<PAGE> 1
As filed with the Securities and Exchange Commission on November 28, 1994
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
COMERICA INCORPORATED
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6711 38-1998421
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
Comerica Tower at One Detroit Center
500 Woodward Avenue, Suite 3100
Detroit, Michigan 48226
(313) 222-4000
(Address, including zip code, and telephone number,
including area code,
of registrant's principal executive offices)
-------------------
Judith C. Dart, Esq.
Executive Vice President, General Counsel and Secretary
Comerica Incorporated
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
(313) 222-7937
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
Copies to:
David D. Joswick, Esq. Eric Georgatos, Esq.
Miller, Canfield, Paddock and Stone, P.L.C. Gray Cary Ware & Freidenrich
150 West Jefferson, Suite 2500 4365 Executive Drive, Suite 1600
Detroit, Michigan 48226 San Diego, California 92121-1477
-------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective.
<PAGE> 2
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
CALCULATION OF REGISTRATION FEE
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=============================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of registration
securities to be registered(1) offering price per aggregate offering fee(2)
registered(1) share(2) price(2)
- -----------------------------------------------------------------------------------------------------------------------------
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Common Stock . . . . . 2,680,820 Shares $24.63 $66,037,614.57 $22,771.59
=============================================================================================================================
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(1) Also includes associated rights to purchase shares of registrant's
Series C Participating Preferred Stock which rights are (a) not
currently separable from the shares of Common Stock and (b) not
currently exercisable. See "DESCRIPTION OF COMERICA CAPITAL STOCK."
(2) The registration fee has been computed pursuant to Rule 457(f)(1)
under the Securities Act of 1933, as amended, based on average
high and low sales prices on the NASDAQ National Market System
on November 25, 1994 equalling $43 a share of common stock of
University Bank & Trust Company. The proposed maximum offering price
per share has been determined by dividing the maximum aggregate
offering price by the number of shares being registered.
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> 3
COMERICA INCORPORATED
Cross-Reference Sheet Between Items in Form S-4 and Prospectus
Pursuant to Item 501(b) of Regulation S-K
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Item No. Form S-4 Caption Heading in Prospectus
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A. Information About the Transaction
Item 1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . . Cover Page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . . Inside Front Cover Page of Prospectus; Table of
Contents; Available Information; Incorporation
of Certain Documents by Reference
Item 3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information . . . . . . . . . . . Summary; Introduction; The Companies; The
Merger
Item 4. Terms of the Transaction . . . . . . . . . . . . . Summary; Introduction; The Special Meeting; The
Merger; Description of Comerica Capital Stock;
Comparison of Shareholder Rights; The Merger
Agreement; The Stock Option Agreement
Item 5. Pro Forma Financial Information . . . . . . . . . . *
Item 6. Material Contacts with the Company Being
Acquired . . . . . . . . . . . . . . . . . . . . . Summary; The Merger
Item 7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters . . . . . . . . . . . . . . . . . . . *
Item 8. Interests of Named Experts and Counsel . . . . . . *
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . *
B. Information About the Registrant
Item 10. Information with Respect to S-3 Registrants . . . . Available Information; Incorporation of Certain
Documents by Reference; Summary; The Companies
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<PAGE> 4
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Item No. Form S-4 Caption Heading in Prospectus
-------- ---------------- ---------------------
Item 11. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by
Reference
Item 12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . . . . . *
Item 13. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . *
Item 14. Information with Respect to Registrants Other
than S-2 or S-3 Registrants . . . . . . . . . . *
C. Information About the Company Being
Acquired
Item 15. Information with Respect to S-3 Companies . . . Available Information; Incorporation of Certain
Documents by Reference; Summary; The Companies
Item 16. Information with Respect to S-2 or S-3
Companies . . . . . . . . . . . . . . . . . . . *
Item 17. Information with Respect to Companies Other
than S-2 or S-3 Companies . . . . . . . . . . . *
D. Voting and Management Information
Item 18. Information if Proxies, Consents or
Authorizations Are to be Solicited . . . . . . Available Information; Incorporation of Certain
Documents by Reference; Summary; University
Bank & Trust Company; Introduction; The
Companies; The Special Meeting; The Merger
Item 19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited or in an
Exchange Offer . . . . . . . . . . . . . . . . *
</TABLE>
____________________
*Omitted because inapplicable or answer is in the negative.
<PAGE> 5
UNIVERSITY BANK & TRUST COMPANY
December __, 1994
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the
Stockholders of University Bank & Trust Company ("UBT"), which will be held at
the offices of UBT located at 250 Lytton Avenue, Palo Alto, California, at 4:30
p.m., local time, on Wednesday, January 25, 1995 (the "Special Meeting").
At the Special Meeting, UBT stockholders will be asked to consider and
vote upon a proposal (the "Merger Proposal") to approve and adopt the Agreement
and Plan of Reorganization and Merger, dated as of October 4, 1994 (the "Merger
Agreement"), by and among Comerica Incorporated, a Delaware corporation and a
registered bank holding company headquartered in Detroit, Michigan
("Comerica"), Comerica Interim Incorporated, a California corporation
("Interim") and UBT, providing for the merger (the "Merger") of Interim into
UBT pursuant to the terms of the Agreement of Merger (the "Subsidiary Merger
Agreement"). UBT will be the surviving corporation of the Merger. No other
business will be transacted at the Special Meeting.
In the Merger, each fully diluted outstanding share of UBT Common
Stock, no par value (subject to certain provisions with respect to fractional
shares and dissenting shares) will be converted into the right to receive
1.7456 shares of Comerica Common Stock, $5.00 par value per share (the
"Comerica Common Stock"), subject to certain adjustments described in the
Merger Agreement.
The proposed Merger requires, among other conditions, certain
regulatory approvals, as well as the approval of the stockholders of UBT.
Your Board of Directors has determined that the Merger Agreement and
the Merger are in the best interests of UBT and its stockholders. THE BOARD
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT
YOU VOTE FOR APPROVAL OF THE MERGER PROPOSAL AT THE SPECIAL MEETING.
The accompanying Notice and Proxy Statement/Prospectus describe the
matters to be acted upon at the Special Meeting. Stockholders are urged to
review carefully the attached Proxy Statement/Prospectus. This document
contains a detailed description of the Merger, its terms and conditions and the
transactions contemplated thereby.
Because of the significance to UBT of the proposed Merger, your
participation in the Special Meeting, in person or by proxy, is especially
important. We urge you to vote FOR approval and adoption of the Merger
Proposal.
Your continuing interest in the business of UBT is appreciated, and we
hope you will attend the Special Meeting. It is important that your shares be
represented at the Special Meeting. Accordingly, whether or not you plan to
attend the Special Meeting, please sign, date and mail the enclosed Proxy
promptly in the postage-paid envelope that has been provided to you for your
convenience. If you wish to vote in accordance with the recommendations of
your Board of Directors, it is not necessary to specify your choices; you may
merely sign, date and return the enclosed Proxy.
Sincerely,
/s/ Carl J. Schmitt
-------------------------------------------------
Carl J. Schmitt
Chairman of the Board and Chief Executive Officer
<PAGE> 6
UNIVERSITY BANK & TRUST COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 25, 1995
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
University Bank & Trust Company will be held at UBT's offices located at 250
Lytton Avenue, Palo Alto, California on January 25, 1995 at 4:30 p.m., local
time (the "Special Meeting"), for the following purposes, all of which are more
fully described in the accompanying Proxy Statement/Prospectus:
To consider and vote upon a proposal (the "Merger
Proposal") to adopt and approve (a) the Agreement and Plan of
Reorganization and Merger, dated as of October 4, 1994 (the
"Merger Agreement"), by and among Comerica Incorporated, a
Delaware corporation and a registered bank holding company
headquartered in Detroit, Michigan ("Comerica"), Comerica
Interim Incorporated, a California corporation ("Interim"), and
UBT, and (b) the Agreement of Merger (the "Subsidiary Merger
Agreement"), providing for the merger (the "Merger") of Interim
with and into UBT, and all of the transactions contemplated
thereby, including but not limited to, the conversion, subject
to certain provisions relating to fractional shares and
dissenting shares, of each fully diluted outstanding share of
common stock, no par value per share, of UBT ("UBT Common
Stock") into the right to receive 1.7456 shares of common
stock, $5.00 par value per share, of Comerica, subject to
certain adjustments described in the Merger Agreement.
The Merger Agreement and the Subsidiary Merger Agreement are set forth
in Annex A and Annex B, respectively, of the accompanying Proxy
Statement/Prospectus.
Stockholders of UBT Common Stock may have dissenter's rights under
California law if their shares of UBT Common Stock qualify as "dissenting
shares" under California law. These rights may require UBT to purchase for
cash at fair market value from UBT stockholders any such "dissenting shares".
UBT stockholders must strictly comply with applicable California law to
exercise their dissenter's rights. A copy of the pertinant statutory
provisions are attached to this Proxy Statement/Prospectus as Annex C.
The UBT Board of Directors has fixed the close of business on December
1, 1994, as the record date for the determination of UBT stockholders entitled
to notice of and to vote at the Special Meeting. Only UBT stockholders of
record at the close of business on such date are entitled to notice of, and to
vote at, the Special Meeting.
The UBT Common Stock is the only security of UBT whose holders are
entitled to vote upon the proposals to be presented at the Special Meeting.
Approval of the Merger Proposal requires the affirmative vote of the holders of
not less than a majority of the outstanding shares of UBT Common Stock.
<PAGE> 7
Your vote is important regardless of the number of shares you own.
Each stockholder, whether he or she now plans to attend the Special
Meeting, is requested to sign, date and return the enclosed Proxy without delay
in the enclosed postage-paid envelope. You may revoke your Proxy at any time
prior to its exercise. Any stockholder present at the Special Meeting or at
any adjournments or postponements thereof may revoke his or her Proxy and vote
personally on each matter brought before the Special Meeting.
/s/ GAYLE A. ANDERSON
--------------------------------------------
Gayle A. Anderson, Secretary
[December 15,], 1994
THE BOARD OF DIRECTORS OF UBT UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE MERGER PROPOSAL.
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE PAID RETURN ENVELOPE.
<PAGE> 8
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
UNIVERSITY BANK & TRUST COMPANY
PROXY STATEMENT
---------------------
COMERICA INCORPORATED
PROSPECTUS
---------------------
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is
being furnished to stockholders of University Bank & Trust Company ("UBT") in
connection with the solicitation of proxies by the Board of Directors of UBT
for use at its Special Meeting of Stockholders (including any adjournments or
postponements thereof) to be held on January 25, 1995, and relates to the
proposed merger (the "Merger") of UBT with Comerica Interim Incorporated, a
California corporation ("Interim") and a wholly-owned subsidiary of Comerica
Incorporated, a Delaware corporation ("Comerica"), pursuant to the Agreement
and Plan of Reorganization and Merger, dated as of October 4, 1994 (the "Merger
Agreement"), by and among UBT, Interim and Comerica and all of the transactions
contemplated thereby including the completion of the Merger pursuant to the
terms of the Agreement of Merger (the "Subsidiary Merger Agreement").
This Proxy Statement/Prospectus also constitutes a prospectus of
Comerica with respect to up to 2,680,820 shares of common stock, $5.00 par
value per share, of Comerica ("Comerica Common Stock") which may be issuable to
holders of common stock, no par value per share, of UBT ("UBT Common Stock"),
in the Merger. Upon consummation of the Merger, each outstanding share of UBT
Common Stock will, subject to certain provisions with respect to fractional
shares and dissenting shares, be converted into the right to receive 1.7456
shares of Comerica Common Stock, subject to certain adjustments described in
the Merger Agreement.
Comerica Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "CMA." The last reported sales price of the Comerica
Common Stock on the NYSE Composite Tape on December __, 1994 was $______.
THE SHARES OF COMERICA COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS DECEMBER __, 1994
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of UBT on or about December __, 1994.
<PAGE> 9
TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Selected Consolidated Financial Data of Comerica Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selected Consolidated Financial Data of University Bank & Trust Company . . . . . . . . . . . . . . . . . . . . . . . . . 16
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Comparative Stock Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
THE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Comerica Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
University Bank & Trust Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Matters to be Considered at the Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Record Date; Shares Entitled to Vote; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Form of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Comerica Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Recommendation of the Board of Directors of UBT and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . 31
Opinion of UBT's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Summary of Financial Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Effective Time of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares . . . . . . . . . . . . . . . . . . . . . 35
Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Conditions to the Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Regulatory Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Operations Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Operations After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Cancellation Fee; Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Anticipated Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
<PAGE> 10
<TABLE>
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Resale of Comerica Common Stock; Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Dissenter's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Interstate Banking and Branching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Certain Transactions by Comerica with its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Comerica's Support of Subsidiary Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
FDIC Insurance Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Implications of Being a Savings and Loan Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
DESCRIPTION OF COMERICA CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Comerica Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Comerica Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
DESCRIPTION OF UBT CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
COMPARISON OF SHAREHOLDER RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Classification, Removal and Nomination of Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Limitation of Liability of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Certain Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Amendment of Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Rights Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Dissenter's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Liquidated Damages; Cancellation Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Shareholder Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Resales by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
THE STOCK OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
<PAGE> 11
ANNEXES
Annex A - Agreement and Plan of Reorganization and Merger
Annex B - Subsidiary Merger Agreement
Annex C - Chapter 13 of the General Corporations Law of the State of
California Code Relating to Dissenters Rights
Annex D - Opinion of Goldman Sachs & Co.
Annex E - Stock Option Agreement
<PAGE> 12
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY COMERICA, INTERIM OR UBT. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF COMERICA, INTERIM OR UBT SINCE THE DATE HEREOF
OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO SUCH
DATE. ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO
COMERICA AND ITS SUBSIDIARIES HAS BEEN SUPPLIED BY COMERICA AND ALL INFORMATION
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS RELATING TO UBT AND ITS
SUBSIDIARIES HAS BEEN SUPPLIED BY UBT.
AVAILABLE INFORMATION
Comerica is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith Comerica files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Since June 17, 1994, UBT has been a California state bank and a member of the
Federal Reserve and therefore files reports, proxy statements and other
information with the Federal Reserve Board (the "Federal Reserve"). Prior to
June 17, 1994, UBT was a National Association and filed reports, proxy
statements and other information with the Office of the Comptroller of the
Currency (the "Comptroller").
The reports, proxy statements and other information filed by Comerica
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661. Copies of such material also can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The reports, proxy
statements and other information filed by UBT with the Federal Reserve can be
inspected and copied at the Public Reference Section of the offices of the
Federal Reserve at 20th and C Streets, N.W., Washington, D.C. 20551. The
reports, proxy statement and other information filed by UBT with the
Comptroller can be inspected and copied at the offices of the Comptroller,
Independence Square, 250 E. Street, S.W., Washington D.C. 20219. In addition,
material filed by Comerica can be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and materials
filed by UBT can be inspected at the offices of the NASDAQ (National
Association of Securities Dealers Automated Quotations) National Market System
at 1735 K Street, N.W., Washington, D.C. 20006.
Comerica has filed with the Commission a Registration Statement on
Form S-4 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Comerica Common Stock to be issued pursuant to the Merger
Agreement. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
Such additional information may be inspected and copied as set forth above.
Statements contained in this Proxy Statement/Prospectus or in any document
incorporated in this Proxy Statement/Prospectus by reference as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
1
<PAGE> 13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Comerica pursuant
to the Exchange Act (File No. 1-10706), the Federal Reserve by UBT (Tax
Identification No. 77-0376213) or the Office of the Comptroller of the Currency
by UBT (Tax Identification No. 94-2622607) are incorporated by reference in
this Proxy Statement/Prospectus:
1. Comerica's Annual Report on Form 10-K for the year
ended December 31, 1993 (the "1993 Comerica 10-K").
2. Comerica's Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, June 30 and September 30, 1994.
3. The description of the Comerica Common Stock, par
value $5.00 per share, incorporated by reference in the Registration
Statement on Form 8-A dated March 4, 1991.
4. Comerica's Registration Statement on Form 8-A dated
March 4, 1991, as amended by an Amendment on Form 8 filed November 1,
1991.
5. The portions of Comerica's Proxy Statement for the
Annual Meeting of Shareholders held May 20, 1994 that have been
incorporated by reference in the 1993 Comerica 10-K other than the
Report of the Compensation Committee on Executive Compensation and the
Performance Graph on pages 25-29 thereof.
6. UBT's Annual Report on Form 10-K for the year ended
December 31, 1993 (the "UBT 10-K") filed with the Comptroller.
7. UBT's Amendment No. 1 on Form 10-K/A to the UBT Form
10-K filed with the Comptroller.
8. UBT's Proxy Statement for the Annual Meeting of
Shareholders held on June 16, 1994, filed with the Comptroller.
9. UBT's Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 1994 filed with the Comptroller
and June 30 and September 30, 1994 filed with the Federal Reserve.
10. UBT's Current Report on Form 8-K dated June 17, 1994
filed with the Federal Reserve.
11. UBT's Current Report on Form 8-K dated October 17,
1994 filed with the Federal Reserve.
All documents and reports filed by Comerica and UBT pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus and prior to the date of the Special Meeting of
stockholders of UBT shall be deemed to be incorporated by reference in this
Proxy Statement/Prospectus and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement/Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement/Prospectus.
2
<PAGE> 14
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, ON WRITTEN OR ORAL REQUEST, IF FOR COMERICA, TO JUDITH C. DART,
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY, COMERICA INCORPORATED,
COMERICA TOWER AT DETROIT CENTER, 500 WOODWARD AVENUE, DETROIT, MICHIGAN 48226,
TELEPHONE (313) 222-7937; AND IF FOR UBT, TO GAYLE A. ANDERSON, SECRETARY, 250
LYTTON AVENUE, P.O. BOX 89, PALO ALTO, CALIFORNIA 94301, TELEPHONE (415)
327-0210. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, REQUESTS SHOULD
BE RECEIVED BY JANUARY 19, 1995 (5 BUSINESS DAYS BEFORE THE DATE OF THE SPECIAL
MEETING).
3
<PAGE> 15
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE
IN THIS PROXY STATEMENT/PROSPECTUS. AS THIS SUMMARY IS NECESSARILY INCOMPLETE,
REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE
MORE DETAILED INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS AND THE ANNEXES HERETO. STOCKHOLDERS ARE URGED TO READ
THIS PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO IN THEIR ENTIRETY.
CERTAIN CAPITALIZED TERMS WHICH ARE USED BUT NOT DEFINED IN THIS SUMMARY ARE
DEFINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS.
THE PARTIES
University Bank & Trust Company ("UBT") is a California
state-chartered bank and a member of the Federal Reserve System. UBT provides
basic banking services and personal trust services to individuals and business
enterprises located primarily in California's Palo Alto area. UBT offers
traditional banking services such as lending and deposit takings in addition to
specialized banking services designed to meet the needs of its customers. As
of September 30, 1994, UBT had total assets of approximately $442.2 million,
total deposits of approximately $403.5 million, total loans (net of unearned
income) of approximately $211.9 million, and stockholders' equity of
approximately $35.4 million. The main banking office of UBT and the principal
executive offices of UBT are both located at 250 Lytton Avenue, Palo Alto,
California 94301. Its telephone number is (415) 327-0210.
Comerica Incorporated ("Comerica") is a Delaware corporation and a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended (the "BHCA"), headquartered in Detroit, Michigan. As of September 30,
1994, Comerica owned directly or indirectly 9 banking and 45 active non-banking
subsidiaries. As of September 30, 1994, Comerica had total assets of
approximately $31.8 billion, total deposits of approximately $20.3 billion,
total loans (net of unearned income) of approximately $20.8 billion, and
stockholders' equity of approximately $2.4 billion. Comerica's principal
subsidiary, Comerica Bank, is a commercial banking and trust institution that
offers individuals, the business community, and governmental agencies all
services associated with a full-service commercial banking institution. The
principal executive offices of Comerica are presently located at Comerica Tower
at Detroit Center, 500 Woodward Avenue, Suite 3100, Detroit, Michigan 48226.
Its telephone number is (313) 222-4000.
Comerica Interim Incorporated is a California corporation and a wholly
owned subsidiary of Comerica. Interim is being used specifically as a merger
vehicle for the acquisition by Comerica of UBT and currently has no assets or
operations.
THE SPECIAL MEETING
Special Meeting of Stockholders. A special meeting of the
stockholders of UBT will be held at the offices of UBT, located at 250 Lytton
Avenue, Palo Alto, California, on January 25, 1995, at 4:30 p.m., local time
(the "Special Meeting"). See "THE SPECIAL MEETING."
Matters to Be Considered. At the Special Meeting, holders of UBT
Common Stock, no par value per share ("UBT Common Stock"), will consider and
vote upon a proposal (the "Merger Proposal") to adopt and approve (a) the
Agreement and Plan of Reorganization and Merger, dated as of October 4, 1994
(the "Merger Agreement"), by and among UBT, Interim and Comerica, and (b) the
Agreement of Merger (the "Subsidiary Merger Agreement") providing for the merger
(the "Merger") of Interim with and into UBT, with UBT
4
<PAGE> 16
being the surviving entity. No other matters will be brought before the
Special Meeting. See "THE SPECIAL MEETING -- Matters to Be Considered at the
Special Meeting."
Votes Required. The affirmative vote of the holders of a majority of
the outstanding shares of UBT Common Stock entitled to vote thereon is required
to approve the Merger Proposal. See "THE SPECIAL MEETING -- Vote Required."
Record Date. The record date for the Special Meeting is December 1,
1994 (the "Record Date"). Only UBT stockholders of record at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Special Meeting.
As of the Record Date, there were __________ shares of UBT Common
Stock outstanding, and each such share is entitled to one vote at the Special
Meeting. As of the Record Date, there were _____ holders of record of UBT
Common Stock.
Security Ownership. As of September 30, 1994, directors and executive
officers of UBT and their affiliates may be deemed to be the beneficial owners
of approximately 16.5% of the outstanding shares of UBT Common Stock. Such
officers and directors are entitled to exercise options to acquire a total of
11,000 shares of UBT Common Stock, which would result in such persons being
deemed to be the beneficial owners of approximately 17.3% of the shares of UBT
Common Stock outstanding as of September 30, 1994. See "THE MERGER -- Stock
Option Plans." Each UBT director who owns UBT Common Stock (each a
"director-stockholder") has executed an agreement which, among other things,
obligates each director-stockholder to vote the shares of UBT Common Stock
owned or controlled by them in favor of the Merger, subject to fiduciary
obligations. See "THE MERGER AGREEMENT -- Shareholder Agreements." As of the
Record Date, the director-stockholders of UBT owned or controlled an aggregate
of _________ shares of UBT Common Stock, representing approximately ____% of
the then outstanding shares of UBT Common Stock.
As of the Record Date, no shares of UBT Common Stock were beneficially
owned by Comerica, Interim or any of their subsidiaries, directors or executive
officers, or their affiliates, excepting 400 shares of UBT Common Stock owned
jointly by Comerica director J. Phillip DiNapoli and his wife.
THE MERGER
Form of the Merger. Pursuant to the Merger Agreement, which is hereby
incorporated by reference and is set forth in Annex A to this Proxy
Statement/Prospectus, at the Effective Time (see "THE MERGER -- Effective Time
of Merger") of the Merger, Interim will merge with and into UBT, with UBT
being the surviving corporation in accordance with the terms of the Subsidiary
Merger Agreement. As a result of the Merger, Comerica will own the entire
equity interest in, and become the sole stockholder of, UBT. See "THE MERGER
- -- Form of the Merger."
Merger Consideration. Upon consummation of the Merger, each
outstanding share of UBT Common Stock will, subject to certain provisions with
respect to fractional shares and dissenting shares, be converted into the right
to receive 1.7456 shares of Comerica Common Stock, subject to certain
adjustments described in the Merger Agreement (as so adjusted, the "UBT
Conversion Rate"). The Merger Agreement provides for an adjustment to the UBT
Conversion Rate in the event that UBT's Consolidated Net Worth (as defined in
the Merger Agreement) is less than $34,200,000 or in the event of certain
changes in the capitalization of Comerica, including, but not limited to, any
recapitalization, reorganization, stock split or stock dividend. In addition,
all existing rights with
5
<PAGE> 17
respect to UBT Common Stock pursuant to UBT stock option plans (the "UBT Stock
Options"), whether vested or unvested or exercisable shall be converted into
and become rights with respect to Comerica Common Stock. Each UBT Stock Option
holder will receive the number of stock options for Comerica Common Stock such
holder would have received according to the UBT Conversion Rate as if such
holder exercised his or her UBT Stock Options in full immediately prior to the
Effective Time. See "THE MERGER -- Merger Consideration and -- Conditions to
the Consummation of the Merger."
Upon consummation of the Merger, each outstanding share of Interim
will be converted into one share of the surviving corporation.
Effective Time of the Merger. It is expected that if the Merger
Proposal is approved by the UBT stockholders, and assuming that the other
conditions described in the Merger Agreement are satisfied, the Merger will
become effective during the first quarter of 1995. See "THE MERGER --
Effective Time of the Merger."
If the Merger does not become effective on or prior to August 31,
1995, any of Comerica, Interim or UBT may terminate the Merger Agreement. See
"THE MERGER AGREEMENT -- Termination."
Purpose of the Merger and Comerica's Reasons for the Merger. The
purpose of the Merger is for Comerica to acquire the entire equity interest in
UBT. It is part of Comerica's current business strategy to expand its
activities from Michigan into states such as California where management
believes there are long-term opportunities which will benefit Comerica and its
shareholders. Comerica California Incorporated, a California corporation and
registered bank holding company, is Comerica's wholly owned bank holding
company subsidiary operating in the State of California, which through its
wholly owned subsidiary, Comerica Bank-California, a California bank, focuses
on middle market banking, small business banking, private banking, high
technology, commercial real estate lending and mortgage banker financing, as
well as trust services, in the San Jose and Los Angeles areas. See "COMERICA
INCORPORATED -- General." Comerica believes that through the Merger Comerica
will be able to increase its penetration of the California commercial, retail
and private banking markets in the communities served by UBT. This transaction
is also expected to enhance the competitiveness of the companies currently in
the deregulated banking environment and prospectively after the full impact of
the Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Act") is known. See "THE MERGER -- Comerica Reasons for the Merger."; "CERTAIN
REGULATORY CONSIDERATIONS -- Interstate Banking and Branching."
Recommendations of the UBT Board of Directors and Reasons for the
Merger. The Board of Directors of UBT believes that the terms of the
Merger are fair to and in the best interests of UBT and its stockholders. All
of the members of the UBT Board were at the meeting approving the Merger
Agreement and they unanimously approved the Merger Agreement, the Subsidiary
Merger Agreement and the Merger. Accordingly, the UBT Board recommends that
UBT stockholders vote FOR the Merger Proposal. See "THE MERGER --
Recommendation of the Board of Directors of UBT and Reasons for the Merger."
The terms of the Merger Agreement, including the financial
consideration provided therein, were the result of arms' length negotiations
between Comerica, Interim and UBT and their respective representatives. In
reaching a conclusion to approve the Merger, the Board of Directors of UBT
considered a number of factors, including, but not limited to, the need to
address the need for a successor to its Chairman within the context of
a consolidating banking industry and a regulatory environment which is
increasingly burdensome to smaller institutions. See "THE MERGER --
Recommendation of the Board of Directors of UBT and Reasons for the Merger" and
- -- "Background of the Merger."
6
<PAGE> 18
Opinion of Financial Advisor to UBT. Goldman, Sachs & Co. ("Goldman
Sachs") has served as financial advisor, and has delivered its written opinion
to the UBT Board, dated as of the date of this Proxy Statement/Prospectus, that
the UBT Conversion Rate to be received by UBT Common Stockholders pursuant to
the Merger Agreement is fair to UBT Common Stockholders. UBT has
agreed to pay Goldman Sachs a fee for their services which is in part
contingent on the consummation of the Merger. See "THE MERGER-Opinion of UBT's
Financial Advisor". The full text of Goldman Sachs' written opinion, dated as
of the date of this Proxy Statement/Prospectus, which sets forth the
assumptions made, matters considered and limits on their review, is attached
hereto as Annex D. UBT Common Stockholders are urged to and should read such
opinion in its entirety.
UBT Acquisition Proposals. The Merger Agreement provides that UBT
will not authorize or knowingly permit any of its representatives, directly or
indirectly, to solicit or encourage, or participate in any discussions or
negotiations with, or provide any nonpublic information to, any person or group
of persons (other than Comerica, Interim or their representatives) concerning
any "Acquisition Proposal." An Acquisition Proposal is defined generally to
mean any proposal for the acquisition or participation in a merger or other
business combination involving UBT, any proposal by which any person or group
other than Comerica or Interim would acquire the right to vote 10% or more of
the capital stock of UBT entitled to vote for the election of directors, any
acquisition of the assets of UBT other than in the ordinary course of business,
or any acquisition of more than 10% of the outstanding capital stock of UBT.
However, UBT or its Board of Directors are not prevented from (A) furnishing
non-public information to, or entering into discussions or negotiations with,
any person or entity in connection with an unsolicited bona fide written
Acquisition Proposal by such person or entity or recommending an unsolicited
bona fide written Acquisition Proposal to the shareholders of UBT, if and to
the extent that (1) the Board of Directors of UBT believes in good faith (after
consultation with and the concurrence of its financial advisor) that such
Acquisition Proposal would, if consummated, result in a transaction materially
more favorable to UBT's shareholders from a financial point of view than the
transaction contemplated by the Merger Agreement and the UBT Board of Directors
determined in good faith after consultation with its outside legal counsel that
such action is necessary for UBT to comply with its fiduciary duties to
shareholders under applicable law, and (2) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person
or entity, the UBT Board of Directors received from such person or entity an
executed confidentiality agreement, with terms similar in scope to those
contained in the confidentiality agreement between Comerica and UBT, or (B)
complying with Rule 14e-2 promulgated under the Exchange Act of 1934, as
amended, with regard to an Acquisition Proposal. UBT is required to notify
Comerica immediately upon receipt of any inquiry regarding any Acquisition
Proposal.
Conditions to the Merger; Termination. The obligations of Comerica,
Interim and UBT, as the case may be, to consummate the Merger are subject to
various conditions set forth in the Merger Agreement including, but not limited
to, obtaining requisite stockholder and regulatory approvals; the absence of
any materially burdensome condition imposed for any regulatory approval; the
absence of any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger by any governmental entity
which makes the Merger illegal, requires any material divestiture or imposes a
materially burdensome condition; the accuracy in all material respects of the
representations and warranties of, and performance in all material respects of
the covenants required to be performed prior to the Effective Time of the
Merger by, the other parties to the Merger Agreement; the absence of any
materially adverse change to the other parties or their subsidiaries; receipt
of an opinion of legal counsel in respect of certain Federal income tax
consequences (see "THE MERGER -- Certain Federal Income Tax Consequences);
receipt of legal opinions and approval of their respective legal counsel of the
transactions contemplated by the Merger Agreement; approval for listing of the
shares of the Comerica Common Stock to be issued in the Merger on the New York
Stock Exchange; and receipt from each of Ernst & Young and KPMG Peat
Marwick, LLP of letters, in form and substance satisfactory to Comerica and UBT
and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
Registration Statement filed in connection with the Merger. In addition, the
obligations of Comerica and Interim to consummate
7
<PAGE> 19
the Merger are subject to the following further conditions, among others: the
requirements that UBT's reserve for possible loan losses 5 business days prior
to the Effective Time shall be at least the greater of $4,700,000 or 2.25% of
UBT's total loans outstanding on that date (subject to certain adjustments) and
that UBT's non-performing assets outstanding on the last day of the month
immediately preceding the Effective Time shall be no more than $4,711,431. The
obligation of UBT to consummate the Merger is subject to the receipt of the
written opinion of Goldman Sachs prior to the mailing of this Proxy
Statement/Prospectus, dated the date of this Proxy Statement/Prospectus to the
effect that, as of such date, the UBT Conversion Rate is fair. There can be no
assurance that the conditions to the Merger will be satisfied. See "THE MERGER
AGREEMENT -- Conditions to the Merger".
Under certain circumstances, Comerica, Interim or UBT may terminate
the Merger Agreement, either prior to or after approval thereof by UBT
stockholders. See "THE MERGER AGREEMENT -- Termination."
Liquidated Damages; Cancellation Fee. The Merger Agreement
provides that, in the event an Acquisition Event shall occur or (i) any of UBT,
Comerica or Interim terminates the Merger Agreement because the Merger
Agreement, the Subsidiary Merger Agreement and the Merger are not
ratified by UBT's shareholders, (ii) any of UBT, Comerica or Interim terminates
the Merger Agreement because there shall have been a material breach of any of
the representations or warranties set forth in the Merger Agreement on the part
of the other party, (iii) Comerica terminates the Merger Agreement because
there is a default by UBT, pursuant to the Merger Agreement and the continuance
of such failure for a period of 20 Business Days after written notice, which
failure to perform, in the reasonable opinion of Comerica and Interim cannot be
cured prior to the closing, or (iv) Comerica terminates the Merger Agreement
because the UBT Board did not publicly recommend in this Proxy
Statement/Prospectus that UBT stockholders adopt and approve the Merger
Agreement or shall withdraw, modify or amend such recommendation in any
respect materially adverse to Comerica followed by an Acquisition Event within
90 days of such termination, UBT is required to pay to Comerica the sum of
$3,200,000 as reasonable and full liquidated damages and reasonable
compensation for the loss sustained thereby. For the purposes of the Merger
Agreement, an Acquisition Event is defined generally to mean (a) that UBT has
authorized, recommended, publicly proposed or publicly announced an intention
to authorize, recommend or propose, or entered into an agreement to effect the
following: a merger, consolidation or similar transaction involving UBT or any
of its subsidiaries; the disposition of assets of UBT or any of its
subsidiaries representing 15% or more of the consolidated assets of UBT and its
subsidiaries; or the issuance, sale or other disposition of securities
representing 10% or more of the voting power of UBT or any of its subsidiaries,
other than securities issued pursuant to the Stock Option Agreement, (b) the
acquisition of the beneficial ownership or the right to acquire beneficial
ownership by any person or group of persons (as the term "beneficial ownership"
is defined in Rule 13d-3 of the Securities Exchange Act of 1934) of 15% or more
of the outstanding UBT Common Stock; or (c) within 180 days after termination
of the Merger Agreement by Comerica upon the occurrence of certain events
specified in the Merger Agreement, where such events were caused in whole or in
part by any action or inaction within the control of UBT, any subsidiary of UBT
or the directors of UBT or UBT's subsidiaries.
In addition, the Merger Agreement provides that, in the event of
termination by UBT of this Agreement because Interim or Comerica has breached
any of their representations and warranties set forth in the Merger Agreement
and in the reasonable opinion of UBT such breach cannot be cured prior to
closing and would have a Material Adverse Effect on Interim or Comerica or
because of a default by Comerica or Interim pursuant to the Merger Agreement
and the continuance of such failure for a period of 20 business days after
written notice of such default, in the reasonable opinion of UBT, cannot be
cured prior to the closing, then Comerica and Interim, jointly and severally,
shall pay to UBT as reasonable and full liquidated damages and reasonable
compensation for the loss sustained thereby and not as a penalty or forfeiture,
the sum of $2,000,000. See "THE MERGER AGREEMENT" --- Liquidated Damages;
Cancellation Fee.
8
<PAGE> 20
Regulatory Approvals Required. The Merger is subject to prior approval
by the Federal Reserve Board, the Commissioner of the Michigan Financial
Institutions Bureau (the "Michigan Commissioner") and the State of California's
Superintendent of Banks (the "California Superintendent"). Although it is not a
condition to consummation of the Merger, Comerica may, sometime after such
consummation, elect to merge the surviving corporation of the merger between
UBT and Interim with and into Comerica Bank-California, a wholly-owned
subsidiary of Comerica California Incorporated, Comerica's California bank
holding company (the "Subsidiary Bank Merger"). The Subsidiary Bank Merger
would be subject to prior approval of the Federal Deposit Insurance Corporation
("FDIC"), and the California Superintendent. Applications for approval of the
Merger have been filed with the Federal Reserve, the Michigan Commissioner and
the California Superintendent. There can be no assurance that any of these
regulatory authorities will approve the Merger or the Subsidiary Bank Merger,
or if approved, as to the date of such approvals. There can also be no
assurance that such approvals will not contain a condition or requirement which
causes such approvals to fail to satisfy the conditions to the consummation of
the Merger. There can also be no assurance that the Department of Justice will
not challenge the Merger or the Subsidiary Bank Merger, or as to the outcome of
any such challenge if made. See "THE MERGER -- Conditions to the Consummation
of the Merger and -- Regulatory Approvals Required."
Operations Pending the Merger. In the Merger Agreement, UBT has
agreed to carry on its business and the business of its subsidiaries in
substantially the manner as conducted prior to the execution of the Merger
Agreement, to notify Comerica promptly of any material adverse changes or
events, to take certain other actions, and to provide Comerica with certain
reports and information. UBT has also agreed in the Merger Agreement that it
will not take certain actions, including by way of example and not of
limitation, issue capital stock (other than pursuant to outstanding stock
options under its Stock Option Plans), issue other securities convertible into
capital stock, acquire or dispose of material assets, incur indebtedness other
than in the ordinary course of business or declare or pay any dividend, other
than regular quarterly cash dividends in an amount not to exceed $.35 per
share. See "THE MERGER AGREEMENT -- Conduct of Business Pending the Merger"
and "THE MERGER -- Operations Pending the Merger."
Operations After the Merger. If the Merger is consummated, UBT will be
the surviving corporation of the Merger, with the articles of incorporation of
UBT and the name University Bank & Trust Company. The separate existence of
Interim will cease, and the surviving corporation will continue as a wholly
owned subsidiary of Comerica. The Board of Directors of the surviving
corporation will be made up of certain directors of Interim and UBT serving in
those capacities at the Effective Time. It is anticipated that, upon
consummation of the Merger, Comerica will contribute the stock of the surviving
corporation to Comerica California Incorporated, Comerica's California bank
holding company. It is also anticipated that at some point after the
consummation of the Merger the surviving corporation will merge into Comerica
Bank-California, a California bank and wholly owned subsidiary of Comerica
California Incorporated. At such time, it is expected that the surviving
corporation will be run as a separate division of Comerica Bank-California.
Following the consummation of the Merger, Carl J. Schmitt, Chairman of
the Board and Chief Executive Officer of UBT is expected to remain as Chairman
of the Board of the surviving corporation. It is also expected that Mr.
Schmitt, upon the anticipated Merger of the surviving corporation into Comerica
Bank-California, will become a member of the Board of Directors of Comerica
Bank-California and, as a result, will receive a fee for each board meeting he
attends, as well as reimbursement for expenses he incurs in doing so. See
"THE MERGER -- Interests of Certain Persons in the Merger."
Banking policies and procedures of the surviving corporation and its
subsidiaries will continue in accordance with the policies of Comerica. See
"THE MERGER -- Operations After the Merger."
Interests of Certain Persons in the Merger. Certain members of UBT's
management, including Mr. Carl J. Schmitt, may be deemed to have certain
interests in the Merger that are in addition to their interests as
9
<PAGE> 21
stockholders of UBT generally. The UBT Board was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby. See "THE MERGER -- Interests of Certain
Persons in the Merger" and -- "Operations After the Merger".
Anticipated Accounting Treatment. The Merger is expected to be
treated as a purchase for accounting and financial reporting purposes. The
shares of Comerica Common Stock to be issued in the Merger will be authorized
but unissued shares, or shares held as treasury shares. Subject to the rules
of the Commission, Comerica may repurchase shares of Comerica Common Stock in
open market or other transactions to fund the Merger consideration. See "THE
MERGER -- Anticipated Accounting Treatment."
Certain Federal Income Tax Consequences. The obligations of Comerica,
Interim and UBT to effect the Merger are conditioned upon the receipt of a
legal opinion dated the Effective Time of the Merger from legal counsel
acceptable to Comerica, subject to exceptions and assumptions normally
included, and in form and substance reasonably satisfactory to Comerica and
UBT, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "IRC"), and that Comerica,
Interim and UBT will each be a party to that reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(E) of the IRC. There can be no
assurance that this opinion will be received. See "THE MERGER -- Certain
Federal Income Tax Consequences."
The material federal income tax consequences of the proposed
transactions to stockholders of UBT are summarized under "THE MERGER -- Certain
Federal Income Tax Consequences."
Stock Exchange Listing. The Comerica Common Stock is listed on the New
York Stock Exchange ("NYSE"). Comerica has agreed to apply for the listing of
the shares of Comerica Common Stock to be issued in the Merger on the NYSE. The
obligations of the parties to the Merger Agreement to consummate the Merger are
subject to approval for listing by the NYSE of such shares. See "THE MERGER --
Stock Exchange Listing."
Dissenter's Rights. Holders of UBT Common Stock may have certain
dissenter's rights if their shares of UBT Common Stock qualify as "dissenting
shares" under California law. These rights may require UBT to purchase for cash
at fair market value from UBT shareholders any such "dissenting shares." UBT
stockholders must strictly comply with applicable California law to exercise
their dissenter's rights. A copy of the pertinent statutory provisions are
attached to this Proxy Statement/Prospectus, as Annex C. See "THE MERGER --
Dissenter's Rights."
For a complete explanation of UBT shareholder dissenter's rights and a
description of the procedure to exercise those rights, see "THE MERGER --
Dissenter's Rights."
Stock Option Agreement. As a condition to entering into the Merger
Agreement, Comerica insisted that it be granted an option to purchase up to
137,718 shares of UBT Common Stock, representing approximately 9.9% of the
issued and outstanding shares of UBT Common Stock. UBT made such grant
pursuant to a separate Stock Option Agreement, dated October 4, 1994 (the
"Stock Option Agreement"). The per share exercise price of $38.25 was
determined on the basis of the average closing price of UBT Common Stock on the
NASDAQ National Market System for the seven trading days ending on October 4,
1994. The option may be exercised only upon the occurrence of certain events
as well as the approval of the Federal Reserve Board. The Stock Option
Agreement is attached to this Proxy Statement/Prospectus as Annex E. See "THE
STOCK OPTION AGREEMENT."
10
<PAGE> 22
The Stock Option Agreement is intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may
have the effect of discouraging persons who might now or prior to the Effective
Time be interested in acquiring all of or a significant interest in UBT from
considering or proposing such an acquisition, even if such persons were
prepared to pay a higher price per share for UBT Common Stock than the price
per share implicit in the UBT Conversion Rate or a higher price per share for
UBT Common Stock than the then current market price of such shares.
Certain Regulatory Considerations. As financial institutions,
Comerica and its banking subsidiaries are subject to certain regulatory
restrictions, and examination and reporting requirements, of certain federal
and state banking authorities. Such restrictions impact, among other things,
the payment of dividends to Comerica by its bank subsidiaries and the extent to
which Comerica and its nonbank subsidiaries can borrow or otherwise obtain
credit from its bank subsidiaries. In addition, Comerica and its bank
subsidiaries are subject to certain capital requirements. Comerica is also
expected to act as a source of financial strength to each of its subsidiary
banks and to commit resources to support each of such subsidiaries. The
regulatory structure applicable to banks has been considerably revised by
recent federal legislation. See "CERTAIN REGULATORY CONSIDERATIONS."
11
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA OF COMERICA INCORPORATED
The following table sets forth certain selected consolidated financial
data of Comerica and is based on the consolidated financial statements of
Comerica, including the respective notes thereto, which are incorporated by
reference in this Proxy Statement/Prospectus from Comerica's Annual Report on
Form 10-K for the year ended December 31, 1993 and Quarterly Report on Form
10-Q for the nine months ended September 30, 1994, and should be read in
conjunction therewith. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"
above.
<TABLE>
<CAPTION>
(Share data in thousands, except per share data; income statement and balance sheet amounts in millions)
For the Nine Months Ended (1)
-----------------------------
September 30, September 30, For the Year Ended December 31,
------------- -------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Condensed Statement
of Income (in millions):
Net interest income $ 918 $ 845 $1,134 $1,121 $1,050 $ 927 $ 847
Provision for loan losses 44 55 69 111 105 100 147
Noninterest income 344 331 462 411 385 348 293
Noninterest expenses 780 761 1038 1092 945 848 754
Provision for income taxes 147 109 148 89 105 79 51
------ ------ ------ ------ ------ ------ ------
Net income $ 291 $ 251 $ 341 $ 240 $ 280 $ 248 $ 188
====== ====== ====== ====== ====== ====== ======
PER COMMON SHARE DATA:
Net income (primary) $ 2.46 $ 2.09 $ 2.85 $ 1.99 $ 2.41 $ 2.25 $ 1.73
Net income (fully diluted) 2.46 2.08 2.85 1.98 2.38 2.23 1.71
Cash dividends declared .92 .79 1.07 .96 .92 .87 .77
Common stockholders' equity
(period end) 20.20 18.56 18.99 17.38 16.30 14.52 13.05
Average primary
common shares outstanding
(in thousands) 118,148 120,079 119,569 119,113 114,713 108,742 106,640
CONSOLIDATED AVERAGE
BALANCES
(IN MILLIONS):
Total loans $19,825 $18,143 $18,307 $17,447 $16,622 $15,477 $14,113
Total assets 31,128 26,684 27,236 26,510 26,365 24,332 22,466
Total deposits 21,305 20,635 20,721 20,913 20,785 19,381 18,397
Long-term debt 2,298 1,004 1,087 414 323 348 354
Common stockholders'equity 2,288 2,123 2,136 1,957 1,741 1,485 1,322
Total stockholders'equity 2,288 2,123 2,136 1,995 1,779 1,523 1,360
</TABLE>
12
<PAGE> 24
<TABLE>
<CAPTION>
For the Nine Months Ended(1)
------------------------------
September 30, September 30, For the Year ended December 31,
------------- ------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS: (2)
Return on average assets 1.24% 1.25% 1.25% 0.91% 1.06% 1.02% 0.84%
Return on average common
stockholders' equity 16.94 15.73 15.94 12.10 15.90 16.47 13.94
Net interest margin -
taxable equivalent 4.34 4.72 4.65 4.73 4.49 4.36 4.33
Noninterest expenses as %
of average total assets 2.50 2.85 3.81 4.12 3.58 3.49 3.36
Nonperforming assets as %
of loans and other real
estate owned (3) 1.02 1.29 1.09 1.50 1.48 1.54 1.68
Nonperforming loans
as % of loans (3) .78 .99 .83 1.23 1.22 1.19 1.33
Allowance for loan
losses as % of loans (3) 1.58 1.63 1.56 1.69 1.62 1.60 2.30
Allowance for loan losses
as % of nonperforming 153 126 143 113 109 104 137
Net charge-offs as %
of average loans .23 .42 .43 .57 .58 1.18 .51
Total stockholders'
equity as % of assets (3) 7.50 7.76 7.2 7.61 6.68 6.05 6.04
Common stockholders'
equity as % of assets (3) 7.50 7.76 7.2 7.47 6.55 5.90 5.88
REGULATORY CAPITAL
RATIOS: (4)
Tier I risk-based capital 8.40% 8.70% 8.21% 8.83% 8.13% 7.23% 7.26%
Total risk-based capital 12.13 11.56 11.58 11.82 10.69 9.99 9.79
Leverage ratio 7.01 7.80 7.04 7.52 6.61 5.75 5.88
</TABLE>
_______________________________
(1) During the nine months ended September 30, 1994, Comerica completed the
acquisitions of Pacific Western Banc Shares, Inc. and Lockwood Banc Group,
Inc. in purchase transactions See "THE COMPANIES -- Comerica Incorporated
-- Recently Completed Acquisitions."
(2) Ratios are annualized where appropriate.
(3) At period end.
(4) Calculated under the risk-based and leverage capital guidelines effective
as of December 31, 1992.
13
<PAGE> 25
<TABLE>
<CAPTION>
For the Nine Months Ended (1)
-----------------------------
September 30, September 30, For the Year Ended December 31,
------------- ------------- --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total stockholders'
equity as % of assets (3) 7.50 7.76 7.2 7.61 6.68 6.05 6.04
Common stockholders'
equity as % of assets (3) 7.50 7.76 7.2 7.47 6.55 5.90 5.88
REGULATORY CAPITAL
RATIOS: (4)
Tier I risk-based capital 8.40% 8.70% 8.21% 8.83% 8.13% 7.23% 7.26%
Total risk-based capital 12.13 11.56 11.58 11.82 10.69 9.99 9.79
Leverage ratio 7.01 7.80 7.04 7.52 6.61 5.75 5.88
</TABLE>
_______________________________
(1) During the nine months ended September 30, 1994, Comerica completed the
acquisitions of Pacific Western Banc Shares, Inc. and Lockwood Banc Group,
Inc. in purchase transactions See "THE COMPANIES -- Comerica Incorporated
-- Recently Completed Acquisitions."
(2) Ratios are annualized where appropriate.
(3) At period end.
(4) Calculated under the risk-based and leverage capital guidelines effective
as of December 31, 1992.
14
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA OF UNIVERSITY BANK & TRUST COMPANY
The following table sets forth certain selected consolidated financial
data of UBT and is based on the financial statements of UBT, including the
respective notes thereto, which are incorporated by reference in this Proxy
Statement/Prospectus from UBT's Annual Report on Form 10-K for the year ended
December 31, 1993 and Quarterly Report on Form 10-Q for the nine months ended
September 30, 1994, and should be read in conjunction therewith. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" above.
(Income statement and balance sheet amounts in thousands,
except per share data)
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------
September 30, September 30, For the Year Ended December 31
------------- ------------- ------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest income $19,194 $17,798 $23,501 $23,865 $25,397 $25,833 $22,693
Interest expense 5,343 4,855 6,418 8,101 12,251 13,499 11,300
------- ------- ------- ------- ------- ------- -------
Net interest income 13,851 12,943 17,083 15,764 13,146 12,334 11,393
Provision for credit losses 475 1,100 2,833 2,215 875 360 310
Other income 2,903 2,601 5,150 3,895 2,518 2,240 1,600
Other expenses 11,099 9,940 13,515 11,808 10,312 9,497 8,044
------- ------- ------- ------- ------- ------- -------
Income before income taxes 5,180 4,504 5,885 5,636 4,477 4,717 4,639
Provision for income taxes 1,478 1,324 1,644 1,555 1,261 1,352 1,393
------- ------- ------- ------- ------- ------- -------
Net income $3,702 $3,180 $4,241 $4,081 $3,216 $3,365 $3,246
======= ======= ======= ======= ======= ======= =======
PER SHARE DATA:
Net income $2.63 $2.31 $3.07 $3.07 $2.46 $2.61 $2.56
Dividends per share 1.05 1.05 1.40 1.10 1.00 .75 .30
Stockholders' equity per share at period end 25.31 22.97 25.53 21.69 19.76 18.30 16.29
CONSOLIDATED BALANCES - END OF PERIOD:
Assets $442,156 387,733 406,731 373,955 337,012 287,147 258,265
Net Loans 211,868 211,898 211,972 224,550 191,782 162,651 144,190
Deposits 403,544 354,716 367,204 343,193 309,134 260,788 231,387
Shareholders' equity 35,433 30,730 34,311 28,425 25,191 22,397 19,471
CONSOLIDATED AVERAGE BALANCES:
Assets 414,866 371,994 377,611 347,533 308,923 273,242 229,544
Loans 211,294 226,212 218,779 206,311 168,909 156,207 126,748
STATEMENT OF OPERATIONS DATA AVERAGE
BALANCES:
Deposits 378,567 339,146 343,847 317,611 281,319 249,481 208,807
Stockholders' equity 32,930 29,803 30,177 26,784 23,735 20,893 17,896
PERFORMANCE RATIOS (ANNUALIZED):
Return on average assets 1.19% 1.14% 1.12% 1.17% 1.04% 1.23% 1.41%
Return on average equity 14.99% 14.25% 14.05% 15.24% 13.55% 16.11% 18.14%
Net interest margin (fully taxable
equivalent) 5.28% 5.60% 5.46% 5.48% 5.21% 5.50% 6.04%
Non-interest expense to average total
assets 2.68% 2.67% 3.58% 3.40% 3.35% 3.48% 3.49%
Non-performing assets to total assets 1.20% 1.40% 1.31% 1.37% 0.24% 0.12% 0.00%
Non-performing loans to total loans 0.59% 2.14% 1.71% 1.74% 0.28% 0.02% 0.01%
Allowance for credit losses to total loans 2.04% 1.79% 2.55% 1.60% 0.88% 0.99% 1.19%
Allowance for credit losses to
nonperforming loans 345.58% 83.94% 149.00% 91.70% 315.77% 5,224.24% 13,769.23%
</TABLE>
15
<PAGE> 27
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------
September 30, September 30, For the Year Ended December 31,
------------- ------------- --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net charge-offs to average loans 0.64% 0.43% 0.36% 0.17% 0.49% 0.27% 0.05%
REGULATORY CAPITAL RATIOS:
Tier 1 risk-based capital ratio 13.60% 12.30% 12.97% 11.11% 10.67% 10.03% NA
Total risk-based capital ratio 14.85% 13.55% 14.24% 12.36% 11.45% 10.80% NA
Leverage ratio 7.91% 8.11% 8.06% 7.97% 7.58% 8.03% NA
</TABLE>
16
<PAGE> 28
COMPARATIVE PER SHARE DATA (Unaudited)
The following table sets forth for the Comerica Common Stock and the
UBT Common Stock certain historical, pro forma and pro forma equivalent per
share financial information. The pro forma data does not purport to be
indicative of the results of future operations or the results that would have
occurred had the Merger been consummated at the beginning of the periods
presented. The pro forma data gives effect to the Merger and is based on
numerous assumptions and estimates. The pro forma financial data has been
included as required by the rules of the Commission and is provided for
comparative purposes only. The information presented below should be read in
conjunction with the separate financial statements of Comerica and UBT,
including the applicable notes, incorporated by reference herein. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
<TABLE>
<CAPTION>
Comerica UBT
--------------------- -------------------------
Equivalent
Historical Pro Forma Historical Pro Forma(2)
---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
COMMON STOCKHOLDERS' EQUITY:
December 31, 1993 . . . . . . . . . . . $18.99 $19.08 $25.53 $33.31
September 30, 1994 . . . . . . . . . . . 20.20 20.27 25.31 35.38
CASH DIVIDENDS:1
Year ended December 31, 1993 . . . . . . 1.07 1.07 1.4 1.87
Nine months ended September 30, 1994 . . .92 .92 1.05 1.61
NET INCOME:
Year ended December 31, 1993:
Primary . . . . . . . . . . . . . . . 2.85 2.86 3.07 4.99
Fully diluted . . . . . . . . . . . . 2.85 2.85 3.07 4.97
Nine months ended September 30, 1994(3)
Primary . . . . . . . . . . . . . . . 2.46 2.47 2.63 4.31
Fully diluted . . . . . . . . . . . . 2.46 2.47 2.63 4.31
</TABLE>
________________________________________
(1) The Comerica pro forma combined dividends per share amounts represent
historical dividends declared per share only on Comerica Common Stock.
The UBT historical dividends per share amount for nine months ended
September 30, 1994 does not include a $.35 dividend per share declared on
September 15, 1994 payable on October 26, 1994 to UBT stockholders of
record on October 12, 1994.
(2) The UBT pro forma equivalent per share amounts are calculated by multiplying
the Comerica pro forma per share amounts by an assumed UBT Conversion Rate
of 1.7456 (assuming no adjustments being required to the UBT Conversion
Rate). See "THE MERGER -- Merger Consideration."
(3) Does not include the dilutive effect of the grant of an option to Comerica
to purchase up to 137,718 shares of UBT Common Stock pursuant to the Stock
Option Agreement. See "THE STOCK OPTION AGREEMENT."
17
<PAGE> 29
COMPARATIVE STOCK PRICES
Comerica Common Stock is listed on the New York Stock Exchange
("NYSE"). The table below sets forth, for the periods indicated, the high and
low sales prices per share of Comerica Common Stock as reported on the NYSE
Composite Transactions Tape. The per share information set forth below has
been adjusted to reflect the 100% stock dividend paid January 4, 1993 to
Comerica common shareholders of record as of December 15, 1992.
UBT Common Stock is listed on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") National Market System. The following
table sets forth, for the periods indicated, the high and low sales prices per
share of UBT Common Stock. Prices reflect actual trades.
<TABLE>
<CAPTION>
Comerica UBT
Common Stock Common Stock
------------------ ---------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C> <C>
1992 First Quarter . . . . . . . . . . . . . . . . $30.250 $26.250 $26.500 $23.000
Second Quarter . . . . . . . . . . . . . . . . 31.875 26.500 25.500 22.750
Third Quarter . . . . . . . . . . . . . . . . 31.125 27.688 28.000 23.500
Fourth Quarter . . . . . . . . . . . . . . . . 32.750 29.250 28.500 24.500
1993 First Quarter . . . . . . . . . . . . . . . . $33.375 $28.750 $34.000 $24.500
Second Quarter . . . . . . . . . . . . . . . . 35.250 27.625 35.000 30.500
Third Quarter . . . . . . . . . . . . . . . . 31.500 26.875 37.000 33.000
Fourth Quarter . . . . . . . . . . . . . . . 29.000 25.125 37.000 30.500
1994 First Quarter . . . . . . . . . . . . . . . . $28.250 $25.250 $35.50 $31.00
Second Quarter . . . . . . . . . . . . . . . . 30.875 25.125 36.00 29.00
Third Quarter . . . . . . . . . . . . . . . . 31.250 27.750 39.50 33.00
Fourth Quarter
(through December __, 1994)
</TABLE>
On October 3, 1994 (the last trading day preceding the execution of the
Merger Agreement), the last sales price of Comerica Common Stock as reported on
the NYSE Composite Transactions Tape was $27.375 per share. On December __,
1994 (the last practicable date prior to the mailing of this Proxy
Statement/Prospectus), the last sales price of Comerica Common Stock as
reported on the NYSE Composite Transactions Tape was $______ per share.
On October 3, 1994 (the last trading day preceding the execution of the
Merger Agreement), the last sales price of UBT Common Stock as reported on the
NASDAQ National Market System Composite Transactions Tape was $38.50 per share.
On December __, 1994 (the last practicable date prior to the mailing of this
Proxy Statement/Prospectus), the last sales price of UBT Common Stock as
reported on the NASDAQ National Market System Composite Tape was $___ per
share.
UBT STOCKHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
COMERICA COMMON STOCK. NO ASSURANCE CAN BE GIVEN CONCERNING THE MARKET PRICE
OF COMERICA COMMON STOCK BEFORE OR AFTER THE
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DATE ON WHICH THE MERGER IS CONSUMMATED. THE MARKET PRICE OF COMERICA
COMMON STOCK WILL FLUCTUATE BETWEEN THE DATE OF THIS PROXY STATEMENT/PROSPECTUS
AND THE DATE ON WHICH THE MERGER IS CONSUMMATED AND THEREAFTER.
On September 30, 1994, there were 16,031 holders of record of Comerica
Common Stock, and 509 holders of record of UBT Common Stock.
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INTRODUCTION
This Proxy Statement/Prospectus is being furnished to stockholders of
University Bank & Trust Company ("UBT") in connection with the solicitation of
proxies by the Board of Directors of UBT (the "UBT Board") for use at the
Special Meeting of Stockholders of UBT (the "Special Meeting") to be held at
the offices of UBT located at 250 Lytton Avenue, Palo Alto, California on
January 25, 1995 at 4:30 p.m., and at any adjournments or postponements
thereof.
