or those series
as to which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such instrument in writing or supplemental
indenture shall constitute such Trustees co-trustees of the same trust and that
each such Trustee shall be trustee of a trust or trusts hereunder separate and
apart from any trust or trusts hereunder administered by any other such Trustee;
and upon the execution and delivery of such instrument in writing or
supplemental indenture the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Corporation or any successor Trustee,
such retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
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(c) Upon request of any such successor Trustee, the Corporation shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Corporation.
If and when the Trustee shall be or become a creditor of the Corporation
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Corporation (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities, which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 3.6, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Corporation and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State or Territory
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section,
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such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Corporation. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Corporation. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent, which shall be acceptable to the Corporation and shall give notice of
such appointment in the manner provided in Section 1.6 to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 6.7.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred
to in the within mentioned Indenture.
Dated:
__________________________,
As Trustee
By: ,
As Authenticating Agent
By:
Authorized Officer
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ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND CORPORATION
SECTION 7.1. Corporation to Furnish Trustee Names and Addresses of
Holders.
The Corporation will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after each Regular
Record Date in each year, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such
Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Corporation of any such request,
a list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished,
in each case to the extent such information is in the possession or control of
the corporation and has not otherwise been received by the Trustee in its
capacity as Securities Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Corporation and the Trustee that neither the Corporation nor the
Trustee nor any agent of either of them shall be held accountable by reason of
the disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act, at the times and in the manner provided pursuant thereto.
(b) Reports so required to be transmitted at stated intervals of not
more than 12 months shall be transmitted no later than 60 days after December 31
in each calendar year, commencing 60 days after the first December 31 after the
first issuance of Securities under this Indenture.
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(c) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each securities exchange upon which any
Securities are listed and also with the Commission. The Corporation will notify
the Trustee when any Securities are listed on any securities exchange.
SECTION 7.4. Reports by Corporation.
The Corporation shall file with the Trustee and with the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided in the Trust Indenture Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with
the Trustee within 15 days after the same is required to be filed with the
Commission. Notwithstanding that the Corporation may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Corporation shall continue to file with the Commission and provide the
Trustee with the annual reports and the information, documents and other reports
which are specified in Sections 13 and 15(d) of the Exchange Act. The
Corporation also shall comply with the other provisions of Trust Indenture Act
Section 314(a).
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Corporation May Consolidate, Etc., Only on Certain Terms.
The Corporation shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Corporation or convey, transfer or lease its properties and assets
substantially as an entirety to the Corporation, unless:
(1) if the Corporation shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, the corporation formed by such consolidation or into
which the Corporation is merged or the Person that acquires by conveyance or
transfer, or that leases, the properties and assets of the Corporation
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of America or any
State thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of
(and premium, if any) and interest (including any Additional Interest) on all
the Securities of every series and the performance of every covenant of this
Indenture on the part of the Corporation to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event that, after notice or lapse of time, or both, would
constitute an Event of Default, shall have happened and be continuing; and
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(3) the Corporation has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and any such supplemental indenture comply
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with; and the Trustee, subject to Section
6.1, may rely upon such Officers' Certificate and Opinion of Counsel as
conclusive evidence that such transaction complies with this Section 8.1.
SECTION 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Corporation with or into any
other Person, or any conveyance, transfer or lease by the Corporation of its
properties and assets substantially as an entirety to any Person in accordance
with Section 8.1, the successor corporation formed by such consolidation or into
which the Corporation is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Corporation under this Indenture with the same effect as if
such successor Person had been named as the Corporation herein; and in the event
of any such conveyance, transfer or lease the Corporation shall be discharged
from all obligations and covenants under the Indenture and the Securities and
may be dissolved and liquidated.
Such successor Person may cause to be executed, and may issue either in
its own name or in the name of the Corporation, any or all of the Securities
issuable hereunder that theretofore shall not have been signed by the
Corporation and delivered to the Trustee; and, upon the order of such successor
Person instead of the Corporation and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities that previously shall have been signed and
delivered by the officers of the Corporation to the Trustee for authentication
pursuant to such provisions and any Securities that such successor Person
thereafter shall cause to be executed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Corporation, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Corporation, and the assumption by any such successor of the covenants
of the Corporation herein and in the Securities contained; or
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(2) to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee or to surrender any right or power herein
conferred upon the Corporation; or
(3) to establish the form or terms of Securities of any series as
permitted by Sections 2.1 or 3.1; or
(4) to add to the covenants of the Corporation for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities, stating
that such covenants are expressly being included solely for the benefit
of the series specified) or to surrender any right or power herein
conferred upon the Corporation; or
(5) to add any additional Events of Default for the benefit of
the Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are expressly
being included solely for the benefit of the series specified); or
(6) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall (a) become
effective only when there is no Security Outstanding of any series
created prior to the execution of such supplemental indenture that is
entitled to the benefit of such provision or (b) not apply to any
Outstanding Securities; or
(7) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action
pursuant to this clause (7) shall not adversely affect the interest of
the Holders of Securities of any series in any material respect or, in
the case of the Securities of a series issued to an Issuer Trust and for
so long as any of the corresponding series of Preferred Securities
issued by such Issuer Trust shall remain outstanding, the holders of
such Preferred Securities; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 6.11(b); or
(9) to comply with the requirements of the Commission in order to
effect or maintain qualification of this Indenture under the Trust
Indenture Act.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Corporation and
the Trustee, the Corporation, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Securities of such series under this Indenture;
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provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security of each series affected
thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest (including any Additional Interest) on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or reduce any premium
payable upon the redemption thereof, or reduce the amount of principal of a
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 5.2, or change the
place of payment where, or the coin or currency in which, any Security or
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in aggregate principal amount of the
Outstanding Securities of any series, the consent of whose Holders is required
for any such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Security affected thereby;
provided, further, that, in the case of the Securities of a series issued to an
Issuer Trust, so long as any of the corresponding series of Preferred Securities
issued by such Issuer Trust remains outstanding, (i) no such amendment shall be
made that adversely affects the holders of such Preferred Securities in any
material respect, and no termination of this Indenture shall occur, and no
waiver of any Event of Default or compliance with any covenant under this
Indenture shall be effective, without the prior consent of the holders of at
least a majority of the aggregate Liquidation Amount (as defined in the related
Trust Agreement) of such Preferred Securities then outstanding unless and until
the principal of (and premium, if any, on) the Securities of such series and all
accrued and (subject to Section 3.12) unpaid interest (including any Additional
Interest) thereon have been paid in full, and (ii) no amendment shall be made to
Section 5.8 of this Indenture that would impair the rights of the holders of
Preferred Securities issued by any Issuer Trust provided therein without the
prior consent of the holders of each such Preferred Security then outstanding
unless and until the principal of (and premium, if any, on) the Securities of
such series and all accrued and (subject to Section 3.12) unpaid interest
(including any Additional Interest) thereon have been paid in full.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities or any corresponding
series of Preferred Securities of an Issuer Trust that holds the Securities of
any series, or that modifies the rights of the Holders of Securities of such
series or holders of such Preferred Securities of such corresponding series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under this Indenture of the Holders of Securities of any other series or
holders of Preferred Securities of any other such corresponding series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture, and
that all conditions precedent herein provided for relating to such action have
been complied with. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Trustee's own rights, duties,
indemnities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Corporation, bear a notation in form approved by the Corporation as to any
matter provided for in such supplemental indenture. If the Corporation shall so
determine, new Securities of any series so modified as to conform, in the
opinion of the Corporation, to any such supplemental indenture may be prepared
and executed by the Corporation and authenticated and delivered by the Trustee
in exchange for Outstanding Securities of such series.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Corporation covenants and agrees for the benefit of each series of
securities that it will duly and punctually pay the principal of (and premium,
if any) and interest (including any Additional Interest) on the Securities of
that series in accordance with the terms of such Securities and this Indenture.
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SECTION 10.2. Maintenance of Office or Agency.
The Corporation will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Corporation in respect of the Securities of that series and this
Indenture may be served. The Corporation initially appoints U.S. Stock Transfer
Corporation as its agent for said purposes. The Corporation will give prompt
written notice to the Trustee of any change in the location of any such office
or agency. If at any time the Corporation shall fail to maintain such office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
principal business offices of U.S. Stock Transfer Corporation, currently located
at 1745 Gardena Avenue, Suite 200, Glendale, California 91204, and the
Corporation hereby appoints U.S. Stock Transfer Corporation as its agent to
receive all such presentations, surrenders, notices and demands.
The Corporation may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Corporation of its obligation to maintain an office or agency in
each Place of Payment for Securities of any series for such purposes. The
Corporation will give prompt written notice to the Trustee of any such
designation and any change in the location of any such office or agency.
SECTION 10.3. Money for Security Payments to be Held in Trust.
If the Corporation shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any, an) or interest on any of the Securities of
such series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee in writing
of its failure so to act.
Whenever the Corporation shall have one or more Paying Agents, it will,
prior to 10:00 a.m., Los Angeles time, on each due date of the principal of (or
premium, if any) or interest (including any Additional Interest) on any
Securities, deposit with a Paying Agent a sum sufficient to pay the principal
(and premium, if any) or interest (including any Additional Interest) so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal (and premium, if any) or interest (including any
Additional Interest), and (unless such Paying Agent is the Trustee) the
Corporation will promptly notify the Trustee of its failure so to act.
The Corporation will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest (including any Additional Interest) on
the Securities of a series in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
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(2) give the Trustee written notice of any default by the
Corporation (or any other obligor upon such Securities) in the making of
any payment of principal (and premium, if any) or interest (including
any Additional Interest) in respect of any Security of any Series;
(3) at any time during the continuance of any default with
respect to a series of Securities, upon the written request of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such
Paying Agent with respect to such series; and
(4) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent.
The Corporation may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Corporation Order direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Corporation or such Paying Agent, such sums to be held by
the Trustee upon the same trusts as those upon which such sums were held by the
Corporation or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Corporation in trust for the payment of the principal of (and premium, if
any) or interest (including any Additional Interest) on any Security and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall (unless otherwise required by
mandatory provision of applicable escheat or abandoned or unclaimed property
law) be paid on Corporation Request to the Corporation, or (if then held by the
Corporation) shall (unless otherwise required by mandatory provision of
applicable escheat or abandoned or unclaimed property law) be discharged from
such trust; and the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Corporation for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Corporation as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Corporation cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the city of Los
Angeles, California, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Corporation.
SECTION 10.4. Statement as to Compliance.
The Corporation shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Corporation ending after the date hereof, an
Officers' Certificate covering the preceding calendar year, stating whether or
not to the best knowledge of the signers thereof the Corporation is in default
in the performance, observance or fulfillment of or compliance with any of the
terms, provisions, covenants and conditions of this Indenture, and if the
Corporation shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge. For the purpose of this Section
10.4, compliance shall be determined without regard to any grace period (other
than an Extension Period) or requirement of notice provided pursuant to the
terms of this Indenture.
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SECTION 10.5. Waiver of Certain Covenants.
Subject to the rights of holders of Preferred Securities specified in
Section 9.2, if any, the Corporation may omit in any particular instance to
comply with any covenant or condition provided pursuant to Section 3.1, 9.1(3)
or 9.1(4) with respect to the Securities of any series, if before or after the
time for such compliance the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities of such series shall, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the
Corporation in respect of any such covenant or condition shall remain in full
force and effect.
SECTION 10.6. Additional Sums.
In the case of the Securities of a series initially issued to an Issuer
Trust, so long as no Event of Default has occurred and is continuing and except
as otherwise specified as contemplated by Section 2.1 or Section 3.1, if (i) an
Issuer Trust is the Holder of all of the Outstanding Securities of such series,
and (ii) a Tax Event described in clause (i) or (iii) in the definition of Tax
Event in Section 1.1 hereof has occurred and is continuing in respect of such
Issuer Trust, the Corporation shall pay to such Issuer Trust (and its permitted
successors or assigns under the related Trust Agreement) for so long as such
Issuer Trust (or its permitted successor or assignee) is the registered holder
of the Outstanding Securities of such series, such additional sums as may be
necessary in order that the amount of Distributions (including any Additional
Amounts (as defined in such Trust Agreement)) then due and payable by such
Issuer Trust on the related Preferred Securities and Common Securities that at
any time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any Additional Taxes arising from such Tax Event (the
"Additional Sums"). Whenever in this Indenture or the Securities there is a
reference in any context to the payment of principal of or interest on the
Securities, such mention shall be deemed to include mention of the payments of
the Additional Sums provided for in this paragraph to the extent that, in such
context, Additional Sums are, were or would be payable in respect thereof
pursuant to the provisions of this paragraph and express mention of the payment
of Additional Sums (if applicable) in any provisions hereof shall not be
construed as excluding Additional Sums in those provisions hereof where such
express mention is not made; provided, however, that the deferral of the payment
of interest pursuant to Section 3.12 or the Securities shall not defer the
payment of any Additional Sums that may be due and payable.
SECTION 10.7. Additional Covenants.
The Corporation covenants and agrees with each Holder of Securities of
each series that it shall not, and it shall not permit any Subsidiary of the
Company to, (a) declare or pay any dividends or distributions on, or redeem
purchase, acquire or make a liquidation payment with respect to, any shares of
the Corporation's capital stock, or (b) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to the Securities of such series (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Corporation
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of any one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities
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convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of an exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a Subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series of
the Corporation's capital stock, (c) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any Rights Plan, or the
issuance of rights, stock or other property under any Rights Plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock) if at such time (i) there shall have occurred any event
(A) of which the Corporation has actual knowledge that with the giving of notice
or the lapse of time, or both, would constitute an Event of Default with respect
to the Securities of such series, and (B) which the Corporation shall not have
taken reasonable steps to cure, (ii) if the Securities of such series are held
by an Issuer Trust, the Corporation shall be in default with respect to its
payment of any obligations under the Guarantee Agreement relating to the
Preferred Securities issued by such Issuer Trust, or (iii) the Corporation shall
have given notice of its election to begin an Extension Period with respect to
the Securities of such series as provided herein and shall not have rescinded
such notice, or such Extension Period, or any extension thereof, shall be
continuing.
The Corporation also covenants with each Holder of Securities of a
series issued to an Issuer Trust (i) to hold, directly or indirectly, 100% of
the Common Securities of such Issuer Trust, provided that any permitted
successor of the Corporation hereunder may succeed to the Corporation's
ownership of such Common Securities, (ii) as holder of such Common Securities,
not to voluntarily terminate, wind-up or liquidate such Issuer Trust, except
upon prior approval of the Federal Reserve, if then required under applicable
capital guidelines or policies of the Federal Reserve, and (a) in connection
with a distribution of the Securities of such series to the holders of the
related Preferred Securities in liquidation of such Issuer Trust, or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the related Trust Agreement, and (iii) to use its reasonable efforts, consistent
with the terms and provisions of such Trust Agreement, to cause such Issuer
Trust to continue not to be taxable as a corporation for United States federal
income tax purposes.
SECTION 10.8. Original Issue Discount.
On or before December 15 of each year during which any Securities that
were issued with original issue discount are Outstanding, the Corporation shall
furnish to each Paying Agent in a timely fashion such information as may be
reasonably requested by each Paying Agent in order that each Paying Agent may
prepare the information which it is required to report for such year on Internal
Revenue Service Forms 1096 and 1099 pursuant to Section 6049 of the Internal
Revenue Code of 1986, as amended. Such information shall include the amount of
original issue discount includible in income for each $20 of principal amount at
Stated Maturity of outstanding Securities during such year.
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ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1. Applicability of This Article.
Redemption of Securities of any series (whether by operation of a
sinking fund or otherwise) as permitted or required by any form of Security
issued pursuant to this Indenture shall be made in accordance with such form of
Security and this Article; provided, however, that if any provision of any such
form of Security shall conflict with any provision of this Article, the
provision of such form of Security shall govern. Except as otherwise set forth
in the form of Security for such series, each Security of a series shall be
subject to partial redemption only in the amount of $20 or any integral
multiples thereof.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The election of the Corporation to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at the
election of the Corporation, the Corporation shall, not less than 30 nor more
than 90 days prior to the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing and, in the case of
Securities of a series held by an Issuer Trust, the Property Trustee under the
related Trust Agreement, of such date and of the principal amount of Securities
of the applicable series to be redeemed and provide the additional information
required to be included in the notice or notices contemplated by Section 11.4.
In the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities, the
Corporation shall furnish the Trustee with an Officers' Certificate and an
Opinion of Counsel evidencing compliance with such restriction. The Corporation
shall have received the prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve prior to
redeeming any Securities pursuant hereto.
SECTION 11.3. Selection of Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.
The Trustee shall promptly notify the Corporation in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security that has been or is to be
redeemed. If the Corporation shall so direct, Securities registered in the name
of the Corporation, any Affiliate or any Subsidiary thereof shall not be
included in the Securities selected for redemption.
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SECTION 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not later than the thirtieth day, and not earlier than the
ninetieth day, prior to the Redemption Date, to each Holder of Securities to be
redeemed, at the address of such Holder as it appears in the Securities
Register.
With respect to Securities of each series to be redeemed, each notice of
redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price or, if the Redemption Price cannot be
calculated prior to the time the notice is required to be sent, the estimate of
the Redemption Price together with a statement that it is an estimate and that
the actual Redemption Price will be calculated on the third Business Day prior
to the Redemption Date (and if an estimate is provided, a further notice shall
be sent of the actual Redemption Price on the date that such Redemption Price is
calculated);
(c) if less than all Outstanding Securities of such particular series
are to be redeemed, the identification (and, in the case of partial redemption,
the respective principal amounts) of the particular Securities to be redeemed;
(d) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof, and that interest
(including any Additional Interest) thereon, if any, shall cease to accrue on
and after said date;
(e) the place or places where such Securities are to be surrendered for
payment of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is the case;
(g) such other provisions as may be required in respect of the terms of
a particular series of Securities.
Notice of redemption of Securities to be redeemed at the election of the
Corporation shall be given by the Corporation or, at the Corporation's request,
by the Trustee in the name and at the expense of the Corporation and shall not
be irrevocable. The notice if mailed in the manner provided above shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Security designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
SECTION 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m., Los Angeles time, on the Redemption Date specified
in the notice of redemption given as provided in Section 11.4, the Corporation
will deposit with the Trustee or with one or more Paying Agents (or if the
Corporation is acting as its own Paying Agent, the Corporation will segregate
and hold in trust as provided in Section 10.3) an amount of money sufficient to
pay the
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Redemption Price of, and any accrued interest (including any Additional
Interest) on, all the Securities (or portions thereof) that are to be redeemed
on that date.
SECTION 11.6. Payment of Securities Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4,
the Securities or portion of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with accrued
interest (including any Additional Interest) to the Redemption Date. On
presentation and surrender of such Securities at a Place of Payment in said
notice specified, the said Securities or the specified portions thereof shall be
paid and redeemed by the Corporation at the applicable Redemption Price,
together with accrued interest (including any Additional Interest) to the
Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 3.1, installments of interest (including any Additional
Interest) whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant record
dates according to their terms and the provisions of Section 3.8.
Upon presentation of any Security redeemed in part only, the Corporation
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Corporation, a new Security or Securities of the
same series, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Security so presented and having the same Original
Issue Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security (subject to Section 3.5) will also be a new Global Security.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
SECTION 11.7. Right of Redemption of Securities Initially Issued to an
Issuer Trust.
In the case of the Securities of a series initially issued to an Issuer
Trust, except as otherwise specified as contemplated by Section 3.1, the
Corporation, at its option, may redeem such Securities (i) on or after the date
specified in such Security, in whole at any time or in part from time to time,
or (ii) upon the occurrence and during the continuation of a Tax Event,
Investment Company Event or Capital Treatment Event, prior to the date specified
as contemplated by Section 3.1 and within 90 days following the occurrence and
during the continuation of such Tax Event, Investment Company Event or Capital
Treatment Event, in whole (but not in part), in each case at a Redemption Price
specified in such Security, together with accrued interest (including any
Additional Interest) to the Redemption Date.
If less than all the Securities of any such series are to be redeemed,
the aggregate principal amount of such Securities remaining Outstanding after
giving effect to such redemption shall be sufficient to satisfy any provisions
of the Trust Agreement related to the Issuer Trust to which such Securities were
issued, including any requirement in such Trust Agreement as to the minimum
Liquidation Amount (as defined in such Trust Agreement) of Preferred Securities
that may be held by a holder of Preferred Securities thereunder.
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ARTICLE XII
SINKING FUNDS
SECTION 12.1. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 3.1 for such Securities.
The minimum amount of any sinking fund payment provided for by the terms
of any Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any sinking fund payment in excess of such minimum amount
that is permitted to be made by the terms of such Securities of any series is
herein referred to as an "optional sinking fund payment". If provided for by the
terms of any Securities of any series, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 12.2. Each sinking
fund payment shall be applied to the redemption (or purchase by tender or
otherwise) of Securities of any series as provided for by the terms of such
Securities.
SECTION 12.2. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of a mandatory sinking fund payment
with respect to any Securities of a series in cash, the Corporation may at its
option, at any time no more than 16 months and no less than 45 days prior to the
date on which such sinking fund payment is due, deliver to the Trustee
Securities of such series (together with the unmatured coupons, if any,
appertaining thereto) theretofore purchased or otherwise acquired by the
Corporation, except Securities of such series that have been redeemed through
the application of mandatory or optional sinking fund payments pursuant to the
terms of the Securities of such series, accompanied by a Corporation Order
instructing the Trustee to credit such obligations and stating that the
Securities of such series were originally issued by the Corporation by way of
bona fide sale or other negotiation for value; provided that the Securities to
be so credited have not been previously so credited. The Securities to be so
credited shall be received and credited for such purpose by the Trustee at the
redemption price for such Securities, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.
SECTION 12.3. Redemption of Securities for Sinking Fund.
Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Corporation will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
such Securities pursuant to the terms of such Securities, the portion thereof,
if any, which is to be satisfied by payment of cash in the currency in which the
Securities of such series are payable (except as provided pursuant to Section
3.1) and the portion thereof, if any, that is to be satisfied by delivering and
crediting Securities pursuant to Section 12.2 and will also deliver to the
Trustee any Securities to be so delivered. Such Officers' Certificate shall be
irrevocable and upon its delivery the Corporation shall be obligated to make the
cash payment or payments therein referred to, if any, on or before the
succeeding sinking fund payment date. In the case of the failure of the
Corporation to deliver such Officers' Certificate (or, as required by this
Indenture, the Securities and coupons, if any, specified in such Officers'
Certificate) by the due date therefor, the sinking fund payment due on the
succeeding sinking fund payment date for such series shall be paid entirely in
cash and shall be sufficient to redeem
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the principal amount of the Securities of such series subject to a mandatory
sinking fund payment without the right to deliver or credit securities as
provided in Section 12.2 and without the right to make the optional sinking fund
payment with respect to such series at such time.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Corporation if the Corporation is acting as its own Paying
Agent) on the sinking fund payment date on which such payment is made (or, if
such payment is made before a sinking fund payment date, on the sinking fund
payment date immediately following the date of such payment) to the redemption
of Securities of such series at the Redemption Price specified in such
Securities with respect to the sinking fund. Any sinking fund moneys not so
applied or allocated by the Trustee (or, if the Corporation is acting as its own
Paying Agent, segregated and held in trust by the Corporation as provided in
Section 10.3) for such series and together with such payment (or such amount so
segregated) shall be applied in accordance with the provisions of this Section
12.3. Any and all sinking fund moneys with respect to the Securities of any
particular series held by the Trustee (or if the Corporation is acting as its
own Paying Agent, segregated and held in trust as provided in Section 10.3) on
the last sinking fund payment date with respect to Securities of such series and
not held for the payment or redemption of particular Securities of such series
shall be applied by the Trustee (or by the Corporation if the Corporation is
acting as its own Paying Agent), together with other moneys, if necessary, to be
deposited (or segregated) sufficient for the purpose, to the payment of the
principal of the Securities of such series at Maturity. The Trustee shall select
the Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 11.3 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Corporation in the manner provided in
Section 11.4. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Section
11.6. On or before each sinking fund payment date, the Corporation shall pay to
the Trustee (or, if the Corporation is acting as its own Paying Agent, the
Corporation shall segregate and hold in trust as provided in Section 10.3) in
cash a sum in the currency in which Securities of such series are payable
(except as provided pursuant to Section 3.1) equal to the principal (and
premium, if any) and any interest (including any Additional Interest) accrued to
the Redemption Date for Securities or portions thereof to be redeemed on such
sinking fund payment date pursuant to this Section 12.3.
Neither the Trustee nor the Corporation shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Corporation, if the
Corporation is then acting as its own Paying Agent) shall redeem such Securities
if cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Corporation) for that purpose in accordance with the terms of
this Article XII. Except as aforesaid, any moneys in the sinking fund for such
series at the time when any such default or Event of Default shall occur and any
moneys thereafter paid into such sinking fund shall, during the continuance of
such default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 12.3.
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ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Indebtedness.
The Corporation covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the payment of the
principal of (and premium, if any) and interest (including any Additional
Interest) on each and all of the Securities of each and every series are hereby
expressly made subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness.
SECTION 13.2. No Payment When Senior Indebtedness in Default; Payment
Over of Proceeds Upon Dissolution, Etc.
If the Corporation shall default in the payment of any principal of (or
premium, if any) or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, upon written notice of such
default to the Corporation by the holders of Senior Indebtedness or any trustee
therefor, unless and until such default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the principal of (or premium, if any) or interest (including any
Additional Interest) on any of the Securities, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of any of the Securities.
In the event of (a) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceedings relating to the Corporation, its creditors or its property, (b) any
proceeding for the liquidation, dissolution or other winding up of the
Corporation, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (c) any assignment by the Corporation for the benefit of
creditors or (d) any other marshalling of the assets of the Corporation (each
such event, if any, herein sometimes referred to as a "Proceeding"), all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made to
any Holder of any of the Securities on account thereof. Any payment or
distribution, whether in cash, securities or other property (other than
securities of the Corporation or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), which would
otherwise (but for these subordination provisions) be payable or deliverable in
respect of the Securities of any series shall be paid or delivered directly to
the holders of Senior Indebtedness in accordance with the priorities then
existing among such holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any Proceeding) shall have
been paid in full.
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In the event of any Proceeding, after payment in full of all sums owing
with respect to Senior Indebtedness, the Holders of the Securities, together
with the holders of any obligations of the Corporation ranking on a parity with
the Securities, shall be entitled to be paid from the remaining assets of the
Corporation the amounts at the time due and owing on account of unpaid principal
of (and premium, if any) and interest on the Securities and such other
obligations before any payment or other distribution, whether in cash, property
or otherwise, shall be made on account of any capital stock or any obligations
of the Corporation ranking junior to the Securities and such other obligations.
If, notwithstanding the foregoing, any payment or distribution of any character
or any security, whether in cash, securities or other property (other than
securities of the Corporation or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at least to
the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Securities, to the payment of all Senior
Indebtedness at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment), shall be
received by the Trustee or any Holder in contravention of any of the terms
hereof and before all Senior Indebtedness shall have been paid in full, such
payment or distribution or security shall be received in trust for the benefit
of, and shall be paid over or delivered and transferred to, the holders of the
Senior Indebtedness at the time outstanding in accordance with the priorities
then existing among such holders for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all such Senior
Indebtedness in full. In the event of the failure of the Trustee or any Holder
to endorse or assign any such payment, distribution or security, each holder of
Senior Indebtedness is hereby irrevocably authorized to endorse or assign the
same.
The Trustee and the Holders shall take such action (including, without
limitation, the delivery of this Indenture to an agent for the holders of Senior
Indebtedness or consent to the filing of a financing statement with respect
hereto) as may, in the opinion of counsel designated by the holders of a
majority in principal amount of the Senior Indebtedness at the time outstanding,
be necessary or appropriate to assure the effectiveness of the subordination
effected by these provisions.
The provisions of this Section 13.2 shall not impair any rights,
interests, remedies or powers of any secured creditor of the Corporation in
respect of any security interest the creation of which is not prohibited by the
provisions of this Indenture.
The securing of any obligations of the Corporation, otherwise ranking on
a parity with the Securities or ranking junior to the Securities, shall not be
deemed to prevent such obligations from constituting, respectively, obligations
ranking on a parity with the Securities or ranking junior to the Securities.