At the Special Meeting, the stockholders of UBT will be asked to
consider and vote upon a proposal (the "Merger Proposal") to adopt and approve
(a) the Agreement and Plan of Reorganization and Merger, dated as of October 4,
1994 (the "Merger Agreement"), by and among Comerica Incorporated, a Delaware
corporation and a registered bank holding company ("Comerica"), Comerica
Interim Incorporated, a California corporation ("Interim"), and UBT attached as
Annex A hereto and more fully described herein, and (b) the Agreement of Merger
(the "Subsidiary Merger Agreement"), attached as Annex B hereto, providing for
the merger (the "Merger") of Interim with and into UBT. UBT will be the
surviving corporation following the Merger, and will continue as a wholly-owned
subsidiary of Comerica.
In the Merger, each outstanding share of common stock, no par value
per share, of UBT ("UBT Common Stock"), subject to certain provisions with
respect to fractional shares and dissenting shares, will be converted into the
right to receive 1.7456 of a share of common stock, $5.00 par value per share,
of Comerica ("Comerica Common Stock"), subject to certain adjustments described
in the Merger Agreement (the "UBT Conversion Rate"). In addition, all existing
rights with respect to UBT Common Stock pursuant to UBT stock option plans (the
"Stock Options"), whether vested or unvested or exercisable shall be converted
into and become rights with respect to Comerica Common Stock. Each UBT Stock
Option holder will receive the number of stock options for Comerica Common
Stock such holder would have received according to the UBT Conversion Rate as
if such holder exercised his or her UBT Stock Options in full immediately prior
to the Effective Date. See "THE MERGER -- Merger Consideration."
The date on which this Proxy Statement/Prospectus is first being sent
to stockholders of UBT is on or about December __, 1994.
THE COMPANIES
COMERICA INCORPORATED
General. Comerica is a registered bank holding company incorporated
under the laws of the State of Delaware, headquartered in Detroit, Michigan and
was formed in 1973 to acquire the outstanding common stock of Comerica Bank
(formerly Comerica Bank- Detroit), a Michigan banking corporation ("Comerica
Bank"). On June 18, 1992, Manufacturers National Corporation, a registered
bank holding company incorporated under the laws of the State of Delaware
("Manufacturers"), was merged with and into Comerica. Comerica was the
surviving corporation. The merger was accounted for as a pooling-of-interests.
As of September 30, 1994, Comerica owned directly or indirectly all the
outstanding common stock (except for directors' qualifying shares, where
applicable) of 9 banking and 45 active nonbanking subsidiaries. At September
30, 1994, Comerica had total assets of approximately $31.8 billion, total
deposits of approximately $20.3 billion, total loans (net of unearned income)
of approximately $22.8 billion, and shareholders' equity of approximately $2.4
billion. At September 30, 1994, Comerica was the second largest bank holding
company headquartered in Michigan in terms of total assets.
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Comerica's business strategy focuses on five core businesses in four
geographic markets. Those businesses are corporate banking, consumer banking,
private banking, institutional trust and investment management, and
international finance and trade services. Corporate banking incorporates
highly specialized units servicing a full range of company sizes with both
credit and non- credit products. Consumer banking provides deposit, credit and
fee-based products to individuals needing financial services but whose income
or wealth do not make them prospects for private banking services. Private
banking is oriented to servicing the financial needs of the affluent market as
defined by individual net income or worth. Institutional trust and investment
management activities involve providing companies, municipalities and other
entities a wide spectrum of investment management products and trust products
such as master trust, master custody, and corporate trust services, as well as
administering and serving as trustee for employee benefit plans. International
finance and trade services offer importers and exporters trade financing,
letters of credit, foreign exchange and international customhouse brokerage and
freight forwarding products. The core businesses are tailored to each of
Comerica's four primary geographic markets: the Midwest (currently Michigan and
Illinois), Texas, California, and Florida. The Midwest is the only market in
which all five core businesses are currently pursued. In California and Texas,
the primary focus is on corporate banking and private banking activities. In
Florida, the primary focus is on private banking.
On September 14, 1992, Comerica Bank, Comerica's principal banking
subsidiary, and Manufacturers Bank, N.A. (the principal banking subsidiary of
Manufacturers prior to its merger into Comerica on June 18, 1992) were merged,
with Comerica Bank being the surviving institution. Such merger was accounted
for using the pooling-of-interests method. At September 30, 1994, Comerica
Bank had approximately 282 branch offices in Michigan and total assets of
approximately $25.3 billion. At September 30, 1994, Comerica Bank was the
second largest commercial bank in Michigan in terms of deposits.
In Illinois, Comerica owns Comerica Bank-Illinois. At September 30,
1994, Comerica Bank-Illinois had 24 offices in Illinois and total assets of
approximately $1.5 billion.
In Texas, Comerica owns Comerica Bank-Texas, which focuses on middle
market banking, small business banking, private banking and trust services in
the Dallas/Fort Worth, Texas area, and Lockwood National Bank of Houston which
provides similar services in the Houston area. At September 30, 1994, Comerica
Bank-Texas and Lockwood National Bank of Houston had total assets of
approximately $3.4 billion and 60 offices. See " -- Recently Completed
Acquisitions" for information regarding Lockwood National Bank of Houston,
which was acquired by Comerica on August 4, 1994.
In California, Comerica owns Comerica Bank-California, which focuses
on middle market banking, small business and private banking, as well as trust
services, in the San Jose and Los Angeles areas. At September 30, 1994,
Comerica Bank-California had total assets of approximately $1.7 billion. It
has 33 offices of which eleven are located in the San Francisco Bay Area.
Comerica Bank-California provides a wide array of services focused in middle
market banking, small business banking, high technology, commercial real estate
lending and mortgage banker financing. Comerica Bank-California also provides
cash management and trade finance services to corporate customers. It also
targets affluent and professional clients and provides customized solutions for
their private banking needs. Specialized banking services include lines of
credit, equipment loans, residential mortgage loans, equity lines of credit and
consumer loans. Comerica Bank-California offers fully managed trust accounts
for individuals and companies, and administration, record keeping, and
investment services for 401(k) plans and pension and profit sharing plans.
Comerica serves trust and banking customers in Florida through
Comerica Bank & Trust, F.S.B., a federally chartered savings bank, which
operates seven offices and had approximately $160 million in assets at
September 30, 1994.
Competitors of Comerica's banking subsidiaries include commercial
banks, savings and loan associations, consumer and commercial finance
companies, leasing companies, credit unions and other financial services
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companies. Based on the recent passage of the Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") and on legislation passed during
1985 that allows Michigan-based banks to acquire or be acquired by banks in
states with similar laws in effect, Comerica believes that the level of
competition will increase in the future.
Comerica's principal executive offices are located at Comerica Tower
at Detroit Center, 500 Woodward Avenue, Suite 3100, Detroit, Michigan 48226,
and its telephone number is (313) 222-4000.
Recently Completed Acquisitions. On September 8, 1993, Comerica,
Pacific Western Bancshares, Inc., a Delaware corporation and a bank holding
company ("PAC WEST"), Pacific Western Bank, a California state-chartered bank
and a wholly owned subsidiary of PAC WEST ("PWB") and Comerica California
Incorporated, a California registered bank holding company and wholly owned
subsidiary of Comerica ("COM CAL") entered into an Agreement and Plan of
Reorganization and Merger providing for, among other things, the merger (the
"Merger") of COM CAL into PAC WEST with PAC WEST being the surviving
corporation under the charter and bylaws of COM CAL and the name "Comerica
California Incorporated". The merger was completed on March 30, 1994 and was
accounted for as a purchase. PAC WEST shareholders received common stock of
Comerica valued at approximately $121 million. At December 31, 1993, PAC WEST
had assets of approximately $1 billion. PWB merged into Comerica
Bank-California on June 30, 1994.
On April 4, 1994, Comerica, Michigan National Corporation, a Michigan
corporation and a bank holding company ("MNC"), Lockwood Banc Group, Inc., a
Michigan corporation, wholly owned subsidiary of MNC and a registered bank
holding company ("Lockwood") and Lockwood National Bank of Houston, a national
banking association and wholly owned subsidiary of Lockwood ("LNB") entered
into a Stock Purchase Agreement whereby Comerica purchased from MNC all of the
issued and outstanding stock of Lockwood and LNB. The purchase was completed
on August 4, 1994 for a purchase price of approximately $44 million in cash. At
June 30, 1994 Lockwood had assets of approximately $318 million. Comerica
contributed the stock of LNB to Comerica Texas Incorporated its wholly owned
bank holding company in Texas. It is expected that LNB will merge into
Comerica Bank-Texas in the first quarter of 1995.
Pending Joint Venture. On November 2, 1994, Comerica and Munder
Capital Management, Inc., a Delaware corporation and registered investment
adviser located in the Detroit, Michigan metropolitan area ("Munder"), entered
into a Joint Venture Agreement providing for the combination of the investment
advisory businesses of Munder and two investment advisory subsidiaries of
Comerica: Woodbridge Capital Management, Inc. ("Woodbridge") and World Asset
Management, Inc. ("World"). The Joint Venture Agreement contemplates the
formation of a partnership that will succeed to the investment advisory
businesses of Munder, Woodbridge, and World. Munder will hold a majority
interest in the proposed partnership, and Comerica will hold a minority
interest. The venture is subject to regulatory approval, which is expected by
December 31, 1994.
Future Acquisitions. Comerica continues to review and evaluate
potential acquisitions in order to expand its core businesses in defined
markets. Comerica anticipates that from time to time in the future it will
acquire companies which complement and effectuate Comerica's business
objectives in both federally-assisted and negotiated transactions. Certain
bank acquisitions, including those by Comerica and others have typically
involved the payment of a premium over book and market values, which may
sometimes result in some dilution to the acquiring company's book value and net
income per common share. Comerica expects that future acquisitions may involve
acquisition premiums and dilution.
Michigan Environmental Complaint. Manufacturers Bank (which was
merged with and into Comerica Bank in September, 1992) was served on July 24,
1990 with a complaint by the Attorney General of the State of Michigan
("Plaintiff") in which the Plaintiff sought to impose strict, joint, and
several liabilities upon Manufacturers Bank pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), the
Resource Conservation and Recovery Act, and the Michigan Water Resources
Commission Act. Plaintiff alleged
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that Manufacturers Bank was an operator of certain facilities which have
environmental problems and that Manufacturers Bank had indicia of ownership
under CERCLA. The facilities involved were actually owned and operated by Auto
Specialties Manufacturing Company ("AUSCO"), now in bankruptcy. Plaintiff
bases the allegation upon the fact that two former Manufacturers Bank officers
and employees were members of the Board of Directors of AUSCO and that
Manufacturers Bank allegedly directed the installation of new management at
AUSCO. Plaintiff contends Manufacturers Bank had final and ultimate approval
over AUSCO's corporate strategies, policies and acquisitions.
Plaintiff seeks cleanup costs and damages and has expressed the opinion
that the claim will be well in excess of $30 million. Comerica's management
believes that this action will not have a materially adverse effect on
Comerica's consolidated financial position, although it may, depending upon the
amount of ultimate liability, if any, and the consolidated results of
operations in the year of final resolution, have a materially adverse effect on
the consolidated results of operation in that year. On January 12, 1993, the
United States District Court for the Western District of Michigan granted
Manufacturers Bank its motion for summary judgment. The Plaintiff has filed an
appeal to the Sixth Circuit Court of Appeals.
UNIVERSITY BANK & TRUST COMPANY
UBT is a California state bank organized in 1994 under the laws of the
State of California. The predecessor of UBT is University National Bank &
Trust Company, a national bank ("UNBT"), organized in 1980 under the federal
laws of the United States. On June 17, 1994, UNBT converted from a national
bank charter to a state charter, using the revised name of University Bank &
Trust Company. As a California state chartered bank which is also a member of
the Federal Reserve, UBT is governed by the California Financial Code and
regulated by the California Superintendent of Banks and the Federal Reserve
Board. At September 30, 1994, UBT had total assets of approximately $442.2
million, total deposits of approximately $403.5 million, total loans (net of
unearned income) of approximately $211.9 million, and stockholders' equity of
approximately $35.4 million.
UBT commenced operations on May 13, 1980. Since its formation, UBT
has provided basic banking services and personal trust services to individuals
and business enterprises in the Palo Alto area. Palo Alto is located on the
San Francisco Peninsula, approximately 30 miles south of San Francisco, on the
northern periphery of "Silicon Valley."
UBT's primary service area is considered to be the communities of Palo
Alto, Menlo Park, Atherton and Portola Valley plus the unincorporated areas of
Ladera and Stanford University. This primary service area is oriented towards
professional services, light industry, retail businesses and education.
UBT considers its principal service a "banking relationship," the
keystone of which is a transaction account. In the case of corporations, the
transaction account is a demand (checking) account. In the case of
individuals, it is a Super-NOW account that pays interest, provided that
sufficient funds (i.e., either a daily minimum balance of $3,000 or an average
monthly balance of $6,000) are maintained. Once a customer has established the
"relationship" with UBT by opening a transaction account, that customer may
utilize all other UBT services, including money fund accounts, certificates of
deposit, safe deposit box rentals, cashier's checks, and the purchase of U.S.
postage stamps, U.S. Savings Bonds and traveler's checks. Borrowing clients
who are low and moderate income individuals are not expected to be deposit
clients of UBT. UBT also makes available to qualified customers commercial,
personal and real estate loans, credit cards and standby letters of credit.
Through its correspondents, UBT is also able to offer limited international
banking and municipal bond trading services.
UBT's Trust Department specializes in personal trust services and acts
as trustee on a range of employee benefit plans. UBT does not provide stock
transfer services. UBT maintains a Trust Representative Office at 133 Mission
Street, Santa Cruz, California.
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UBT has an office at 800 Oak Grove, Menlo Park, California. UBT has
automatic teller machines at its two offices and it issues an automatic teller
machine "ATM" card which enables a customer to withdraw cash at over 65,000
offices of other financial institutions world wide which are members of Cirrus,
Money Network, Star System, American Express and the Interlink Network. UBT
also maintains an ATM machine at the Forum, 23500 Christo Rey Drive, Cupertino,
California.
UBT is in the process of obtaining regulatory approval to open a new
branch in Los Altos, California.
Competitors of UBT include commercial banks, savings & loan
associations, securities brokerage firms and credit unions.
UBT's principal executive offices are located at 250 Lytton Avenue,
Palo Alto, California 94301, and its telephone number is (415) 327-0210.
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THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, holders of UBT Common Stock will consider and
vote upon the Merger Proposal to approve and adopt the Merger Agreement, the
Subsidiary Merger Agreement and the Merger. No other matters will be brought
before the Special Meeting.
ALL THE MEMBERS OF THE UBT BOARD WERE PRESENT AT THE MEETING APPROVING
THE MERGER AGREEMENT, THEY UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
SUBSIDIARY MERGER AGREEMENT AND THE MERGER. THE UBT BOARD RECOMMENDS THAT UBT
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER PROPOSAL.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the
outstanding shares of UBT Common Stock entitled to vote thereon is required to
approve the Merger Proposal. Each share of UBT Common Stock is entitled to one
vote. Thus, any shares of UBT Common Stock which for any reason, including
abstentions or broker non-votes, are not voted for approval of the Merger
Proposal will not count toward the required total and will have the same
effect, for purposes of approving the Merger Proposal, as shares voted against
approval. Approval of the Merger Proposal by the requisite vote of UBT
stockholders is a condition to, and required for, the consummation of the
Merger. See "THE SPECIAL MEETING --Record Date; Shares Entitled to Vote;
Quorum."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
At September 30, 1994, UBT directors, executive officers and their
affiliates may be deemed to be the beneficial owners of approximately 230,551
shares of UBT Common Stock, representing approximately 16.5% of the then
outstanding shares of UBT Common Stock. Such officers and directors are
entitled to exercise options to acquire a total of 11,000 shares of UBT Common
Stock, which would result in such persons being deemed to be the beneficial
owners of approximately 17.3% of the shares of UBT Common Stock outstanding as
of September 30, 1994. See "THE MERGER -- Stock Option Plans." Each
director-stockholder of UBT has executed an agreement with Comerica which,
among other things, obligates them to vote the shares of UBT Common Stock owned
or controlled by them in favor of the Merger, subject to fiduciary obligations.
See "THE MERGER AGREEMENT -- Shareholder Agreements."
VOTING OF PROXIES
Shares of UBT Common Stock represented by properly executed proxies
received at or prior to the Special Meeting will be voted at the Special
Meeting in the manner specified by the holders of such shares. Properly
executed proxies which do not contain voting instructions will be voted FOR
approval of the Merger.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Special Meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons
named in the relevant form of proxy enclosed herewith and acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment.
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UBT does not have any knowledge of any matters to be presented at the Special
Meeting other than those matters referred to and described herein.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person or otherwise revoking a proxy. Attendance at
the Special Meeting will not in and of itself constitute revocation of a proxy.
A stockholder may revoke a proxy at any time prior to its exercise by filing
with Gayle A. Anderson, Secretary of UBT, 250 Lytton Avenue, Palo Alto,
California 94301, a duly executed revocation or a proxy bearing a later date
or by voting in person at the Special Meeting.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of UBT Common Stock at the close of business on
December 1, 1994 (the "Record Date") will be entitled to receive notice of, and
to vote at, the Special Meeting. At the Record Date, UBT had outstanding
__________ shares of UBT Common Stock. Holders of a majority of the
outstanding shares of UBT Common Stock entitled to vote must be represented in
person or by proxy at the Special Meeting in order for a quorum to be present
at the Special Meeting. As of the Record Date, there were _____ holders of
record of outstanding UBT Common Stock.
SOLICITATION OF PROXIES
UBT will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers
and employees of UBT may solicit proxies from their respective stockholders by
telephone or telegram or in person. Such persons will not be additionally
compensated, but will be reimbursed for reasonable out-of-pocket expenses
incurred in connection with such solicitation. Arrangements will also be made
with brokerage firms, nominees, fiduciaries and other custodians, for the
forwarding of solicitation materials to the beneficial owners of shares held of
record by such persons, and UBT will reimburse such persons for their
reasonable out-of-pocket expenses in connection therewith.
UBT has retained the services of its transfer agent, First Interstate
Bank of California, to facilitate the distribution of solicitation materials
and the solicitation of proxies from banks, brokerage houses, fiduciaries and
custodians holding shares of UBT Common Stock in their names for beneficial
holders. First Interstate Bank of California may also solicit proxies from
registered stockholders. Solicitation would be made by mail, telephone and
personal contact. UBT will pay First Interstate Bank an estimated fee of $5,000
for its services, plus its reasonable out-of-pocket costs.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES
WITH THEIR PROXY CARDS
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THE MERGER
FORM OF THE MERGER
Pursuant to the Merger Agreement, at the Effective Time (as defined
below under "Effective Time") of the Merger, Interim will merge with and into
UBT, pursuant to the terms of the Subsidiary Merger Agreement with UBT being
the surviving corporation. As a result of the Merger, Comerica will own the
entire equity interest in, and become the sole stockholder of, UBT.
MERGER CONSIDERATION
UBT Conversion Rate. Upon consummation of the Merger, each
outstanding share of UBT Common Stock will be converted (subject to the
provisions with respect to fractional shares and dissenting shares described
under "Conversion of Shares; Procedures for Exchange of Certificates;
Fractional Shares" and "Dissenters Rights" below) into the right to receive
1.7456 shares of duly authorized, validly issued, fully paid and nonassessable
Comerica Common Stock subject to a downward adjustment in the event that UBT's
Consolidated Net Worth, as defined in the Merger Agreement, is less than
$34,200,000. Such amount is referred to herein as the "UBT Conversion Rate".
In addition, all existing rights with respect to UBT Common Stock pursuant to
UBT stock option plans (the "UBT Stock Options"), whether vested or unvested or
exercisable shall be converted into and become rights with respect to Comerica
Common Stock. Each UBT Stock Option holder will receive the number of stock
options for Comerica Common Stock such holder would have received according to
the UBT Conversion Rate as if such holder exercised his or her UBT Stock
Options in full immediately prior to the Effective Date. The UBT Conversion
Rate was determined through arm's-length negotiations between UBT, Comerica and
Interim.
It is a condition to Comerica's obligation to consummate the Merger
that the number of shares of Comerica Common Stock that shall be issuable
pursuant to the terms of the Merger Agreement shall not exceed 2,680,820 as of
the Effective Time.
The Merger Agreement also requires the UBT Conversion Rate to be
further appropriately adjusted to reflect any recapitalization, reorganization,
reclassification, split-up, merger, consolidation, exchange, stock or other
dividend or distribution (other than regular quarterly cash dividends) made,
declared or effective with respect to Comerica Common Stock between the date of
the Merger Agreement and the Effective Time of the Merger.
There can be no assurance that an adjustment to the UBT Conversion Rate will
not occur.
BACKGROUND OF THE MERGER
UBT was founded in 1980 by its current Chairman and Chief
Executive Officer, Carl J. Schmitt. Since UBT's inception, Mr. Schmitt and
certain of his family members, as a group, have constituted the single largest
shareholder block of UBT, owning approximately 12% of the outstanding shares.
For more information regarding the business and history of UBT, and additional
information related to the stock ownership of UBT, see "THE COMPANIES --
University Bank & Trust Company".
UBT has enjoyed steady growth and consistent earnings throughout its
history, and has been recognized in its market as an institution characterized
by personalized, high level customer service. The Board has attributed much of
the resulting success of UBT to the personal qualities and leadership style of
Mr. Schmitt. Beginning in late 1992 and early
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1993, however, a series of events began to heighten the Board's awareness of,
and its need to address, certain difficult issues facing UBT and its future.
In 1992, the market served by UBT was working through a major
recession. While UBT weathered this recession, it highlighted some of the
limitations of an independent bank serving primarily a single geographic market.
In early 1993, UBT underwent an intensive regulatory
compliance examination which also highlighted the increasing and, in
management's view, disparate burden of regulatory compliance on relatively
small, niche-oriented institutions like UBT.
Also in early 1993, the need to identify a suitable
successor to Mr. Schmitt became more acute because he suffered a minor heart
attack. Soon thereafter, Mr. Schmitt made known his desire to begin planning
for retirement from the full time responsibilities of Chairman of the Board
and Chief Executive Officer. By the end of 1993, the convergence of these
events caused the Board to consider alternative courses of action.
On January 19, 1994, the Board met in executive session for a
lengthy review of UBT's progress in the past and its prospects for the future,
particularly in light of Mr. Schmitt's desires. The trend of consolidation in
the banking industry was also discussed. After considerable discussion, the
Board analysis centered on two alternative strategies: (1) to engage an
investment banker to help determine the value of UBT were it to be sold, and
(2) to search for and evaluate possible successors to Mr. Schmitt to take
office as Mr. Schmitt commenced a phased-in retirement from the positions of
Chairman and CEO.
Mr. Schmitt voiced his view that, based on his extensive
knowledge of bank executives familiar with UBT and its market (and knowledge of
a number of bank executives outside UBT's market), and on his efforts to
inquire of the availability of top management to move to UBT, he was not
confident of UBT's ability to identify a suitable successor. He also conveyed
to the Board his concern for the value of UBT and its franchise if he were to
commence a phased-in retirement without a successor having been identified.
The Board concluded at the end of its January 19, 1994 meeting
that UBT should go forward with the strategy of engaging an investment banker
of national stature in the banking industry to assist in the valuation and
potential sale of UBT. Mr. Schmitt suggested, and the Board concurred, that
contact should be initiated with Goldman Sachs & Co. ("Goldman Sachs").
Mr. Schmitt travelled to New York in late January 1994 to meet
with representatives of Goldman Sachs. No agreements were signed and no
conclusions were reached at the meeting, although UBT agreed to provide
additional information to Goldman Sachs to enable Goldman Sachs to better
understand UBT and its value. Mr. Schmitt also acted during this period to
engage the law firm of Gray Cary Ware & Freidenrich in Palo Alto, California to
serve as counsel to UBT in the event of any sale or merger transaction.
On March 17, 1994, the Board met again, this time joined by
counsel and by representatives of Goldman Sachs. Goldman Sachs made a
presentation to the Board regarding its credentials, a preliminary assessment
of UBT's value, and an overview of possible strategies for marketing UBT to
prospective buyers. Following the presentation, representatives of Goldman
Sachs were excused from the meeting, and the Board undertook an extensive
discussion of the overall question of whether to pursue sale or merger of UBT
and if so, on what terms. Several directors questioned whether now was the
right time to pursue a sale or merger, both in terms of UBT's present condition
and in terms of the market for bank mergers and acquisitions. There was
discussion of the likely corporate structure, regulatory requirements and
timing of a possible sale or merger transaction. There was also discussion of
anticipated individual compensation to Mr. Schmitt in the event of a sale or
merger, as the Board recognized his unique value to prospective buyers or
merger partners, and also recognized that Mr. Schmitt did not have any
employment agreement or other agreement with UBT providing him with
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compensation upon change in control of UBT. At the conclusion of this meeting,
Mr. Schmitt was authorized to engage Goldman Sachs to investigate and pursue
sale or merger opportunities.
Goldman Sachs promptly commenced a due diligence review of
UBT, including an examination of financial results, management's financial
projections, competitive position and market share, deposit profile, liquidity,
interest rate exposure, loan portfolio and fixed assets and other matters in
order to determine the range of fair value for UBT. Goldman Sachs prepared a
confidential descriptive memorandum (the "Confidential Memorandum") about UBT
and, based on its extensive knowledge of, and contacts within, the banking
industry nationwide, selected parties that might be interested and able to
acquire UBT. Of the parties discussed, a list of twenty-two institutions was
developed which Goldman Sachs and management agreed would represent the
most attractive potential merger partners. Goldman Sachs contacted these
institutions (without identifying UBT by name) to see if there was sufficient
interest by any of them to sign a confidentiality agreement and receive a copy
of the Confidential Memorandum.
On May 19, 1994, the Board met again, and Mr. Schmitt gave a
progress report on the efforts of Goldman Sachs. The institutions which were
interested in receiving a Confidential Memorandum were discussed, although it
was recognized that there were additional contacts to be made.
By the middle of June 1994, it had been determined that of the
twenty-two institutions contacted, nine were willing to sign a confidentiality
agreement and review the Confidential Memorandum. The other institutions
decided for various reasons not to pursue the opportunity to acquire UBT.
Mr. Schmitt invited each of the nine institutions which had
signed the Confidentiality Agreement to meet with him prior to submitting any
proposal. Over the next several weeks, Mr. Schmitt, together with one or more
representatives of Goldman Sachs, had personal meetings to explain the
philosophy of UBT and respond to any questions with the five interested parties
(including Comerica) which requested such meetings.
Following those meetings, on June 30, 1994, a letter was sent
to nine interested parties requesting that they submit non-binding indications
of interest by July 6, 1994. Three institutions responded to the request for
non-binding indications of interest. Of the three, one of the indications was
delivered orally and subsequently was withdrawn. Both written indications
included a price or range of prices for UBT. After consultation with Goldman
Sachs and input from Board members, Mr. Schmitt directed Goldman Sachs to go
back to both institutions and inform them that, while each of their respective
proposals were compelling in many respects, including perceived cultural fit
and reputation, the offers did not adequately reflect the value of UBT's
franchise. Both institutions were instructed that if they could offer
consideration of at least $50.00 per share, Mr. Schmitt and Goldman Sachs felt
it appropriate to continue discussions and for either, or both, institution to
spend additional time familiarizing themselves with UBT, its earnings record,
and its prospects for 1995. As a result of such discussions, only Comerica
elected to continue in the process.
On July 21, 1994, the Board met and received another update on
the selling effort. At this time only Comerica had indicated a willingness to
consider a price valued at $50 per share for the outstanding shares (and
options) of UBT. Additional efforts by Goldman Sachs to re-introduce the
second bidder into the process were unsuccessful. The Board directed Mr.
Schmitt to continue his discussion with Comerica to determine if an acceptable
proposal could be forthcoming.
During August 1994, a number of meetings with Comerica were
held by Mr. Schmitt and representatives of Goldman Sachs. On August 3, 1994,
Mr. Schmitt met in California with the Vice Chairman of Comerica, along with
the Chairman and the President of Comerica Bank-California. This meeting was
focused on gaining a better understanding of the operating philosophies of the
two institutions. Further, similar discussions took place on August 16, when
Mr. Schmitt met with senior management of Comerica at Comerica's headquarters
offices in Detroit.
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On August 17, 1994, Mr. Schmitt met with senior members of
UBT's management team to inform them of the discussions with Comerica, and of a
meeting scheduled for the following day between them and their counterparts at
Comerica Bank-California. The August 18, 1994 meeting was held at the offices
of Goldman Sachs in San Francisco. Following this meeting, negotiations were
broken off at the direction of Mr. Schmitt.
On August 22, 1994, Goldman Sachs informed Mr. Schmitt that
Comerica had requested an additional meeting to explore the reasons Mr. Schmitt
had broken off discussions and determine if the problems could be resolved.
Later that week, the meeting was held among Mr. Schmitt, a representative of
Goldman Sachs, the Chairman and the President of Comerica Bank-California. Mr.
Schmitt suggested at that meeting that another meeting be held among only
management representatives of the two institutions, to determine if his
concerns about preserving the franchise value of UBT could be reconciled with
Comerica's concerns for consistent and attractive earnings. This additional
meeting was held the following week, and although no agreements were reached,
Mr. Schmitt came away believing that substantial progress had been made toward
better understanding of the subjective aspects of UBT's value and the keys to
preserving and enhancing that value in the future.
On September 15, 1994, UBT's Board of Directors met again in
executive session to receive a full briefing on the status of negotiations with
Comerica, and to reconsider the question of whether any sale or merger was the
right step at that time. The status report delivered by Mr. Schmitt indicated
Comerica had at that time offered $50 per UBT share, subject to satisfactory
completion of due diligence. Mr. Schmitt had countered at a flat exchange rate
of 1.7 shares of Comerica stock, which at the time equalled more than $50 per
share based on the then prevailing Comerica share price. No resolution had
been reached on this issue by Mr. Schmitt and Comerica.
The Board again considered the appropriateness of a potential
sale, at that time in the context of having a bona fide buyer seriously
interested in acquiring UBT. Although the possible adverse impacts of a sale
or merger on the community were recognized as a negative aspect of any
transaction, concerns over the successorship issue regarding Mr. Schmitt, the
disparate impact of the increasing regulatory burden on smaller banks, and the
consolidation trend sweeping the industry were all viewed as persuasive in
favor of proceeding with a transaction if the terms could be successfully
negotiated. At the conclusion of the meeting, the Board voted unanimously to
go forward and have Mr. Schmitt attempt to negotiate an acceptable final price.
The next day, September 16, 1994, the parties agreed on a
fixed share exchange ratio, subject to a downward adjustment under certain
circumstances, based on an average of the closing price of Comerica
common stock for the period from September 12, 1994 until two days before
signing a definitive agreement to merge. The parties also agreed on a schedule
for Comerica to conduct its due diligence while negotiations for the definitive
agreement were ongoing.
On September 24, 1994, Mr. Schmitt met with the Chairman of
the Board and the President of Comerica Bank-California to discuss the terms of
a proposed covenant not to compete from Mr. Schmitt, as well as Mr. Schmitt's
continuing commitment to assist UBT following any merger. Mr. Schmitt set
forth his needs and expectations with respect to compensation for such an
arrangement. Tentative agreement was reached calling for compensation of
approximately $2.2 million at closing of the Merger in exchange for Mr.
Schmitt's agreement not to compete in Santa Clara and Santa Cruz counties in
California, and in exchange for his agreement to continue as Chairman of the
Board of the surviving company.
On September 26, 1994 Mr. Schmitt, together with a
representative of Goldman Sachs, met in Detroit, Michigan with senior
management of Comerica to conduct due diligence on the current financial
condition and future prospects for Comerica. During this time, Comerica's due
diligence on UBT also proceeded, and
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counsel for the parties worked on the terms of a definitive agreement, which by
September 30, 1994 was in substantially final form.
On October 2, 1994, the UBT Board members met with representatives of
Goldman Sachs and legal counsel to review the status of negotiations and the
terms of the proposed Merger Agreement. Goldman Sachs gave a detailed review
of the sale process, the terms and conditions of the proposed final agreement
relative to other bank merger transactions, and concluded with its oral opinion
that the terms, as proposed in the most recent draft of the Agreement, were
fair to UBT's stockholders from a financial point of view. Legal counsel
briefed the Board on the material terms of the proposed definitive agreement,
including the mutual breakup fees, the lock up option, as well as the proposed
terms of a Non-Competition Agreement between Mr. Schmitt and Comerica. At the
conclusion of the meeting, Board members voted unanimously to approve the
Merger Agreement, the Subsidiary Merger Agreement and the transactions
contemplated thereby, including, but not limited to, the Merger and the
proposed Non-Competition Agreement to be entered into by Mr. Schmitt, but
reserved for themselves a 24 hour period in which to reconvene if any director
felt differently the following day.
No director called for a reconvening of the Board meeting, and on
October 4, 1994 the Merger Agreement was executed by the parties.
The Comerica Board approved the Merger and authorized execution of the
Merger Agreement on September, 16, 1994.
COMERICA REASONS FOR THE MERGER
It is part of Comerica's current business strategy to expand its
activities from Michigan into states such as California where management
believes there are long-term opportunities which will benefit Comerica and its
shareholders. Comerica California Incorporated is Comerica's wholly-owned bank
holding company subsidiary operating in the State of California, which through
its wholly owned subsidiary, Comerica Bank-California, focuses on middle market
banking, small business banking, private banking and trust services in the San
Francisco Bay and San Jose areas. See "THE COMPANIES -- Comerica Incorporated
- -- General." Comerica believes that through the Merger Comerica will be able
to increase its penetration of the California commercial, retail and private
banking markets in the communities served by UBT. This transaction is also
expected to enhance the competitiveness of the companies in a deregulated
banking environment.
In addition, Comerica believes that in light of the acceleration in
the number and size of combinations currently occurring within the financial
and banking industries and the promulgation of the Interstate Act will provide
further impetus to consolidation of banking entities, it is desirable for
Comerica to expand its financial resources and markets.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF UBT AND UBT REASONS FOR THE MERGER
The UBT Board has determined that the Merger Agreement is in the best
interests of UBT and its stockholders, and unanimously recommends that the UBT
Common Stockholders approve the Merger Agreement. In arriving at its
conclusion, the UBT Board was influenced by the factors discussed above under
"Background of Merger", namely the need to address the need for a successor to
its Chairman within the context of a consolidating banking industry and a
regulatory environment which is increasingly burdensome to smaller
institutions. The UBT Board also considered several additional factors,
though the Board did not assign any specific or relative weight to these
factors in its considerations. Additional factors considered by the
Board included the following:
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(i) the fact that the due diligence examination conducted by
representatives of UBT, including Goldman Sachs, indicated that Comerica is
strong in capital, earnings and management, and has good regulatory
relationships, and a compatible operating philosophy with UBT;
(ii) the opinion of Goldman Sachs that the UBT Conversion
Rate is fair to the stockholders of UBT;
(iii) the fact that the Merger will be tax-free for federal
income tax purposes for the stockholders of UBT Common Stock (other than in
respect to cash paid in lieu of fractional shares);
(iv) the likelihood that the Merger would result in receipt
of substantially increased dividends to stockholders of UBT Common Stock who
keep their shares of Comerica Common Stock after the Merger;
(v) the market liquidity afforded by the listing of shares of
Comerica Common Stock on the NYSE compared to the minimal trading of UBT's
Common Stock;
(vi) the Board's review with its legal advisors and with
Goldman Sachs of the provisions of the Merger Agreement; and
(vii) the probable impact of the Merger on employees and
customers of UBT.
OPINION OF UBT'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated March 17, 1994 (the "Engagement
Letter"), UBT retained Goldman Sachs as its exclusive financial advisor in
connection with reviewing UBT's strategic alternatives, including a possible
sale of UBT. Goldman Sachs is an internationally recognized investment banking
firm and is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. Goldman Sachs is familiar with UBT, having acted as
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Merger Agreement. Goldman Sachs has also provided
certain investment banking services to Comerica from time to time and may
provide investment banking services to Comerica in the future. The UBT Board
selected Goldman Sachs to act as UBT's exclusive financial advisor based on
Goldman Sachs' substantial experience in mergers and acquisitions and in
securities valuation generally.
THE FULL TEXT OF THE GOLDMAN SACHS WRITTEN OPINION DATED AS OF THE DATE OF THIS
PROXY STATEMENT\PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON THEIR REVIEW, IS ATTACHED HERETO AS ANNEX D. HOLDERS
OF SHARES OF UBT COMMON STOCK ARE URGED TO AND SHOULD READ SUCH OPINION IN ITS
ENTIRETY.
In connection with its opinion dated as of the date of this Proxy
Statement/Prospectus, Goldman Sachs reviewed, among other things, the Merger
Agreement; the Registration Statement on Form S-4, including this Proxy
Statement/Prospectus relating to the Special Meeting to be held in connection
with the Merger Agreement; Annual Reports to Stockholders and Annual Reports on
Form 10-K of UBT for the two years ended December 31, 1993; Annual Reports to
Stockholders and Annual Reports on Form F-2 of UBT for the three years ended
December 31, 1991; Annual Reports to Stockholders and Annual Reports on Form
10-K of Comerica for the five years ended December 31, 1993; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of UBT and Comerica;
certain other communications from UBT to its stockholders; and certain internal
financial analyses and forecasts for UBT prepared by its management. Goldman
Sachs also held discussions with members of the senior managements of UBT and
Comerica regarding the past and current business operations, financial
condition and
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future prospects of their respective companies. In addition, Goldman Sachs has
reviewed the reported price and trading activity for UBT Common Stock, compared
certain financial and stock market information with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the banking
industry specifically and in other industries generally and performed such
other studies and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied, without independent verification, upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In that regard, Goldman Sachs assumed, with the
consent of the UBT Board, that the financial forecasts, including, without
limitation, projections regarding underperforming and nonperforming assets and
net chargeoffs were reasonably prepared on a basis reflecting the best
currently available judgments and estimates of UBT and that such forecasts
would be realized in the amounts and at the times contemplated thereby.
Goldman Sachs is not an expert in the evaluation of loan and lease portfolios
for purposes of assessing the adequacy of the allowances for losses with
respect thereto and has assumed, with the consent of the UBT Board, that such
loss allowances for each of UBT and Comerica are in the aggregate adequate to
cover all such losses. Goldman Sachs did not review individual credit files nor
did it make an independent evaluation or appraisal of the assets and
liabilities of UBT or Comerica or any of their respective subsidiaries.
Goldman Sachs also has assumed that Comerica will receive all necessary
regulatory approvals without undue delay.
Pursuant to the terms of the Engagement Letter, UBT has agreed to pay Goldman
Sachs a transaction fee equal to 1.5% of the aggregate consideration paid in
such transaction or approximately $1.15 million. In addition, UBT has agreed
to reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including
the fees and disbursements of its counsel, plus any sales, use or similar taxes
arising in connection with its engagement, and to indemnify Goldman Sachs
against certain liabilities relating to or arising out of its engagement,
including liabilities under the federal securities laws.
SUMMARY OF FINANCIAL ANALYSES
The following is a summary of the material financial analyses utilized
by Goldman Sachs in connection with providing its written opinion dated as of
the date of this Proxy Statement\Prospectus to the UBT Board but does not
purport to be a complete description of the analyses performed by Goldman
Sachs.
Pro Forma Analysis. Goldman Sachs analyzed certain pro forma effects
for 1995 resulting from the Merger based on (i) financial forecasts for UBT
prepared by UBT management, (ii) projected earnings for Comerica based on the
median of institutional brokers' estimates compiled by SNL Securities, L.P. as
of September 30, 1994 (SNL Securities, L.P. is a data firm that monitors and
publishes a compilation of earnings estimates produced by selected research
analysts), and (iii) cost savings equal to 10% of UBT's estimated 1994
noninterest expense, estimated by management of UBT to be attainable in the
Merger.
Selected Transaction Analysis. Goldman Sachs analyzed certain
information relating to 19 bank and thrift acquisitions, including nine bank
acquisitions in the states of Arizona, California, Colorado, Oklahoma and Texas
announced since January 1, 1992 in which the aggregate consideration was
greater than $25 million and less than $100 million (the "Western U.S. Bank
Acquisitions") and ten acquisitions by Comerica announced since January 1, 1988
(the "Comerica Acquisitions"). Such analysis indicated that, for the Western
U.S. Bank Acquisitions and the Comerica Acquisitions, (i) the median values of
the consideration paid as a multiple of tangible book value were ___x and ___x,
respectively, as compared to a corresponding value for the consideration
payable pursuant to the Merger as a multiple of UBT's tangible book value of
___x; (ii) the median values of the adjusted consideration paid as a multiple
of adjusted tangible book value (where both consideration and tangible book
value are adjusted to eliminate excess capital, defined as capital in excess of
a ____% tangible common equity to tangible assets) were ___x and ___x,
respectively, as compared to a corresponding value for the adjusted
consideration payable pursuant to the Merger as a multiple of UBT's adjusted
tangible book value of ___x, and; (iii) the median value of the
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consideration paid as a multiple of the acquired banking organizations' latest
twelve months' ("LTM") after-tax earnings were ____x and ____x, respectively,
as compared to the corresponding value for the consideration paid pursuant to
the Merger as a multiple of UBT's after-tax LTM earnings of ____x.
Selected Company Analysis. Goldman Sachs reviewed and compared actual
and estimated selected financial, operating and stock market information for
UBT with corresponding information for selected mid-capitalization banking
organizations located in California, including CVB Financial Corporation,
California Bancshares, Inc., City National Corporation, Imperial Bancorp, Santa
Barbara Bancorp, Silicon Valley Bancshares and Westamerica Bancorp
(collectively, the "Selected Group One Banks"), and for selected large-
capitalization organizations headquartered in California, including BankAmerica
Corporation, First Interstate Bancorp and Wells Fargo & Company (collectively,
the "Selected Group Two Banks"), based on publicly available information,
consensus analysts' estimates for the Selected Group One Banks and the Selected
Group Two banks and financial forecasts for UBT prepared by management. Such
analysis indicated, among other things, that for the Selected Group One Banks
and the Selected Group Two Banks, (i) the median estimated 1995 price-earnings
multiples were ____x and ___x, respectively, as compared to a corresponding
value of ___x for UBT, (ii) the median values of price as a multiple of
tangible book value per share were ___x and ___x, respectively, as compared to
a corresponding value of ___x for UBT, (iii) the median ratios of nonperforming
assets as a percentage of total loans and other real estate owned were ____%
and ____%, respectively, as compared to ____% for UBT, (iv) the median ratios
of loan loss reserves as a percentage of nonperforming loans were ___% and
___%, respectively, as compared to ___% for UBT, (v) the median after-tax
returns on equity were ___% and ____%, respectively, as compared to ____% for
UBT, and (vi) the median ratios of tangible common equity as a percentage of
tangible assets were 8.00% and 6.13%, respectively, as compared to ____% for
UBT.
Selected Comerica Information Analysis. Goldman Sachs reviewed and
analyzed certain financial and other information for Comerica, including (i)
historical and current loan portfolio by type of loan, (ii) deposit market
share by state in the United States and by county in California, (iii) a
comparison of actual and estimated selected financial, operating and stock
market information for Comerica with corresponding information for selected
super-regional banking organizations, including Banc One Corporation, Boatmen's
Bancshares,Inc., Corestates Financial Corporation, First Bank System, Inc.,
First Interstate Bancorp, Mellon Bank Corporation, NBD Bancorp, Inc., National
City Corporation, Norwest Corporation, PNC Bank Corporation, U.S. Bancorp and
Wells Fargo & Company (collectively, the "Selected Super-Regional Banks"), (iv)
the daily stock price performance of Comerica Common Stock, the Standard &
Poor's 500 Stock Index and a composite of the Selected Super-Regional Banks,
all indexed daily from September 28, 1993 to September 28, 1994, weekly from
September 23, 1991 to September 23, 1994 and monthly from August 31, 1989 to
August 31, 1994, (v) historical trading prices per share and trading volume of
Comerica Common Stock, on a daily basis from September 27, 1993 through
September 27, 1994, on a weekly basis from September 23, 1991 through September
23, 1994 and on a monthly basis from August 31, 1984 to August 31, 1994, and
(vi) summaries of selected research reports on, and earnings estimates for,
Comerica.
Other Analyses. Goldman Sachs also analyzed available information
regarding the ownership and ownership profiles of shares of UBT Common Stock
and Comerica Common Stock.
General. The foregoing is a summary of the material financial analyses
performed by Goldman Sachs, but does not purport to be a complete description
of the analyses performed by Goldman Sachs. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. Selecting portions of the analyses or of the
summary set forth above, without considering the analysis as a whole, could
create an incomplete view of the processes underlying Goldman Sachs' opinion.
In arriving at their fairness determination, Goldman Sachs considered the
results of all such analyses. No Selected Group One Bank or Selected Group Two
Bank is identical to UBT and none of the Western U.S. Bank Acquisitions or the
Comerica Acquisitions, is identical to the Merger. Accordingly, Goldman Sachs
indicated to the UBT Board that analyses of the results described above under
Selected Transaction Analysis and Selected Company Analysis are not
mathematical, but rather involve complex considerations and judgments
concerning differences in operating and financial characteristics including,
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among other things, differences in revenue composition and earnings
performance among UBT, Comerica and the selected companies and transactions
reviewed. The analyses were prepared solely for purposes of Goldman Sachs'
providing their written opinion dated as of the date of this Proxy
Statement/Prospectus, to the UBT Board as to the fairness of the UBT Conversion
Rate, and do not purport to be appraisals or necessarily reflect the prices at
which UBT or its securities actually may be sold. Analyses based upon
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses.
EFFECTIVE TIME OF MERGER
The Merger will become effective as to UBT at the time (the "Effective
Time") when an appropriate certificate of merger and the Subsidiary Merger
Agreement with respect to the Merger are filed with the Secretary of State of
the State of California. It is currently anticipated that if the Merger is
approved by UBT stockholders at the Special Meeting, and all the other
conditions to the Merger are satisfied, the Merger will become effective during
the first quarter of 1995.
There can be no assurance, however, that the Effective Time will not
be delayed. In the event the Merger has not become effective by August 31,
1995, the Board of Directors of Comerica, UBT or Interim, as applicable, may
terminate the Merger Agreement notwithstanding any approvals previously given
by the stockholders of UBT. See "THE MERGER AGREEMENT -- Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL
SHARES
The conversion of outstanding shares of UBT Common Stock into shares
of Comerica Common Stock will occur automatically at the Effective Time.
Outstanding shares of UBT Common Stock will be converted into the right to
receive that number of shares of Comerica Common Stock determined in accordance
with the Merger Agreement. See "Merger Consideration" above.
As soon as is practicable after the Effective Time, Norwest Bank
Minnesota, N.A., or another person chosen by Comerica, in its capacity as
Exchange Agent (the "Exchange Agent"), will send to each UBT stockholder a form
of letter of transmittal (which will specify that delivery will be effected,
and risk of loss and title to certificates for shares of UBT Common Stock will
pass, only upon proper delivery of such certificates to the Exchange Agent) and
instructions for use in effecting the exchange of the certificates for shares
of Comerica Common Stock and cash in lieu of fractional shares.
UBT STOCKHOLDERS SHOULD NOT FORWARD UBT CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS. UBT STOCKHOLDERS SHOULD NOT
RETURN STOCK CERTIFICATES WITH THE ENCLOSED FORMS OF PROXIES.
Until the certificates representing UBT Common Stock are surrendered
for exchange after the consummation of the Merger, holders of such certificates
will not be paid dividends or other distributions that are declared on Comerica
Common Stock. Upon surrender and exchange of such certificates, any such
unpaid dividends or other distributions will be paid (without interest) in
accordance with the terms of such Comerica Common Stock.
No transfer taxes will be payable by any stockholder in respect of the
issuance of the new certificates, except that if any new certificate is to be
issued in a name other than that in which the UBT certificates surrendered
shall have been registered, it shall be a condition of such issuance that the
holder requesting such issuance shall
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properly endorse the certificate or certificates and shall pay to Comerica or
the Exchange Agent any transfer taxes payable on the issuance, or on any prior
transfer of such surrendered certificate, or establish to the satisfaction of
Comerica or the Exchange Agent that such taxes have been paid or are not
payable.
Any Comerica Common Stock or cash delivered to the Exchange Agent
(together with any interest or profits earned thereon) and not distributed at
the end of nine months from the Effective Time, will be returned to Comerica,
in which event the persons entitled to payment shall look only to Comerica for
reimbursement. If any holder of UBT Common Stock shall be unable to surrender
such holder's certificates for such stock because such certificates have been
stolen, lost or destroyed, such holder may deliver in lieu thereof an affidavit
and indemnity bond in form and substance with surety reasonably satisfactory to
the Exchange Agent.
After the Effective Time, there will be no further registration of
transfers on the stock transfer books of the surviving corporation of the
shares of UBT Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates representing such
shares are presented to the surviving corporation in the Merger, they will be
canceled and exchanged for Comerica Common Stock as provided in the Merger
Agreement.
No fractional shares of Comerica Common Stock will be issued to any
UBT stockholder upon consummation of the Merger. In lieu of the issuance of any
fractional share of Comerica Common Stock, cash payments will be made to UBT
stockholders in respect of any fractional share in an amount equal to the
product (rounded to the nearest tenth) obtained by multiplying (a) $28.7083, by
(b) the fraction of the share of Comerica Common Stock to which the UBT
stockholder would otherwise be entitled. No such stockholder will be entitled
to dividends or other rights in respect of any such fraction. No interest on
the cash payments to be made in lieu of the issuance of fractional shares will
accrue pending surrender to the Exchange Agent of certificates representing UBT
Common Stock.
ACQUISITION PROPOSALS
For the period between the execution of the Merger Agreement and the
Effective Time of the Merger, UBT has agreed not to authorize or knowingly
permit any of its representatives, directly or indirectly, to solicit or
encourage any Acquisition Proposal (as defined below), or participate in any
discussion or negotiations with any person or group of persons other than
Comerica, Interim or their representatives concerning any Acquisition Proposal.
An "Acquisition Proposal" is defined as any (i) proposal pursuant to
which any person other than Comerica or Interim would acquire or participate in
a merger or other business combination involving UBT; (ii) proposal by which
any person or group other than Comerica or Interim would acquire the right to
vote 10% or more of the capital stock of UBT entitled to vote thereon for the
election of directors; (iii) acquisition of the assets of UBT other than in the
ordinary course of business; or (iv) acquisition in excess of 10% of the
outstanding capital stock of UBT, other than that contemplated by the Merger
Agreement. However, UBT or its Board of Directors may not be prevented from (A)
furnishing non- public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal to the shareholders of UBT,
if and only to the extent that (1) the Board of Directors of UBT believes in
good faith (after consultation with and the concurrence of its financial
advisor) that such Acquisition Proposal would, if consummated, result in a
transaction materially more favorable to UBT's shareholders from a financial
point of view than the transaction contemplated by the Merger Agreement and the
UBT Board of Directors determined in good faith after consultation with its
outside legal counsel that such action is necessary for UBT to comply with its
fiduciary duties to shareholders under applicable law, and (2) prior to
furnishing such non-public information to, or entering into discussions or
negotiations with, such person or entity, the UBT Board of Directors received
from such person or entity an executed confidentiality agreement, with terms
similar in scope to those contained in the confidentiality agreement between
Comerica and UBT, or (B) complying with Rule 14e-2 promulgated under the
Exchange Act of 1934, as amended, with regard to an
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Acquisition Proposal. UBT is required to notify Comerica immediately upon
receipt of any such Acquisition Proposal.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of Comerica, Interim and UBT under the Merger
Agreement to consummate the Merger are subject to various conditions, including
but not limited to, obtaining requisite stockholder and regulatory approvals;
the absence of any materially burdensome condition imposed in connection with
obtaining any such regulatory approvals; the absence of any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any governmental entity which makes the Merger
illegal, requires any material divestiture or imposes a materially burdensome
condition; the accuracy in all material respects of the representations and
warranties of, and performance in all material respects of the covenants
required to be performed prior to the Effective Time by, the other parties to
the Merger Agreement; the absence of any materially adverse change to the other
parties to the Merger Agreement or their subsidiaries; receipt of opinion of
legal counsel to Comerica in respect of certain federal income tax consequences
of the Merger (see " -- Certain Federal Income Tax Consequences" below);
receipt of legal opinions and approval of their respective legal counsel of the
validity of the transactions contemplated in the Merger Agreement; and approval
for listing of the shares of the Comerica Common Stock to be issued in the
Merger on the NYSE and receipt of letters from each of Ernst & Young and KPMG
Peat Marwick, LLP dated the effective date of the Registration Statement to be
filed in connection with the Merger and the Effective Time, in form and
substance satisfactory to Comerica and UBT and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
In addition, the obligations of Comerica and Interim under the Merger
Agreement to consummate the Merger are subject to certain other conditions,
including, but not limited to, the requirements that UBT's reserve for possible
loan losses on the Determination Date shall be at least the greater of
$4,700,000 or 2.25% of UBT's total loans outstanding on that date, and that
UBT's non-performing assets outstanding on the last day of the month
immediately preceding the Effective Time shall be no more than $4,711,431; the
absence of any materially adverse change to UBT or its subsidiaries; and
receipt of shareholder agreements from each UBT director who owns UBT Common
Stock which, among other things, obligates each such director to vote the
shares of UBT Common Stock owned or controlled by such director in favor of
the Merger, subject to fiduciary obligations. See "THE MERGER AGREEMENT --
Shareholder Agreements."
Further, the obligation of UBT under the Merger Agreement to
consummate the Merger is subject to certain conditions, including but not
limited to the, the receipt of a written opinion of Goldman Sachs concerning the
fairness of the UBT Conversion Rate.
There can be no assurance that the conditions to the Merger will be
satisfied. See "THE MERGER AGREEMENT -- Conditions to the Merger."
Under certain circumstances, the Merger Agreement may be terminated by
Comerica, Interim or UBT, as applicable, at any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of
UBT. See "THE MERGER AGREEMENT -- Termination."
REGULATORY APPROVALS REQUIRED
The Merger is subject to prior approval by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") under Section 3 of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). Although it is not
a condition of the Merger, Comerica may elect, after consummation of the
Merger, to merge the surviving corporation with and into Comerica Bank-
California (the "Subsidiary Bank Merger"). The Subsidiary Bank Merger (when
and if it is initiated) would be subject to prior approval by the Federal
Deposit Insurance Corporation (the "FDIC") under the Bank Merger Act, as
amended (the "BMA"). Application for approval of the
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<PAGE> 49
Merger under the BHCA has been filed with the Federal Reserve Board. If the
Subsidiary Bank Merger is initiated, an application for its approval will be
filed with the FDIC under the BMA. The BHCA and the BMA prohibit the Federal
Reserve Board and the FDIC from approving the Merger or the Subsidiary Bank
Merger, as the case may be, (i) if it would result in a monopoly or be in
furtherance of any combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United States, or (ii) if
its effect in any section of the country may be substantially to lessen
competition or to tend to create a monopoly, or if it would in any other manner
be in restraint of trade, unless the Federal Reserve Board or the FDIC finds
that the anticompetitive effects of the Merger or the Subsidiary Bank Merger,
as the case may be, are clearly outweighed in the public interest by the
probable effects of the transaction in meeting the needs and convenience of the
communities to be served. Neither the Merger nor the Subsidiary Bank Merger
may ordinarily be consummated until the thirtieth day following the date of
Federal Reserve Board and FDIC approval of each such transaction, respectively,
during which time the United States Department of Justice may challenge the
Merger or the Subsidiary Bank Merger, as the case may be, on antitrust grounds.
The commencement of an antitrust action would stay the effectiveness of the
Federal Reserve Board's approval unless a court specifically orders otherwise.
Under legislation enacted in September, 1994, the post-approval waiting period
may be shortened from 30 to 15 days, with the consent of the Federal Reserve
Board, as the case may be, and if the United States Department of Justice does
not object.
It is possible that the Federal Reserve Board or the United States
Department of Justice may request that Comerica or UBT divest certain
operations in order to alleviate what such agency believes would otherwise be
an adverse competitive effect. Neither Comerica nor UBT can predict whether
such divestitures will be required, or if required, what the aggregate amount
of any such divestitures may be, but each believes that divestitures are
unlikely to be required, and if required, that the aggregate amount of any such
divestitures will not be material, on a pro forma basis, to the business,
operations or financial condition of the combined institution and its
subsidiaries, taken as a whole. The application to the Federal Reserve Board
has not proposed any divestiture. Any application to the FDIC relating to the
Subsidiary Bank Merger would not propose any divestiture. If the level of any
required divestitures is sufficiently large in amount so as to render the
consummation of the Merger inadvisable in the reasonable judgment of either the
Comerica Board or the UBT Board, one of the conditions to the consummation of
the Merger will not be satisfied and either Comerica or UBT may terminate the
Merger Agreement. See "THE MERGER AGREEMENT -- Conditions to the Merger" and
- -- "Termination" below.
In addition, each of the BHCA and BMA require that the Federal Reserve
Board and the FDIC take into consideration, among other factors, the financial
and managerial resources and future prospects of the institutions and the
convenience and needs of the communities to be served. The Federal Reserve
Board and the FDIC have the authority to deny an application if it concludes
that the combined organization would have an inadequate capital position or if
the requirements of the Community Reinvestment Act of 1977 are not satisfied.
While Comerica already conducts operations in California, its banking
operations are principally conducted in Michigan with operations in Ohio,
Illinois, Texas and Florida. Although Section 3(d) of the BHCA generally
restricts interstate bank acquisitions, there is an exception to this
restriction provided the relevant states authorize such acquisitions.
The California Superintendent of Banks (the "California
Superintendent") must also approve the Merger, under provisions of California
law that require such approval in connection with the acquisition of a
California bank or bank holding company by an out- of-state bank holding
company. In order to approve the application, the California Superintendent
must find (i) that there is "substantial reciprocity" between the interstate
banking laws of the States of California and Michigan, meaning that a bank
holding company whose operations are principally conducted in California could
acquire a Michigan bank or bank holding company on terms and conditions that
are substantially the same as those on which a Michigan banking organization
may acquire a California bank, and (ii) that Comerica's acquisition of UBT will
not have an adverse effect on the public convenience or advantage in
California. No assurances can be given that the California Superintendent will
approve the Merger, and the Merger will not be consummated unless such approval
is obtained. An application for this approval under these provisions
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<PAGE> 50
has been filed. In addition, the Subsidiary Bank Merger would have to be
reviewed by the California Superintendent for approval under the California
Banking Law.
The Merger will require the approval of the Commissioner of the
Michigan Financial Institutions Bureau (the "Michigan Commissioner"). Before
this approval may be granted, Comerica must agree to comply with certain
consumer laws applicable to Michigan residents. In addition, the Michigan
Commissioner must assess the composite record of the bank subsidiaries of
Comerica in meeting the credit needs of the communities in the states in which
these bank subsidiaries are located, including low and moderate income
neighborhoods, consistent with the safe and sound operation of these bank
subsidiaries. An application for this approval under these provisions has been
filed.
The Merger and the Subsidiary Bank Merger (if and when it is
initiated) will not be consummated unless all of the requisite regulatory
approvals for such transactions are obtained. See "-- Conditions to
Consummation of the Merger" above and "THE MERGER AGREEMENT -- Amendment and
Waiver" and " -- Termination" below.