SECTION 13.3. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Corporation, at any time, except
during the pendency of the conditions described in the first paragraph of
Section 13.2 or of any Proceeding referred to in Section 13.2, from making
payments at any time of principal of (and premium, if any) or interest
(including any Additional Interest) on the Securities, or (b) the application by
the Trustee of any moneys deposited with it hereunder to the payment of or on
account of the principal of (and premium, if any) or interest (including any
Additional Interest) on the Securities or the retention of such payment by the
Holders, if, at the time of such
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<PAGE> 75
application by the Trustee, it did not have knowledge that such payment would
have been prohibited by the provisions of this Article.
SECTION 13.4. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all amounts due or to become due on
all Senior Indebtedness, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the extent of
the payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the holders
of all indebtedness of the Corporation that by its express terms is subordinated
to Senior Indebtedness of the Corporation to substantially the same extent as
the Securities are subordinated to the Senior Indebtedness and is entitled to
like rights of subrogation by reason of any payments or distributions made to
holders of such Senior Indebtedness) to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Indebtedness
by Holders of the Securities or the Trustee, shall, as among the Corporation,
its creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment or distribution by the Corporation to or
on account of the Senior Indebtedness.
SECTION 13.5. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as between the Corporation and the Holders of
the Securities, the obligations of the Corporation, which are absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest (including any Additional Interest) on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Corporation of the
Holders of the Securities and creditors of the Corporation other than their
rights in relation to the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Security (or to the extent expressly provided
herein, the holder of any Capital Security) from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
including filing and voting claims in any Proceeding, subject to the rights, if
any, under this Article of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder.
SECTION 13.6. Trustee to Effectuate Subordination.
Each Holder of a Security by his or her acceptance thereof authorizes
and directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination provided
in this Article and appoints the Trustee his or her attorney-in-fact for any and
all such purposes.
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<PAGE> 76
SECTION 13.7. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Corporation or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Corporation with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof that any such
holder may have or be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Indebtedness may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders of the Securities
of any series, without incurring responsibility to such Holders of the
Securities and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of such Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Corporation and any other Person.
SECTION 13.8. Notice to Trustee.
The Corporation shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Corporation that would prohibit
the making of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts that would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until a Responsible Officer of the Trustee
shall have received written notice thereof from the Corporation or a holder of
Senior Indebtedness or from any trustee, agent or representative therefor;
provided, however, that if the Trustee shall not have received the notice
provided for in this Section at least two Business Days prior to the date upon
which by the terms hereof any monies may become payable for any purpose
(including, the payment of the principal of (and premium, if any, on) or
interest (including any Additional Interest) on any Security), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such monies and to apply the same to the purpose
for which they were received and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself or herself to be a holder of Senior Indebtedness (or a trustee or
attorney-in-fact therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee or attorney-in-fact therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article,
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<PAGE> 77
and if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
SECTION 13.9. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Corporation referred
to in this Article, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to conclusively rely upon any
order or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders of Securities, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Corporation, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article.
SECTION 13.10. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee, in its capacity as trustee under this Indenture, shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
shall not be liable to any such holders if it shall in good faith mistakenly pay
over or distribute to Holders of Securities or to the Corporation or to any
other Person cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article or otherwise.
SECTION 13.11. Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness that
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
SECTION 13.12. Article Applicable to Paying Agents.
For so long as the Paying Agent is other than the Trustee, the term
"Trustee" as used in this Article shall (unless the context otherwise requires)
be construed as extending to and including the Paying Agent within its meaning
as fully for all intents and purposes as if the Paying Agent were named in this
Article in addition to or in place of the Trustee.
* * * *
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<PAGE> 78
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
FIRST COASTAL BANCSHARES
By:_____________________________________
Name:
Title:
Attest: ___________________________
WILMINGTON TRUST COMPANY,
as Trustee and not in its individual
capacity
By: ____________________________________
Name:
Title:
Attest: ___________________________
<PAGE> 1
EXHIBIT 4.2
[Form of Face of Security]
FIRST COASTAL BANCSHARES
% JUNIOR SUBORDINATED DEBENTURE DUE DECEMBER 31, 2028
No. $
FIRST COASTAL BANCSHARES, a corporation organized and existing under the
laws of California (hereinafter called the "Corporation", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________, or registered assigns, the
principal sum of __________ Dollars on December 31, 2028, or such other
principal amount represented hereby as may be set forth in the records of the
Securities Registrar hereinafter referred to in accordance with the Indenture,;
provided that the Corporation may shorten the Stated Maturity of the principal
of this Security to a date not earlier than December 31, 2001, or extend the
Stated Maturity to a date not later than _______, at any time on one or more
occasions, subject to certain conditions specified in Section 3.15 of the
Indenture. The Corporation further promises to pay interest on said principal
sum from the original issue date or from the most recent Interest Payment Date
to which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on March 31st, June 31st, September
31st, and December 31st of each year, commencing March 31, 1999, at the rate of
___% per annum, together with Additional Sums, if any, as provided in Section
10.6 of the Indenture until the principal hereof is paid or duly provided for or
made available for payment; provided that any overdue principal, premium or
Additional Sums and any overdue installment of interest shall bear Additional
Interest at the rate of ___% per annum (to the extent that the payment of such
interest shall be legally enforceable), compounded quarterly, from the dates
such amounts are due until they are paid or made available for payment, and such
interest shall be payable on demand. The amount of interest payable for any
period less than a full interest period shall be computed on the basis of a
360-day year of twelve 30-day months and the actual days elapsed in a partial
month in such period. The amount of interest payable for any full interest
period shall be computed by dividing the applicable rate per annum by four. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest installment,
which shall be the 15th day or (whether or not a Business Day), next preceding
the relevant Interest Payment Date. Any such interest not so punctually paid or
duly provided for shall forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.
So long as no Event of Default has occurred and is continuing, the
Corporation shall have the right, at any time during the term of this security,
from time to time to defer the payment of interest on this Security for up to 20
consecutive quarterly interest payment periods with respect to each deferral
period (each an "Extension Period") at the end of which the Corporation shall
pay all interest then accrued and unpaid including any Additional Interest, as
provided below; provided, however, that no Extension Period shall extend beyond
the Stated Maturity of the principal of this Security, as then in effect, and no
such Extension Period may end on a date other than an Interest Payment Date; and
<PAGE> 2
provided, further, however, that during any such Extension Period, the
Corporation shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Corporation's capital stock, or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank pari passu in all respects with or
junior in interest to this Security (other than (a) repurchases, redemptions or
other acquisitions of shares of capital stock of the Corporation in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of any one or more employees, officers, directors or
consultants, in connection with a dividend reinvestment or stockholder stock
purchase plan or in connection with the issuance of capital stock of the
Corporation (or securities convertible into or exercisable for such capital
stock) as consideration in an acquisition transaction entered into prior to the
applicable Extension Period, (b) as a result of an exchange or conversion of any
class or series of the Corporation's capital stock (or any capital stock of a
Subsidiary of the Corporation) for any class or series of the Corporation's
capital stock or of any class or series of the Corporation's indebtedness for
any class or series of the Corporation's capital stock, (c) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in connection
with any Rights Plan, or the issuance of rights, stock or other property under
any Rights Plan, or the redemption or repurchase of rights pursuant thereto, or
(e) any dividend in the form of stock, warrants, options or other rights where
the dividend stock or the stock issuable upon exercise of such warrants, options
or other rights is the same stock as that on which the dividend is being paid or
ranks pari passu with or junior to such stock). Prior to the termination of any
such Extension Period, the Corporation may further defer the payment of
interest, provided that no Extension Period shall exceed 20 consecutive
quarterly interest payment periods, extend beyond the Stated Maturity of the
principal of this Security or end on a date other than an Interest Payment Date.
Upon the termination of any such Extension Period and upon the payment of all
accrued and unpaid interest and any Additional Interest then due on any Interest
Payment Date, the Corporation may elect to begin a new Extension Period, subject
to the above conditions. No interest shall be due and payable during an
Extension Period, except at the end thereof, but each installment of interest
that would otherwise have been due and payable during such Extension shall bear
Additional Interest (to the extent that the payment of such interest shall be
legally enforceable) at the rate of ____% per annum, compounded quarterly and
calculated as set forth in the first paragraph of this Security, from the dates
on which amounts would otherwise have been due and payable until paid or made
available for payment. The Corporation shall give the Holder of this Security
and the Trustee notice of its election to begin any Extension Period at least
one Business Day prior to the next succeeding Interest Payment Date on which
interest on this Security would be payable but for such deferral, or so long as
such Securities are held by First Coastal Capital Trust, at least one Business
Day prior to the earlier of (i) the next succeeding date on which Distributions
on the Capital Securities of such Issuer Trust would be payable but for such
deferral, and (ii) the date on which the Property Trustee of such Issuer Trust
is required to give notice to holders of such Capital Securities of the record
date or the date such Distributions are payable.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Corporation maintained for
that purpose in the city of El Segundo, California, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
the Corporation payment of interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Securities Register, or (ii) by wire transfer in immediately
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<PAGE> 3
available funds at such place and to such account as may be designated by the
Person entitled thereto as specified in the Securities Register.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided, and
(c) appoints the Trustee his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be duly
executed under its corporate seal.
FIRST COASTAL BANCSHARES
By:
Name:
Title:
Attest:
- ----------------------------------
[Secretary or Assistant Secretary]
[Form of Reverse of Security]
This Security is one of a duly authorized issue of securities of the
Corporation (herein called the "Securities"), issued and to be issued in one or
more series under the Junior Subordinated Indenture, dated as of _______ , 199_
(herein called the "Indenture"), between the Corporation and Wilmington Trust
Company, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the
Corporation, the Trustee, the holders of Senior Indebtedness and the Holders of
the Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate
-3-
<PAGE> 4
principal amount to $___________.
All terms used in this Security that are defined in the Indenture or in
the Amended and Restated Trust Agreement, dated as of _________, 199_ (as
modified, amended or supplemented from time to time, the "Trust Agreement"),
relating to First Coastal Capital Trust (the "Issuer Trust") among the
Corporation, as Depositor, the Trustees named therein and the Holders from time
to time of the Trust Securities issued pursuant thereto, shall have the meanings
assigned to them in the Indenture or the Trust Agreement, as the case may be.
The Corporation may at any time, at its option, on or after December 31,
2001, and subject to the terms and conditions of Article XI of the Indenture,
redeem this Security in whole at any time or in part from time to time, at the
following Redemption Prices (expressed as percentages of the principal amount
hereof):
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
December 31, 2001 through 108%
December 30, 2002
December 31, 2002 through 105%
December 30, 2003
December 31, 2003 through 102%
December 30, 2004
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount
hereof, together, in the case of any such redemption, with accrued interest,
including any Additional Interest, to but excluding the date fixed for
redemption.
In addition, upon the occurrence and during the continuation of a Tax
Event, Capital Treatment Event or an Investment Company Event in respect of the
Issuer Trust, the Corporation may, at its option, at any time within 90 days of
the occurrence and during the continuation of such Tax Event or Investment
Company Event, as the case may be redeem this Security, in whole but not in
part, subject to the terms and conditions of Article XI of the Indenture, at a
redemption price equal to the Redemption Price on the corresponding date of
redemption.
In the event of redemption of this Security in part only, a new Security
or Securities of this series for the unredeemed portion hereof will be issued in
the name of the Holder hereof upon the cancellation hereof.
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Corporation with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Corporation and the Trustee at any time to enter into a supplemental indenture
or indentures for the purpose of modifying in any manner the rights and
obligations of the Corporation and of the Holders of the Securities, with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series to be affected by such supplemental
indenture. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Securities of each
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<PAGE> 5
series at the time Outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Corporation with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, if an Event
of Default with respect to the Securities of this series at the time Outstanding
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 25% in aggregate principal amount of the Outstanding Securities
of this series may declare the principal amount of all the Securities of this
series to be due and payable immediately, by a notice in writing to the
Corporation (and to the Trustee if given by Holders), provided that, if upon an
Event of Default, the Trustee or such Holders fail to declare the principal of
all the Outstanding Securities of this series to be immediately due and payable,
the holders of at least 25% in aggregate Liquidation Amount of the Capital
Securities then Outstanding shall have the right to make such declaration by a
notice in writing to the Corporation and the Trustee; and upon any such
declaration the principal amount of and the accrued interest (including any
Additional Interest) on all the Securities of this series shall become
immediately due and payable, provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIII of the Indenture.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest including any Additional Interest) on this Security at the times, place
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Corporation maintained under Section 10.2 of the
Indenture for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Corporation and the
Securities Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $20 and any integral multiple of $20 in excess
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Corporation, the Trustee and any agent of the Corporation or the Trustee may
treat the Person in whose name this
-5-
<PAGE> 6
Security is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Corporation, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Corporation and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States Federal, state and local
tax purposes it is intended that this Security constitute indebtedness.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
-6-
<PAGE> 1
Exhibit 5.1
[SULLIVAN & CROMWELL LETTERHEAD]
December 1, 1998
First Coastal Capital Trust,
275 Main Street,
El Segundo, California 90245,
First Coastal Bancshares,
275 Main Street,
El Segundo, California 90245.
Dear Sirs:
In connection with the registration under the Securities Act
of 1933 (the "Act") of (a) 330,000 units (the "Units"), each Unit consisting of
(i) one __% Cumulative Preferred Security, liquidation amount $20 per security
(the "Preferred Securities") of First Coastal Capital Trust, a Delaware
statutory business trust (the "Issuer Trust") and (ii) one share of common
stock, without par value ("Common Stock"), of First Coastal Bancshares, a
California corporation (the "Company"), (b) 330,000 Preferred Securities, (c)
330,000 shares of Common Stock, (d) $6,600,000 aggregate principal amount of __%
Junior Subordinated Debentures due December 31, 2028 (the "Debentures") of the
Company, and (e) the guarantee and certain other back-up undertakings by the
Company with respect to the Preferred Securities (the "Guarantees" and, together
with the Units, Preferred Securities and Common Stock, the "Securities"), we, as
your special counsel, have examined such corporate records, certificates and
other
<PAGE> 2
First Coastal Capital Trust
First Coastal Bancshares -2-
documents, and such questions of law, as we have considered necessary or
appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, in our
opinion:
(1) With respect to the Common Stock, when the Registration
Statement relating to the Securities has become effective under the
Act, the terms of the sale of the Common Stock have been duly
established in conformity with the Company's articles of incorporation,
and the Common Stock has been duly issued and sold as contemplated by
the Registration Statement, the Common Stock will be validly issued,
fully paid and nonassessable.
(2) With respect to the Debentures, when the Registration
Statement relating to the Securities has become effective under the
Act, the Indenture relating to the Debentures has been duly executed
and delivered, the terms of the sale of the Debentures has been duly
established in conformity with the Indenture so as not to violate any
applicable law or result in a default under or breach of any agreement
or instrument binding upon the Company and so as to comply with any
requirement or restriction imposed by any court or governmental body
having jurisdiction over the Company, and the Debentures have been duly
executed and authenticated in accordance with the Indenture and issued
and sold as contemplated by the Registration Statement, the Debentures
will constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(3) With respect to the Guarantees, when the Registration
Statement relating to the Securities has become effective under the
Act, the guarantee agreement
<PAGE> 3
First Coastal Capital Trust
First Coastal Bancshares -3-
relating to the Guarantees has been duly executed and delivered by the
Company, the terms of the Guarantees and of their issue have been duly
established in conformity with the Guarantee Agreement so as not to
violate any applicable law or result in a default under or breach of
any agreement or instrument binding upon the Company and so as to
comply with any requirement or restriction imposed by any court or
governmental body having jurisdiction over the Company, the Preferred
Securities which are the subject of the Guarantees have been duly
executed in accordance with the trust agreement governing the Issuer
Trust and the Guarantees have been issued and delivered as contemplated
by the Registration Statement, the Guarantees will constitute the valid
and legally binding obligation of the Company, enforceable against the
Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
The foregoing opinion is limited to the Federal laws of the
United States and the laws of the State of California, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction.
We understand that you have received an opinion regarding the
Preferred Securities from Richards, Layton & Finger, LLP, special Delaware
counsel for the Company and the Issuer Trust. We are expressing no opinion with
respect to the matters contained in such opinion.
We have relied as to certain matters on information obtained
from public officials, officers of the Company and other sources believed by us
to be responsible.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the references to us under the heading
"Validity of the Securities". In giving such consent, we do not thereby
<PAGE> 4
First Coastal Capital Trust
First Coastal Bancshares -4-
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
/S/ SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 5.2
[Letterhead of Richards, Layton & Finger, P.A.]
December 1, 1998
First Coastal Capital Trust
c/o First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Re: First Coastal Capital Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Coastal
Bancshares, a California corporation (the "Company"), and First Coastal Capital
Trust, a Delaware business trust (the "Trust"), in connection with the matters
set forth herein. At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated November 13,
1998 (the "Certificate"), as filed in the office of the Secretary of State of
the State of Delaware (the "Secretary of State") on November 13, 1998;
(b) The Trust Agreement of the Trust, dated as of November 13,
1998, among the Company, the trustee of the Trust named therein and the
administrator named therein;
(c) A form of Amended and Restated Trust Agreement of the Trust
(including Exhibits A, B and C thereto) (the "Trust Agreement"), to be entered
into among the Company, as depositor, the trustees of the Trust named therein,
the administrators named therein and the holders, from time to time, of
undivided beneficial interests in the assets of the Trust, attached as an
exhibit to the Registration Statement (as defined below);
(d) The Registration Statement on Form SB-2 (the "Registration
Statement"), including a preliminary prospectus ("Prospectus"), relating to the
Preferred
<PAGE> 2
First Coastal Capital Trust
December 1, 1998
Page 2
Securities of the Trust representing undivided beneficial interests in the
assets of the Trust (each, a "Preferred Security" and collectively, the
"Preferred Securities"), as proposed to be filed by the Company and the Trust
with the Securities and Exchange Commission on or about December 1, 1998; and
(e) A Certificate of Good Standing for the Trust, dated December
1, 1998, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined
are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (e) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (e) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i)
the authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate are in full force and effect and have not been
amended, (ii) except to the extent provided in paragraph 1 below, the due
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (v) the due authorization, execution and
delivery by all parties thereto of all documents examined by us, (vi) the
receipt by each Person to whom a Preferred Security is to be issued by the Trust
(collectively, the "Preferred Security Holders") of a Preferred Securities
Certificate for such Preferred Security and the payment for the Preferred
Security acquired by it, in accordance with the Trust Agreement and the
Registration Statement, and (vii) that the Preferred Securities are issued and
sold to the Preferred Security Holders in accordance with the Trust Agreement
and the
<PAGE> 3
First Coastal Capital Trust
December 1, 1998
Page 3
Registration Statement. We have not participated in the preparation of the
Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act.
2. The Preferred Securities will represent valid and, subject to
the qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Preferred Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition, we
hereby consent to the use of our name under the heading "Validity of the
Securities" in the Prospectus. In giving the foregoing consents, we do not
thereby admit that we come within the category of Persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER, P.A.
<PAGE> 1
EXHIBIT 8.1
[SULLIVAN & CROMWELL LETTERHEAD]
December 1, 1998
First Coastal Bancshares,
275 Main Street,
El Segundo, CA 90245
Ladies and Gentlemen:
We have acted as special tax counsel to First Coastal Capital Trust (the
"Trust") and First Coastal Bancshares (the "Bank") in connection with the
registration of up to 330,000 Units by the Trust and Bank as more fully
described in the Form SB-2 to which this opinion is filed as an exhibit (the
"Registration Statement"). It is our opinion that the discussion under the
heading "Certain Federal Income Tax Consequences" in the Registration Statement
is a fair and accurate summary of the matters discussed therein, subject to the
limitations set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving the foregoing consent, we do not admit that
we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 10.1
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES, dated as of __________, 1998,
between First Coastal Bancshares, a California corporation, as holder of the
common securities of First Coastal Capital Trust and issuer of Junior
Subordinated Debentures (the "Corporation"), and First Coastal Capital Trust, a
Delaware business trust (the "Issuer Trust").
WHEREAS, the Issuer Trust intends to issue its Common Securities (the
"Common Securities") to and acquire Junior Subordinated Debentures from the
Corporation and to issue and sell _____% Cumulative Preferred Securities (the
"Preferred Securities") with such powers, preferences and special rights and
restrictions as are set forth in the Amended and Restated Trust Agreement, dated
as of __________, 1998, among First Coastal Bancshares, as Depositor, Wilmington
Trust Company, as Property Trustee and Delaware Trustee, the Administrators and
the Holders of Preferred Securities, as the same may be amended from time to
time (the "Trust Agreement");
WHEREAS, the Corporation will directly or indirectly own all of the
common securities of the Trust and will issue the Junior Subordinated
Debentures;
WHEREAS, capitalized terms used but not defined herein have the meanings
set forth in the Trust Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
SECTION 1.1. Guarantee by the Corporation. The Corporation hereby agrees
to assume any and all Obligations (as hereinafter defined) of the Issuer Trust
and in the event any such Obligation is not so assumed, subject to the terms and
conditions hereof, the Corporation hereby irrevocably and unconditionally
guarantees to each person or entity to whom the Issuer Trust is now or hereafter
becomes indebted or liable (the "Beneficiaries") the full payment, when and as
due, of any and all Obligations (as hereinafter defined) to such Beneficiaries.
As used herein, "Obligations" means any costs, expenses or liabilities (but not
including liabilities related to taxes) of the Issuer Trust, other than
obligations of the Issuer Trust to pay to holders of any Preferred Securities
the amounts due such holders pursuant to the terms of the Preferred Securities.
This Agreement is intended to be for the benefit of, and to be enforceable by,
all such Beneficiaries, whether or not such Beneficiaries have received notice
hereof.
<PAGE> 2
SECTION 1.2. Subordination of Guarantee. The guarantee and other
liabilities and obligations of the Corporation under this Agreement shall
constitute unsecured obligations of the Corporation and shall rank subordinate
and junior in right of payment to all Senior Indebtedness (as defined in the
Indenture) of the Corporation to the extent and in the manner set forth in the
Indenture with respect to the Junior Subordinated Debentures, and the provisions
of Article XIII of the Indenture will apply, mutatis mutandis, to the
obligations of the Corporation hereunder. The obligations of the Corporation
hereunder do not constitute Senior Indebtedness (as defined in the Indenture) of
the Corporation.
SECTION 1.3. Term of Agreement. This Agreement shall terminate and be of
no further force and effect upon the later of (a) the date on which full payment
has been made of all amounts payable to all holders of all the Preferred
Securities (whether upon redemption, liquidation, exchange or otherwise) and (b)
the date on which the Junior Subordinated Debentures shall have been distributed
to the Holders of the Preferred Securities as provided in Article IX of the
Trust Agreement; provided, however, that this Agreement shall continue to be
effective or shall be reinstated, as the case may be, if at any time any holder
of Preferred Securities or any Beneficiary must restore payment of any sums paid
under the Preferred Securities, under any Obligation, under the Guarantee
Agreement dated the date hereof by the Corporation and Wilmington Trust Company,
as guarantee trustee, or under this Agreement for any reason whatsoever. This
Agreement is continuing, irrevocable, unconditional and absolute.
SECTION 1.4. Waiver of Notice. The Corporation hereby waives notice of
acceptance of this Agreement and of any Obligation to which it applies or may
apply, and the Corporation hereby waives presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 1.5. No Impairment. The obligations, covenants, agreements and
duties of the Corporation under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the extension of time for the payment by the Issuer Trust of all or
any portion of the Obligations or for the performance of any other obligation
under, arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of the
Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Issuer Trust granting indulgence or extension of any
kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors,
-2-
<PAGE> 3
reorganization, arrangement, composition or readjustment of debt of, or other
similar proceedings affecting, the Issuer Trust or any of the assets of the
Issuer Trust (other than the dissolution of the Trust in accordance with the
terms thereof).
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the Corporation with respect to the happening of any of the
foregoing.
SECTION 1.6. Enforcement. A Beneficiary may enforce this Agreement
directly against the Corporation and the Corporation waives any right or remedy
to require that any action be brought against the Issuer Trust or any other
person or entity before proceeding against the Corporation.
SECTION 1.7. Subrogation. The Corporation shall be subrogated to all
rights (if any) of any Beneficiary against the Issuer Trust in respect of any
amounts paid to the Beneficiaries by the Corporation under this Agreement;
provided, however, that the Corporation shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any rights
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Agreement, if,
at the time of any such payment, any amounts are due and unpaid under this
Agreement.
ARTICLE II
SECTION 2.1. Assignment. This Agreement may not be assigned by either
party hereto without the consent of the other, and any purported assignment
without such consent shall be void; provided, however, that, upon any transfer
of the Common Securities, this Agreement shall be assigned and delegated by the
Corporation to its successor with such transfer without any action by either
party hereto.
SECTION 2.2. Binding Effect. All guarantees and agreements contained in
this Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the
Beneficiaries.
SECTION 2.3. Amendment. So long as there remains any Beneficiary or any
Preferred Securities are outstanding, this Agreement shall not be modified or
amended in any manner adverse to such Beneficiary or to the holders of the
Preferred Securities without the consent of such Beneficiary or the holders of
the Preferred Securities, as the case may be.
SECTION 2.4. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail), telex or by registered or
-3-
<PAGE> 4
certified mail, addressed as follows (and if so given, shall be deemed given
when mailed or upon receipt of an answer-back, if sent by telex):
If given to the Corporation:
First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Facsimile No.: (310) 322-2411
Attention: Chief Financial Officer
If given to the Issuer Trust:
First Coastal Capital Trust
c/o Wilmington Trust Company
1100 N. Market Street
Rodney Square North
Wilmington, Delaware 19890
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
With a copy to:
First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Facsimile No.: 310-322-2411
Attention: Chief Financial Officer
SECTION 2.5. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
-4-
<PAGE> 5
THIS AGREEMENT is executed as of the day and year first above written.
FIRST COASTAL BANCSHARES
By:
------------------------
Name:
Title:
FIRST COASTAL CAPITAL TRUST
By:
------------------------
Name:
Title: Administrator
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE AGREEMENT
BY AND BETWEEN
FIRST COASTAL BANCSHARES
as Guarantor
and
WILMINGTON TRUST COMPANY,
as Guarantee Trustee
RELATING TO
FIRST COASTAL CAPITAL TRUST
----------------------
Dated as of _________, 199_
----------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS REFERENCE TABLE*
<TABLE>
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Guarantee Agreement
- ------------------- -------------------
<S> <C>
310(a)................................................................4.1(a)
310(b)...........................................................4.1(c), 2.8
310(c)..........................................................Inapplicable
311(a)................................................................2.2(b)
311(b)................................................................2.2(b)
311(c)..........................................................Inapplicable
312(a)................................................................2.2(a)
312(b)................................................................2.2(b)
313......................................................................2.3
314(a)...................................................................2.4
314(b)..........................................................Inapplicable
314(c)...................................................................2.5
314(d)..........................................................Inapplicable
314(e).........................................................1.1, 2.5, 3.2
314(f)..............................................................2.1, 3.2
315(a)................................................................3.1(d)
315(b)...................................................................2.7
315(c)...................................................................3.1
315(d)................................................................3.1(d)
316(a).........................................................1.1, 2.6, 5.4
316(b)...................................................................5.3
316(c)...................................................................8.2
317(a)..........................................................Inapplicable
317(b)..........................................................Inapplicable
318(a)...................................................................2.1
318(b)...................................................................2.1
318(c)...................................................................2.1
</TABLE>
- ----------
* This Cross Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1. Definitions..........................................................1
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.....................................4
Section 2.2. List of Holders......................................................5
Section 2.3. Reports by the Guarantee Trustee.....................................5
Section 2.4. Periodic Reports to the Guarantee Trustee............................5
Section 2.5. Evidence of Compliance with Conditions Precedent.....................5
Section 2.6. Events of Default; Waiver............................................6
Section 2.7. Event of Default; Notice.............................................6
Section 2.8. Conflicting Interests................................................6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee...........................6
Section 3.2. Certain Rights of Guarantee Trustee..................................8
Section 3.3. Compensation; Indemnity; Fees........................................9
ARTICLE IV
GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility......................................10
Section 4.2. Appointment, Removal and Resignation of the Guarantee Trustee.......10
ARTICLE V
GUARANTEE
Section 5.1. Guarantee...........................................................11
Section 5.2. Waiver of Notice and Demand.........................................12
Section 5.3. Obligations Not Affected............................................12
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
Section 5.4. Rights of Holders...................................................13
Section 5.5. Guarantee of Payment................................................13
Section 5.6. Subrogation.........................................................13
Section 5.7. Independent Obligations.............................................13
ARTICLE VI
COVENANTS AND SUBORDINATION
Section 6.1. Subordination.......................................................14
Section 6.2. Pari Passu Guarantees...............................................14
ARTICLE VII
TERMINATION
Section 7.1. Termination.........................................................14
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Successors and Assigns..............................................15
Section 8.2. Amendments..........................................................15
Section 8.3. Notices.............................................................15
Section 8.4. Benefit.............................................................16
Section 8.5. Governing Law.......................................................16
Section 8.6. Counterparts........................................................16
</TABLE>
-ii-
<PAGE> 5
GUARANTEE AGREEMENT, dated as of __________, 1998, between FIRST COASTAL
BANCSHARES, a California corporation (the "Guarantor"), having its principal
office at 275 Main Street, El Segundo, California 90245, and Wilmington Trust
Company, a Delaware banking corporation, as trustee (the "Guarantee Trustee"),
for the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of FIRST COASTAL CAPITAL TRUST, a
Delaware statutory business trust (the "Issuer Trust").
RECITALS OF THE CORPORATION
WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as
of __________, 1998 (the "Trust Agreement"), among First Coastal Bancshares, as
Depositor, the Property Trustee and the Delaware Trustee named therein, the
Administrators named therein and the holders from time to time of undivided
beneficial interests in the assets of the Issuer Trust, the Issuer Trust is
issuing up to 6,600,000 aggregate Liquidation Amount (as defined in the Trust
Agreement) of its ____% Preferred Securities (liquidation amount $20 per
preferred security) (the "Preferred Securities"), representing preferred
undivided beneficial interests in the assets of the Issuer Trust and having the
terms set forth in the Trust Agreement; and
WHEREAS, the Preferred Securities will be issued by the Issuer Trust and
the proceeds thereof, together with the proceeds from the issuance of the Issuer
Trust's Common Securities (as defined herein), will be used to purchase the
Junior Subordinated Debentures (as defined in the Trust Agreement) of the
Guarantor, which Junior Subordinated Debentures will be deposited with
Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets; and
WHEREAS, as an incentive for the Holders to purchase Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, as
described herein, to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase of Preferred Securities
by each Holder, which purchase the Guarantor hereby acknowledges shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
For all purposes of this Guarantee Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings assigned to them
in this Article, and include the plural as well as the singular;
<PAGE> 6
(b) All other terms used herein that are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to them
therein;
(c) The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation";
(d) All accounting terms used but not defined herein have the meanings
assigned to them in accordance with United States generally accepted accounting
principles;
(e) Unless the context otherwise requires, any reference to an "Article"
or a "Section" refers to an Article or a Section, as the case may be, of this
Guarantee Agreement; and
(f) The words "hereby", "herein", "hereof" and "hereunder" and other
words of similar import refer to this Guarantee Agreement as a whole and not to
any particular Article, Section or other subdivision.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Board of Directors" means the board of directors of the Guarantor or
the Executive Committee of the board of directors of the Guarantor (or any other
committee of the board of directors of the Guarantor performing similar
functions) or a committee designated by the board of directors of the Guarantor
(or such committee), comprised of two or more members of the board of directors
of the Guarantor or officers of the Guarantor, or both.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer Trust.
"Event of Default" means (i) a default by the Guarantor in any of its
payment obligations under this Guarantee Agreement or (ii) a default by the
Guarantor in any other obligation hereunder that remains unremedied for 30 days.
"Guarantee Agreement" means this Guarantee Agreement, as modified,
amended or supplemented from time to time.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the Issuer Trust: (i) any accumulated and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Preferred Securities, to the extent the Issuer Trust shall have funds on hand
available therefor at such time; (ii) the Redemption Price (as defined in the
Trust Agreement) with respect to any Preferred Securities called for redemption
by the Issuer Trust, to the extent the Issuer Trust shall have funds on hand
available therefor at such time; and (iii) upon a voluntary or involuntary
termination,
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<PAGE> 7
winding-up or liquidation of the Issuer Trust, unless Junior Subordinated
Debentures are distributed to the Holders, the lesser of (a) the Liquidation
Distribution (as defined in the Trust Agreement) with respect to the Preferred
Securities, to the extent that the Issuer Trust shall have funds on hand
available therefor at such time and (b) the amount of assets of the Issuer Trust
remaining available for distribution to Holders on liquidation of the Issuer.
"Guarantee Trustee" means Wilmington Trust Company, solely in its
capacity as Guarantee Trustee and not in its individual capacity, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee Agreement, and thereafter means each
such Successor Guarantee Trustee.
"Guarantor" has the meaning specified in the first paragraph of this
Guarantee Agreement.
"Holder" means any Holder (as defined in the Trust Agreement) of any
Preferred Securities; provided, however, that in determining whether the holders
of the requisite percentage of Preferred Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor,
the Guarantee Trustee, or any Affiliate of the Guarantor or the Guarantee
Trustee.
"Indenture" means the Junior Subordinated Indenture, dated as of
__________, 199_, between First Coastal Bancshares and Wilmington Trust Company,
as trustee, as the same may be modified, amended or supplemented from time to
time.
"Issuer Trust" has the meaning specified in the first paragraph of this
Guarantee Agreement.
"List of Holders" has the meaning specified in Section 2.2(a).
"Majority in Liquidation Amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, Preferred Securities representing
more than 50% of the aggregate Liquidation Amount (as defined in the Trust
Agreement) of all Preferred Securities then Outstanding (as defined in the Trust
Agreement).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman or a Vice Chairman of the Board of Directors of such
Person or the President or a Vice President of such Person, and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Guarantor, and delivered to the Guarantee Trustee. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee Agreement shall include:
(a) a statement by each officer signing the Officers' Certificate that
such officer has read the covenant or condition and the definitions relating
thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officers' Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
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(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, company,
limited liability company, trust, business trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Securities" has the meaning specified in the recitals to this
Guarantee Agreement.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust Officer or Assistant Trust Officer or any officer assigned to the
Corporate Trust Office, including any managing director, vice president,
assistant vice president, assistant treasurer or assistant secretary of the
Guarantee Trustee and also means, with respect to a particular matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.
"Trust Agreement" means the Amended and Restated Trust Agreement of the
Issuer Trust referred to in the recitals to this Guarantee Agreement, as
modified, amended or supplemented from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this Guarantee Agreement was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Vice President", when used with respect to the Corporation, means any
duly appointed vice president, whether or not designated by a number or a word
or words added before or after the title "vice president."
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.
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(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act through operation of Section 318(c)
thereof, such imposed duties shall control. If any provision of this Guarantee
Agreement modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Guarantee Agreement as so modified or to be excluded, as the case may be.
SECTION 2.2. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before June 30 and December 31 of each
year, a list, in such form as the Guarantee Trustee may reasonably require, of
the names and addresses of the Holders (a "List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the Guarantor and has
not otherwise been received by the Guarantee Trustee in its capacity as such.
The Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with the requirements of Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION 2.3. Reports by the Guarantee Trustee.
Not later than 60 days after December 31 of each year, commencing 60
days after the first December 31 after the issuance of the Preferred Securities,
the Guarantee Trustee shall provide to the Holders such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.4. Periodic Reports to the Guarantee Trustee.
The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
If the Guarantee Trustee is also acting as the Property Trustee under the Trust
Agreement or the Indenture Trustee under the Indenture, then such reports will
not be required hereunder.
SECTION 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given
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by an officer of the Guarantor pursuant to Section 314(c)(1) may be given in the
form of an Officers' Certificate.
SECTION 2.6. Events of Default; Waiver.
The Holders of at least a Majority in Liquidation Amount of the
Preferred Securities may, by vote, on behalf of the Holders of all the Preferred
Securities, waive any past default or Event of Default and its consequences.
Upon such waiver, any such default or Event of Default shall cease to exist, and
any default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 2.7. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default actually known to a Responsible Officer of the Guarantee
Trustee, transmit by mail, first class postage prepaid, to the Holders, notice
of any such Event of Default, unless such Event of Default has been cured before
the giving of such notice, provided that, except in the case of a default in the
payment of a Guarantee Payment, the Guarantee Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained actual knowledge, of such Event of
Default.
SECTION 2.8. Conflicting Interests.
The Trust Agreement and the Indenture shall be deemed to be specifically
described in this Guarantee Agreement for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Guarantee Trustee hereunder. The right, title and interest of the Guarantee
Trustee, as such, hereunder shall automatically vest in any Successor Guarantee
Trustee, upon
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acceptance by such Successor Guarantee Trustee of its appointment hereunder, and
such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. If an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6), the Guarantee
Trustee shall exercise such of the rights and powers vested in it by this
Guarantee Agreement, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own wilful misconduct, except that:
(i) Prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement (including pursuant to Section 2.1), and the
Guarantee Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in
this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof or of
the Trust Indenture Act are specifically required to be furnished
to the Guarantee Trustee, the Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform
to the requirements of this Guarantee Agreement.
(ii) The Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made.
(iii) The Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the written direction of the Holders of
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not less than a Majority in Liquidation Amount of the Preferred
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee under
this Guarantee Agreement.
(iv) Subject to Section 3.1(b), no provision of this Guarantee
Agreement shall require the Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the performance
of any of its duties or in the exercise of any of its rights or powers,
if the Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured
to it under the terms of this Guarantee Agreement or indemnity
reasonably satisfactory to it against such risk or liability is not
reasonably assured to it.
SECTION 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document reasonably believed by it to be
genuine and to have been signed, sent or presented by the proper party
or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate which,
upon receipt of such request from the Guarantee Trustee, shall be
promptly delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or opinion of such legal counsel with respect to
legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or opinion.
Such legal counsel may be legal counsel to the Guarantor or any of its
Affiliates and may be one of its employees. The Guarantee Trustee shall
have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder unless such Holder
shall have provided to the Guarantee Trustee such adequate security and
indemnity as would satisfy a reasonable person in the position of the
Guarantee Trustee against the costs, expenses (including attorneys' fees
and expenses) and liabilities that might be
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incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Guarantee Trustee;
provided that nothing contained in this Section 3.2(a)(v) shall be taken
to relieve the Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents, attorneys, custodians or nominees and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent, attorney, custodian or nominee
appointed by it with due care hereunder.
(viii) Whenever in the administration of this Guarantee Agreement
the Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the
Holders, (B) may refrain from enforcing such remedy or right or taking
such other action until such instructions are received, and (C) shall be
fully protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.
SECTION 3.3. Compensation; Indemnity; Fees.
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such
reasonable compensation for all services rendered by it hereunder as may
be agreed by the Guarantor and the Guarantee Trustee from time to time
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse
the Guarantee Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by the Guarantee Trustee in
accordance with any provision of this Guarantee Agreement (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel),
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except any such expense, disbursement or advance as may be attributable
to its negligence or bad faith; and
(c) to indemnify the Guarantee Trustee and its officers,
directors and employees for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, wilful misconduct or
bad faith on the part of the Guarantee Trustee, arising out of or in
connection with the acceptance or administration of this Guarantee
Agreement, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
The Guarantee Trustee will not claim or exact any lien or charge on any
Guarantee Payments as a result of any amount due to it under this Guarantee
Agreement. The Guarantor's indemnification obligations as set forth in this
Section 3.3 shall survive the termination of this Guarantee Agreement or the
resignation or removal of the Guarantee Trustee.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust Indenture
Act to act as such and has a combined capital and surplus of at least
$50,000,000, and shall be a corporation meeting the requirements of
Section 310(a) of the Trust Indenture Act. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then, for the
purposes of this Section 4.1 and to the extent permitted by the Trust
Indenture Act, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2.
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.2. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.2(c), the Guarantee Trustee may be appointed or
removed at any time by the action of the Holders of a Majority in Liquidation
Amount of the Preferred Securities delivered
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to the Guarantee Trustee and the Guarantor (i) for cause or (ii) if a Junior
Subordinated Debenture Event of Default (as defined in the Trust Agreement)
shall have occurred and be continuing at any time.
(b) Subject to Section 4.2(c), the Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by giving written
notice thereof to the Holders and the Guarantor and by appointing a successor
Guarantee Trustee. The Guarantee Trustee shall appoint a successor by requesting
from at least three Persons meeting the requirements of Section 4.1(a) their
expenses and charges to serve as the Guarantee Trustee, and selecting the Person
who agrees to the lowest expenses and charges.
(c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed and shall have accepted
such appointment. No removal or resignation of a Guarantee Trustee shall be
effective until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor and, in the case of any
resignation, the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Holders and the Guarantor of a notice of resignation, the
resigning Guarantee Trustee may petition, at the expense of the Guarantor, any
court of competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Guarantee Trustee.
(e) If a resigning Guarantee Trustee shall fail to appoint a successor,
or if a Guarantee Trustee shall be removed or become incapable of acting as
Guarantee Trustee and a replacement shall not be appointed prior to such
resignation or removal, or if a vacancy shall occur in the office of Guarantee
Trustee for any cause, the Holders of the Preferred Securities, by the action of
the Holders of record of not less than 25% in aggregate Liquidation Amount (as
defined in the Trust Agreement) of the Preferred Securities then Outstanding (as
defined in the Trust Agreement) delivered to such Guarantee Trustee, may appoint
a Successor Guarantee Trustee or Trustees. If no successor Guarantee Trustee
shall have been so appointed by the Holders of the Preferred Securities and
accepted appointment, any Holder, on behalf of such Holder and all others
similarly situated, or any other Guarantee Trustee, may petition any court of
competent jurisdiction for the appointment of a successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.1. Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Issuer
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Trust may have or assert, except the defense of payment. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer Trust
to pay such amounts to the Holders.
SECTION 5.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, the Issuer Trust or any other Person before proceeding
against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice
of redemption and all other notices and demands.
SECTION 5.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer Trust of any express or
implied agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer Trust;
(b) the extension of time for the payment by the Issuer Trust of
all or any portion of the Distributions (other than an extension of time
for payment of Distributions that results from the extension of any
interest payment period on the Junior Subordinated Debentures as
provided in the Indenture), Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Preferred Securities or
the extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the Issuer Trust
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of
debt of, or other similar proceedings affecting, the Issuer Trust or any
of the assets of the Issuer Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor
(other than payment of the underlying obligation),
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it being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4. Rights of Holders.
The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer Trust
or any other Person.
SECTION 5.5. Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer Trust) or upon the distribution of Junior Subordinated Debentures
to Holders as provided in the Trust Agreement.
SECTION 5.6. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of the Holders
against the Issuer Trust in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer Trust with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
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ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.1. Subordination.
The obligations of the Guarantor under this Guarantee Agreement will
constitute unsecured obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture) of the Guarantor to the extent and in the manner set forth in the
Indenture with respect to the Junior Subordinated Debentures, and the provisions
of Article XIII of the Indenture will apply, mutatis mutandis, to the
obligations of the Guarantor hereunder. The obligations of the Guarantor
hereunder do not constitute Senior Indebtedness (as defined in the Indenture) of
the Guarantor.
SECTION 6.2. Pari Passu Guarantees.
The obligations of the Guarantor under this Guarantee Agreement shall
rank pari passu with the obligations of the Guarantor under (i) any similar
guarantee agreements issued by the Guarantor on behalf of the holders of
preferred or Preferred Securities issued by the Issuer Trust (as defined in the
Indenture), (ii) the Indenture and the Securities (as defined therein) issued
thereunder; (iii) the Expense Agreement (as defined in the Trust Agreement) and
(iv) any other security, guarantee or other agreement or obligation that is
expressly stated to rank pari passu with the obligations of the Guarantor under
this Guarantee Agreement or with any obligation that ranks pari passu with the
obligations of the Guarantor under this Guarantee Agreement.
ARTICLE VII
TERMINATION
SECTION 7.1. Termination.
This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price (as defined in the Trust
Agreement) of all Preferred Securities, (ii) the distribution of Junior
Subordinated Debentures to the Holders in exchange for all of the Preferred
Securities or (iii) full payment of the amounts payable in accordance with
Article IX of the Trust Agreement upon liquidation of the Issuer Trust.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
is required to repay any sums paid with respect to Preferred Securities or this
Guarantee Agreement.
-14-
<PAGE> 19
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article VIII of the
Indenture and pursuant to which the successor or assignee agrees in writing to
perform the Guarantor's obligations hereunder, the Guarantor shall not assign
its obligations hereunder, and any purported assignment other than in accordance
with this provision shall be void.
SECTION 8.2. Amendments.
Except with respect to any changes that do not adversely affect the
rights of the Holders in any material respect (in which case no consent of the
Holders will be required), this Guarantee Agreement may only be amended with the
prior approval of the Holders of not less than a Majority in Liquidation Amount
of the Preferred Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of such approval.
SECTION 8.3. Notices.
Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:
(a) if given to the Guarantor, to the address or telecopy number set
forth below or such other address or telecopy number as the Guarantor may give
notice to the Guarantee Trustee and the Holders:
First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Attention: Chief Financial Officer
Telecopy: 310-322-2411
(b) if given to the Guarantee Trustee, at the address or telecopy number
set forth below or such other address or telecopy number as the Guarantee
Trustee may give notice to the Guarantor and Holders:
-15-
<PAGE> 20
Wilmington Trust Company
1100 N. Market Street
Rodney Square North
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopy: (302) 651-8882
with a copy to:
First Coastal Capital Trust
c/o First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Attention: Chief Financial Officer
Telecopy: 310-322-2411
(c) if given to any Holder, at the address set forth on the books and
records of the Issuer Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.4. Benefit.
This Guarantee Agreement is solely for the benefit of the Holders and is
not separately transferable from the Preferred Securities.
SECTION 8.5. Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.6. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-16-
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Guarantee
Agreement as of the day and year first above written.
FIRST COASTAL BANCSHARES
By:
---------------------------
Name: Don M. Griffith
Title: Chief Executive Officer
WILMINGTON TRUST COMPANY
as Guarantee Trustee
By:
---------------------------
Name:
Title:
<PAGE> 22
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On the __ day of ________, 1998, before me personally came Don M.
Griffith, to me known, who, being by me duly sworn, did depose and say that he
is Chief Executive Officer of First Coastal Bancshares, one of the corporations
described in and which executed the foregoing instrument; that he/she signed
his/her name thereto by authority of the Board of Directors of said corporation.
- ---------------------------
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE )
On the __ day of __________, 1998, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he is a ______________ of Wilmington Trust Company, one of the
corporations described in and which executed the foregoing instrument by
authority of the Board of Directors of said corporation.
- -----------------------------
-18-
<PAGE> 1
EXHIBIT 10.3
FIRST COASTAL BANK, N.A.
1996 STOCK OPTION PLAN
1. Purpose
The purpose of the First Coastal Bank, N.A. 1996
Stock Option Plan (the "Plan") is to strengthen First Coastal Bank, N.A. (the
"Bank") and those banks and corporations which are or hereafter become
subsidiary corporations (the "Subsidiary" or "Subsidiaries") by providing
additional means of attracting and retaining competent managerial personnel and
by providing to participating directors, advisory directors, officers and key
employees added incentive for high levels of performance and for unusual efforts
to increase the earnings of the Bank and any Subsidiaries. The Plan seeks to
accomplish these purposes and achieve these results by providing a means whereby
such directors, advisory directors, officers and key employees may purchase
shares of the Common Stock of the Bank pursuant to Stock Options granted in
accordance with this Plan.
Stock Options granted pursuant to this Plan are intended to be
Incentive Stock Options or Non-Qualified Stock Options, as shall be determined
and designated by the Stock Option Committee upon the grant of each Stock Option
hereunder.
2. Definitions
For purposes of this Plan, the following terms shall
have the following meanings:
a. "Affiliation" or "affiliated." For purposes of
Sections 10, 11, 12, 13 and 14 hereof, these terms shall mean service as a
director or advisory director of the Bank or any Subsidiary.
b. "Bank." This term shall mean First Coastal
Bank, N.A., a national banking association.
c. "Common Stock." This term shall mean shares of
the Bank's common stock subject to adjustment pursuant to Section 15 (Adjustment
Upon Changes in Capitalization) hereunder.
d. "Eligible Participants." This term shall mean:
(i) all directors and advisory directors of the Bank or any Subsidiary; (ii) all
officers (whether or not they are also directors) of the Bank or any Subsidiary;
and (iii) all key employees (as such persons may be determined by the Stock
Option Committee from time to time) of the Bank or any Subsidiary, provided that
such officers and key employees have a customary work week of at least forty
hours in the employ of the Bank or a Subsidiary.
<PAGE> 2
e. "Fair Market Value." This term shall mean the
fair market value of the Common Stock as determined in accordance with any
reasonable valuation method selected by the Stock Option Committee, including
the valuation methods described in Treasury Regulations Section 20.2031-2.
f. "Incentive Stock Option." This term shall mean
a Stock Option which is an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended.
g. "Non-Qualified Stock Option." This term shall
mean a Stock Option which is not an Incentive Stock Option.
h. "Option Shares." This term shall mean Common
Stock covered by and subject to any outstanding unexercised Stock Option granted
pursuant to this Plan.
i. "Optionee." This term shall mean any Eligible
Participant to whom a Stock Option has been granted pursuant to this Plan,
provided that at least part of the Stock Option is outstanding and unexercised.
j. "Plan." This term shall mean the First Coastal
Bank, N.A. 1996 Stock Option Plan as embodied herein and as may be amended from
time to time in accordance with the terms hereof and applicable law.
k. "Stock Option." This term shall mean the right
to purchase a specified number of shares of Common Stock under this Plan, at a
price and upon the terms and conditions determined by the Stock Option
Committee.
l. "Stock Option Committee." The Board of
Directors of the Bank may select and designate a Stock Option Committee
consisting of three or more directors of the Bank, having full authority to act
in the matter. Regardless of whether a Stock Option Committee is selected, the
Board of Directors of the Bank may act as the Stock Option Committee and any
action taken by said Board as such shall be deemed to be action taken by the
Stock Option Committee. All references in the Plan to the "Stock Option
Committee" shall be deemed to refer to the Board of Directors of the Bank acting
as the Stock Option Committee and to a duly appointed Stock Option Committee, if
there be one. In the event of any conflict between action taken by the Board
acting as a Stock Option Committee and action taken by a duly appointed Stock
Option Committee, the action taken by the Board shall be controlling and the
action taken by the duly appointed Stock Option Committee shall be disregarded.
<PAGE> 3
m. "Subsidiary." This term shall mean each
"subsidiary corporation" (treating the Bank as the employer corporation) as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended.
3. Administration
a. Stock Option Committee. This Plan shall be
administered by the Stock Option Committee. The Board of Directors of the Bank
shall have the right, in its sole and absolute discretion, to remove or replace
any person from or on the Stock Option Committee at any time for any reason
whatsoever.
b. Administration of the Plan. Any action of the
Stock Option Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote, or pursuant to the unanimous written consent,
of its members. Any such action taken by the Stock Option Committee in the
administration of this Plan shall be valid and binding, so long as the same is
not inconsistent with the terms and conditions of this Plan. Subject to
compliance with the terms, conditions and restrictions set forth in this Plan,
the Stock Option Committee shall have the exclusive right, in its sole and
absolute discretion, to establish the terms and conditions of all Stock Options
granted under the Plan, including, without meaning any limitation, the power to:
(i) establish the number of Stock Options, if any, to be granted hereunder, in
the aggregate and with regard to each Eligible Participant; (ii) determine the
time or times when such Stock Options, or parts thereof, may be exercised; (iii)
determine and designate which Stock Options granted under the Plan shall be
Incentive Stock Options and which shall be Non-Qualified Stock Options; (iv)
determine the Eligible Participants, if any, to whom Stock Options are granted;
(v) determine the duration and purposes, if any, of leaves of absence which may
be permitted to holders of unexercised, unexpired Stock Options without such
constituting a termination of employment under the Plan; and (vi) prescribe and
amend the terms, provisions and form of each instrument and agreement setting
forth the terms and conditions of every Stock Option granted hereunder.
c. Decisions and Determinations. Subject to the
express provisions of the Plan, the Stock Option Committee shall have the
authority to construe and interpret this Plan, to define the terms used herein,
to prescribe, amend, and rescind rules and regulations relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for administration of the Plan. Determinations of the Stock Option
Committee on matters referred to in this Section 3 shall be final and conclusive
so long as the same are not inconsistent with the terms of this Plan.
<PAGE> 4
4. Shares Subject to the Plan
Subject to adjustments as provided in Section 15
hereof, the maximum number of shares of Common Stock which may be issued upon
exercise of all Stock Options granted under this Plan is limited to four hundred
twenty-five thousand (425,000) in the aggregate. If any Stock Option shall be
canceled, surrendered, or expire for any reason without having been exercised in
full, the unpurchased Option Shares represented thereby shall again be available
for grants of Stock Options under this Plan.
5. Eligibility
Only Eligible Participants shall be eligible to
receive grants of Stock Options under this Plan.
6. Grants of Stock Options
a. Grant. Subject to the express provisions of the
Plan, the Stock Option Committee, in its sole and absolute discretion, may grant
Stock Options to Eligible Participants for a number of Option Shares, at the
price(s) and time(s), and on the terms and conditions as it deems advisable and
specifies in the respective grants.
The terms upon which and the times at which, or the
periods within which, the Option Shares subject to such Stock Options may become
acquired or such Stock Options may be acquired and exercised shall be as set
forth in the Plan and the related Stock Option Agreements.
Subject to the limitations and restrictions set forth
in the Plan, an Eligible Participant who has been granted a Stock Option may, if
otherwise eligible, be granted additional Stock Options if the Stock Option
Committee shall so determine. The Stock Option Committee shall designate in each
grant of a Stock Option whether the Stock Option is an Incentive Stock Option or
a Non-Qualified Stock Option.
b. Date of Grant and Rights of Optionee. The
determination of the Stock Option Committee to grant a Stock Option shall not in
any way constitute or be deemed to constitute an obligation of the Bank, or a
right of the Eligible Participant who is the proposed subject of the grant, and
shall not constitute or be deemed to constitute the grant of a Stock Option
hereunder unless and until both the Bank and the Eligible Participant have
executed and delivered to the other a Stock Option Agreement in the form then
required by the Stock Option Committee as evidencing the grant of the Stock
Option, together with such other instrument or instruments as may be required by
the Stock Option Committee pursuant to this Plan; provided, however, that the
Stock Option Committee may fix the date of grant as any date on or after the
date of its final determination
<PAGE> 5
to grant the Stock Option (or if no such date is fixed, then the date of grant
shall be the date on which the determination was finally made by the Stock
Option Committee to grant the Stock Option), and such date shall be set forth in
the Stock Option Agreement. The date of grant as so determined shall be deemed
the date of grant of the Stock Option for purposes of this Plan.
c. Shareholder-Employees. A Stock Option granted
hereunder to an Eligible Participant who is also an officer or key employee of
the Bank or any Subsidiary, who owns, directly or indirectly, at the date of the
grant of the Stock Option, more than ten percent (10%) of the total combined
voting power of all classes of capital stock of the Bank or a Subsidiary (if
permitted in accordance with the provisions of Section 5 herein) shall not
qualify as an Incentive Stock Option unless: (i) the purchase price of the
Option Shares subject to said Stock Option is at least one hundred ten percent
(110%) of the Fair Market Value of the Option Shares, determined as of the date
said Stock Option is granted; and (ii) the Stock Option by its terms is not
exercisable after five (5) years from the date that it is granted. The
attribution rules of Section 424(d) of the Internal Revenue Code of 1986, as
amended, shall apply in the determination of indirect ownership of stock.
d. Maximum Value of Stock Options. No grant of
Incentive Stock Options hereunder may be made when the aggregate Fair Market
Value of Option Shares with respect to which Incentive Stock Options (pursuant
to this Plan or any other Incentive Stock Option Plan of the Bank or any
Subsidiary) are exercisable for the first time by the Eligible Participant
during any calendar year exceeds One Hundred Thousand Dollars ($100,000).
e. Substituted Stock Options. If all of the
outstanding shares of common stock of another corporation are changed into or
exchanged solely for Common Stock in a transaction to which Section 424(a) of
the Internal Revenue Code of 1986, as amended, applies, then, subject to the
approval of the Board of Directors of the Bank, Stock Options under the Plan may
be substituted ("Substituted Options") in exchange for valid, unexercised and
unexpired stock options of such other corporation. Substituted Options shall
qualify as Incentive Stock Options under the Plan, provided that (and to the
extent) the stock options exchanged for the Substituted Options were Incentive
Stock Options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.
f. Non-Qualified Stock Options. Stock Options and
Substituted Options granted by the Stock Option Committee shall be deemed
Non-Qualified Stock Options under this Plan if they: (i) are designated at the
time of grant as Incentive Stock Options but do not so qualify under the
provisions of Section 422 of the Code or any regulations or rulings issued by
the Internal
<PAGE> 6
Revenue Service for any reason; (ii) are not granted in accordance with the
provisions of Section 6(c); (iii) are in excess of the fair market value
limitations set forth in Section 6(d); (iv) are granted to an Eligible
Participant who is not an officer or key employee of the Bank or any Subsidiary;
or (v) are designated at the time of grant as Non-Qualified Stock Options.