THERE CAN BE NO ASSURANCE THAT THE REGULATORY AUTHORITIES DESCRIBED
ABOVE WILL APPROVE THE MERGER AND THE SUBSIDIARY BANK MERGER (IF AND WHEN IT IS
INITIATED), AND IF SUCH TRANSACTIONS ARE APPROVED, THERE CAN BE NO ASSURANCE AS
TO THE DATE OF SUCH APPROVALS. THERE CAN ALSO BE NO ASSURANCE THAT ANY SUCH
APPROVALS WILL NOT CONTAIN A MATERIALLY BURDENSOME CONDITION OR REQUIREMENT
WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS TO CONSUMMATION
OF THE MERGER SET FORTH IN THE MERGER AGREEMENT. THERE CAN LIKEWISE BE NO
ASSURANCE THAT THE DEPARTMENT OF JUSTICE WILL NOT CHALLENGE THE MERGER OR THE
SUBSIDIARY BANK MERGER, OR IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT
THEREOF.
OPERATIONS PENDING THE MERGER
In the Merger Agreement, UBT has agreed to carry on its business, and
to cause its subsidiaries to carry on their businesses in the ordinary course,
in substantially the manner as conducted prior to the execution of the Merger
Agreement and use commercially reasonable efforts to preserve intact its
business organizations, keep available the services of its officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it, to notify Comerica promptly of any material
adverse changes or events, and maintain material permits, insurance and bonding
coverage, perform contractual obligations, observe legal requirements, and file
governmental reports and returns. In addition, UBT has agreed to maintain
assets, advise Comerica of certain acquisitions of its common stock, charge-off
loans consistent with past practice, maintain an adequate allowance for loan
losses and furnish certain reports and financial information and statements to
Comerica, maintain reserves for contingent liabilities, and furnish certain
information to Comerica with respect to litigation. UBT also agreed that it
will not take certain actions, including, by way of example and not of
limitation, declare or pay dividends other than regular quarterly cash
dividends in an amount not to exceed $.35 per share, issue capital stock (other
than pursuant to Stock Option Plans) or issue other securities convertible into
capital stock, acquire or dispose of material assets, incur indebtedness other
than in the ordinary course of business, make credit policies less stringent,
make any capital expenditures in excess of certain amounts, renew or enter into
any new employment agreements or terminate any employment benefit plan or
arrangement, except as contemplated by the Merger Agreement, or take any action
that would result in any of its representations and warranties in the Merger
Agreement becoming untrue or in any condition to the Merger not being
satisfied, or amend its Articles of Incorporation or Bylaws.
See "THE MERGER AGREEMENT -- Conduct of Business Pending the Merger."
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<PAGE> 51
OPERATIONS AFTER THE MERGER
If the Merger is consummated at the Effective Time, UBT will be the
surviving corporation with the Articles of Incorporation of UBT and the name
University Bank & Trust Company. The separate existence of Interim will cease.
It is anticipated that upon consummation of the Merger, Comerica will transfer
the stock of the surviving corporation to Comerica California Incorporated. It
is also anticipated that subsequent to consummation of the Merger, the
surviving corporation will merge into Comerica Bank-California. At that time,
it is expected that the surviving corporation will be run as a separate
division of Comerica Bank-California. At the Effective Time, the Board of
Directors and officers of the surviving corporation will be made up of certain
directors of Interim and UBT serving in those capacities at the Effective Time.
Following the consummation of the Merger, Carl J. Schmitt is expected
to remain as Chairman of the Board of the surviving corporation. It is also
expected that Mr. Schmitt, upon the anticipated Merger of the surviving
corporation into Comerica Bank-California, will become a member of the Board of
Directors of Comerica Bank-California and, as a result, will receive a fee for
each board meeting he attends as well as reimbursement for expenses he incurs
in doing so. See "THE MERGER -- Interests of Certain Persons in the Merger."
Banking policies and procedures of the surviving corporation and its
subsidiaries will continue in accordance with the policies of Comerica.
It is part of Comerica's current business strategy to expand its
business activities into states such as California where management believes
there are long-term opportunities which will benefit Comerica and its
stockholders. In California, Comerica has a wholly-owned bank holding company
subsidiary which owns and operates Comerica Bank-California See "THE COMPANIES
- -- Comerica Incorporated -- General."
Information about the directors, executive officers and principal
shareholders of Comerica is contained in Comerica's Proxy Statement for its
1994 Annual Meeting of Shareholders, relevant portions of which are
incorporated by reference in this Proxy Statement/Prospectus pursuant to
Comerica's Annual Report on Form 10-K for the year ended December 31, 1993.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE
INFORMATION."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the management and Board of Directors of UBT have
certain interests in the Merger that are in addition to their general interests
as stockholders of UBT. The UBT Board was aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
The Merger Agreement provides, as a condition to Comerica's obligations
to consummate the Merger, that Carl J. Schmitt shall have entered into a
Non-Competition Agreement with Comerica pursuant to which, among other things,
Mr. Schmitt will agree not to solicit, cause or induce any employee of UBT to
leave; cause any customer or client of UBT to terminate or adversely change any
relationship with UBT; cause, induce or encourage any potential supplier or
customer to not enter into any business relationship with UBT or directly or
indirectly as, among other things, an employee or director, engage in any
business relating to a bank or other financial institution in the counties of
Santa Clara and Santa Cruz in the State of California. The Non-Competition
Agreement has a term of two years from the date of Mr. Schmitt's termination of
employment with UBT. Mr. Schmitt will receive the sum of $2,239,185 within 10
days of the execution of the Non-Competition Agreement to be executed at the
consummation of the Merger.
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<PAGE> 52
As did each of the other director-shareholders of UBT, Carl J. Schmitt
has entered into a Shareholder Agreement with Comerica. See "THE MERGER
AGREEMENT -- Shareholder Agreements." In addition, each of Carl J. Schmitt,
Gayle A. Anderson, David Hood, Hall Palmer and Suzanne M. Powers has entered
into an Affiliate's Agreement with Comerica. See "THE MERGER AGREEMENT --
Resales by Affiliates."
UBT has agreements with each of its directors, under which UBT will
indemnify each of such persons, to the maximum amount permitted by law, for
certain liabilities incurred by such persons in their capacities as directors
of UBT. Comerica has agreed that all rights of indemnification under such
agreements and UBT's Charter and Bylaws shall survive the Merger and continue
in full force and effect, without any amendment thereto, for a period of six
years from the Effective Date.
Under the Merger Agreement, Comerica has agreed to use its
commercially reasonable efforts to cause to be maintained in effect, for a
period of six years after the Effective Time, policies of directors' and
officers' liability insurance (with such coverage, terms and conditions as are
now less advantageous than the insurance presently maintained by Comerica for
its officers and directors) with respect to all matters arising from facts or
events which occurred before the Effective Time for which UBT, or its
subsidiaries would have had an obligation to indemnify their directors and
officers. Comerica's obligation to do so, however, is limited to the extent
that it need not pay premiums in excess of 300% of the amount of the 1994
annual premiums paid by UBT for such insurance.
As of September 30, 1994, the directors and executive officers of UBT
beneficially owned 230,551 shares of UBT Common Stock, representing
approximately 16.5% of UBT Common Stock outstanding at that time. See "THE
SPECIAL MEETING -- Security Ownership of Certain Beneficial Owners."
Comerica has indicated that it does not intend to employ Gayle A.
Anderson, Executive Vice President and Chief Financial Officer of UBT,
subsequent to the consummation of the Merger and that in connection with her
departure she will be provided with a one-time cash severance payment of
approximately $380,000.
STOCK OPTION PLANS
UBT has two stock option plans, the Amended and Restated Stock Option
Plan (the "Option Plan") and the Outside Directors Stock Option Plan (the
"Directors Plan"). Options granted under both the Option Plan and the
Directors Plan generally vest (i.e., become exercisable) at the rate of 20%
each year from the date of grant.
The table below shows, as to the executive officers and directors
named, the aggregate amount of UBT Common Stock subject to options outstanding
at September 30, 1994 under the Option Plan and the Directors Plan. All
options under the Option Plan and the Directors Plan, whether vested or
unvested, will be converted into rights with respect to Comerica Common Stock
and Comerica shall assume each such stock option in accordance with the Option
Plan and the Directors Plan, respectively.
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<PAGE> 53
<TABLE>
<CAPTION>
=========================================================================================================
Number of Unexercised Weighted
Options at September 30, 1994 Average Exercise
Name Exercisable/Unexercisable Price Per Share
---- ----------------------------- ----------------
<S> <C> <C> <C>
Carl J. Schmitt 0 10,150 $26.42
Gayle A. Anderson 5,000 6,900 24.65
David Hood 1,800 9,200 26.80
Hall Palmer 0 6,900 26.54
Suzanne M. Powers 1,200 8,200 26.32
Lawrence A. Aufmuth 400 600 24.75
Thomas R. Brown 400 600 24.75
Linda R. Meier 400 600 24.75
J. Boyce Nute 400 600 24.75
George G.C. Parker 400 600 24.75
William A. Preston 200 600 24.75
Leslie M. Quist 400 600 24.75
Leonard Ware 400 600 24.75
=========================================================================================================
</TABLE>
CANCELLATION FEE; LIQUIDATED DAMAGES
The Merger Agreement provides that, in the event an Acquisition
Event shall occur or (i) any of UBT, Comerica or Interim terminates the Merger
Agreement because the Subsidiary Merger Agreement and the Merger are not
ratified and approved by UBT's shareholders, (ii) any of UBT, Comerica or
Interim terminates the Merger Agreement because there shall have been a
material breach of any of the representations or warranties set forth in the
Merger Agreement on the part of the other party, (iii) Comerica terminates the
Merger Agreement because there is a default by UBT, pursuant to the Merger
Agreement and the continuance of such failure for a period of 20 business days
after written notice, which failure to perform, in the reasonable opinion of
Comerica and Interim cannot be cured prior to the closing, or (iv) Comerica
terminates the Agreement because the UBT Board did not publicly recommend in
this Proxy Statement/Prospectus that UBT stockholders adopt and approve the
Merger Agreement or the UBT Board shall withdraw, modify or amend such
recommendation in any respect materially adverse to Comerica, followed in the
case of each of the foregoing clauses (i) through (iv) above by an Acquisition
Event within 90 days of such termination, UBT is required to pay to Comerica
the sum of $3,200,000 as reasonable and full liquidated damages and reasonable
compensation for the loss sustained thereby.
In the event of termination by UBT of the Merger Agreement because
Interim or Comerica has breached any of their representations and warranties
set forth in the Merger Agreement and in the reasonable opinion of UBT such
breach cannot be cured prior to closing and would have a Material Adverse
Effect on Interim or Comerica, or because of a default by Comerica or Interim
pursuant to the Merger Agreement and the continuance of such failure for a
period of 20 business days after written notice of such default, in the
reasonable opinion of UBT, cannot be cured prior to the closing, then Comerica
and Interim, jointly and severally, shall pay to UBT as reasonable and full
liquidated damages and reasonable compensation for the loss sustained thereby
and not as a penalty or forfeiture, the sum of $2,000,000. The making and
receipt of such payments, as applicable shall satisfy the obligations and
liabilities of UBT and Comerica and Interim, respectively under the Merger
Agreement, and UBT, Comerica and Interim, as the case may be, shall have no
further obligations of any kind under the Merger Agreement. See "THE MERGER
AGREEMENT -- Cancellation Fee; Liquidated Damages."
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<PAGE> 54
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a purchase for accounting and
financial reporting purposes. Under this method of accounting, Comerica will
adjust the assets and liabilities of UBT to their fair values as of the
Effective Time. The shares of Comerica Common Stock to be issued in the Merger
will be authorized but unissued shares, or shares held as treasury shares.
Subject to the rules of the Commission, Comerica may repurchase shares of
Comerica Common Stock in open market or other transactions to fund the Merger
consideration.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Required Tax Opinion Regarding The Merger. The obligations of
Comerica and UBT to effect the Merger are conditioned upon the receipt of an
opinion of legal counsel satisfactory to Comerica subject to assumptions and
exceptions normally included, dated the Effective Time, to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the "IRC"), and that Comerica, Interim and
UBT will each be a party to that reorganization within the meaning of Section
368(b) of the IRC. It is expected that Miller, Canfield, Paddock and Stone,
P.L.C., counsel to Comerica, will deliver such an opinion to Comerica and UBT.
Summary of Anticipated Federal Income Tax Consequences. The following
is a summary of the anticipated Federal income tax consequences of the Merger
to UBT stockholders. It is not intended as tax advice and is based upon the
parties' understanding of the Federal income tax laws as currently interpreted
and does not address issues of state or local taxation. It does not constitute
a representation by UBT, Interim, Comerica, or their counsel. The following
discussion is included solely for purposes of general information only.
BECAUSE OF THE COMPLEXITIES OF FEDERAL, STATE, AND LOCAL INCOME TAX
LAWS, IT IS RECOMMENDED THAT UBT STOCKHOLDERS CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE MERGER.
This summary is limited to those persons who hold shares of UBT Common
Stock as "capital assets" (generally, property held for investment) within the
meaning of Section 1221 of the IRC. (Any reference herein to a "Section" is a
reference to a section of the IRC unless otherwise specified.) The tax
consequences to any particular stockholder of UBT Common Stock may be affected
by matters not discussed below. For example, certain taxpayers, such as life
insurance companies, tax-exempt organizations, and foreign taxpayers may be
subject to special rules not addressed herein. In addition, the tax
consequences to UBT stockholders who acquired their shares of UBT Common Stock
pursuant to the exercise of employee stock options or otherwise as compensation
is not discussed below.
Assuming the Merger satisfies all requirements of Section 368(a)(1)(A)
and Section 368(a)(2)(E), the Merger will have the Federal income tax
consequences described below.
Receipt Solely of Comerica Common Stock in Exchange for UBT Common
Stock. A stockholder who receives solely shares of Comerica Common Stock in
exchange for shares of UBT Common Stock in the Merger will not recognize gain
or loss on the exchange. The stockholder's tax basis in the Comerica Common
Stock received will be the same as the stockholder's tax basis in the shares of
UBT Common Stock exchanged in the Merger, and the holding period of the
Comerica Common Stock received will include the holding period of the UBT
Common Stock exchanged.
Receipt of Cash in Lieu of Fractional Shares. Pursuant to the Merger,
UBT stockholders will receive cash in lieu of fractional shares of Comerica
Common Stock. Since the payment to a stockholder of cash in lieu of a
fractional Comerica share in this transaction is undertaken solely for the
purpose of saving the expense and
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<PAGE> 55
inconvenience of issuing and transferring fractional shares, and is not
separately bargained for consideration, these payments will generally be
treated as having been received as distributions in full payment in exchange
for the Comerica Common Stock redeemed as provided in Section 302(a) and taxed
as capital gain or loss.
RESALE OF COMERICA COMMON STOCK; RESTRICTIONS ON TRANSFER
The shares of Comerica Common Stock to be issued in the Merger will be
registered under the Securities Act and will be freely transferable under the
Securities Act, except for shares issued to any stockholder who may be deemed
to be an "affiliate" of UBT for purposes of Rule 145 under the Securities Act.
Affiliates may not sell their shares of Comerica Common Stock acquired in
connection with the Merger except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 or another applicable exemption from the registration requirements of
the Securities Act. Persons who may be deemed to be affiliates of UBT
generally include individuals or entities that control, are controlled by or
under common control with UBT, and may include certain officers and directors
of UBT, as well as principal stockholders of UBT.
UBT has delivered to Comerica a written agreement from each affiliate
of UBT obligating them to ensure compliance with the Securities Act.
STOCK EXCHANGE LISTING
The Comerica Common Stock is listed on the NYSE. Comerica has agreed
to apply for NYSE listing of the shares of Comerica Common Stock to be issued
in the Merger. The obligations of the parties to the Merger Agreement to
consummate the Merger are subject to approval of that application and the
listing by the NYSE of such shares. See "THE MERGER -- Conditions to the
Consummation of the Merger" above.
DISSENTER'S RIGHTS
The stockholders of UBT may have certain dissenter's rights
under Chapter 13 (Sections 1300-1312) of the California General
Corporations Law (the "CGCL") if said stockholders qualify as holders of
"dissenting shares" under the CGCL. The exercise of dissenter's rights may
require UBT to purchase for cash at fair market value from dissenting UBT
stockholders UBT Common Stock which qualifies as dissenting shares. The fair
market value will be determined as of October 3, 1994, the day before the first
announcement of the terms of the Merger; provided however, that fair market
value will not be adjusted for any appreciation or depreciation in value
resulting from the Merger.
"Dissenting Shares" are defined under the CGCL as 1) any shares not
listed on a national securities exchange certified by the California
Commissioner of Corporations or listed on the list of OTC margin stocks issued
by the Board of Governors of the Federal Reserve System immediately prior to a
reorganization ("Listed Securities"), 2) Listed Securities, if demands for
payment are filed with respect to 5% or more of the outstanding shares of that
class of Listed Securities; 3) shares which were outstanding on the date for
determination of stockholders entitled to vote on the reorganization and were
not voted in favor of the reorganization, or shares described in 1) above which
were voted against the reorganization; 4) shares which the dissenting
stockholder has demanded that the corporation purchase at fair market value in
accordance with the CGCL; and 5) shares which the dissenting stockholder has
submitted for endorsement in accordance with the CGCL. Under the CGCL, UBT
stockholders will waive their stockholder dissenting rights if they do not vote
against the Merger.
Inasmuch as the UBT Common Stock is listed on the NASDAQ/National
Market System, a national securities exchange certified by the California
Commissioner of Corporations, shares of UBT Common Stock will only qualify as
Dissenting Shares if demands for payment are filed with respect to 5% or
more of the outstanding shares of UBT Common Stock. Subject to this limitation,
holders of UBT Common Stock desiring to exercise dissenter's rights must comply
with
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<PAGE> 56
the requirements set forth in items 4 and 5 listed above.
Assuming the Merger Proposal is approved, UBT must mail to all of its
stockholders meeting those requirements notice of such approval of the
reorganization within 10 days of the Special Meeting, together with a copy of
the relevant sections of the CGCL, a statement of the price determined by UBT to
represent the fair market value of the Dissenting Shares, and a brief
description of the procedure to be followed if a stockholder desires to
exercise dissenter's rights. The statement of price constitutes an
offer by UBT to purchase the shares of the dissenting stockholder at such price,
unless those shares lose their status as Dissenting Shares under the CGCL.
Merely voting or delivering a proxy directing a vote against the
approval of the Merger, or failing to deliver a proxy or vote as to approval of
the Merger, does not constitute a demand for purchase. A written demand is
essential. Any stockholder of record who has the right to require UBT to
purchase such stockholders' shares of UBT Common Stock and has complied with the
requirements set forth in items 4 and 5 listed above, and who desires that UBT
purchase such shares of UBT Common Stock, shall make written demand upon UBT for
the purchase of such shares of UBT Common Stock and payment to the stockholder
in cash of their fair market value. Notice must be received by UBT or any
transfer agent thereof, not later than the date of the Special Meeting. The
demand must state the number and class of shares of UBT Common Stock held of
record by the stockholder which the stockholder demands that UBT purchase and
shall contain a statement of what such stockholder claims to be the fair market
value of those shares as of the day before the announcement of the Merger. The
statement of fair market value constitutes an offer by the stockholder to sell
the shares at such price. A stockholder may not withdraw a demand for payment
without the consent of UBT.
Holders of UBT common Stock desiring to exercise dissenter's rights
should send demand for payment to UBT in care of Gayle A. Anderson, Secretary,
250 Lytton Avenue, P.O. Box 89, Palo Alto, California 94301 by registered or
certified mail, return receipt requested. The demand should be signed by the
stockholder of record (or his or her duly authorized representative) exactly as
his or her name appears on the certificates evidencing ownership of the shares
of UBT Common Stock. A demand for the purchase of shares of UBT Common Stock
owned jointly by more than one person should identify and be signed by all such
holders. Any person signing a demand for purchase in any representative
capacity (such as attorney-in-fact, executor, administrator, trustee or
guardian) should indicate his or her title and, if UBT so requests, furnish
written proof of his or her capacity and authority to sign the demand.
Within 30 days after the date on notice of approval of the Merger is
mailed to its stockholders by UBT, any stockholder exercising dissenter's rights
must deliver to UBT at its principal office or at the office of any transfer
agent thereof, the share certificates representing the shares of UBT Common
Stock the stockholder demands to be purchased, to be stamped or endorsed with
the statement that the shares are Dissenting Shares or to be exchanged for
certificates of appropriate denomination so stamped or endorsed. Upon subsequent
transfer of the Dissenting Shares on the corporate books, the new certificate,
initial transaction statement, and other written statements issued thereof shall
bear a like statement, together with the name of the original dissenting holder
of the shares.
If UBT and a dissenting stockholder agree that the shares are
Dissenting Shares and agree upon the price of the shares, the stockholder will
be entitled to that price plus interest at the legal rate on judgments from the
date of the agreement. The agreement fixing the fair market value of any
Dissenting Shares must be filed with the Secretary of UBT. Subject to certain
creditors' rights, UBT shall make payment at the later of 1) within 30 days
after the agreement or 2) within 30 days after any statutory or contractual
conditions to the Merger are satisfied, subject to surrender of the share
certificates to UBT. Cash dividends, if any, declared and paid by UBT on the
Dissenting Shares after the date of approval of the Merger and prior to payment
for the Dissenting Shares shall be credited against the total amount to be paid
by UBT.
If UBT and a dissenting stockholder disagree that the shares are
Dissenting Shares and/or disagree on the fair market value of the shares, the
stockholder may file within 6 months after the date on which the notice of the
approval of the Merger by the outstanding shares was mailed to the stockholder,
a complaint in the Superior Court for Santa Clara County requesting that the
court determine whether the shares are Dissenting Shares and/or
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the fair market value of the shares. In addition, any other dissenting
stockholder may intervene in any action pending on such a complaint.
If the status of the shares is at issue, the court will first determine
whether the shares are Dissenting Shares. If the court finds that the shares
are Dissenting Shares, the court, or one or more impartial appraisers, will at
that time determine the fair market value of the shares if said amount also is
in issue. If judgement is rendered against UBT, UBT will pay the amount equal
to the fair market value of each Dissenting Share multiplied by the number of
Dissenting Shares which any dissenting stockholder is entitled to require UBT
to purchase, with interest thereon at the legal rate from the date judgment was
entered. Judgement is payable upon the endorsement and delivery to UBT of the
certificates of the shares described in the judgement. Costs of the action will
be assessed or apportioned as the court considers equitable, but, if the
appraisal exceeds the price offered by UBT, UBT will be assessed all costs
(including, in the discretion of the court, attorneys' fees, fees of expert
witnesses and interest at the legal rate from the date of compliance with UBT's
obligations under Chapter 13 of the CGCL if the value for the Dissenting Shares
is more than 125% of the price originally offered by UBT).
No stockholder of UBT who has a right to demand payment of cash for
the shares of UBT Common Stock held by him or her shall have any right at law
or in equity to attack the validity of the Merger or to have the Merger set
aside or rescinded, except in an action to test whether the number or shares
required to authorize or approve the Merger have been legally voted in favor
thereof.
UBT Common Stock holders wishing to exercise dissenter's rights should
seek advice from their attorney in conjunction with the exercise of such
rights.
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
Bank holding companies and banks are extensively regulated under both
federal and state law. To the extent that the following information describes
statutory and regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. A change in
applicable law or regulation may have a material effect on the business of
Comerica.
As a bank holding company, Comerica is subject to regulation under the
BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not (subject to certain limited exceptions) directly or
indirectly acquire the ownership or control of more than 5% of any class of
voting shares or substantially all of the assets of any company, including a
bank, without the prior written approval of the Federal Reserve Board. In
addition, banking holding companies are generally prohibited under the BHCA
from engaging in nonbanking activities, subject to certain exceptions.
The BHCA prohibits the Federal Reserve Board from approving the
acquisition by a bank holding company of more than 5% of any class of the
voting shares of, or substantially all the assets of, any bank (or its holding
company) located outside of the state in which the operations of such acquiring
bank holding company's banking subsidiaries are principally conducted on the
date such company became a bank holding company unless such acquisition is
specifically authorized by the laws of the state in which the bank to be
acquired is located. Most states, including Michigan and California, have
adopted legislation that permits out-of-state bank holding companies throughout
the United States to acquire local banks and bank holding companies. Most
states that have enacted such nationwide interstate banking laws, including
Michigan and California, have a reciprocity requirement. In approving
Comerica's acquisition of the predecessors to Comerica Bank--California, both
the Federal Reserve Board and the
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California Superintendent determined that the "substantial reciprocity"
requirement of California law was met in connection with such an interstate
acquisition.
INTERSTATE BANKING AND BRANCHING
On September 29, 1994, the Reigle/Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Interstate Act") was signed into law.
This Interstate Act effectively permits nationwide banking. The Interstate Act
provides that one year after enactment, adequately capitalized and adequately
managed bank holding companies may acquire banks in any state, even in those
jurisdictions that currently bar acquisitions by out-of-state institutions,
subject to deposit concentration limits. The deposit concentration limits
provide that regulatory approval by the Federal Reserve Board may not be
granted for a proposed interstate acquisition if after the acquisition, the
acquiror on a consolidated basis would control more than 10% of the total
deposits nationwide or would control more than 30% of deposits in the state
where the acquiring institution is located. The deposit concentration state
limit does not apply for initial acquisitions in a state and in every case, may
be waived by the state regulatory authority. Interstate acquisitions are
subject to compliance with the Community Reinvestment Act ("CRA"). States are
permitted to impose age requirements not to exceed five years on target banks
for interstate acquisitions. States are not allowed to opt-out of interstate
banking.
Branching between states may be accomplished either by merging
separate banks located in different states into one legal entity, or by
establishing de novo branches in another state. Consolidation of banks is not
permitted until June 1, 1997 provided that the state has not passed legislation
"opting-out" of interstate branching. If a state opts-out prior to June 1,
1997, then banks located in that state may not participate in interstate
branching. A state may opt-in to interstate branching by bank consolidation or
by de novo branching by passing appropriate legislation earlier than June 1,
1997. Interstate branching is also subject to a 30% statewide deposit
concentration limit on a consolidated basis, and a 10% nationwide deposit
concentration limit. The laws of the host state regarding community
reinvestment, fair lending, consumer protection (including usury limits) and
establishment of branches shall apply to the interstate branches.
De novo branching by an out-of-state bank is not permitted unless the
host state expressly permits de novo branching by banks from out-of-state. The
establishment of an initial de novo branch in a state is subject to the same
conditions as apply to initial acquisition of a bank in the host state other
than the deposit concentration limits.
Effective one year after enactment, the Interstate Act permits bank
subsidiaries of a bank holding company to act as agents for affiliated
depository institutions in receiving deposits, renewing time deposits, closing
loans, servicing loans and receiving payments on loans and other obligations.
A bank acting as agent for an affiliate shall not be considered a branch of the
affiliate. Any agency relationship between affiliates must be on terms that
are consistent with safe and sound banking practices. The authority for an
agency relationship for receiving deposits includes the taking of deposits for
an existing account but is not meant to include the opening or origination of
new deposit accounts. Subject to certain conditions, insured saving
associations which were affiliated with banks as of June 1, 1994, may act as
agents for such banks. An affiliate bank or saving association may not conduct
any activity as an agent which such institution is prohibited from conducting
as principal.
If an interstate bank decides to close a branch located in a low- or
moderate-income area, it must comply with additional branch closing notice
requirements. The appropriate regulatory agency is authorized to consult with
community organizations to explore options to maintain banking services in the
affected community where the branch is to be closed.
To ensure that interstate branching does not result in taking deposits
without regard to a community's credit needs, the regulatory agencies are
directed to implement regulations prohibiting interstate branches from being
used as "deposit production offices." The regulations to implement its
provisions are due by June 1, 1997. The regulations must include a provision
to the effect that if loans made by an interstate branch are less than fifty
percent of the average of all depository institutions in the state, then the
regulator must review the loan portfolio of the
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branch. If the regulator determines that the branch is not meeting the credit
needs of the community, it has the authority to close the branch and to
prohibit the bank from opening new branches in that state.
When the interstate banking provisions become effective in one year,
Comerica will have enhanced opportunities to acquire banks in any state subject
to approval by the appropriate federal and state regulatory agencies. When the
interstate branching provisions become effective in June 1997, Comerica will
have the opportunity to consolidate its affiliate banks to create one legal
entity with branches in more than one state should management decide to do so,
or to establish branches in different states, subject to any state opt-out
provisions. The agency authority permitting Comerica affiliate banks to act as
agents for each other in accepting deposits or servicing loans should make it
more convenient for customers of one Comerica bank to transact their banking
business at a Comerica affiliate in another state provided that operations are
in place to facilitate these out of state transactions.
PAYMENT OF DIVIDENDS
Comerica is a legal entity separate and distinct from its banking and
other subsidiaries. Most of Comerica's revenues result from dividends paid to
it by its bank subsidiaries. There are statutory and regulatory requirements
applicable to the payment of dividends by subsidiary banks as well as by
Comerica to its shareholders.
Each state bank subsidiary that is a member of the Federal Reserve
System and each national banking association is required by federal law to
obtain the prior approval of the Federal Reserve Board or the Comptroller of
the Currency (the "Comptroller"), as the case may be, for the declaration and
payment of dividends if the total of all dividends declared by the board of
directors of such bank in any year will exceed the total of (i) such bank's net
profits (as defined and interpreted by regulation) for that year plus (ii) the
retained net profits (as defined and interpreted by regulation) for the
preceding two years, less any required transfers to surplus. In addition,
these banks may only pay dividends to the extent that retained net profits
(including the portion transferred to surplus) exceed bad debts (as defined by
regulation).
Under the foregoing dividend restrictions, in 1994 Comerica's
subsidiary banks, without obtaining governmental approvals, can declare
aggregate dividends of approximately $273 million from retained net profits of
the preceding two years, plus an amount approximately equal to the net profits
(as measured under current regulations), if any, earned for the period from
January 1, 1994 through the date of declaration. During 1993, Comerica's
subsidiary banks paid $311 million in dividends.
The banking authorities in the states where Comerica owns
state-chartered banks also regulate the payment of dividends by banks organized
in such states. Generally, (i) California state banks such as Comerica
Bank-California may not declare or pay a dividend, without the prior written
approval of the California Superintendent, if the total of all dividends
declared by such bank in any calendar year would exceed the total of its net
profits, as defined, for that year combined with its retained net profits, as
defined, for the preceding two years, (ii) Michigan state banks such as
Comerica Bank may not pay a dividend if the amount of such dividend would
exceed net profits then on hand or surplus remaining after payment thereof
would be less than 20 percent of the bank's capital, and (iii) payment of
dividends by Texas state banks such as Comerica Bank-Texas are restricted by
minimum capital requirements. Generally, an Illinois state chartered bank,
such as Comerica Bank-Illinois, may pay dividends only out of net profits. If
an Illinois bank's surplus does not equal its capital, it may declare a
dividend only after at least one-tenth of its net profits since the declaration
of the last dividend has been added to its surplus. An Illinois bank may not
pay dividends in an amount greater than net profits then on hand, less
deductions for losses and bad debts, as defined by statute.
The payment of dividends by Comerica and its bank subsidiaries is also
affected by various regulatory requirements and policies, such as the
requirement to maintain capital at or above regulatory guidelines. In
addition, if, in the opinion of the applicable regulatory authority, a bank
under its jurisdiction is engaged in or is about to
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engage in an unsafe or unsound practice (which, depending on the financial
condition of the bank, could include the payment of dividends), such authority
may require, after notice and hearing, that such bank cease and desist from
such practice. The Federal Reserve Board and the Comptroller have each
indicated that paying dividends that deplete a bank's capital base to an
inadequate level would be an unsafe and unsound banking practice. The Federal
Reserve Board, the Comptroller and the FDIC have issued policy statements which
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
CERTAIN TRANSACTIONS BY COMERICA WITH ITS AFFILIATES
There are also various legal restrictions on the extent to which
Comerica and most of its nondepository subsidiaries can borrow or otherwise
obtain credit from, or engage in certain other transactions with, its
depository subsidiaries. The "covered transactions" that an insured depository
institution and its subsidiaries are permitted to engage in with their
nondepository affiliates are limited to the following amounts: (i) in the case
of any one such affiliate, the aggregate amount of covered transactions of the
insured depository institution and its subsidiaries cannot exceed 10% of the
capital stock and the surplus of the insured depository institution; and (ii)
in the case of all affiliates, the aggregate amount of covered transactions of
the insured depository institution and its subsidiaries cannot exceed 20% of
the capital stock and surplus of the insured depository institution. In
addition, extensions of credit that constitute covered transactions must be
collateralized in prescribed amounts.
"Covered transactions" are defined by statute to include a loan or
extension of credit to the affiliate, a purchase of securities issued by an
affiliate, a purchase of assets from the affiliate (unless otherwise exempted
by the Federal Reserve Board), the acceptance of securities issued by the
affiliate as collateral for a loan and the issuance of a guarantee, acceptance,
or letter of credit for the benefit of an affiliate. Further, a bank holding
company and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
CAPITAL
The Federal Reserve Board has adopted final risk based capital
guidelines for bank holding companies. The minimum guideline for the ratio of
total capital ("Total Capital") to risk weighted assets (including certain
off-balance-sheet activities, such as standby letters of credit) is 8%. At
least half of the Total Capital is to be composed of common stockholders'
equity, minority interests in the equity accounts of consolidated subsidiaries
and a limited amount of perpetual preferred stock, less disallowed intangibles
including goodwill ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock and a limited amount of loan loss
reserves ("Tier 2 Capital").
In addition, the Federal Reserve Board has established minimum
leverage ratio guidelines for bank holding companies. These guidelines provide
for a minimum Tier 1 Capital leverage ratio (Tier 1 Capital to total assets,
less goodwill) of 3% for bank holding companies that meet certain specified
criteria, including having the highest regulatory rating. All other bank
holding companies will generally be required to maintain a minimum Tier 1
Capital leverage ratio of 3% plus an additional cushion of 100 to 200 basis
points. The Federal Reserve Board has not advised Comerica of any specific
minimum Tier 1 Capital leverage ratio applicable to it. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets (e.g., goodwill, core deposit intangibles and purchased
mortgage servicing rights). Furthermore, the guidelines indicate that the
Federal Reserve Board will continue to consider a "tangible Tier 1 Capital
leverage ratio" (deducting all intangibles) in evaluating proposals for
expansion or new activities. As of September 30, 1994, the "tangible Tier 1
Capital leverage ratios" of Comerica, UBT and pro forma (giving effect to the
Merger) for UBT and Comerica combined were 6.89%, 7.91% and 6.79%,
respectively.
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The following tables set forth the Tier 1 capital to risk-weighted
assets ratios, the total capital to risk-weighted assets ratios and the Tier 1
leverage ratios for Comerica and UBT individually and on a pro forma combined
basis as of certain dates and periods. Such pro forma combined data is derived
from the financial information of Comerica and UBT at September 30, 1994 and
for each of the years presented below and gives effect to the Merger, the
repurchase of shares to be issued to holders of UBT Common Stock as
consideration for the Merger, adjustment to fair value of the assets and
liabilities of UBT as of the Effective Time.
<TABLE>
<CAPTION>
Tier 1 Capital to Risk-Weighted Assets Ratio
(in each case calculated pursuant to the
final risk-based capital guidelines)
Pro Forma
As of: Comerica UBT Combined
------ -------- --- ---------
<S> <C> <C> <C>
September 30, 1994 . . . . . . . . . . . . . . . . . 8.40% 13.60% 8.31%
December 31, 1993 . . . . . . . . . . . . . . . . . . 8.21 12.97 --
December 31, 1992 . . . . . . . . . . . . . . . . . . 8.83 11.11 --
December 31, 1991 . . . . . . . . . . . . . . . . . . 8.13 10.67 --
</TABLE>
<TABLE>
<CAPTION>
Total Capital To Risk-Weighted Assets Rati
(in each case calculated pursuant to the
final risk-based capital guidelines)
Pro Forma
As of: Comerica UBT Combined
------ -------- --- ---------
<S> <C> <C> <C>
September 30, 1994 . . . . . . . . . . . . . . . . . 12.13% 14.85% 12.01%
December 31, 1993 . . . . . . . . . . . . . . . . . . 11.58 14.24 --
December 31, 1992 . . . . . . . . . . . . . . . . . . 11.82 12.36 --
December 31, 1991 . . . . . . . . . . . . . . . . . . 10.69 11.45 --
</TABLE>
<TABLE>
<CAPTION>
Tier 1 Leverage Ratio
Pro Forma
As of: Comerica UBT Combined
------ -------- --- ---------
<S> <C> <C> <C>
September 30, 1994 . . . . . . . . . . . . . . . . . 7.01% 7.91% 6.91%
December 31, 1993 . . . . . . . . . . . . . . . . . . 7.04 8.35 --
December 31, 1992 . . . . . . . . . . . . . . . . . . 7.52 7.36 --
December 31, 1991 . . . . . . . . . . . . . . . . . . 6.61 7.58 --
</TABLE>
Each of Comerica's banks is subject to similar capital requirements
adopted by the Federal Reserve Board, the Comptroller or the FDIC. At
September 30, 1994, each of Comerica's subsidiary banks had a Tier 1 Capital
ratio and a Total Capital ratio (computed under the 1993 guidelines) in excess
of the fully phased in requirements
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and a Tier 1 Capital leverage ratio in excess of 6.50%. At September 30, 1994,
Comerica Bank's Tier 1 Capital ratio and Total Capital ratio (computed under
the 1993 guidelines) was in excess of the fully phased in requirements and its
Tier 1 Capital leverage ratio was 6.49%. No regulatory agency has advised any
of Comerica's subsidiary banks of any specific applicable minimum Tier 1
Capital leverage ratio.
Failure to meet capital guidelines could subject an insured bank to a
variety of enforcement remedies, including the termination of deposit insurance
by the FDIC and a prohibition on the taking of brokered deposits. See "FDICIA"
below.
It is possible that bank regulators will raise capital requirements
applicable to banking organizations beyond their current levels. However, the
management of Comerica is unable to predict whether and when higher capital
requirements might be imposed and, if they are imposed, at what levels and on
what schedule.
COMERICA'S SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve Board policy, Comerica is expected to act as a
source of financial strength to each of its subsidiary banks and, if necessary,
to commit resources to support each of such subsidiaries. This support may be
required at times when, absent such Federal Reserve Board policy, Comerica
would not otherwise be required to provide it.
Under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989 ("FIRREA"), a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989 in connection with (i) the default of a commonly
controlled FDIC-insured depository institution, or (ii) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository institution "in
danger of default." "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance.
Under Michigan law, if the capital of a Michigan state chartered bank
is impaired by losses or otherwise, the Michigan Financial Institutions Bureau
is authorized to require payment of the deficiency by assessment upon the
bank's shareholders, pro rata, and to the extent necessary, if any such
assessment is not paid by any shareholder after three months' notice, to cause
the sale of the stock of such shareholder to make good the deficiency.
Under the National Bank Act, if the capital stock of a national bank
is impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's shareholders, pro rata,
and to the extent necessary, if any such assessment is not paid by any
shareholder after three months' notice, to sell the stock of such shareholder
to make good the deficiency.
Any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment. This priority
would apparently apply to guarantees of capital plans under the Federal Deposit
Insurance Corporation Improvement Act of 1991 (discussed below) ("FDICIA").
FDIC INSURANCE ASSESSMENTS
Comerica's subsidiary banks are subject to FDIC deposit insurance
assessments. On January 1, 1994, a permanent risk-based deposit premium
assessment system became effective under which each depositary institution
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is placed in one of nine assessment categories based on certain capital and
supervisory measures. The assessment rates under the system range from 0.23
percent to 0.31 percent of domestic deposits depending upon the assessment
category into which the insured institution is placed. It is possible that
such assessments will be increased and it is possible that there may be special
additional assessments in the future. A significant increase in the assessment
rate or a special additional assessment could have an adverse impact on
Comerica's results of operations.
FDICIA
In December 1991 FDICIA was enacted. This legislation substantially
revises the bank regulatory and funding provisions of the Federal Deposit
Insurance Act and makes revisions to several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to
take "prompt corrective action" in respect of depository institutions that do
not meet minimum capital requirements. FDICIA establishes five capital tiers:
"well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." A
depository institution's capital tier depends upon where its capital levels are
in relation to various relevant capital measures, which includes a risk-based
capital measure and a leverage ratio capital measure, and certain other
factors.
A depository institution is well capitalized if it significantly
exceeds the minimum level required by regulation of each relevant capital
measure, adequately capitalized if it meets each such measure, undercapitalized
if it fails to meet any such measure, significantly undercapitalized if it is
significantly below any such measure and critically undercapitalized if it has
a ratio of tangible equity to total assets that is equal to or less than 2
percent. An institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if, among other
things, it receives an unsatisfactory examination rating.
Regulations establishing the specific capital tiers have been adopted.
Under these regulations, for an institution to be well capitalized it must have
a total risk-based capital ratio of at least 10 percent, a Tier 1 risk-based
capital ratio of at least 6 percent, and a Tier 1 leverage ratio of at least 5
percent, and not be subject to any specific capital order or directive. For an
institution to be adequately capitalized it must have a total risk-based
capital ratio of at least 8 percent, a Tier 1 risk-based capital ratio of at
least 4 percent, and a leverage ratio of at least 4 percent (and in some cases
3 percent). Under these new regulations, the banking subsidiaries of Comerica
would be considered to be well capitalized as of September 30, 1994.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
growth limitations and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the
parent holding company is limited to the lesser of (i) an amount equal to 5
percent of the depository institution's total assets at the time it became
undercapitalized, and (ii) the amount that is necessary (or would have been
necessary) to bring the institution into compliance with all capital standards
applicable with respect to such institution as of the time it fails to comply
with the plan. If a depository institution fails to submit an acceptable plan,
it is treated as if it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce the total assets and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions are subject to the appointment
of a receiver or conservator.
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Under FDICIA, the FDIC is permitted to provide financial assistance to
an insured bank before appointment of a conservator or receiver only if (i)
such assistance would be the least costly method of meeting the FDIC's
insurance obligations, (ii) grounds for appointment of a conservator or a
receiver exist or are likely to exist, (iii) it is unlikely that the bank can
meet all capital standards without assistance, and (iv) the bank's management
has been competent, has complied with applicable laws, regulations, rules and
supervisory directives and has not engaged in any insider dealing, speculative
practice or other abusive activity.
FDICIA directs that each federal banking agency prescribe standards
for depository institutions and depository institution holding companies
relating to internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and other standards as they deem appropriate. Because
such standards have been proposed but not yet finalized, management is unable
to assess their impact.
FDICIA also contains a variety of other provisions that may affect the
operations of depository institutions including new reporting requirements,
regulatory standards for real estate lending, "truth in savings" provisions,
the requirement that a depository institution give 90 days' prior notice to
customers and regulatory authorities before closing any branch and a
prohibition on the acceptance or renewal of brokered deposits by depository
institutions that are not well capitalized or are adequately capitalized and
have not received a waiver from the FDIC. Under regulations relating to the
brokered deposit prohibition, Comerica Bank is well capitalized and may accept
brokered deposits without restriction.
IMPLICATIONS OF BEING A SAVINGS AND LOAN HOLDING COMPANY
As a result of Comerica's control of all of the capital stock of
Comerica Bank & Trust, F.S.B. ("Comerica FSB"), Comerica is a savings and loan
holding company under Section 10 of the Home Owners' Loan Act, as amended
("HOLA"). Comerica is registered with the Office of Thrift Supervision (the
"OTS") and is subject to OTS regulations, supervision and reporting
requirements.
With certain exceptions, a savings and loan holding company must
obtain the prior written approval of the OTS before acquiring control of an
insured savings association or savings and loan holding company through the
acquisition of stock or through a merger or some other business combination.
HOLA prohibits the OTS from approving an acquisition by a savings and loan
holding company which would result in the holding company controlling savings
associations in more than one state unless (i) the holding company is
authorized to do so by the FDIC as an emergency acquisition, (ii) the holding
company controls a savings association which operated an office in the
additional state or states on March 5, 1987, or (iii) the statutes of the state
in which the savings association to be acquired is located specifically permit
a savings association chartered by such state to be acquired by an out-of-
state savings association or savings and loan holding company.
As a subsidiary of a savings and loan holding company, Comerica FSB is
subject to certain restrictions in its dealings with Comerica and with other
companies affiliated with Comerica. In addition, savings association
subsidiaries of savings and loan holding companies are required to give the OTS
thirty days' prior notice of any proposed payment of dividends to the savings
and loan holding company.
As a federal savings bank, Comerica FSB is subject to the capital
adequacy guidelines of the OTS. In general, a federal savings bank is required
to satisfy three capital requirements: (i) a leverage test under which core
capital must be at least three percent of adjusted total assets, (ii) a
tangible capital test under which tangible capital must be at least 1.5% of
adjusted total assets and (iii) a risk based capital test under which core
capital must, on a fully phased-in basis, be at least 4% of risk adjusted
assets and total capital must, on a fully phased-in basis, be at least 8% of
risk adjusted assets. The OTS has proposed a regulation that would increase
the minimum leverage ratio from 3% to at least 4% to 5% for savings
associations not having the highest supervisory rating. As of
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September 30, 1994, Comerica FSB had capital well in excess of the foregoing
requirements with a leverage ratio of 6.75%, a tangible capital ratio of 6.75%,
a core risk based capital ratio of 11.14%, and a total risk based capital ratio
of 12.40%.
In general, a savings and loan holding company such as Comerica that
has a federal savings bank subsidiary that fails to meet the "qualified thrift
lender" test is required to become a bank holding company. As Comerica is
already a bank holding company, Comerica FSB's failure to satisfy the
"qualified thrift lender" test would have no material effect on Comerica. In
addition, if a federal savings bank, such as Comerica FSB, does not satisfy the
"qualified thrift lender" test, then such federal savings bank (i) will be
limited to establishing new branches as if it were a national bank located in
the same state, (ii) will be barred from obtaining new Federal Home Loan Bank
advances, (iii) will be prohibited from making any new investment or engaging
in any new activity unless the investment or activity is permitted for a
national bank and (iv) will be subject to the dividend restrictions applicable
to national banks. Moreover, three years after it has failed to qualify as
"qualified thrift lender", a federal savings bank must (i) divest any
investments and activities not permitted for a national bank and (ii) repay any
of its outstanding Federal Home Loan Bank advances "as promptly as can
prudently be done" consistent with its safe and sound operation and must divest
any investment and cease any activity not permitted for a national bank. Even
if Comerica FSB failed the "qualified thrift lender" test, Comerica does not
believe that it would have a significant effect on its operations.
To be a "qualified thrift lender" a federal savings bank must maintain
"qualified thrift investments" of at least 65 percent of its "portfolio assets"
as measured on a monthly average basis in 9 out of the last 12 months. The
assets that qualify as "qualified thrift investments" include assets generally
related to the development of domestic residential real property. "Portfolio
assets" is defined as a federal savings bank's total assets, minus (i) goodwill
and other intangible assets, (ii) the value of property used by the savings
association to conduct its business and (iii) subject to a maximum of 20
percent of total assets, liquid assets required to be maintained under Section
6 of HOLA.
DESCRIPTION OF COMERICA CAPITAL STOCK
The following description contains a summary of all of the material
features of the capital stock of Comerica but does not purport to be complete
and is subject to and qualified in its entirety by reference to the Comerica
Restated Certificate of Incorporation, including the Certificate of Designation
for the Comerica Series C Preferred Stock (the "Comerica Charter"), all of
which are filed as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus forms a part and are incorporated herein by reference.
See also "COMPARISON OF SHAREHOLDER RIGHTS" below. The following description
should be read carefully by the UBT stockholders.
Comerica's total authorized capital stock currently consists of (i)
10,000,000 shares of preferred stock, without par value (the "Comerica
Preferred Stock"), and (ii) 250,000,000 shares of Comerica Common Stock, with a
par value of $5.00 per share.
With respect to the Comerica Preferred Stock, 500,000 shares with no
stated value have been designated as Series C Participating Preferred Stock
(the "Comerica Series C Preferred Stock"). All shares of two former series of
Comerica Preferred Stock, designated Adjustable Rate Cumulative Preferred
Stock, Series A and Series B Preferred Stock, have been redeemed and restored
to the status of authorized but unissued Comerica Preferred Stock. All shares
designated as Comerica Series C Preferred Stock have been reserved for issuance
in connection with the Comerica Rights. The Comerica Rights are not currently
exercisable and no shares of Comerica Series C Preferred Stock are outstanding.
For a description of the Comerica Rights, see "COMPARISON OF SHAREHOLDER RIGHTS
- -- Rights Plan" below.
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With respect to the Comerica Common Stock, as of September 30, 1994,
119,294,355 shares of Comerica Common Stock were issued and outstanding.
COMERICA PREFERRED STOCK
General. The Comerica Preferred Stock may be issued in one or more
series at such time or times and for such consideration or considerations as
Comerica's Board may determine. The Comerica Board is expressly authorized at
any time, and from time to time, to provide for the issuance of Comerica
Preferred Stock with such voting powers or without voting powers, and with such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the Comerica Board resolution providing for
the issuance thereof. The Comerica Board is authorized to designate the series
and the number of shares comprising such series, the dividend rate on the
shares of such series, the redemption rights, if any, any purchase, retirement
or sinking fund provisions, any conversion rights and any special voting
rights.
Uncommitted authorized but unissued shares of Comerica Preferred Stock
may be issued from time to time to such persons and for such consideration as
the Comerica Board may determine and holders of the then outstanding shares of
Comerica Common Stock or Comerica Preferred Stock may or may not be given the
opportunity to vote thereon, depending upon the nature of any such
transactions, applicable law, the rules and policies of NYSE and the judgment
of the Comerica Board regarding the submission of such issuance to Comerica's
shareholders. Comerica shareholders have no preemptive rights to subscribe to
newly issued shares.
Moreover, it is possible that shares of Comerica Preferred Stock would
be issued for the purpose of making an acquisition by an unwanted suitor of a
controlling interest in Comerica more difficult, time-consuming or costly or
otherwise to discourage an attempt to acquire control of Comerica. Under such
circumstances the availability of authorized and unissued shares of Comerica
Common Stock and Comerica Preferred Stock may make it more difficult for
shareholders to obtain a premium for their shares. Such authorized and
unissued shares could be used to create voting or other impediments or to
frustrate a person seeking to obtain control of Comerica by means of a merger,
tender offer, proxy contest or other means. Such shares could be privately
placed with purchasers who might cooperate with the Comerica Board in opposing
such an attempt by a third party to gain control of Comerica. The issuance of
shares of Comerica Preferred Stock could also be used to dilute ownership of a
person or entity seeking to obtain control of Comerica. Although Comerica does
not currently contemplate taking such action, shares of one or more series of
Comerica Preferred Stock could be issued for the purposes and effects described
above and the Comerica Board reserves its rights (if consistent with its
fiduciary responsibilities) to issue such stock for such purposes.
Shares of Comerica Preferred Stock redeemed or acquired by Comerica
may return to the status of authorized and unissued shares of Comerica
Preferred Stock, without designation as to series, and may be reissued by the
Comerica Board.
Comerica Series C Preferred Stock. The Comerica Series C Preferred
Stock is issuable upon exercise of the Comerica Rights. The Comerica Rights
are not currently exercisable and no shares of Comerica Series C Preferred
Stock are outstanding. For a description of the Comerica Rights, see
"COMPARISON OF SHAREHOLDER RIGHTS -- Rights Plan" below. The Comerica Series C
Preferred Stock carries a quarterly dividend rate equal (rounded to the nearest
cent) to the greater of (a) $10 or (b) a multiple (the "Comerica Multiple")
times the aggregate per share amount of all cash dividends and the Comerica
Multiple times the aggregate per share amount of all non-cash dividends or
other distributions other than a dividend payable in shares of Comerica Common
Stock or a subdivision of the outstanding shares of Comerica Common Stock,
declared on the Comerica Common Stock during the period specified. Dividends
on the Comerica Series C Preferred Stock are cumulative. The Comerica
Multiple, which is subject to adjustment upon the occurrence of stock dividends
on, or
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splits or combinations of, outstanding Comerica Common Stock is 450. Unless
all dividends on the Comerica Series C Preferred Stock have been paid in full,
no dividend may be declared or paid on the Comerica Common Stock. If dividends
shall be in arrears in an amount equal to six quarterly dividends, the holders
of the Comerica Series C Preferred Stock shall have the right, voting as a
class, to elect two directors.
Each share of Comerica Series C Preferred Stock is entitled to vote on
all matters submitted to a vote of the shareholders of Comerica, the number of
votes being subject to adjustment under the same circumstances which require an
adjustment of the Comerica Multiple but may not have more than one vote per
share. Except as otherwise required by the Comerica Charter or bylaws, the
holders of shares of Comerica Series C Preferred Stock and the holders of
Comerica Common Stock vote together as one class.
Upon any liquidation, dissolution or winding up of Comerica, each
share of Comerica Series C Preferred Stock is entitled, prior to any payment or
distribution in respect of the Comerica Common Stock, to a liquidation
preference equal to $100 plus any accrued and unpaid dividends. If sufficient
assets of Comerica remain after payment of the liquidation preference in
respect of the Comerica Series C Preferred Stock and certain payments to the
holders of Comerica Common Stock, the Comerica Series C Preferred Stock
participates with the Comerica Common Stock in respect of the remaining assets
of Comerica based on a ratio.
If Comerica enters into any consolidation, merger, combination or
other transaction in which Comerica Common Stock is exchanged for other stock,
securities, cash or other property, then the shares of Comerica Series C
Preferred Stock will at the same time be similarly exchanged in an amount per
share, subject to certain adjustments, equal to the Comerica Multiple times the
aggregate amount of stock, security, cash or other property into which or for
which each share of Comerica Common Stock is changed or exchanged.
COMERICA COMMON STOCK
Subject to the rights of any outstanding shares of Comerica Preferred
Stock, the holders of Comerica Common Stock are entitled to receive such
dividends as may from time to time be declared by the Comerica Board. They are
entitled to one vote per share of Comerica Common Stock on every issue
submitted to them as Comerica shareholders at a meeting of shareholders or
otherwise. In the event of liquidation they are entitled, after payment in
full of the liquidation preference of any outstanding Comerica Preferred Stock
and subject to the right of the holders of Comerica Series C Preferred Stock to
participate in certain distributions, to share ratably in all assets of
Comerica available for distribution to holders of Comerica Common Stock.
Holders of shares of Comerica Common Stock do not have preemptive or cumulative
voting rights. All shares of Comerica Common Stock now issued and outstanding
are fully paid and nonassessable.
The registrar and transfer agent for the Comerica Common Stock is
Norwest Bank, Minnesota, National Association.
DESCRIPTION OF UBT CAPITAL STOCK
UBT's total authorized capital stock currently consists of 6,000,000
shares of Common Stock, with no par value (the "UBT Common Stock").
Holders of UBT Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders of UBT. The holders of UBT Common
Stock are entitled to receive ratably such dividends, if any, as may be
declared by the UBT Board of Directors out of funds legally available therefor.
In the event of
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liquidation, dissolution or winding up of UBT, the holders of UBT Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities. The UBT Common Stock has no preemptive, redemption, conversion or
other subscription rights. The outstanding shares of UBT Common Stock are
fully paid and nonassessable.
As of September 30, 1994, there were 1,339,697 shares of UBT Common
Stock outstanding held by 509 holders of record.
The transfer agent and registrar for the UBT Common Stock is First
Interstate Bank of California.
COMPARISON OF SHAREHOLDER RIGHTS
In the event the proposed Merger is consummated, stockholders of UBT
whose shares of UBT Common Stock, are converted into shares of Comerica Common
Stock will become shareholders of Comerica. Their rights will be governed by
Delaware law and the Comerica Charter and the Comerica Bylaws (the "Comerica
Bylaws").
Certain differences between the rights of holders of UBT Common Stock
and the holders of Comerica Common Stock are set forth below. UBT is organized
under the laws of California and Comerica is organized under the laws of
Delaware, and there are differences arising from various provisions of the
Comerica Charter, the Comerica Bylaws, the UBT Articles of Incorporation (the
"UBT Charter"), the UBT Bylaws, the "Comerica Rights Agreement" (See "Rights
Plans" below) and state laws. This summary contains a description of the
material differences, but is not meant to be relied upon as an exhaustive list
or detailed description of the provisions discussed and is qualified in its
entirety by reference to the DGCL, California state law, the Comerica Charter,
the Comerica Bylaws, the UBT Charter, the UBT Bylaws and the Comerica Rights
Agreement.
CLASSIFICATION, REMOVAL AND NOMINATION OF BOARD OF DIRECTORS
The Comerica Charter provides for classification of the Comerica Board
into three classes of directors with each class as nearly equal in number as
possible and elected for a three-year term, and with only one class standing
for election each year. The total number of directors and the number of
directors constituting each class may be fixed or changed from time to time by
the Comerica Board without shareholder approval. The Comerica Board currently
consists of 14 members. The affirmative vote of the holders of at least 75% of
Comerica's then outstanding voting stock is required to amend, change, or
repeal this provision unless such amendment, change, or repeal is approved by
three-fourths of the Comerica Board, in which case such amendment, change, or
repeal will only require the affirmative vote of a majority of shares entitled
to vote thereon. The Comerica Charter contains no provisions concerning the
removal of directors. Under the DGCL, then, Comerica shareholders may remove a
Comerica director only for cause.
Nominations of candidates for election as directors of Comerica at any
election meeting may be made by the Directors' Committee of the Board of
Directors until June 18, 1995, and thereafter by the Board of Directors.
Shareholders may nominate directors by delivering notice to the Secretary of
Comerica not less than 30 days prior to the date of the election meeting,
outlining in the notice (a) the name, age, business address and residence of
each nominee proposed in the notice, (b) the principal occupation or employment
of each such nominee, (c) the number of shares of Comerica Capital Stock which
are beneficially owned by each such nominee, and (d) such other information
concerning each such nominee as would be required in a proxy statement
soliciting proxies for the election of such nominee.
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The UBT Bylaws provide that the UBT Board of Directors shall consist
of not less than 7 nor more than 13 directors, until changed
by amendment of the Articles of Incorporation or, if not prohibited by the
Articles, by an amendment to the Bylaws adopted by the shareholders. The exact
number of directors within the range mentioned above is fixed at 9 and
may be reduced or increased within the range by a resolution duly adopted by
the Board of Directors. Directors need not be shareholders of the corporation.
Board of Director nominations may be made by the Board of Directors or
by any shareholder of any outstanding class of capital stock of the corporation
entitled to vote for the election of directors. Notice of intention to make
any nominations shall be made in writing and shall be delivered or mailed to
the President of UBT not less than 21 days nor more than 60 days prior
to any meeting of shareholders called for the election of directors; provided
however, that if less than 21 days' notice of the meeting is given to
shareholders, such notice of intention to nominate shall be mailed or delivered
to the President of UBT not later than the close of business on the tenth day
following the day on which the notice of meeting was mailed; provided further,
that if notice of such meeting is sent by third class mail, no notice of
intention to make nominations shall be required. Such notification shall
contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
capital stock of UBT owned by each proposed nominee; (d) the name and residence
address of the notifying shareholder; and (e) the number of shares of capital
stock of UBT owned by the notifying shareholder. Nominations not made in
accordance herewith may, in the discretion of the Chairperson of the meeting,
be disregarded and upon the Chairperson's instructions, the inspectors of
election can disregard all votes cast for each such nominee.