Non-Qualified Stock Options granted or substituted hereunder shall be so
designated in the Stock Option Agreement entered into between the Bank and the
Optionee.
7. Stock Option Exercise Price
a. Minimum Price. The exercise price of any Option
Shares shall be determined by the Stock Option Committee, in its sole and
absolute discretion, upon the grant of a Stock Option. Except as provided
elsewhere herein, said exercise price shall not be less than one hundred percent
(100%) of the Fair Market Value of the Common Stock represented by the Option
Shares on the date of grant of the related Stock Option.
b. Substituted Options. The exercise price of the
Option Shares subject to each Substituted Option may be fixed at a price less
than one hundred percent (100%) of the Fair Market Value of the Common Stock at
the time such Substituted Option is granted if said exercise price has been
computed to be not less than the exercise price set forth in the stock option of
the other corporation for which it was exchanged immediately before
substitution, with appropriate adjustment to reflect the exchange ratio of the
shares of stock of the other corporation into the shares of Common Stock.
8. Exercise of Stock Options
a. Exercise. Except as otherwise provided
elsewhere herein, each Stock Option shall be exercisable in such increments,
which need not be equal, and upon such contingencies as the Stock Option
Committee shall determine at the time of grant of the Stock Option; provided,
however, that if an Optionee shall not in any given period exercise any part of
a Stock Option which has become exercisable during that period, the Optionee's
right to exercise such part of the Stock Option shall continue until expiration
of the Stock Option or any part thereof as may be provided in the related Stock
Option Agreement. No Stock Option or part thereof shall be exercisable except
with respect to whole shares of Common Stock, and fractional share interests
shall be disregarded except that they may be accumulated.
b. Prior Outstanding Incentive Stock Options.
Incentive Stock Options granted (or substituted) to an Optionee under the Plan
may be exercisable while such Optionee has outstanding and unexercised any
Incentive Stock Option previously granted (or substituted) to him or her
pursuant to this Plan or any other Incentive Stock Option Plan of the Bank or
any
<PAGE> 7
Subsidiary. An Incentive Stock Option shall be treated as outstanding until it
is exercised in full or expires by reason of lapse of time.
c. Notice and Payment. Stock Options granted
hereunder shall be exercised by written notice delivered to the Bank specifying
the number of Option Shares with respect to which the Stock Option is being
exercised, together with concurrent payment in full of the exercise price as
hereinafter provided. If the Stock Option is being exercised by any person or
persons other than the Optionee, said notice shall be accompanied by proof,
satisfactory to the counsel for the Bank, of the right of such person or persons
to exercise the Stock Option. The Bank's receipt of a notice of exercise without
concurrent receipt of the full amount of the exercise price shall not be deemed
an exercise of a Stock Option by an Optionee, and the Bank shall have no
obligation to an Optionee for any Option Shares unless and until full payment of
the exercise price is received by the Bank and all of the terms and provisions
of the Plan and the related Stock Option agreement have been fully complied
with.
d. Payment of Exercise Price. The exercise price
of any Option Shares purchased upon the proper exercise of a Stock Option shall
be paid in full at the time of each exercise of a Stock Option in cash (or bank,
cashier's or certified check) and/or, with the prior written approval of the
Stock Option Committee at or before the time of exercise, in Common Stock of the
Bank which, when added to the cash payment, if any, which has an aggregate Fair
Market Value equal to the full amount of the exercise price of the Stock Option,
or part thereof, then being exercised. Payment by an Optionee as provided herein
shall be made in full concurrently with the Optionee's notification to the Bank
of his intention to exercise all or part of a Stock Option. If all or any part
of a payment is made in shares of Common Stock as heretofore provided, such
payment shall be deemed to have been made only upon receipt by the Bank of all
required share certificates, and all stock powers and all other required
transfer documents necessary to transfer the shares of Common Stock to the Bank.
e. Minimum Exercise. Not less than ten (10) Option
Shares may be purchased at any one time upon exercise of a Stock Option unless
the number of shares purchased is the total number which remains to be purchased
under the Stock Option.
f. Compliance With Law. No shares of Common Stock
shall be issued upon exercise of any Stock Option, and an Optionee shall have no
right or claim to such shares, unless and until: (i) payment in full as provided
hereinabove has been received by the Bank; (ii) in the opinion of the counsel
for the Bank, all applicable requirements of law and of regulatory bodies having
jurisdiction over such issuance and delivery have been fully complied with; and
(iii) if required by federal or state
<PAGE> 8
law or regulation, the Optionee shall have paid to the Bank the amount, if any,
required to be withheld on the amount deemed to be compensation to the Optionee
as a result of the exercise of his or her Stock Option, or made other
arrangements satisfactory to the Bank, in its sole discretion, to satisfy
applicable income tax withholding requirements.
g. Acceleration Upon Reorganization.
Notwithstanding any provision in any Stock Option Agreement pertaining to the
time of exercise of a Stock Option, or part thereof, upon adoption by the
requisite holders of the outstanding shares of Common Stock of any plan of
dissolution, liquidation, reorganization, merger, consolidation or sale of all
or substantially all of the assets of the Bank to another corporation which
would, upon consummation, result in termination of a Stock Option in accordance
with Section 16 hereof, all Stock Options previously granted shall become
immediately exercisable, whether or not vested under the Plan or the Stock
Option Agreement, as to all unexercised Option Shares for such period of time as
may be determined by the Stock Option Committee, but in any event not less than
30 days, on the condition that the terminating event described in Section 16
hereof is consummated. If such terminating event is not consummated, Stock
Options granted pursuant to the Plan shall be exercisable in accordance with the
terms of their respective Stock Option Agreements.
9. Nontransferability of Stock Options
Each Stock Option shall, by its terms, be non-
transferable by the Optionee other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
10. Continuation of Affiliation
Nothing contained in this Plan (or in any Stock
Option Agreement) shall obligate the Bank or any Subsidiary to employ or
continue to employ or remain affiliated with any Optionee or any Eligible
Participant for any period of time or interfere in any way with the right of the
Bank or a Subsidiary to reduce or increase the Optionee's or Eligible
Participant's compensation.
11. Cessation of Affiliation
Except as provided in Section 12 hereof, if, for any
reason other than disability or death, an Optionee ceases to be employed by or
affiliated with the Bank or a Subsidiary, the Stock Options granted to such
Optionee shall expire on the expiration dates specified for said Stock Options
at the time of their grant, or ninety (90) days after the Optionee ceases to be
so affiliated, whichever is earlier. During such period after cessation of
affiliation, such Stock Options shall be exercisable
<PAGE> 9
only as to those increments, if any, which had become exercisable as of the date
on which such Optionee ceased to be affiliated with the Bank or the Subsidiary,
and any Stock Options or increments which had not become exercisable as of such
date shall expire automatically on such date.
12. Termination for Cause
If the Stock Option Agreement so provides and if an
Optionee's employment by or affiliation with the Bank or a Subsidiary is
terminated for cause, the Stock Options granted to such Optionee shall
automatically expire and terminate in their entirety immediately upon such
termination; provided, however, that the Stock Option Committee may, in its sole
discretion, within thirty (30) days of such termination, reinstate such Stock
Options by giving written notice of such reinstatement to the Optionee. In the
event of such reinstatement, the Optionee may exercise the Stock Options only to
such extent, for such time, and upon such terms and conditions as if the
Optionee had ceased to be employed by or affiliated with the Bank or a
Subsidiary upon the date of such termination for a reason other than cause,
disability or death. Termination for cause shall include, but shall not be
limited to, termination for malfeasance or gross misfeasance in the performance
of duties or conviction of illegal activity in connection therewith and, in any
event, the determination of the Stock Option Committee with respect thereto
shall be final and conclusive.
13. Death of Optionee
If an Optionee dies while employed by or affiliated
with the Bank or a Subsidiary, or during the ninety-day period referred to in
Section 11 hereof, the Stock Options granted to such Optionee shall expire on
the expiration dates specified for said Stock Options at the time of their
grant, or one (1) year after the date of such death, whichever is earlier. After
such death, but before such expiration, subject to the terms and provisions of
the Plan and the related Stock Option Agreements, the person or persons to whom
such Optionee's rights under the Stock Options shall have passed by will or by
the applicable laws of descent and distribution, or the executor or
administrator of the Optionee's estate, shall have the right to exercise such
Stock Options to the extent that increments, if any, had become exercisable as
of the date on which the Optionee died.
14. Disability of Optionee
If an Optionee is disabled while employed by or
affiliated with the Bank or a Subsidiary or during the ninety (90) day period
referred to in Section 11 hereof, the Stock Options granted to such Optionee
shall expire on the expiration dates specified for said Stock Options at the
time of their
<PAGE> 10
grant, or one (1) year after the date such disability occurred, whichever is
earlier. After such disability occurs, but before such expiration, the Optionee
or the guardian or conservator of the Optionee's estate, as duly appointed by a
court of competent jurisdiction, shall have the right to exercise such Stock
Options to the extent that increments, if any, had become exercisable as of the
date on which the Optionee became disabled or ceased to be employed by or
affiliated with the Bank or a Subsidiary as a result of the disability. An
Optionee shall be deemed to be "disabled" if it shall appear to the Stock Option
Committee, upon written certification delivered to the Bank of a qualified
licensed physician, that the Optionee has become permanently and totally unable
to engage in any substantial gainful activity by reason of a medically
determinable physical or mental impairment which can be expected to result in
the Optionee's death, or which has lasted or can be expected to last for a
continuous period of not less than 12 months.
15. Adjustment Upon Changes in Capitalization
If the outstanding shares of Common Stock of the Bank
are increased, decreased, or changed into or exchanged for a different number or
kind of shares or securities of the Bank, through a reorganization, merger,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Bank, an appropriate
and proportionate adjustment shall be made in the number and kind of shares as
to which Stock Options may be granted. A corresponding adjustment changing the
number or kind of Option Shares and the exercise prices per share allocated to
unexercised Stock Options, or portions thereof, which shall have been granted
prior to any such change, shall likewise be made. Such adjustments shall be made
without change in the total price applicable to the unexercised portion of the
Stock Option, but with a corresponding adjustment in the price for each Option
Share subject to the Stock Option. Adjustments under this Section shall be made
by the Stock Option Committee, whose determination as to what adjustments shall
be made, and the extent thereof, shall be final and conclusive. No fractional
shares of stock shall be issued or made available under the Plan on account of
such adjustments, and fractional share interests shall be disregarded, except
that they may be accumulated.
16. Terminating Events
Upon consummation of a plan of dissolution or
liquidation of the Bank, or upon consummation of a plan of reorganization,
merger or consolidation of the Bank with one or more corporations, as a result
of which the Bank is not the surviving entity, or upon the sale of all or
substantially all the assets of the Bank to another corporation, the Plan shall
automatically terminate and all Stock Options theretofore granted shall be
terminated, unless provision is made in connection with
<PAGE> 11
such transaction for assumption of Stock Options theretofore granted (in which
case such Stock Options shall be converted into stock options for a like number
and kind of shares of the surviving entity), or substitution for such Stock
Options with new stock options covering stock of a successor employer
corporation, or a parent or subsidiary corporation thereof, solely at the
discretion of such successor corporation, or parent or subsidiary corporation,
with appropriate adjustments as to number and kind of shares and prices.
17. Amendment and Termination
The Board of Directors of the Bank may at any time
and from time to time suspend, amend, or terminate the Plan and may, with the
consent of an Optionee, make such modifications of the terms and conditions of
that Optionee's Stock Option as it shall deem advisable; provided that, except
as permitted under the provisions of Section 15 hereof, no amendment or
modification may be adopted without the Bank having first obtained the approval
of the holders of a majority of the Bank's outstanding shares of Common Stock
present, or represented, and entitled to vote at a duly held meeting of
shareholders of the Bank, or by written consent, if the amendment or
modification would:
(a) materially increase the number of securities
which may be issued under the Plan;
(b) materially modify the requirements as to
eligibility for participation in the Plan;
(c) increase or decrease the exercise price of any
Stock Option granted under the Plan;
(d) increase the maximum term of Stock Options
provided for herein;
(e) permit Stock Options to be granted to any person
who is not an Eligible Participant; or
(f) change any provision of the Plan which would
affect the qualification as an Incentive Stock Option under the internal revenue
laws then applicable of any Stock Option granted as an Incentive Stock Option
under the Plan.
No Stock Option may be granted during any suspension
of the Plan or after termination of the Plan. Amendment, suspension, or
termination of the Plan shall not (except as otherwise provided in Section 15
hereof), without the consent of the Optionee, alter or impair any rights or
obligations under any Stock Option theretofore granted.
18. Rights of Eligible Participants and Optionees
<PAGE> 12
No Eligible Participant, Optionee or other person
shall have any claim or right to be granted a Stock Option under this Plan, and
neither this Plan nor any action taken hereunder shall be deemed to give or be
construed as giving any Eligible Participant, Optionee or other person any right
to be retained in the employ of the Bank or any Subsidiary. Without limiting the
generality of the foregoing, no person shall have any rights as a result of his
or her classification as an Eligible Participant or Optionee, such
classifications being made solely to describe, define and limit those persons
who are eligible for consideration for privileges under the Plan.
19. Privileges of Stock Ownership; Regulatory Law
Compliance; Notice of Sale
No Optionee shall be entitled to the privileges of
stock ownership as to any Option Shares not actually issued and delivered. No
Option Shares may be purchased upon the exercise of a Stock Option unless and
until all then applicable requirements of all regulatory agencies having
jurisdiction and all applicable requirements of the securities exchanges upon
which securities of the Bank are listed (if any) shall have been fully complied
with. The Optionee shall, not more than five (5) days after each sale or other
disposition of shares of Common Stock acquired pursuant to the exercise of Stock
Options, give the Bank notice in writing of such sale or other disposition.
20. Effective Date of the Plan
The Plan shall be deemed adopted as of November 21, 1996, and
shall be effective immediately, subject to approval of the Plan by the holders
of at least a majority of the Bank's outstanding shares of Common Stock
represented and voting at a meeting of shareholders.
21. Termination
Unless previously terminated as aforesaid, the Plan
shall terminate on November 21, 2006. No Stock Options shall be granted under
the Plan thereafter, but such termination shall not affect any Stock Option
theretofore granted.
22. Option Agreement
Each Stock Option granted under the Plan shall be
evidenced by a written Stock Option Agreement executed by the Bank and the
Optionee, and shall contain each of the provisions and agreements herein
specifically required to be contained therein, and such other terms and
conditions as are deemed desirable by the Stock Option Committee and are not
inconsistent with this Plan.
23. Stock Option Period
<PAGE> 13
Each Stock Option and all rights and obligations thereunder shall
expire on such date as the Stock Option Committee may determine, but not later
than ten (10) years from the date such Stock Option is granted, and shall be
subject to earlier termination as provided elsewhere in this Plan.
24. Exculpation and Indemnification of Stock Option
Committee
In addition to such other rights of indemnification which they
may have as directors of the Bank or as members of the Stock Option Committee,
the members of the Stock Option Committee, and each of them, shall be
indemnified by the Bank for and against all costs, judgments, penalties and
reasonable expenses, including reasonable attorneys' fees, actually and
appropriately incurred by them in connection with all actions, suits and
proceedings, and in connection with appeals thereof, to which they or any of
them may be a party by reason of any act or omission of any member of the Stock
Option Committee under or in connection with the Plan or any Stock Option
granted thereunder; provided, however, that a member of the Stock Option
Committee shall not be entitled to any indemnification whatsoever pursuant to
this Section for or as a result of any act or omission of such member which was
not taken in good faith and which constituted willful misconduct or gross
negligence by such member; provided further, that any amounts paid by any member
of the Stock Option Committee in settlement of an action, suit or proceeding for
which indemnification may be sought pursuant to this Section shall be first
approved in writing by independent legal counsel selected by the Bank; and,
provided further, that within thirty (30) days after institution of an action,
suit or proceeding against any member with respect to which such member is
entitled to indemnification hereunder, such member shall, in writing, offer the
Bank the opportunity, at its own expense, to handle (including settle) and
conduct the defense thereof. The provisions of this Section shall apply to the
estate, executor and administrator of each member of the Stock Option Committee.
25. Notices
All notices and demands of any kind which the Stock
Option Committee, any Optionee, Eligible Participant, or other person may be
required or desires to give under the terms of this Plan shall be in writing and
shall be delivered in hand to the person or persons to whom addressed (in the
case of the Stock Option Committee, with the Chief Executive Officer, Cashier or
Secretary of the Bank), by leaving a copy of such notice or demand at the
address of such person or persons as may be reflected in the records of the
Bank, or by mailing a copy thereof, properly addressed as above, by certified or
registered mail, postage prepaid, with return receipt requested. Delivery by
mail shall be deemed made upon receipt by the notifying party
<PAGE> 14
of the return receipt request acknowledging receipt of the notice or demand.
26. Limitation on Obligations of the Bank
All obligations of the Bank arising under or as a
result of this Plan or Stock Options granted hereunder shall constitute the
general unsecured obligations of the Bank, and not of the Board of Directors of
the Bank, any member thereof, the Stock Option Committee, any member thereof,
any officer of the Bank, or any other person or any Subsidiary, and none of the
foregoing, except the Bank, shall be liable for any debt, obligation, cost or
expense hereunder.
27. Limitation of Rights
The Stock Option Committee, in its sole and absolute
discretion, is entitled to determine who, if anyone, is an Eligible Participant
under this Plan, and which, if any, Eligible Participant shall receive any grant
of a Stock Option. No oral or written agreement by any person on behalf of the
Bank relating to this Plan or any Stock Option granted hereunder is authorized,
and such may not bind the Bank or the Stock Option Committee to grant any Stock
Option to any person.
28. Severability
If any provision of this Plan as applied to any
person or to any circumstance shall be adjudged by a court of competent
jurisdiction to be void, invalid, or unenforceable, the same shall in no way
affect any other provision hereof, the application of any such provision in any
other circumstances, or the validity or enforceability hereof.
29. Construction
Where the context or construction requires, all words
applied in the plural herein shall be deemed to have been used in the singular
and vice versa, and the masculine gender shall include the feminine and the
neuter and vice versa.
30. Headings
The headings of the several sections herein are
inserted solely for convenience of reference and are not intended to form a part
of and are not intended to govern, limit or aid in the construction of any term
or provision hereof.
31. Successors
This Plan shall be binding upon the respective
successors, assigns, heirs, executors, administrators, guardians and personal
representatives of the Bank and Optionees.
<PAGE> 15
32. Governing Law
To the extent not governed by the laws of the United
States, this Plan shall be governed by and construed in accordance with the laws
of the State of California.
33. Conflict
In the event of any conflict between the terms and
provisions of this Plan, and any other document, agreement or instrument,
including, without meaning any limitation, any Stock Option Agreement, the terms
and provisions of this Plan shall control.
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of July, 1997, (hereinafter the
"Agreement Date") between FIRST COASTAL BANK (hereinafter the "Bank") and JAMES
F. GARDUNIO (hereinafter the "Executive"),
W I T N E S S E T H
WHEREAS, Bank desires to avail itself of the skill, knowledge and
experience of Executive in order to insure the successful management of its
business; and
WHEREAS, the parties hereto desire to specify the terms of Executive's
employment by Bank as controlling Executive's employment with the Bank;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, it is agreed that from July 1, 1997 (hereinafter the
"Effective Date"), the following terms and conditions shall apply to Executive's
said employment:
A. TERM OF EMPLOYMENT
1. Term. Bank hereby employs Executive and Executive hereby
accepts employment with Bank for the period of three (3) years commencing with
the Effective Date (the "Term"), subject, however, to prior termination of this
Agreement as hereinafter provided. Where used herein, "Term" shall refer to the
entire period of employment of Executive by Bank hereunder commencing
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<PAGE> 2
with the Effective Date, whether for the period provided above, or whether
terminated earlier as hereinafter provided.
B. DUTIES OF EXECUTIVE
1. Duties. Executive shall perform the duties of Executive Vice
President and Chief Credit Officer of Bank, or such other duties as may be
established by the Board of Directors, subject to the powers by law vested in
the Board of Directors of Bank and in the Bank's shareholders. During the Term,
Executive shall perform exclusively the services herein contemplated to be
performed by Executive faithfully, diligently and to the best of Executive's
ability, consistent with the highest and best standards of the banking industry
and in compliance with all applicable laws and Bank's Articles of Incorporation
and Bylaws.
2. Conflicts of Interest. Except with respect to the time
reasonably necessary to operate Executive's bakery business and otherwise as
permitted by the prior written consent of the Board of Directors of Bank,
Executive shall devote Executive's entire productive time, ability and attention
to the business of Bank during the Term, and Executive shall not directly or
indirectly render any services of a business, commercial or professional nature
to any other person, firm, or corporation, whether for compensation or
otherwise, which are in conflict with Bank's interests.
C. COMPENSATION
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<PAGE> 3
1. Salary. For Executive's services hereunder, Bank shall
pay or cause to be paid as salary to Executive the amount of Eight Thousand,
Three Hundred and Thirty-Three Dollars and Thirty-Four Cents ($8,333.34) per
month during the Term. All of the foregoing payments (the "Base Salary") shall
be prorated for any month in which this Agreement is in effect for only a
portion of the month. The Base Salary shall be payable in equal installments in
conformity with Bank's normal payroll periods.
2. Bonus. Executive shall be entitled to receive as an
incentive, such bonus as the Board of Directors shall determine from time to
time in its sole and absolute discretion. For the first year of the Term,
Executive shall be entitled to a minimum bonus of Forty-Five Thousand Dollars
($45,000). Said bonus shall be advanced to Executive, at his request, at any
time after the Effective Date; provided however, that if Executive resigns his
employment with the Bank:
(a) Prior to July 1, 1998, Executive shall not be entitled to any bonus
and all advances shall be repayable immediately upon demand by Bank;
(b) After July 1, 1998 but prior to July 1, 1999, Executive shall be
entitled to one-third of the $45,000 bonus ($15,000) and shall not be entitled
to the remainder of the bonus ($30,000) and the remainder of the bonus ($30,000)
shall be repayable immediately upon demand by Bank;
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<PAGE> 4
(c) After July 1, 1999 but prior to July 1, 2000, Executive shall be
entitled to two-thirds of the $45,000 bonus ($30,000) and shall not be entitled
to the remainder of the bonus ($15,000) and the remainder of the bonus ($15,000)
shall be repayable immediately upon demand by Bank;
(d) After July 1, 2000, Executive shall be entitled to one hundred
percent of the $45,000 bonus and no portion of the bonus shall be repayable to
Bank.
D. EXECUTIVE BENEFITS
1. Vacation. Executive shall be entitled to four (4) weeks
vacation during each year of the Term provided, however, that during that
period, Executive is required to and shall take at least two (2) weeks of said
vacation (the "Mandatory Vacation") which shall be taken consecutively. All
vacation which is not taken during the respective year of the Term, shall expire
without compensation to the Executive unless otherwise approved in writing by
the Bank's Chief Executive Officer.
2. Group Medical and Life Insurance Benefits. Bank shall provide
for Executive, participation in medical, accident and health insurance benefits
in accordance with the benefits provided to Bank employees generally, and the
Bank will pay the premium for that coverage in the same manner as provided for
Bank employees generally. Said coverage shall be in existence or shall take
effect as of the Effective Date or as soon thereafter
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<PAGE> 5
as permitted by the insurance carrier and shall continue throughout the Term.
Bank's liability to Executive for any breach of this paragraph shall be limited
to the amount of premiums payable by Bank in order to obtain the coverage
contemplated herein.
E. BUSINESS EXPENSES AND REIMBURSEMENT
1. Business Expenses. Executive shall be entitled to
reimbursement by Bank for any ordinary and necessary business expenses incurred
by Executive in the performance of Executive's duties and in acting for Bank
during the Term, including but not limited to, entertainment, meals, and travel
expenses provided that:
(a) Each such expenditure is of a nature
qualifying it as a proper deduction on the federal and state
income tax returns of Bank as a business expense; and
(b) Executive furnishes to Bank adequate records
and other documentary evidence required by federal and state statutes and
regulations issued by the appropriate taxing authorities for the substantiation
of such expenditures as deductible business expenses of Bank.
2. Reimbursement. All such reimbursements shall be subject to
review and audit and in the event any such expenditure is subsequently
determined by the Board of Directors, in good faith, to not be a proper business
expense or is disallowed as a proper deduction on the federal or state income
tax returns of
5
<PAGE> 6
Bank by the appropriate taxing authorities, Executive agrees to reimburse Bank
the full amount of the expenditure.
F. TERMINATION
1. Termination For Cause. Bank may terminate this Agreement at
any time, without further obligation or liability to Executive, by action of the
Board of Directors for "cause." The occurrence of any of the following shall
constitute "cause" for purposes of this Agreement:
(a) Executive commits an act or acts or an
omission to act which constitutes: (i) a willful breach of duty in the course of
Executive's employment; (ii) a habitual neglect of duty; (iii) a willful
violation of any applicable banking law or regulation; or (iv) a willful
violation of any policy, procedure, practice, method of operation or specific
mode of conduct established by the Board of Directors or as set forth in the
Bank's Employee Manual, if any;
(b) Executive engages in activity which, in the
opinion of the Board of Directors, could materially adversely affect Bank's
reputation in the community or which evidences the lack of Executive's fitness
or ability to perform Executive's duties as determined by the Board of
Directors, in good faith;
(c) Executive commits any act or acts or an
omission to act which would cause termination of coverage under Bank's Bankers
Blanket Bond as to Executive or as to Bank as a whole or any act which would
give rise to a colorable claim by
6
<PAGE> 7
Bank under its Bankers Blanket Bond as determined by the Board of Directors, in
good faith;
(d) Bank is closed or taken over by the
Comptroller of the Currency or the Federal Deposit Insurance
Corporation;
(e) Any regulatory authority having supervisory
authority over Bank exercises its cease and desist powers to remove Executive
from office or advises Bank that Executive should be removed from office; or
(f) Any other act or omission which would
constitute "cause" under California law.
The determination of "cause" shall be accomplished by the Board of Directors, in
good faith, and its determination shall be final and binding upon the parties
hereto. Termination pursuant to this Section F.1 shall become effective
immediately upon notice of termination.
2. Termination Without Cause. Notwithstanding anything to the
contrary herein, Bank may terminate this Agreement at any time without cause. In
the event of Executive's death or substantial disability, the Bank may terminate
this Agreement which termination shall be treated as being without cause.
3. Merger or Corporate Dissolution. In the event of a merger
where Bank is not the surviving corporation, in the event of a consolidation, in
the event of a transfer of all or substantially all of the assets of Bank, this
Agreement may be
7
<PAGE> 8
terminated or may be assigned to any person, association or corporation
acquiring all or substantially all of its assets or to any corporation into
which it shall be merged or consolidated if agreed to by Bank and that person,
association or corporation, in which case, this Agreement shall remain in full
force and effect and Bank shall be unconditionally released from all of its
duties and obligations hereunder upon such assignment.
4. Expiration of Term Without Renewal. If the Bank is
unwilling, for any reason whatsoever, to enter into a new employment agreement
with Executive at the expiration of the full Term, or the Executive and Bank are
unable to reach a mutually agreeable contract prior to the expiration of a full
Term, or Executive decides to retire or to take employment elsewhere at the
expiration of the full Term, then this Agreement shall terminate at the end of
the full Term and Executive's employment with the Bank shall terminate as of the
end of the full Term.
5. Effect of Termination.
(a) In the event this Agreement is terminated for any of
the reasons specified in Section F.1 or F.4 of this Agreement, Executive shall
be entitled to the Base Salary earned by Executive prior to the date of
termination, computed pro rata up to and including that date, and accrued but
unused vacation time, but Executive shall be entitled to no further compensation
or benefits for services rendered after the date of termination.
(b) In the event this Agreement is terminated pursuant
to Sections F.2 or F.3 hereof, Executive shall be
8
<PAGE> 9
entitled to the Base Salary earned by Executive prior to the date of
termination, computed pro rata up to and including that date,
accrued but unused vacation time, plus his Base Salary for the remainder of the
Term. Payment of the amounts required by this Section may be made by the Bank in
equal installments in accordance with the Bank's normal payroll periods and
shall discharge Bank from any further liability to Executive hereunder.
(c) In the event this Agreement is terminated
pursuant to Section F of this Agreement, the provisions of Sections G.1 through
G.7 hereof shall survive said termination and shall inure to the benefit of and
be binding upon the parties hereto and their respective executors,
administrators, successors and assigns.
6. Resignation. In the event Executive is terminated in
accordance with this Agreement, resigns as Executive Vice President and Chief
Credit Officer of the Bank or otherwise becomes unaffiliated with the Bank, and
if at such time Executive is a member of the Board of Directors, Executive
shall, and hereby agrees to, submit his resignation from the Board of Directors
of the Bank and any parent company and from any committees thereof and the Board
of Directors shall determine, in its sole discretion, to accept or decline such
tendered resignation. If such resignation is not received by the Bank within
three (3) days after the date of termination, resignation or nonaffiliation,
Executive hereby authorizes and directs the Board of Directors to consider the
failure to so act as
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<PAGE> 10
Executive's resignation from the Board of Directors of the Bank effective as of
the date of termination, resignation or nonaffiliation.
G. GENERAL PROVISIONS
1. Trade Secrets. During the Term, Executive will have
access to and become acquainted with what Executive and Bank acknowledge are
trade secrets, to wit, knowledge or data concerning Bank, including its
operations and business, and the identity of customers of Bank, including
knowledge of their financial condition, their financial needs, as well as their
methods of doing business. Executive shall not disclose any of the aforesaid
trade secrets, directly or indirectly, or use them in any way, either during the
Term or for a period of eighteen (18) months after the termination of the Term
of this Agreement, except as required in the course of Executive's employment
with Bank.
2. Return of Documents. Executive expressly agrees that all
manuals, documents, files, reports, studies, instruments, software, computer
programs or similarly generated electronic materials or other materials used
and/or developed by Executive during the Term are solely the property of Bank,
and that Executive has no right, title or interest therein. Upon termination of
the Term of this Agreement, Executive or Executive's representative shall
promptly deliver possession of all of said property to Bank in good condition.
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<PAGE> 11
3. Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be deemed to be properly
given when personally served in writing, when deposited in the United States
mail, postage prepaid, or when communicated to a public telegraph company for
transmittal, addressed to the Bank at its head office location or the Executive
at his last known address. Either party may change its address by written notice
in accordance with this Section.
4. Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
executors, administrators, successors and assigns.
5. Applicable Law. This Agreement is to be governed by and
construed under the laws of the State of California.
6. Invalid Provisions. Should any provisions of this
Agreement for any reason be declared invalid, void, or unenforceable by a court
of competent jurisdiction, the validity and binding effect of any remaining
portion shall not be affected, and the remaining portions of this Agreement
shall remain in full force and effect as if this Agreement had been executed
with said provision eliminated.
7. Entire Agreement. Except as to separate stock option
agreements, this Agreement contains the entire agreement of the parties. It
supersedes any and all other agreements, either oral or in writing, between the
parties hereto with respect to the employment of Executive by Bank. Each party
to
11
<PAGE> 12
this Agreement acknowledges that no representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein, and that no other agreement,
statement, or promise not contained in this Agreement shall be valid or binding
other than duly authorized and executed stock option agreements. This Agreement
may not be modified or amended by oral agreement, but only by an agreement in
writing signed by Bank and Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FIRST COASTAL BANK, N.A.
By: /s/ Don M. Griffith
-----------------------------
Its: Chief Executive Officer
Executive:
/s/ James F. Gardunio
--------------------------------
JAMES F. GARDUNIO
12
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 1st day of August, 1997, (hereinafter
the "Agreement Date") between FIRST COASTAL BANK N.A. (hereinafter the "Bank")
and ED MYSKA hereinafter the "Executive"),
W I T N E S S E T H
WHEREAS, Bank desires to avail itself of the skill, knowledge and
experience of Executive in order to insure the successful development of its
business; and
WHEREAS, the parties hereto desire to specify the terms of Executive's
employment by Bank as controlling Executive's employment with the Bank;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, it is agreed that from August 1, 1997 (hereinafter the
"Effective Date"), the following terms and conditions shall apply to Executive's
said employment:
A. TERM OF EMPLOYMENT
1. Term. Bank hereby employs Executive and Executive hereby accepts
employment with Bank for the period of three (3) years commencing with the
Effective Date (the "Term"), subject, however, to prior termination of this
Agreement as hereinafter provided. Where used herein, "Term" shall refer to the
entire period of employment of Executive by Bank hereunder commencing
1
<PAGE> 2
with the Effective Date, whether for the period provided above, or whether
terminated earlier as hereinafter provided.
B. DUTIES OF EXECUTIVE
1. Duties. Executive shall perform the duties of Senior Vice
President and Business Development Officer of Bank, or such other duties as may
be established by the Board of Directors, subject to the powers by law vested in
the Board of Directors of Bank and in the Bank's shareholders. During the Term,
Executive shall perform exclusively the services herein contemplated to be
performed by Executive faithfully, diligently and to the best of Executive's
ability, consistent with the highest and best standards of the banking industry
and in compliance with all applicable laws and Bank's Articles of Incorporation
and Bylaws.
2. Conflicts of Interest. Except as permitted by the prior written
consent of the Board of Directors of Bank, Executive shall devote Executive's
entire productive time, ability and attention to the business of Bank during the
Term, and Executive shall not directly or indirectly render any services of a
business, commercial or professional nature to any other person, firm, or
corporation, whether for compensation or otherwise, which are in conflict with
Bank's interests.
C. COMPENSATION
1. Salary. For Executive's services hereunder, Bank shall pay or
cause to be paid as salary to Executive the amount of Six Thousand, Six Hundred
and Sixty-Six Dollars and Sixty-Seven Cents ($6,666.67) per month during the
Term. All of the
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<PAGE> 3
foregoing payments (the "Base Salary") shall be prorated for any month in which
this Agreement is in effect for only a portion of the month. The Base Salary
shall be payable in equal installments in conformity with Bank's normal payroll
periods.
2. Commission. In addition to the Base Salary, Executive shall be
entitled to receive commissions ("Commissions"), to be advanced quarterly on an
estimated basis and reconciled annually within sixty days of the anniversary of
the Effective Date, equal to:
(a) One percent (1%) of the average aggregate demand deposit
balances held at the Bank, during the twelve months preceding such anniversary,
by customers introduced to the Bank by Executive at any time during the
twenty-four months preceding such anniversary ("Eligible Customers"); plus
(b) One-half of one percent (1/2%) of the average aggregate money
market and savings balances held at the Bank, during the twelve months preceding
such anniversary, by Eligible Customers; plus
(c) One quarter of one percent (1/4%) of the average aggregate
time deposits held at the Bank, during the twelve months preceding such
anniversary, by Eligible Customers; plus
(d) One half of one percent (1/2%) of the average aggregate
demand deposit balances held at the Bank, during the twelve months preceding
such anniversary, by customers introduced to the Bank by Executive who are no
longer Eligible Customers; plus
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(e) One quarter of one percent (1/4%) of the average aggregate
money market and savings balances held at the Bank, during the twelve months
preceding such anniversary, by customers introduced to the Bank by Executive who
are no longer Eligible Customers; plus
(f) One eighth of one percent (1/8%) of the average aggregate
time deposits held at the Bank, during the twelve months preceding such
anniversary date, by customers introduced to the Bank by Executive who are no
longer Eligible Customers.
In the event of a dispute regarding the identify of Eligible Customers
or the calculation of average aggregate balances, the determination of the
Bank's Board of Directors shall govern.
3. Advances. From the Effective Date through the first anniversary
of the Effective Date, Executive may take advances, in addition to Base Salary
and Commissions, not to exceed Sixty Thousand Dollars ($60,000) and from the
first anniversary of the Effective Date through the second anniversary of the
Effective Date, Executive may take additional advances not to exceed another
Twenty Thousand Dollars ($20,000). These advances shall be repaid only as
follows:
(a) At such time as Executive's annual compensation from Base Salary
and Commission exceeds One Hundred and Eighty Thousand Dollars ($180,000), all
compensation in excess of $180,000 shall be applied to reduce the balance of the
advances.
(b) Should Bank terminate executive for any reason, other than "for
cause" as defined in Section F.1 hereof, or
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should Bank be unwilling to renew this Employment Agreement on substantially
similar terms at the expiration of the Term, the unpaid balance of the advances
shall be canceled but treated as earned compensation.
(c) Should Executive resign or should Executive be terminated
"for cause" as defined in Section F.1 hereof, the unpaid balance of the advances
shall be immediately due and payable.
D. EXECUTIVE BENEFITS
1. Vacation. Executive shall be entitled to four (4) weeks vacation
during each year of the Term provided, however, that during that period,
Executive is required to and shall take at least two (2) weeks of said vacation
(the "Mandatory Vacation") which shall be taken consecutively. All vacation
which is not taken during the respective year of the Term, shall expire without
compensation to the Executive unless otherwise approved in writing by the Board
of Directors.
2. Group Medical and Life Insurance Benefits. Bank shall provide for
Executive, participation in medical, accident and health insurance benefits in
accordance with the benefits provided to Bank employees generally, and the Bank
will pay the premium for that coverage in the same manner as provided for Bank
employees generally. Said coverage shall be in existence or shall take effect as
of the Effective Date or as soon thereafter as the insurance carrier permits and
shall continue throughout the Term. Bank's liability to Executive for any breach
of this
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paragraph shall be limited to the amount of premiums payable by Bank in order to
obtain the coverage contemplated herein.
E. BUSINESS EXPENSES AND REIMBURSEMENT
1. Business Expenses. Executive shall be entitled to reimbursement
by Bank for any ordinary and necessary business expenses incurred by Executive
in the performance of Executive's duties and in acting for Bank during the Term,
including but not limited to, entertainment, meals, and travel expenses provided
that:
(a) Each such expenditure is of a nature qualifying it as a
proper deduction on the federal and state income tax returns of Bank as a
business expense; and
(b) Executive furnishes to Bank adequate records and other
documentary evidence required by federal and state statutes and regulations
issued by the appropriate taxing authorities for the substantiation of such
expenditures as deductible business expenses of Bank.
2. Reimbursement. All such reimbursements shall be subject to review
and audit and in the event any such expenditure is subsequently determined by
the Bank's Board of Directors, in good faith, to not be a proper business
expense or is disallowed as a proper deduction on the federal or state income
tax returns of Bank by the appropriate taxing authorities, Executive agrees to
reimburse Bank the full amount of the expenditure.
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F. TERMINATION
1. Termination For Cause. Bank may terminate this Agreement at any
time, without further obligation or liability to Executive, by action of the
Board of Directors for "cause." The occurrence of any of the following shall
constitute "cause" for purposes of this Agreement:
(a) Executive commits an act or acts or an omission to act which
constitutes: (i) a willful breach of duty in the course of Executive's
employment; (ii) a habitual neglect of duty; (iii) a willful violation of any
applicable banking law or regulation; or (iv) a willful violation of any policy,
procedure, practice, method of operation or specific mode of conduct established
by the Board of Directors or as set forth in the Bank's Employee Manual, if any;
(b) Executive engages in activity which, in the opinion of the
Board of Directors, could materially adversely affect Bank's reputation in the
community or which evidences the lack of Executive's fitness or ability to
perform Executive's duties as determined by the Board of Directors, in good
faith;
(c) Executive commits any act or acts or an omission to act which
would cause termination of coverage under Bank's Bankers Blanket Bond as to
Executive or as to Bank as a whole or any act which would give rise to a
colorable claim by Bank under its Bankers Blanket Bond as determined by the
Board of Directors, in good faith;
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<PAGE> 8
(d) Bank is closed or taken over by the Comptroller of the
Currency or the Federal Deposit Insurance Corporation;
(e) Any regulatory authority having supervisory authority over
Bank exercises its cease and desist powers to remove Executive from office or
advises Bank that Executive should be removed from office; or
(f) Any other act or omission which would constitute "cause"
under California law. The determination of "cause" shall be accomplished by the
Board of Directors, in good faith, and its determination shall be final and
binding upon the parties hereto. Termination pursuant to this Section F.1 shall
become effective immediately upon notice of termination.
2. Termination Without Cause. Notwithstanding anything to the
contrary herein, Bank may terminate this Agreement at any time without cause. In
the event of Executive's death or substantial disability, the Bank may terminate
this Agreement which termination shall be treated as without cause.
3. Merger or Corporate Dissolution. In the event of a merger where
Bank is not the surviving corporation, in the event of a consolidation, in the
event of a transfer of all or substantially all of the assets of Bank, this
Agreement may be terminated or may be assigned to any person, association or
corporation acquiring all or substantially all of its assets or to any
corporation into which it shall be merged or consolidated if agreed to by Bank
and that person, association or corporation, in which case, this Agreement shall
remain in full force and
8
<PAGE> 9
effect and Bank shall be unconditionally released from all of its duties and
obligations hereunder upon such assignment.
4. Expiration of Term Without Renewal. If the Bank is unwilling,
for any reason whatsoever, to enter into a new employment agreement with
Executive at the expiration of the full Term, or the Executive and Bank are
unable to reach a mutually agreeable contract prior to the expiration of a full
Term, or Executive decides to retire or to take employment elsewhere at the
expiration of the full Term, then this Agreement shall terminate at the end of
the full Term and Executive's employment with the Bank shall terminate as of the
end of the full Term.
5. Effect of Termination.
(a) In the event this Agreement is terminated for any of the
reasons specified in Section F.1 or F.4 of this Agreement, Executive shall be
entitled to the Base Salary and Commissions earned by Executive prior to the
date of termination, computed pro rata up to and including that date, and
accrued but unused vacation time, but Executive shall be entitled to no further
benefits or compensation, including Commissions, after the date of termination.
(b) In the event this Agreement is terminated pursuant to Section
F.2 hereof, Executive shall be entitled to the Base Salary and Commissions
earned by Executive prior to the date of termination, computed pro rata up to
and including that date, accrued but unused vacation time, plus (A)Base Salary
for the remainder of the Term, plus (B) Commissions for the remainder of
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<PAGE> 10
the Term based on the ongoing balances of Eligible Customers and customers
introduced to the Bank by Executive who are no longer Eligible Customers(the
"Additional Compensation"). Payment of the At Will Additional Compensation
required by this Section may be made by the Bank in installments in accordance
with the Bank's normal payroll periods and quarterly Commission advances and
such payments shall discharge Bank from any further liability to Executive
hereunder.
(c) In the event this Agreement is terminated pursuant to Section
F.3 of this Agreement, Executive shall be entitled to the Base Salary and
Commissions earned by Executive prior to the date of termination, computed pro
rata up to and including that date, accrued but unused vacation time, plus (A)
Base Salary for the remainder of the Term, plus (B)Commissions for an additional
three (3) years on the ongoing balances of Eligible Customers and customers
introduced to the Bank by Executive who are no longer Eligible Customers (the
"Merger Additional Compensation"). Payment of the Merger Additional Compensation
shall discharge Bank from any further liability to Executive hereunder.
(d) In the event this Agreement is terminated pursuant to Section
F of this Agreement, the provisions of Sections G.1 through G.7 hereof shall
survive said termination and shall inure to the benefit of and be binding upon
the parties hereto and their respective executors, administrators, successors
and assigns.
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<PAGE> 11
G. GENERAL PROVISIONS
1. Trade Secrets. During the Term, Executive will have access to
and become acquainted with what Executive and Bank acknowledge are trade
secrets, to wit, knowledge or data concerning Bank, including its operations and
business, and the identity of customers of Bank, including knowledge of their
financial condition, their financial needs, as well as their methods of doing
business. Executive shall not disclose any of the aforesaid trade secrets,
directly or indirectly, or use them in any way, either during the Term or for a
period of twelve (12) months after the termination of the Term of this
Agreement, except as required in the course of Executive's employment with Bank.
2. Return of Documents. Executive expressly agrees that all manuals,
documents, files, reports, studies, instruments, software, computer programs or
similarly generated electronic materials or other materials used and/or
developed by Executive during the Term are solely the property of Bank, and that
Executive has no right, title or interest therein. Upon termination of the Term
of this Agreement, Executive or Executive's representative shall promptly
deliver possession of all of said property to Bank in good condition.
3. Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be deemed to be properly given when
personally served in writing, when deposited in the United States mail, postage
prepaid, or when
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<PAGE> 12
communicated to a public telegraph company for transmittal, addressed to the
Bank at its head office location or the Executive at his last known address.
Either party may change its address by written notice in accordance with this
Section.
4. Benefit of Agreement. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective executors,
administrators, successors and assigns.
5. Applicable Law. This Agreement is to be governed by and construed
under the laws of the State of California.
6. Invalid Provisions. Should any provisions of this Agreement for
any reason be declared invalid, void, or unenforceable by a court of competent
jurisdiction, the validity and binding effect of any remaining portion shall not
be affected, and the remaining portions of this Agreement shall remain in full
force and effect as if this Agreement had been executed with said provision
eliminated.
7. Entire Agreement. This Agreement contains the entire agreement
of the parties. It supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the employment of Executive
by Bank. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein,
and that no other agreement, statement, or promise not contained in this
Agreement shall be valid or binding other than duly authorized and executed
stock
12
<PAGE> 13
option agreements. This Agreement may not be modified or amended by oral
agreement, but only by an agreement in writing signed by Bank and Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FIRST COASTAL BANK, N.A.
By: /s/ Deborah Marsten
------------------------
Its: Executive Vice President
------------------------
EXECUTIVE
/s/ Ed Myska
-----------------------------
ED MYSKA
-----------------------------
13
<PAGE> 1
EXHIBIT 10.6
CREDIT ANALYSIS AGREEMENT
THIS AGREEMENT is made as of February 1, 1998, by and between DataTech
Management, Inc. ("Servicer"), a corporation duly organized and existing under
the laws of the State of California, and First Coastal Bank, N.A., a national
banking association ("Customer"), duly organized and existing under the laws of
the United States of America.
The parties hereto, in consideration of the obligations herein made and
undertaken, and intending to be legally bound, hereby agree as follows:
1. Duties of Servicer. Servicer shall provide Customer with such credit
analysis services as Customer may request and that Servicer makes available,
from time to time, including but not limited to, obtaining credit reports,
Fair/Isaac Credit Scoring for small business applicants and for consumer loan
applicants, the preparation of credit analysis worksheets including business
debt coverage, personal 1040 cash flow analysis, real estate collateral
coverage, business collateral coverage, combined collateral coverage, financial
statements and spreadsheets, accounts receivable aging summaries, schedules of
real estate owned and personal credit analysis. In addition, Servicer will
provide, upon request, a full credit analysis, complete with a Fair/Isaacs Small
Business Scorecard, appropriate credit analysis worksheets, financial statement
spreads and a brief narrative summary discussion.
2. Duties of Customer. It shall be Customer's responsibility to provide
Servicer with such raw data and supporting information as Servicer reasonably
requests in order to perform the credit analysis services, generally as set
forth on the "Credit Analysis Check Sheet" a sample of which is attached hereto
as Exhibit A.
3. Processing. Servicer's scheduled business hours will be 8:30 a.m. to
5:30 p.m., Pacific Time, Monday through Friday, except for bank holidays
observed in California. Servicer will provide credit analysis services promptly,
generally within three (3) business days of receipt of all information, data and
documents requested by Servicer. Servicer shall not be responsible for delays
attributable to causes beyond its reasonable control.
4. Fees and Charges. For the services to be provided hereunder, Servicer
will charge and Customer will pay the fees and charges as set forth in Exhibit B
attached hereto. Servicer may adjust the fees periodically; provided however,
that any adjustment of the fee schedule must be available for review by the
Customer at least sixty (60) days prior to its effective date.
<PAGE> 2
5. Records. Customer acknowledges that Servicer may microfilm, or
otherwise copy, the documents sent to Servicer by Customer. Otherwise, the
documents and records sent to Servicer, as the basis for rendering its credit
analysis services will be returned to Customer along with Servicer's worksheets
and analysis.
6. Confidentiality. Customer views the data, information and records
relating to its business and the data, information, records and accounts of its
customers as "confidential information". Servicer views all data, information
and records relating to its customers and its provision of services under this
Agreement as confidential information.
The parties agree to hold each other's confidential information in
confidence. The parties agree not to make each other's confidential information
available in any form to any third party or to use each other's confidential
information for any purpose other than providing services to Customer and the
implementation of this Agreement. Should either party receive a subpoena or
similar judicial or governmental order or request seeking confidential
information belonging or pertaining to the other party, notice of such subpoena
or order shall be given immediately to the other party so as to afford
reasonable opportunity to seek a protective order or such other relief as may be
deemed appropriate by the party in interest. Each party agrees to take all
reasonable steps to ensure that confidential information is not disclosed or
distributed by its employees or agents in violation of the provision of this
Agreement.
7. Limitation of Liability. Servicer shall be liable to Customer only
for Servicer's intentional misconduct or materially negligent performance of the
services to be provided hereunder. Servicer shall not be responsible for any
loss arising, directly or indirectly, in whole or in part, from: (a) any act or
failure to act on the part of any person not within Servicer's reasonable
control, (b) the negligence of Customer or the breach of this Agreement by
Customer, (c) any ambiguity or inaccuracy in any instruction given to the
Servicer by Customer or Customer's agent, (d) from any error, failure or delay
in transmission or delivery of any data, documents or records provided, or to be
provided, to Servicer by Customer, or (e) Customer's altering, editing or
revising any document, report, write-up or analysis furnished to Customer by
Servicer.
8. Insurance. Servicer will carry such insurance as is ordinary and
customary for similar types of business including employee fidelity coverage of
not less than $2,000,000, errors and omissions coverage, and physical loss
coverage insuring Customer's records while in Servicer's possession. A summary
of Servicer's insurance coverage shall be available to Customer upon
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<PAGE> 3
request.
9. Indemnity.
A. Except to the extent prohibited or limited by law, Customer shall
defend, indemnify and hold harmless the Servicer against any and all losses,
claims, damages, liabilities, actions, costs or expenses, including reasonable
attorneys' fees incurred by it in connection with any claim against it and in
defending any action (collectively "Losses"), for which the Servicer may become
liable and which arise out of or are based upon any act or omission to act by
any officer or employee of Customer.
B. Except to the extent prohibited or limited by law, the Servicer
shall defend, indemnify and hold harmless Customer from and against any and all
losses, claims, damages, liabilities, actions, costs or expenses, including
reasonable attorneys' fees incurred by it in connection with any claim against
it and in defending any action (collectively "Losses") for which Customer may
become liable and which arise out of or are based upon any act or omission to
act by any officer or employee of Servicer.
C. If any claim is made or lawsuit, proceeding or enforcement action
is filed (herein, "Claim" or "Claims") against any party entitled to the benefit
of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within ten (10)
business days after receipt of the Claim or the service of the citation or
summons); provided, that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
The indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such Claim, and to employ and engage attorneys
of its own choice who are reasonably acceptable to the indemnified party to
handle and defend the same, at the indemnifying party's cost, risk and expense.
The indemnifying party shall notify the indemnified party in writing of its
election to defend in good faith any such Claim as soon as it is practicable,
and in any event within fifteen (15) days after receipt of written notice
thereof by the indemnifying party from the indemnified party. The indemnifying
party shall have the right to settle or compromise any such claim without the
consent of the indemnified party at any time utilizing its own funds to do so,
if in connection with such settlement or compromise the indemnified party is
fully released from liability and is paid any indemnification amounts due
hereunder. If the indemnifying party fails, or does not elect, to assume the
defense of such Claim within fifteen (15) days
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<PAGE> 4
after receipt of notice pursuant to this Section, the indemnified party will
(upon delivering notice to such effect to the indemnifying party) have the right
to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the indemnifying party; provided, however, that such Claim shall not be
compromised or settled without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. In the event the indemnified
party assumes defense of the Claim, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying party shall be liable for any
settlement of any Claim effected pursuant to and in accordance with this Section
and/or any final judgment or assessment (subject to any right of appeal), and
the indemnifying party agrees to indemnify and hold harmless the indemnified
party from and against any damages by reason of such settlement or judgment.
D. The indemnified party shall cooperate in all reasonable respects
with the indemnifying party and its attorneys in any investigation, trial and
defense relating to a Claim and any appeal arising therefrom; provided, however,
that the indemnified party may, at its own costs, participate in the
investigation, trial and defense of such claim and any appeal arising therefrom.
E. The rights of the parties to indemnification provided for in this
Section 9 shall survive the termination of this Agreement.
10. Auditing. Servicer will cause an independent audit of its operation
to be conducted at least annually and shall make a copy of that audit available
to Customer upon request.
Customer, its independent auditors, and any bank regulatory personnel
shall have access to, and may examine, all documents and records pertaining to
Customer held by Servicer, during Servicer's scheduled business hours.
11. Binding Nature and Assignment. This Agreement shall be binding on
parties hereto and their successors and assigns, but neither party may assign
this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld.
12. Entire Agreement. This Agreement, together with each Schedule
annexed hereto, constitutes the entire agreement between the parties. There are
no understandings or agreements relative hereto which are not fully expressed
herein and no change, waiver or discharge hereof shall be valid unless in
writing and executed
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<PAGE> 5
by the party against whom such change, waiver or discharge is sought to be
enforced. This Agreement supersedes any and all previous agreements relating to
loan documentation services entered into between the parties.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
14. Binding Arbitration. Any controversy arising out of or relating to
this Agreement or the transactions contemplated hereby shall be referred to
arbitration pursuant to the provisions of California Code of Civil Procedure
Section 1281 et.
seq.
DataTech Management, Inc.
By: /s/ Deborah A. Marsten
-------------------------
Its: President
------------------------
First Coastal Bank, N.A.
-----------------------------
("Customer")
By: /s/ James F. Gardunio
-------------------------
Its: Executive Vice President
------------------------
5
<PAGE> 1
EXHIBIT 10.7
LOAN DOCUMENTATION AGREEMENT
THIS AGREEMENT is made as of February 1, 1998, by and between DataTech
Management, Inc. ("Servicer"), a corporation duly organized and existing under
the laws of the State of California, and First Coastal Bank, N.A., a national
banking association, ("Customer"), duly organized and existing under the
laws of the United States of America.
The parties hereto, in consideration of the obligations herein made and
undertaken, and intending to be legally bound, hereby agree as follows:
1. Term. Subject to the provisions of Section 8 hereof, the initial term
shall be one (1) years. This Agreement shall automatically renew for a
successive one (1) year term unless either party notifies the other of its
intent not to renew within six (6) months before the end of any term.
2. Duties of Servicer. Servicer shall provide Customer with loan
documentation utilizing the CFI Laser Pro forms and system, except for
specialized documentation which shall be prepared by such person or firm as
Customer designates. The loan documents shall be prepared by Servicer and will
be available to Customer at a printer to be designated by Customer and located
in Customer's premises.
3. Duties of Customer. It shall be Customer's responsibility to provide
Servicer, from time to time, with an updated list of officers authorized to
request loan documentation. In addition, Customer will provide to Servicer such
loan approvals and supporting documentation as are necessary to permit Servicer
to produce the appropriate loan documentation. It shall be the Customer's
responsibility to review all loan documents prepared by Servicer for both
accuracy and completeness. Customer shall notify Servicer of any errors or
omissions noted in the loan documentation and Servicer shall immediately revise
the loan documentation in such manner as is requested by Customer.