SPECIAL MEETINGS OF SHAREHOLDERS
The Comerica Bylaws provide that a special meeting of shareholders may
be called only by (i) the Chairman of the Board of Comerica or, during such
Chairman's absence or disability, by the President of Comerica, or (ii) by the
President or Secretary of Comerica at the request in writing of a majority of
the Comerica Board, or at the request in writing by shareholders owning at
least 75% of the then outstanding Comerica voting stock entitled to vote at the
meeting. Pursuant to the Comerica Charter, any amendment, alteration, change,
addition to, or repeal of this Comerica Bylaw provision proposed by a Comerica
shareholder requires the affirmative vote of the holders of at least 75% of
Comerica's then outstanding voting stock, and the same super majority
shareholder vote is required to amend, change, or repeal this Comerica Charter
provision, except under the circumstances described above under
"--Classification, Removal, and Nomination of Board of Directors."
The UBT Bylaws provide that special meetings of shareholders may be
called by the Board of Directors, or by the shareholders entitled to cast not
less than 10% of the votes at the meeting.
LIMITATION OF LIABILITY OF DIRECTORS
The DGCL permits, and the Comerica Charter provides, that a director
shall not be personally liable to Comerica or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a)
for any breach of the director's duty of loyalty to the corporation or its
shareholders, (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) for the approval of
an illegal dividend, asset distribution, stock purchase, or certain other
illegal actions, or (d) for any transaction for which the director derived an
improper personal benefit.
The UBT Charter and Bylaws provide that, the liability of directors of
UBT for monetary damages shall be eliminated to the fullest extent permitted
under California law.
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ACTION BY WRITTEN CONSENT
The Comerica Charter permits shareholder action by written consent only
if such consent is taken by not less than 75% of the outstanding voting stock
of Comerica. The affirmative vote of the holders of at least 75% of Comerica's
then outstanding voting stock is required to amend, change, or repeal this
Comerica Charter provision.
The UBT Bylaws permit shareholder action by written consent only if
the consent is signed by the holders of outstanding shares having not less than
the minimum number of votes necessary to authorize such action at a meeting at
which all shares entitled to vote were present, except that unanimous written
consent is required for election of directors to non-vacant positions.
CERTAIN BUSINESS COMBINATIONS
Section 203 of the DGCL. Delaware has enacted a business combination
statute (Section 203 of the DGCL) pursuant to which a corporation having a
class of voting stock listed on a national securities exchange or authorized
for quotation on a national inter- dealer quotation system or held of record by
more than 2,000 shareholders, and whose charter or bylaws do not provide that
the corporation shall not be governed by the statute shall not engage in any
business combination (defined as any merger or consolidation of the corporation
or its subsidiary) with any interested shareholder (defined generally as any
person owning or recently owning 15% of more of the outstanding voting stock of
the corporation) for a period of 3 years following the date that such
shareholder became an interested shareholder, unless (a) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the shareholder becoming an interested
shareholder, or (b) the interested shareholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned (i) by persons who are directors and also officers and (ii)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (c) on or subsequent to such date
the business combination is approved by the board of directors and authorized
at an annual or special meeting of shareholders, and not by written consent, by
the affirmative vote of at least 66 and 2/3% of the outstanding voting stock
which is not owned by the interested shareholder.
Comerica Charter Provisions With Respect to Certain Business
Combinations. The Comerica Charter provides that any "Business Combination"
(hereinafter referred to as a "Comerica Business Combination") involving
Comerica and a person who beneficially owns 10% or more of Comerica's capital
stock (a "Comerica Related Person") must be approved by (i) the holders of at
least 75% of the votes entitled to be cast by the holders of Comerica's voting
stock and (ii) a majority of the votes entitled to be cast by the holders of
such voting stock, excluding stock beneficially owned by such Comerica Related
Person (the "Comerica Voting Requirement"). The Comerica Voting Requirement
does not apply if the Comerica Business Combination is approved by
three-fourths of the Comerica Continuing Directors (defined generally to
include each director who either was a director immediately prior to the time
the Comerica Related Person in the Comerica Business Combination became such a
person or was designated as a Comerica Continuing Director by a majority of the
then Comerica Continuing Directors prior to initial election as a director), or
complies with certain minimum price and other requirements. As defined in the
Comerica Charter, a Comerica Business Combination includes, among other things,
(i) any merger or consolidation of Comerica with, into, or for the benefit of a
Comerica Related Person; (ii) the sale by Comerica of a Substantial Part (more
than 10% of the fair market value) of its assets to a Comerica Related Person;
(iii) the acquisition by Comerica of a Substantial Part of the assets of a
Comerica Related Person; (iv) the issuance by Comerica of any of its securities
to a Comerica Related Person (other than an issuance which is effected on a pro
rata basis to all Comerica shareholders); or (v) the acquisition by Comerica of
any securities of a Comerica Related Person. This provision of the Comerica
Charter cannot be amended, changed, or repealed except by a vote similar
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to the Comerica Voting Requirement unless such amendment, change, or repeal is
recommended by three-fourths of the Comerica Continuing Directors, in which
case such amendment, change, or repeal will require such vote, if any, as
otherwise is required by Delaware law.
The California Corporations Code does not have a business combination
statute. The UBT Charter does not have a comparable business combination
provisions.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Comerica Charter provides that any amendment, change, or repeal of
such charter with respect to the provisions relating to (i) size and
classification of the Comerica Board, (ii) certain amendments to the provisions
of the Comerica Bylaws relating to calling special meetings of shareholders and
nominations of director candidates, (iii) Business Combinations, and (iv)
actions of shareholders permitted by written consent must be approved by a vote
of at least 75% of the then outstanding shares of capital stock entitled to
vote (and, with respect to amending provisions relating to Business
Combinations, a majority of the outstanding shares of capital stock entitled to
vote of which a Related Person is not a beneficial owner); provided, however,
that such voting requirements are not required by any proposed amendment,
change, or repeal recommended to shareholders by not less than three-fourths
of the Comerica Board (or, with respect to such proposals relating to Business
Combinations, three-fourths of the Comerica Continuing Directors (as defined
above)).
Pursuant to California law, the Charter of UBT may be amended by the
approval of the UBT Board of Directors and the affirmative vote or written
consent of a majority of the outstanding shares entitled to vote.
RIGHTS PLANS
Comerica Rights Plan. On January 26, 1988, the Comerica Board
declared a dividend distribution of one right (each, a "Comerica Right") for
each outstanding share of Comerica Common Stock to shareholders of record at
the close of business on February 8, 1988. Each Comerica Right entitles the
registered holder to purchase from Comerica a unit consisting of 1/100th of one
share (a "Unit") of Comerica Series C Preferred Stock at a Purchase Price (the
"Comerica Purchase Price") of $175 in cash per Unit, subject to adjustment.
The number of Comerica Rights per share of Comerica Common Stock is subject to
adjustment in certain events described below. Each share of Comerica Common
Stock currently carries 2/9ths of one Comerica Right. The Comerica Common
Stock to be issued in the Merger will have attached thereto the associated
number of Rights. The description and terms of the Comerica Rights are set
forth in a Rights Agreement (the "Comerica Rights Agreement"), dated as of
January 28, 1988, as amended, between Comerica and Comerica Bank, as Rights
Agent (the "Comerica Rights Agent").
At the present time, the Comerica Rights attach to all Comerica Common
Stock certificates representing outstanding shares, and no separate Comerica
Rights certificates have been distributed. The Comerica Rights will separate
from the Comerica Common Stock and a "Comerica Distribution Date" will occur
upon the earlier of (i) ten days following a public announcement that a person
or group of affiliated or associated persons (a "Comerica Acquiring Person")
has acquired, or obtained the right to acquire, beneficial ownership of 20
percent or more of the outstanding shares of Comerica Common Stock (the
"Comerica Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 25% or more of such outstanding shares of Comerica
Common Stock. Until a Comerica Distribution Date, (i) the Comerica Rights will
be evidenced by the Comerica Common Stock certificates and will be transferred
with and only with such Comerica Common Stock certificates, (ii) new Comerica
Common Stock certificates issued after February 8, 1988 will contain a notation
incorporating the Comerica Rights Agreement by reference, and (iii) the
surrender for transfer of any certificates for Comerica Common Stock
outstanding will also
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constitute the transfer of the Comerica Rights associated with the Comerica
Common Stock represented by such certificates.
The Comerica Rights are not exercisable until the Comerica
Distribution Date and will expire at the earlier of (i) the close of business
on February 8, 1998, and (ii) the date which is 24 months after the first date
upon which Comerica can generally be acquired by bank holding companies, and
Comerica is generally permitted to acquire banks, principally located in at
least 15 of the 20 states listed on Exhibit D to the Comerica Rights Agreement,
unless earlier redeemed by Comerica as described below. Pursuant to the
Comerica Rights Agreement, Comerica reserves the right to require prior to the
occurrence of a Comerica Triggering Event (as defined below) that, upon any
exercise of Comerica Rights, a number of Comerica Rights be exercised so that
only whole shares of Comerica Series C Preferred Stock will be issued.
As soon as practicable after a Comerica Distribution Date, Comerica
Rights certificates will be mailed to holders of record of the Comerica Common
Stock as of the close of business on the Comerica Distribution Date and,
thereafter, the separate Comerica Rights certificates alone will represent the
Comerica Rights. Except as otherwise determined by the Comerica Board and
except in connection with the shares of Comerica Common Stock issued upon the
exercise of employee stock options or the conversion of convertible securities,
only shares of Comerica Common Stock issued prior to the Comerica Distribution
Date will be issued with Comerica Rights. The number of Comerica Rights per
share of Comerica Common Stock is subject to adjustment upon the occurrence of
stock dividends on, or splits or combinations of, outstanding Comerica Common
Stock. Currently, each share of Comerica Common Stock currently carries 2/9ths
of one Comerica Right.
In the event that, at any time following the Comerica Distribution
Date, (i) a person becomes the beneficial owner of more than 25 percent of the
then outstanding shares of Comerica Common Stock except pursuant to an offer
for all outstanding shares of Comerica Common Stock which the independent
directors serving on the Comerica Board determine to be fair to, and otherwise
in the best interests of, Comerica shareholders, or (ii) Comerica is the
surviving corporation in a merger with a Comerica Acquiring Person and the
Comerica Common Stock is not changed or exchanged, each holder of a Comerica
Right will thereafter have the right to receive, upon exercise, Comerica Common
Stock (or, in certain circumstances, cash, property, or other securities of
Comerica) having a value equal to two times the exercise price of the Comerica
Right. Notwithstanding the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Comerica Rights that are, or (under
certain circumstances specified in the Comerica Rights Agreement) were,
beneficially owned by any Comerica Acquiring Person will be null and void.
However, Comerica Rights are not exercisable following the occurrence of either
of the events set forth above until such time as the Comerica Rights are no
longer redeemable by Comerica as set forth below.
In the event that, at any time following the Comerica Stock
Acquisition Date, (i) Comerica is acquired in a merger or other business
combination transaction in which Comerica is not the surviving corporation or
Comerica Common Stock is changed or exchanged (other than a merger which
follows an offer described in clause (i) of the preceding paragraph), or (ii)
50 percent or more of Comerica's assets or earning power is sold or
transferred, each holder of a Comerica Right (except Comerica Rights which
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Comerica Right. Each of the
events set forth in this paragraph and in the preceding paragraph is referred
to as a "Comerica Triggering Event."
The Comerica Purchase Price payable, and the number of Units of
Comerica Series C Preferred Stock or other securities or property issuable,
upon exercise of the Comerica Rights are subject to adjustment in certain
events.
At any time until ten days following the Comerica Stock Acquisition
Date, Comerica may redeem the Comerica Rights in whole, but not in part, at a
price of $0.05 per Comerica Right, subject to adjustment where appropriate
(payable in cash, stock, or other consideration deemed appropriate by the
Comerica Board). After the
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redemption period has expired, Comerica's right of redemption may be reinstated
if a Comerica Acquiring Person reduces his or her beneficial ownership to 10
percent or less of the outstanding shares of Comerica Common Stock in a
transaction or series of transactions not involving Comerica. Immediately upon
the action of the Comerica Board ordering redemption of the Comerica Rights,
the Comerica Rights will terminate and the only right of the holders of
Comerica Rights will be to receive the $0.05 redemption price.
Until a Comerica Right is exercised, the holder thereof, as such, will
have no rights as a holder of Comerica shares, including, without limitation,
the right to vote or to receive dividends.
Other than those provisions relating to the principal economic terms
of the Comerica Rights, any of the provisions of the Comerica Rights Agreement
(including the provisions relating to the termination of such agreement) may be
amended by the Comerica Board prior to the Comerica Distribution Date. After
the Comerica Distribution Date, the provisions of the Comerica Rights Agreement
may be amended by the Comerica Board in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Comerica
Rights (excluding the interests of any Comerica Acquiring Person), or to
shorten or lengthen any time period under the Comerica Rights Agreement;
provided, however, that no amendment to adjust the time period governing
redemption shall be made at such time as the Comerica Rights are not
redeemable.
The Comerica Rights have certain anti-takeover effects. The Comerica
Rights will cause substantial dilution to a person or group that attempts to
acquire Comerica on terms not approved by the Comerica Board, unless the offer
is conditional on a substantial number of Comerica Rights being acquired. The
Comerica Rights, however, should not affect any prospective offeror willing to
make an offer at a fair price and otherwise in the best interests of Comerica
and its shareholders as determined by a majority of the independent directors
on the Comerica Board, or willing to negotiate with the Comerica Board. The
Comerica Rights should not interfere with any merger or other business
combination approved by the Comerica Board since the Comerica Board may, at its
option, at any time until ten days following the Comerica Stock Acquisition
Date redeem all but not less than all of the then outstanding Comerica Rights
at the $0.05 redemption price.
The Comerica Rights Agreement is incorporated herein by reference.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" above. The foregoing
description of the Comerica Rights does not purport to be complete and is
qualified in its entirety by reference to the Comerica Rights Agreement, as
amended.
UBT does not have a rights plan.
DIVIDENDS
UBT is a corporation organized under the laws of the State of
California and Comerica is a corporation organized under the laws of the State
of Delaware. Dividends upon the UBT Common Stock and the Comerica Common Stock
may be declared by the Board of Directors of UBT and Comerica, respectively,
pursuant to the applicable provisions of California and Delaware law.
The payment of dividends by Comerica and its bank subsidiaries is
affected by various regulatory requirements and policies. See "CERTAIN
REGULATORY CONSIDERATIONS -- Payment of Dividends".
The payment of dividends by UBT is similarly affected by various
regulatory requirements and policies.
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DISSENTER'S RIGHTS
The shareholders of UBT may have dissenter's rights under the CGCL if
their shares of UBT Common Stock qualify "dissenting shares" under the CGCL.
These rights may require UBT to purchase for cash at fair market value from
UBT stockholders shares of UBT Common Stock which qualify as dissenting
shares. Under the CGCL, UBT stockholders will waive their dissenter's rights
if they do not vote against the Merger and a vote against the Merger by itself
will not provide adequate notice to UBT of such stockholders' intention to
assert dissenters rights. See "THE MERGER -- Dissenters Rights."
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the
Merger Agreement not otherwise described in this Proxy Statement/Prospectus and
is qualified in its entirety by reference to the Merger Agreement which is
attached as Annex A to this Proxy Statement/Prospectus. The Merger Agreement
is incorporated herein by reference. UBT stockholders are urged to read the
Merger Agreement carefully.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of UBT, Comerica and Interim have made
certain customary representations relating to, among other things, (i) each of
their organization and similar corporate matters; (ii) certain licenses,
permits, and certificates necessary for each to conduct their respective
businesses; (iii) authorization, execution, delivery, performance, and
enforceability of the Merger Agreement and related matters; (iv) documents
filed by each party with the Commission and other regulatory authorities and
the accuracy of information contained therein; (v) the capital structure of
each party; (vi) in the case of UBT, the validity, payment, and
nonassessability of the authorized capital stock of UBT; (vii) the accuracy of
information supplied by each party in connection with this Proxy
Statement/Prospectus and the Registration Statement on Form S-4 of which this
Proxy Statement/Prospectus forms a part; (viii) compliance with applicable
laws; (ix) the absence of material pending or threatened litigation except as
disclosed by the parties prior to the date of the Merger Agreement; (x) the
absence of restrictive agreements with banking regulators except as disclosed
by the parties on schedules attached to the Merger Agreement; (xi) in the case
of UBT, the existence of insurance policies; (xii) in the case of UBT, good and
marketable title to real and personal property; (xiii) in the case of UBT and
Comerica, filing of tax returns and payment of taxes; (xiv) the performance of
all material obligations; (xv) in the case of UBT, the validity of certain
loans and investments; (xvi) the absence of material adverse change in the
assets or financial condition of the parties; (xvii) the use of brokers and
finders; (xviii) in the case of UBT, the status of trust assets; (xix) in the
case of UBT, material contracts; (xx) the absence of any material adverse
changes to the businesses of the parties; (xxi) the absence of any undisclosed
liabilities of the parties; (xxii) in the case of UBT, retirement and other
employee plans and matters relating to the Employee Retirement Income Security
Act of 1974, as amended; (xxiii) in the case of UBT, certain intellectual
property rights; (xxiv) in the case of UBT, certain environmental matters;
(xxv) in the case of UBT, the absence of any power of attorney; (xxvi)
disclosures made in the schedules to the Merger Agreement; (xxvii) the
performance of all material obligations; (xxviii) in the case of UBT,
outstanding stock options; (xxix) in the case of UBT, subsidiaries; (xxx) in
the case of UBT, interest rate risk management instruments; (xxxi) no actual
knowledge of misrepresentation or breach of warranty, and (xxxii) in the case
of Comerica, the formation of Interim.
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CONDUCT OF BUSINESS PENDING THE MERGER
In the Merger Agreement, UBT has agreed to carry on its business in
substantially the manner as conducted prior to the execution of the Merger
Agreement, and UBT has agreed to notify Comerica promptly in writing of any
Material Change in the capital structure, financial condition, assets, results
of operations, business or prospects of UBT or of any other Materially Adverse
Change known to UBT respecting the business and operation of UBT or of any
matter which would make the representations and warranties set forth in the
Merger Agreement not true and correct in any material respects as of the
effective date of the Registration Statement and at the Effective Time. All
capitalized terms not defined in this paragraph have the meanings given to them
in the Merger Agreement.
In addition, UBT has agreed in the Merger Agreement that it will (i)
use commercially reasonable efforts to satisfy the conditions to the Merger
specified in the Merger Agreement, (ii) keep in full force all material permits
and licenses, (iii) use commercially reasonable efforts to maintain insurance
and bonding coverage, (iv) perform its contractual obligations and not amend,
modify, or terminate any material agreement, understanding, commitment, or
offer (each, an "Understanding") or materially default under any Understanding,
(v) observe legal requirements applicable to its business, (vi) duly and timely
file all reports and returns required with any governmental entity, (vii)
maintain assets and properties in good condition and repair, (viii) promptly
advise Comerica of the acquisition by any person or group of ownership or
control of 5% or more of the outstanding shares of UBT Common Stock, (ix)
charge-off loans consistent with past practice, (x) furnish to Comerica copies
of reports and other filings with its Board of Directors and regulatory
agencies and copies of monthly and quarterly financial statements, (xi)
maintain reserves for contingent liabilities in accordance with generally
accepted accounting principles consistent with past practice, (xii) notify
Comerica of the filing of any litigation or governmental or regulatory action
or investigation, (xiii) inform Comerica of the amounts and categories of
loans, leases, and other extensions of credit that have been classified as
"Specially Mentioned," "Renegotiated," "Substandard," "Doubtful," "Loss," or
any comparable classification and furnish Comerica monthly schedules of certain
classified credits, (xiv) furnish Comerica upon request information with
respect to participating loans and leases, loans and leases (including
commitments) to any UBT director, officer at or above the vice president level,
or 5% stockholder, and standby letters of credit, and (xv) furnish Comerica
copies of loan applications of $500,000 or more and related financial
information.
UBT has also agreed that it will not, without the written consent of
Comerica, among other things, (i) declare or pay any dividend or make any other
distribution in respect of its capital stock other than regular quarterly cash
dividends in an amount not to exceed $.35 per share, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) repurchase or otherwise acquire any shares of its capital
stock, other than through customary repossession, (iv) take any action that
would or might result in any of its representations and warranties contained in
the Merger Agreement being or becoming materially untrue or in any of the
conditions precedent to the Merger not being satisfied, (v) except as
specifically contemplated by UBT Stock Option Plans (See THE MERGER - Stock
Option Plan) issue, deliver, or sell, or authorize the issuance, delivery, or
sale of any shares of its capital stock or any class of securities convertible
into capital stock, or rights, warrants, or options therefor, except as
specifically contemplated by the UBT Stock Options or the UBT Stock Option
Agreement, (vi) amend its articles of incorporation or bylaws, except as
required by law or the Merger Agreement, (vii) authorize or knowingly permit
any direct or indirect solicitation of any Acquisition Proposal, unless such
Acquisition Proposal shall be in writing and shall have been received by the
UBT Board without solicitation after the date of the Merger Agreement, (viii)
other than in the ordinary course of business consistent with prior practice,
acquire, or agree to acquire, the assets of any business or person which would
be material to UBT, (ix) sell or lease any material assets, except in the
ordinary course of business, consistent with prior practice, (x) incur any
indebtedness for borrowed money or guarantee any such indebtedness other than
in the ordinary course of business consistent with prior practice, (xi) enter
into any Understanding, except relating to deposits incurred, loans made in
connection with the Merger Agreement, loan sales made in the ordinary course of
business or for less than $100,000 and having a term of not more than one year,
(xii) make, or commit to make, any loan or other extension of credit to any UBT
or Subsidiary director, officer or employee, except in accordance with a
practice or policy in effect as of the date of the Merger
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Agreement, (xiii) grant any general or uniform increase in pay and benefits for
employees outside the ordinary course of business consistent with prior
practice, (xiv) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or liabilities, except in the ordinary course and consistent with prior
practice or as required by an existing contract, (xv) make its credit
underwriting policies, standards or practices relating to the making of loans
and other extension of credit, less stringent than those in effect on August
30, 1994, (xvi) except in connection with budgeted capital expenditures or the
pending opening of a branch office, make any capital expenditures, or
commitments with respect thereto, except those in the ordinary course of
business which do not exceed $250,000 in the aggregate, (xvii) renew or extend
any existing employment contract, enter into any new employment contract or
make special or extraordinary payments to any person, without the prior written
consent of Comerica, (xviii) make any material investments, by purchase of
stock or securities or by capital contribution, in any other individual,
corporation, or other entity, except in the ordinary course of business
consistent with prior practice, (xix) except as otherwise required to correct a
prior filing, compromise or settle any assertion or claim of a deficiency in
taxes or file any appeal from an asserted deficiency except in a form
previously approved by Comerica, or make any tax election or change any method
or period of accounting unless required by generally accepted accounting
principles or law, (xx) terminate any employee plan or benefit arrangement,
except as anticipated under the Merger Agreement, (xxi) change its fiscal year
or methods of accounting, except as required by changes in generally accepted
accounting principles, (xxi) take any action which would disqualify the Merger
as a tax-free "reorganization" for tax purposes, and (xxii) take or cause to be
acquired any real estate interest without an environmental assessment thereof
and the written consent of Comerica and Interim.
Comerica has agreed to use commercially reasonable efforts to
expeditiously satisfy the conditions to the Merger specified in the Merger
Agreement, refrain from any action that would or might result in any of its
representations and warranties under the Merger Agreement becoming untrue,
except to the extent such actions are required by any applicable law,
regulation, or at the direction of any regulatory authority, and to refrain
from any action that would disqualify the UBT Merger as a "reorganization"
within the meaning of Section 368(a) of the IRC.
CONDITIONS TO THE MERGER
Conditions in favor of Comerica, Interim, and UBT. Each of
Comerica's, Interim's and UBT's, obligation to effect the Merger is subject to
the following conditions:
(i) the Merger Agreement, the Subsidiary Merger Agreement and the
Merger shall have been validly ratified and confirmed or authorized by
the holders of a majority of the outstanding UBT Common Stock entitled
to vote;
(ii) all material permits, approvals, and consents required to be
obtained, and all waiting periods required to expire, prior to the
consummation of the Merger under applicable federal laws of the United
States or applicable laws of any state having jurisdiction over the
Merger shall have been obtained or expired, as the case may be (all
such permits, approvals, and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory
Approvals"), without the imposition of any condition which is
materially burdensome upon UBT, Comerica, Interim, their respective
affiliates, or the surviving corporation;
(iii) no action shall have been taken, nor any statute, rule,
regulation, or order enacted, entered, enforced or deemed applicable
to the Merger, by any governmental entity which: (a) makes the
consummation of the Merger illegal; (b) requires the divestiture by
Comerica of any material subsidiary or of a material portion of the
business of Comerica on a consolidated basis; or (c) imposes any
condition upon Comerica, Interim or their subsidiaries (other than
general provisions of law applicable to all banks and bank holding
companies) which in the reasonable judgment of Comerica and Interim
would be materially burdensome, to Comerica and Interim;
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(iv) the Registration Statement on Form S-4 of which this Proxy
Statement/Prospectus forms a part shall have become effective under
the Securities Act and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and shall remain in
effect and no legal, administrative, arbitration, investigatory, or
other proceeding by any governmental entity shall have been instituted
and, at what would otherwise have been the Effective Time, remain
pending by or before any governmental entity to restrain or prohibit
the transactions contemplated by the Merger Agreement;
(v) the shares of Comerica Common Stock deliverable pursuant to
the Merger Agreement shall have been duly authorized for listing,
subject to notice of issuance, on the NYSE;
(vi) Comerica and UBT shall have received an opinion from counsel
to Comerica dated the Effective Time, subject to assumptions and
exceptions normally included and in form and substance reasonably
satisfactory to Comerica and UBT, to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the IRC and that Comerica, Interim,
and UBT will each be a party to that reorganization within the meaning
of Section 368(b) of the IRC (See "THE MERGER -- Certain Federal
Income Tax Consequences"); and
(vii) Comerica and UBT shall have received from each of Ernst & Young
and KPMG Peat Marwick, LLP letters, dated the effective date of the
Registration Statement on Form S-4 and the Effective Time, in form and
substance satisfactory to Comerica and UBT and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement.
Conditions in favor of Comerica and Interim. The obligations of
Comerica and Interim to effect the Merger are subject to the fulfillment of the
conditions specified in the Merger Agreement, including, but not limited to,
the following:
(i) except as otherwise provided in this paragraph (i), (a) the
representations and warranties of UBT contained in the Merger
Agreement shall be true in all material respects as of the Effective
Time as though made at and as of the Effective Time except to the
extent they expressly refer to an earlier time and, except where the
failure to be true, individually or in the aggregate, would not have
or would not be reasonably likely to have, a material adverse effect
on UBT or upon the consummation of the transactions contemplated by
the Merger Agreement; (b) UBT shall have duly performed and complied
in all material respects with all agreements and covenants required by
the Merger Agreement to be performed or complied with by them prior to
or at the Effective Time, except where the failure to so perform and
comply, individually or in the aggregate, would not have or would not
be reasonably likely to have, a material adverse effect on UBT or upon
the consummation of the transactions contemplated by the Merger
Agreement; (c) none of the events or conditions entitling Comerica to
terminate the Merger Agreement shall have occurred and be continuing;
and (d) UBT shall have delivered to Comerica a certificate dated the
date of the Effective Time and signed by its Chief Executive Officer
to the effect set forth in the clauses (a), (b) and (c) of this
paragraph (i);
(ii) any consent required for the consummation of the Merger under
any agreement, contract, or license to which UBT is a party or by or
under which it is bound or licensed, the withholding of which might
have a material adverse effect on Comerica or UBT, shall have been
obtained;
(iii) Comerica shall have received the closing schedules to the
Merger Agreement (the "Closing Schedules"), and the Closing Schedules
shall not reflect any item that was not on the schedules delivered
with the execution copy of the Merger Agreement that would have, or
would be reasonably likely to have, a material adverse effect on UBT
or upon the consummation of the Merger;
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(iv) UBT's reserve for possible loan losses on the determination
sale shall be at least the greater of $4,700,000 or 2.25% of UBT's
total loans outstanding on that date. UBT provided, however, that
this condition shall be met (a) to the extent loan losses are reduced
from the date of the Merger Agreement by the actual charge-off of
loans that are specified in the Loan Loss Allocation Report; or (b) to
the extent the allowance for loan loss reserves are reduced from the
date of the Merger Agreement by the actual charge-off of loans where
such charge-off specifically has been provided for since June 30, 1994
by an appropriate charge to earnings;
(v) UBT's non-performing assets (including Other Real Estate Owned
and in Substance Foreclosures) outstanding on the last day of the
month immediately preceding the Effective Time shall be no more than
$4,711,431;
(vi) between the date of the Merger Agreement and the Effective
Time, no event or circumstance shall have occurred which had a
Material Adverse Effect on UBT or its Subsidiaries and Comerica and
Interim shall have received a certificate signed on behalf of UBT by
UBT's Chief Executive Officer to such effect;
(vii) Comerica shall have received a letter from KPMG Peat Marwick,
LLP dated the Effective Time, after customary review but without
audit, in form and substance satisfactory to Comerica containing the
certifications required by the Merger Agreement (i) certifying that
the conditions set forth in paragraphs (iv) and (v) above have been
satisfied and (ii) setting forth, as of the Business Day immediately
prior to the Closing Date, (A) UBT Consolidated Net Worth, (B) Fully
Diluted UBT Common Stock, (C) UBT's reserve for possible loan losses,
and (D) the amount of UBT's non performing assets;
(viii) Comerica shall have received from its legal counsel an opinion
regarding the Proxy Statement/Prospectus;
(ix) Comerica shall have received from legal counsel to UBT, an
opinion dated the Effective Time as to securities and corporate
matters on form and substance customary for transactions of this
nature and reasonably satisfactory to Comerica;
(x) counsel for Comerica shall have approved, in the exercise of
counsel's reasonable discretion, 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 Comerica under the Merger Agreement or that are
reasonably requested by such counsel;
(xi) the sale of the Comerica Common Stock resulting from the
Merger shall have been qualified or registered with the appropriate
State securities law regulatory authorities of all States in which
qualification or registration is required and such qualifications or
registrations shall not have been suspended or revoked;
(xii) UBT shall have delivered to Comerica not later than 30 days
prior to the date of Registration Statement on Form S-4 becomes
effective, all of the executed Affiliate Agreements in the form
attached as an exhibit to the Merger Agreement (see "Resales by
Affiliates" below);
(xiii) Comerica shall have received from each of KPMG Peat Marwick,
LLP and Ernst & Young letters, dated the effective date of the
Registration Statement, the date of the meeting of UBT's shareholders
in connection with this Agreement and the Effective Time, in form and
substance satisfactory to Comerica and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement;
(xiv) Comerica shall have received from Ernst & Young an opinion,
dated the date of the Effective Time, in form and substance
satisfactory to Comerica, to the effect that the Merger on the terms
and
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conditions contained in the Merger Agreement and in the Subsidiary
Merger Agreement will be treated for accounting purposes as a pooling
of interests;
(xv) Comerica shall have received a non-competition agreement from
Carl J. Schmitt in substantially the form attached to the Merger
Agreement;
(xvi) The total number of shares of Comerica Common Stock that shall
be issuable pursuant to the terms of the Merger Agreement under any
computation shall not be greater than 2,680,820 shares, subject to
adjustment as appropriate to reflect any recapitalization,
reorganization, reclassification, split-up, merger, consolidation,
exchange, stock or other dividend or distribution (other than regular
quarterly cash dividends) made, declared or effective with respect to
the Comerica Common Stock between the date of the Merger Agreement and
the Effective Time;
(xvii) Comerica shall have received the environmental site
assessments (the "Site Assessments") provided for in the Merger
Agreement, unless Comerica shall have waived its right to conduct such
assessment, and, except as disclosed, such Site Assessments shall not
have disclosed any environmental condition which would be reasonably
likely to have a Material Adverse Effect on real property owned,
controlled or used by UBT;
(xviii) UBT nor any of its Subsidiaries shall be subject to any
memorandum of understanding, cease and desist order, or other
agreement with any governmental entity restricting the conduct of UBT
and its Subsidiaries' business, prospects and operations, so as to
have a Material Adverse Effect, other than those agreements described
in schedule 3.10 to the Merger Agreement as of the date of the
execution of the Merger Agreement; and
(xix) UBT's director-stockholders shall have delivered to Comerica
not later than ten Business Days from the date of the Merger Agreement
the Shareholder Agreements in the form attached to the Merger
Agreement. See "Shareholder Agreements" below.
Conditions in favor of UBT. The obligation of UBT to effect the
Merger shall be subject to the fulfillment of the conditions specified in the
Merger Agreement, including, without limitation, the following:
(i) except as otherwise provided in this paragraph (i), (a) the
representations and warranties of Comerica and Interim contained in
the Merger Agreement shall be true in all material respects as of the
Effective Time as though made at the Effective Time, except to the
extent they expressly refer to an earlier time and except where the
failure to be true, individually or in the aggregate, would not have
or would not be reasonably likely to have, a Material Adverse Effect
on Comerica or Interim or upon the consummation of the transactions
contemplated hereby; (b) Comerica and Interim shall have duly
performed and complied in all material respects with all agreements
and covenants required by the Merger Agreement to be performed or
complied with by them prior to or at the Effective Time, except where
the failure to so perform and comply, individually or in the
aggregate, would not have or would not be reasonably likely to have, a
Material Adverse Effect on Comerica or Interim or upon the
consummation of the transactions contemplated in the Merger Agreement;
(c) none of the events or conditions entitling UBT to terminate the
Merger Agreement shall have occurred and be continuing; and (d)
Comerica and Interim shall have delivered to UBT a certificate dated
the date of the Effective Time and signed by a duly authorized officer
to the effect set forth in clauses (a), (b) and (c) of this paragraph
(i);
(ii) prior to the mailing of this Proxy Statement/ Prospectus to
the stockholders of UBT, UBT shall have received an opinion of Goldman
Sachs, dated the date of this Proxy Statement/Prospectus, to the
effect that, as of such date, the UBT Conversion Rate is fair to the
stockholders of UBT from a financial point of view;
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(iii) counsel for UBT shall have approved, in the exercise of
counsel's reasonable discretion, 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 UBT under the Merger Agreement or reasonably requested
by such counsel;
(iv) there shall not have been any change in the consolidated
financial condition, aggregate net assets, stockholders' equity,
business, or operating results of Comerica and its subsidiaries taken
as a whole, from January 1, 1994 to the Effective Time that results in
a Material Adverse Effect on the consolidated financial condition,
aggregate net assets, shareholders' equity, business operating results
of Comerica and its Subsidiaries taken as a whole;
(v) any consent required for the consummation of the Merger under
any agreement, contract or license to which Comerica or Interim is a
party or by or under which either of them is bound or licensed, the
withholding of which might have a Material Adverse Effect on Comerica
or UBT or the transactions contemplated by the Merger Agreement shall
have been obtained; and
(vi) UBT shall have received from legal counsel to Comerica and
Interim an opinion dated the Effective Time as to securities and
corporate matters in form and substance customary for transactions
contemplated by the Merger Agreement and reasonably satisfactory to
UBT.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of UBT: (a) by
mutual consent of the Boards of Directors of UBT, Interim and Comerica; (b) by
any of Comerica, UBT or Interim upon the failure to satisfy any conditions to
all parties' obligations to close specified in the Merger Agreement if such
failure is not caused by any action or inaction of the party requesting
termination of the Agreement; (c) by any of UBT, Interim or Comerica if the
Effective Time shall not have occurred by the close of business on August 31,
1995 provided such failure is not caused by a breach of the Merger Agreement by
the terminating party; (d) by Comerica if an Acquisition Event shall have
occurred; (e) by any of UBT, Interim or Comerica if there shall have been a
material breach of any of the representations or warranties set forth in the
Merger Agreement on the part of the other party, which breach in the reasonable
opinion of the non-breaching party by its nature cannot be cured prior to the
closing and which breach would, in the reasonable opinion of the non-breaching
party, individually or in the aggregate, have, or be reasonably likely to have,
a material adverse effect on the breaching party or upon the consummation of
the transactions contemplated in the Merger Agreement; (f) by UBT, Comerica or
Interim if the Merger Agreement, the Subsidiary Merger Agreement and the Merger
are not ratified and approved by UBT's shareholders; (g) by UBT after the
occurrence of a default by Comerica or Interim and the continuance of such
failure for a period of 20 business days after written notice of such default,
which failure to perform, in the reasonable opinion of UBT cannot be cured
prior to closing; (h) by Comerica or Interim after the occurrence of a default
by UBT and the continuance of such failure for a period of 20 business days
after written notice of such default, which failure to perform, in the
reasonable opinion of Comerica and Interim cannot be cured prior to closing;
(i) by Comerica and Interim if any environmental site assessment provided for
in the Merger Agreement discloses any environmental condition which would be
reasonably likely to have a material adverse effect on the property which is
the subject thereof; (j) by Comerica if the UBT Board of Directors does not
publicly recommend in this Proxy Statement/Prospectus that UBT's stockholders
approve and adopt the Merger Agreement, or if after recommending in this Proxy
Statement/Prospectus that stockholders ratify and confirm the Merger Agreement,
the UBT Board of Directors shall have withdrawn, modified or amended such
recommendations in any respect materially adverse to Comerica; (k) by UBT upon
the failure of Comerica or Interim to satisfy any conditions to UBT's
obligations to close specified in the Merger Agreement; and (l) by Comerica and
Interim upon the failure of UBT to satisfy any conditions to Comerica's
obligation to close specified in the Merger Agreement.
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LIQUIDATED DAMAGES; CANCELLATION FEE
The Merger Agreement provides that, in the event an Acquisition Event
shall occur or (i) any of UBT, Comerica or Interim terminates the Merger
Agreement because the Subsidiary Merger Agreement and the Merger are not
ratified by UBT's shareholders, (ii) any of UBT, Comerica or Interim terminates
the Merger Agreement because there shall have been a material breach of any of
the representations or warranties set forth in the Merger Agreement on the part
of the other party, (iii) Comerica terminates the Merger Agreement because
there is a default by UBT, pursuant to the Merger Agreement and the continuance
of such failure for a period of 20 Business Days after written notice, which
failure to perform, in the reasonable opinion of Comerica and Interim cannot be
cured prior to the closing, or (iv) Comerica terminates the Agreement because
the UBT Board did not publicly recommend in this Proxy Statement/Prospectus
that UBT stockholders adopt and approve the Merger Agreement or shall withdraw,
modify or amend such recommendation in any respect materially adverse to
Comerica followed by an Acquisition Event within 90 days of such termination,
UBT shall pay to Comerica, as reasonable and full liquidated damages and
reasonable compensation for the loss sustained thereby and not as a penalty or
forfeiture, the sum of $3,200,000, within ten (10) business days following such
occurrence. For the purposes of the Merger Agreement, an Acquisition Event is
defined generally to mean (a) that UBT has authorized, recommended, publicly
proposed or publicly announced an intention to authorize, recommend or propose,
or entered into an agreement to effect the following: a merger, consolidation
or similar transaction involving UBT or any of its subsidiaries; the
disposition of assets of UBT or any of its subsidiaries representing 15% or
more of the consolidated assets of UBT and its subsidiaries; or the issuance,
sale or other disposition of securities representing 10% or more of the voting
power of UBT or any of its subsidiaries, other than securities issued pursuant
to the Stock Option Agreement, (b) the acquisitions of the beneficial ownership
or the right to acquire beneficial ownership by any person or group of persons
(as the term "beneficial ownership" is defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of 15% of the outstanding UBT Common Stock;
or (c) the occurrence of any of the events described in the foregoing clause
(a) within 180 days after the termination of the Merger Agreement by Comerica
upon the failure of any of the conditions described above under "THE MERGER
AGREEMENT" --- Conditions to the Merger -- "Conditions in favor of Comerica
and Interim" under items (i), (ii), (iii), (iv), (v), (vi), (vii), (ix),
(xii), (xiii) and (xviii) where such failure shall have been caused in whole
or in part by any action or inaction within the control of UBT, or any
Subsidiary of UBT or the directors of any of UBT or UBT's Subsidiaries.
The Merger Agreement provides that, in the event of termination by UBT
of this Agreement because Interim or Comerica has breached any of their
representations and warranties set forth in the Merger Agreement and in the
reasonable opinion of UBT such breach cannot be cured prior to closing and
would have a Material Adverse Effect on Interim or Comerica or because of a
default by Comerica or Interim pursuant to the Merger Agreement and the
continuance of such failure for a period of 20 Business Days after written
notice of such default, in the reasonable opinion of UBT, cannot be cured prior
to the closing, then Comerica and Interim, jointly and severally, shall pay to
UBT as reasonable and full liquidated damages and reasonable compensation for
the loss sustained thereby and not as a penalty or forfeiture, the sum of
$2,000,000, within ten (10) Business Days following such occurrence.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring the same; provided,
however, that Comerica will file on a timely basis the reports required by Rule
144(c) of the Securities Act. UBT's expenses incurred in connection with the
Merger Agreement and the transactions contemplated therein, including
attorneys', accountants', investment bankers' and any other fees, collectively
shall not exceed the sum of $1,500,000 without the prior written consent of
Comerica which shall not be unreasonably withheld.
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SHAREHOLDER AGREEMENTS
As noted above in item (xix) under the caption "Conditions to the
Merger -- Conditions in favor of Comerica and Interim," the Merger is
conditioned upon delivery by each of the UBT director-stockholders of a
Shareholder Agreement, the form of which is prescribed by the Merger Agreement.
The Shareholder Agreement obligates each of the members of the UBT Board of
Directors who own shares of UBT Common Stock to vote those shares, as well as
any other shares of UBT Common Stock over which any such director exercises
voting power, in favor of the Merger at any stockholder meeting or in
connection with any solicitation of stockholder written consent occurring prior
to August 31, 1995, subject to fiduciary obligations. Pursuant to the
Shareholder Agreement, each director-stockholder also agrees not to pledge or
otherwise encumber, or to sell, assign or otherwise dispose of, any of such
director-stockholder UBT Common Stock, or enter into any agreement to do any of
the foregoing, until (i) adjournment of the special meeting of UBT stockholders
called to approve the Merger, (ii) termination of the Merger Agreement in
accordance with its terms, or (iii) August 31, 1995, except with Comerica's
prior written consent or pursuant to the Merger. Finally, the Shareholder
Agreement obligates each director-stockholder not to directly or indirectly
solicit or initiate any inquiries, proposals or offers from any person or
entity other than Comerica or an affiliate of Comerica, or vote in favor of,
any proposal or transaction for disposition of, the business or assets of UBT
or any of its subsidiaries, the acquisition of the securities of UBT or any
such subsidiary, or any business combination other than with Comerica or one of
its affiliates.
RESALES BY AFFILIATES
Pursuant to the terms of the Merger Agreement, certain persons
believed by UBT to be "affiliates" (as defined in Rule 144 of the Securities
Act of 1933) of UBT have entered into an "Affiliate's Agreement." The
Affiliate's Agreement generally provides that affiliates of UBT may not sell or
otherwise dispose of (a) any shares of UBT Common Stock currently owned by them
or any shares of Comerica Common Stock received pursuant to the Merger, for a
period beginning not less than thirty days prior to the consummation of the
Merger and ending on the date that Comerica publishes financial results
covering a period of at least thirty days of combined operations of UBT and
Comerica following the consummation of the Merger (except that such affiliates
may exchange their shares of UBT Common Stock for shares of Comerica Common
Stock in the Merger), or (b) any shares of Comerica Common Stock received
pursuant to the Merger or any securities that may be distributed with respect
thereto or issued in exchange or substitution therefor (collectively, the
"Restricted Securities"), or any option, right or other interest with respect
to any Restricted Securities, unless such sale or other disposition is effected
(i) pursuant to an exemption from the registration requirements of the
Securities Act, or (ii) pursuant to an effective registration statement under
the Securities Act. Notwithstanding the foregoing, affiliates may make bona
fide gifts of such shares of Comerica Common Stock so long as the recipients
thereof agree not to sell or otherwise dispose of the Comerica Common Stock
except as provided in the Affiliate's Agreement. Because the Merger is
currently expected to qualify as a purchase for accounting and financial
reporting purposes, affiliates may be relieved from certain restrictions in the
Affiliate's Agreement which relate to treatment of the Merger as a pooling of
interests for accounting purposes.
AMENDMENT AND WAIVER
Subject to applicable law, (i) the Merger Agreement may be amended by
action taken or authorized by the respective boards of directors of Comerica,
Interim and UBT, as the case may be, or the duly authorized committees thereof,
at any time before or after approval by the stockholders of UBT; provided,
however, that after any such approval by the stockholders, no amendment shall
be made which by law requires further approval by such stockholders without
such further approval; and (ii) any term or provision of the Merger Agreement
may be waived in writing at any time by the party which is entitled to the
benefits of the specific term or provision Neither Comerica nor UBT has
determined under what circumstances it would waive any of the terms and
provisions of the Merger Agreement.
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THE STOCK OPTION AGREEMENT
The following is a brief summary of certain provisions of the Stock
Option Agreement, dated as of October 4, 1994, between UBT and Comerica, which
is attached hereto as Annex E. The following summary is qualified in its
entirety by reference to the Stock Option Agreement.
Under the Stock Option Agreement, UBT has granted to Comerica an
irrevocable option to purchase up to 137,718 shares of UBT Common Stock at a
per share exercise price equal to $38.50, which was calculated on the basis of
the average of the closing prices for UBT Common Stock on the NASDAQ National
Market System for the seven trading days ending on the date of the Stock Option
Agreement.
The option is exercisable only upon the occurrence of one of the
following events (each a "Purchase Event"):
(a) UBT fails to publicly oppose a Tender Offer or an
Exchange Offer (as defined below) or authorizes, recommends, publicly
proposes or publicly announces an intention to authorize, recommend or
propose, or enters into an agreement with any person (other than
Comerica or any of its subsidiaries) to (i) effect a merger,
consolidation or similar transaction involving UBT or any of its
subsidiaries (other than internal mergers, reorganizations,
consolidations or dissolutions involving only existing subsidiaries),
(ii) except as permitted in the Merger Agreement, sell, lease,
exchange or otherwise dispose of 15% or more of the consolidated
assets of UBT and its subsidiaries, or (iii) issue, sell or otherwise
dispose of (including by merger, consolidation, share exchange or
similar transaction) securities representing 10% or more of the voting
power of UBT or any of its subsidiaries (any of the foregoing an
"Acquisition Transaction"); or
(b) any person (other than Comerica or its subsidiaries)
shall have acquired beneficial ownership (as defined under the
Exchange Act) of or the right to acquire beneficial ownership of, or
any group (as defined in the Exchange Act) shall have been formed
which beneficially owns or has the right to acquire beneficial
ownership of 15% or more of the outstanding common stock of UBT.
The option will terminate upon the earliest to occur of (i) the moment
in time which is immediately prior to the Effective Time, (ii) 12 months after
the first occurrence of a Purchase Event, (iii) 18 months after the termination
of the Merger Agreement following the occurrence of a Preliminary Purchase
Event (as defined below), (iv) termination of the Merger Agreement in
accordance with the terms thereof prior to the occurrence of a Purchase Event
or a Preliminary Purchase Event (other than a termination by Comerica if the
Merger Agreement, the subsidiary Merger Agreement and the merger are not
ratified and approved by UBT's shareholder's company or by Comerica and UBT
upon the mutual consent of their Board of Directors if UBT at that time was
entitled to terminate the merger because the Merger Agreement, the Subsidiary
Merger Agreement and the Merger were not ratified by UBT's shareholders, or (v)
12 months after the termination of the Merger Agreement by Comerica if the
Merger Agreement, the Subsidiary Merger Agreement and the Merger are not
ratified and approved by UBT's shareholder's company or by Comerica and UBT
upon the mutual consent of their Board of Directors if UBT at that time was
entitled to terminate the merger because the Merger Agreement, the Subsidiary
Merger Agreement and the Merger whereas not ratified by UBT's shareholders
(provided, however, that if within 12 months after such termination of the
Merger Agreement a Purchase Event or Preliminary Purchase Event occurs, then
the option will terminate 12 months after the first occurrence of such event).
The closing of a purchase of shares pursuant to the Stock Option Agreement is
subject to the obtaining of all necessary governmental approvals.
For purposes of the Stock Option Agreement, each of the following
events is a "Preliminary Purchase Event":
(a) any person (other than Comerica or any of its
subsidiaries) shall have commenced (as defined in the Exchange Act),
or shall have filed a registration statement under the Securities Act
with
72
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respect to, a tender offer or exchange offer for shares of UBT'S
Common Stock which, upon consummation of such offer, would result in
such person owning or controlling 15% or more of the outstanding
common stock of UBT (such an offer being referred to as a "Tender
Offer" or an "Exchange Offer," respectively);
(b) the stockholders of UBT shall not have approved the
Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have
been held or shall have been canceled prior to termination of the
Merger Agreement or the Board of Directors of UBT shall have withdrawn
or modified in a manner adverse to Comerica the recommendation of such
Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other
than Comerica or any subsidiary of Comerica) shall have (i) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, or (ii) commenced a Tender Offer or filed a registration
statement under the Securities Act with respect to an Exchange Offer.
The number and type of securities subject to the option and the
purchase price of shares will be adjusted for any change in the UBT's Common
Stock by reason of a stock dividend, stock split, split up, recapitalization,
combination, exchange of shares or similar transaction, such that Comerica will
receive (upon exercise of the option) the same number and type of securities as
if the option had been exercised immediately prior to the occurrence of such
event (or the record date therefor). The number of shares of UBT Common Stock
subject to the option will also be adjusted in the event that UBT issues
additional shares of common stock such that the number of shares of common
stock subject to the option, together with shares previously purchased pursuant
thereto, represents 9.9% of UBT's Common Stock then issued and outstanding,
without giving effect to shares subject to or issued pursuant to the option.
In the event that UBT enters into any agreement (i) to merge or
consolidate with any person other than Comerica or one of its subsidiaries such
that UBT is not the surviving corporation, (ii) to permit any person, other
than Comerica or one of its subsidiaries, to merge into UBT and UBT is the
surviving corporation, but, in connection with such merger, the outstanding
shares of UBT's Common Stock are changed into or exchanged for stock or other
securities of UBT or any other person or cash or any other property or the
outstanding shares of UBT's Common Stock prior to such merger shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person other than Comerica or one of its
subsidiaries, then, and in each such case, the agreement governing the
transaction must provide that, upon consummation of the transaction, the option
will be converted into or exchanged for an option (the "Substitute Option") to
purchase securities of either the acquiring person, a person that controls the
acquiring person or UBT (if UBT is the surviving entity), in all cases in the
option of Comerica. The number of shares for which the Substitute Option will
be exercisable and the exercise price applicable thereto will be determined in
accordance with Sections 7(c) and 7(d) of the Stock Option Agreement.
As described above under "Stock Option Agreement," the Stock Option
Agreement may discourage competing offers for UBT and is intended to increase
the likelihood that the Merger is consummated in accordance with the terms of
the Merger Agreement.
LEGAL MATTERS
The legality of the Comerica Common Stock and associated rights to be
issued in connection with the Merger will be passed upon by Miller, Canfield,
Paddock and Stone, P.L.C., 150 West Jefferson, Suite 2500, Detroit, Michigan
48226.
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EXPERTS
The consolidated financial statements of Comerica incorporated herein
by reference to the Comerica Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, have been audited by Ernst & Young, independent
accountants, which is based in part on the report of KPMG Peat Marwick, LLP for
the year ended December 31, 1994, the predecessor auditors for Comerica, and
have been so incorporated herein in reliance upon such reports, given on the
authority of such firms as experts in auditing and accounting.
The consolidated financial statements of UBT incorporated in this
Proxy Statement/Prospectus by reference from the UBT Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, have been audited by KPMG Peat
Marwick, LLP independent auditors, as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of KPMG Peat Marwick, LLP given upon their authority as experts
in accounting and auditing.
The UBT Board has appointed the firm of KPMG Peat Marwick, LLP,
certified public accountants, as independent auditors for UBT for 1994.
Representatives of KPMG Peat Marwick, LLP are expected to be present at the UBT
Special Meeting. These representatives will have an opportunity to make
statements if they so desire and will be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
UBT will hold a 1995 Annual Stockholders Meeting only if the Merger is
not consummated prior to the time for such meeting designated by the UBT Board
in accordance with the Bylaws of UBT. Should such annual meeting occur, any
UBT stockholder who wishes to present a proposal for inclusion in the proxy
statement for such annual meeting must comply with the rules and regulations of
the Commission then in effect. As disclosed in the UBT Proxy Statement for its
1994 Annual Meeting of Stockholders, any such proposal must have been received
by UBT not later than December 30, 1994.
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ANNEX A
AGREEMENT
AND PLAN OF
REORGANIZATION
AND MERGER
BY AND AMONG
UNIVERSITY BANK & TRUST COMPANY,
COMERICA INTERIM INCORPORATED
AND
COMERICA INCORPORATED
<PAGE> 87
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.2 Effect of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.3 Articles of Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.4 Conversion of INTERIM Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.5 Conversion of UBT Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.6 Conversion of Issued and Outstanding UBT Common Stock. . . . . . . . . . . . . . 10
Section 2.7 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.8 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF UBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.1 Organization; Corporate Power; Etc. . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2 Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4 Authorization of Agreement; No Conflicts. . . . . . . . . . . . . . . . . . . . . 12
Section 3.5 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.6 UBT Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.7 Accuracy of Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.8 Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.10 Agreements with Banking Authorities. . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.12 Title to Assets other than Real Property. . . . . . . . . . . . . . . . . . . . 16
Section 3.13 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.14 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.15 Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.16 Loans and Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.18 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.19 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.20 Absence of Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.21 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.22 Employees; Employee Benefit Plans; ERISA. . . . . . . . . . . . . . . . . . . . . 21
Section 3.23 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.24 [Reserved]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.25 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.26 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.27 Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.28 Interest Rate Risk Management Instruments. . . . . . . . . . . . . . . . . . . . 27
Section 3.29 Disclosure in Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.30 No Actual Knowledge of Misrepresentation or Breach of Warranty. . . . . . . . . 27
</TABLE>
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<TABLE>
<S> <C> <C>
Section 3.31 Effective Date of Representations, Warranties, Covenants and Agreements. . . . . 27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF COMERICA . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.1 Organization; Corporate Power; Etc. . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.2 Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.3 Authorization of Agreement; No Conflicts. . . . . . . . . . . . . . . . . . . . . 28
Section 4.4 Capital Structure of COMERICA. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.5 Formation of INTERIM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.6 COMERICA Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.7 Accuracy of Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.8 Compliance With Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.9 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.10 Agreements with Banking Authorities. . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.11 Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.12 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.13 Absence of Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.14 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.15 Disclosure in Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.16 No Actual Knowledge of Misrepresentation or Breach of Warranty. . . . . . . . . . 33
Section 4.17 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.19 Effective Date of Representations, Warranties, Covenants and Agreements. . . . . 34
ARTICLE 5 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.1 Access to Information, Due Diligence, etc. . . . . . . . . . . . . . . . . . . . 34
Section 5.2 Shareholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.3 Taking of Necessary Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.4 Registration Statement and Applications. . . . . . . . . . . . . . . . . . . . . 36
Section 5.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.6 Notification of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.7 Environmental Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.8 Schedules, Closing Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.9 Indemnification and Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.10 Additional Accruals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 6 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.1 Affirmative Conduct of UBT. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.2 Negative Covenants of UBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.3 Conduct of COMERICA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.1 Conditions to the Parties' Obligations. . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<TABLE>
<S> <C> <C>
Section 7.2 Conditions to COMERICA's and INTERIM's Obligations. . . . . . . . . . . . . . . 47
Section 7.3 Conditions to UBT's Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 8 TERMINATION, AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.2 Effect of Termination; Survival. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.5 Liquidated Damages; Cancellation Fee. . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 9 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.1 Non-Survival of Representations and Warranties. . . . . . . . . . . . . . . . . 54
Section 9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.4 Entire Agreement/No Third Party Rights/Assignment. . . . . . . . . . . . . . . 54
Section 9.5 Non-disclosure of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
<PAGE> 90
INDEX OF EXHIBITS
Exhibit 2.1.1 Form of Subsidiary Merger Agreement
Exhibit 7.2.14 Form of Affiliate's Agreement
Exhibit 7.2.17 Form Covenant Not to Compete
Exhibit 7.2.21 Form of Shareholder's Agreement
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER is entered into
as of October 4, 1994 by and among UNIVERSITY BANK & TRUST COMPANY, a
California bank ("UBT"), COMERICA INTERIM INCORPORATED, a California
corporation to be created by COMERICA ("INTERIM") and COMERICA INCORPORATED, a
Delaware corporation and bank holding company ("COMERICA").
W I T N E S S E T H:
WHEREAS the respective Boards of Directors of UBT and COMERICA have
determined that it is in the best interests of UBT and COMERICA and their
respective businesses and stockholders for UBT to be merged with INTERIM, a
California corporation and wholly- owned subsidiary of COMERICA to be formed
after the date of this Agreement, upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the California Corporations
Code, the California Financial Code and other applicable laws; and
WHEREAS each of the Boards of Directors of UBT and COMERICA has
approved this Agreement and the transactions contemplated hereby; and
WHEREAS UBT's Board of Directors has resolved to recommend approval of
the merger of UBT and INTERIM to its shareholders:
NOW, THEREFORE, in consideration of these premises and the
representations, warranties and agreements herein contained, UBT and COMERICA
hereby agree as follows:
ARTICLE 1 DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"Acquisition Event" shall mean any of the following:
(a) UBT shall have authorized, recommended, publicly proposed or
publicly announced an intention to authorize, recommend or propose, or entered
into an agreement with any Person (other than COMERICA or any Subsidiary of
COMERICA) to effect an Acquisition Transaction or failed to publicly oppose a
Tender Offer or an Exchange Offer (as defined below). As used herein, the term
Acquisition Transaction shall mean (A) a merger, consolidation or similar
transaction involving UBT or any of its Subsidiaries (other than internal
mergers, reorganizations, consolidations or dissolutions involving only
existing Subsidiaries), (B) the disposition, by sale, lease, exchange or
otherwise, of assets of UBT or any of its Subsidiaries representing 15% or more
of the consolidated assets of UBT and its Subsidiaries or (C) the issuance,
sale or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 10% or more of the
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voting power of UBT or any of its Subsidiaries, other than securities issued
pursuant to the Stock Option Agreement; or
(b) any Person (other than COMERICA or any Subsidiary of COMERICA)
shall have acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of 15% or more of the then outstanding shares of UBT
Common Stock; or
(c) the occurrence of any of the events described in subsection (a) of
this paragraph within a period of 180 days following the termination of this
Agreement by COMERICA pursuant to Sections 8.1.4, 8.1.5, 8.1.6, 8.1.8 or 8.1.11
or by COMERICA pursuant to Section 8.1.13 solely by reason of the failure of
the conditions set forth in Sections 7.2.1, 7.2.2, 7.2.3, 7.2.5, 7.2.6, 7.2.7,
7.2.8, 7.2.10, 7.2.11, 7.2.14, 7.2.15 or 7.2.20 to be satisfied where such
failure shall have been caused in whole or in part by any action or inaction
within the control of UBT, any Subsidiary of UBT or the directors of any of UBT
or UBT's Subsidiaries (it being understood that any action or inaction outside
of the control of UBT or UBT's Subsidiaries, such as, by way of example only,
the filing of a lawsuit against them, shall not come within this subsection (c)
of this paragraph).
"Acquisition Proposal" shall have the meaning given such term in
Section 6.2.5.
"Affiliate" or "affiliate" shall mean, with respect to any other
Person, any Person that, directly or indirectly, controls or is controlled by
or is under common control with such Person.