4. Processing. Servicer's scheduled business hours will be 8:30 a.m. to
5:30 p.m. Pacific Time, Monday through Friday, except for bank holidays observed
in California. Servicer will process Customer's loan documentation requests
promptly, with an anticipated turn around time of 24-48 hours and in any case
not to exceed 72 hours. Servicer shall not be responsible for delays
attributable to causes beyond its reasonable control, including limitations upon
the availability of telephone transmission facilities or failures of other
communications equipment or Servicer's inability to access CFI Laser Pro.
5. Fees and Charges. During the first year of the term, Servicer will
charge and Customer will pay the fees and charges as set forth in Schedule "A"
attached hereto. Thereafter, Servicer may adjust the fees annually; provided
however, that any
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<PAGE> 2
adjustment of the fee schedule must be available for review by the Customer at
least one hundred twenty (120) days prior to its effective date.
6. Backup. Servicer shall maintain adequate backup arrangements and
equipment in order to maintain services hereunder in the event of the failure of
Servicer's equipment . Without limiting the generality of the foregoing,
Servicer will backup all files daily by tape onto Servicer's network and will
maintain duplicate tapes off-site. In addition, monthly backup tapes will be
available to Customer upon request.
7. Confidentiality. Customer views the data, information and records
relating to its business and the data, information, records and accounts of its
customers as "confidential information". Servicer views all data, information
and records relating to its customers and its provision of services under this
Agreement as confidential information.
The parties agree, both during the term of this Agreement and forever
thereafter, to hold each other's confidential information in confidence. The
parties agree not to make each other's confidential information available in any
form to any third party or to use each other's confidential information for any
purpose other than the servicing of Customer's transactions and the
implementation of this Agreement. Should either party receive a subpoena or
similar judicial or governmental order or request seeking confidential
information belonging or pertaining to the other party, notice of such subpoena
or order shall be given immediately to the other party so as to afford
reasonable opportunity to seek a protective order or such other relief as may be
deemed appropriate by the party in interest. Each party agrees to take all
reasonable steps to ensure that confidential information is not disclosed or
distributed by its employees or agents in violation of the provision of this
Agreement.
8. Termination.
A. Termination for Non-Payment. In the event that Customer fails
to pay any fees properly invoiced to Customer by Servicer within sixty (60) days
from the date of Servicer's invoice, Servicer in its discretion may terminate
this Agreement immediately with notification to Customer.
B. Termination on Notice. Customer may terminate this Agreement
upon ninety (90) days prior written notice to Servicer and Servicer may
terminate this Agreement upon one hundred and twenty (120) days prior written
notice to Customer.
9. Limitation of Liability. Servicer shall be liable to Customer only
for Servicer's intentional misconduct or materially negligent performance of the
services to be provided hereunder. Servicer shall not be responsible for any
loss arising, directly or indirectly, in whole or in part, from: (a) any act or
failure
2
<PAGE> 3
to act on the part of any person not within Servicer's reasonable control, (b)
the negligence of Customer or the breach of this Agreement by Customer, (c) any
ambiguity or inaccuracy in any instruction given to the Servicer by Customer or
Customer's agent, or (d) from any error, failure or delay in transmission or
delivery of any data, records, or items, including without limitation, any
inoperability of computer or communications facilities, or other circumstances
beyond Servicer's reasonable control. Further, Customer acknowledges that
Servicer is utilizing loan documentation forms provided by CFI Laser Pro and
that Servicer has made no representation or warranty regarding the legality or
enforceability of these Laser Pro loan documents.
10. Insurance. Servicer will carry such insurance as is ordinary and
customary for similar types of business including employee fidelity coverage of
not less than $2,000,000 and physical loss coverage insuring Customer's records
while in Servicer's possession. A summary of Servicer's insurance coverage shall
be available to Customer upon request.
11. Indemnity.
A. Except to the extent prohibited or limited by law, Customer
shall defend, indemnify and hold harmless the Servicer against any and all
losses, claims, damages, liabilities, actions, costs or expenses, including
reasonable attorneys' fees incurred by it in connection with any claim against
it and in defending any action (collectively "Losses"), for which the Servicer
may become liable and which arise out of or are based upon any act or omission
to act by any officer or employee of Customer.
B. Except to the extent prohibited or limited by law, the
Servicer shall defend, indemnify and hold harmless Customer from and against any
and all losses, claims, damages, liabilities, actions, costs or expenses,
including reasonable attorneys' fees incurred by it in connection with any claim
against it and in defending any action (collectively "Losses") for which
Customer may become liable and which arise out of or are based upon any act or
omission to act by any officer or employee of Servicer.
C. If any claim is made or lawsuit, proceeding or enforcement
action is filed (herein, "Claim" or "Claims") against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within ten (10)
business days after receipt of the Claim or the service of the citation or
summons); provided, that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such failure.
The indemnifying party shall be entitled, if it so elects, to take control of
the defense and investigation of such
3
<PAGE> 4
Claim, and to employ and engage attorneys of its own choice who are reasonably
acceptable to the indemnified party to handle and defend the same, at the
indemnifying party's cost, risk and expense. The indemnifying party shall notify
the indemnified party in writing of its election to defend in good faith any
such Claim as soon as it is practicable, and in any event within fifteen (15)
days after receipt of written notice thereof by the indemnifying party from the
indemnified party. The indemnifying party shall have the right to settle or
compromise any such claim without the consent of the indemnified party at any
time utilizing its own funds to do so, if in connection with such settlement or
compromise the indemnified party is fully released from liability and is paid
any indemnification amounts due hereunder. If the indemnifying party fails, or
does not elect, to assume the defense of such Claim within fifteen (15) days
after receipt of notice pursuant to this Section, the indemnified party will
(upon delivering notice to such effect to the indemnifying party) have the right
to undertake, at the indemnifying party's cost and expense, the defense,
compromise or settlement of such Claim on behalf of and for the account and risk
of the indemnifying party; provided, however, that such Claim shall not be
compromised or settled without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. In the event the indemnified
party assumes defense of the Claim, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying party shall be liable for any
settlement of any Claim effected pursuant to and in accordance with this Section
and/or any final judgment or assessment (subject to any right of appeal), and
the indemnifying party agrees to indemnify and hold harmless the indemnified
party from and against any damages by reason of such settlement or judgment.
D. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and its attorneys in any investigation,
trial and defense relating to a Claim and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own costs, participate
in the investigation, trial and defense of such claim and any appeal arising
therefrom.
E. The rights of the parties to indemnification provided for in
this Section 11 shall survive the termination of this Agreement.
12. Auditing. Servicer will cause an independent audit of its operation
to be conducted at least annually and shall make a copy of that audit available
to Customer upon request.
Customer, its independent auditors, and any bank regulatory personnel
shall have access to, and may examine, all documents and records pertaining to
Customer held by Servicer, during Servicer's scheduled business hours.
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<PAGE> 5
13. Binding Nature and Assignment. This Agreement shall be binding on
parties hereto and their successors and assigns, but neither party may assign
this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld.
14. Entire Agreement. This Agreement, together with each Schedule
annexed hereto, constitutes the entire agreement between the parties. There are
no understandings or agreements relative hereto which are not fully expressed
herein and no change, waiver or discharge hereof shall be valid unless in
writing and executed by the party against whom such change, waiver or discharge
is sought to be enforced. This Agreement supersedes any and all previous
agreements relating to loan documentation services entered into between the
parties.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
16. Binding Arbitration. Any controversy arising out of or relating to
this Agreement or the transactions contemplated hereby shall be referred to
arbitration pursuant to the provisions of California Code of Civil Procedure
Section 1281 et.
seq.
DataTech Management, Inc.
By: \s\ Deborah Marsten
------------------------------------
Its: President
------------------------------------
First Coastal Bank, N.A.
----------------------------------------
("Customer")
By: \s\ James F. Garduino
------------------------------------
Its: Executive Vice President
------------------------------------
5
<PAGE> 1
EXHIBIT 10.8
LOAN SERVICING AGREEMENT
THIS AGREEMENT is made as of February 1, 1998, by and between DataTech
Management, Inc. ("Servicer"), a corporation duly organized and existing under
the laws of the State of California, and First Coastal Bank, N.A., a national
banking association ("Customer"), duly organized and existing under the
laws of the United States of America.
The parties hereto, in consideration of the obligations herein made and
undertaken, and intending to be legally bound, hereby agree as follows:
1. Term. Subject to the provisions of Section 8 hereof, the initial term
shall be one (1) years. This Agreement shall automatically renew for a
successive one (1) year term unless either party notifies the other of its
intent not to renew within six (6) months before the end of any term.
2. Duties of Servicer. Servicer shall provide Customer with services
similar to those provided by a bank note department, including but not limited
to boarding loans on to Customer's data processing system, generating billing
statements and mailing such statements to borrowers, processing payments
received from borrowers, processing and preparing statistical information
pertaining to serviced loans, performing daily call backs of transactions and
balancing to Customer's general ledger, performing research and responding to
inquiries directed to Customer, posting and balancing deferred fees and costs,
and processing transactions relating to paid off loans including the release of
collateral and the termination of financing statements. In addition, Servicer
shall prepare various reports to assist Customer in monitoring collateral,
financial statements, tax returns, and insurance coverage on collateral.
Servicer shall provide such other information as Customer reasonably requests
provided such information is available to Servicer from Customer's data base.
3. Duties of Customer. It shall be Customer's responsibility to provide
Servicer, from time to time, with an updated list of officers authorized to
approve loan disbursements and advances, make modifications to existing loans as
well as to interface with Servicer to approve system changes and rate changes.
In addition, Customer will provide authorization to Servicer in order to permit
Servicer to access the data processing system used by Customer so that Servicer
can perform its duties hereunder.
4. Processing. Servicer's scheduled business hours will be 8:30 a.m. to
5:30 p.m., Pacific Time, Monday through Friday, except for bank holidays
observed in California. Servicer will process loan transactions promptly, with
postings to be complete within 24 hours of receipt by Servicer. Servicer shall
not be responsible for delays attributable to causes beyond its reasonable
control.
1
<PAGE> 2
5. Fees and Charges. During the first year of the term, Servicer will
charge and Customer will pay the fees and charges as set forth in Schedule "A"
attached hereto. Thereafter, Servicer may adjust the fees annually; provided
however, that any adjustment of the fee schedule must be available for review by
the Customer at least one hundred twenty (120) days prior to its effective date.
6. Backup. Customer acknowledges that entries will be processed by
Servicer to Customer's data processing system. Consequently, historical
information and transactional histories will be under the control of Customer
and Customer shall be responsible for such backup of files, and maintenance of
records off-site, as Customer deems appropriate
7. Confidentiality. Customer views the data, information and records
relating to its business and the data, information, records and accounts of its
customers as "confidential information". Servicer views all data, information
and records relating to its customers and its provision of services under this
Agreement as confidential information.
The parties agree, both during the term of this Agreement and forever
thereafter, to hold each other's confidential information in confidence. The
parties agree not to make each other's confidential information available in any
form to any third party or to use each other's confidential information for any
purpose other than the servicing of Customer's transaction and the
implementation of this Agreement. Should either party receive a subpoena or
similar judicial or governmental order or request seeking confidential
information belonging or pertaining to the other party, notice of such subpoena
or order shall be given immediately to the other party so as to afford
reasonable opportunity to seek a protective order or such other relief as may be
deemed appropriate by the party in interest. Each party agrees to take all
reasonable steps to ensure that confidential information is not disclosed or
distributed by its employees or agents in violation of the provision of this
Agreement.
8. Termination.
A. Termination for Non-Payment. In the event that Customer fails
to pay any fees properly invoiced to Customer by Servicer within sixty (60) days
from the date of Servicer's invoice, Servicer in its discretion may terminate
this Agreement immediately with notification to Customer.
B. Termination on Notice. Customer may terminate this Agreement
upon ninety (90) days prior written notice to Servicer and Servicer may
terminate this Agreement upon one hundred and twenty (120) days prior written
notice to Customer.
2
<PAGE> 3
9. Limitation of Liability. Servicer shall be liable to Customer only
for Servicer's intentional misconduct or materially negligent performance of the
services to be provided hereunder. Servicer shall not be responsible for any
loss arising, directly or indirectly, in whole or in part, from: (a) any act or
failure to act on the part of any person not within Servicer's reasonable
control, (b) the negligence of Customer or the breach of this Agreement by
Customer, (c) any ambiguity or inaccuracy in any instruction given to the
Servicer by Customer or Customer's agent, or (d) from any error, failure or
delay in transmission or delivery of any data, records, or items, including
without limitation, any inoperability of computer or communications facilities,
or other circumstances beyond Servicer's reasonable control.
10. Insurance. Servicer will carry such insurance as is ordinary and
customary for similar types of business including employee fidelity coverage of
not less than $2,000,000 and physical loss coverage insuring Customer's records
while in Servicer's possession. A summary of Servicer's insurance coverage shall
be available to Customer upon request.
11. Indemnity.
A. Except to the extent prohibited or limited by law, Customer
shall defend, indemnify and hold harmless the Servicer against any and all
losses, claims, damages, liabilities, actions, costs or expenses, including
reasonable attorneys' fees incurred by it in connection with any claim against
it and in defending any action (collectively "Losses"), for which the Servicer
may become liable and which arise out of or are based upon any act or omission
to act by any officer or employee of Customer.
B. Except to the extent prohibited or limited by law, the
Servicer shall defend, indemnify and hold harmless Customer from and against any
and all losses, claims, damages, liabilities, actions, costs or expenses,
including reasonable attorneys' fees incurred by it in connection with any claim
against it and in defending any action (collectively "Losses") for which
Customer may become liable and which arise out of or are based upon any act or
omission to act by any officer or employee of Servicer.
C. If any claim is made or lawsuit, proceeding or enforcement
action is filed (herein, "Claim" or "Claims") against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within ten (10)
business days after receipt of the Claim or the service of the citation or
summons); provided, that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such
3
<PAGE> 4
failure. The indemnifying party shall be entitled, if it so elects, to take
control of the defense and investigation of such Claim, and to employ and engage
attorneys of its own choice who are reasonably acceptable to the indemnified
party to handle and defend the same, at the indemnifying party's cost, risk and
expense. The indemnifying party shall notify the indemnified party in writing of
its election to defend in good faith any such Claim as soon as it is
practicable, and in any event within fifteen (15) days after receipt of written
notice thereof by the indemnifying party from the indemnified party. The
indemnifying party shall have the right to settle or compromise any such claim
without the consent of the indemnified party at any time utilizing its own funds
to do so, if in connection with such settlement or compromise the indemnified
party is fully released from liability and is paid any indemnification amounts
due hereunder. If the indemnifying party fails, or does not elect, to assume the
defense of such Claim within fifteen (15) days after receipt of notice pursuant
to this Section, the indemnified party will (upon delivering notice to such
effect to the indemnifying party) have the right to undertake, at the
indemnifying party's cost and expense, the defense, compromise or settlement of
such Claim on behalf of and for the account and risk of the indemnifying party;
provided, however, that such Claim shall not be compromised or settled without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes defense of the
Claim, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any Claim effected
pursuant to and in accordance with this Section and/or any final judgment or
assessment (subject to any right of appeal), and the indemnifying party agrees
to indemnify and hold harmless the indemnified party from and against any
damages by reason of such settlement or judgment.
D. The indemnified party shall cooperate in all reasonable
respects with the indemnifying party and its attorneys in any investigation,
trial and defense relating to a Claim and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own costs, participate
in the investigation, trial and defense of such claim and any appeal arising
therefrom.
E. The rights of the parties to indemnification provided for in
this Section 11 shall survive the termination of this Agreement.
12. Auditing. Servicer will cause an independent audit of its operation
to be conducted at least annually and shall make a copy of that audit available
to Customer upon request.
Customer, its independent auditors, and any bank regulatory
personnel shall have access to, and may examine, all documents
4
<PAGE> 5
and records pertaining to Customer held by Servicer, during Servicer's scheduled
business hours.
13. Binding Nature and Assignment. This Agreement shall be binding on
parties hereto and their successors and assigns, but neither party may assign
this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld.
14. Entire Agreement. This Agreement, together with each Schedule
annexed hereto, constitutes the entire agreement between the parties. There are
no understandings or agreements relative hereto which are not fully expressed
herein and no change, waiver or discharge hereof shall be valid unless in
writing and executed by the party against whom such change, waiver or discharge
is sought to be enforced. This Agreement supersedes any and all previous
agreements relating to loan documentation services entered into between the
parties.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
16. Binding Arbitration. Any controversy arising out of or relating to
this Agreement or the transactions contemplated hereby shall be referred to
arbitration pursuant to the provisions of California Code of Civil Procedure
Section 1281 et.
seq.
DataTech Management, Inc.
By: \s\ Deborah Marsten
------------------------------------
Its: President
------------------------------------
First Coastal Bank, N.A.
------------------------------------
("Customer")
By: \s\ James F. Garduino
------------------------------------
Its: Executive Vice President
------------------------------------
5
<PAGE> 1
EXHIBIT 10.9
CONVERSION AGREEMENT
__________, 1998
First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Ladies and Gentlemen:
The undersigned, the holder of ________ shares of Series A 10% Cumulative
Convertible Preferred Stock, without par value (the "Series A Preferred
Stock"), of First Coastal Bancshares (the "Company"), hereby confirms his
intention to convert such shares on accordance with their terms into shares of
common stock, without par value, of the Company.
The undersigned agrees to convert all such shares of Series A Preferred
Stock into the Company's common stock no later than the Effective Time of the
Merger, as defined in the Agreement and Plan of Reorganization by and among the
Company, First Coastal Bank, N.A. and American Independent Bank, N.A., and is
conditioned upon the consummation of such merger. Nevertheless, the undersigned
reserves its right to convert its shares of Series A Preferred Stock, at its
option, if such condition is not met.
The undersigned represents that it has valid title or authority to convert
such shares of Series A Preferred Stock, and the Company represents that upon
the valid surrender of the Series A Preferred Stock for conversion in
accordance with its terms, the shares of common stock shall be duly authorized,
validly issued, fully paid and non-assessable.
The undersigned acknowledges that he has been informed of the Company's
intention to call the Series A Preferred Stock for redemption on or prior to
March 31, 1999. The undersigned further acknowledges that, as a shareholder of
the Company and a member of California Community LLC, the Company's largest
shareholder, the undersigned wishes to enter into this agreement in order to
assist the Company in its acquisition of American Independent Bank and its
offering of the units. The undersigned understands that the Company will be
relying upon this agreement in connection with the preparation of a
registration statement filed with the Securities and Exchange Commission
relating to the offering and sale of units consisting of common stock and trust
preferred securities.
<PAGE> 2
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and the undersigned.
Very truly yours,
_____________________________________
Name:
Agreed and Accepted:
FIRST COASTAL BANCSHARES
By: ________________________________
Don M. Griffith
Chief Executive Officer
-2-
<PAGE> 1
EXHIBIT 10.10
SUBSCRIPTION AGREEMENT
November 16, 1998
First Coastal Bancshares
275 Main Street
El Segundo, California 90245
Ladies and Gentlemen:
The undersigned, as the holder of warrants (the "Warrants") to
purchase an aggregate of 225,000 shares of common stock, without par value, of
First Coastal Bancshares (the "Company") for $5.00 per share (as adjusted for
the Company's planned one-for-five reverse stock split), hereby confirms its
subscription for 225,000 shares of common stock pursuant to the exercise of the
Warrants.
The undersigned agrees to exercise the Warrants and subscribe for
the shares no later that the Effective Time of the Merger, as defined in the
Agreement and Plan of Reorganization by and among the Company, First Coastal
Bank, N.A. and American Independent Bank, N.A., and is conditioned upon the
consummation of the such merger. In addition, the issuance and subscription
pursuant to this agreement is conditioned upon the Board of Directors of the
Company approving a resolution to allow us to exercise the warrants prior to
March 1, 1999. Nevertheless, the undersigned reserves its right to exercise the
Warrants, at its option, if such conditions are not met.
The undersigned represents that it has, or will have by the
Effective Time of the Merger, sufficient funds for payment of the exercise price
of the warrants, and the Company represents that upon the valid exercise of the
warrants, including the delivery of the exercise price, the shares of common
stock shall be duly authorized, validly issued, fully paid and non-assessable.
The undersigned understands that the Company will be relying upon
this agreement in connection with the preparation of a registration statement
filed with the Securities and Exchange Commission relating to the offering and
sale of units consisting of common stock and trust preferred securities.
<PAGE> 2
Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the undersigned.
Very truly yours,
CALIFORNIA COMMUNITY LLC
By: /s/ Don M. Griffith
------------------------
Don M. Griffith
Chief Executive Officer
Agreed and Accepted:
FIRST COASTAL BANCSHARES
By: /s/ Don M. Griffith
------------------------
Don M. Griffith
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.11
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement is made this 3rd day of
August, 1998, between First Coastal Bank, N.A. as successor to American
Independent Bank, N.A. (hereinafter the "Bank") and Charles E. Brooks
(hereinafter the "Executive").
WITNESSETH
WHEREAS, American Independent Bank, N.A. has entered into an Employment
Agreement with Executive dated as of October 18, 1996; and
WHEREAS, First Coastal Bank, N.A. has merged with and acquired American
Independent Bank, N.A. (the "Merger"); and
WHEREAS, as a condition to the Merger, Bank has agreed to make various
changes in the Employment Agreement with Executive;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, it is agreed that from and after the effective date of
the Merger between American Independent Bank, N.A. and First Coastal Bank, N.A.,
the Employment Agreement with Executive shall remain in full force and effect
except as set forth below:
1. The Term, as set forth in paragraph A.1.(a), shall begin with the
Effective Date of the Merger and shall continue for three (3) years thereafter.
2. Paragraph A.1.(b) shall be deleted in its entirety.
3. The first sentence of paragraph B.1. is amended to read as follows:
"DUTIES. The Executive shall perform the duties of the Vice Chairman
of the Board and Executive Vice President of the Bank, subject to the
powers by law vested in the Board of Directors of the Bank and in the
Bank's shareholders."
4. Paragraph C.3. is deleted in its entirety. However, should Bank adopt
a bonus program for executive officers, Executive shall be entitled to
participate therein fully, in accordance with the terms of such bonus plan.
5. Paragraph D is amended by adding a new sub-paragraph 5 following
subparagraph 4, which new sub-paragraph shall read as follows:
"5. SALARY CONTINUATION. Commencing with the later of Executive's
sixty-fifth (65th) birthday, or Executive's retirement from the Bank,
and continuing for 120 months, Bank shall pay to Executive, or his
estate or beneficiary as designated, as
EXHIBIT "D"
<PAGE> 2
salary continuation, an amount equal to fifty percent (50%) of
Executive's base salary in effect on March 31, 1998."
6. Paragraph 7.4.(b) is amended by deleting the phrase "plus twelve (12)
months' salary" where it appears therein and inserted in lieu thereof the phrase
"plus the monthly salary of Executive, payable in one lump sum on the date of
termination for the remainder of the thirty-six (36) months that originally
constituted the amended Term".
Except as amended hereby, the Employment Agreement between Charles E.
Brooks and American Independent Bank, N.A., dated October 18, 1996, shall remain
in full force and effect except that the duties of American Independent Bank,
N.A. thereunder shall be undertaken and assumed by First Coastal Bank, N.A.
IN WITNESS WHEREOF, the First Amendment has been executed as of the date
first hereinabove written.
EXECUTIVE
/s/ CHARLES E. BROOKS
----------------------------------------
Charles E. Brooks
FIRST COASTAL BANK, N.A.
as successor to American Independent
Bank, N.A.
By: /s/ DON M. GRIFFITH
-------------------------------------
Don M. Griffith
Chairman and Chief Executive Officer
<PAGE> 3
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
THIS AGREEMENT (hereinafter the "Agreement") is made on this 18th day of
October, 1996 (hereinafter the "Agreement Date") between AMERICAN INDEPENDENT
BANK, N.A. (hereinafter the "Bank") and CHARLES E. BROOKS (hereinafter the
"Executive").
WITNESSETH
WHEREAS, the Bank desires to avail itself of the skill, knowledge and
experience of the Executive in order to insure the successful management of its
business; and
WHEREAS, the Parties hereto desire to specify the terms of the
Executive's employment by the Bank as controlling the Executive's employment
with the Bank;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, it is agreed that from February 1, 1997, the following
terms and conditions shall apply to the Executive's said employment:
A. TERM OF EMPLOYMENT
1. (a) TERM. The Bank hereby employs the Executive and the Executive
hereby accepts employment with the Bank for the period of five (5) years (the
"Term") commencing on February 1, 1997 (the "Effective Date"), and ending
February 1, 2002, subject, however, to prior termination of this Agreement as
hereinafter provided. Where used herein, the "Term" shall refer to the entire
period of employment of the Executive by the Bank hereunder commencing with the
Effective Date, whether for the period provided above, or whether terminated
earlier as hereinafter provided.
(b) Subject to the notice provision set forth in this paragraph,
the Term of this Agreement shall be automatically extended for one (1)
additional year on September 30 of each calendar year. The Term shall not be
automatically extended as provided in this paragraph if either party shall give
written notice to the other, on or before September 30 of each year that the
Agreement shall not be automatically renewed on the next February 1. In the
event either party shall give the other written notice as provided in this
paragraph, the Term of this Agreement shall thereafter terminate on the next
following agreement termination date.
(c) If the Bank should form a holding company, then such holding
company shall join and become obligated under this Agreement.
1
<PAGE> 4
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
B. DUTIES OF THE EXECUTIVE
1. DUTIES. The Executive shall perform the duties of the President
and Chief Executive Officer of the Bank, subject to the powers by law vested in
the Board of Directors of the Bank and in the Bank's shareholders. During the
Term, the Executive shall perform exclusively the services herein contemplated
to be performed by the Executive faithfully, diligently and to the best of the
Executive's ability, consistent with the highest and best standards of the
banking industry and in compliance with all applicable laws and Bank's Articles
of Association and Bylaws.
2. CONFLICTS OF INTEREST. Except as permitted by the prior written
consent of the Board of Directors of the Bank, the Executive shall devote the
Executive's entire productive time, ability and attention to the business of the
Bank during the Term, and the Executive shall not directly or indirectly render
any services of a business, commercial or professional nature to any other
person, firm or corporation, whether for compensation or otherwise, which are in
conflict with the Bank's interests.
C. COMPENSATION
1. SALARY. For the Executive's services hereunder, the Bank shall
pay or cause to be paid as salary to the Executive the amount of nine thousand
one hundred sixty-six dollars and sixty-seven cents ($9,166.67) per month during
the Term of this Agreement, prorated for any month in which this Agreement is in
effect for only a portion of the month. The salary shall be payable in equal
installments in conformity with the Bank's normally payroll periods. The
Executive's salary shall be reviewed by the Board of Directors from time to
time, but not less than annually, on or about the anniversary of the Effective
Date and the Executive shall receive such salary increases, if any, as the Board
of Directors, in its sole discretion, shall determine.
2. During the Term of this Agreement, Executive shall also receive
annual increases to the salary described in paragraph C.1. of this Agreement
equal to 100% of the annual increase to the Los Angeles-Anaheim-Riverside All
Urban Consumer Price Index.
3. BONUS. The Executive shall be entitled to receive as an
incentive a "percentage bonus" as described herein for each of the Bank's fiscal
years during which this Agreement is in effect for only a part of the year. For
the purpose of this Agreement, the "percentage bonus" (hereinafter referred to
as Bonus "A") shall be calculated by multiplying by five percentage (5%) points,
the amount of the Bank's "net profits" (as defined herein). For the purpose of
this Agreement, "net profits" shall be the net income as shown on the Bank's
audited accrual basis financial statements. For the purpose of this Agreement,
Bonus "B" will be as follows: In the event the Bank reaches a twelve
2
<PAGE> 5
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
percent (12%) return on Shareholder's Equity measured as of the close of the
preceding fiscal year, as shown on the Bank's audited financial statement for
that preceding year, then the Bank shall pay the Executive a bonus equal to
seven point five percent (7.5%) times the amount of the Bank's net profit and
shall come from the year end annual report. The Executive shall be entitled to
receive either Bonus "A" or "B". Bonus is based on profit, but after income
taxes. This bonus shall be payable within thirty (30) days after the Bank's
certified public accountants have issued their report.