"Agreement Date COMERICA Shares" shall mean the result of a fraction,
the numerator of which is $76,961,840 and the denominator of which is the
Agreement Date COMERICA Share Price; provided, however, that such numerator
shall be reduced by $1 for each $1 that the UBT Consolidated Net Worth at the
Effective Time is less than the sum of $34,200,000 plus the Pre-Closing Income
Amount.
"Agreement Date COMERICA Share Price shall mean $28.7083.
"Benefit Arrangement" shall have the meaning given such term in
Section 3.22.4.
"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.
"Business Day" shall mean any day, other than a Saturday, Sunday or
legal holiday, on which California state banks are open for substantially all
their banking business in California.
"Classified Credits" shall have the meaning given such term in Section
6.1.16.
"Closing" shall have the meaning given such term in Section 2.1.
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"Closing Date" shall have the meaning given such term in Section 2.1.
"Closing Schedules" shall have the meaning given such term in Section
5.8.
"COMERICA" shall have the meaning set forth in the preamble to this
Agreement.
"COMERICA Common Stock" shall mean the Common Stock, $5.00 par value
per share, of COMERICA.
"COMERICA Filings" shall have the meaning given such term in Section
4.6.1.
"COMERICA Financial Statements" shall mean the financial statements of
COMERICA that were filed on SEC Form 10-K for the year ended December 31, 1993
and the unaudited financial statements filed on SEC Form 10-Q for the quarters
ended March 31, 1994 and June 30, 1994.
"COMERICA SEC Documents" shall have the meaning set forth in Section
4.6.2.
"Conversion Rate" shall mean the result of a fraction, the numerator
of which is the Agreement Date COMERICA Shares, as adjusted and determined at
the Effective Time, and the denominator of which is Fully Diluted UBT Common
Stock at the Effective Time.
"Covered Loan" shall have the meaning given such term in Section 3.16.
"Deemed COMERICA Shares" shall have the meaning given such term in
Section 2.5.1.
"Default" shall mean, as to any party to this Agreement, a failure by
such party to perform, in any material respect, any of the agreements or
covenants provided by Articles 5 or 6.
"Determination Date" shall mean the fifth Business Day before the date
on which the Effective Time occurs.
"Disclosed Matters" shall have the meaning given such term in Section
5.7.
"Effective Time" shall have the meaning given such term in Section 2.1.
"Employee Plan" shall have the meaning given such term in Section
3.22.3.
"Environmental Laws" shall mean and include any and all laws,
statutes, ordinances, rules, regulations, orders, or determinations of any
Governmental Entity pertaining to health or to the environment, including,
without limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Federal Water Pollution Control Act Amendments, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the
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Hazardous Materials Transportation Act of 1975, as amended, the Safe Drinking
Water Act, as amended, and the Toxic Substances Control Act, as amended.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean Norwest Bank, Minnesota, National
Association, or such other Person as COMERICA shall have appointed to perform
the duties set forth in Section 2.8.
"Exchange Offer" shall mean the commencement (as such term is defined
in Rule 14d-2 under the Exchange Act) of an exchange offer or the filing by any
person of a registration statement under the Securities Act with respect to, an
exchange offer to purchase any shares of UBT Common Stock such that, upon
consummation of such offer, such person would own or control 15% or more of the
then outstanding shares of UBT Common Stock.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
"Fully Diluted UBT Common Stock" shall mean the sum of the total
number of shares of UBT Common Stock outstanding on the Closing Date assuming
the exercise of all of the UBT Stock Options and any other options or other
rights in or for UBT Common Stock other than the options contemplated by the
Stock Option Agreement.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles consistently applied.
"Governmental Entity" shall mean any court, federal, state, local or
foreign government or any administrative agency or commission or other
governmental authority or instrumentality whatsoever.
"Hazardous Substances" shall have the meaning given such term in
Section 3.26.5.
"Intellectual Property" shall have the meaning given such term in
Section 3.25.
"INTERIM" shall have the meaning set forth in the preamble to this
Agreement.
"IRC" shall mean the Internal Revenue Code of 1986, as amended.
"Knowledge" shall mean, with respect to any representation or warranty
contained in this Agreement: (1) as to COMERICA, the actual knowledge, after
due inquiry, of any executive officer or director of either COMERICA and (2) as
to UBT, the actual knowledge, after due inquiry, of any:
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(i) director; or (ii) executive officer, one of whom shall be the person within
UBT who has principal responsibility for regulatory and compliance matters.
"Last Regulatory Approval" shall mean the final Requisite Regulatory
Approval required from any Governmental Entity under applicable federal laws of
the United States and laws of any state having jurisdiction over the Merger for
the Merger to be consummated.
"Material Adverse Effect" shall mean a material adverse effect: (i) on
the business, assets, results of operations or financial condition of a Person
and its subsidiaries, if any, taken as a whole (unless specifically indicated
otherwise); or (ii) on the ability of a party to perform its obligations under
this Agreement or to consummate the transactions contemplated by this
Agreement.
"Merger" shall have the meaning set forth in Section 2.1.
"New Certificates" shall have the meaning given such term in Section
2.8.1.
"Non-Performing Assets" shall mean the sum of the book value, as of
the applicable date, of UBT's (i) loans 90 days past due as to either
principal or interest, (ii) loans on which interest is or should be recognized
only upon receipt, (iii) loans on which interest is being or has been
renegotiated to lower than market rates due to the adverse financial condition
of the borrower, and (iv) other real estate owned.
"Person" or "person" shall mean an individual, corporation,
partnership, joint venture, trust or unincorporated organization, Governmental
Entity or any other legal entity whatsoever.
"Pre-Closing Income Amount" shall mean the product obtained by
multiplying $460,000 by the number of whole and fractional months beginning
with September 1, 1994 and ending on the Closing Date.
"Property" shall have the meaning given such term in Section 3.26.1.
"Proxy Statement" shall have the meaning given such term in Section
3.4.2.
"Registration Statement" shall have the meaning given such term in
Section 3.7.2.
"Regulatory Authority" shall mean any Governmental Entity, the
approval of which is legally required for consummation of the Merger.
"Requisite Regulatory Approvals" shall have the meaning set forth in
Section 7.1.2.
"Returns" shall mean all returns, declarations, reports, statements,
and other documents required to be filed with respect to federal, state, local
and foreign Taxes, and the term "Return" means any one of the foregoing
Returns.
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"SEC" shall mean the Securities and Exchange Commission.
"Secured Loan" shall have the meaning given such term in Section 3.16.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Site Assessment" shall have the meaning given such term in Section
5.7.1.
"Stock Option Agreement" shall mean the agreement between UBT and
COMERICA dated the date of this Agreement.
"Subsidiary" shall mean, with respect to any corporation (the
"parent"), any other corporation, association or other business entity of which
more than 50% of the shares of the Voting Stock are owned or controlled,
directly or indirectly, by the parent or by one or more Subsidiaries of the
parent, or by the parent and one or more of its Subsidiaries.
"Subsidiary Merger Agreement" shall have the meaning given such term
in Section 2.1.
"Surviving Corporation" shall have the meaning given such term in
Section 2.1.
"Surviving Corporation Stock" shall have the meaning given such term
in Section 2.4.
"Taxes" shall mean all federal, state, local and foreign net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties, or other taxes, together with any interest and any
penalties, additions to tax, or additional amounts with respect thereto, and
the term "Tax" means any one of the foregoing Taxes.
"Tender Offer" shall mean the commencement (as such term is defined in
Rule 14d-2 under the Exchange Act) of a tender offer or the filing by any
person of a registration statement under the Securities Act with respect to, a
tender offer to purchase any shares of UBT Common Stock such that, upon
consummation of such offer, such person would own or control 15% or more of the
then outstanding shares of UBT Common Stock.
"Trust Assets" shall mean and include: (a) all right, title and
interest of UBT in and to and under any and all trusts, wills, agency
agreements, decedent's estates and other representative or fiduciary
appointments in favor of, or services by, UBT's Subsidiaries as further
described in Schedule 3.17 to this Agreement and all other trusts, wills,
agency agreements and the like similar to the foregoing under which UBT has
been named as of the Closing Date in some representative or fiduciary capacity
to take effect at some time in the future; and (b) all properties, rights,
documents, instruments, interests and other tangible and intangible assets
owned by, governed or administered under, arising under or with respect to or
pertaining to any of the foregoing.
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"UBT" shall have the meaning set forth in the preamble of this
Agreement.
"UBT Certificates" shall have the meaning given such term in Section
2.8.1.
"UBT Common Stock" shall mean the common stock, no par value, of UBT
and any Common Stock of UBT created pursuant to any recapitalization,
reorganization, or similar event or any subdivision or combination of shares of
common stock or similar event.
"UBT Consolidated Net Worth" shall mean the difference between:
(A) the sum of: (1) total shareholders' equity of UBT as of
the Determination Date determined in accordance with Generally
Accepted Accounting Principles applied consistently with prior
periods; (2) any amount attributable to the payment of regular
quarterly dividends in the amount of $.35 per share or less
paid on or after the date of this Agreement; and (3) any
amount attributable to the actual exercise of the UBT Stock
Options between the date of this Agreement and the Closing
Date;
minus
(B) amounts attributable to the period from the date of this
Agreement to the Determination Date and arising from: (1)
gains and income attributable to real estate development
activities; (2) gains from the sale or other disposition of
assets not in the ordinary course of business (other than
gains resulting from the sale of Other Real Estate Owned,
which shall be added to total shareholders' equity); (3) gains
attributable to non-recurring extraordinary items, and changes
related to new accounting principles and changes in
application of existing accounting principles; (4) all fees
and costs of UBT attributable to the consummation of the
transaction contemplated by this Agreement exceeding
$1,500,000, including without limitation, advisory, investment
banking, legal and accounting fees and filing fees not
previously paid or accrued; and (5) the sum of $600,000 to the
extent that the Other Real Estate Owned by UBT on the date of
this Agreement has not been written down to such extent
between the date of this Agreement and the Closing Date. The
parties understand and agree that those items specified in
(B)(1) - (5) of this paragraph shall be calculated net of any
related tax benefit determined at the applicable tax rate;
provided, however, that the amounts calculated pursuant to (A) and (B) above
shall not reflect any gains or losses, as the case may be, attributable to
mark to market gains or losses arising from the date of this Agreement through
the Closing Date.
"UBT Filings" shall have the meaning given such term in Section 3.6.
"UBT Financial Statements" shall have the meaning given such term in
Section 3.7.3.
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"UBT Stock Options" shall mean any options granted on or before the
Effective Time, whether vested or unvested, pursuant to the UBT Stock Option
Plans.
"UBT Stock Option Plans" shall mean the University National Bank &
Trust Company 1980 Stock Option Plan, as amended, the University National Bank
& Trust Company Outside Directors Stock Option Plan effective as of January 23,
1992, as amended, and any other UBT stock option plan, whether qualified or
non-qualified.
"Understanding" shall have the meaning set forth in Section 6.1.5.
"Voting Stock" shall mean the stock or other interest entitling the
holders thereof to vote in the election of the directors, trustees or Persons
performing similar functions of the Person in question, except that it shall
not include any stock or other interest so entitling the holders thereof to
vote only upon the happening of a contingency, whether or not such contingency
has occurred.
ARTICLE 2 THE MERGER
Section 2.1 The Merger. Subject to the terms and conditions of
this Agreement, as promptly as practicable following the receipt of the Last
Regulatory Approval and the expiration of all applicable waiting periods,
INTERIM shall be merged into UBT (which shall be the Surviving Corporation of
the merger) in accordance with the applicable provisions of the California
Financial Code and the California Corporations Code (the "Merger") pursuant to
the Agreement of Merger attached to this Agreement as Exhibit 2.1 (the
"Subsidiary Merger Agreement"). The closing of the Merger (the "Closing")
shall take place at a location, time and Business Day to be designated by
COMERICA (the "Closing Date"). The Merger shall be effective when the
Subsidiary Merger Agreement (together with any other documents required by law
to effectuate the Merger) shall have been approved by the Superintendent of
Banks and filed with the Secretary of State of the State of California. When
used in this Agreement, the term "Effective Time" shall mean the time of filing
of the Subsidiary Merger Agreement with the Secretary of State, and "Surviving
Corporation" shall mean UBT.
Section 2.2 Effect of the Merger. By virtue of the Merger and at
the Effective Time, all of the rights, privileges, powers and franchises and
all property and assets of every kind and description of UBT and INTERIM shall
be vested in and be held and enjoyed by the Surviving Corporation, without
further act or deed, and all the estates and interests of every kind of UBT and
INTERIM, including all debts due to either of them, shall be as effectively the
property of the Surviving Corporation as they were of UBT and INTERIM
immediately prior to the Effective Time, and the title to any real estate
vested by deed or otherwise in either UBT or INTERIM 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 UBT and INTERIM shall be preserved unimpaired and all
debts, liabilities and duties of UBT and INTERIM shall be debts, liabilities
and duties of the Surviving Corporation and may be
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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.
Section 2.3 Articles of Incorporation. The articles of
incorporation of INTERIM in effect immediately prior to the Effective Time
shall be the articles of incorporation of the Surviving Corporation until
amended in accordance with the provisions thereof and the name of the Surviving
Corporation shall be "University Bank & Trust Company."
Section 2.4 Conversion of INTERIM Stock. The authorized and
issued capital stock of INTERIM, all of which shall be owned by COMERICA,
immediately prior to the Effective Time, on and after the Effective Time,
pursuant to the Subsidiary Merger Agreement and without any further action on
the part of COMERICA or INTERIM shall be converted into one share of common
stock of the Surviving Corporation (the "Surviving Corporation Stock"). Each
outstanding stock certificate which prior to the Effective Time represented
shares of capital stock of INTERIM automatically and for all purposes shall be
deemed to represent the number of shares of Surviving Corporation Stock into
which the shares of capital stock of INTERIM represented by such certificate
have been converted as provided in this Section 2.4.
Section 2.5 Conversion of UBT Stock Options. At the Effective
Time, all outstanding rights with respect to UBT Common Stock pursuant to stock
options under the UBT Stock Option Plans, whether vested or unvested or whether
or not then exercisable, shall be converted into and become rights with respect
to COMERICA Common Stock, and COMERICA shall assume each UBT Stock Option in
accordance with the terms of the UBT Stock Option Plans and the stock option
agreement by which it is evidenced.
2.5.1 From and after the Effective Time, (i) each
UBT Stock Option assumed by COMERICA may be exercised solely for shares of
COMERICA Common Stock; (ii) the number of shares of COMERICA Common Stock
subject to each UBT Stock Option shall be equal to the number of full or
partial shares of COMERICA Common Stock as the holder of such UBT Stock Option
would have been entitled to receive pursuant to Section 2.6 of this Agreement
had such holder exercised such option in full immediately prior to the
Effective Time (the "Deemed COMERICA Shares"); and (iii) the per share exercise
price for each such UBT Stock Option shall be equal to the result of (y) the
aggregate exercise price for the shares of UBT Common Stock otherwise
purchasable pursuant to such UBT Stock Option, divided by (z) the Deemed
COMERICA Shares; provided, however, that the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 424(a) of the
IRC.
2.5.2 As soon as practicable after the Effective
Time, COMERICA shall file a registration statement on Form S-3 or Form S-8, as
the case may be (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of COMERICA Common
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Stock subject to such options and shall use its best efforts to maintain the
effectiveness of such registration statements for so long as such options
remain outstanding.
Section 2.6 Conversion of Issued and Outstanding UBT Common
Stock. Except as provided in Section 2.7, each share of Fully Diluted UBT
Common Stock shall be converted at the Effective Time into and become the right
to receive that number of shares of duly authorized, validly issued, fully paid
and nonassessable shares of COMERICA Common Stock equal to the Conversion Rate,
as determined at the Effective Time, subject to adjustment, if any, as provided
in any other section of this Agreement. The Conversion Rate shall be further
appropriately adjusted to reflect any recapitalization, reorganization,
reclassification, split-up, merger, consolidation, exchange, stock or other
dividend or distribution (other than regular quarterly cash dividends), made,
declared or effective with respect to the COMERICA Common Stock between the
date of this Agreement and the Effective Time.
Section 2.7 Fractional Shares. No fractional shares of
COMERICA Common Stock shall be issued in the Merger. In lieu thereof, each
holder of UBT Common Stock who would otherwise be entitled to receive a
fractional share shall receive an amount in cash equal to the product (rounded
to the nearest tenth) obtained by multiplying (a) the Agreement Date COMERICA
Share Price by (b) the fraction of the share of COMERICA Common Stock to which
such holder would otherwise be entitled. No such holder shall be entitled to
dividends or other rights in respect of any such fraction.
Section 2.8 Exchange Procedures. On or as soon as practicable
after the Effective Time, COMERICA will deliver to the Exchange Agent
certificates representing a sufficient number of shares of COMERICA Common
Stock issuable in the Merger and funds representing a sufficient amount of cash
payable for fractional shares in the Merger pursuant to Section 2.7 of this
Agreement.
2.8.1 Upon surrender for cancellation to the
Exchange Agent of one or more certificates for shares of UBT Common Stock ("UBT
Certificates"), accompanied by a duly executed letter of transmittal in proper
form, the Exchange Agent shall, as promptly as practicable thereafter, deliver
to each holder of such surrendered UBT Certificates, certificates representing
the appropriate number of shares of COMERICA Common Stock ("New Certificates")
and/or checks for payment of cash in lieu of fractional shares, in respect of
the UBT Certificates. In no event shall the holders of UBT Certificates
entitled to receive cash in lieu of fractional shares be entitled to receive
interest on such amounts.
2.8.2 Until the UBT Certificates have been
surrendered and exchanged as herein provided, each outstanding UBT Certificate
shall represent, on and after the Effective Time, the right to receive the
number of shares of COMERICA Common Stock into which the number of shares of
UBT Common Stock shown thereon have been converted as provided by Section 2.6.
No dividends or other distributions that are declared on COMERICA Common Stock
shall be paid to holders thereof otherwise entitled to receive the same until
the UBT Certificates have been
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surrendered in exchange for New Certificates in the manner herein provided, but
upon such surrender, such dividends or other distributions, from and after the
Effective Time, will be paid to such holders in accordance with the terms of
such COMERICA Common Stock. In no event shall the holders entitled to receive
such dividends or other distributions be entitled to receive interest on such
dividends or other distributions.
2.8.3 No transfer taxes shall be payable by any
shareholder in respect of the issuance of New Certificates, except that if any
New Certificate is to be issued in a name other than that in which the UBT
Certificates surrendered shall have been registered, it shall be a condition of
such issuance that the holder requesting such issuance shall properly endorse
the certificate or certificates and shall pay to COMERICA or the Exchange Agent
any transfer taxes payable by reason thereof, or of any prior transfer of such
surrendered certificate, or establish to the satisfaction of COMERICA or the
Exchange Agent that such taxes have been paid or are not payable.
2.8.4 Any COMERICA Common Stock or cash delivered
to the Exchange Agent (together with any interest or profits earned thereon)
and not distributed pursuant to this Section 2.8 at the end of nine months from
the Effective Time, shall be returned to COMERICA, in which event the Persons
entitled thereto shall look only to COMERICA for payment thereof.
2.8.5 Notwithstanding anything to the contrary set
forth in Sections 2.8.2 and 2.8.3 hereof, if any holder of UBT Common Stock
shall be unable to surrender such holder's UBT Certificates because such
certificates have been stolen, lost or destroyed, such holder may deliver in
lieu thereof an affidavit and indemnity bond in form and substance and with
surety reasonably satisfactory to Exchange Agent and COMERICA.
2.8.6 The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to the shares of COMERICA
Common Stock held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or distributed with
respect to such shares of COMERICA Common Stock for the account of the Persons
entitled thereto.
2.8.7 After the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of UBT Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates representing such shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for COMERICA Common Stock as
provided in this Article 2.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF UBT
UBT represents and warrants to COMERICA as follows:
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Section 3.1 Organization; Corporate Power; Etc. UBT is a bank
duly organized, validly existing and in good standing under the laws of the
State of California. UBT is authorized by the State of California to conduct a
general banking business and its deposits are insured by the FDIC in the manner
and to the extent provided by law. Each of UBT and its Subsidiaries has all
requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business substantially as presently
conducted. UBT maintains and operates branch offices only in the State of
California. Neither the scope of the business of UBT or any Subsidiary of UBT
nor the location of any of their respective properties requires that UBT or any
of its Subsidiaries be licensed or qualified to conduct business in any
jurisdiction other than the State of California except where the failure to be
so licensed or qualified would not have a Material Adverse Effect on UBT.
Section 3.2 Licenses and Permits. Except as disclosed on Schedule
3.2, UBT and its Subsidiaries have all licenses, certificates, franchises and
permits that are necessary for the conduct of their respective businesses, and
such licenses are in full force and effect, except for any failure to obtain or
failure to be in full force and effect that would not, individually or in the
aggregate, have a Material Adverse Effect on UBT. The properties, assets,
operations and business of UBT and its Subsidiaries are and have been
maintained and conducted, in all material respects, in compliance with all
applicable licenses, certificates, franchises and permits.
Section 3.3 Subsidiaries. The only corporation, partnership,
joint venture or other entity in which UBT owns, directly or indirectly (except
as pledgee pursuant to loans or stock or other interest held as the result of
or in lieu of foreclosure pursuant to pledge or other security arrangement),
any equity position or other voting interest is the Lytton Corporation.
Section 3.4 Authorization of Agreement; No Conflicts.
3.4.1 The execution and delivery of this Agreement
and the Subsidiary Merger Agreement by UBT and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of UBT, subject only to the approval of
this Agreement, the Subsidiary Merger Agreement and the Merger by UBT's
shareholders. This Agreement has been duly executed and delivered by UBT and
constitutes a valid and binding obligation of UBT, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights
of California state banks, and in any case, by general equitable principles,
and the Subsidiary Merger Agreement, upon due execution and filing thereof by
UBT in accordance with the applicable provisions California Financial Code and
the California Corporations Code, will constitute a valid and binding
obligation of UBT, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of California banks generally and by
general equitable principles.
3.4.2 Except as disclosed on Schedule 3.4, the
execution and delivery of this Agreement and the Subsidiary Merger Agreement
and the consummation of the transactions contemplated hereby and thereby do not
and will not conflict with, or result in any violation of or
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default or loss of a material benefit under, any provision of the articles of
incorporation or bylaws of UBT or, except for the necessity of obtaining
Requisite Regulatory Approvals and approval of the shareholders of UBT, any
material mortgage, indenture, lease, agreement or other instrument or any
permit, concession, grant, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to UBT or its
properties, other than any such conflict, violation, default or loss which will
not have a Material Adverse Effect on UBT or which will be cured or waived
prior to the Effective Time. No material consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement or the Subsidiary Merger Agreement by UBT or the consummation by it
of the transactions contemplated hereby or thereby, except for (a) filings
required in order to obtain the Requisite Regulatory Approvals, (b) the filing
with the SEC of a proxy statement in definitive form relating to the meeting of
shareholders of UBT to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Statement"); and (c) the filing
of the Subsidiary Merger Agreement with the Superintendent of Banks of the
State of California and the Secretary of State of the State of California.
Section 3.5 Capital Structure.
3.5.1 The authorized capital stock of UBT consists
solely of 3,000,000 shares of Common Stock, no par value. At of the close of
business on September 26, 1994, 1,391,097 shares of Common Stock were
outstanding and 144,700 shares were reserved for issuance pursuant to UBT's
Stock Option Plans. All outstanding shares of UBT capital stock are validly
issued, fully paid and nonassessable (except for assessments made pursuant to
Section 662 of the California Financial Code) and do not possess any preemptive
rights. Other than the UBT Stock Options described on Schedule 3.27 to this
Agreement and the Stock Option Agreement, there are not on the date of this
Agreement any options, warrants, calls, rights, commitments, securities or
agreements of any character to which UBT is a party or by which it is bound
obligating UBT to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of UBT or obligating UBT to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
3.5.2 UBT is the direct owner, beneficially and of
record, of all of the issued and outstanding capital stock of the Lytton
Corporation which is its only direct Subsidiary, free and clear of all liens,
pledges, charges and other encumbrances of any nature whatsoever.
Section 3.6 UBT Filings.
3.6.1 Since January 1, 1992, UBT and its
Subsidiaries have filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, copies of which
have been made available to COMERICA, except to the extent prohibited by law,
that were required to be filed with (a) the Federal Reserve Board or any
Federal Reserve Bank; (b) the California Superintendent of Banks; (c) the
Federal Deposit Insurance Corporation; and (d) any other applicable federal,
state or local governmental or regulatory authority. All such reports,
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registrations and filings are collectively referred to as the "UBT Filings."
As of their respective filing dates, each of the past UBT Filings (a) was true
and complete in all material respects (or was amended so as to be so promptly
following discovery of any discrepancy); and (b) complied in all material
respects with all of the statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it was filed (or was amended
so as to be so promptly following discovery of any such noncompliance) and none
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The UBT Financial Statements have been prepared in accordance
with Generally Accepted Accounting Principles or applicable banking regulations
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and present fairly (subject, in the case of the
unaudited statements, to recurring adjustments normal in nature and amount) the
consolidated financial position of UBT as of the respective dates indicated and
the consolidated results of its operations and changes in cash flows at the
respective dates and for the respective periods covered by such financial
statements.
3.6.2 UBT has filed each report, schedule,
registration statement and definitive proxy statement and amendments to each of
the foregoing since January 1, 1991 that UBT was required to file with the SEC,
the OCC or the FDIC, as applicable, since such date (the "UBT SEC Documents"),
all of which have been made available to COMERICA. As of their respective
dates, the UBT SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such UBT SEC
Documents, and none of the UBT SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of UBT included in the UBT SEC Documents comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with Generally Accepted Accounting Principles applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) and fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount) the
consolidated financial position of UBT as at the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended.
Section 3.7 Accuracy of Information Supplied.
3.7.1 No representation or warranty of UBT
contained in this Agreement or any statement, schedule, exhibit or certificate
prepared by and given or to be given by or on behalf of UBT or its Subsidiaries
to COMERICA in connection herewith and none of the information supplied or to
be supplied by UBT or its Subsidiaries to COMERICA under this Agreement
contains or will contain any untrue statement of material fact or omit to state
any material fact required to be
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stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
3.7.2 None of the information supplied or to be
supplied by UBT for inclusion or incorporation by reference in, or relating to
UBT and included or incorporated by reference in, (i) the Registration
Statement on Form S-4 to be filed with the SEC by COMERICA in connection with
the issuance of shares of COMERICA Common Stock in the Merger (including the
Proxy Statement and prospectus constituting a part thereof, the "Registration
Statement") will, at the time the Registration Statement becomes effective
under the Securities Act, 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 therein, in light of the circumstances under which they
were made, not misleading; (ii) the Proxy Statement and any amendment or
supplement thereto will, at all times from the date of mailing to shareholders
of UBT through the date of the meeting of shareholders of UBT to be held in
connection with the Merger, 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 therein, in light of the circumstances under which they
were made, not misleading; and (iii) the statements, correspondence,
applications and forms to be filed with securities or "blue sky" authorities,
self regulatory authorities, the NYSE or any Governmental Entity in connection
with the Merger, the issuance of any shares of COMERICA Common Stock in
connection with the Merger, or any Requisite Regulatory Approvals will, at the
time filed or at the time they become effective, 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 statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to COMERICA and its
Subsidiaries) will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
3.7.3 UBT has delivered or will deliver as soon as
practicable to COMERICA copies of: (a) the balance sheet as of March 31, 1994,
June 30, 1994 and September 30, 1994 of UBT; and (b) the balance sheets of UBT
and its consolidated Subsidiaries as of December 31, 1992 and 1993 and the
related statements of income changes in stockholders' equity and cash flows for
the years then ended and the related notes to such financial statements, as
audited by KPMG Peat Marwick, independent public accountants (the "UBT
Financial Statements"), and UBT will hereafter until the Closing Date deliver
to COMERICA copies of additional financial statements of UBT as provided in
Sections 5.1.1(iii) and 6.1.11(iii). The UBT Financial Statements have been
prepared (and all of said additional financial statements will be prepared) in
accordance with Generally Accepted Accounting Principles or applicable banking
regulations consistently followed throughout the periods covered by such
statements (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC), and present
(and, in the case of said additional financial statements, will present) fairly
(subject in the case of the unaudited statements, to recurring adjustments
normal in nature and amount), the financial position of UBT and its
consolidated Subsidiaries as of the respective dates indicated and the results
of their operations and changes in cash flows at the respective dates and for
the respective periods covered by such financial statements.
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Section 3.8 Compliance with Applicable Laws. The businesses of
UBT and its Subsidiaries are not being conducted in violation of any applicable
law, ordinance or regulation, except for violations which individually or in
the aggregate would not have a Material Adverse Effect on UBT. Except as set
forth in Schedule 3.8 and except for normal examinations conducted by a
Governmental Entity in the regular course of business of UBT, no investigation
or review by any Governmental Entity with respect to UBT is pending or, to the
knowledge of UBT, threatened, nor has any Governmental Entity indicated to UBT
an intention to conduct the same, other than those the outcome of which, as far
as can be reasonably foreseen, will not have a Material Adverse Effect on UBT.
Section 3.9 Litigation. There is no suit, action or proceeding
pending or, to the knowledge of UBT, threatened against or affecting UBT or any
Subsidiary which, if adversely determined, would have a Material Adverse Effect
on UBT and its Subsidiaries taken as a whole; nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against UBT or any Subsidiary having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
Schedule 3.9 contains a true, correct and complete list, including
identification of the applicable insurance policy covering such litigation, if
any, subject to reservation of rights, if any, the applicable deductible and
the amount of any reserve therefor, of all pending litigation in which UBT or
any Subsidiary is a named party, all of which is adequately covered by
insurance in force, except for applicable deductibles, or have been adequately
reserved for in accordance with UBT's and UBT's prior business practices.
Section 3.10 Agreements with Banking Authorities. Except as set
forth on Schedule 3.10 to this Agreement, none of UBT or any Subsidiary of UBT
is a party to any written agreement, memorandum of understanding, order or
directive with any Governmental Entity.
Section 3.11 Insurance. Schedule 3.11 contains a list of all
policies of insurance and bonds carried and owned by UBT or any Subsidiary.
None of UBT or any Subsidiary is in default under any such policy of insurance
or bond such that it can be canceled and all material claims thereunder have
been filed in timely fashion. UBT and its Subsidiaries have filed claims with,
or given notice of claim, to their insurers or bonding companies in timely
fashion, with respect to all material matters and occurrences for which they
believe they have coverage.
Section 3.12 Title to Assets other than Real Property. UBT and its
Subsidiaries have good and marketable title to all their properties and assets,
other than real property which is the subject of Section 3.13, owned or leased
by UBT or any Subsidiary, free and clear of all mortgages, liens, encumbrances,
pledges or charges of any kind or nature except for: (a) encumbrances as set
forth in the UBT Financial Statements; (b) liens for current taxes not yet due
which have been fully reserved for; and (c) encumbrances, if any, that are not
substantial in character, amount or extent or that do not materially detract
from the value, or materially interfere with present use of the property
subject thereto or affected thereby.
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Section 3.13 Real Property. Schedule 3.13 is an accurate list and
general description of all real property owned or leased by UBT or any of its
Subsidiaries other than Other Real Estate Owned. UBT and its Subsidiaries have
good and marketable title to the real property, and valid leasehold interests
in the leaseholds, described in such schedule, free and clear of all mortgages,
covenants, conditions, restrictions, easements, liens, security interests,
charges, claims, assessments and encumbrances, except for (a) rights of
lessors, lessees or sublessees in such matters that are reflected in a written
lease; (b) current taxes (including assessments collected with taxes) not yet
due and payable; (c) any encumbrances set forth in UBT's Financial Statements;
and (d) encumbrances, if any, that are not substantial in character, amount or
extent or that do not materially detract from the value, or materially
interfere with present use of the property subject thereto of affected thereby;
and (e) minor defects and irregularities in title and encumbrances which do not
materially impair the use thereof for the purposes for which such property is
held. UBT and its Subsidiaries have valid leasehold interests in the leaseholds
they respectively hold, free and clear of all mortgages, liens, security
interest, charges, claims, assessments and encumbrances, except for (a) claims
of lessors, co-lessees or sublessees in such matters as are reflected in a
written lease; (b) title exceptions affecting the fee estate of the lessor
under such leases and (c) other matters as described in Schedule 3.13. The
activities of UBT and its Subsidiaries with respect to all real property owned
or leased by them for use in connection with their operations are in all
material respects permitted and authorized by applicable zoning laws,
ordinances and regulations and all applicable laws and regulations of any
Governmental Entity, including environmental matters affecting such properties.
Except as set forth in Schedule 3.13, UBT and its Subsidiaries enjoy quiet
possession under all material leases to which either is the lessee and all of
such leases are valid and in full force and effect.
Section 3.14 Taxes.
3.14.1 Filing of Returns. UBT and its Subsidiaries
have duly prepared and filed federal, state, local and foreign Returns (for tax
or informational purposes) which were required to be filed by or in respect of
UBT and its Subsidiaries, or any of their properties, income and/or operations
on or prior to the Closing Date. As of the time of filing, the foregoing
Returns correctly reflect the material facts regarding the income, business,
assets, operations, activities, status, and any other information required to
be shown thereon. Except as set forth on Schedule 3.14, no extension of time
within which to file any Return has been requested.
3.14.2 Payment of Taxes. With respect to all Taxes
imposed on UBT or any Subsidiary or for which UBT is or could be liable,
whether to taxing authorities (as, for example, under law) or to other Persons
or entities (as, for example, under tax allocation agreements), with respect to
all taxable periods or portions of periods ending on or before the Closing
Date, all applicable tax laws and agreements have been or will be fully
complied with, and all such amounts required to be paid by or on behalf of UBT
or any Subsidiary to taxing authorities or others on or before the date hereof
have been paid.
3.14.3 Audit History. Except as disclosed on
Schedule 3.14, there has not, within the last 3 years, been any review or audit
by any taxing authority of any Tax liability of UBT
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or any Subsidiary. Except as disclosed on Schedule 3.14, UBT and its
Subsidiaries have not received any notice of any pending or threatened audit by
the Internal Revenue Service or any state, local or foreign agency related to
UBT's and its Subsidiaries' Tax or information returns or Tax liability for any
period and no claim for assessment or collection of Taxes has been asserted
against UBT or its Subsidiaries. UBT and its Subsidiaries currently have no
unpaid deficiency assessed by the Internal Revenue Service or any state, local
or foreign taxing authority with respect to any of UBT's and its Subsidiaries'
Tax returns filed for fiscal years ended on or after December 31, 1987 through
Closing Date, nor, to the Knowledge of UBT, is there reason to believe that any
deficiency will be assessed. There are no actions, suits, proceedings,
investigations or claims now pending or, to the Knowledge of UBT, threatened
against UBT or its Subsidiaries in respect of Taxes, nor are any matters under
discussion by UBT or its Subsidiaries with any Governmental Entity relating to
Taxes.
3.14.4 Statute of Limitations. No agreements are in
force or are currently being negotiated by or on behalf of UBT or its
Subsidiaries for any waiver or for the extension of any statute of limitations
governing the time of assessment or collection of any Tax. No closing
agreements or compromises with any taxing authority are currently pending or
have been entered into by UBT or its Subsidiaries.
3.14.5 Withholding Obligations. UBT and its
Subsidiaries have withheld from each payment made to any of its officers,
directors and employees, the amount of all applicable Taxes, including, but not
limited to, income tax, social security contributions, unemployment
contributions, backup withholding and other deductions required to be withheld
therefrom by any Tax law and have paid the same to the proper Taxing
authorities within the time required under any applicable legislation.
3.14.6 Tax Liens. There are no Tax liens, whether
imposed by any federal, state, local or foreign taxing authority, outstanding
against any assets owned by UBT or its Subsidiaries, except for liens for taxes
that are not yet due and payable.
3.14.7 Safe Harbor Lease Property. None of the
assets owned by UBT or its Subsidiaries is property that is required to be
treated as being owned by any other Person pursuant to the so-called safe
harbor lease provisions of former Section 168 (f)(8) of the IRC.
3.14.8 Security for Tax-Exempt Obligations. None of
the assets owned by UBT or its Subsidiaries directly or indirectly secures any
debt, the interest on which is tax-exempt under Section 103(a) of the IRC.
3.14.9 Tax-Exempt Use Property. None of the assets
owned by UBT or its Subsidiaries is "tax-exempt use property" within the
meaning of Section 168(h) of the IRC.
3.14.10 Foreign Person. None of UBT or its
Subsidiaries is a person other than a United States person within the meaning
of the IRC.
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3.14.11 No Withholding. The transaction contemplated
herein is not subject to the tax withholding provisions of Section 3406 of the
IRC, or of Subchapter A of Chapter 3 of the IRC.
3.14.12 Tax Reserves. UBT and its Subsidiaries have
made full and adequate provision and reserve for all federal, state, local or
foreign Taxes for the current period for which Tax and information returns are
not yet required to be filed. The UBT Financial Statements contain fair and
sufficient accruals for the payment of all Taxes for the periods covered by the
UBT Financial Statements and all periods prior thereto.
3.14.13 Tax Elections. No new material elections
with respect to Taxes or any changes in current material elections with respect
to Taxes affecting the assets owned by UBT or its Subsidiaries shall be made
after the date of this Agreement without the prior written consent of COMERICA,
which shall not be unreasonably withheld.
3.14.14 IRC Section 382 Applicability. None of UBT
or any related party, including any party joining in any consolidated return to
which UBT is a member, was subject to IRC Section 382 prior to the execution
of this Agreement.
3.14.15 Disclosure Information. Within sixty days of
the date of this Agreement, UBT will provide COMERICA with a schedule setting
forth the following information with respect to UBT as of the most recent
practicable date: (a) UBT's basis in its assets; (b) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to UBT; and (c) the
amount of any deferred gain or loss allocable to UBT arising out of any
deferred intercompany transactions.
Section 3.15 Performance of Obligations. UBT and its Subsidiaries
have performed in all material respects all of the obligations required to be
performed by them to date under, and none of UBT nor any Subsidiary is in
default under or in breach of, any term or provision of any covenant, contract,
lease, indenture or any other covenant to which any is a party, is subject or
is otherwise bound, and no event has occurred that, with the giving of notice
or the passage of time or both, would constitute such default or breach, where
such default or breach or failure to perform would have a Material Adverse
Effect on UBT and its Subsidiaries taken as a whole. To UBT's Knowledge no
party with whom UBT or its Subsidiaries has an agreement that is of material
importance to the businesses of UBT and its Subsidiaries taken as a whole is in
default thereunder.
Section 3.16 Loans and Investments. Except as set forth on
Schedule 3.16, in all material respects, all loans, leases and other extensions
of credit, and guaranties, security agreements or other agreements supporting
any loans or extensions of credit, and investments of UBT and its Subsidiaries
are, and constitute the legal, valid and binding obligations of the parties
thereto and are enforceable against such parties 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 California
banks or creditors generally and by general equitable principles. As of August
31, 1994, and except as
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disclosed in Schedule 3.16, no loans or investments held by UBT or any
Subsidiary are (i) more than ninety days past due with respect to any scheduled
payment of principal or interest, other than loans on a non-accrual status;
(ii) classified as "loss," "doubtful," "substandard" or "specially mentioned"
by any federal or state banking regulators; or (iii) on a non-accrual status in
accordance with UBT's loan review procedures. None of such investments, other
than loans, are subject to any restrictions, contractual, statutory or other,
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 any such investments under the
Securities Act and the regulations thereunder or state securities laws and
pledges or security interests given in connection with government deposits.
UBT has no loans, leases or other extensions of credit outstanding, or
commitments to make any loans, leases or other extensions of credit to any
Affiliates of UBT which are not on substantially the same terms (including
interest rates, repayment terms and collateral) as would be available for
comparable transactions with Persons of similar creditworthiness who are not
Affiliates of UBT. For each outstanding loan or extension of credit or
commitment to make a loan or extension of credit where the original principal
amount is in excess of $25,000, UBT to its Knowledge has taken all action
consistent with good banking practice to document each such loan or extension
of credit, including perfecting security interests, if applicable, or obtaining
the due execution and delivery of guaranties or similar obligations, if
applicable.
Section 3.17 Status of Trust Assets. Schedule 3.17 is a complete
list of all Trust Assets.
3.17.1 With respect to the Trust Assets: (i) no
notice has been received by UBT or any of its Subsidiaries questioning the
validity or enforceability of any of the agreements, contracts or other
commitments to which UBT is a party comprising a part of the Trust Assets; (ii)
to UBT's Knowledge, none of the parties to any such agreement, contract or
other commitment is in default of any material obligation under, or in the
performance of, any material term, condition or other provision of any such
agreement, contract or other commitment; (iii) the rights of UBT or its
Subsidiaries to receive fees in connection with Trust Assets are free and clear
of all pledges, security interests and liens of any kind whatsoever; (iv) in
the management, operation and servicing of the Trust Assets, UBT and its
Subsidiaries have complied, in all material respects, with all applicable
federal, state and local laws, rules, regulations, ordinances, rulings, orders,
awards, judgments and decrees; and (v) in the management, operation and
servicing of the Trust Assets, UBT and its Subsidiaries have complied with all
material terms of all instruments governing the Trust Assets.
3.17.2 Except as set forth on Schedule 3.17.2, to
UBT's Knowledge, (without conducting any site investigation or other analysis
for the purpose of making this representation), neither the use nor current
condition of any real property relating to the Trust Assets is or has been such
during the time the Trust Assets were owned, operated or managed by UBT, in
violation of any Environmental Law under circumstances where the violation
would have a Material Adverse Effect (as defined in Section 5.7.2) on the real
property in question. UBT has adhered to and followed in all material respects
all environmental policies of UBT with respect to the Trust Assets.
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Section 3.18 Brokers and Finders. Other than the retention of
Goldman, Sachs & Co., none of UBT or any Subsidiary is a party to or obligated
under any agreement with any broker or finder relating to the transactions
contemplated hereby, and neither the execution of this Agreement or the
Subsidiary Merger Agreement nor the consummation of the transactions provided
for herein or therein will result in any liability to any broker or finder.
UBT agrees to indemnify and hold harmless COMERICA and INTERIM and their
respective affiliates, and to defend with counsel selected by COMERICA and
INTERIM and reasonably satisfactory to UBT from and against any liability, cost
or expense, including reasonable attorneys' fees, incurred in connection with a
breach of this Section 3.18.
Section 3.19 Material Contracts. Schedule 3.19 to this Agreement
is a complete and accurate written list of all material agreements, obligations
or understandings, written and oral, to which UBT or any Subsidiary is a party
as of the date of this Agreement, except for loans and other extensions of
credit made by UBT in the ordinary course of business and those items disclosed
in the UBT Financial Statements.
Section 3.20 Absence of Material Adverse Effect. Since December
31, 1993, the businesses of UBT and its Subsidiaries have been conducted only
in the ordinary course, in the same manner as theretofore conducted, and no
event or circumstance occurred or is expected to occur which has, or is likely
to result in, a Material Adverse Effect on UBT.
Section 3.21 Undisclosed Liabilities. To UBT's Knowledge, UBT and
its Subsidiaries have no liabilities or obligations, either accrued, contingent
or otherwise, that are material to UBT and its Subsidiaries taken as a whole
and that have not been reflected or disclosed in the UBT Financial Statements,
or incurred subsequent to December 31, 1993 in the ordinary course of business
consistent with past practices. Neither UBT nor any of UBT's Subsidiaries has
any knowledge of any basis for the assertion against any of them of any
liability, obligation or claim (including without limitation that of any
Governmental Entity) that is likely to result in or cause a Material Adverse
Effect that is not fairly reflected in the UBT Financial Statements.
Section 3.22 Employees; Employee Benefit Plans; ERISA.
3.22.1 All of UBT's and its Subsidiaries'
obligations for payment to trusts or other funds or to any Governmental Entity
or to any individual, director, officer, employee or agent (or his or her
heirs, legatees or legal representatives) with respect to unemployment
compensation benefits, profit-sharing, pension or retirement benefits or social
security benefits, whether arising by operation of law, by contract or by past
custom, have been properly accrued for the periods covered thereby on the UBT
Financial Statements and paid when due. All of UBT's and its Subsidiaries
obligations, whether arising by operation of law, by contract or by past custom
for vacation or holiday pay, bonuses and other forms of compensation which are
payable to UBT's and its Subsidiaries' directors, officers, employees or agents
have been properly accrued on the UBT Financial Statements for the periods
covered thereby and paid when due. Except as set forth on Schedule 3.22, there
are no unfair labor practice complaints, strikes, slowdowns, stoppages or other
controversies pending
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or, to the knowledge of UBT, attempts to unionize or controversies threatened
between UBT or any Subsidiary or Affiliate and, or relating to, any of their
employees that are likely to have a Material Adverse Effect on UBT and its
Subsidiaries taken as a whole. None of UBT or any Subsidiary is a party to any
collective bargaining agreement with respect to any of their employees and,
except as set forth on Schedule 3.22, none of UBT or any Subsidiary is a party
to a written employment contract with any of their employees and there are no
understandings with respect to the employment of any officer or employee of UBT
or its Subsidiaries which are not terminable by UBT or its Subsidiaries without
liability on not more than thirty (30) days' notice. Except as disclosed in
the UBT Financial Statements for the periods covered thereby, all sums due for
employee compensation have been paid and all employer contributions for
employee benefits, including deferred compensation obligations, and any
benefits under any Employee Plan (as defined in Section 3.22.3 hereof) or any
Benefit Arrangement (as defined in Section 3.22.4 hereof) have been duly and
adequately paid or provided for in accordance with plan documents. Except as
set forth on Schedule 3.22, no director, officer or employee of UBT or any
Subsidiary is entitled to receive any payment of any amount under any existing
agreement, severance plan or other benefit plan as a result of the consummation
of any transaction contemplated by this Agreement or the Subsidiary Merger
Agreement. UBT and its Subsidiaries have complied in all material respects
with all applicable federal and state statutes and regulations which govern
workers' compensation, equal employment opportunity and equal pay, including,
but not limited to, all civil rights laws, Presidential Executive Order 1124,
and the Fair Labor Standards Act of 1938, as amended and the Americans with
Disabilities Act.
3.22.2 Prior to the execution of this Agreement,
UBT has delivered as Schedule 3.22 a complete list of:
a. all current employees of UBT or any
Subsidiary, together with each employee's age, tenure with UBT or Subsidiary,
title or job classification, and the current annual rate of compensation
anticipated to be paid to each such employee; and
b. all Employee Plans and Benefit
Arrangements, including all plans or practices providing for current
compensation or accruals for active Employees, including, but not limited to,
all employee benefit plans, all pension, profit-sharing, retirement, bonus,
stock option, incentive, deferred compensation, severance, long-term
disability, medical, dental, health, hospitalization, life insurance or other
insurance plans or related benefits.
3.22.3 Except as disclosed on Schedule 3.22, none of
UBT or any Subsidiary maintains, administers or otherwise contributes to any
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which is subject to any
provisions of ERISA and covers any employee, whether active or retired, of UBT
or any Subsidiary of either (any such plan being herein referred to as an
"Employee Plan"). True and complete copies of each such Employee Plan,
including amendments thereto, have been previously delivered to COMERICA,
together with (i) all agreements regarding plan assets with respect to such
Employee Plans, (ii) a true and complete copy of the annual reports for the
most recent three years (Form 5500 Series including, if applicable, Schedules A
and B thereto) prepared in connection with
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any such Employee Plan, (iii) a true and complete copy of the actuarial
valuation reports for the most recent three years, if any, prepared in
connection with any such Employee Plan covering any active employee of UBT,
(iv) a copy of the most recent summary plan description of each such Employee
Plan, together with any modifications thereto, and (v) a copy of the most
recent favorable determination letter (if applicable) from the Internal Revenue
Service for each Employee Plan. None of the Employee Plans is a "multiemployer
plan" as defined in Section 3(37) of ERISA or a "multiple employer plan" as
covered in Section 412(c) of the IRC, and none of UBT or any Subsidiary has
been obligated to make a contribution to any such multiemployer or multiple
employer plan within the past five years. Each Employee Plan which is intended
to be qualified under Section 401(a) of the IRC is so qualified and each trust
maintained pursuant thereto is exempt from income tax under Section 501(a) of
the IRC, and none of UBT or any Subsidiary is aware of any fact which has
occurred which would cause the loss of such qualification or exemption.
3.22.4 Except as disclosed in Schedule 3.22 and
exclusive of any Employee Plan, none of UBT or any Subsidiary maintains (other
than base-salary and base wages) any form of current or deferred compensation,
bonus, stock option, stock appreciation right, severance pay, salary
continuation, retirement or incentive plan or arrangement for the benefit of
any director, officer or employee, whether active or retired, of UBT or any
Subsidiary or for any class or classes of such directors, officers or
employees. Except as disclosed in Schedule 3.22 and other than any Employee
Plan, none of UBT or any Subsidiary maintains any group or individual health or
insurance, welfare or similar plan or arrangement for the benefit of any
director, officer or employee of UBT or any Subsidiary whether active or
retired, or for any class or classes of such directors, officers or employees.
Any such plan or arrangement described in this Section 3.22.4, copies of which
have been delivered to COMERICA, shall be herein referred to as a "Benefit
Arrangement."
3.22.5 All Employee Plans and Benefit Arrangements
are operated in material compliance with the requirements prescribed by any and
all statutes, governmental or court orders, or governmental rules or
regulations currently in effect, including but not limited to ERISA and the
IRC, applicable to such plans or arrangements, and plan documents relating to
any such plans or arrangements, comply with or will be amended to comply with
applicable legal requirements. Except as disclosed in Schedule 3.22, no
Employee Plan which is subject to Title IV of ERISA has been completely or
partially terminated and no condition exists that could constitute grounds for
the termination of any Employee Plan pursuant to Subtitle C of Title IV of
ERISA, nor has UBT or any Subsidiary incurred, nor does either reasonably
expect to incur, any liability to the Pension Benefit Guaranty Corporation,
except for required premium payments which have been paid when due; except as
disclosed in Schedule 3.22, none of the Employee Plans which are employee
pension benefit plans within the meaning of Section 3(2) of ERISA has engaged
in a merger or consolidation with any other plan or transferred assets or
liabilities from any other plan; with respect to each Employee Plan, to UBT's
Knowledge, none of UBT, any Subsidiary nor any Employee Plan, nor any trusts
created thereunder, nor any trustee, administrator nor any other fiduciary
thereof, has engaged in a "prohibited transaction," as defined in Section 406
of ERISA and Section 4975 of the IRC, that could subject any of them or
COMERICA to liability under Section 409 or 502(i) of ERISA or Section 4975 of
the IRC or that would adversely affect the qualified status of such plans; each
"plan official"
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within the meaning of Section 412 of ERISA of each Employee Plan is bonded to
the extent required by such Section 412; with respect to each Employee Plan, to
the Knowledge of UBT, no employee of UBT or any Subsidiary nor any fiduciary of
any Employee Plan has engaged in any breach of fiduciary duty as defined in
Part 4 of Subtitle B of Title I of ERISA which could subject UBT or any
Subsidiary to liability if UBT or any Subsidiary is obligated to indemnify such
Person against liability. No Employee Plan that is subject to Title IV of
ERISA or Section 412 of the IRC incurred any "accumulated funding deficiency"
(as defined in ERISA), whether or not waived, taking into account contributions
made within the period described in Section 412(c)(10) of the IRC; nor, except
as disclosed in Schedule 3.22, has any of UBT or any Subsidiary failed to make
any contribution or pay any amount due and owing as required by law or the
terms of any Employee Plan or Benefit Arrangement.
3.22.6 Except as set forth on Schedule 3.22, to the
Knowledge of UBT, no Employee Plan or Benefit Arrangement has any liability of
any nature, accrued or contingent, including, without limitation, liabilities
for federal, state, local or foreign taxes, interest or penalty other than
liability for claims arising in the course of the administration of each such
plan. There is no pending or, to the Knowledge of UBT, threatened legal
action, proceeding or investigation against any Employee Plan, other than
routine claims for benefits, which could result in liability to such plans and
there is no basis for any such legal action or proceeding.
3.22.7 Each Benefit Arrangement which is a group
health plan (within the meaning of such term under IRC Section 4980B(g)(2))
complies and has complied in all material respects with the requirements of
Section 601 through 608 of ERISA or Section 4980B of the IRC governing
continuation coverage requirements for employee-provided group health plans.
3.22.8 Except as disclosed in Schedule 3.22, none of
UBT or any Subsidiary maintains any Employee Plan or Benefit Arrangement
pursuant to which any benefit or other payment will be required to be made by
UBT or any Subsidiary or Affiliate or pursuant to which any other benefit will
accrue or vest in any director, officer or employee of UBT or any Subsidiary or
Affiliate, in either case as a result of the consummation of the transactions
contemplated by this Agreement.
3.22.9 No "reportable event," as defined in ERISA,
has occurred with respect to any of the Employee Plans.
Section 3.23 Powers of Attorney. No power of attorney or similar
authorization given by UBT or any Subsidiary is presently in effect or
outstanding other than powers of attorney given in the ordinary course of
business with respect to routine matters.
Section 3.24 [Reserved].
Section 3.25 Intellectual Property Rights. Schedule 3.25 is a
complete and accurate list of all United States and foreign patents,
trademarks, service marks, copyrights and all pending applications therefor,
whether or not issued (the "Intellectual Property"), that relate to or arise
from
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or are used in the operation of the businesses of UBT and its Subsidiaries or
the rights of UBT and its Subsidiaries thereunder. There are no material
claims or demands of any Person pertaining to the Intellectual Property, and no
proceedings have been instituted or are pending or threatened, which challenge
the rights of UBT and its Subsidiaries in respect thereof, and to the Knowledge
of UBT, none of the Intellectual Property is being infringed upon or
appropriated by others, and none is subject to any outstanding order, decree,
judgment, stipulation, injunction, restriction or agreement affecting the scope
of the free and unrestricted use by UBT or any Subsidiary. To the Knowledge of
UBT, none of UBT or any Subsidiary is infringing or violating, and has not so
infringed or violated, any Intellectual Property rights of others.
Section 3.26 Hazardous Materials.
3.26.1 Except for ordinary and necessary quantities
of cleaning, pest control and office supplies, and other small quantities of
Hazardous Substances used in the ordinary course of UBT's and its Subsidiaries
businesses, used and stored in compliance with applicable Environmental Laws,
or ordinary rubbish, debris and nonhazardous solid waste stored in garbage cans
or bins for regular disposal off-site, or petroleum contained in and de minimus
quantities discharged from motor vehicles in their ordinary operation on the
Property (as defined below), UBT and its Subsidiaries have not engaged in the
generation, use, manufacture, treatment, transportation, storage (in tanks or
otherwise), or disposal of Hazardous Substances other than as permitted by
applicable law. To UBT's Knowledge, (and without conducting any site
investigation or other analysis for the purpose of making this representation),
no Hazardous Substances have been released, emitted or disposed of, or
otherwise deposited, on or in any real property which is now or has been
previously owned or leased in the past two years by UBT or any Subsidiary,
including (Other Real Estate Owned)(collectively, the "Property"), or to UBT's
Knowledge (based upon a review of UBT's loan origination documentation, as and
if updated upon renewal), on or in any real property in which UBT or any
Subsidiary now holds any security interest, mortgage or other lien or interest,
except for (i) Disclosed Matters; (ii) ordinary and necessary quantities of
cleaning, pest control and office supplies, and other small quantities of
Hazardous Substances used in the ordinary course of UBT's and its Subsidiaries
businesses, used and stored in compliance with applicable Environmental Laws,
or ordinary rubbish, debris and nonhazardous solid waste stored in garbage cans
or bins for regular disposal off-site, or petroleum contained in and de minimus
quantities discharged from motor vehicles in their ordinary operation on the
Property; and (iii) such releases, emissions, disposals or deposits which
constituted a violation of an Environmental Law but did not have a Material
Adverse Effect on the Property involved . To UBT's Knowledge, (and without
conducting any site investigation or other analysis for the purpose of making
this representation), no activity has been undertaken on the Property during
UBT's or any Subsidiary's occupancy of or during any period in which UBT or any
Subsidiary had any rights in the Property that would cause or contribute to:
a. the Property becoming a treatment,
storage or disposal facility within the
meaning of RCRA or any similar state law or
local ordinance;
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b. a release or threatened release of
any Hazardous Substances under circumstances
which would violate any Environmental Laws; or
c. the discharge of Hazardous
Substances into any soil, subsurface water or
ground water or into the air, or the dredging
or filling of any waters, that would require a
permit or any other approval under the Federal
Water Pollution Control Act, 33 U.S.C. Section
1251 et seq., the Clean Air Act, as amended,
42 U.S.C. Section 7401 et seq., or any
similar federal or state law or local
ordinance;
the cumulative effect of which would have a Material Adverse Effect on the
Property involved.
3.26.2 To UBT's Knowledge, (and without conducting
any site investigation or other analysis for the purpose of making this
representation), there are no substances or conditions in or on the Property
that may support a claim or cause of action under any Environmental Law and, to
UBT's Knowledge, (and without conducting any site investigation or other
analysis for the purpose of making this representation), there are not, and
never have been, any underground storage tanks located in or under the
Property.
3.26.3 None of UBT or any Subsidiary has received any
written notice of, and to its Knowledge, (and without conducting any inquiry of
any Governmental Entity for the purpose of making this representation), any
verbal notice of, any pending or threatened claims, investigations,
administrative proceedings, litigation, regulatory hearings or requests or
demands for remedial or response actions or for compensation, with respect to
the Property, alleging noncompliance with or violation of any Environmental Law
or seeking relief under any Environmental Law and the Property is not listed on
the United States Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites, or, to UBT's Knowledge, any other list, schedule, log,
inventory or record of hazardous waste sites maintained by any federal, state
or local agency.
3.26.4 Except as set forth on Schedule 3.26, to UBT's
Knowledge, (and without conducting any site investigation or other analysis for
the purpose of making this representation), there are no environmental reports
regarding the Property nor have there been any environmental investigations
relating to the Property.
3.26.5 "Hazardous Substances" shall mean any
hazardous, toxic or infectious substance, material, gas or waste which is
regulated by any local, state or federal Governmental Entity, or any of their
agencies or which has been identified by any such Governmental Entity as a
toxic, cancer causing or otherwise hazardous substance.
Section 3.27 Stock Options. Schedule 3.27 to this Agreement
contains a list of all of all UBT Stock Options outstanding, indicating for
each: (a) the grant date; (b) whether vested or unvested; (c) exercise price;
and (d) a vesting schedule by plan year.
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Section 3.28 Interest Rate Risk Management Instruments.
All interest rate swaps, floors and option agreements and similar interest rate
risk management arrangements to which UBT or any of its Subsidiaries is a party
or by which any of their properties or assets may be bound were entered into in
the ordinary course of business, in accordance with commercially reasonable
banking practices and applicable rules, regulations and policies of the
California Superintendent of Banks and are legal, valid and binding obligations
enforceable in accordance with their terms against UBT and, to UBT's Knowledge,
against all other parties thereto (except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
California banks or creditors and by general equitable principles). To UBT's
Knowledge, all counterparties to such arrangements are financially responsible
and are able to adequately perform their obligations under such arrangements.
UBT and its Subsidiaries have duly performed their obligations under such
arrangements to the extent that such obligations to perform have accrued and to
UBT's Knowledge, there are no material breaches, violations or defaults or
allegations or assertions of such by any party to such arrangements.