D. EXECUTIVE BENEFITS
1. VACATION. The Executive shall be entitled to vacation during
each year of the Term in accordance with the Bank's policy on vacation
(currently four weeks for the Executive) as it may change from time to time;
provided however, that during each year period, the Executive is required to and
shall take at least two (2) weeks of said vacation (the "Mandatory Vacation")
which shall be taken consecutively.
2. AUTOMOBILE. During the Term hereof, the Bank shall provide the
Executive for the Executive's sole use, an automobile substantially equivalent
to a top of the line Oldsmobile or Cadillac, fully equipped, and shall pay all
operating expenses of any nature whatsoever with regard to such automobile
including insurance coverage for the automobile, provided that the Executive
furnishes to the Bank adequate records and other documentary evidence required
by federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of such payments as deductible business
expenses of the Bank.
3. GROUP MEDICAL AND LIFE INSURANCE BENEFITS. The Bank shall
provide for the Executive, at the Bank's expense, participation in medical,
dental, accident and health, income continuation and life insurance benefits
equivalent to the maximum benefits currently available under the California
Banker's Association Group Insurance Program for an employee of the Executive's
salary level. The Bank shall also provide additional term life insurance of
$250,000.00. Said coverage shall continue until premiums at term prices require
conversion to a more appropriate plan, approved by the Board. The Bank's
liability to the Executive for any breach of this paragraph shall be limited to
the amount of premiums payable by the Bank in order to obtain the coverage
contemplated herein.
4. During the employment period, Executive shall be eligible to
participate in any pension or profit-sharing plan, or similar employee benefit
plan or retirement program of the Bank now or hereafter existing, to the extent
that he is eligible under the provisions thereof and commensurate with his
position in relationship to other participants.
3
<PAGE> 6
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
E. BUSINESS EXPENSES AND REIMBURSEMENT
1. BUSINESS EXPENSES. The Executive shall be entitled to
reimbursement by the Bank for any ordinary and necessary business expenses
incurred by the Executive in the performance of the Executive's duties and in
acting for the Bank during the Term, including but not limited to entertainment,
meals, travel expenses, conventions, meetings, seminars, and clubs, provided
that the Executive furnishes to the Bank adequate records and other documentary
evidence of such expenditures. All such reimbursements shall be subject to
review and audit by the Bank's Board of Directors from time to time, at its sole
discretion. The Bank shall issue credit card(s) for the Executive's use.
F. TERMINATION
1. TERMINATION FOR CAUSE. The Bank may terminate this Agreement at
any time, without further obligation or liability to the Executive, by action of
the Board of Directors for cause. The occurrence of any of the following shall
constitute cause for purposes of this Agreement:
(a) The Executive commits an act or acts of malfeasance or
gross misfeasance in his duties or a willful violation of applicable banking law
or regulations;
(b) The Executive engages in activity which materially
adversely affects the Bank's reputation in the community or which evidences the
lack of the Executive's fitness or ability to perform the Executive's duties as
determined by the Board of Directors, in good faith;
(c) The Executive has committed any act which would cause
termination of coverage under the Bank's Blanket Bond as to Employee, as
distinguished from termination of coverage as to Bank as a whole;
(d) In the event of the Executive's death or the Executive is
found to be physically or mentally incapable of performing the Executive's
duties for a period of 90 days or greater by the Board of Directors, in good
faith;
(e) The Bank is closed or taken over by the Office of the
Comptroller of the Currency or other supervisory authority, including the
Federal Deposit Insurance Corporation; or
(f) Any regulatory authority having supervisory authority over
the Bank, exercises its cease and desist powers to remove the Executive from
office.
4
<PAGE> 7
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
Termination pursuant to this Section F.1 shall become effective immediately upon
notice of termination.
2. TERMINATION WITHOUT CAUSE. Notwithstanding anything to the contrary
herein, the Bank may terminate this Agreement at any time without cause,
3. MERGER OR CORPORATE DISSOLUTION. In the event of a merger where the
Bank is not the surviving corporation, in the event of a consolidation, in the
event of a transfer of all or substantially all of the assets of the Bank, this
Agreement may be terminated or may be assigned to any person, association or
corporation acquiring all or substantially all of its assets or to any
corporation into which it shall be merged or consolidated if agreed to by the
Sank and that person, association or corporation in which case this Agreement
shall remain in full force and effect and the Bank shall be unconditionally
released from all of its duties and obligations hereunder upon such assignment.
4. EFFECT OF TERMINATION.
(a) In the event this Agreement is terminated for any of the reasons
specified in Section F.1 of this Agreement, the Executive shall be entitled to
the salary earned by the Executive prior to the date of termination as provided
for in this Agreement, computed pro rata up to and including that date, and
accrued but unused vacation time, but the Executive shall be entitled to no
further compensation for services rendered after the date of termination.
(b) In the event this Agreement is terminated pursuant to Section F.2
or F.3 of this Agreement, the Executive shall be entitled to the salary earned
by the Executive to the date of termination, computed pro rata up to and
including that date, and accrued but unused vacation time, plus twelve (12)
months' salary at the rate in effect immediately prior to such termination.
Payment of the additional salary required by this Section shall discharge the
Bank from any further liability to the Executive hereunder.
(c) In the event this Agreement is terminated pursuant to Section F
of this agreement, the provisions of Sections I.1 through I.6 and I.8 hereof
shall survive said termination and shall insure to the benefit of and be binding
upon the parties hereto and their respective executors, administrators,
successors and assigns.
H. RESIGNATION FROM BANK'S BOARD OF DIRECTORS
1. RESIGNATION. In the event the Executive is terminated in
accordance with the Agreement or resigns as President and Chief Executive
Officer of the
5
<PAGE> 8
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
Bank or otherwise becomes unaffiliated with the Bank, the Executive shall tender
his resignation from the Board of Directors of the Bank effective on the date of
termination, resignation or non-affiliation.
I. GENERAL PROVISIONS
1. TRADE SECRETS. During the Term, the Executive will have access to
and become acquainted with what the Executive and the Bank acknowledge are trade
secrets, to wit, knowledge or data concerning the Bank, including its operations
and business, and the identity of customers of the Bank, including knowledge of
their financial condition, their financial needs, as well as their methods of
doing business. The Executive shall not disclose any of the aforesaid trade
secrets, directly or indirectly, or use them in any way, either during the Term
or for a period of one (1) year after the termination of the Term of this
Agreement, except as required in the course of the Executive's employment with
the Bank.
2. RETURN OF DOCUMENTS. The Executive expressly agrees that all
manuals, documents, files, reports, studies, instruments or other materials used
and/or developed by the Executive during the Term, appertaining to banking, are
solely the property of the Bank, and that the Executive has no right, title or
interest therein. Upon termination of the Term of this Agreement, the Executive
or Executive's representative shall promptly deliver possession of all said
property to the Bank in good condition.
3. NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be deemed to be properly given when
personally served in writing, when deposited in the United States mail, postage
prepaid, or when communicated to a public telegraph company for transmittal,
addressed to the Bank at its head office location or the Executive at his last
known address. Either party may change its address by written notice in
accordance with this Section.
4. BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective executors,
administrators, successors and assigns.
5. APPLICABLE LAW. This Agreement is to be governed by and construed
under the laws of the State of California.
6. INVALID PROVISIONS. Should any provisions of this Agreement for
any reason be declared invalid, void, or unenforceable by a court of competent
jurisdiction, the validity and binding effect of any remaining portion shall not
be affected, and remaining portions of this Agreement shall remain in full force
and effect as if this Agreement had been executed with said provision
eliminated.
6
<PAGE> 9
EMPLOYMENT AGREEMENT
CHARLES E. BROOKS
OCTOBER 1996
7. ENTIRE AGREEMENT. Except as to separate stock option agreements,
this Agreement contains the entire agreement of the parties. It supersedes any
and all other agreements, either oral or in writing, between the parties hereto
with respect to the employment of the Executive by the Bank. Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein, and that no other agreement,
statement, or promise not contained in this Agreement shall be valid or binding
other than duly authorized and executed stock option agreements. This Agreement
may not be modified or amended by oral agreement, but only by an agreement in
writing signed by the Bank and the Executive.
8. ARBITRATION. In the event that any dispute shall arise between the
parties concerning the provisions of this Agreement or the performance of any
part of the obligations hereunder, or in the event of an alleged breach of this
Agreement by any of the parties hereto, and the parties are unable to mutually
adjust and settle same, such dispute or disputes shall be submitted to binding
arbitration pursuant to the applicable rules of the American Arbitration
Association, and the decision and determination of the arbitrators shall be
final and conclusive.
IN WITNESS HEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
BANK
By /s/ W.S. (STEVE) VAN DE WEGHE 10-21-96
-------------------------------- ----------------------------------
W.S. (Steve) Van De Weghe Date
Its: Chairman of the Board of Directors
EXECUTIVE
/s/ CHARLES E. BROOKS 10-18-96
- ---------------------------------- ----------------------------------
Charles E. Brooks Date
7
<PAGE> 1
EXHIBIT 10.12
THESE SECURITIES MAY NOT BE PUBLICLY OFFERED OR SOLD UNLESS AT THE TIME OF SUCH
OFFER OR SALE, THE PERSON MAKING SUCH OFFER OR SALE DELIVERS A PROSPECTUS
MEETING THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933 FORMING A
PART OF A REGISTRATION STATEMENT, OR POST-EFFECTIVE AMENDMENT THERETO, WHICH IS
EFFECTIVE UNDER SAID ACT, UNLESS IN THE OPINION OF COUNSEL TO FIRST COASTAL SUCH
OFFER AND SALE IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SAID ACT.
WARRANT
For the Purchase of [_______________] ([______])
Shares of Common Stock
of
FIRST COASTAL BANCSHARES
THIS IS TO CERTIFY, that, for value received, [_____________] (the
"Holder") or registered assigns, is entitled, subject to the terms and
conditions hereinafter set forth, on or after January [__], 2000 and at any time
prior to 5:00 p.m., Los Angeles time, on January [__], 2004, but not thereafter,
to purchase such number of shares (the "Shares") of common stock, no par value
(the "Common Stock"), of First Coastal Bancshares, a California corporation
("First Coastal"), from First Coastal as is set forth above and upon payment to
First Coastal of $[____] per Share (the "Exercise Price"), if and to the extent
this Warrant is exercised, in whole or in part, during the period this Warrant
remains in force, subject in all cases to adjustment as provided in Section 2
hereof, and to receive a certificate or certificates representing the Shares so
purchased, upon presentation and surrender to First Coastal of this Warrant,
with the form of subscription attached hereto, including changes thereto
reasonably requested by First Coastal, duly executed, and accompanied by payment
of the Exercise Price of each Share.
1. TERMS OF THIS WARRANT.
1.1 Time of Exercise. Subject to the provisions of Sections 1.5 and 3.1
hereof, this Warrant may be exercised at any time and from time to time after
9:00 a.m., Los Angeles time, on January [__], 2000, but no later than 5:00 p.m.,
Los Angeles time, on January [__], 2003, at which it shall become void, and all
rights hereunder shall thereupon cease.
1.2 Manner of Exercise.
1.2.1 The Holder may exercise this Warrant, in whole or in part,
upon surrender of this Warrant with the form of subscription attached
hereto duly executed, to First Coastal at its corporate office in El
Segundo, California together with the full Exercise Price for each Share
to be purchased in lawful money of the United States, or by certified
check, bank draft or postal or express money order payable in United
States dollars to the order of First Coastal, and upon compliance with and
subject to the conditions set forth herein.
1.2.2 Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Exercise Price
for the Shares for which this Warrant is then being exercised, First
Coastal shall cause to be issued certificates for the total number of
whole Shares for which this Warrant is being exercised in such
denominations as are required for delivery to the Holder, and First
Coastal shall thereupon deliver such certificates to the Holder or its
nominee. Such payment shall be made either by check payable to the order
of First Coastal or the Holder may elect to receive that number of Shares
equal to the value (as determined below) of this Warrant, in which event
First Coastal shall issue to the Holder the number of Shares determined by
using the following formula:
Y (A - B)
X = ---------------------
A
where X = the number of Shares to be issued to the Holder; Y = the total
number of Shares subject to this Warrant; A = the current market value of
one (1) Share; and B = the Exercise Price per Share. Certificates for the
Shares so purchased shall be delivered to the Holders, at their respective
addresses designated in the form of subscription, within a reasonable
time, in no event exceeding five (5) days after the rights represented by
this Warrant shall have been so exercised, and, unless this Warrant has
expired or been exercised in full, a new Warrant representing the number
of Shares (if any) with respect to which this Warrant shall not then have
been exercised shall also be issued to the Holder
<PAGE> 2
within such time.
1.2.3 In case the Holder shall exercise this Warrant with respect to
less than all of the Shares that may be purchased under this Warrant,
First Coastal shall execute a new Warrant for the balance of the Shares
that may be purchased upon exercise of this Warrant and deliver such new
Warrant to the Holder.
1.2.4 First Coastal covenants and agrees that it will pay when due
and payable any and all taxes which may be payable in respect of the issue
of this Warrant, or the issue of any Shares upon the exercise of this
Warrant. First Coastal shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issuance
or delivery of this Warrant or of the Shares in a name other than that of
the Holder at the time of surrender, and until the payment of such tax
First Coastal shall not be required to issue such Shares.
1.3 Exchange of Warrant. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, the Holder shall make such request in writing delivered
to First Coastal at its corporate office and shall surrender this Warrant and
any other Warrants to be so split-up, combined or exchanged. First Coastal shall
then execute and deliver to the person entitled thereto a Warrant or Warrants,
as the case may be, as so requested. First Coastal shall not be required to
effect any split-up, combination or exchange which will result in the issuance
of a Warrant entitling the Holder to purchase upon exercise a fraction of a
Share. First Coastal may require the Holder to pay a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any split-up,
combination or exchange of Warrants.
1.4 Holder as Owner. Prior to due presentment for registration of transfer
of this Warrant, First Coastal may deem and treat the Holder as the absolute
owner of this Warrant (notwithstanding any notation of ownership or other
writing hereon) for the purpose of any exercise hereof and for all other
purposes, and First Coastal shall not be affected by any notice to the contrary.
1.5 Transfer and Assignment. Prior to one year from the date hereof, this
Warrant may not be sold, hypothecated, exercised, assigned or transferred,
except to individuals who are officers of the Holder or any successor to its
business or pursuant to the laws of descent and distribution, and thereafter and
until its expiration shall be assignable and transferable in accordance with and
subject to the provisions of the Securities Act of 1933 and applicable state
securities laws.
1.6 Method of Assignment. Any assignment permitted hereunder shall be made
by surrender of this Warrant to First Coastal at its principal office with the
form of assignment attached hereto duly executed and funds sufficient to pay any
transfer tax. In such event, First Coastal shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such instrument of
assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation thereof at the corporate office of First Coastal together with a
written notice signed by the Holder, specifying the names and denominations in
which such new Warrants are to be issued.
1.7 Rights of Holder. Nothing contained in this Warrant shall be construed
as conferring upon the Holder the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever as
a shareholder of First Coastal. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
(a) First Coastal shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings as
indicated by the accounting treatment of such dividend or distribution on
the books of First Coastal; or
(b) First Coastal shall offer to the holders of its Common Stock any
additional shares of capital stock of First Coastal or securities
convertible into or exchangeable for shares of capital stock of First
Coastal, or any option, right or warrant to subscribe therefor; or
(c) there shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially
all of the assets of First Coastal, or a consolidation or merger of First
Coastal with another entity; or
(d) there shall be proposed a voluntary or involuntary dissolution,
liquidation or winding up of First Coastal;
then, in any one or more of said cases, First Coastal shall cause to be mailed
to the Holder, at the
<PAGE> 3
earliest practicable time (and, in any event, not less than twenty (20) days
before any record date or other date set for definitive action), written notice
of the date on which the books of First Coastal shall close or a record shall be
taken to determine the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Exercise
Price and the kind and amount of the Shares and other securities and property
deliverable upon exercise of this Warrant. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall participate in
said distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of First
Coastal, the right to exercise this Warrant shall terminate).
Without limiting the obligation of First Coastal to provide notice to the
Holder of actions hereunder, it is agreed that failure of First Coastal to give
notice shall not invalidate such action of First Coastal.
1.8 Lost Certificates. If this Warrant is lost, stolen, mutilated or
destroyed, First Coastal shall, on such reasonable terms as to indemnity or
otherwise as it may impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination and
tenor as, and in substitution for, this Warrant, which shall thereupon become
void. Any such new Warrant shall constitute an additional contractual obligation
of First Coastal, whether or not the Warrant so lost, stolen, destroyed or
mutilated shall be at any time enforceable by anyone.
1.9 Covenants of First Coastal. First Coastal covenants and agrees as
follows:
1.9.1 At all times it shall reserve and keep available for the
exercise of this Warrant such number of authorized shares of Common Stock
as are sufficient to permit the exercise in full of this Warrant.
1.9.2 Prior to the issuance of any Shares upon exercise of this
Warrant, First Coastal shall secure the listing of such Shares upon any
securities exchange or automated quotation system upon which First
Coastal's Common Stock is listed for trading.
1.9.3 First Coastal covenants that all Shares when issued upon the
exercise of this Warrant will be validly issued, fully paid,
non-assessable and free of preemptive rights.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
EXERCISE
2.1 Stock Splits. If First Coastal at any time or from time to time after
the issuance date of this Warrant effects a subdivision of the outstanding
Common Stock, the Exercise Price then in effect immediately before that
subdivision shall be proportionately decreased and the number of shares
purchasable hereunder shall be proportionately increased, and conversely, if
First Coastal at any time or from time to time after the issuance date of this
Warrant combines the outstanding shares of Common Stock, the Exercise Price then
in effect immediately before the combination shall be proportionately increased
and the number of shares purchasable hereunder shall be proportionately
decreased. Any adjustment under this subsection 2.1 shall become effective at
the close of business on the date the subdivision or combination becomes
effective.
2.2 Dividends and Distributions. In the event First Coastal at any time,
or from time to time after the issuance date of this Warrant makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Exercise Price then in effect shall be
decreased as of the time of such issuance or, in the event such a record date is
fixed, as of the close of business on such record date, by multiplying the
Exercise Price then in effect by a fraction (i) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution; provided, however,
that if such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Exercise Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter the Exercise Price shall be adjusted pursuant to this subsection
2.2 as of the time of actual payment of such dividends or distributions.
2.3 Recapitalization or Reclassification. If the Shares issuable upon the
exercise of
<PAGE> 4
the Warrant are changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets, provided for
elsewhere in this Section 2), then and in any such event each Holder shall have
the right thereafter to exercise such Holder's Warrant as to the kind and amount
of stock and/or other securities and property receivable upon such
reclassification or other change, by the holder of the number of shares of
Shares as to which such Warrant might have been exercised immediately prior to
such reclassification or exchange, all subject to further adjustment as provided
herein.
2.4 Sale of First Coastal. If at any time or from time to time there is a
capital reorganization of the Common Stock (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 2) or a merger or consolidation of First Coastal with
or into another person, or the sale of all or substantially all of First
Coastal's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the Holder shall thereafter be entitled to receive upon exercise of such
Holder's Warrant, the number of shares of stock or other securities or property
of First Coastal, or of the successor entity resulting from such merger or
consolidation or sale, to which a holder of Shares deliverable upon exercise
would have been entitled on such capital reorganization, merger, consolidation,
or sale. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 2 with respect to the rights of
the Holder after the reorganization, merger, consolidation or sale to the end
that the provisions of this Section (including adjustment of the Exercise Price
then in effect and number of shares purchasable upon exercise of the Warrants)
shall be applicable after that event and be as nearly equivalent to the
provisions hereof as may be practicable.
2.5 Observance of Duties. First Coastal will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by First Coastal but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment.
3. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
3.1 Registration and Legends. This Warrant and the Shares issuable upon
exercise of this Warrant have not been registered under the Securities Act of
1933, as amended (the "Act"). Upon exercise, in part or in whole, of this
Warrant, the certificates representing the Shares shall bear the following
legend:
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE
AND MAY NOT BE OFFERED AND SOLD UNLESS REGISTERED AND/OR QUALIFIED
PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION
APPLICABLE. THEREFORE, NO SALE OR TRANSFER OF THIS SECURITY SHALL BE MADE,
NO ATTEMPTED SALE OR TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH
TRANSACTION SHALL HAVE BEEN DULY REGISTERED UNDER THE ACT AND QUALIFIED OR
APPROVED UNDER APPROPRIATE STATE OR BLUE SKY LAWS, OR (B) THE ISSUER SHALL
HAVE FIRST RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
REGISTRATION, QUALIFICATION OR APPROVAL IS NOT REQUIRED.
3.2 No-Action Letter. First Coastal agrees that it shall be satisfied that
no post-effective amendment or new registration is required for the public sale
of the Shares if it shall be presented with a letter from the Staff of the
Securities and Exchange Commission (the "Commission") stating in effect that,
based upon stated facts which First Coastal shall have no reason to believe are
not true in any material respect, the Staff will not recommend any action to the
Commission if such shares are offered and sold without delivery of a prospectus,
and that, therefore, no post-effective amendment to the Registration Statement
under which such Shares are to be registered or new registration statement is
required to be filed.
3.3 Demand Registration Rights. Upon the Holder's demand, First Coastal
shall register the Shares, file a new Registration Statement, and file all
necessary undertakings with the Commission so as to permit the Holder, or any
assignee of the Holder, the right to sell publicly the Shares issued on exercise
of this Warrant on one occasion at any time within five (5) years from the date
of this Warrant. First Coastal will bear all expenses attendant to registering
the securities (subject to paragraph 3.5.5).
3.4 Piggyback Registration Rights. In the event that the Holder does not
exercise its right to demand that the Shares be registered, First Coastal agrees
to include any appropriate Shares issuable upon exercise of the Warrants in any
Registration Statement filed by First Coastal at any time within seven (7) years
from the date of this Warrant (except for any registration statements on Forms
S-4 or S-8 or similar forms).
<PAGE> 5
3.5 Covenants Regarding Registration. In connection with any registration
under Section 3.3 or 3.4 hereof, First Coastal covenants and agrees as follows:
3.5.1 First Coastal will, within twenty (20) days after written
request from the Holder, take all steps necessary to effectuate
preparation and filing with the Commission of the registration statement
as required by and in compliance with the Act.
3.5.2 First Coastal shall keep such registration statement effective
for the lesser of (a) one hundred twenty (120) days, or (b) the period of
time in which the Holder has effected the distribution of the Holder's
Shares. During such period First Coastal shall prepare and file with the
Commission such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Act with respect to
the disposition of all securities covered by such registration statement.
3.5.3 First Coastal shall notify the Holder at any time when a
prospectus relating to the Shares is required to be delivered under the
Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
3.5.4 First Coastal shall furnish to the Holder such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as the Holder
may reasonably request in order to facilitate the disposition of the
Shares owned by the Holder.
3.5.5 First Coastal shall pay all costs, fees, and expenses in
connection with new registration statements under Section 3.3 and Section
3.4 hereof including, without limitation, First Coastal's legal and
accounting fees, printing expenses and blue sky fees and expenses, except
that First Coastal shall not pay for any of the following costs and
expenses: (a) underwriting discounts and commissions allocable to the
Shares, (b) state transfer taxes, (c) brokerage commissions, and (d) fees
and expenses of counsel and accountants for the Holder.
3.5.6 First Coastal will take all necessary action which may be
required to qualify or register the Shares included in any registration
statement or post-effective amendment or new registration statement for
offering and sale under the securities or blue sky laws of such states as
are reasonably requested by the Holder, provided that First Coastal shall
not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the
laws of any such jurisdiction.
3.5.7 The Holder shall be entitled to pay the Exercise Price for the
Shares purchasable upon the exercise of this Warrant out of the proceeds
of any sale of the Shares purchasable upon its exercise.
3.6 Indemnity.
3.6.1 First Coastal shall indemnify and hold harmless each person
registering securities pursuant to this Section 3 (the "Seller") and each
underwriter, within the meaning of the Act, who may purchase from or sell
for any Seller any of the Shares from and against any and all losses,
claims, damages, and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration
statement or any supplemented prospectus under the Act included therein
required to be filed or furnished by reason of this Section 3, or caused
by any omission or alleged omission to state therein or necessary to make
the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or
alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to First
Coastal by such Seller or underwriter within the meaning of such Act;
provided, however, that the indemnity agreement set forth in this Section
3.6 with respect to any prospectus which shall be subsequently amended
prior to the written confirmation of sale of any Shares shall not inure to
the benefit of any Seller or underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased such Shares
which are the subject thereof (or to the benefit of any person controlling
such Seller or underwriter), if such Seller or underwriter failed to send
or give a copy of the prospectus as amended to such person at or prior to
the written confirmation of the sale of such Shares and if such amended
prospectus did not contain any untrue statement or alleged untrue
statement or omission or alleged omission giving rise to such cause,
claim, damage, or liability.
<PAGE> 6
3.6.2 Each Seller which avails itself of the procedures under this
Section 3 shall indemnify and secure the agreement of any underwriter
which the Seller employs to indemnify First Coastal, its directors, each
officer signing the related post-effective amendment or registration
statement and each person, if any, who controls First Coastal, within the
meaning of the Act from and against any losses, claims, damages, and
liabilities caused by any untrue statement or alleged untrue statement of
a material fact contained in any post-effective amendment or registration
statement or any prospectus required to be filed or furnished by reason of
this Section 3 or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, insofar as such losses, claims,
damages, or liabilities are caused by any untrue statement or alleged
untrue statement or omission or alleged omission based upon information
furnished in writing to First Coastal by any such Seller or underwriter
expressly for use therein.
3.7 Survival of Obligations. The agreements in this Section 3 shall
continue in effect regardless of the exercise and surrender of this Warrant.
4. OTHER MATTERS.
4.1 Payment of Taxes. First Coastal will from time to time promptly pay,
subject to the provisions of paragraph 1.2.4 hereof, all taxes and charges that
may be imposed upon First Coastal in respect of the issuance or delivery of this
Warrant or the Shares purchasable upon the exercise of this Warrant.
4.2 Binding Effect. All the covenants and provisions of this Warrant by or
for the benefit of First Coastal shall bind and inure to the benefit of its
successors and assigns hereunder.
4.3 Notices. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on First Coastal shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
or facsimilie and addressed, until another address is designated in writing by
First Coastal, as follows:
First Coastal Bancshares
275 Main Street
El Segundo, CA 90245
Notices to the Holder provided for in this Warrant shall be deemed given or made
by First Coastal if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at his last known
address as it shall appear on the books of First Coastal.
4.4 Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of California.
4.5 Parties Bound and Benefitted. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than First Coastal and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of First Coastal and its successors and of the Holder, its successors and, if
permitted, its assignees.
4.6 Headings. The Section headings herein are for convenience only and are
not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by First Coastal
under its corporate seal as of the [___] day of January [__], 1999.
FIRST COASTAL BANCSHARES
By:
-------------------------------------
Don M. Griffith
Chairman, President and
Chief Executive Officer
<PAGE> 7
FIRST COASTAL BANCSHARES
Assignment of Warrant
FOR VALUE RECEIVED, the Holder named below hereby sells, assigns and
transfers unto ____________________________________________ the within Warrant
and the rights represented thereby, and does hereby irrevocably constitute and
appoint _______________________________ Attorney, to transfer said Warrant on
the books of First Coastal Bancshares, with full power of substitution.
Dated: _____________________
Signed:
---------------------------------
Signature guaranteed:
- -----------------------------------
<PAGE> 1
EXHIBIT 21
Subsidiaries
First Coastal Bank, National Association is the only subsidiary of First Coastal
Bancshares.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our Independent Auditor's Report dated
January 23, 1998, regarding the consolidated balance sheets of First Coastal
Bancshares as of December 31, 1997 and 1996 and the related consolidated
statements of operations, changes in shareholders' equity, and cash flows for
the each of the two years in the period ended December 31, 1997, and the
reference to our firm as "experts", in the Form SB-2 filed with the Securities
and Exchange Commission.
We also consent to the inclusion of our Independent Auditor's Report dated
January 29, 1998, regarding the balance sheet of American Independent Bank, N.A.
as of December 31, 1997, and the related statements of income, changes in
stockholders' equity, and cash flows for the year then ended.