Section 3.29 Disclosure in Schedules. Anything disclosed by UBT or
any of is Subsidiaries in the Schedules to this Agreement shall be considered
to have been disclosed for purposes of all representations, warranties and
covenants of such party under this Agreement.
Section 3.30 No Actual Knowledge of Misrepresentation or Breach of
Warranty. In connection with any investigation of UBT conducted by COMERICA,
UBT has not, to its Knowledge, failed to advise COMERICA and INTERIM on or
before the Closing Date of any actual Knowledge UBT may have that any of the
representations or warranties of UBT contained in this Agreement or in the
exhibits and schedules to this Agreement are not true.
Section 3.31 Effective Date of Representations, Warranties,
Covenants and Agreements. Each representation, warranty, covenant and
agreement of UBT set forth in this Agreement shall be deemed to be made on and
as of the date hereof and as of the Effective Time.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF COMERICA
COMERICA represents and warrants to UBT that:
Section 4.1 Organization; Corporate Power; Etc. COMERICA is a
bank holding company registered under the BHCA. COMERICA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business substantially as they are
being conducted on the date of this Agreement. Each of COMERICA's Subsidiaries
has all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business substantially as they are being
conducted on the date of this Agreement, except where the failure to have such
power or authority would not have a Material Adverse Effect on COMERICA or the
ability to consummate the transactions contemplated by this Agreement. COMERICA
has all requisite corporate power and authority to enter into this Agreement
and, subject to the obtaining of all
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Requisite Regulatory Approvals, to consummate the transactions contemplated
hereby. Neither the scope of business of COMERICA or any Subsidiary or the
location of any of their properties requires that COMERICA be licensed to
conduct business in any jurisdiction other than those jurisdictions in which it
is licensed or qualified to do business as a foreign corporation where the
failure to be so licensed or qualified would, individually or in the aggregate,
have a Material Adverse Effect on COMERICA.
Section 4.2 Licenses and Permits. COMERICA and its Subsidiaries
have all material licenses, certificates, franchises and permits that are
necessary for the conduct of their respective businesses, and such licenses are
in full force and effect, except for any failure to be in full force and effect
that would not, individually or in the aggregate, have a Material Adverse
Effect on COMERICA or any of its banking subsidiaries. The properties and
operations of COMERICA and its Subsidiaries are and have been maintained and
conducted, in all material respects, in compliance with all applicable
licenses, certificates, franchises and permits.
Section 4.3 Authorization of Agreement; No Conflicts.
4.3.1 The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action on the part of COMERICA.
This Agreement has been duly executed and delivered by COMERICA and constitutes
a legal, valid and binding obligation of COMERICA, enforceable against COMERICA
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of Delaware corporations and bank holding companies generally and by
general equitable principles, and the Subsidiary Merger Agreement, upon due
execution and filing thereof in accordance with the applicable provisions of
the California Corporations Code and California Financial Code, will constitute
a valid and binding obligation of INTERIM, enforceable in accordance with its
terms.
4.3.2 The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby does not and will
not, in the case of COMERICA, and will not, in the case of INTERIM, conflict
with, or result in any violation of or default or loss of a material benefit
under, any provision of the certificate of incorporation or bylaws of COMERICA
or INTERIM or, except for the necessity of obtaining Requisite Regulatory
Approvals, any material mortgage, indenture, lease, agreement or other material
instrument, or any permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
COMERICA or any of its Subsidiaries, other than any such conflict, violation,
default or loss which (i) will not have a Material Adverse Effect on COMERICA;
or (ii) will be cured or waived prior to the Effective Time. No material
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental authority is required in connection with the
execution and delivery of this Agreement by COMERICA and INTERIM or the
consummation by COMERICA or INTERIM of the transactions contemplated hereby,
except for (a) filings required in order to obtain Requisite Regulatory
Approvals, (b) the filing of the Registration Statement with the SEC and the
declaration by the SEC that the Registration Statement is effective, (c) the
filing and approval of
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the Subsidiary Merger Agreement with the California Superintendent of Banks and
the Secretary of State of the State of California; (d) any approvals required
to be obtained pursuant to the BHCA or any other required governmental approval
for the execution and delivery of this Agreement by COMERICA or INTERIM or the
consummation of the Merger; (e) any consents, authorizations, approvals,
filings or exemptions required to be made or obtained under the securities of
"blue sky" laws of various jurisdictions in connection with the issuance of
shares of COMERICA Common Stock contemplated by this Agreement; and (f) any
consents, authorizations, approvals, filings or exemptions in connection with
compliance with the rules of the NYSE.
Section 4.4 Capital Structure of COMERICA. On the date of this
Agreement, the authorized capital stock of COMERICA consists of 250,000,000
shares of COMERICA Common Stock and 10,000,000 shares of Preferred Stock
without par value. At the close of business on September 30, 1994, 119,294,355
shares of COMERICA Common Stock were outstanding, no shares of COMERICA Common
Stock were reserved for issuance upon the exercise of outstanding employee
stock options (including COMERICA's Long Term Incentive Plan and COMERICA's
dividend reinvestment plan), 751,395 shares of COMERICA Common Stock were held
by COMERICA in its treasury (in addition to shares held directly or indirectly
in trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties), not more than
500,000 shares of COMERICA Series C Participating Preferred Stock were reserved
for issuance upon exercise of the rights distributed to the holders of COMERICA
Common Stock pursuant to the Rights Agreement, dated as of January 26, 1988,
between COMERICA and COMERICA Bank as Rights Agent. The issuance of the shares
of COMERICA Common Stock proposed to be issued pursuant to this Agreement at
the Effective Time will have been duly authorized by all requisite corporate
action of COMERICA, and such shares, when issued as contemplated by this
Agreement, will constitute duly authorized, validly issued, fully paid and
non-assessable shares of COMERICA Common Stock, and will not have been issued
in violation of the preemptive or similar rights of any person. As of the date
of this Agreement, and except for this Agreement, the COMERICA Stock Plans, the
COMERICA Rights Agreement, COMERICA does not have outstanding any options,
warrants, calls, rights, commitments, securities or agreements of any character
to which COMERICA is a party or by which it is bound obligating COMERICA to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of COMERICA or obligating COMERICA to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
Section 4.5 Formation of INTERIM. As soon as practicable after
the of this Agreement, COMERICA shall cause INTERIM to be formed, all of the
stock of which will be held by COMERICA.
Section 4.6 COMERICA Filings.
4.6.1 Since January 1, 1992, COMERICA and its
Subsidiaries have filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, copies of which
have been made available to UBT except to the extent prohibited by law, that
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were required to be filed with (a) the Federal Reserve Board or any Federal
Reserve Bank; (b) the OCC; (c) the Federal Deposit Insurance Corporation; (d)
Michigan Banking Commissioner; and (e) any other applicable federal, state or
local governmental or regulatory authority. All such reports, registrations and
filings are collectively referred to as the "COMERICA Filings." As of their
respective filing dates, each of the past COMERICA Filings (a) was true and
complete in all material respects (or was amended so as to be so promptly
following discovery of any discrepancy); and (b) complied in all material
respects with all of the statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it was filed (or was amended
so as to be so promptly following discovery of any such noncompliance) and none
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The COMERICA Financial Statements, together with the financial
statements contained in the COMERICA Filings, have been prepared in accordance
with Generally Accepted Accounting Principles consistently followed throughout
the periods covered by such statements, and present fairly the consolidated
financial position of COMERICA as of the respective dates indicated and the
consolidated results of its operations and changes in its cash flows at the
respective dates and for the respective periods covered by such financial
statements.
4.6.2 COMERICA has filed each report, schedule,
registration statement and definitive proxy statement and amendments to each of
the foregoing since January 1, 1991 that COMERICA was required to file with the
SEC since such date (the "COMERICA SEC Documents"), all of which have been made
available to UBT. As of their respective dates, the COMERICA SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such COMERICA SEC Documents, and none of the
COMERICA SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of COMERICA included in
the COMERICA SEC Documents comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to recurring adjustments
normal in nature and amount) the consolidated financial position of COMERICA as
at the dates thereof and the consolidated results of its operations and cash
flows for the periods then ended.
Section 4.7 Accuracy of Information Supplied.
4.7.1 No representation or warranty of COMERICA
contained in this Agreement or any statement, schedule, exhibit or certificate
given or to be given by or on behalf of COMERICA to UBT in connection herewith
and none of the information supplied or to be supplied by COMERICA to UBT under
this Agreement contains or will contain any untrue statement of
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material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
4.7.2 None of the information supplied or to be
supplied by COMERICA for inclusion or incorporation by reference in, or
relating to COMERICA and included or incorporated by reference in, (i) the
Registration Statement on Form S-4 to be filed with the SEC by COMERICA in
connection with the issuance of shares of COMERICA Common Stock in the Merger
(including the Proxy Statement and prospectus constituting a part thereof, the
"Registration Statement") will, at the time the Registration Statement becomes
effective under the Securities Act, 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 therein, in light of the circumstances under
which they were made, not misleading; (ii) the Proxy Statement and any
amendment or supplement thereto will, at all times from the date of mailing to
shareholders of UBT through the date of the meeting of shareholders of UBT to
be held in connection with the Merger, 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 therein, in light of the circumstances under
which they were made, not misleading; and (iii) the statements, correspondence,
applications and forms to be filed with securities or "blue sky" authorities,
self regulatory authorities, the NYSE or any Governmental Entity in connection
with the Merger, the issuance of any shares of COMERICA Common Stock in
connection with the Merger, or any Requisite Regulatory Approvals will, at the
time filed or at the time they become effective, 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 statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement (except for such portions thereof that relate only to UBT and its
Subsidiaries) will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
Section 4.8 Compliance With Applicable Laws. Except as disclosed
in the COMERICA SEC Documents filed prior to the date of this Agreement, the
businesses of COMERICA and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation, except for violations which
individually or in the aggregate would not, have a Material Adverse Effect on
COMERICA and its Subsidiaries taken as a whole. No investigation or review by
any Governmental Entity with respect to COMERICA is pending or, to the
knowledge of COMERICA, threatened, nor has any Governmental Entity indicated to
COMERICA an intention to conduct the same, other than those previously
disclosed to UBT, the outcome of which, as far as can be reasonably foreseen,
will not have a Material Adverse Effect on COMERICA or any Subsidiary.
Section 4.9 Litigation. Except as disclosed in the COMERICA SEC
Documents, there is no suit, action or proceeding pending or, to the Knowledge
of COMERICA, threatened against or affecting COMERICA and its Subsidiaries
which, if adversely determined, would have a Material Adverse Effect on
COMERICA or any Subsidiary of COMERICA taken as a whole; nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against COMERICA or any Subsidiary of COMERICA having,
or which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
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Section 4.10 Agreements with Banking Authorities. Except as set
forth on Schedule 4.10, none of COMERICA or its banking subsidiaries is a party
to any written agreement, memorandum of understanding or order or directive
with any Governmental Entity.
Section 4.11 Performance of Obligations. COMERICA and its
Subsidiaries have performed in all material respects all of the obligations
required to be performed by them to date and none of COMERICA nor any of its
Subsidiaries is in default under or in breach of any term or provision of any
covenant, contract, lease, indenture or any other covenant to which it is a
party, is subject or is otherwise bound, and no event has occurred that, with
the giving of notice or the passage of time or both, would constitute such
default or breach, where such default or breach would have a Material Adverse
Effect on COMERICA and its Subsidiaries, taken as a whole. To COMERICA's
Knowledge, no party with whom COMERICA or its Subsidiaries has an agreement
that is of material importance to the business of COMERICA and its Subsidiaries
taken as a whole, is in default thereunder.
Section 4.12 Brokers and Finders. COMERICA is not a party to or
obligated under any agreement with any broker or finder relating to the
transactions contemplated hereby, and neither the execution of this Agreement
or the Subsidiary Merger Agreement nor the consummation of the transaction
provided for herein or therein will result in any liability to any broker or
finder. COMERICA agrees to indemnify and hold harmless UBT and its affiliates
and to defend with counsel selected by UBT and reasonably satisfactory to
COMERICA from and against any liability, cost or expense, including attorneys'
fees, incurred in connection with a breach of this Section 4.12.
Section 4.13 Absence of Material Adverse Change. Except as
disclosed in COMERICA SEC Documents, since December 31, 1993, the businesses of
COMERICA and its Subsidiaries have been conducted only in the ordinary course,
in the same manner as theretofore conducted, and no event or circumstance has
occurred or is expected to occur which resulted in or is likely to result in a
Material Adverse Effect on COMERICA.
Section 4.14 Undisclosed Liabilities. COMERICA and its
Subsidiaries have no liabilities or obligations, either accrued, contingent or
otherwise, that are material to COMERICA and its Subsidiaries taken as a whole
and that have not been: (a) reflected or disclosed in the COMERICA Financial
Statements; (b) incurred subsequent to January 1, 1994 in the ordinary course
of business consistent with past practice; or (c) disclosed in writing to UBT
prior to the date of this Agreement. COMERICA knows of no basis for the
assertion against it or any of its Subsidiaries of any liability, obligation or
claim (including without limitation that of any Governmental Entity) that is
likely to result in or cause a Material Adverse Effect on COMERICA and its
Subsidiaries, taken as a whole, that is not fairly reflected in the COMERICA
Financial Statements or otherwise disclosed in writing to UBT prior to the date
of this Agreement.
Section 4.15 Disclosure in Schedules. Anything disclosed by
COMERICA or any of its Subsidiaries in the Schedules to this Agreement shall be
considered to have been disclosed for purposes of all representations,
warranties and covenants of such party under this Agreement.
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Section 4.16 No Actual Knowledge of Misrepresentation or Breach of
Warranty. In connection with any investigation of UBT conducted by
COMERICA, COMERICA has not, to its Knowledge, failed to advise UBT on or before
the date hereof of any Knowledge COMERICA may have that any of the
representations or warranties of UBT contained in this Agreement or in the
exhibits and schedules to this Agreement are not true.
Section 4.17 Taxes.
4.17.1 Filing of Returns. COMERICA has duly prepared
and filed federal, state, local and foreign Returns (for tax or informational
purposes) which were required to be filed by or in respect of COMERICA and its
Subsidiaries, or any of their properties, income and/or operations on or prior
to the Closing Date. As of the time of filing, the foregoing Returns correctly
reflect the material facts regarding the income, business, assets, operations,
activities, status, and any other information required to be shown thereon.
4.17.2 Payment of Taxes. With respect to all Taxes
imposed on COMERICA or any Subsidiary or for which COMERICA is or could be
liable, whether to taxing authorities (as, for example, under law) or to other
Persons or entities (as, for example, under tax allocation agreements), with
respect to all taxable periods or portions of periods ending on or before the
Closing Date, all applicable tax laws and agreements have been or will be fully
complied with, and all such amounts required to be paid by or on behalf of
COMERICA or any Subsidiary to taxing authorities or others on or before the
date hereof have been paid.
4.17.3 Audit History. Except as previously
disclosed to UBT, there has not, within the last year, been any review or audit
by any taxing authority of any Tax liability of COMERICA or any Subsidiary.
Except as previously disclosed to UBT, COMERICA and its Subsidiaries have not
received any notice of any pending or threatened audit by the Internal Revenue
Service or any state, local or foreign agency related to COMERICA's and its
Subsidiaries' Tax or information returns or Tax liability for any period and no
claim for assessment or collection of Taxes has been asserted against COMERICA
or its Subsidiaries. COMERICA and its Subsidiaries currently have no unpaid
deficiency assessed by the Internal Revenue Service or any state, local or
foreign taxing authority with respect to any of COMERICA's and its
Subsidiaries' Tax returns filed for fiscal years ended on or after December 31,
1993 through Closing Date, nor, to the Knowledge of COMERICA, is there reason
to believe that any deficiency will be assessed.
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Section 4.18 No Knowledge Regarding Approvals. COMERICA has no
reason to believe that the Requisite Regulatory Approvals will impose any
condition which is materially burdensome upon UBT, COMERICA, INTERIM, their
respective Affiliates or the Surviving Corporation or will require the
divestiture by COMERICA of any material Subsidiary or of a material portion of
the business of COMERICA.
Section 4.19 Effective Date of Representations, Warranties,
Covenants and Agreements. Each representation, warranty, covenant and
agreement of COMERICA set forth in this Agreement shall be deemed to be made on
and as of the date hereof and as of the Effective Time.
ARTICLE 5 ADDITIONAL AGREEMENTS
Section 5.1 Access to Information, Due Diligence, etc.
5.1.1 Upon reasonable notice, UBT and its
subsidiaries shall allow COMERICA and INTERIM and their accountants, counsel
and other representatives reasonable access during business hours to its
officers, employees, properties, books, contracts, commitments and records and
from the date hereof through the Effective Time, shall furnish to COMERICA as
soon as practicable, (i) a copy of each UBT Filing filed since the date of this
Agreement after such document has been filed with the appropriate Governmental
Entity; (ii) unless otherwise prohibited by law, a copy of each report,
schedule and other documents filed or received by it during such period with
any Regulatory Authority or the Internal Revenue Service (as to documents other
than related to employees or customers and other than those distributed to
banks generally); (iii) as promptly as practicable following the end of each
calendar month after the date hereof, a consolidated balance sheet of UBT as of
the end of such month; and (iv) all other information concerning its business,
properties, assets, financial condition, results of operations, liabilities,
personnel and otherwise as COMERICA or INTERIM may reasonably request.
5.1.2 Upon reasonable notice, COMERICA shall allow
UBT and its accountants, counsel and other representatives such access to its
officers, employees, properties, books, contracts, commitments and records as
COMERICA provides to financial analysts in the normal course of business and,
from the date hereof through the Effective Time at UBT's request, shall furnish
to UBT as soon as practicable, a copy of each COMERICA SEC Document filed since
the date of this Agreement and any other information relating to its existing
business, properties, financial condition, results of operations and personnel
as UBT may reasonably request.
5.1.3 UBT, INTERIM and COMERICA each agrees to keep
confidential and not divulge to any other party or Person (other than to the
employees, attorneys, accountants and consultants of each who have a need to
receive such information and other than as may be required by law or the rules
of the NYSE) any information received from the other, unless and until the
earlier of (i) the second anniversary of the date on which this Agreement
terminates; and (ii) the date on
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which such documents and other information otherwise becomes publicly
available. In the event of termination of this Agreement for any reason, the
parties shall promptly return or at the election of the other party destroy all
documents obtained from the other and any copies or notes of such documents
(except as otherwise required by law) and, upon the request of the other party,
confirm such destruction to the other in writing.
Section 5.2 Shareholder Approval.
5.2.1 UBT shall promptly call a meeting of its
shareholders to be held at the earliest practicable date after the date on
which the initial Registration Statement is filed with the SEC for the purpose
of ratifying and confirming this Agreement and authorizing the Subsidiary
Merger Agreement and the Merger. The UBT Board of Directors will recommend to
the UBT shareholders ratification and confirmation of this Agreement, the
Subsidiary Merger Agreement and the Merger; provided, however, that the UBT
Board of Directors may withdraw such recommendation if such Board of Directors
believes in good faith that a Superior Proposal (defined below) has been made
and shall have determined in good faith, after consultation with its outside
legal counsel, that the withdrawal of such recommendation is necessary for such
Board of Directors to comply with its fiduciary duties under applicable law.
5.2.2 Prior to the Effective Time of the Merger,
COMERICA, as the sole shareholder of INTERIM, shall take all action proper or
advisable for the consummation of the Merger by INTERIM.
Section 5.3 Taking of Necessary Action.
5.3.1 Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees, subject to applicable laws and
the fiduciary duties of UBT's, COMERICA's or INTERIM's Board of Directors as
advised in writing by counsel, to use all reasonable efforts promptly to take
or cause to be taken all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Subsidiary Merger Agreement, including, without limitation, the
delivery of any certificate or other document reasonably requested by counsel
to a party to this Agreement. Without limiting the foregoing, COMERICA, UBT
and INTERIM will use their reasonable efforts to obtain all consents of third
parties and Government Entities necessary or, in the reasonable opinion of
COMERICA and INTERIM or UBT, advisable for the consummation of the transactions
contemplated by this Agreement. Without limiting the foregoing, COMERICA shall
cause INTERIM to take all actions necessary to execute and file the Subsidiary
Merger Agreement and to effect all transactions contemplated of INTERIM by this
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or the
Subsidiary Merger Agreement, or to vest the Surviving Corporation with full
title to all properties, assets, rights, approvals, immunities and franchises
of UBT and its Subsidiaries, the proper officers or directors of COMERICA,
INTERIM or UBT, as the case may be, shall take all such necessary action.
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5.3.2 UBT shall use its best efforts to cause each
director, executive officer and other Person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act and for purposes of qualifying
for "pooling-of-interests" treatment for accounting purposes) of UBT to deliver
to COMERICA, within 20 Business Days after the date of this Agreement and in
any event prior to the date the Registration Statement on Form S-4 is initially
filed, a written agreement in the form attached hereto as Exhibit 7.2.15.
Section 5.4 Registration Statement and Applications.
5.4.1 COMERICA and UBT will cooperate and jointly
prepare and file as promptly as practicable the Registration Statement (in
which the Proxy Statement will be included as a prospectus), the statements,
applications, correspondence or forms to be filed with appropriate State
securities law regulatory authorities, and the statements, correspondence,
applications or forms to be filed to obtain the Requisite Regulatory Approvals
to consummate the transactions contemplated by this Agreement. Each of
COMERICA and UBT shall use all reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing, and thereafter mail the Proxy Statement to UBT's
shareholders. COMERICA shall prepare and file the listing application to be
filed with the New York Stock Exchange with respect to the COMERICA Common
Stock to be issued in the Merger. Each party will furnish all financial or
other information, including independent public accountant comfort letters
relating thereto, certificates, consents and opinions of counsel concerning it
and its Subsidiaries reasonably deemed necessary by the other party for the
filing or preparation for filing of the Registration Statement and related
matters.
5.4.2 Each party shall provide to the other at the
request of the other party: (i) immediately prior to the filing thereof, copies
of all material statements, applications, correspondence or forms to be filed
with State securities law regulatory authorities, the SEC and other appropriate
regulatory authorities to obtain the Requisite Regulatory Approvals to
consummate the transactions contemplated by this Agreement; provided, however,
that no approval need be obtained from any party to which such materials are
provided; and (ii) promptly after delivery to, or receipt from, such regulatory
authorities all written communications, letters, reports or other documents
relating to the transactions contemplated by this Agreement.
5.4.3 COMERICA, INTERIM and UBT shall receive
opinions of their respective counsel, addressed to the parties and dated the
date the Registration Statement becomes effective and the date of the
shareholders meeting in substantially the forms previously agreed upon.
Section 5.5 Expenses.
5.5.1 Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring the same;
provided, however, that COMERICA will file on a timely basis at its own expense
the reports required by Rule 144(c) of the Securities Act.
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5.5.2 UBT's expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement, including
attorneys', accountants', investment bankers' and any other fees, collectively
shall not exceed the sum of $1,500,000 without the prior written approval of
COMERICA, which shall not be unreasonably withheld. UBT shall use its best
efforts to ensure that its attorneys, accountants, investment bankers and other
consultants engaged in connection with the transaction contemplated by this
Agreement submit full and final bills on the Closing Date.
Section 5.6 Notification of Certain Events.
5.6.1 UBT shall provide to COMERICA and INTERIM, as
soon as practicable, written notice (sent via facsimile and overnight mail or
courier) of the occurrence or failure to occur of any of the events,
circumstances or conditions that are the subject of Sections 6.1 and 6.2, which
notice shall provide reasonable detail as to the subject matter thereof.
5.6.2 COMERICA shall provide to UBT as soon as
practicable, written notice (sent via facsimile and overnight mail or courier)
of the occurrence or failure to occur of any of the events, circumstances or
conditions that are the subject of Section 6.3, which notice shall provide
reasonable detail as to the subject matter thereof.
5.6.3 The parties shall promptly advise each other
in writing of any change or event which could reasonably be expected to have a
Material Adverse Effect on any such party.
5.6.4 UBT shall immediately notify COMERICA in
writing in the event that UBT becomes aware that the Registration Statement or
Proxy Statement at any time contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or that the Registration Statement or the Proxy
Statement otherwise is required to be amended as supplemented, which notice
shall specify, in reasonable detail, the circumstances thereof.
Section 5.7 Environmental Assessment.
5.7.1 COMERICA and INTERIM shall have the right to
conduct before the Closing Date, but to be commenced no later than 60 days
after the date of this Agreement, at their sole expense, environmental site
investigations and assessments ("Site Assessments") covering any real property
owned or leased by UBT (including Other Real Estate Owned) or held in trust or
otherwise managed by UBT, for the purpose of determining whether there exists
on such real property any environmental condition which could result in any
liability, cost or expense to COMERICA, INTERIM, the Surviving Corporation or
any other owner, user or occupant of such property relating to Hazardous
Substances or other adverse environmental conditions. Such Site Assessment may
include both above and below the ground testing for environmental damage or the
presence of Hazardous Substances on such property as may be reasonably
necessary to conduct the
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Site Assessment in the opinion of the persons conducting such Site Assessment
and UBT shall allow such persons access to such property during normal business
hours and upon reasonable prior notice in order to permit them to conduct the
Site Assessment and shall otherwise cooperate with such persons in connection
therewith. In exercising its rights hereunder, COMERICA shall coordinate with
UBT to avoid unduly interfering with the conduct of business by UBT and its
Subsidiaries. For invasive testing (exclusive of asbestos sampling)(e.g., soil
and soil boring testing), COMERICA will first present to UBT the plan of
testing that is contemplated by COMERICA and COMERICA may not conduct such
testing without UBT's prior written consent, which shall not be unreasonably
withheld or delayed. In connection with such inspection and testing, COMERICA
shall obtain at its sole cost and expense all permits and licenses required in
connection with the performance of such work. COMERICA shall repair any
damages caused by its tests or inspections. COMERICA hereby indemnifies UBT
for all injuries and damages to persons or property caused by such surveys and
testing for the cost of removing all mechanics' or materialmen's liens on the
inspected property resulting from such surveys and testing ordered by COMERICA.
As used herein, "Disclosed Matters" shall mean all information contained in the
Site Assessments obtained by COMERICA.
5.7.2 If any such Site Assessment discloses any
environmental condition which would be reasonably likely to have a Material
Adverse Effect on such real property, COMERICA and INTERIM shall have the right
and option to terminate this Agreement prior to the Closing Date and to declare
it null and void pursuant to Section 8.1.9 of this Agreement by delivering
written notice of termination to UBT within thirty (30) days after the receipt
of each such Site Assessment and including with such notice a copy of such Site
Assessment. For purposes of this Section 5.7.2, Material Adverse Effect shall
mean a diminution in value (from the appraised value of the property in
question), of more than ten percent and at least $150,000.
5.7.3 COMERICA and INTERIM shall not provide any
such Site Assessment, or any non-public information contained therein, to any
third party, including any Governmental Entity, unless otherwise required to do
so by law or regulation.
Section 5.8 Schedules, Closing Schedules. All schedules
referred to in this Agreement have be previously and separately delivered by
the parties. On the Closing Date, UBT shall prepare updates of the schedules
provided for in Articles 3 and 7 of this Agreement and shall deliver to
COMERICA revised schedules containing the updated information (the "Closing
Schedules")(or a certificate signed by UBT's Chief Executive Officer stating
that there have been no changes on the applicable schedules). The Closing
Schedules shall be dated as of the day prior to the Closing Date and shall
contain information as of the day prior to the Closing Date or as of such
earlier date as is practicable in the circumstance.
Section 5.9 Indemnification and Insurance.
5.9.1 For a period of six years after the Effective
Time, COMERICA shall use its commercially reasonable efforts to cause to be
maintained in effect policies of directors' and officers' liability insurance
(with such coverage, terms and conditions as are no less advantageous than
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the insurance presently maintained by COMERICA with respect to its officers and
directors) with respect to all matters arising from facts or events which
occurred before the Effective Time for which UBT would have had an obligation
to indemnify their directors and officers; provided, however, that in no event
shall COMERICA be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this Section 5.9.1 any amount per annum in
excess of 300% of the amount of the 1994 annual premiums paid by UBT for such
insurance (the "Maximum Amount"). If the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, COMERICA shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount.
5.9.2 COMERICA agrees that all rights to
indemnification and all limitations of liability existing in favor of the
directors and officers of UBT as provided in UBT's Articles of Incorporation or
Bylaws or any Indemnification Agreement with respect to matters occurring prior
to the Effective Time shall survive the Merger and shall continue in full force
and effect, without any amendment thereto, for a period of six years from the
Effective Time; provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim. Nothing contained in this
Section 5.9.2 shall be deemed to preclude any rights to indemnification or
limitations on liability provided in UBT's Articles of Incorporation or Bylaws
or the similar governing documents of any of UBT's Subsidiaries with respect to
matters occurring subsequent to the Effective Time to the extent that the
provisions establishing such rights or limitations are not otherwise amended to
the contrary.
5.9.3 If COMERICA or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity, then
and in each such case, COMERICA shall take no action to impair the rights
provided in this Section 5.9.
5.9.4 The provisions of this Section are intended to
be for the benefit of, and shall be enforceable by, each director or officer of
UBT and his or her heirs and representatives.
Section 5.10 Additional Accruals.
5.10.1 At COMERICA's or INTERIM's request, UBT shall,
consistent with Generally Accepted Accounting Principles, establish such
additional accruals and reserves immediately prior to the Effective Time as may
be necessary to conform UBT's accounting and credit loss reserve practices and
methods to those of COMERICA and INTERIM or its Subsidiaries; provided,
however, that no accrual or reserve made by UBT pursuant to this Section
5.10.1, or any litigation or regulatory proceeding arising out of any such
accrual or reserve, or any other effect on UBT resulting from UBT's compliance
with this Section 5.10.1, shall constitute or be deemed to be a breach,
violation of or failure to satisfy any representation, warranty, covenant,
condition or other provision of this Agreement or otherwise be considered in
determining whether any such breach,
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violation or failure to satisfy shall have occurred; and provided further,
however, that no accrual or reserve made by UBT pursuant to this Section 5.10.1
shall be used by the parties in the calculation of the Conversion Rate.
5.10.2 UBT shall continue to accrue anticipated
bonuses and profit sharing amounts in a manner consistent with UBT's prior
practice.
ARTICLE 6 CONDUCT OF BUSINESS
Section 6.1 Affirmative Conduct of UBT. During the period from
the date of execution of this Agreement through the Effective Time, UBT agrees
to carry on its business, and to cause its Subsidiaries to carry on their
businesses, in the ordinary course in substantially the manner in which
heretofore conducted, subject to changes in law applicable to all California
banks and directives from regulators, and use all commercially reasonable
efforts to preserve intact its business organization, keep available the
services of its officers and employees, (other than terminations in the
ordinary course of business) and preserve its relationship with customers,
suppliers and others having business dealings with it; and, to these ends, will
fulfill each of the following;
6.1.1 Use its commercially reasonable efforts, or
cooperate with others, to expeditiously bring about the satisfaction of the
conditions specified in Article 7 hereof;
6.1.2 Advise COMERICA promptly in writing of any
Material Adverse Change known to UBT or of any matter which would make the
representations and warranties set forth in Article 3 hereof not true and
correct in any respect as of the effective date of the Registration Statement
and at the Effective Time;
6.1.3 Keep in full force and effect all of the
existing material permits and licenses of UBT and its Subsidiaries;
6.1.4 Use its commercially reasonable efforts to
maintain insurance or bonding coverage on all properties owned or leased by it
or for which it is responsible to maintain such coverage and on its business
operations, and carry not less than the same coverage for fidelity, public
liability, personal injury, property damage and other risks equal to that which
is in effect as of the date of this Agreement; and notify COMERICA in writing
promptly of any facts or circumstances which could affect UBT's ability to
maintain such insurance or bonding coverage;
6.1.5 Perform its contractual obligations and not
amend, modify, or, except as they may be terminated in accordance with their
terms, terminate any material contract, agreement, understanding, commitment,
or offer, whether written or oral, (collectively referred to as an
"Understanding") or materially default in the performance of any of its
obligations under any Understanding where such action would have a Material
Adverse Effect on UBT;
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6.1.6 Duly observe and conform to all legal
requirements applicable to its business, except for any failure to so observe
and conform, that would not, individually or in the aggregate, and, in the
future will not, have a Material Adverse Effect on UBT;
6.1.7 Duly and timely file as and when due all
reports and returns required to be filed with any Governmental Entity;
6.1.8 Maintain its assets and properties in good
condition and repair, normal wear and tear excepted;
6.1.9 Promptly advise COMERICA in writing of any
event or any other transaction within UBT's Knowledge whereby any Person or
related group of Persons acquires, directly or indirectly, record or beneficial
ownership (as defined in Rule 13d-3 promulgated by the SEC pursuant to the
Exchange Act) or control of 5% or more of the outstanding shares of UBT Common
Stock prior to the record date fixed for the UBT shareholders' meeting or any
adjourned meeting thereof to approve the transactions contemplated herein;
6.1.10 Charge off, in a manner consistent with past
practices, all loans, leases, receivables and other assets, or portions
thereof, deemed uncollectible in accordance or consistent with Generally
Accepted Accounting Principles, regulatory accounting principles, applicable
law or regulation, or classified as "loss" or as directed by any regulatory
authority, unless such classification or direction has been disregarded in good
faith and UBT has submitted in writing to such regulatory authority the basis
upon which it has so disregarded such classification or direction; and maintain
the allowance for loan losses of UBT at a level which is adequate to provide
for all known and reasonably expected losses on assets outstanding and other
inherent risks in UBT's loan portfolio;
6.1.11 Furnish to COMERICA, as soon as practicable,
and in any event within fifteen days after it is prepared, unless the
disclosure is prohibited by applicable law or regulation, (i) a copy of any
report submitted to the board of directors of UBT and access to the working
papers related thereto, provided, however, that UBT need not furnish COMERICA
communications of UBT's legal counsel regarding UBT's rights against and
obligations to COMERICA or its Affiliates under this Agreement or books,
records and documents covered by the attorney-client privilege, or which are
attorneys' work product, (ii) copies of all reports, renewals, filings,
certificates, statements, correspondence and other documents specific to UBT
filed with or received from the SEC, Federal Reserve Board, any Federal Reserve
Bank, the FDIC, the California State Banking Department or any other
Governmental Entity; (iii) monthly unaudited statements of condition and
statements of income for and quarterly unaudited consolidated and consolidating
statements of condition and statements of income for UBT, in each case prepared
on a basis consistent with past practice, and (iv) such other reports as
COMERICA may reasonably request relating to UBT. Each of the financial
statements of UBT delivered pursuant to this subsection 6.1.11 shall be
accompanied by a certificate of the Chief Financial Officer of UBT to the
effect that such financial statements fairly present the financial information
presented therein of UBT, for the periods covered, subject to recurring audit
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adjustments normal in nature and amount, necessary for a fair presentation and
are prepared on a basis consistent with past practice;
6.1.12 UBT agrees that through the Effective Time, as
of their respective dates, (i) each UBT Filing will be true and complete in all
material respects; and (ii) each UBT Filing will comply in all material
respects with all of the statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it will be filed and none
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
therein, in light of the circumstances under which they will be made, not
misleading. Any financial statement contained in any of such UBT Filings that
is intended to present the financial position of the entities or entity during
the periods involved to which it relates will fairly present the financial
position of such entities or entity and will be prepared in accordance with
Generally Accepted Accounting Principles or applicable banking regulations
consistently applied, except as stated therein;
6.1.13 Maintain reserves for contingent liabilities
in accordance with Generally Accepted Accounting Principles and consistent with
past practices;
6.1.14 Promptly notify COMERICA of the filing of any
litigation, or the filing of any governmental or regulatory action, including
any investigation or notice of investigation, or similar proceeding or notice
of any claims against UBT or any of its assets;
6.1.15 [Intentionally Left Blank].
6.1.16 Inform COMERICA of the amounts and categories
of any loans, leases or other extensions of credit that have been classified by
any bank regulatory authority or by any unit of UBT as "Specially Mentioned,"
"Renegotiated," "Substandard," "Doubtful," "Loss" or any comparable
classification ("Classified Credits"). UBT will furnish to COMERICA, as soon as
practicable, and in any event within fifteen days after the end of each
calendar month, schedules including the following: (i) Classified Credits by
type (including each credit in an amount equal to or greater than $25,000), and
its classification category; (ii) nonaccrual credits by type (including each
credit in an amount equal to or greater than $25,000), (iii) renegotiated loans
(loans on which interest has been renegotiated to lower than market rates
because of the financial condition of the borrowers) by type, (iv) delinquent
credits by type (including each delinquent credit in an amount equal to or
greater than $25,000), including an aging into 30-89 and 90+ day categories;
(v) loans or leases charged off, in whole or in part, during the previous month
by type (including each such loan or lease in an amount equal to or greater
than $25,000); and (vi) other real estate or assets owned stating with respect
to each its type;
6.1.17 Furnish to COMERICA, upon COMERICA's request,
schedules with respect to the following: (i) participating loans and leases,
stating, with respect to each, whether it is purchased or sold, the loan or
lease type; (ii) loans or leases (including any commitments) by UBT to any UBT
director, officer at or above the Vice President level, or shareholder holding
5% or more
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of the capital stock of UBT, including with respect to each such loan or lease
the identity and, to the best knowledge of UBT, the relation of the borrower to
UBT, the loan or lease type and the outstanding and undrawn amounts; and (iii)
standby letters of credit, by type, (including each letter of credit in a face
amount equal to or greater than $25,000); and
6.1.18 Furnish to COMERICA copies of each credit
authorization package, consisting of all applications for and financial
information regarding loans, renewals of loans or other extensions of credit of
$500,000 or more (on a non-cumulative basis), which are approved by UBT after
the date of this Agreement, within five Business Days of preparation of such
packages.
Section 6.2 Negative Covenants of UBT. During the period from the
date of execution of this Agreement through the Effective Time, UBT agrees
(except to the extent COMERICA shall otherwise consent in writing), that it
shall not:
6.2.1 (i) declare or pay any dividend on or make any
other distribution in respect of any of its capital stock, other than regular
quarterly cash dividends in an amount not to exceed $.35 per share; (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) repurchase or otherwise acquire any
shares of its capital stock, other than through customary repossession;
6.2.2 take any action that would result in any of
the representations and warranties set forth in the Agreement becoming untrue
in any material respect or in any of the conditions to the Merger set forth in
Article 7 not being satisfied, except to the extent such actions are undertaken
in accordance with applicable law, regulation or at the direction of any
regulatory authority;
6.2.3 except as specifically contemplated by the UBT
Stock Option Plans, (and previously authorized to be issued), and the Stock
Option Agreement, issue, deliver or sell, authorize the issuance, delivery or
sale of or purchase any shares of its capital stock or any class of securities
convertible into capital stock, or rights, warrants or options, including
options under any stock Option Plans;
6.2.4 amend its articles of incorporation or bylaws,
except as required by applicable law or by the terms of this Agreement;
6.2.5 authorize or knowingly permit any of its
representatives, directly or indirectly, to solicit or encourage any
Acquisition Proposal (as hereinafter defined) or participate in any discussions
or negotiations with, or provide any nonpublic information to, any Person or
group of Persons (other than COMERICA, INTERIM and their representatives)
concerning any Acquisition Proposal. UBT shall notify COMERICA immediately if
an inquiry regarding an Acquisition Proposal is received by UBT, including the
terms thereof. For purposes of this Section 6.2.5, "Acquisition Proposal"
shall mean any (i) proposal pursuant to which any Person other than COMERICA or
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INTERIM would acquire or participate in a merger or other business combination
involving UBT; (ii) proposal by which any Person or group, other than COMERICA
or INTERIM, would acquire the right to vote ten percent (10%) or more of the
capital stock of UBT entitled to vote thereon for the election of directors;
(iii) acquisition of the assets of UBT other than in the ordinary course of
business; or (iv) acquisition in excess of ten percent (10%) of the outstanding
capital stock of UBT, other than as contemplated by this Agreement.
Notwithstanding the foregoing, nothing contained in this Agreement shall
prevent UBT or its Board of Directors from (A) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity in connection with an unsolicited bona fide written Acquisition
Proposal by such person or entity or recommending an unsolicited bona fide
written Acquisition Proposal to the shareholders of UBT, if and only to the
extent that (1) the Board of Directors of UBT believes in good faith (after
consultation with and the concurrence of its financial advisor) that such
Acquisition Proposal would, if consummated, result in a transaction materially
more favorable to UBT's shareholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to in this Agreement as a "Superior Proposal") and the
UBT Board of Directors determined in good faith after consultation with its
outside legal counsel that such action is necessary for UBT to comply with its
fiduciary duties to shareholders under applicable law and (2) prior to
furnishing such non-public information to, or entering into discussions or
negotiations with, such person or entity, the UBT Board of Directors received
from such person or entity an executed confidentiality agreement, with terms no
more favorable to such party than those contained in the Confidentiality
Agreement between UBT and COMERICA, or (B) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
6.2.6 acquire or agree to acquire by merging,
consolidating with, or by purchasing a substantial portion of the assets of, or
in any other manner, any business or any Person or otherwise acquire or agree
to acquire any assets which are material, on a consolidated basis, to UBT,
other than in the ordinary course of business consistent with prior practice;
6.2.7 sell, lease or otherwise dispose of any of its
assets which are material, individually or in the aggregate, to UBT, except in
the ordinary course of business consistent with prior practice;
6.2.8 incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of UBT or
any subsidiary thereof or guarantee any debt securities of others other than in
the ordinary course of business consistent with prior practice;
6.2.9 enter into any Understanding, except (A)
deposits incurred, and short-term debt securities (obligations maturing within
one year) issued, in the ordinary course of business and consistent with prior
practice, and liabilities arising out of, incurred in connection with, or
related to the consummation of this Agreement, (B) commitments to make loans or
other extensions of credit in the ordinary course of business and consistent
with prior practice; (C) commitments to act as trustee or agent in the ordinary
course of business and consistent with prior practice; (D) loan sales in the
ordinary course of business, without any recourse, provided that no commitment
to sell loans
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shall extend beyond the Effective Time; and (E) any Understanding that has a
value of less than $100,000 and a term of not more than one year;
6.2.10 make or enter into a commitment to make any
loan or other extension of credit, or enter into any commitment to make any
loan or other extension of credit, to any UBT or Subsidiary director, officer
or employee except in accordance with practice or policy in existence on the
date of this Agreement;
6.2.11 except in the ordinary course of business and
consistent with prior practice or as required by an existing contract or as
disclosed in Schedule 6.2.11, grant any general or uniform increase in the
rates of pay of employees or employee benefits or any increase in salary or
employee benefits of any officer, employee or agent or pay any bonus to any
Person;
6.2.12 sell, transfer, mortgage, encumber or
otherwise dispose of any assets or other liabilities except in the ordinary
course of business and consistent with prior practice or as required by any
existing contract;
6.2.13 make its credit underwriting policies,
standards or practices relating to the making of loans and other extensions of
credit, or commitments to make loans and other extensions of credit, less
stringent than those in effect on August 30, 1994;
6.2.14 except in connection with budgeted capital
expenditures for the pending opening of a branch office, make any capital
expenditures, or commitments with respect thereto, except those in the ordinary
course of business which do not exceed $250,000 in aggregate;
6.2.15 renew or extend any existing employment
contract or agreement, enter into any new employment contract or agreement or
make special or extraordinary payments to any person without the prior written
consent of COMERICA;
6.2.16 except in the ordinary course of business
consistent with prior practice, make any material investments, by purchase of
stock or securities, contributions of capital, property transfers, purchases of
any property or assets or otherwise, in any other individual, corporation or
other entity;
6.2.17 except as otherwise required to correct a
prior filing, compromise or otherwise settle or adjust any assertion or claim
of a deficiency in taxes (or interest thereon or penalties in connection
therewith) or file any appeal from an asserted deficiency except in a form
previously approved by COMERICA in writing or file or amend any federal,
foreign or state tax return or report or make any tax election or change any
method or period of accounting unless required by generally accepted accounting
principles or applicable law;
6.2.18 except as contemplated in this Agreement,
terminate any Employee Plan or Benefit Arrangement;
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6.2.19 change its fiscal year or methods of
accounting in effect at June 30, 1994, except as required by changes in
Generally Accepted Accounting Principles as concurred to by UBT's independent
auditors; or
6.2.20 take or cause to be taken any action which
would disqualify the Merger as a "pooling of interests" for accounting purposes
or the Merger as a "reorganization" within the meaning of Section 368(a) of the
IRC.
6.2.21 take or cause to be taken into Other Real
Estate Owned any property without (i) an environmental report reporting no
adverse environmental condition on such property; or (ii) the written consent
of COMERICA and INTERIM.
Section 6.3 Conduct of COMERICA. During the period from the date
of execution of this Agreement through the Effective Time, COMERICA agrees
(except to the extent UBT shall otherwise consent in writing) to do the
following:
6.3.1 Use its commercially reasonable efforts, or
cooperate with others, to expeditiously bring about the satisfaction of the
conditions specified in Article 7 hereof;
6.3.2 Not take any action that would or might result
in any of the representations and warranties set forth in the Agreement
becoming untrue or in any of the conditions to the Merger set forth in Article
7 not being satisfied, except to the extent such actions are undertaken in
accordance with applicable law, regulation or at the direction of any
regulatory authority; and
6.3.3 Not take or cause to be taken any action which
would disqualify the Merger as a "reorganization" within the meaning of Section
368(a) of the IRC as a tax free reorganization.
ARTICLE 7 CONDITIONS PRECEDENT TO CLOSING
Section 7.1 Conditions to the Parties' Obligations. The
obligations of all the parties to this Agreement to effect the Merger shall be
subject to the fulfillment of the following conditions:
7.1.1 This Agreement, the Subsidiary Merger
Agreement and the Merger shall have been validly ratified and confirmed or
authorized by the holders of a majority of the outstanding UBT Common Stock
entitled to vote.
7.1.2 All material permits, approvals and consents
required to be obtained, and all waiting periods required to expire, prior to
the consummation of the Merger under applicable federal laws of the United
States or applicable laws of any state having jurisdiction over the Merger
shall have been obtained or expired, as the case may be (all such permits,
approvals and consents and
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the lapse of all such waiting periods being referred to as the "Requisite
Regulatory Approvals"), without the imposition of any condition which is
materially burdensome upon UBT, COMERICA, INTERIM, their respective Affiliates
or the Surviving Corporation.
7.1.3 There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which: (i) makes the
consummation of the Merger illegal; (ii) requires the divestiture by COMERICA
of any material Subsidiary or of a material portion of the business of
COMERICA; or (iii) imposes any condition upon COMERICA, INTERIM or their
Subsidiaries (other than general provisions of law applicable to all banks and
bank holding companies) which in the judgment of COMERICA and INTERIM would be
materially burdensome to COMERICA or INTERIM.
7.1.4 The Registration Statement shall become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and shall
remain in effect. No legal, administrative, arbitration, investigatory or
other proceeding by any Governmental Entity shall have been instituted and, at
what would otherwise have been the Effective Time, remain pending by or before
any Governmental Entity to restrain or prohibit the transactions contemplated
hereby.
7.1.5 The shares of COMERICA Common Stock
deliverable pursuant to this Agreement shall have been duly authorized for
listing, subject to notice of issuance, on the New York Stock Exchange.
7.1.6 COMERICA and UBT shall have received an
opinion from counsel to COMERICA dated the Effective Time, subject to
assumptions and exceptions normally included, and in form and substance
reasonably satisfactory to COMERICA and UBT to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the IRC and that COMERICA, UBT will each be a
party to that reorganization within the meaning of Section 368(b) of the IRC.
7.1.7 COMERICA, INTERIM and UBT shall have received
from each of Ernst & Young and KPMG Peat Marwick, letters, dated the effective
date of the Registration Statement and the Effective Time, in form and
substance satisfactory to COMERICA, INTERIM and UBT and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
Section 7.2 Conditions to COMERICA's and INTERIM's Obligations.
The obligations of COMERICA and INTERIM to effect the Merger shall be subject
to the fulfillment (or waiver by COMERICA and INTERIM) of the following
conditions:
7.2.1 Except as otherwise provided in this Section
7.2, (a) the representations and warranties of UBT contained in Article 3 shall
be true in all material respects as of the Effective Time as though made at the
Effective Time, except to the extent they expressly refer to an earlier time
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and except where the failure to be true, individually or in the aggregate,
would not have or would not be reasonably likely to have, a Material Adverse
Effect on UBT or upon the consummation of the transactions contemplated hereby;
(b) UBT shall have duly performed and complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by them prior to or at the Effective Time, except where the
failure to so perform and comply, individually or in the aggregate, would not
have or would not be reasonably likely to have, a Material Adverse Effect on
UBT or upon the consummation of the transactions contemplated hereby; (c) none
of the events or conditions entitling COMERICA to terminate this Agreement
under Article 8 shall have occurred and be continuing; and (d) UBT shall each
have delivered to COMERICA a certificate dated the date of the Effective Time
and signed by its Chief Executive Officer to the effect set forth in
subsections 7.2.1 (a), (b) and (c).
7.2.2 Any consent required for the consummation of
the Merger under any agreement, contract or license to which UBT is a party or
by or under which it is bound or licensed, the withholding of which might have
a Material Adverse Effect on COMERICA or UBT or the transactions contemplated
by this Agreement shall have been obtained.
7.2.3 COMERICA shall have received the Closing
Schedules and such Closing Schedules shall not reflect any item that was not on
the schedules delivered on the date of execution of this Agreement that would
have or would be reasonably likely to have, a Material Adverse Effect on UBT or
upon the consummation of the transactions contemplated hereby.
7.2.4 [Intentionally Left Blank].
7.2.5 UBT's reserve for possible loan losses on the
Determination Date shall be at least the greater of $4,700,000 or 2.25% of
UBT's total loans outstanding on that date; provided, however, that this
condition shall be met (a) to the extent loan loss reserves are reduced from
the date of this Agreement by the actual charge-off of loans that are
specifically provided for in the Loan Loss Reserve Allocation Report; or (b) to
the extent loan loss reserves are reduced from the date of this Agreement by
the actual charge-off of loans where such charge-off specifically has been
provided for since June 30, 1994 by an appropriate charge to earnings.
7.2.6 UBT's Non-Performing Assets (including Other
Real Estate Owned and in substance foreclosures) outstanding on the last day of
the month immediately preceding the Effective Time shall be no more than
$4,711,431.
7.2.7 Between the date of this Agreement and the
Effective Time, no event or circumstance shall have occurred which had a
Material Adverse Effect on UBT or its Subsidiaries and COMERICA and INTERIM
shall have received a certificate signed on behalf of UBT by UBT's Chief
Executive Officer to such effect.
7.2.8 COMERICA shall have received from KPMG Peat
Marwick a letter dated the Effective Time, after customary review but without
audit, in form and substance satisfactory
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to COMERICA, (i) certifying that the conditions set forth in subsections 7.2.5
and 7.2.6 have been satisfied and (ii) setting forth, as of the Business Day
immediately prior to the Closing Date, (A) UBT Consolidated Net Worth; (B)
Fully Diluted UBT Common Stock; (C) UBT's reserve for possible loan losses;
and (D) the amount of UBT's Non-Performing Assets.
7.2.9 COMERICA shall have received from its legal
counsel the opinion called for by Section 5.4.3.
7.2.10 COMERICA shall have received from legal
counsel to UBT an opinion dated the Effective Time as to securities and
corporate matters in form and substance customary for transaction of this
nature and reasonably satisfactory to COMERICA.
7.2.11 [Intentionally Left Blank].
7.2.12 Counsel for COMERICA shall have approved, in
the exercise of counsel's reasonable discretion, 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 COMERICA hereunder or that are reasonably requested by such
counsel.
7.2.13 The sale of the COMERICA Common Stock
resulting from the Merger shall have been qualified or registered with the
appropriate State securities or "blue sky" regulatory authorities of all
jurisdictions in which qualification or registration is required under
applicable laws, and such qualifications or registrations shall not have been
suspended or revoked.
7.2.14 UBT shall have delivered to COMERICA not later
than 30 days prior to the date the Registration Statement on Form S-4 becomes
effective, all of the executed Affiliate Agreements in the form attached hereto
as Exhibit 7.2.14.
7.2.15 COMERICA shall have received from each of KPMG
Peat Marwick and Ernst & Young letters, dated the effective date of the
Registration Statement, the date of the meeting of UBT's shareholders in
connection with this Agreement and the Effective Time, in form and substance
satisfactory to COMERICA and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
7.2.16 COMERICA shall have received from Ernst &
Young an opinion, dated the date of the Effective Time, in form and substance
satisfactory to COMERICA, to the effect that the Merger on the terms and
conditions contained in this Agreement and in the Subsidiary Merger Agreement
will be treated for accounting purposes as a pooling of interests.
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7.2.17 A non-competition agreement in substantially
the form attached as Exhibit 7.2.17 to this Agreement.
7.2.18 The total number of shares of COMERICA Common
Stock that shall be issuable pursuant to the terms of this Agreement under any
computation shall not be greater than 2,680,820 shares, subject to adjustment
as appropriate to reflect any recapitalization, reorganization,
reclassification, split-up, merger, consolidation, exchange, stock or other
dividend or distribution (other than regular quarterly cash dividends) made,
declared or effective with respect to the COMERICA Common Stock between the
date of this Agreement and the Effective Time.
7.2.19 COMERICA shall have received the Site
Assessments provided for in Section 5.7.1, unless COMERICA shall have waived
its right to conduct such assessment, and, except as disclosed on Schedule
3.26, such Site Assessment shall not have disclosed any environmental condition
which would be reasonably likely to have a Material Adverse Effect (as defined
in Section 5.7.2) on such real property.
7.2.20 None of UBT or any of its Subsidiaries shall
be subject to any memorandum of understanding, cease and desist order, or other
agreement with any Governmental Entity restricting the conduct of UBT and its
Subsidiaries' business, prospects and operations, so as to have a Material
Adverse Effect, other than those agreements attached as Schedule 3.10 as of the
date of execution of this Agreement.
7.2.21 UBT's director-shareholders shall have
delivered to COMERICA and INTERIM not later than ten Business days from date of
this Agreement the Shareholder's Agreements in the form attached hereto as
Exhibit 7.2.21.
Section 7.3 Conditions to UBT's Obligations. The obligation of
UBT to effect the Merger shall be subject to the fulfillment (or waiver by UBT)
of the following conditions:
7.3.1 Except as otherwise provided in this Section
7.3, (a) the representations and warranties of COMERICA and INTERIM contained
in Article 4 shall be true in all material respects as of the Effective Time as
though made at the Effective Time, except to the extent they expressly refer to
an earlier time and except where the failure to be true, individually or in the
aggregate, would not have or would not be reasonably likely to have, a Material
Adverse Effect on COMERICA or INTERIM or upon the consummation of the
transactions contemplated hereby; (b) COMERICA and INTERIM shall have duly
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
prior to or at the Effective Time, except where the failure to so perform and
comply, individually or in the aggregate, would not have or would not be
reasonably likely to have, a Material Adverse Effect on COMERICA or INTERIM or
upon the consummation of the transactions contemplated hereby; (c) none of the
events or conditions entitling UBT to terminate this Agreement under Article 8
shall have occurred and be continuing; and (d) COMERICA and INTERIM shall each
have delivered to
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UBT certificates dated the date of the Effective Time and signed by a duly
authorized officer to the effect set forth in subsections 7.3.1 (a), (b) and
(c).
7.3.2 Prior to the mailing of the Prospectus/Proxy
Statement to the shareholders of UBT shall have received an opinion of Goldman,
Sachs & Co., dated the date of the Prospectus/Proxy Statement, to the effect
that, as of such date, the Conversion Rate is fair to the shareholders of UBT
from a financial point of view.
7.3.3 Counsel for UBT shall have approved, in the
exercise of counsel's reasonable discretion, 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
UBT hereunder or reasonably requested by such counsel.
7.3.4 There shall not have been any change in the
consolidated financial condition, aggregate net assets, shareholders' equity,
business, or operating results of COMERICA and its Subsidiaries taken as a
whole, from January 1, 1994 to the Effective Time that results in a Material
Adverse Effect on the consolidated financial condition, aggregate net assets,
shareholders' equity, business, or operating results of COMERICA and its
Subsidiaries taken as a whole.
7.3.5 Any consent required for the consummation of
the Merger under any agreement, contract or license to which COMERICA or
INTERIM is a party or by or under which either of them is bound or licensed,
the withholding of which might have a Material Adverse Effect on COMERICA or
UBT or the transactions contemplated by this Agreement shall have been
obtained.
7.3.6 UBT shall have received from legal counsel to
COMERICA and INTERIM an opinion dated the Effective Time opinions dated the
Effective Time as to securities and corporate matters in form and substance
customary for transaction of this nature and reasonably satisfactory to UBT.
ARTICLE 8 TERMINATION, AMENDMENTS AND WAIVERS
Section 8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of UBT:
8.1.1 by mutual consent of the Boards of Directors
of UBT, INTERIM and COMERICA;
8.1.2 by any of COMERICA, UBT or INTERIM upon the
failure to satisfy any conditions specified in Section 7.1 if such failure is
not caused by any action or inaction of the party requesting termination of
this Agreement;
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8.1.3 by any of UBT, INTERIM or COMERICA if the
Effective Time shall not have occurred by the close of business on August 31,
1995, provided such failure to close shall not have been caused by the breach
of this Agreement by the terminating party;
8.1.4 by COMERICA if an Acquisition Event shall have
occurred;
8.1.5 by any of UBT, INTERIM or COMERICA if there
shall have been a material breach of any of the representations or warranties
set forth in this Agreement on the part of the other party, which breach, in
the reasonable opinion of the non-breaching party, by its nature cannot be
cured prior to the Closing and which breach would, in the reasonable opinion of
the non-breaching party, individually or in the aggregate, have, or be
reasonably likely to have, a Material Adverse Effect on the breaching party or
upon the consummation of the transactions contemplated hereby;
8.1.6 by any of UBT, COMERICA or INTERIM if this
Agreement, the Subsidiary Merger Agreement and the Merger are not ratified and
approved by UBT's shareholders;
8.1.7 by UBT after the occurrence of a Default by
COMERICA or INTERIM and the continuance of such failure for a period of 20
Business Days after written notice of such Default, which failure to perform,
in the reasonable opinion of UBT, cannot be cured prior to the Closing;
8.1.8 by COMERICA after the occurrence of a Default
by UBT and the continuance of such failure for a period of 20 Business Days
after written notice of such Default, which failure to perform, in the
reasonable opinion of COMERICA and INTERIM cannot be cured prior to the
Closing;
8.1.9 by COMERICA in accordance with the provisions
of 5.7.2 of this Agreement;
8.1.10 [Intentionally Left Blank];
8.1.11 by COMERICA if the UBT Board of Directors does
not publicly recommend in the Prospectus/Proxy Statement that UBT's
shareholders approve and adopt this Agreement, or if after recommending in the
Prospectus/Proxy Statement that shareholders ratify and confirm this Agreement,
the UBT Board of Directors shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to COMERICA;
8.1.12 by UBT upon the failure of COMERICA or INTERIM
to satisfy any conditions specified in Section 7.3;
8.1.13 by COMERICA and INTERIM upon the failure by
UBT to satisfy any conditions specified in Section 7.2.
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Section 8.2 Effect of Termination; Survival. Except as provided
in Section 8.5, no termination of this Agreement as provided in Section 8.1 for
any reason or in any manner shall release, or be construed as so releasing, any
party hereto from its obligations pursuant to Sections 5.1.3, 5.5, 8.5 or 9.5
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.