VAVRINEK, TRINE, DAY & CO., LLP
December 1, 1998
Laguna Hills, California
<PAGE> 1
EXHIBIT 23.4
We hereby consent to the use in this Registration Statement on Form SB-2
filed on or about December 1, 1998 of our report, dated January 24, 1997,
relating to the financial statements of American Independent Bank, N.A. We also
consent to the reference to our Firm under the caption "Experts" in the
Prospectus.
/s/ McGladrey & Pullen, LLP
---------------------------
Anaheim, California
December 1, 1998
<PAGE> 1
EXHIBIT 25.1
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
FIRST COASTAL BANCSHARES
FIRST COASTAL CAPITAL TRUST
(Exact name of obligor as specified in its charter)
California 95-4693574
Delaware To be applied for
(State of incorporation) (I.R.S. employer identification no.)
275 Main Street
El Segundo, California 90245
(Address of principal executive offices) (Zip Code)
Preferred Securities of First Coastal Capital Trust
(Title of the indenture securities)
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ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 6th day
of November, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Emmett R. Harmon
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Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
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AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware
is at Rodney Square North, in the City of Wilmington, County of New
Castle; the name of its resident agent is WILMINGTON TRUST COMPANY whose
address is Rodney Square North, in said City. In addition to such
principal office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware, the Town of
Newport, New Castle County, Delaware, at Claymont, New Castle County,
Delaware, at Greenville, New Castle County Delaware, and at Milford
Cross Roads, New Castle County, Delaware, and shall be empowered to
open, maintain and operate branch offices at Ninth and Shipley Streets,
418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in
the City of Wilmington, New Castle County, Delaware, and such other
branch offices or places of business as may be authorized from time to
time by the agency or agencies of the government of the State of
Delaware empowered to confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to the
same extent as natural persons might or could do and in any part of the
world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold,
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purchase, convey, mortgage or otherwise deal in real and
personal estate and property, and to appoint such officers and
agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the
United States or of this State, to discount bills, notes or
other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
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instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of
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interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures, notes, shares
of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights,
powers and privileges of individual owners thereof, including
the right to vote thereon; to invest and deal in and with any of
the moneys of the Corporation upon such securities and in such
manner as it may think fit and proper, and from time to time to
vary or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its
said corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property
of any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other
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negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of
Directors of the Corporation is hereby expressly granted authority to
fix by resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers and
the designations, preferences and relative, optional and other special
rights, and the qualifications, limitations and restrictions of such
series, including, but without limiting the generality of the foregoing,
the following:
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(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of stock and
whether such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums
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as sinking funds or redemption or purchase accounts (fixed in accordance
with the provisions of section (b) of this Article FOURTH), and subject
further to any conditions which may be fixed in accordance with the
provisions of section (b) of this Article FOURTH, then and not otherwise
the holders of Common Stock shall be entitled to receive such dividends
as may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind available
for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article FOURTH, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class
or series of stock or securities convertible into or exchangeable for
stock, or carrying any right to purchase stock, may be issued and
disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of
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Directors in the resolution or resolutions adopted pursuant to authority
granted in section (b) of this Article FOURTH and the consent, by class
or series vote or otherwise, of the holders of such of the series of
Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other series
of Preferred Stock whether or not the powers, preferences and rights of
such other series shall be fixed by the Board of Directors as senior to,
or on a parity with, the powers, preferences and rights of such
outstanding series, or any of them; provided, however, that the Board of
Directors may provide in the resolution or resolutions as to any series
of Preferred Stock adopted pursuant to section (b) of this Article
FOURTH that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of such
series voting thereon shall be required for the issuance of any or all
other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and
for such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the
whole Board, provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting
the whole Board shall be twenty-four until otherwise fixed by a majority
of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in 1982,
directors of the first class shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of the second
class
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shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any reason,
and any newly created directorships resulting from any increase in the
directors, may be filled by the Board of Directors, acting by a majority
of the directors then in office, although less than a quorum, and any
directors so chosen shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a successor to
such director to hold office until the next election of the class for
which such director shall have been chosen and until his successor shall
be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter
or Act of Incorporation or the ByLaws of the Corporation), any director
or the entire Board of Directors of the Corporation may be removed at
any time without cause, but only by the affirmative vote of the holders
of two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the Corporation not less than 14 days nor more than
50 days prior to any meeting of the stockholders called for the election
of directors; provided, however, that if less than 21 days' notice of
the meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the Corporation
not later than the close of the seventh day following the day on which
notice of the meeting was mailed to stockholders. Notice of nominations
which are proposed by the Board of Directors shall be given by the
Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of
such nominee and (iii) the number of shares of stock of the Corporation
which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing
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procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General Corporation
Law", approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which
may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or
more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for
this purpose as one class).
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FOURTEENTH: - Meetings of the Directors may be held outside of the State
of Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of
the State of Delaware at such places as may be from time to time
designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares").
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Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that some lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in this
Article FIFTEENTH shall mean any transaction which is
referred to any one or more of clauses (A) through (E)
of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter
12
<PAGE> 16
defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect
in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition
of Investment Stockholder set forth in paragraph (2) of this section
(c), the term "Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
13
<PAGE> 17
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH
or SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
14
<PAGE> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE> 20
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
2
<PAGE> 21
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
3
<PAGE> 22
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over the
Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to
4
<PAGE> 23
auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
5
<PAGE> 24
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE> 25
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
7
<PAGE> 26
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington
Trust Company" within the inner circle the words
"Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE> 27
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal
9
<PAGE> 28
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The Corporation shall
indemnify a person in connection with a proceeding initiated by such person only
if the proceeding was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE> 29
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 6, 1998 By: /s/ Emmett R. Harmon
-------------------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 30
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks
and savings banks with state publication requirements.
It has not been approved by any state banking
authorities. Refer to your appropriate state banking
authorities for your state publication requirements.
REPORT OF CONDITION
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------------- -------------------
Name of Bank City
in the State of DELAWARE , at the close of business on JUNE 30, 1998.
-------------
ASSETS
<TABLE>
<CAPTION>
Thousands of dollars
--------------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins ............... 232,976
Interest-bearing balances ......................................... 0
Held-to-maturity securities ................................................. 195,579
Available-for-sale securities ............................................... 1,416,957
Federal funds sold and securities purchased under agreements to resell ...... 150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income .......................... 3,978,706
LESS: Allowance for loan and lease losses ........................ 63,164
LESS: Allocated transfer risk reserve ............................ 0
Loans and leases, net of unearned income, allowance, and reserve .. 3,915,542
Assets held in trading accounts ............................................. 0
Premises and fixed assets (including capitalized leases) .................... 135,596
Other real estate owned ..................................................... 1,696
Investments in unconsolidated subsidiaries and associated companies ......... 1,066
Customers' liability to this bank on acceptances outstanding ................ 0
Intangible assets ........................................................... 55,759
Other assets ................................................................ 103,586
Total assets ................................................................ 6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
LIABILITIES
<TABLE>
<S> <C>
Deposits:
In domestic offices ......................................................... 4,568,934
Noninterest-bearing ............................................... 838,655
Interest-bearing .................................................. 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase .. 418,382
Demand notes issued to the U.S. Treasury .................................... 99,350
Trading liabilities (from Schedule RC-D) .................................... 0
Other borrowed money: ....................................................... ///////
With original maturity of one year or less ........................ 524,000
With original maturity of more than one year ...................... 43,000
Bank's liability on acceptances executed and outstanding .................... 0
Subordinated notes and debentures ........................................... 0
Other liabilities (from Schedule RC-G) ...................................... 91,728
Total liabilities ........................................................... 5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................... 0
Common Stock ................................................................ 500
Surplus (exclude all surplus related to preferred stock) .................... 62,118
Undivided profits and capital reserves ...................................... 394,325
Net unrealized holding gains (losses) on available-for-sale securities ...... 6,520
Total equity capital ........................................................ 463,463
Total liabilities, limited-life preferred stock, and equity capital ......... 6,208,857
</TABLE>
2
<PAGE> 1
EXHIBIT 25.2
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2) [ ]
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
FIRST COASTAL BANCSHARES
(Exact name of obligor as specified in its charter)
California 95-4693574
(State of incorporation) (I.R.S. employer identification no.)
275 Main Street
El Segundo, California 90245
(Address of principal executive offices) (Zip Code)
Junior Subordinated Debentures of First Coastal Bancshares
(Title of the indenture securities)
================================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 6th day
of November, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Emmett R. Harmon
----------------------- --------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is WILMINGTON TRUST
COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold,
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<PAGE> 5
purchase, convey, mortgage or otherwise deal in real and
personal estate and property, and to appoint such officers and
agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the
United States or of this State, to discount bills, notes or
other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
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<PAGE> 6
instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of
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<PAGE> 7
interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures, notes, shares
of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights,
powers and privileges of individual owners thereof, including
the right to vote thereon; to invest and deal in and with any of
the moneys of the Corporation upon such securities and in such
manner as it may think fit and proper, and from time to time to
vary or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its
said corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property
of any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other
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<PAGE> 8
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding;
and, subject to the provisions of subparagraph 1 of Paragraph (c) of
this Article FOURTH, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designations, preferences
and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
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<PAGE> 9
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of stock and
whether such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article FOURTH), if any, shall have been met and
after the Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums
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<PAGE> 10
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article FOURTH),
and subject further to any conditions which may be fixed in accordance
with the provisions of section (b) of this Article FOURTH, then and
not otherwise the holders of Common Stock shall be entitled to receive
such dividends as may be declared from time to time by the Board of
Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind available
for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article FOURTH, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class
or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued
stock of any class or series or any additional shares of any class or
series to be issued by reason of any increase of the authorized
capital stock of the Corporation of any class or series, or bonds,
certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the Corporation of any
class or series, or carrying any right to purchase stock of any class
or series, but any such unissued stock, additional authorized issue of
shares of any class or series of stock or securities convertible into
or exchangeable for stock, or carrying any right to purchase stock,
may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of
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Directors in the resolution or resolutions adopted pursuant to
authority granted in section (b) of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of such
of the series of Preferred Stock as are from time to time outstanding
shall not be required for the issuance by the Board of Directors of
any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall
be required for the issuance of any or all other series of Preferred
Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time
in office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of
the second class
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shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any
reason, and any newly created directorships resulting from any
increase in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office, although less
than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen
and until his successor shall be elected and qualified. No decrease in
the number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the Corporation may be
removed at any time without cause, but only by the affirmative vote of
the holders of two-thirds or more of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting
of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election
of directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than 14 days nor
more than 50 days prior to any meeting of the stockholders called for
the election of directors; provided, however, that if less than 21
days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary
of the Corporation not later than the close of the seventh day
following the day on which notice of the meeting was mailed to
stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment
of such nominee and (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing
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<PAGE> 13
procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class).
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FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares").
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Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that some lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to
any one or more of clauses (A) through (E) of paragraph 1
of the section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter
12
<PAGE> 16
defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Investment Stockholder set forth in paragraph (2) of
this section (c), the term "Subsidiary" shall mean only a corporation
of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
13
<PAGE> 17
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) shall be required
to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH,
FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
14
<PAGE> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE> 20
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
2
<PAGE> 21
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or
3
<PAGE> 22
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to
4
<PAGE> 23
auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
5
<PAGE> 24
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE> 25
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
7
<PAGE> 26
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington Trust
Company" within the inner circle the words "Wilmington,
Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE> 27
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal
9
<PAGE> 28
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The Corporation shall
indemnify a person in connection with a proceeding initiated by such person only
if the proceeding was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE> 29
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 6, 1998 By: /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 30
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has not
been approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ------------------------ ----------
Name of Bank City
in the State of DELAWARE, at the close of business on JUNE 30, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins....................... 232,976
Interest-bearing balances................................................. 0
Held-to-maturity securities......................................................... 195,579
Available-for-sale securities....................................................... 1,416,957
Federal funds sold and securities purchased under agreements to resell.............. 150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income............ 3,978,706
LESS: Allowance for loan and lease losses.......... 63,164
LESS: Allocated transfer risk reserve.............. 0
Loans and leases, net of unearned income,
allowance, and reserve............................ 3,915,542
Assets held in trading accounts..................................................... 0
Premises and fixed assets (including capitalized leases)............................ 135,596
Other real estate owned............................................................. 1,696
Investments in unconsolidated subsidiaries and associated companies................. 1,066
Customers' liability to this bank on acceptances outstanding........................ 0
Intangible assets................................................................... 55,759
Other assets........................................................................ 103,586
Total assets........................................................................ 6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
<S> <C> <C> <C>
LIABILITIES
Deposits:
In domestic offices................................................................. 4,568,934
Noninterest-bearing................................. 838,655
Interest-bearing.................................... 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase.......... 418,382
Demand notes issued to the U.S. Treasury............................................ 99,350
Trading liabilities (from Schedule RC-D)............................................ 0
Other borrowed money:............................................................... ///////
With original maturity of one year or less................................ 524,000
With original maturity of more than one year.............................. 43,000
Bank's liability on acceptances executed and outstanding............................ 0
Subordinated notes and debentures................................................... 0
Other liabilities (from Schedule RC-G).............................................. 91,728
Total liabilities................................................................... 5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................................... 0
Common Stock........................................................................ 500
Surplus (exclude all surplus related to preferred stock)............................ 62,118
Undivided profits and capital reserves.............................................. 394,325
Net unrealized holding gains (losses) on available-for-sale securities.............. 6,520
Total equity capital................................................................ 463,463
Total liabilities, limited-life preferred stock, and equity capital................. 6,208,857
</TABLE>
2
<PAGE> 1
EXHIBIT 25.3
===============================================================================
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
FIRST COASTAL BANCSHARES
(Exact name of obligor as specified in its charter)
California 95-4693574
(State of incorporation) (I.R.S. employer identification no.)
275 Main Street
El Segundo, California 90245
(Address of principal executive offices) (Zip Code)
Guarantee and certain other back-up undertakings
of First Coastal Bancshares
(Title of the indenture securities)
===============================================================================
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers. The
trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the
trustee and upon information furnished by the obligor, the obligor is
not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b)
of Trust Indenture Act. D. Copy of most recent Report of
Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 6th day
of November, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Donald G. MacKelcan By: /s/ Emmett R. Harmon
------------------------ ------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
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<PAGE> 3
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE> 4
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is WILMINGTON TRUST
COMPANY whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold,
<PAGE> 5
purchase, convey, mortgage or otherwise deal in real and
personal estate and property, and to appoint such officers and
agents as the business of the Corporation shall require, to make
by-laws not inconsistent with the Constitution or laws of the
United States or of this State, to discount bills, notes or
other evidences of debt, to receive deposits of money, or
securities for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally to use,
exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any
estate or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and
from all fiduciaries, and from all other persons and
individuals, and from all corporations whether state, municipal,
corporate or private, and to rent boxes, safes, vaults and other
receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other
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instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding
places of responsibility or trust; to become surety for any
person, or persons, for the faithful performance of any trust,
office, duty, contract or agreement, either by itself or in
conjunction with any other person, or persons, corporation, or
corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be
entered in any court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by any law,
judge, officer or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of
Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or
authority such trustee, trustee in bankruptcy, receiver,
assignee, assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity, it shall not
be required to give bond with surety, but its capital stock
shall be taken and held as security for the performance of the
duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect, receipt
for, and dispose of
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interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock,
securities, obligations, contracts, evidences of indebtedness
and other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures, notes, shares
of capital stock, securities, obligations, contracts, evidences
of indebtedness and other property, any and all the rights,
powers and privileges of individual owners thereof, including
the right to vote thereon; to invest and deal in and with any of
the moneys of the Corporation upon such securities and in such
manner as it may think fit and proper, and from time to time to
vary or realize such investments; to issue bonds and secure the
same by pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its
said corporate business of investment and to the extent
authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property
of any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises
and to undertake the whole or any part of the assets and
liabilities of any person, firm, association or corporation, and
to pay for the same in cash, stock of this Corporation, bonds or
otherwise; to hold or in any manner to dispose of the whole or
any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business so acquired, and to
exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of
every kind with any person, firm, association or corporation,
and, without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other
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<PAGE> 8
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same
extent as natural persons might or could do, to purchase or
otherwise acquire, to hold, own, to mortgage, sell, convey or
otherwise dispose of, real and personal property, of every class
and description, in any State, District, Territory or Colony of
the United States, and in any foreign country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited
or restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding;
and, subject to the provisions of subparagraph 1 of Paragraph (c) of
this Article FOURTH, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designations, preferences
and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
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<PAGE> 9
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board
of Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if any,
of such dividends to the dividends payable on any other class or
classes, or series of the same or other class of stock and
whether such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or
any other class or classes of stock of the Corporation and the
terms and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of
the foregoing include the right, voting as a series or by itself
or together with other series of Preferred Stock or all series
of Preferred Stock as a class, to elect one or more directors of
the Corporation if there shall have been a default in the
payment of dividends on any one or more series of Preferred
Stock or under such circumstances and on such conditions as the
Board of Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article FOURTH), if any, shall have been met and
after the Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums
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<PAGE> 10
as sinking funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this Article FOURTH),
and subject further to any conditions which may be fixed in accordance
with the provisions of section (b) of this Article FOURTH, then and
not otherwise the holders of Common Stock shall be entitled to receive
such dividends as may be declared from time to time by the Board of
Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article FOURTH), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind available
for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted
by the Board of Directors pursuant to section (b) of this
Article FOURTH, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held on all matters
voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class
or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued
stock of any class or series or any additional shares of any class or
series to be issued by reason of any increase of the authorized
capital stock of the Corporation of any class or series, or bonds,
certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the Corporation of any
class or series, or carrying any right to purchase stock of any class
or series, but any such unissued stock, additional authorized issue of
shares of any class or series of stock or securities convertible into
or exchangeable for stock, or carrying any right to purchase stock,
may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of
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Directors in the resolution or resolutions adopted pursuant to
authority granted in section (b) of this Article FOURTH and the
consent, by class or series vote or otherwise, of the holders of such
of the series of Preferred Stock as are from time to time outstanding
shall not be required for the issuance by the Board of Directors of
any other series of Preferred Stock whether or not the powers,
preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall
be required for the issuance of any or all other series of Preferred
Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time
in office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of
the second class
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shall be elected to hold office for a term expiring at the second
succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Any vacancies in the Board of Directors for any
reason, and any newly created directorships resulting from any
increase in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office, although less
than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen
and until his successor shall be elected and qualified. No decrease in
the number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the ByLaws of the Corporation), any
director or the entire Board of Directors of the Corporation may be
removed at any time without cause, but only by the affirmative vote of
the holders of two-thirds or more of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting
of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election
of directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than 14 days nor
more than 50 days prior to any meeting of the stockholders called for
the election of directors; provided, however, that if less than 21
days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary
of the Corporation not later than the close of the seventh day
following the day on which notice of the meeting was mailed to
stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment
of such nominee and (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing
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procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
ELEVENTH: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the
world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class).
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FOURTEENTH: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of
this Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any
other corporation (whether or not itself an Interested
Stockholder), which, after such merger or consolidation, would
be an Affiliate (as hereinafter defined) of an Interested
Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $1,000,000 or more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares").
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Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that some lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any
one or more of clauses (A) through (E) of paragraph 1 of the
section (a).
(b) The provisions of section (a) of this Article FIFTEENTH
shall not be applicable to any particular business combination
and such business combination shall require only such
affirmative vote as is required by law and any other provisions
of the Charter or Act of Incorporation of By-Laws if such
business combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more
than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within
two years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning
of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates
(as hereafter
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defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of
its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect in December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Investment Stockholder set forth in paragraph (2) of
this section (c), the term "Subsidiary" shall mean only a corporation
of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the
basis of information known to them, (1) the number of Voting
Shares beneficially owned by any person (2) whether a person is
an Affiliate or Associate of another, (3) whether a person has
an agreement, arrangement or understanding with another as to
the matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of
securities by the Corporation, or any Subsidiary has an
aggregate fair market value of $1,000,000 or more.
13
<PAGE> 17
(e) Nothing contained in this Article FIFTEENTH shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) shall be required
to amend, alter or repeal any provision of Articles FIFTH, THIRTEENTH,
FIFTEENTH or SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of
the Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
14
<PAGE> 18
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE> 19
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the
third Thursday in April each year at the principal office at the Company or at
such other date, time, or place as may be designated by resolution by the Board
of Directors.
Section 2. Special meetings of all stockholders may be called at any
time by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given
by mailing to each stockholder at least ten (10) days before said meeting, at
his last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the
Company issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors
shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72)
years shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for
three years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed
and conducted by the Board of Directors.
<PAGE> 20
Section 5. The Board of Directors shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of
any special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability
to act, or disqualification of any director, the Board of Directors, although
less than a quorum, shall have the right to elect the successor who shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
2
<PAGE> 21
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more
than nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal
office of the Company or elsewhere in its discretion at such times to be
determined by a majority of its members, or at the call of the Chairman of the
Executive Committee or at the call of the Chairman of the Board of Directors.
The majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be held
at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Company by its directors and officers as contemplated by these By-Laws any
two available members of the Executive Committee as constituted immediately
prior to such disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the provisions of Article III of these By-Laws; and if less than three
members of the Trust Committee is constituted immediately prior to such disaster
shall be available for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to the Trust
Committee under Article III Section 2 hereof. In the event of the
unavailability, at such time, of a minimum of two members of such Executive
Committee, any three available directors shall constitute the Executive
Committee for the full conduct and management of the affairs and business of the
Company in accordance with the foregoing provisions of this Section. This By-Law
shall be subject to implementation by Resolutions of the Board of Directors
presently existing or
3
<PAGE> 22
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members
who shall be selected by the Board of Directors from its own members, none of
whom shall be an officer of the Company, and shall hold office at the pleasure
of the Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to
4
<PAGE> 23
auditing the Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than five (5) members who shall be selected by the Board of Directors from its
own members who are not officers of the Company and who shall hold office during
the pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected
by the Board of Directors as an associate director, to serve during the pleasure
of the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
5
<PAGE> 24
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining
to the office of the President conferred or imposed upon him by statute or
assigned to him by the Board of Directors in the absence of the Chairman of the
Board the President shall have the powers and duties of the Chairman of the
Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however
denominated by the Board of Directors, who may at any time perform all the
duties of the Chairman of the Board of Directors and/or the President and such
other powers and duties as may from time to time be assigned to them by the
Board of Directors, the Executive Committee, the Chairman of the Board or the
President and by the officer in charge of the department or division to which
they are assigned.
Section 6. The Secretary shall attend to the giving of notice of
meetings of the stockholders and the Board of Directors, as well as the
Committees thereof, to the keeping of accurate minutes of all such meetings and
to recording the same in the minute books of the Company. In addition to the
other notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE> 25
Section 7. The Treasurer shall have general supervision over all
assets and liabilities of the Company. He shall be custodian of and responsible
for all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to
all Vice Presidents with such functional titles as shall be determined from time
to time by the Board of Directors, who shall ex officio hold the office
Assistant Secretary of this Company and who may perform such duties as may be
prescribed by the officer in charge of the department or division to whom they
are assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
7
<PAGE> 26
Section 2. Certificate of stock shall bear the signature of the
President or any Vice President, however denominated by the Board of Directors
and countersigned by the Secretary or Treasurer or an Assistant Secretary, and
the seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of stock
shall be issued only upon giving such security as may be satisfactory to the
Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix
in advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words "Wilmington Trust
Company" within the inner circle the words "Wilmington,
Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE> 27
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other
than salaried officers of the Company, shall be paid such reasonable honoraria
or fees for attending meetings of the Board of Directors as the Board of
Directors may from time to time determine. Directors and associate directors who
serve as members of committees, other than salaried employees of the Company,
shall be paid such reasonable honoraria or fees for services as members of
committees as the Board of Directors shall from time to time determine and
directors and associate directors may be employed by the Company for such
special services as the Board of Directors may from time to time determine and
shall be paid for such special services so performed reasonable compensation as
may be determined by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal
9
<PAGE> 28
representative, is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The Corporation shall
indemnify a person in connection with a proceeding initiated by such person only
if the proceeding was authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X
shall not be exclusive of any other rights which such person may have or
hereafter acquire under any statute, provision of the Charter or Act of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions
of this Article X shall not adversely affect any right or protection hereunder
of any person in respect of any act or omission occurring prior to the time of
such repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole
or in part, and any new By-Law or By-Laws adopted at any regular or special
meeting of the Board of Directors by a vote of the majority of all the members
of the Board of Directors then in office.
10
<PAGE> 29
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as
amended, Wilmington Trust Company hereby consents that reports of examinations
by Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: November 6, 1998 By /s/ Emmett R. Harmon
---------------------
Name: Emmett R. Harmon
Title: Vice President
<PAGE> 30
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings banks with
state publication requirements. It has not been approved by any state banking
authorities. Refer to your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------------------------------- -----------------
Name of Bank City
in the State of DELAWARE, at the close of business on JUNE 30, 1998.
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins..........................232,976
Interest-bearing balances........................................................ 0
Held-to-maturity securities........................................................... 195,579
Available-for-sale securities........................................................1,416,957
Federal funds sold and securities purchased under agreements to resell.................150,100
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . 3,978,706
LESS: Allowance for loan and lease losses. . . . . . 63,164
LESS: Allocated transfer risk reserve. . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve...........3,915,542
Assets held in trading accounts..............................................................0
Premises and fixed assets (including capitalized leases)...............................135,596
Other real estate owned................................................................. 1,696
Investments in unconsolidated subsidiaries and associated companies......................1,066
Customers' liability to this bank on acceptances outstanding.................................0
Intangible assets.......................................................................55,759
Other assets...........................................................................103,586
Total assets.........................................................................6,208,857
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE> 31
<TABLE>
LIABILITIES
<S> <C>
Deposits:
In domestic offices..................................................................4,568,934
Noninterest-bearing . . . . . . . . 838,655
Interest-bearing. . . . . . . . . . 3,730,279
Federal funds purchased and Securities sold under agreements to repurchase............ 418,382
Demand notes issued to the U.S. Treasury................................................99,350
Trading liabilities (from Schedule RC-D).....................................................0
Other borrowed money:..................................................................///////
With original maturity of one year or less...................................524,000
With original maturity of more than one year..................................43,000
Bank's liability on acceptances executed and outstanding.....................................0
Subordinated notes and debentures............................................................0
Other liabilities (from Schedule RC-G)............................................... 91,728
Total liabilities....................................................................5,745,394
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................0
Common Stock...............................................................................500
Surplus (exclude all surplus related to preferred stock)................................62,118
Undivided profits and capital reserves.................................................394,325
Net unrealized holding gains (losses) on available-for-sale securities...................6,520
Total equity capital...................................................................463,463
Total liabilities, limited-life preferred stock, and equity capital..................6,208,857
</TABLE>
2
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001073932
<NAME> FIRST COASTAL BANCSHARES
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1,000
<CASH> 3,710
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,550
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,077
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 56,325
<ALLOWANCE> 562
<TOTAL-ASSETS> 81,120
<DEPOSITS> 72,921
<SHORT-TERM> 1,000
<LIABILITIES-OTHER> 1,154
<LONG-TERM> 0
0
2,658
<COMMON> 3,424
<OTHER-SE> (37)
<TOTAL-LIABILITIES-AND-EQUITY> 81,120
<INTEREST-LOAN> 3,224
<INTEREST-INVEST> 480
<INTEREST-OTHER> 250
<INTEREST-TOTAL> 3,954
<INTEREST-DEPOSIT> 1,550
<INTEREST-EXPENSE> 1,651
<INTEREST-INCOME-NET> 2,303
<LOAN-LOSSES> 10
<SECURITIES-GAINS> 26
<EXPENSE-OTHER> 2,223
<INCOME-PRETAX> 486
<INCOME-PRE-EXTRAORDINARY> 486
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241
<EPS-PRIMARY> $0.04
<EPS-DILUTED> $0.04
<YIELD-ACTUAL> 6.44
<LOANS-NON> 403
<LOANS-PAST> 54
<LOANS-TROUBLED> 1,001
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 615
<CHARGE-OFFS> 136
<RECOVERIES> 73
<ALLOWANCE-CLOSE> 562
<ALLOWANCE-DOMESTIC> 427
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 135
</TABLE>