Section 8.3 Amendment. This Agreement may be amended by the
parties hereto, by action taken by UBT's respective boards of directors or the
duly authorized committees thereof, and the duly authorized officers or boards
of directors of COMERICA and INTERIM at any time before or after approval
hereof by the shareholders of UBT; provided, however, that after any such
approval by the shareholders, no amendment shall be made which by law requires
further approval by such shareholders without such further approval.
Section 8.4 Waiver. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose shareholders
are, entitled to the benefits thereof.
Section 8.5 Liquidated Damages; Cancellation Fee.
8.5.1 Notwithstanding anything to the contrary
contained herein, in the event of the occurrence of an Acquisition Event or
termination of this Agreement pursuant to Sections 8.1.6 or 8.1.11, or pursuant
to Sections 8.1.5 or 8.1.8 followed by an Acquisition Event within 90 days of
such termination, then UBT shall pay to COMERICA, as reasonable and full
liquidated damages and reasonable compensation for the loss sustained thereby
and not as a penalty or forfeiture, the sum of $3,200,000, within ten (10)
Business Days following such occurrence. Upon the making and receipt of such
payment under this Section 8.5.1 and except for Sections 5.1.3, 5.5 or 9.5 UBT
shall have no further obligations or liabilities of any kind under this
Agreement and COMERICA and UBT shall have no further obligations of any kind
under this Agreement (but not including the Stock Option Agreement, which shall
remain in full force and effect).
8.5.2 Notwithstanding anything to the contrary
contained herein, in the event of termination by UBT of this Agreement pursuant
to Sections 8.1.5 or 8.1.7, then COMERICA and INTERIM, jointly and severally,
shall pay to UBT as reasonable and full liquidated damages and reasonable
compensation for the loss sustained thereby and not as a penalty or forfeiture,
the sum of $2,000,000, within ten (10) Business Days following such occurrence.
Upon the making and receipt of such payment under this Section 8.5.2 and except
for Sections 5.1.3, 5.5 or 9.5 COMERICA and INTERIM shall have no further
obligations or liabilities of any kind under this Agreement and COMERICA and
UBT shall have no further obligations of any kind under this Agreement (but not
including the Stock Option Agreement, which shall remain in full force and
effect).
53
<PAGE> 144
ARTICLE 9 GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time
or to a termination of this Agreement.
Section 9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt requested),
sent by confirmed overnight courier or telecopied (with electronic confirmation
and verbal confirmation of the person to whom such telecopy is addressed), on
the date such notice is so delivered, mailed or sent, as the case may be, to
the parties at the following addresses or (or any such other address for a
party as shall be specified by like notice):
If to UBT at:
UNIVERSITY BANK & TRUST COMPANY
250 Lytton
Palo Alto, California 94301
Attention: Carl J. Schmitt
If to COMERICA or INTERIM at:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
Section 9.3 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 9.4 Entire Agreement/No Third Party Rights/Assignment.
This Agreement (including the documents and instruments referred to herein):
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) except as expressly set forth herein, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder; (c) shall not be assigned by a party, by operation of law
or otherwise, without the consent of the other parties; and
54
<PAGE> 145
(d) subject to the foregoing, shall be binding upon and shall inure to the
benefit of the parties hereto and their permitted successors and assigns.
Section 9.5 Non-disclosure of Agreement. COMERICA, UBT and
INTERIM agree, except as required by law or the rules of the NYSE, so long as
this Agreement is in effect, not to issue any public notice, disclosure or
press release with respect to the transactions contemplated by this Agreement
without seeking the consent of the other party, which consent shall not be
unreasonably withheld.
Section 9.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without
regard to any applicable conflicts of law.
Section 9.7 Headings/Table of Contents. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Section 9.8 Enforcement of Agreement. The parties hereto agree
that irreparable damage will occur in the event that any of the provisions of
this Agreement or the Subsidiary Merger Agreement is not performed in
accordance with its specific terms or is otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provision hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 9.9 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, UBT and COMERICA have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first above written.
UNIVERSITY BANK & TRUST COMPANY COMERICA INCORPORATED
By: /s/ Carl J. Schmitt By: /s/ Mark W. Yonkman
--------------------------- --------------------
Name: Carl J. Schmitt Name: Mark W. Yonkman
Its: Chief Executive Officer Its: Vice President and
Assistant Secretary
55
<PAGE> 146
ANNEX B
EXHIBIT 2.1.1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of _____________ 1995 between Comerica
Interim Incorporated ("Interim"), a corporation organized under the laws of the
state of California, the headquarters of which is located in the city of San
Jose, county of Santa Clara, state of California, with capital divided into
5,000,000 shares of common stock, each of no par value, and University Bank &
Trust Company ("UBT"), a state bank organized under the laws of the state of
California, the headquarters of which is located in the city of Palo Alto,
county of Santa Clara, state of California, with capital divided into
3,000,000 shares of common stock, each pursuant to a resolution of its board of
directors, adopted by the unanimous vote of its directors, and a consent
resolution of the sole shareholder of each, pursuant to the authority given by
and in accordance with the applicable provisions of law and subject to the
approval of the applicable regulatory agency.
WITNESSETH:
WHEREAS, the Boards of Directors of UBT and Interim deem it in the best
interests of UBT and Interim, the public which they serve and the shareholders
of each of Interim and UBT, to consolidate and merge UBT with Interim under the
provisions of applicable law.
NOW THEREFORE, in consideration of the agreements contained herein, the Boards
of Directors of UBT and Interim hereby adopt this Agreement of Merger, and
agree that the plan for the consummation of their merger shall be as follows:
SECTION 1. Upon the Effective Date, as defined below, of the merger, UBT
and Interim (the "Merging Parties") shall be consolidated under the charter of
UBT and UBT shall be the surviving entity and the separate corporate existence
of Interim shall cease.
SECTION 2. The name of the surviving institution (the "Surviving
Institution") shall be University Bank & Trust Company, which shall be a
California chartered bank.
SECTION 3. The Surviving Institution shall engage in the business of
banking and providing trust services and any business related or incidental
thereto, with all of the powers, and subject to all of the limitations and
restrictions, conferred or imposed by applicable laws of the State of
California and the United States of America. The corporate term of the
Surviving Institution shall be the corporate term of UBT. This business shall
be conducted by the Surviving Institution at its main office, which shall be
located at ___________, Palo Alto, California, and at the following legally
established branches and trust representative offices:
JOINT BRANCHES AND TRUST REPRESENTATIVE OFFICES:
1.
<PAGE> 147
All of the branches of Interim and UBT and trust representative offices of UBT
which were in lawful operation at the Effective Date shall continue as branches
and trust representative offices of the Surviving Institution, and the
principal office of _________________ in Palo Alto California shall continue as
the main office and a trust representative office of the Surviving Institution.
SECTION 4. The amount of capital stock of the Surviving Institution shall
be divided into 5,000,000 shares of common stock, each of no par value, which
shares shall be vested equally, share for share, with the voting rights and all
other rights, powers and privileges, without qualification, limitation or
restriction, of one share over another.
SECTION 5. The persons listed below shall be the directors of the
Surviving Institution until the next annual meeting of the shareholders of the
Surviving Institution or until their successors are duly elected and qualified:
[Directors]
SECTION 6. The persons listed below shall be the senior officers of the
Surviving Institution, holding the positions listed next to their respective
names, until such persons resign or are removed from such positions:
[Officers]
SECTION 7. The Articles of Incorporation of Interim shall be the Articles
of Incorporation of the Surviving Institution.
SECTION 8. The Bylaws of UBT in effect immediately prior to the Effective
Date of the merger, as amended, shall be and constitute the Bylaws of the
Surviving Institution until the same shall thereafter be altered, amended or
repealed.
SECTION 9. The merger shall be consummated and become effective, subject
to the terms and conditions of this Agreement of Merger and in accordance with
Section 2072 of the California Financial Code, when the Agreement of Merger,
having been filed with the Secretary of State with the approval of the
Superintendent of Banks endorsed thereon, shall have been certified by the
Secretary of State and filed with the Superintendent of Banks; provided,
however, that the date must follow, among other things, the approval of the
merger by the sole shareholder of UBT and Interim and by the Superintendent of
the California State Banking Department. The close of business on the day on
which the merger shall become effective is herein referred to as the "Effective
Date."
SECTION 10. At the Effective Date of the merger, the corporate existence
of the Merging Parties shall be consolidated into and continued in the
Surviving Institution, which shall be deemed to be the same corporation as
each of the Merging Parties, possessing all the rights, privileges, powers and
franchises, and subject to all the restrictions, disabilities and duties of the
Merging Parties, except as such rights, privileges, powers and franchises may
be limited by law. Upon the merger becoming effective, all the provisions of
law regarding the effects of merger shall be effective with respect to the
merger and the Surviving Institution, including, without limitation, the
following:
2
<PAGE> 148
A. All of the rights, interests, privileges, powers, and
franchises of the Merging Parties, both of a public and private nature, shall
vest in the Surviving Institution without further act or deed as effectively as
the same were vested in the Merging Parties prior to the merger.
B. All property, real, personal and mixed, including, without
limitation, all debts due, chooses in action of every description, licenses,
registrations, and other assets of every kind and description of the Merging
Parties shall, without further act or deed, be transferred to, vested in and
devolve upon the Surviving Institution, and shall be as effectively the
property of the Surviving Institution as they were of the Merging Parties prior
to the merger without any deed or other transfer and without any order or other
action on the part of any court or otherwise.
C. Title to any real estate, whether vested by deed or otherwise,
in the Merging Parties shall not revert or be in any way impaired by reason of
the merger or otherwise.
D. The Surviving Institution shall thenceforth be subject to all
of the restrictions, disabilities, duties, liabilities and obligations of the
Merging Parties and the same may thereafter be enforced against it to the same
extent as if the same had been incurred or contracted by the Surviving
Institution.
E. The Surviving Institution, by virtue of the merger, and
without any order or other action on the part of any court or otherwise, shall
hold and enjoy the same and all rights of property, franchises and interests,
including appointments, designations, and nominations and all other rights and
interest as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, guardian of mentally incompetent
persons and in every other fiduciary capacity, in the same manner and to the
same extent as such rights, franchises and interests were held or enjoyed by
the Merging Parties, or either of them, at the time of the merger.
F. Any action or proceeding pending by or against the Merging
Parties may be prosecuted to judgment to the same extent as if the merger had
not taken place, which judgment shall bind the Surviving Institution, or,
alternatively, the Surviving Institution may be proceeded against or
substituted in place of the Merging Parties in any such action or proceeding.
The officers and directors of the Merging Parties shall, from time to time, as
and when requested by the Surviving Institution or its successors or assigns,
execute and deliver or cause to be executed and delivered, such deeds,
instruments, assignments, or assurances as the Surviving Institution may deem
necessary, desirable, or convenient in order to vest in and confirm to the
Surviving Institution title to or possession of any property or rights of the
Merging Parties acquired or to be acquired by reason of or as a result of the
merger, or otherwise to carry out the purposes of this Merger Agreement. Any
person who, immediately before the merger became effective, was an officer or
director of the Merging Parties is hereby fully authorized, in the name of such
institution, to execute any and all such deeds, instruments, assignments, or
assurances, or to take any and all such action as may be requested by the
Surviving Institution.
SECTION 11. The manner of converting the shares of the Merging Parties
into shares of the Surviving Institution shall be as follows:
3
<PAGE> 149
Upon the Effective Date of merger, each share of common stock of UBT then
issued and outstanding shall be, and hereby is, by virtue of the merger and
without any action on the part of the holder thereof, converted into the right
to receive _________________. Each share of common stock of Interim then
issued and outstanding shall be, and hereby is, by virtue of the merger and
without any action on the part of the holder thereof, converted into and
constitute the shares of the common stock, no par value, of the Surviving
Institution, and all the shares of the Surviving Institution shall be owned by
Comerica Incorporated, a Delaware corporation.
SECTION 12. This Agreement of Merger may be terminated by the unilateral
action of the board of directors of either of the Merging Parties prior to the
approval of the sole shareholder of either of the Merging Parties or by the
mutual consent of the boards of both of the Merging Parties after the sole
shareholder of either of the Merging Parties has taken affirmative action.
SECTION 13. This Agreement shall be ratified and confirmed by written
consent resolution of the sole shareholder of each of the Merging Parties in
lieu of a shareholders' meeting.
SECTION 14. This Agreement may be executed in one or more counterparts,
all of which shall be taken together to constitute one and the same instrument
and shall be binding upon each party who may sign a counterpart of this
instrument.
IN WITNESS WHEREOF, UBT and Interim, pursuant to the approval and authority
duly given by resolution of their respective Boards of Directors, have caused
this Merger Agreement to be signed by their respective Presidents and
Secretaries on this day and year first above written.
<TABLE>
<CAPTION>
COMERICA INTERIM INCORPORATED UNIVERSITY BANK & TRUST COMPANY
<S> <C>
By: By:
------------------------------ ----------------------------------
Name: Name:
Its: Its: President
By: By:
------------------------------ ----------------------------------
Name: J. Michael Fulton Name:
Its: President and Chief Executive Officer Its: Secretary
By:
------------------------------
Name: Rebecca Levey
Its: Secretary
</TABLE>
4
<PAGE> 150
ANNEX C
SECTION 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) of Section 1201, each shareholder of the corporation entitled
to vote on the transaction and each shareholder of a subsidiary corporation in
a short-form merger may, by complying with this chapter, require the
corporation in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair maket value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (i) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (ii) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision does
not apply to any shares with respect to which there exists any restriction on
transfer imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described in
clause (i) or (ii) if demands for payment are filed with respect to 5 percent
or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (i) were not voted in
favor of the reorganization or, (ii) if described in clause (i) or (ii) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
or a short-form merger; provided, however, that clause (i) rather than clause
(ii) of this paragraph applies in any case where the approval required by
Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record. (Added
by Stats.1975, c. 682, Section 7. Amended by Stats.1976, c. 641, Section 21.3;
Stats.1982, c. 36, Section 3; Stats.1990, c. 1018 (A.B.2259), Section 2.)
Former Section 1300 was repealed by Stats.1975, c. 682, Section 6. See,
now, Section 410.
CROSS REFERENCES
Application of this chapter to transactions consummated after effective
date of new law, see Section 2313.
Foreign corporations subject to this chapter, see Section 2115.
<PAGE> 151
SECTION 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS;
DEMAND FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation
to purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval,
accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a
statement of the price determined by the corporation to represent the fair
market value of the dissenting shares, and a brief description of the procedure
to be followed if the shareholder desires to exercise the shareholder's right
under such sections. The statement of price constitutes an offer by the
corporation to purchase at the price stated any dissenting shares as defined in
subdivision (b) of Section 1300, unless they lose their status as dissenting
shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraph (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be
the fair market value of those shares as of the day before the announcement of
the proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
(added by Stats.1975, c. 682, Section 7. Amended by Stats.1976, c. 641, Section
21.6; Stats.1980, c. 501, Section 5; Stats.1980, c. 1155, Section 1.)
Former Section 1301 was repealed by Stats.1975, c. 682, Section 6.
See, now, Section 411.
<PAGE> 152
SECTION 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORESEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certificates initial
transaction statement, and other written statements issued therefor shall bear
a like statement, together with the name of the original dissenting holder of
the shares. (Added by Stats.1975, c. 682, Section 7. Amended by Stats.1986,
c. 766, Section 23.)
Former Section 1302 was repealed by Stats.1975, c. 682, Section 6.
See, now, Section 412.
SECTION 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefore, unless provided otherwise by agreement. (Added by Stats.1975,
c. 682, Section 7. Amended by Stats.1980, c. 501, Section 6; Stats.1986,
c. 766, Section 24.)
Former Section 1303 was repealed by Stats.1975, c. 682, Section 6.
<PAGE> 153
SECTION 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION;
DETERMINATION OF ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares
is in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares. (Added by
Stats. 1975, c. 682, Section 7.)
Former Section 1304 was repealed by Stats.1975, c. 682, Section 6. See,
now, Section 413.
CROSS REFERENCES
Consolidation of actions, see Code of Civil Procedure Section 1048.
Defendants, joinder, see Code of Civil Procedure Sections 379, 382.
Designation of parties, see Code of Civil Procedure Section 308.
Dissolution, determination of fair value of shares, see Section 2000.
Form of action, see Code of Civil Procedure Section 307.
Intervention, see Code of Civil Procedure Section 387.
Limitation of six months, see Code of Civil Procedure Section 341.
Plaintiffs, joinder, see Code of Civil Procedure Sections 378, 382.
Trial of issues, see Code of Civil Procedure Sections 591, 592, 594.
<PAGE> 154
SECTION 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file
a report in the office of the clerk of the court. Thereupon, on the motion of
any party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the
court, the court shall determine the fair market value of the dissenting
shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at
the legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated sercurities and, with respect to certificated securities,
only upon the endorsement and delivery to the corporation of the certificates
for the shares described in the judgment. Any party may appeal from the
judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of
Section 1301). (Added by Stats.1975, c. 682, Section 7. Amended by Stats.1976,
c. 641, Section 22; Stats.1977, c. 235, Section 16; Stats.1986, c. 766, Section
25.)
Former Section 1305 was repealed by Stats.1975, c. 682, Section 6.
Costs generally, see Code of Civil Procedure Section 1021 et seq.
Manner of giving and entering judgment, see Code of Civil Procedure
Section 664 et seq.
Relief granted to plaintiff, scope, see Code of Civil Procedure Section
580.
SECTION 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5. (Added by Stats.1975, c. 682,
Section 7.)
Former Section 1306 was repealed by Stats.1975, c. 682, Section 6. See,
now, Section 414.
CROSS REFERENCES
Dividends and reacquisitions of shares, see Section 500 et seq.
<PAGE> 155
SECTION 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor. (Added by Stats.1975, c. 682, Section 7.)
Former Section 1307 was repealed by Stats.1975, c. 682, Section 6.
CROSS REFERENCES
Dividends, see Section 500 et seq.
SECTION 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL
OF DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto. (added by Stats.1975, c. 682, Section 7.)
Former Section 1308 was repealed by Stats.1975, c. 682, Section 6. See,
now, Section 2251.
SECTION 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorney's fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(Added by Stats.1975, c. 682, Section 7.)
Former Section 1309 was repealed by Stats.1975, c. 682, Section 6. See,
now, Section 2252.
SECTION 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Section 1304 and 1305 shall be suspended until final determination of
such litigation. (Added by Stats.1975, c. 682, Section 7.)
Former Section 1310 was repealed by Stats.1975, c. 682, Section 6.
See, now, Section 415.
CROSS REFERENCES
Short-form mergers, see Section 1110.
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SECTION 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger. (Added by
Stats.1975, c. 682, Section 7. Amended by Stats.1988, c. 919, Section 8.)
Former Section 1311 was repealed by Stats.1975, c. 692, Section 6.
SECTION 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION;
CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
<PAGE> 157
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or
short-form merger or to have the reorganization or short-form merger set aside
or rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization of short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholder of any party so controlled. (Added by Stats.1975, c. 682,
Section 7. Amended by Stats.1976, c. 641, Section 22.5; Stats.1988, c. 919,
Section 9.)
Former Section 1312 was repealed by Stats.1975, c. 682, Section 6.
<PAGE> 158
ANNEX E
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of October 4, 1994 (the
"Agreement"), is made by and between University Bank & Trust Company, a
California Bank ("Issuer"), and Comerica Incorporated, a Delaware corporation
("Grantee") .
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization and Merger dated as of the date hereof (the "Merger Agreement"),
providing for, among other things, the merger of a subsidiary of Grantee with
and into Issuer, with Issuer as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 137,718 (as adjusted as set forth herein) shares (the "Option
Shares") of Common Stock, par value $.01 per share ("Issuer Common Stock"), of
Issuer at a purchase price per Option Share determined by calculating the
average of the closing prices for Issuer Common Stock on the NASDAQ for the
seven trading days ending on the date hereof (the "Purchase Price").
3. Exercise of Option. (a) If not in material breach of the Merger
Agreement, Grantee may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as defined
below); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) immediately prior to the Effective
Time, (ii) 12 months after the first occurrence of a Purchase Event, (iii) 18
months after the termination of the Merger Agreement following the occurrence
of a Preliminary Purchase Event (as defined below), (iv) termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence
of a Purchase Event or a Preliminary Purchase Event (other than a termination
of the Merger Agreement by Grantee pursuant to Section 8.1.6 thereof or by
Grantee and Issuer pursuant to Section 8.1.1 thereof if Grantee shall at that
time have been entitled to
<PAGE> 159
terminate the Merger Agreement pursuant to Section 8.1.6 thereof) or (v) 12
months after the termination of the Merger Agreement by Grantee pursuant to
Section 8.1.6 thereof or by Grantee and Issuer pursuant to Section 8.1.1
thereof if Grantee shall at that time have been entitled to terminate the
Merger Agreement pursuant to Section 8.1.6 thereof (provided, however, that if
within 12 months after such termination of the Merger Agreement a Purchase
Event or a Preliminary Purchase Event shall occur, then notwithstanding
anything to the contrary contained herein, this Option shall terminate 12
months after the first occurrence of such an event); and provided further, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the California
Financial Code.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Issuer shall have authorized, recommended,
publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction or failed to
publicly oppose a Tender Offer or an Exchange Offer (as
defined below). As used herein, the term Acquisition
Transaction shall mean (A) a merger, consolidation or similar
transaction involving Issuer or any of its Subsidiaries (other
than internal mergers, reorganizations, consolidations or
dissolutions involving only existing Subsidiaries), (B) the
disposition, by sale, lease, exchange or otherwise, of assets
of Issuer or any of its Subsidiaries representing 15% or more
of the consolidated assets of Issuer and its Subsidiaries or
(C) the issuance, sale or other disposition of (including by
way of merger, consolidation, share exchange or any similar
transaction) securities representing 10% or more of the voting
power of Issuer or any of its Subsidiaries; or
(ii) any person (other than Grantee or any Subsidiary
of Grantee) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of or
the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to
acquire beneficial ownership of 15% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary
of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act) or shall have filed a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender
offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer, such
person would own or control 15% or more of the then
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<PAGE> 160
outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer
respectively); or
(ii) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of such
stockholders held for the purpose of voting on the Merger
Agreement, such meeting shall not have been held or shall have
been cancelled prior to termination of the Merger Agreement,
or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Merger
Agreement, in each case after it shall have been publicly
announced that any person (other than Grantee or any
Subsidiary of Grantee) shall have (A) made or disclosed an
intention to make a proposal to engage in an Acquisition
Transaction or (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect
to an Exchange Offer.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Grantee wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which is referred to as the "Notice
Date") specifying (i) the total number of Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier than three
business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other regulatory authority is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of any such approval.
4. Payment and Delivery of Certificates. (a) On each Closing Date,
Grantee shall (i) pay to Issuer, in immediately available funds by wire
transfer to a bank account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares to be purchased on
such Closing Date and (ii) present and surrender this Agreement to the Issuer
at the address of the Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a),
(i) Issuer shall deliver to Grantee (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder, and (ii) Grantee shall deliver to Issuer a letter agreeing that
Grantee shall not offer to sell or otherwise dispose of such Option Shares in
violation of the provisions of this Agreement.
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(c) Certificates for the Option Shares delivered at each Closing shall
be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED
AS OF OCTOBER 4, 1994, A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A
WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals referred
to herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Issuer. This Agreement has been duly executed and delivered by
Issuer.
(b) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, shares of Issuer Common Stock necessary for
Grantee to exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of Issuer
Common Stock or other securities which may be issued pursuant to Section 7 upon
exercise of the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer Common Stock
or other securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid and nonassessable
(except for assessments made pursuant to Section 662 of the California
Financial Code), and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including any
preemptive rights of any stockholder of Issuer.
(c) Board Action. The performance by Issuer of this Agreement and the
transactions contemplated hereby (including the exercise of the Option) do not
require any approval of the stockholders of Issuer.
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<PAGE> 162
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being, and any
Option Shares or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
7. Adjustment Upon Changes in Capitalization, etc. (a) In the event of
any change in Issuer Common Stock by reason of a stock dividend, stock split,
split up, recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Grantee shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 9.9% of
the number of shares of Issuer Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the
Option. Issuer agrees that in no event shall the number of shares of Issuer
Common Stock issued after the date of this Agreement pursuant to the preceding
sentence, together with the number of shares of Issuer Common Stock subject to
the Option, adjusted as aforesaid, exceed the number of available authorized
but unissued and unreserved shares of Issuer Common Stock.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one
of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise
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<PAGE> 163
transfer all or substantially all of its assets to any person other than
Grantee or one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, of either (A) the
Acquiring Corporation (as defined below), (B) any person that controls the
Acquiring Corporation, or (C) in the case of a merger described in clause (ii),
the Issuer (such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then holder or holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as is hereinafter defined) as is equal
to the Assigned Value (as is hereinafter defined) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as is hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common
Stock (the "Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable and
the denominator is the number of shares of the Substitute Common Stock for
which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in a merger in which Issuer is the continuing or surviving
person, and (C) the transferee of all or any substantial part of the Issuer's
assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (A) the price per
share of the Issuer Common Stock at which a tender offer or exchange offer
therefor has been made by any person (other than Grantee), (B) the price per
share of the Issuer Common Stock to be paid by any person (other than the
Grantee) pursuant to an agreement with Issuer, and (C) the highest bid price
per share of Issuer Common Stock as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source within the six-month period immediately preceding the agreement;
provided, however, that in the event of a
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<PAGE> 164
sale of less than all of Issuer's assets, the Assigned Value shall be the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a majority in interest of
the Grantees if there shall be more than one Grantee (a"Grantee Majority")),
divided by the number of shares of the Issuer Common Stock outstanding at the
time of such sale. In the event that an exchange offer is made for the Issuer
Common Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for the Issuer Common Stock shall
be determined by a nationally recognized investment banking firm mutually
selected by Grantee and Issuer (or if applicable, Acquiring Corporation),
provided that if a mutual selection cannot be made as to such investment
banking firm, it shall be selected by Grantee (or a Grantee Majority).
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person merging into Issuer or by
any company which controls or is controlled by such merging person, as Grantee
may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 9.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option.
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so that
the shares of Substitute Common Stock are in no way distinguishable from or
have lesser economic value than other shares of common stock issued by the
Substitute Option Issuer).
(h) The provisions of Sections 8 and 9 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable
pursuant to this Section 7 and as applicable, references in such sections to
"Issuer", "Option", "Purchase Price" and "Issuer Common Stock" shall be deemed
to be references to "Substitute Option Issuer", "Substitute Option",
"Substitute Purchase Price" and "Substitute Common Stock", respectively.
8. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation on the
NASDAQ, the New York Stock Exchange (NYSE) or any securities exchange, Issuer,
upon the request of Grantee, will promptly file an application to authorize for
quotation the shares of Issuer Common Stock or other securities to be
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<PAGE> 165
acquired upon exercise of the Option on the NASDAQ, NYSE or such other
securities exchange and will use its best efforts to obtain approval of such
listing as soon as practicable.
9. Division of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Grantee, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Issuer
Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
10. Miscellaneous. (a) Expenses. Except as otherwise provided in
Section 8, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the grant or exercise of
this Option, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein (i) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (ii) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and
8 (as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
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(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of California without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by personal delivery,
by telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) to the parties as follows:
If to Issuer:
UNIVERSITY BANK & TRUST COMPANY
250 Lytton Avenue
Palo Alto, California 94301
Attention: Carl J. Schmitt
If to Grantee:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
or to such other address as a party may have furnished to the others in writing
in accordance with this paragraph, except that notices of change of address
shall only be effective upon receipt. Any notice, demand or other
communication given pursuant to the provisions of this Section 11(f) shall be
deemed to have been given on the date actually delivered or three days
following the date mailed, as the case may be.
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to
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<PAGE> 167
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
University Bank & Trust Company
By: /s/ Carl J. Schmitt
---------------------------
Name: Carl J. Schmitt
Title: Chief Executive Officer
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
-----------------------------------
Name: Mark W. Yonkman
Title: Vice President and Assistant
Secretary
10
<PAGE> 168
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The General Corporation Law of the State of Delaware ("DGCL") provides
that a Delaware corporation, such as Comerica Incorporated ("Comerica"), may
indemnify a director or officer against his or her expenses and judgments,
fines and amounts paid in settlement actually and reasonably incurred in
connection with any action, suit or proceeding (other than an action by or in
the right of the corporation) involving such person by reason of the fact that
such person is or was a director or officer, concerning actions taken in good
faith and in a manner reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
DGCL also provides that in derivative actions, Comerica may indemnify its
directors and officers against expenses actually and reasonably incurred to the
extent that such directors or officers have been successful on the merits or
otherwise in any such action, suit or proceeding or in the defense of any
claim, issue or matter therein. Under the DGCL, no indemnification shall be
made with respect to any claim, issue or matter as to which such director or
officer shall have been adjudged to be liable to the corporation unless and
only to the extent that the court shall determine upon application that,
despite the adjudication of liability but in view of all of the circumstances
of the case, such director or officer is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. The DGCL also
generally permits the advancement of a director's or officer's expenses,
including by means of mandatory charter or Bylaw provision to that effect, in
lieu of requiring the authorization of such advancement by the Board of
Directors in specific cases. Section 12 of Article V of Comerica's Bylaws
implements such provisions and provides as follows:
INDEMNIFICATION AND INSURANCE
(a) Comerica shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of Comerica) by reason
of the fact that he or she is or was a Director, officer, employee of Comerica
or is or was serving at the request of Comerica as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interest of Comerica, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Any person who is or was an agent of Comerica may be indemnified to the same
extent as hereinabove provided. In addition, in the event any such action,
suit or proceeding is threatened or instituted against a spouse to whom a
director or officer is legally married at the time such director or officer is
covered under the indemnification provided herein which action, suit or
proceeding arises solely out of his or her status as the spouse of a director
or officer, including, without limitation, an action, suit or proceeding that
seeks damages recoverable from marital community property of the director or
officer and his or her spouse, property owned jointly by them or property
purported to have been transferred from the director or officer to his or her
spouse, the spouse of the director or officer shall be indemnified to the same
extent as hereinabove provided. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of Comerica, and, with
respect to any criminal action or proceeding, raise any inference that he or
she had reasonable cause to believe that his or her conduct was unlawful.
(b) Comerica shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of Comerica to procure a judgment in its
favor by reason of the fact that he or she is or was a Director, officer, or
employee of Comerica, or is or was serving at the request of Comerica as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred
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by such person in connection with the defense or settlement of such action or
suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of Comerica, and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to Comerica
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application, that despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. Any person who is or was an agent of Comerica may be
indemnified to the same extent hereinabove provided. In addition, in the event
any such action or suit is threatened or instituted against a spouse to whom a
director or officer is legally married at the time such director or officer is
covered under the indemnification provided herein which action or suit arises
solely out of his or her status as the spouse of a director or officer,
including, without limitation, an action or suit that seeks damages recoverable
from marital community property of the director or officer and his or her
spouse, property owned jointly by them or property purported to have been
transferred from the director or officer to his or her spouse, the spouse of
the director or officer shall be indemnified to the same extent as hereinabove
provided.
(c) To the extent that a Director, officer, spouse of a Director
or officer, employee or agent of Comerica has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this Section, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this
Section (unless ordered by a court) shall be made by Comerica only as
authorized in the specific case upon a determination that indemnification of
the Director, officer, spouse of a Director or officer, employee or agent is
proper in the circumstances because such person has met the applicable standard
of conduct set forth in subsections (a) and (b) of this Section. Such
determination shall be made (1) by the Board of Directors by a majority vote of
the quorum consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or even if obtainable a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
Director, or spouse of an officer or Director, in defending a civil or criminal
action, suit or proceeding may be paid by Comerica in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
Comerica as authorized in this Section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this Section shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.
(g) Comerica may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, spouse of a Director or officer,
employee or agent of Comerica, or is or was serving at the request of Comerica
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his or her
status as such, whether or not Comerica would have the power to indemnify such
person against such liability under the provisions of this Section.
(h) For the purpose of this Section, references to "Comerica"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is
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or was a director, officer, spouse of a director or officer, employee or agent
of such a constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Section with respect to the
resulting or surviving corporation as he or she would if he or she had served
the resulting or surviving corporation in the same capacity.
(i) For the purposes of this Section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan, and reference to "serving at the request of Comerica" shall
include any service as a Director, officer, employee or agent of Comerica which
imposes duties on, or involves services by, such Director, officer, employee or
agent of Comerica with respect to an employee benefit plan, its participants,
or beneficiaries; and a person who acted in good faith and in a manner he or
she reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of Comerica" as referred to in this
Section.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
Director, officer, employee or agent, and with respect to any spouse of a
director or officer, shall continue following the time the director or officer
spouse ceases to be a director or officer even if the marriage of the
individuals terminates prior to the end of the period of coverage, and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
(relating to liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit. At the 1987 Annual Meeting
of Comerica's shareholders, the shareholders approved an amendment to
Comerica's Restated Certificate of Incorporation to include such a provision.
Comerica has entered into Indemnification Agreements (the
"Agreements") with each of its directors pursuant to which Comerica agrees (i)
to indemnify each such director to the fullest extent permitted by any
combination of (a) the benefits provided by the indemnification provisions of
Comerica's Bylaws as in effect on the date of such Agreement, (b) the benefits
provided by the indemnification provisions of Comerica's Bylaws in effect at
the time such indemnified costs are incurred by such director, (c) the benefits
allowable under the DGCL in effect at the date of such Agreement or as the same
may be amended (but in the case of any such amendment, only to the extent that
such amendment permits Comerica to provide broader indemnification than such
law permits Comerica to provide prior to such amendment), (d) the benefits
allowable under the law of the jurisdiction under which Comerica is organized
at the time such indemnified costs are incurred by such director, (e) the
benefits available under any Directors' and Officers' Insurance or other
liability insurance obtained by Comerica and (f) the benefits available to the
fullest extent authorized to be provided to such director by Comerica under the
non-exclusivity provisions of the Bylaws of Comerica and the DGCL, against
liabilities and expenses incurred by reason of such person serving as a
director or officer of Comerica or, at Comerica's request, as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or with respect to employee benefit plans; (ii) to
advance certain expenses to such persons; and (iii) except under certain
circumstances to purchase and maintain in effect one or more Directors' and
Officers' insurance policies.
No indemnification, reimbursement, or payments are required of
Comerica under the Agreements (except to the extent it is provided from
policies of insurance carried by Comerica): (1) with respect to any claim as
to which such director shall have been finally adjudged by a court of competent
jurisdiction to (a) have acted in bad
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faith, (b) be liable for acts or omissions which involve intentional
misconduct, a knowing violation of law or of such director's duty of loyalty to
Comerica or its shareholders, (c) have authorized a redemption or dividend on
Comerica's stock which is prohibited by Delaware law or (d) has effected any
transaction from which such director has derived an improper personal benefit
within the meaning of 102(b)(7) of the DGCL, except to the extent that such
court, or another court having jurisdiction, shall determine upon application
that, despite the adjudication of liability, but in view of all the
circumstances of the case, such director is fairly and reasonably entitled to
indemnity for such indemnified costs as the court shall deem proper; (2) with
respect to any payment determined by final judgment of a court, or other
tribunal having jurisdiction over the question, to be unlawful; and (3) with
respect to any obligation of such director under Section 16(b) of the
Securities Exchange Act of 1934, as amended.
Insurance is maintained on a regular basis (and not specifically in
connection with this offering) against liabilities arising on the part of
director and officers out of their performance in such capacities or arising on
the part of Comerica out of its foregoing indemnification provisions, subject
to certain exclusions and to the policy limits.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits. The following exhibits are filed as part of this
Registration Statement.
Item 601
Regulation S-K
Exhibit Reference
Number Description
- ----------------- -----------
(2)(a) Agreement and Plan of Reorganization and
Merger, dated as of October 4, 1994, by and
among University Bank & Trust Company,
Comerica Interim Incorporated and Comerica
Incorporated, included as part of Annex A to
the Proxy Statement/Prospectus which is part
of this Registration Statement.
(2)(b) Form of Agreement of Merger between Comerica
Interim Incorporated and University Bank &
Trust Company, included as part of Annex B to
the Proxy Statement/Prospectus which is part
of this Registration Statement.
(3)(i) Restated Certificate of Incorporation of
Comerica Incorporated (incorporated by
reference to Exhibit 3(a) to the Registrant's
Registration Statement on Form S-4 dated
December 11, 1992, Registration No.
33-556682).
(3)(ii) Bylaws of Comerica Incorporated (incorporated
by reference to Exhibit 3(ii) to the
Registrant's Registration Statement on Form
S-4 dated October 26, 1993, Registration No.
33-50787).
(4)(a) Specimen certificate for Comerica Common
Stock (incorporated by reference to Exhibit
4(a) to the Registrant's Registration
Statement on Form S-4 dated December 11,
1992, Registration No. 33- 556682).
(4)(b) Restated Certificate of Incorporation of
Comerica Incorporated (incorporated by
reference to Exhibit 3(a) to the Registrant's
Registration Statement on Form S-4 dated
December 11, 1992, Registration No.
33-556682).
(4)(c) Rights Agreement between Comerica
Incorporated and Comerica Bank-Detroit, as
Rights Agent (incorporated by reference to
Exhibits 1 and 2 of the
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Registrant's Registration Statement on Form
8-A dated January 26, 1988, Commission File
No. 0- 7269).
(4)(d) First Amendment to the Rights Agreement
between Comerica Incorporated and Comerica
Bank-Detroit, as Rights Agent (incorporated
by reference to Exhibit 1.1 of the
Registrant's Registration Report on Form 8
filed November 1, 1991, Commission File No.
0-7269).
(5)(a) Opinion and consent of Miller, Canfield, Paddock
and Stone.
(8) Opinion and consent of Miller, Canfield,
Paddock and Stone (Federal Tax Matters).*
(23)(a) Consent of Miller, Canfield, Paddock and
Stone (included in Exhibit 5(a)).
(23)(b) Consent of Miller, Canfield, Paddock and
Stone (Federal Tax Matters) (included in
Exhibit 8).*
(23)(c) Consent of Ernst & Young, independent public
accountants (auditors for Comerica Incorporated).
(23)(d) Consent of KPMG Peat Marwick, LLP,
independent public accountants (predecessor
auditors for Comerica Incorporated).
(23)(e) Consent of KPMG Peat Marwick, LLP,
independent auditors (auditors for University
Bank & Trust Company).
(23)(f) Consent of Goldman Sachs & Co.*
(24) Powers of Attorney (see signature page to
this Form S-4 Registration Statement).
(27) Financial Data Schedule. Schedule has been
omitted because it is not required.
(99)(a) Opinion of Goldman Sachs & Co. Incorporated
is set forth in full as Annex D to the Proxy
Statement\Prospectus which is part of this
Registration Statement.*
(99)(b) Form of Proxy Card for University Bank &
Trust Company.
(99)(c) Shareholder Agreements.
(99)(d) Stock Option Agreement, dated October 4,
1994, between University Bank & Trust Company
and Comerica Incorporated, included as Annex
E to the Proxy Statement/Prospectus which is
part of this Registration Statement.
(99)(e) Section 1300 of the California Law of the
State of California relating to Dissenters
Rights as set forth in full on Annex C to the
Proxy Statement/Prospectus which is part of
this Registration Statement.
(99)(f) Affiliate's Agreement.
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<PAGE> 173
(99)(g) Non-Competition Agreement between Carl J. Schmitt
and Comerica Incorporated.
(99)(h) University Bank & Trust Company's Annual Report of
From 10-K for the year ended December 31, 1993.
(99)(i) University Bank & Trust Company's Amendment No. 1
on Form 10-K/A for the year ended December 31, 1993.
(99)(j) University Bank & Trust Company's Proxy
Statement for the Annual Meeting of
Shareholders held on June 16, 1994.
(99)(k) University Bank & Trust Company's Quarterly
Reports on Form 10-Q for the quarterly periods
ended March 31, June 30 and September 30, 1994.
(99)(l) University Bank & Trust Company's Current report
on Form 8-K dated June 17, 1994.
(99)(m) University Bank & Trust Company's Current Report
on Form 8-K dated October 17, 1994.
(b) Financial Statement Schedules. Schedules have
been omitted because they are not required.
(c) Not applicable.
___________________________________
* TO BE FILED BY AMENDMENT
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<PAGE> 174
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 as amended (the "Securities Act") may be permitted to
directors, officers and controlling persons of Comerica pursuant to the
provisions described in Item 20 or otherwise, Comerica has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Comerica of expenses
incurred or paid by a director, officer or controlling person of Comerica 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, Comerica will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The undersigned registrant undertakes that every prospectus (i) that
is filed pursuant to the foregoing paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
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<PAGE> 175
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Detroit,
State of Michigan, on the 28th day of November, 1994.
COMERICA INCORPORATED
By: /s/ EUGENE A. MILLER
------------------------
Eugene A. Miller
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the dates indicated below. By so signing each of the
undersigned, in his or her capacity as a director of officer, or both, as the
case may be, of the registrant, does hereby appoint Eugene A. Miller, Arthur W.
Hermann, Judith C. Dart and Robert C. Shrosbree, and each of them severally,
his or her true and lawful attorney to execute in his or her name, place and
stead, in his or her capacity as a director or officer, or both, as the case
may be, of the registrant, any and all amendments to this Registration
Statement and post-effective amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission. Each of said attorneys shall have full power and
authority to do and perform in the name and on behalf of each of the
undersigned, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as each of the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys and each
of them.
Signatures Title Date
- ---------- ----- ----
(1) Principal Executive Officer:
/s/ EUGENE A. MILLER Chairman and Chief November 28, 1994
- -------------------------------- Executive Officer
Eugene A. Miller
(2) Principal Financial Officer:
/s/ PAUL H. MARTZOWKA Executive Vice November 28, 1994
- -------------------------------- President and Chief
Paul H. Martzowka Financial Officer
(3) Controller and Principal
Accounting Officer:
/s/ ARTHUR W. HERMANN Senior Vice November 28, 1994
- -------------------------------- President
Arthur W. Hermann
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<PAGE> 177
(4) Directors:
/s/ E. PAUL CASEY Director November 28, 1994
- -------------------------------
E. Paul Casey
/s/ JAMES F. CORDES Director November 28, 1994
- -------------------------------
James F. Cordes
/s/ J. PHILIP DiNAPOLI Director November 28, 1994
- -------------------------------
J. Philip DiNapoli
/s/ MAX M. FISHER Director November 28, 1994
- -------------------------------
Max M. Fisher
/s/ JOHN D. LEWIS Director November 28, 1994
- -------------------------------
John D. Lewis
Director November __, 1994
- -------------------------------
Patricia Shontz Longe, Ph.D.
/s/ WAYNE B. LYON Director November 28, 1994
- -------------------------------
Wayne B. Lyon
/s/ GERALD V. MacDONALD Director November 28, 1994
- -------------------------------
Gerald V. MacDonald
/s/ EUGENE A. MILLER Director November 28, 1994
- -------------------------------
Eugene A. Miller
/s/ MICHAEL T. MONAHAN Director November 28, 1994
- -------------------------------
Michael T. Monahan
/s/ ALFRED A. PIERGALLINI Director November 28, 1994
- -------------------------------
Alfred A. Piergallini
/s/ ALAN E. SCHWARTZ Director November 28, 1994
- -------------------------------
Alan E. Schwartz
/s/ HOWARD F. SIMS Director November 28, 1994
- -------------------------------
Howard F. Sims
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EXHIBIT INDEX
Item 601
Regulation S-K
Exhibit Reference
Number Description
- ----------------- -----------
(2)(a) Agreement and Plan of Reorganization and
Merger, dated as of October 4, 1994, by and
among University Bank & Trust Company,
Comerica Interim Incorporated and Comerica
Incorporated, included as part of Annex A to
the Proxy Statement/Prospectus which is part
of this Registration Statement.
(2)(b) Form of Agreement of Merger between Comerica
Interim Incorporated and University Bank &
Trust Company, included as part of Annex B to
the Proxy Statement/Prospectus which is part
of this Registration Statement.
(3)(i) Restated Certificate of Incorporation of
Comerica Incorporated (incorporated by
reference to Exhibit 3(a) to the Registrant's
Registrations Statement on Form S-4 dated
December 11, 1992, Registration No.
33-556682).
(3)(ii) Bylaws of Comerica Incorporated (incorporated
by reference to Exhibit 3(ii) to the
Registrant's Registration Statement on Form
S-4 dated October 26, 1993, Registration No.
33-50787).
(4)(a) Specimen certificate for Comerica Common
Stock (incorporated by reference to Exhibit
4(a) to the Registrant's Registration
Statement on Form S-4 dated December 11,
1992, Registration No. 33- 556682).
(4)(b) Restated Certificate of Incorporation of
Comerica Incorporated (incorporated by
reference to Exhibit 3(a) to the Registrant's
Registration Statement on Form S-4 dated
December 11, 1992, Registration No.
33-556682).
(4)(c) Rights Agreement between Comerica
Incorporated and Comerica Bank-Detroit, as
Rights Agent (incorporated by reference to
Exhibits 1 and 2 of the
<PAGE> 179
Registrant's Registration Statement on Form
8-A dated January 26, 1988, Commission File
No. 0- 7269).
(4)(d) First Amendment to the Rights Agreement
between Comerica Incorporated and Comerica
Bank-Detroit, as Rights Agent (incorporated
by reference to Exhibit 1.1 of the
Registrant's Registration Report on Form 8
filed November 1, 1991, Commission File No.
0-7269).
(5)(a) Opinion and consent of Miller, Canfield, Paddock
and Stone.
(8) Opinion and consent of Miller, Canfield,
Paddock and Stone (Federal Tax Matters).*
(23)(a) Consent of Miller, Canfield, Paddock and
Stone (included in Exhibit 5(a)).
(23)(b) Consent of Miller, Canfield, Paddock and
Stone (Federal Tax Matters) (included in
Exhibit 8).*
(23)(c) Consent of Ernst & Young, independent public
accountants (auditors for Comerica Incorporated).
(23)(d) Consent of KPMG Peat Marwick, LLP,
independent public accountants (predecessor
auditors for Comerica Incorporated).
(23)(e) Consent of KPMG Peat Marwick, LLP,
independent auditors (auditors for University
Bank & Trust Company).
(23)(f) Consent of Goldman Sachs & Co.*
(24) Powers of Attorney (see signature page to
this Form S-4 Registration Statement).
(27) Financial Data Schedule. Schedule has been
omitted because it is not required.
(99)(a) Opinion of Goldman Sachs & Co. Incorporated
is set forth in full as Annex D to the Proxy
Statement\Prospectus which is part of this
Registration Statement.*
(99)(b) Form of Proxy Card for University Bank &
Trust Company.
(99)(c) Shareholder Agreements.
(99)(d) Stock Option Agreement, dated October 4,
1994, between University Bank & Trust Company
and Comerica Incorporated, included as Annex
E to the Proxy Statement/Prospectus which is
part of this Registration Statement.
(99)(e) Section 1300 of the California Law of the
State of California relating to Dissenters
Rights as set forth in full on Annex C to the
Proxy Statement/Prospectus which is part of
this Registration Statement.
(99)(f) Affiliate's Agreement.
<PAGE> 180
(99)(g) Non-Competition Agreement between Carl J. Schmitt
and Comerica Incorporated.
(99)(h) University Bank & Trust Company's Annual Report of
From 10-K for the year ended December 31, 1993.
(99)(i) University Bank & Trust Company's Amendment No. 1
on Form 10-K/A for the year ended December 31, 1993.
(99)(j) University Bank & Trust Company's Proxy
Statement for the Annual Meeting of
Shareholders held on June 16, 1994.
(99)(k) University Bank & Trust Company's Quarterly
Reports on Form 10-Q for the quarterly periods
ended March 31, June 30 and September 30, 1994.
(99)(l) University Bank & Trust Company's Current report
on Form 8-K dated June 17, 1994.
(99)(m) University Bank & Trust Company's Current Report
on Form 8-K dated October 17, 1994.
(b) Financial Statement Schedules. Schedules have
been omitted because they are not required.
(c) Not applicable.
___________________________________
* TO BE FILED BY AMENDMENT
<PAGE> 1
EXHIBIT 5(a)
[LETTERHEAD OF MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.]
November 28, 1994
Comerica Incorporated
100 Renaissance Center
Suite 3800
Detroit, MI 48243
Dear Ladies and Gentlemen:
With respect to the Registration Statement on Form S-4 (the
"Registration Statement"), being filed today by Comerica Incorporated, a
Delaware corporation (the "Company"), with the Securities and Exchange
Commission for the purpose of registering under the Securities Act of 1933, as
amended, 2,680,820 shares of Common Stock, $5.00 par value ("Company Common
Stock"), together with associated Rights to purchase shares of the Company's
Series C Participating Preferred Stock (the "Rights" and together with the
Company Common Stock, the "Securities"), we, as your counsel, have examined
such certificates, instruments, and documents and reviewed such questions of
law as we have considered necessary or appropriate for the purposes of this
opinion. The Securities are to be issued in exchange for shares of the Common
Stock, no par value per share ("UB&T Stock"), of University Bank & Trust
Company, a California state-chartered bank ("UB&T"), in connection with the
merger (the "Merger") of Comerica Interim Incorporated, a California
corporation and a wholly owned subsidiary of the Company ("Interim") with and
into UB&T, pursuant to an Agreement and Plan of Reorganization and Merger,
dated as of October 4, 1994 (the "Merger Agreement").
On the basis of such examination and review, we advise you that, in our
opinion, when (a) the Registration Statement becomes effective under the
Securities Act of 1933, as amended, and (b) the Merger become effective and the
Securities have been issued in exchange for shares of UB&T Common Stock
pursuant to the Merger Agreement, the Company Common Stock will be validly
issued, fully paid and non-assessable and the associated Rights will be validly
issued. We note that the Rights are not currently exercisable. In expressing
the foregoing opinions, we do not express any opinion with respect to, and have
assumed the validity of, the Company's
<PAGE> 2
-2-
Series C Participating Preferred Stock issuable upon exercise of the Rights.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Joint Proxy Statement/Prospectus forming a part of the
Registration Statement. In giving such consent we do not hereby admit that we
are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules or regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MILLER, CANFIELD, PADDOCK AND STONE, P.L.C.
By /s/ Thomas G. Appleman
<PAGE> 1
EXHIBIT 23(c)
[ERNST & YOUNG LLP LETTERHEAD]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-4 and related prospectus of Comerica
Incorporated for the registration of approximately 2,680,820 shares of its
common stock and the incorporation by reference therein of our report dated
January 18, 1994 with respect to the consolidated financial statements of
Comerica Incorporated included in the Company's Annual Report on Form 10-K, for
the year ended December 31, 1993, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
November 21, 1994
<PAGE> 1
EXHIBIT 23(d)
ACCOUNTANTS' CONSENT
The Board of Directors
Comerica Incorporated
We consent to the use of our report dated January 15, 1992, incorporated herein
by reference, relating to the consolidated statements of income, changes in
shareholders' equity, and cash flows for the year ended December 31, 1991,
which report appears in the December 31, 1993, annual report on Form 10-K of
Comerica Incorporated, and to the reference to our firm under the heading
"Experts" in the Comerica Incorporated prospectus.
KPMG PEAT MARWICK LLP
Detroit, Michigan
November 21, 1994
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
University Bank & Trust Company:
We consent to the use of our reports incorporated herein on Form S-4 by
reference and to the reference to our firm under the heading "Experts" in the
prospectus.
KPMG PEAT MARWICK LLP
San Francisco, California
November 21, 1994
<PAGE> 1
EXHIBIT 99(b)
[FACE]
UNIVERSITY BANK & TRUST COMPANY
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Carl J. Schmitt and Linda R. Meier, and
each of them, with full power of substitution, to represent the undersigned and
to vote all of the shares of stock in University Bank & Trust Company (the
"Bank"), that the undersigned is entitled to vote at the special meeting of the
shareholders of the Bank to be held on Wednesday, January 25, 1995, at 4:30
p.m., local time, and at any adjournment thereof (1) as specified below upon
the proposal listed on the reverse side and as described in the Proxy
Statement/Prospectus of the Bank dated December , 1994, receipt of which is
hereby acknowledged, and (2) in their discretion upon such other matters as may
properly come before the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THESE SHARES SHALL BE VOTED FOR PROPOSAL 1.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[REVERSE]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
To approve (a) the Agreement and Plan of Reorganization and Merger,
dated as of October 4, 1994, by and among Comerica Incorporated, a Delaware
corporation, Comerica Interim Incorporated, a California corporation
("Interim"), and the Bank, and (b) the Agreement of Merger by and between
Interim and the Bank, and all of the transactions contemplated thereby,
including, but not limited to, providing for the merger of Interim with and
into the Bank, as set forth in full in the Proxy Statement/Prospectus.
/ / FOR / / AGAINST / / ABSTAIN
/ / PLEASE MARK HERE FOR / / PLEASE MARK HERE IF
ADDRESS CHANGE YOU PLAN TO ATTEND
AND NOTE AT LEFT. THE MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS Date: __________________________
ON YOUR STOCK CERTIFICATES. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, Signature:______________________
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE
AS SUCH. IF A CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY PRESIDENT OR OTHER Signature:______________________
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
<PAGE> 1
EXHIBIT 99(c)
SHAREHOLDER AGREEMENT
This Shareholder Agreement ("Agreement") is made as of October 6,
1994, by Comerica Incorporated, a Delaware corporation ("Comerica") and the
other person executing the last page of this Agreement (a "Shareholder"). All
terms not otherwise defined in this Agreement shall have the meanings ascribed
to them in the Merger Agreement (as that term is defined below).
A. Comerica and University Bank & Trust, a California bank
("University") Company have entered into an Agreement and Plan of
Reorganization and Merger (the "Merger Agreement"), dated as of October 4, 1994
pursuant to which a wholly-owned subsidiary of Comerica will be merged with and
into University (the "Merger").
B. In order to induce Comerica to enter into the Merger
Agreement, the Shareholder, solely in the Shareholder's capacity as a
shareholder, desires to undertake to take certain actions and to refrain from
taking other actions in connection with the Merger.
NOW, THEREFORE, in consideration of these premises and of the
representations, warranties, covenants, and agreements contained in this
Agreement and in the Merger Agreement, the parties agree as follows:
1. Agreements of the Shareholder
1.1 Agreement to Vote. At any meeting of shareholders of
University held prior to August 31, 1995, or in connection with any
solicitation of the written consent of shareholders of University
considered prior to August 31, 1995, to approve the Merger on the
terms provided in the Merger Agreement, the Shareholder shall vote or
cause to be voted all shares of common stock of University
("University Stock") the Shareholder owns or hereafter acquires, and,
subject to fiduciary obligations, any other shares of University Stock
over which the Shareholder has voting power as a trustee or comparable
capacity (the "Shareholder's University Stock"), in favor of, and to
approve, the Merger on the terms provided in the Merger Agreement and
any other matters provided in the Merger Agreement that require the
approval of shareholders of University.
1.2 Restrictions on Dispositions. The Shareholder agrees
that until the earlier of (i) the adjournment of the meeting of
shareholders called to approve the Merger on the terms provided in the
Merger Agreement, (ii) the termination of the Merger Agreement in
accordance with its terms, or (iii) August 31, 1995, the Shareholder
will not pledge or otherwise encumber, or sell, assign or otherwise
dispose of, any shares of the Shareholder's University Stock or enter
into any agreement to do the foregoing other than with Comerica or an
affiliate of Comerica (unless the Shareholder shall have retained full
voting power with respect to such shares or the person to whom such
shares shall have been pledged, sold, assigned or otherwise disposed
of shall have agreed to be bound by
<PAGE> 2
the provisions of this Agreement), except (a) with the prior written
consent of Comerica or (b) pursuant to the Merger.
1.3 Cooperation. At any time during which the
Shareholder's agreements contained in Section 1.2 above are in effect,
the Shareholder agrees not to directly or indirectly solicit or
initiate any inquiries, proposals or offers from any person or entity
other than Comerica or any affiliate of Comerica relating to, or vote
in favor of, any proposal or transaction for disposition of, the
business or assets of University or any of its Subsidiaries, the
acquisition of securities of University or any Subsidiary of
University, or any business combination with any person other than
Comerica or any affiliate of Comerica.
2. Representations and Warranties of the Shareholder
The Shareholder represents and warrants to Comerica as follows:
2.1 Capacity. The Shareholder has the requisite capacity
and authority to enter into and perform the Shareholder's obligations
under this Agreement.
2.2 Binding Agreement. This Agreement constitutes the
valid and legally binding obligation of the Shareholder.
2.3 Noncontravention. The execution and delivery of this
Agreement by the Shareholder does not, and the performance by the
Shareholder of the Shareholder's obligations under this Agreement and
the consummation by the Shareholder of the transactions contemplated
by this Agreement will not in any material respect, violate or
conflict with or constitute a material default under any agreement,
instrument, contract or other obligation, any order, arbitration
award, judgment or decree to which the Shareholder is a party or by
which the Shareholder is bound, or any statute, rule or regulation to
which the Shareholder or any of the Shareholder's property is subject.
2.4 Ownership of Shares. Schedule 1 correctly sets forth
the number of shares of University Stock owned by the Shareholder, or
with respect to which the Shareholder has sole voting power, as of the
date of this Agreement. The Shareholder has full power to vote all of
the shares of University Stock set forth on Schedule 1.
3. Enforcement
3.1 Damages Inadequate; Specific Performance. In the
event of a threatened or actual breach of this Agreement by the
Shareholder, it is agreed that damages would not be an adequate remedy
to compensate Comerica. Accordingly, each party agrees that the
Shareholder's obligations will be enforceable by court order requiring
specific performance without proof of damages or posting of any bond.
In the event of a threatened or
2
<PAGE> 3
actual breach of this Agreement by the Shareholder, Comerica will be
entitled to a temporary restraining order and to temporary and
permanent injunctive relief to prevent or terminate such threatened or
actual breach, provided that nothing in this Agreement shall be
construed to limit the damages otherwise recoverable by Comerica in
any such event.
3.2 Notice to Third Parties. In addition, after notice
to the Shareholder, Comerica will have the right to inform any person
or entity that Comerica reasonably believes to be, or to be
contemplating, participating with the Shareholder (or receiving
assistance from the Shareholder) in violation of this Agreement, and
that participation by any such entity or person with the Shareholder
in activities in violation of this Agreement may give rise to claims
by Comerica against such entity or person.
4. Miscellaneous
4.1 Expenses. Each party will pay that party's costs and
expenses, including attorney and accountant fees, in connection with
this Agreement and the transactions contemplated by this Agreement.
4.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt
requested), sent by confirmed overnight courier or telecopied (with
electronic confirmation and verbal confirmation of the person to whom
such telecopy is addressed), on the date such notice is so delivered,
mailed or sent, as the case may be, to the parties at the following
addresses or (or any such other address for a party as shall be
specified by like notice):
If to Comerica:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
3
<PAGE> 4
If to the Shareholder:
or to such other address as a party may have furnished to the others
in writing in accordance with this paragraph, except that notices of
change of address shall only be effective upon receipt. Any notice,
demand or other communication given pursuant to the provisions of this
paragraph 4.2 shall be deemed to have been given on the date actually
delivered or three days following the date mailed, as the case may be.
4.3 Successors and Assigns. All terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties and their permitted transferees, successors and permitted
assigns. This Agreement and the rights, privileges, duties and
obligations of the parties may not be assigned or delegated by any
party without the prior written consent of the other party. Any
purported assignment in violation of this paragraph 4.3 shall be null
and void.
4.4 Third Party Beneficiaries. Each party 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. As used
in this Agreement, the term party or parties shall refer only to
Comerica and the Shareholder.
4.5 Counterparts. This Agreement may be executed in one
or more counterparts, all of which taken together shall constitute one
instrument. An executed counterpart received by telecopy shall have
the same effect as an originally-executed counterpart.
4.6 Governing Law. This Agreement will be governed by
Delaware law, except those provisions concerning choice of law.
4.7 Captions. The captions contained in this Agreement
are for convenience of reference only and do not form a part of this
Agreement.
4.8 Waiver and Modification. No waiver of any term,
provision or condition of this Agreement, whether by conduct or
otherwise, shall be deemed to be a further or continuing waiver of any
such term, provision or condition. This Agreement may be modified or
amended only by an instrument signed by the parties.
4.9 Attorney Fees. If any of the parties brings an
action or suit against any other party by reason of any breach of any
covenant, agreement, representation, warranty or other provision of
this Agreement, or any breach of any duty or obligation created under
this Agreement by such other party, the prevailing party in whose
favor final judgment is entered shall be entitled to recover from the
losing party all reasonable costs
4
<PAGE> 5
and expenses incurred by the prevailing party in connection with such
suit or action, including legal fees and court costs (whether or not
taxable as such).
4.10 Entire Agreement. This Agreement embodies the entire
understanding of the parties with respect to its subject matter, and
there are no other agreements or understandings, written or oral, in
effect between the parties relating to the subject matter of this
Agreement, unless expressly referred to in this Agreement.
4.11 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be valid
under applicable law. However, if any provision shall be invalid or
unenforceable, it shall be construed and limited to effectuate its
purpose to the maximum legally permissible extent. If it cannot be so
construed 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
Name:
Title:
SHAREHOLDER:
/s/ Carl J. Schmitt
/s/ Leonard Ware
/s/ Linda Meier
/s/ William Preston
/s/ Thomas Brown
/s/ Robert A. Schmitt
/s/ Lawrence A. Aufmuth
/s/ The Shurtleff Family
Trust, dated 7/29/82
/s/ George G.C. Parker
/s/ Leslie M. Quist
/s/ J. Boyce Nute
5
<PAGE> 6
SCHEDULE 1
UNIVERSITY BANK & TRUST COMPANY
SHAREHOLDER AGREEMENTS
Name of Shareholder No. of Shares
- ------------------- -------------
Carl J. Schmitt 87,790
Leonard Ware 20,448 (includes exercisable
options for 400 shares)
Linda R. Meier 26,538 (includes exercisable
options for 400 shares)
William Preston 19,984 (includes exercisable
options for 400 shares)
Thomas Brown 900 (includes exercisable options
for 400 shares)
Robert A. Schmitt 40,000-Robert A. Schmitt Trust
30,000-Trustee of CE Schmitt Trust
Lawrence A. Aufmuth 1,900 (includes exercisable options
for 400 shares)
The Shurtleff Family 14,098
Trust dated 7/29/82
George G.C. Parker 5,050 (includes exercisable options
for 400 shares)
Leslie M. Quist 2,600 (includes exercisable options
for 400 shares)
J. Boyce Nute 3,127 (includes exercisable options
for 400 shares)
-------
252,435
6
<PAGE> 1
EXHIBIT 99(f)
AFFILIATE'S AGREEMENT
October 6, 1994
Comerica Incorporated
211 West Fort Street
Detroit, Michigan 48275-1041
Gentlemen:
Reference is made to the Agreement and Plan of Reorganization and
Merger, dated as of October 4, 1994 (the "Merger Agreement"), by and among
Comerica Incorporated ("Comerica"), Comerica Interim Incorporated ("Interim")
and University Bank & Trust Company ("University"), which Merger Agreement
provides for the merger (the "Merger") of Interim, a wholly-owned subsidiary of
Comerica, and University, in a transaction in which, among other things, shares
of the common stock of University ("University Common Stock") will be converted
into the right to receive shares of common stock, $5.00 par value, of Comerica
("Comerica Common Stock"), as more fully provided therein.
The undersigned has been informed that the Merger constitutes a transaction
covered by Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"); that the undersigned may be deemed to be an "affiliate" of
University within the meaning of Rule 145; and that, accordingly, the shares of
Comerica Common Stock which the undersigned may acquire in connection with the
Merger may be disposed of only in conformity with the provisions hereof. In
addition, the undersigned has been informed that the treatment of the Merger as
a pooling-of-interests for financial accounting purposes is dependent upon the
accuracy of certain of the representations and the compliance with certain of
the agreements set forth herein.
The capitalized terms used and not defined herein shall have the meaning set
forth in the Merger Agreement.
1. The undersigned after inquiry of any agent with discretionary power
to transfer the undersigned's shares of University Common Stock, represents,
warrants and agrees as follows:
(a) The undersigned has full power to execute this Affiliate's
Agreement and to make the representations, warranties and agreements herein,
and to perform his, her or its obligations hereunder.
(b) The undersigned is currently the owner of that number of
shares of University Common Stock set forth in Schedule 1 hereto (the
"University Shares") and has held the University Shares at all times since
September 1, 1994, unless otherwise set forth in Schedule 1.
<PAGE> 2
(c) The undersigned currently owns no shares of Comerica
Common Stock and has not owned any shares of Comerica Common Stock since August
1, 1994, except as otherwise disclosed on Schedule 1 to this Agreement.
(d) The undersigned shall not sell, transfer or otherwise
dispose of, or reduce the undersigned's risk of ownership or investment in, any
of the University Shares or any of the shares of Comerica Common Stock received
by the undersigned pursuant to the Merger, for a period beginning not less than
thirty days prior to the Effective Time of the Merger (the "Effective Time")
and ending on the date Comerica publishes financial results covering a period
of at least thirty days of combined operations of University and Comerica
following the Effective Time; provided, however, that the undersigned may (i)
exchange the University Shares for shares of Comerica Common Stock in the
Merger, and (ii) may make bona fide gifts of distributions without
consideration so long as the recipients thereof agree not to sell, transfer or
otherwise dispose of the Comerica Common Stock except as provided herein.
(e) The undersigned will not sell, transfer or dispose of any
shares of Comerica Common Stock which the undersigned may acquire in connection
with the Merger or any securities which may be paid as a dividend or otherwise
distribued thereon or with respect thereto or issued or delivered in exchange
or substitution therefor (all such shares and other securities are sometimes
collectively referred to herein as "Restricted Securities"), or any option,
right or other interest with respect to any Restricted Securities, unless such
sale, transfer or disposition is effected (i) pursuant to an exemption from the
registration requirements of the Securities Act as provided in Section 3
hereof, or (ii) pursuant to an effective registration statement under, and in
compliance with, the Securities Act; provided however, that the undersigned may
make bona-fide gifts or distributions without consideration so long as the
recipients thereof agree not to sell, transfer or otherwise dispose of the
Comerica Common Stock except as provided herein.
(f) The undersigned has no present plan or intent to engage in
sale, exchange, transfer, redemption or reduction in any way of the
undersigned's risk of ownership by short sale otherwise, or other disposition,
directly or indirectly (such actions being collectively referred to as a
"Sale") of the University Shares or any of the shares of Comerica Common Stock
to be received by the undersigned pursuant to the Merger.
(g) The undersigned has not engaged in a Sale of any shares of
University Common Stock at any time since August 1, 1994 unless otherwise set
forth in Schedule 1.
(h) The undersigned is not aware of or participating in any
plan or intention on the part of the University shareholders (a "Plan") to
engage in a Sale of Comerica Common Stock to be received by such University
shareholders pursuant to the Merger that will reduce such University
shareholders' ownership of Comerica Common Stock to a number of shares having,
in the aggregate, a value at the Effective Time of less than 50% of the total
fair market value of the University Shares/or Common Stock outstanding
immediately prior to the Merger. For purposes of this representation, shares
of the University Stock disposed of in a Sale (including through the
2
<PAGE> 3
exercise of dissenters' rights) will be considered to be outstanding stock of
University immediately prior to the Merger that was exchanged for Comerica
Common Stock in the Merger, and then disposed of pursuant to a Plan.
(i) The undersigned has no present plan or intent to (i)
engage in a Sale of the University Shares (other than in exchange for Comerica
Common Stock pursuant to the Merger), or (ii) exercise dissenters' rights in
connection with the Merger.
(j) The representations contained herein shall be true and
correct at all times from the date hereof through the Effective Time.
(k) The undersigned has consulted such legal and financial
counsel as the undersigned deems appropriate in connection with the execution
of this Affiliate's Agreement.
2. Comerica agrees to use its best efforts to file all reports and
data with the Securities and Exchange Commission ("SEC") necessary to permit
the undersigned to sell Restricted Securities pursuant to and otherwise in
conformity with Rule 145(d) under the Securities Act.
3. Comerica acknowledges that the provisions of Section 1(e) of this
Affiliate's Agreement will be satisfied as to any sale by the undersigned of
Restricted Securities pursuant to Rule 145(d) under the Securities Act, as
evidenced by a broker's letter stating that the requirements of Rule 145 have
been met; provided, however, that if counsel for Comerica reasonably believes
that the provisions of Rule 145 have not been complied with, or if requested by
Comerica in connection with a proposed disposition, the undersigned shall
furnish to Comerica a copy of a "no action" letter or other communication from
the staff of the SEC or an opinion of counsel in form and substance reasonably
satisfactory to Comerica and its counsel, to the effect that the applicable
provisions of Paragraphs (c), (e), (f) and (g) of Rule 144 under the Securities
Act have been complied with or that the disposition may be otherwise effected
in the manner requested in compliance with the Securities Act.
4. The undersigned also understands that stop transfer instructions
will be given to Comerica's transfer agent with respect to the Restricted
Securities and that there will be placed on the certificates evidencing the
Restricted Securities, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), APPLIES AND MAY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF
AND COMERICA INCORPORATED, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF COMERICA INCORPORATED."
3
<PAGE> 4
Comerica agrees that such stop transfer instructions and legend will be
promptly removed if the provisions of Section 3 are complied with.
5. This Affiliate's Agreement shall be binding upon and enforceable
against administrators, executors, representatives, heirs, legatees and
divisees of the undersigned and any pledgee holding the Restricted Securities of
the undersigned as collateral.
IN WITNESS WHERE OF, the undersigned has executed the foregoing Affiliate's
Agreement as of the date first above written.
Very truly yours
By: /s/ Carl J. Schmitt
AGREED TO AND ACCEPTED:
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
Name: Mark W. Yonkman
Title: Vice President and Assistant Secretary
/s/ Gayle A. Anderson
/s/ David Hood
/s/ Hall Palmer
/s/ Suzanne M. Powers
4
<PAGE> 1
EXHIBIT 99(g)
NON-COMPETITION AGREEMENT
This Agreement is entered into as of ___________________, 1995 by and
between University Bank and Trust Company, a California corporation, (the
"Company") and Carl J. Schmitt ("Officer").
RECITALS
WHEREAS, due to the position of Officer with the Company and his
knowledge of information concerning the Company and its business, the Company
desires to restrict Officer's ability to compete with the Company;
NOW THEREFORE, in consideration of these circumstances, the parties
have entered into this Agreement on the terms set forth below for valuable
consideration, the adequacy and receipt of which is hereby acknowledged.
Compensation. The Company hereby agrees to pay the Officer, whether
or not Officer is an officer, director, or employee of, or a consultant to, the
Company, the sum of $________________ (less applicable withholding) upon
execution of this Agreement. Any payments due under this Agreement shall not
be offset by any compensation or other remuneration due or which becomes due
to Officer after the date of this Agreement.
1. Character of Payments. The Company and Officer agree and
acknowledge that the payment due Officer hereunder is in consideration of
Officer's refraining from competing with the Company for the period specified
in this Agreement. Such payment shall be treated as ordinary income to Officer
by company and Officer on their tax returns.
<PAGE> 2
2. Non-Disclosure of Confidential Information.
(a) Except as authorized in writing by the Company, the
Officer shall not at any time, disclose or use, directly or indirectly,
confidential information of the Company which the Officer has gained
knowledge of by reason of said employment, and the Officer shall
retain all such information in trust in a fiduciary capacity for the
sole use and benefit of the Company. Such confidential information
includes, but is not limited to, information of the Company whether
now owned or hereafter obtained, concerning marketing and sale methods,
materials, processes, procedures, devices, computer programs, computer
software, fringe benefit programs or any other process or procedures
utilized by the Company. Such confidential information shall also
include but is not limited to products distributed by the Company or
its distributors, products manufactured and/or sold by the Company
business forms, computer programs, computer software, prices, list of
suppliers and customers, plans for new areas or markets, internal
operations and any patents, improvements, ideas, variations, trade
secrets, proprietary information and other confidential information of
any type, together with all written, graphic and other materials
relating to all or any part of the same. The Officer acknowledges
that the confidential information of the Company is valuable,
special and unique to the Company's business and on which the
Company's business depends, and is proprietary to the Company, and
that the Company wishes to protect said confidential information by
keeping it secret and confidential for its sole use and benefit. The
Officer will take all reasonable steps necessary, and all reasonable
steps requested by the Company, to insure that all such confidential
information is kept secret and confidential for the sole use and
benefit of the Company.
<PAGE> 3
(b) Upon termination of the Officer's employment with the
Company, or any other time the Company may in writing so request, the
Officer shall promptly deliver to the Company all materials concerning
any confidential information, copies thereof and any other material of
the Company which are in the possession or under the control of the
Officer. The Officer shall not make or retain any copy or extract
thereof.
3. Non-Compete. At any time that the Officer is employed by the
Company, and for a period of _______________ years after termination of the
Officer's employment the Company, the Officer shall not:
(a) solicit, cause, induce or encourage, directly or
indirectly, any employee of the Company to leave its employ, or any
independent contractor to terminate any independent contractor
relationship with the Company;
(b) cause, induce or encourage, directly or indirectly,
any customer or client of the Company to terminate or adversely change
any relationship with the Company;
(c) cause, induce or encourage any potential supplier or
customer to not enter into any business relationship with the Company;
(d) directly or indirectly, including but not by way of
limitation, as an owner, employee, employer, operator, investor,
independent contractor, agent, stockholder, partner (general or
limited), joint venturer, officer, director, consultant, franchisee,
franchiser or co-worker, enter into, conduct participate or engage in
any form of business in the counties of ____________, ____________,
____________, ____________, in the State of California, which are
related to or operates a bank, bank holding company, savings and loan
association, savings bank or other financial institution.
<PAGE> 4
4. The Officer shall disclose to the Company all inventions,
discoveries, variations, computer programs, ideas and improvements, whether or
not copyrightable or patentable, conceived or made by the Officer alone or
jointly with other during the Officer's employment with the Company, related to
the business or activities of the Company or resulting asks assigned by the
Company and assigns and agrees to assign all the Officer's interest therein to
the Company as the sole exclusive property of the Company. The Officer shall
execute such documents and do such acts as shall be necessary to perfect the
Company's rights therein. These obligations shall continue after termination
of the Officer employment with the Company with respect to all inventions,
discoveries, variations, ideas and improvements conceived or made by the
Officer during the term of said employment.
5. It is expressly understood and agreed that although the
Officer and Company consider the restrictions contained in Sections 3, 4 and 5
above reasonable for the purpose of preserving for the Company goodwill,
proprietary rights and going concern value, if a final judicial determination
is made by a court having jurisdiction that the time or territory or any other
restriction contained in these paragraphs is an unenforceable restriction on
the activities of the Officer, the provisions of these paragraphs shall not be
rendered void but shall be deemed amended to apply as to such maximum time and
territory and to such other extent as such court may judicially determine or
indicate to be reasonable. Alternatively, if the court referred to above
finds that any restriction contained in these paragraphs is unenforceable, and
such restriction cannot be amended so as to make it enforceable, such finding
shall not affect the enforceability of any of the other restrictions contained
herein.
<PAGE> 5
6. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of Officer and his heirs and legal representatives,
and the Company and their respective successors and permitted assigns.
7. Enforcements.
(a) Damages Inadequate. In the event of a threatened or actual
breach of Sections 3, 4 and 5 of the Agreement by the Officer, it is agreed and
acknowledged that damages would not be an adequate remedy to compensate the
Company of the loss of goodwill and other harm to the business of the Company.
(b) Injunctive Relief. In the event of a threatened or actual
breach of Section 3, 4 and 5 of this Agreement by the Officer, the Company
shall be entitled to a temporary restraining order, and to temporary and
permanent injunctive relief, to prevent or terminate such anticipated or actual
breach, provided that nothing in this Agreement shall be construed to limit the
damages otherwise recoverable by the Company in any such event.
(c) Notice to Third Parties. In addition, after discussing the
matter with the Officer, the Company shall have the right, subject to
applicable law, to inform any other third party that the Company reasonably
believes to be, or to be contemplating, participating with the Officer or
receiving from the Officer assistance in violation of this Agreement, of the
terms of this Agreement and of the rights of the Company hereunder, and that
participation by any such entity or persons with the Officer in activities in
violation of this Agreement may give rise to claims by the Company against such
entity, persons or third party.
8. Assignment. The Company may assign its rights and benefits
under this Agreement to any person, firm, partnership, corporation,
association, or other entity to which may be transferred all or a part of the
businesses of the Company or its subsidiaries, in the aggregate,
<PAGE> 6
and/or a majority of the outstanding capital stock of the Company or its
subsidiaries, in the aggregate, in which even the covenants, duties,
obligations and agreements on the part of Officer contained in this Agreement
shall inure to the benefit of any such transferee or other successor to the
same extent and with the same force and effect as if this Agreement had been
entered into by Officer directly with such transferee or other successor. The
obligations of Officer under this Agreement are personal as to Officer and may
not be transferred or delegated by Officer to any person, either voluntarily or
involuntarily, but Officer shall be entitled to assign his rights to receive
payments hereunder and such rights shall inure to the benefit of Officer's
estate in the event of his death in the absence of any prior assignment. Except
as specifically provided herein, this Agreement is not intended to, and shall
not, confer any rights or benefits upon any person or entity that is not a
party hereto.
9. Waiver of breach. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any party.
10. Captions. The various titles of the paragraphs herein are
used solely for convenience and shall not be used for interpretation or
construing any word, clause, paragraph or subparagraph of this Agreement.
11. Governing law. This Agreement shall be construed and
interpreted according to the laws of the State of California.
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
Address:
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
------------------------------------
Officer
<PAGE> 1
EXHIBIT 99(h)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
Commission File Number
UNIVERSITY NATIONAL BANK & TRUST COMPANY
(Exact name of registrant as specified in its charter)
National Banking Laws 94-2622607
- --------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 LYTTON AVENUE, PALO ALTO, CALIFORNIA 94301
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code, (415) 327-0210
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.50 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports, and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [ X ]
[Cover page 1 of 2 pages]
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the average of the closing bid and ask prices of the
Common Stock on March 7, 1994 as reported by NASDAQ National Market System, was
approximately $44,629,997.
As of March 7, 1994, Registrant had 1,362,748 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the Annual Meeting is incorporated by reference into
Part III.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
<S> <C>
ITEM 1. Business . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. Properties . . . . . . . . . . . . . . . . . . . . 20
ITEM 3. Legal Proceedings. . . . . . . . . . . . . . . . . 20
ITEM 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . 20
PART II
ITEM 5. Market for Registrant's Common Stock and Related
Security Holder Matters. . . . . . . . . . . . . . 22
ITEM 6. Selected Financial Data. . . . . . . . . . . . . . 23
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 24
ITEM 8. Financial Statements and Supplementary Data. . . . 40
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . 63
PART III
ITEM 10. Directors and Executive Officers of the Registrant 63
ITEM 11. Executive Compensation . . . . . . . . . . . . . . 64
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . 64
ITEM 13. Certain Relationships and Related Transactions . . 64
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. . . . . . . . . . . . . . . . 65
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>
<PAGE> 4
PART I.
ITEM 1. BUSINESS
General
The Bank commenced operations on May 13, 1980. Its principal banking office is
located at 250 Lytton Avenue, Palo Alto, California. Since its formation, the
Bank has provided basic banking services and personal trust services to
individuals and business enterprises in the Palo Alto area. Palo Alto is
located on the San Francisco Peninsula, approximately 30 miles south of San
Francisco, on the northern periphery of "Silicon Valley."
The Bank's primary service area is considered to be the communities of Palo
Alto, Menlo Park, Atherton and Portola Valley plus the unincorporated areas of
Ladera and Stanford University. This primary service area is oriented towards
professional services, light industry, retail businesses and education.
The Bank considers its principal service a "banking relationship," the keystone
of which is a transaction account. In the case of corporations, the
transaction account is a demand (checking) account. In the case of
individuals, it is a Super-NOW account that pays interest, provided that
sufficient funds (i.e., either a daily minimum balance of $3,000, or an average
monthly balance of $6,000) are maintained. Once a customer has established the
"relationship" with the Bank by opening a transaction account, that customer
may utilize all other Bank services, including money fund accounts,
certificates of deposit, safe deposit box rentals, cashier's checks, and the
purchase of U.S. postage stamps, U.S. Savings Bonds and traveler's checks.
Borrowing clients who are low and moderate income individuals are not expected
to be deposit clients of the bank. The Bank also makes available to qualified
customers commercial, personal and real estate loans, credit cards and standby
letters of credit. Through its correspondents, the Bank is also able to offer
limited international banking and municipal bond trading services.
The Bank's Trust Department specializes in personal trust services and acts as
trustee on a range of employee benefit plans. The Bank does not provide stock
transfer services. The Bank maintains a Trust Representative Office at 133
Mission Street, Santa Cruz, CA.
The Bank has an office at 800 Oak Grove, Menlo Park, CA. The Bank has
automatic teller machines at its two offices and it issues an ATM card which
enables a customer to withdraw cash at over 65,000 offices of other financial
institutions world wide which are members of Cirrus, Money Network, Star
System, American Express and the Interlink Network. The Bank also maintains an
ATM machine at the Forum, 23500 Christo Rey Drive, Cupertino, CA. The Bank
employed 138 full time and 8 part-time employees at year end.
1
<PAGE> 5
Competition From Other Financial Institutions
The Bank considers its principal market area to be composed of the communities
of Palo Alto, Menlo Park, Atherton, Portola Valley and Stanford. According to
the 1990 Census, the aggregate population of these communities was 118,390.
The 1990 Census further indicates that individuals 18 years old or older with
four or more years of college education totaled 55.8% of this market, versus
28.2% for the San Francisco Bay Area and 20.8% for the State of California.
Individuals in this primary market area who were 16 years old or older at the
1990 Census date and who were employed as executives, administrators, managers
or in a professional specialty totaled 52.7%, as compared to 33.1% for the San
Francisco Bay Area and 28.6% for the State of California.
This market is very heavily serviced by financial institutions. There are 31
commercial banking offices, 13 savings and loan offices, 24 securities
brokerage firms and six credit unions within this market area. The 31 banking
offices alone had deposits from individuals, partnerships and corporations
totaling $2.9 billion as of June 30, 1993, compared to $1.6 billion at December
31, 1983. The Bank's market share was 2.17% on December 31, 1982, 3.88% on
December 31, 1983, 4.49% on December 31, 1984, 6.39% on December 31, 1985,
6.50% on December 31, 1986, 8.57% on December 31, 1987, 9.59% on December 31,
1988, 9.74% on December 31, 1989, 10.07% on December 31, 1990, 10.52% on
December 31, 1991, 11.20% on December 31, 1992 and 11.60% on June 30, 1993.
With regard to loans, the Bank competes with other commercial banks, savings
and loan associations, consumer finance companies and other lending
institutions. The Bank's Trust Department competes with the trust departments
of all the major banks operating within the Bank's primary service area.
In addition to its principal market area, the Bank considers as a secondary
market area, the surrounding communities of Woodside, Los Altos, Mountain View,
Sunnyvale, and Santa Clara to the south and Redwood City, San Carlos, Belmont
and San Mateo to the north. The Bank services customers in these areas by mail
or by the use of its six courier vans, which pick up non-cash deposits on
scheduled routes.
Outside its primary market area, the Bank competes with other national banks,
state banks, savings and loan associations, and credit unions for time and
savings deposits, other deposits, checking or draft accounts, and loans
throughout the San Francisco Bay area. With respect to certain of its
services, including, but not limited to, loans, and particularly with respect
to securing funds available for deposits, the Bank competes with other
financial institutions such as insurance companies, consumer and business
finance or loan companies, industrial loan associations, real estate investment
trusts, pension funds, mortgage companies, and credit card organizations. The
national equity and debt securities markets also compete for available funds.
2
<PAGE> 6
Many of the Bank's competitors offer a comprehensive array of banking products
which the Bank has chosen not to offer, and these competitors thereby may have
a competitive advantage over the Bank. Further, many of the Bank's competitors
have long established reputations and loyal customer bases. However,
management of the Bank believes that the level of service which it provides in
the delivery of banking services to its customers contributes to the Bank's
ability to obtain market share in the face of such competition.
Many of the banks and other financial institutions, including regional money
center banks, with which the Bank competes, have capital and resources
substantially in excess of the capital and resources of the Bank. Because
banks, including the Bank, are generally restricted from lending in excess of a
specified percentage of their capital base to one borrower, the Bank is
dependent upon its correspondent relationships for loan participations in order
to accommodate loan requests in excess of its legal lending limit. The Bank's
legal limit on unsecured lending to any one entity was $5,156,922 on December
31, 1993.
To a certain extent, the Bank is also faced with competition from banks and
other institutions located in money centers outside of California, and from
foreign banks which maintain representative offices in California.
Commitments
As of December 31, 1993, and December 1992, the Bank's loan commitment by
category is as follows:
<TABLE>
<CAPTION>
Loan Commitments Loan Commitments
Outstanding as of Outstanding as of
December 31, 1993 December 31, 1992
--------------------- ---------------------
Percent Percent
(Thousands) of Total (Thousands) of Total
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Commercial
Loans $ 44,165 53.99% $ 40,269 50.05%
Consumer Revolving
Lines of Credit 23,071 28.20% 29,305 36.42%
Real Estate
Loans 9,431 11.53% 3,554 4.42%
Letters of
Credit 5,139 6.28% 7,328 9.11%
-------- ------- ------- -------
TOTAL $ 81,806 100.00% $ 80,456 100.00%
-------- ------- ------- -------
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
----------------- -----------------
<S> <C> <C> <C> <C>
Estimate of
Amount Drawn
During Year $ 44,076 53.88% $ 39,806 49.48%
</TABLE>
All commitments made are "firm" and could be drawn. The largest category of
commitments is Commercial Loans ($44,165M [53.99%]). The Bank expects
approximately 50% of these commitments to be drawn. The Bank anticipates that
50% of the commitments in the next largest category, Consumer Revolving Loans
($23,071M [28.20%]) to be drawn. Less than 5% of the commitments are fixed
rate commitments.
Commercial loan commitments are generally in the form of revolving lines of
credit with floating interest rates and typically mature within one year. All
other commitments are on terms whereby prices of interest rates are to be
determined by market conditions prevailing at the time of exercise.
Concentration of Bank Deposits
There are no material portions of the Bank's deposit base obtained from a
single person or group of persons. The Bank has no deposits of Federal, State
or Local governments other than a Treasury Tax and Loan account. At December
31, 1993, the Bank had deposits totaling $44,696,233 from its Trust Department.
That total represents deposits of 750 individual trust accounts.
As of December 31, 1993, the Bank's deposit structure was as follows:
<TABLE>
<CAPTION>
Deposits Percent
Type of Account (Thousands) of Total
--------------- ----------- --------
<S> <C> <C>
Demand Deposits (1) $ 60,848 16.57%
Savings and NOW Accounts (2) 85,007 23.15%
Time Certificates of
Deposit 21,957 5.98%
Public Deposits 810 .22%
Trust Deposits 44,696 12.17%
Personal Money Funds 80,619 21.96%
Nonpersonal Money Funds 73,267 19.95%
--------- ------
TOTAL $367,204 100.00%
========= ======
</TABLE>
(1) Demand deposits are comprised entirely of corporate transaction accounts.
(2) Individual transaction accounts, as well as transaction accounts for
non-profit organizations, partnerships and sole proprietorships are all
classified as Savings & NOW Accounts.
4
<PAGE> 8
Seasonality of Business
The Bank generally experiences an increase in total deposits at year-end and in
April in anticipation of tax payments as shown below:
<TABLE>
<CAPTION>
Total Deposits
--------------
Monthly Average Balance
-----------------------
<S> <C>
December 1990 $260,000,000
April 1991 276,000,000
May 1991 265,000,000
December 1991 307,000,000
April 1992 334,000,000
May 1992 320,000,000
December 1992 332,000,000
April 1993 343,000,000
May 1993 350,000,000
December 1993 367,000,000
</TABLE>
Foreign Sources of Business
There are no material deposit liabilities incurred from outside the Bank's
primary and secondary service areas. The Bank has no brokered deposits and has
a policy not to accept any. The Bank's loans are made primarily to
professionals, executives and privately held companies in the Bank's market
area. From time to time, loan participations are purchased from another bank.
As of December 31, 1993, participations totaling $1,659,000 were included in
the Bank's portfolio.
(Balance of this page intentionally left blank.)
5
<PAGE> 9
SUPERVISION AND REGULATION
The Bank is regulated and supervised by the Office of the Comptroller of the
Currency (the "OCC") and, therefore, is subject to periodic examination by the
OCC. Deposits of the Bank's customers are insured by the Federal Deposit
Insurance Corporation (the "FDIC") up to the maximum limit of $100,000, and, as
an insured bank, the Bank is subject to certain regulations of the FDIC. As a
national bank, the Bank is a member of the Federal Reserve System and is also
subject to the regulations of the Federal Reserve Board (the "FRB").
The regulations of those federal bank regulatory agencies govern most aspects
of the Bank's business and operations, including but not limited to requiring
the maintenance of non-interest bearing reserves on deposits, limiting the
nature and amount of investments and loans which may be made, regulating the
issuance of securities, restricting the payment of dividends, regulating bank
expansion and bank activities and determining maximum rates of interest allowed
on certain deposits.
EFFECT OF STATE LAW
The laws of the State of California also affect the Bank's business and
operations. For example, under 12 U.S.C. Section 36, the OCC may authorize a
national bank to establish branch offices only to the extent allowable under
state law for state banks. Therefore, as California law presently permits a
state bank to establish a branch office at any location in the state, a
national bank may be similarly authorized to establish a branch by the OCC. On
a similar basis, 12 U.S.C. Section 85 provides that state law, in most
circumstances, determines the maximum rate of interest which a national bank
may charge on a loan. As California law exempts all state-chartered and
national banks from the application of its usury laws, national banks are also
provided such an exemption pursuant to Section 85.
CHANGE IN BANK CONTROL
The Bank Holding Company Act of 1956, as amended (the "Holding Company Act")
and the Change in Bank Control Act of 1978, as amended (the "Change in Control
Act"), together with regulations of the FRB and the OCC, require that,
depending on the particular circumstances, either FRB approval must be obtained
or notice must be furnished to the OCC and not disapproved prior to any person
or company acquiring "control" of a national bank, such as the Bank, subject to
exemptions for certain transactions. Control is conclusively presumed to exist
if an individual or company acquires 25% or more of any class of voting
securities of the bank. Control is rebuttably presumed to exist if a person
acquires 10% or more but less than 25% of any class of voting securities and
either the company has registered securities under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
6
<PAGE> 10
or no other person will own a greater percentage of that class of voting
securities immediately after the transaction.
CAPITAL ADEQUACY REQUIREMENTS
The Bank is subject to the OCC's capital guidelines and regulations governing
capital adequacy for national banks. As noted below, the Federal banking
agencies have solicited comments on a proposed regulation which would impose
additional capital requirements on banks based on the interest rate risk
inherent in a bank's portfolio.
The OCC has established a minimum leverage ratio of 3% Tier 1 capital(1) to
total assets for national banks that have received the highest composite
regulatory rating (a regulatory measurement of capital, assets, management,
earnings and liquidity) and that are not anticipating or experiencing any
significant growth. All other institutions will be required to maintain a
leverage ratio of at least 100 to 200 basis points above the 3% minimum.
OCC's regulations also require national banks to maintain a minimum ratio of
qualifying total capital to risk-weighted assets of 8.00%. Risk- based capital
ratios are calculated with reference to risk-weighted assets, including both on
and off-balance sheet exposures, which are multiplied by certain risk weights
assigned by the OCC to those assets. At least one-half of the qualifying
capital must be in the form of Tier 1 capital.
Set forth below are Bank's risk based and leverage capital ratios as of
December 31, 1993:
<TABLE>
<CAPTION>
RISK BASED CAPITAL RATIO AS OF DECEMBER 31, 1993
------------------------------------------------
RISK
BASED
AMOUNT RATIO
------ ------
<S> <C> <C>
Tier 1 Capital.............. $ 31,534 11.92%
Total Capital............... $ 34,869 13.19%
Total Capital minimum
requirement............... $ 21,157 8.00%
Excess...................... $ 13,712
Risk-weighted assets........ $264,458
</TABLE>
(1) Tier 1 capital is generally defined as the sum of the core capital
elements less goodwill and certain intangibles. The following items are
defined as core capital elements: (i) common stockholders' equity; (ii)
qualifying noncumulative perpetual preferred stock; and (iii) minority
interests in the equity accounts of consolidated subsidiaries.
7
<PAGE> 11
LEVERAGE RATIO AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
LEVERAGE
AMOUNT RATIO (1)
------ -----
<S> <C> <C>
Tier 1 Capital ............. $ 31,534 8.35%
Minimum Leverage
requirement............... 11,328 to 3.00% to
18,881 5.00%
Excess...................... $ 20,206 to
12,653
Average total assets........ $ 377,617
- ---------------------------
</TABLE>
(1) Tier 1 Capital to average total assets.
Management of the Bank believes that the Bank will continue to meet its minimum
capital requirements in the foreseeable future.
Under certain circumstances, the OCC may determine that the capital ratios for
a national bank shall be maintained at levels which are higher than the minimum
levels required by the guidelines. A national bank which does not achieve and
maintain adequate capital levels as required may be subject to supervisory
action by the OCC through the issuance of a capital directive to ensure the
maintenance of required capital levels. In addition, the Bank is required to
meet certain guidelines of the OCC concerning the maintenance of an adequate
allowance for loan and lease losses.
If any time the Bank fails to meet its minimum regulatory capital requirements,
it is required, within 45 days thereafter, to submit a capital restoration plan
to the OCC for review and approval.
As required by the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), the federal banking agencies have solicited comments on a
proposed method of incorporating an interest rate risk component into the
current risk-based capital guidelines, with the goal of ensuring that
institutions with high levels of interest rate risk have sufficient capital to
cover their exposures. Interest rate risk is the risk that changes in market
interest rates might adversely affect a bank's financial condition. Under the
proposal, interest rate risk exposures would be quantified by weighing assets,
liabilities and off-balance sheet items by risk factors which approximate
sensitivity to interest rate fluctuations. Institutions identified as having
an interest rate risk exposure greater than a defined threshold would be
required to allocate additional capital to support this higher risk. Higher
individual capital allocations could be required by the bank regulators based
on supervisory concerns.
As the federal banking agencies have solicited comments on this
8
<PAGE> 12
proposal but have not yet proposed regulations to implement any interest rate
risk component into the risk-based capital guidelines, the ultimate impact on
the Bank of final regulation in this area cannot be predicted at this time.
PAYMENT OF DIVIDENDS
The ability of the Bank to make dividend payments is subject to statutory and
regulatory restrictions.
The Board of Directors of a national bank may declare the payment of dividends
depending upon the earnings, financial condition and cash needs of the bank and
general business conditions. A national bank may not pay dividends from its
capital. All dividends must be paid out of net profits then on hand, after
deducting losses and bad debts. A national bank is further prohibited from
declaring a dividend on its shares of common stock until its surplus fund
equals the amount of capital stock or until 10% of the bank's net profits of
the preceding half year in the case of quarterly or semiannual dividends, or
the preceding two consecutive half-year periods in the case of an annual
dividend, are transferred to the surplus fund. Moreover, the approval of the
OCC is required for the payment of dividends if the total of all dividends
declared by the bank in any calendar year would exceed the total of its net
profits of that year combined with its retained net profits of the two
preceding years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.
In addition to the above requirements, guidelines adopted by the OCC set forth
factors which are to be considered by a national bank in determining the
payment of dividends. A national bank, in assessing the payment of dividends,
is to evaluate the bank's capital position, its maintenance of an adequate
allowance for loan and lease losses, and the need to revise or develop a
comprehensive capital plan.
Moreover, the OCC has broad authority to prohibit a national bank from engaging
in banking practices which it considers to be unsafe or unsound. It is
possible, depending upon the financial condition of the national bank in
question and other factors, that the OCC may assert that the payment of
dividends or other payments by a bank is considered an unsafe or unsound
banking practice and therefore, implement corrective action to address such a
practice.
Accordingly, the future payment of cash dividends by the Bank will not only
depend upon the Bank's earnings during any fiscal period but will also depend
upon the assessment of its Board of Directors of capital requirements and other
factors, including dividend guidelines and the maintenance of an adequate
allowance for loan and lease losses.
9
<PAGE> 13
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
GENERAL
FDICIA primarily addresses the safety and soundness of the deposit insurance
funds, supervision of and accounting by insured depository institutions and
prompt corrective action by the federal bank regulatory agencies for troubled
institutions. FDICIA gives the FDIC, in its capacity as federal insurer of
deposits, broad authority to promulgate regulations to assure the viability of
the deposit insurance funds including regulations concerning safety and
soundness standards. FDICIA also places restrictions on the activities of
state-chartered institutions and on institutions failing to meet minimum
capital standards and provides enhanced enforcement authority for the federal
banking agencies. FDICIA has strengthened FDIC regulations regarding insider
transactions.
PROMPT CORRECTIVE ACTION
FDICIA amended the Federal Deposit Insurance Act ("FDIA") to establish a format
for closer monitoring of insured depository institutions and to enable prompt
corrective action by regulators when an institution begins to experience
difficulty. The general thrust of these provisions is to impose greater
scrutiny and more restrictions on institutions as they descend the
capitalization ladder.
FDICIA establishes five capital categories for insured depository institutions:
(a) Well Capitalized;(1) (b) Adequately Capitalized;(2) (c)
Undercapitalized;(3) (d) Significantly Undercapitalized;(4) and (e) Critically
Undercapitalized.(5) All insured institutions (e.g., the Bank) are barred from
making
(1) Well Capitalized means a financial institution with a total risk-based
ratio of 10% or more, a Tier 1 risk-based ratio of 6% or more and a leverage
ratio of 5% or more, so long as the institution is not subject to an order,
written agreement, capital directive or prompt corrective action directive to
meet and maintain a specific capital level for any capital measure.
(2) Adequately Capitalized means a total risk-based ratio of 8% or more, a
Tier 1 risk-based ratio of 4% or more and a leverage ratio of 4% or more (3% or
more if the institution has received the highest composite rating in its most
recent report of examination) and does not meet the definition of a Well
Capitalized institution.
(3) Undercapitalized means a financial institution with a total risk-based
ratio of less than 8%, a Tier 1 risk-based ratio of less than 4% or a leverage
ratio of less than 4%.
(4) Significantly Undercapitalized means a financial institution with a
total risk-based ratio of less than 6%, a Tier 1 risk-based ratio of less than
3% or a leverage ratio of less than 3%.
(5) Critically Undercapitalized means a financial institution with a ratio
of tangible equity to total assets that is equal to or less than 2%.
10
<PAGE> 14
capital distributions or paying management fees to a controlling person if to
do so would cause the institution to fall into any of the three
undercapitalized categories.
Undercapitalized institutions are subject to several mandatory supervisory
actions, including increased monitoring and periodic review of the
institution's efforts to restore its capital, submitting an acceptable capital
restoration plan, restricted asset growth, and limits on acquisitions, new
branches or new lines of business. A parent holding company of an
undercapitalized bank is expected to guarantee that the bank will comply with
the bank's capital restoration plan until the bank has been adequately
capitalized, on the average, for four (4) consecutive quarters. Such guarantee
is limited to the lesser of 5% of the bank's total assets at the time it became
undercapitalized or the amount necessary to bring the bank into full capital
compliance.
Significantly undercapitalized institutions and undercapitalized institutions
that fail to submit and implement adequate capital restoration plans are
subject to the mandatory provisions applicable to undercapitalized institutions
and, in addition, may be required to: sell additional capital, including
voting shares; restrict transactions with affiliates; restrict interest rates
paid on deposits; restrict asset growth or reduce total assets; terminate,
reduce or alter any risky activities; elect new directors and install new
management; cease accepting deposits from correspondent depository
institutions; or divest or liquidate certain subsidiaries. A bank holding
company may be required to divest itself of any affiliate of the institution
(other than another insured depository institution) under certain conditions.
Critically undercapitalized institutions face even more severe restrictions.
In addition, significantly undercapitalized institutions will be prohibited
from paying any bonus or raise to a senior executive officer without prior
agency approval. No such approval will be granted to an institution which is
required to but has failed to submit an acceptable capital restoration plan.
FDICIA also provides that if a well or adequately capitalized or
undercapitalized institution is in an unsafe or unsound condition or is
engaging in an unsafe or unsound practice, its capital category may be
downgraded to achieve a higher level of regulatory scrutiny and prompt
corrective action. FDICIA restricts the solicitation and acceptance of and
interest rates payable on brokered deposits by insured depository institutions
that are not well capitalized and has added new bases for which a conservator
or receiver may be appointed for undercapitalized and critically
undercapitalized institutions and under certain other circumstances not
relating to capital levels. Finally, FDICIA establishes a risk-based
assessment system for calculating a depository institution's semiannual deposit
insurance premium under which institutions pay premiums based upon their
capital classification and supervisory risk.
11
<PAGE> 15
BROKERED DEPOSITS
FDICIA restricts the acceptance of brokered deposits by insured depository
institutions that are not well capitalized. It also places restrictions on the
interest rate payable on brokered deposits and the solicitation of such
deposits. An undercapitalized institution will not be allowed to solicit
brokered deposits by offering rates of interest that are significantly higher
than the prevailing rates of interest on insured deposits in the particular
institution's normal market areas or in the market area in which such deposits
would otherwise be accepted.
The FDIC has promulgated final regulations with respect to the ability of
insured depository institutions in each of the new capitalization categories to
accept brokered deposits. Under the regulations, undercapitalized institutions
are prohibited from accepting funds obtained directly or indirectly though a
deposit broker. Adequately capitalized institutions may accept brokered
deposits only if a waiver is first obtained from the FDIC. Well capitalized
institutions are permitted by the regulations to accept brokered funds without
restriction. For purposes of the brokered deposit regulation the FDIC has
stated that the term "well capitalized" means an institution whose leverage and
risk- based capital ratios are at least one to two percentage points higher
than those currently required by applicable regulations, and which has not been
notified that it is in a troubled condition.
In addition to the above restrictions on acceptance of brokered deposits,
FDICIA provides that no pass-through deposit insurance will be provided to
employee benefit plan deposits accepted by an institution which is ineligible
to accept brokered deposits under applicable law and regulations.
DEPOSIT INSURANCE PREMIUMS
As of January 1, 1993, the FDIC charges higher deposit insurance premiums on
banks which pose greater risks to the deposit insurance fund. Under the rule,
a bank is required to pay an annual insurance premium of 0.23% to 0.31% for
domestic deposits, depending upon the bank's risk classification. A bank's
risk classification is determined by the FDIC according to the bank's capital
ratios and the FDIC's evaluation of the bank based upon federal and state
supervisory examinations and other relevant information. Under the
classification system, the Bank's deposit insurance premium is set at 0.23%.
PROPOSED STANDARDS ON SAFETY AND SOUNDNESS
Pursuant to the requirements of FDICIA, recently proposed FDIC and OCC
regulations provide new standards for safety and soundness applicable to banks.
The proposed regulations establish managerial, operational, asset quality and
earnings standards for state national banks as well as bank holding companies,
i.e.,
12
<PAGE> 16
requiring banks and bank holding companies to maintain a ratio of classified
assets to total capital and ineligible allowances no greater than 1.0, and to
maintain minimum earnings sufficient to absorb losses without impairing
capital. A bank's "minimum earnings" are sufficient if the bank is in
compliance with established minimum capital requirements as calculated by the
last four quarters and projected for the next four quarters.
In addition, the proposed safety and soundness standards would prohibit
excessive compensation or compensation which could lead to material financial
loss for the bank or bank holding company.
These regulations are subject to change; therefore, the ultimate impact on the
Bank of final regulation in this area cannot be predicted at this time.
EXTENSIONS OF CREDIT TO INSIDERS AND TRANSACTIONS WITH AFFILIATES
The Federal Reserve Act and FRB Regulation O, which are applicable to national
banks, place limitations and conditions on loans or extensions of credit to: a
bank's or bank holding company's executive officers, directors and principal
shareholders (i.e., in most cases, those persons who own, control or have power
to vote more than 10% of any class of voting securities); any company
controlled by any such executive officer, director or shareholder; or any
political or campaign committee controlled by such executive officer, director
or principal shareholder.
Loans extended to any of the above persons must comply with
loan-to-one-borrower limits, require prior full board approval when aggregate
extensions of credit to such person exceed specified amounts, must be made on
substantially the same terms (including interest rates and collateral) as, and
following credit-underwriting procedures that are not less stringent than,
those prevailing at the time for comparable transactions with non-insiders, and
must not involve more than the normal risk of repayment or present other
unfavorable features. Regulation O also prohibits a bank from paying an
overdraft on an account of an executive officer or director, except pursuant to
a written pre-authorized interest-bearing extension of credit plan that
specifies a method of repayment or a written pre-authorized transfer of funds
from another account of the officer or director at the bank.
The provisions of Regulation O summarized above reflect substantial
strengthening as a result of the adoption of FDICIA. FDICIA also resulted in
an amendment to Regulation O which provides that the aggregate limit on
extensions of credit to all insiders of a bank as a group cannot exceed the
bank's unimpaired capital and unimpaired surplus. An exception to this
limitation is provided for banks with less than $100,000,000 in deposits. The
aggregate limit applicable to such banks is two times the bank's unimpaired
capital and unimpaired surplus, provided the bank meets or exceeds all
applicable capital requirements.
13
<PAGE> 17
GOVERNMENT MONETARY POLICY
The earnings of the Bank are and will be affected by the policies of regulatory
authorities, including the FRB. An important function of the FRB is to
regulate the national supply of bank credit. Among the instruments used to
implement these objectives are open market operations in U.S. Government
securities, changes in reserve requirements against bank deposits, and changes
in the discount rate which banks pay on advances from the Federal Reserve
System. These instruments are used in varying combinations to influence
overall growth and distribution of bank loans, investments and deposits, and
their use may also affect interest rates on loans or interest rates paid for
deposits. The monetary policies of the FRB have had a significant effect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future. The effect, if any, of such policies upon the
future business earnings of the Bank cannot be predicted.
RECENT REGULATIONS AND GUIDELINES
BANK SALES OF NONDEPOSIT INVESTMENTS
Securities activities of national banks, as well as their subsidiaries and
affiliates, are governed by OCC regulations. The OCC has taken the position
that bank sales of alternative investment products, such as mutual funds and
annuities, raise substantial bank safety and soundness concerns involving
consumer confusion over the nature of the products offered, and the potential
for mismanagement of sales programs for such investments which could expose a
bank to liability under the anti-fraud provisions of federal securities laws.
Accordingly, the OCC has issued guidelines to national banks which recommend,
among other things, establishing a compliance and audit program to monitor the
bank's mutual funds sales activities and compliance with applicable federal
securities laws, providing full disclosure to customers about the risks of such
investments (including the possibility of loss of principal investment),
conducting securities activities of bank subsidiaries or affiliates in separate
and distinct locations, and prohibiting bank employees involved in
deposit-taking activities from selling investment products or from giving
investment advice.
Banks are also required to establish qualitative standards for the selection
and marketing of the investments offered by the bank and maintain appropriate
documentation regarding suitability of investments recommended to bank
customers.
OTHER
Various other legislation, including proposals to overhaul the bank regulatory
system and to limit the investments that a depository institution may make with
insured funds, is introduced into
14
<PAGE> 18
Congress or the California Legislature from time to time. The Bank cannot
determine the ultimate effect that any potential legislation, if enacted, would
have upon the financial condition or operations of the Bank.
IMPACT OF FEDERAL AND CALIFORNIA TAX LAWS
The following are the more significant Federal and California income tax
provisions affecting commercial banks.
1. CORPORATE TAX RATES. For tax years beginning on or after July 1, 1987,
and before 1993, for most corporations taxable income was taxed at a 34 percent
rate. For tax years beginning after 1992, corporate taxable income in excess
of $10 million generally is taxed at a 35 percent rate. Corporations with
taxable income over $15 million are subject to an additional tax of 3 percent
of the excess over $15 million, or $100,000, whichever is smaller.
2. CORPORATE ALTERNATIVE MINIMUM TAX. The Tax Reform Act of 1986 (the "1986
Act") enacted an alternative minimum tax ("AMT"). Generally, a corporation
will be subject to the AMT to the extent the tentative minimum tax exceeds the
corporation's regular tax liability. The tentative minimum tax is equal to (a)
20 percent of the excess of a corporation's "alternative minimum taxable
income" ("AMTI") over an exemption amount, less (b) the alternative minimum tax
foreign tax credit. Generally, AMTI is defined as taxable income computed with
special adjustments and increased by the amount of tax preferences for a tax
year.
Effective for tax years beginning after 1989, a special adjustment is made for
"adjusted current earnings" ("ACE"). This adjustment replaced the "book
income" adjustment that was effective for tax years beginning in 1987 through
1989. The ACE adjustment is equal to three-fourths of the excess of ACE over
AMTI (determined without regard to this adjustment and the AMT net operating
loss). Generally, ACE is computed by adjusting AMTI to reflect the rules
applicable in computing corporate earnings and profits for federal income tax
purposes; adjustments are made for depreciation, for inclusion of certain items
otherwise excluded from taxable income, for disallowance of certain deductions
otherwise allowed in computing taxable income, and other items. The U.S.
Treasury has promulgated regulations providing detailed rules for calculating
the ACE adjustment.
The Revenue Reconciliation Act of 1989 (the "1989 Act"), the Revenue
Reconciliation Act of 1990 (the "1990 Act"), and the Comprehensive National
Energy Policy Act of 1992 (the "Energy Tax Act") made various technical changes
to the ACE provisions. In addition, the Revenue Reconciliation Act of 1993
(the "1993 Act") eliminates the special ACE adjustment for depreciation after
1993, and provides that depreciation is to be calculated under the method
utilized in determining AMTI. The 1993 Act also made other technical changes
to the ACE provisions.
15
<PAGE> 19
Generally, for purposes of determining AMTI, a corporation is required to
compute its depreciation allowance using a slower depreciation rate than that
used in computing regular taxable income. Also, special adjustments are made
in computing a corporation's net operating loss, and generally a net operating
loss deduction cannot exceed 90 percent of AMTI. Further, tax-exempt interest
on certain private activity bonds issued after August 7, 1986 constitutes a tax
preference increasing AMTI. Finally, the Energy Tax Act and the 1993 Act made
technical changes to the AMT provisions.
3. BAD DEBT DEDUCTION. The 1986 Act required a bank with average adjusted
bases of all assets exceeding $500 million ("large bank") to compute its bad
debt deduction using the specific charge-off method. Under that method, a
deduction is taken at the time the debt becomes partially or wholly worthless.
Under prior law, a large bank could also use one of two reserve methods, under
which a bad debt deduction was computed according to the amount added to a
reserve set aside for bad debts. The 1986 Act, as modified by the 1990 Act,
continued to permit a bank not meeting the definition of a large bank ("small
bank") to use either the specific charge-off method or the "experience" reserve
method, under which the addition to bad debt reserve is based on the bank's
actual loss experience for the current year and five preceding years.
The U.S. Treasury has promulgated regulations permitting a bank to elect to
establish a conclusive presumption that a debt is worthless, based on applying
a single set of standards for both regulatory and tax accounting purposes.
4. INTEREST INCURRED FOR TAX-EXEMPT OBLIGATIONS. Generally, taxpayers are not
allowed to deduct interest on indebtedness incurred to purchase or carry
tax-exempt obligations. Prior to the 1986 Act, this provision generally did
not apply to interest paid by banks or other financial institutions with
respect to debts incurred in the ordinary course of the bank's business. Banks
were subject, however, to a 20 percent disallowance of such interest in certain
cases.
After the 1986 Act, a bank is denied a deduction for the portion of the bank's
interest that is allocable to tax-exempt obligations acquired by the bank after
August 7, 1986. The 20 percent disallowance of pre-1986 Act law continues to
apply to tax-exempt obligations acquired between January 1, 1983 and August 7,
1986. A special exception applies to a "qualified tax-exempt obligation,"
which includes any tax-exempt obligation that (a) is not a private activity
bond and (b) is issued by an issuer that reasonably anticipates it will issue
not more than $10 million of tax-exempt obligations (other than certain private
activity bonds) during the calendar year. Qualified tax-exempt obligations are
treated as acquired before August 8, 1986; thus, interest expense allocable to
such bonds continues to be deductible, subject to the 20 percent disallowance.
16
<PAGE> 20
5. NET OPERATING LOSSES. Under the 1986 Act, a bank is permitted to carry a
net operating loss ("NOL") back to the prior three tax years and forward to the
succeeding fifteen tax years, as opposed to the ten-year carryback and
five-year carryforward periods of prior law. The prior law periods were
retained, however, to the extent the NOL of a commercial bank is attributable
to a bad debt deduction taken under the specific charge-off method. This
special rule applies to NOLs for tax years beginning after December 31, 1986
and before January 1, 1994. The 1990 Act clarifies that a commercial bank's
bad debt loss is treated as a separate NOL to be taken into account after the
remaining portion of the NOL for the year.
6. AMORTIZATION OF INTANGIBLE ASSETS INCLUDING BANK DEPOSIT BASE. Prior to
the 1993 Act, there was considerable controversy regarding the amortization
(depreciation) of certain intangible assets, such as customer lists and similar
items. Generally, the issue involved whether the intangible asset represented
non-amortizable goodwill or a separate and distinct asset which could be
amortized over its useful life.
The 1993 Act provides that certain intangible property acquired by a taxpayer
must be amortized over a 15 year period. For this purpose, acquired assets
required to be amortized include goodwill and the deposit base or any similar
asset acquired by a financial institution (such as checking and savings
accounts, escrow accounts and similar items). The 15 year amortization rule
generally applies to property acquired after August 10, 1993. Taxpayers may
elect, however, to apply the new rules to property acquired after July 25,
1991. The IRS recently issued temporary regulations regarding the election to
retroactively apply the amortization rules.
7. MARK TO MARKET RULES. The 1993 Act introduced certain "mark-to-market" tax
accounting rules for "dealers in securities." Under these rules, certain
"securities" held at the close of a taxable year must be marked to fair market
value, and the unrealized gain or loss inherent in the security must be
recognized in that year for federal income tax purposes. Under the definition
of a "dealer", a bank or financial institution that regularly purchases or
sells loans may be subject to the new rules. The rules generally are effective
for tax years ending on or after December 31, 1993.
Certain securities are excepted from the mark-to-market rules provided the
taxpayer timely complies with certain identification rules. The principal
exceptions affecting banks are for (1) any security held for investment and (2)
any note, bond, or other evidence of indebtedness acquired or originated in the
ordinary course of business and which is not held for sale. If a taxpayer
timely and properly identifies loans and securities as being excepted from the
mark-to-market rules, these loans and securities will not be subject to the new
rules. Generally, a financial institution may make the identification of an
excepted debt
17
<PAGE> 21
obligation in accordance with normal accounting practices, but no later than 30
days after acquisition. The IRS recently issued temporary regulations
interpreting the mark-to-market provisions.
8. CALIFORNIA TAX LAWS. A commercial bank is subject to the California
franchise tax. The applicable tax rate is higher than that applied to general
(non-financial) corporations because it includes an amount "in lieu" of many
other state and local taxes and license fees payable by such corporations but
generally not payable by banks and financial corporations. The bank statutory
tax rate for income years ending in 1989, 1990 and 1991 was 10.741%. For
income years ending after 1991 and before December 1, 1995, the rate is based
on the franchise tax rate applicable to general corporations (currently 9.3%)
plus the in-lieu rate, but the total rate cannot exceed 11.7%. For these
years, the in-lieu rate is computed under a formula based on the amount of
personal property taxes, business license taxes and California income reported
for general corporations, and must be at least 1.3%. Based on this formula,
the bank rate for income years ending in 1992 and 1993 is 11.007% and 11.107%,
respectively. For income years ending on or after December 31, 1995, the
applicable bank tax rate will be the general corporate rate plus 2%, with no
ceiling.
California has substantially adopted the federal AMT, subject to modifications
for the ACE adjustment, computation of NOLs, tax preference treatment for
tax-exempt interest and certain other items. Generally, a bank is subject to
California AMT in an amount equal to the sum of (a) seven percent of AMTI
(computed for California purposes) over an exemption amount and (b) the excess
of the bank tax rate over the general corporation tax rate applied against net
income for the taxable year, unless the bank's regular tax liability is
greater.
California permits a bank to compute its deduction for bad debt losses under
either the specific charge-off method or according to the amount of a
reasonable addition to a bad debt reserve. Regulations provide detailed rules
for determining the deduction under either method.
California has incorporated the federal NOL provisions, subject to significant
modifications for most corporations. First, NOLs arising in income years
beginning before 1987 are disregarded. Second, no carryback is permitted, and
NOLs may be carried forward only five years. Third, in most cases, only fifty
percent of the NOL for any income year may be carried forward. Fourth, NOL
carryover deductions are suspended for income years beginning in calendar years
1991 and 1992, although the carryover period is extended by one year for losses
sustained in income years beginning in 1991 and by two years for losses
sustained in income years beginning before 1991. Finally, the special federal
NOL rules regarding bad debt losses of commercial banks do not apply for
California purposes.
In 1993, California enacted legislation which significantly
18
<PAGE> 22
modifies the NOL provisions for income years beginning after 1992. First, for
most corporations, the carryover period is reduced to five years (under prior
law, the carryover period was 15 years). Second, the California NOL provisions
are made permanent (under prior law, the California NOL provisions were to
expire for NOLs arising after 1996). The 1993 legislation also makes other
changes to the California NOL provisions, including special NOL carryover
provisions for corporations and banks in bankruptcy.
The various laws discussed herein contain other changes that could have a
significant impact on the banking industry. The effect of these changes is
uncertain and varied, and it is unclear to what extent any of these changes may
influence the Company's or the Bank's operations or the banking industry
generally.
(Balance of this page intentionally left blank)
19
<PAGE> 23
ITEM 2. PROPERTIES
The Bank's headquarters building is located at 250 Lytton Avenue, Palo Alto,
California. The Bank commenced operations in this new facility on October 20,
1986. The building, owned by the Bank, contains 25,800 square feet spread over
three floors. In addition, there are two levels of underground parking.
On July 26, 1989, the Bank entered into a lease purchase agreement on the
building located at 800 Oak Grove, Menlo Park and presently occupies 6,527
square feet. The purchase was completed on February 1, 1991. Additionally,
effective October 16, 1989, the Bank leased 1,053 square feet at 133 Mission
Street, Santa Cruz, California to house its Trust Representative Office. On
October 15, 1993, the Bank purchased a 5,348 square foot building at 275 Third
Street, Los Altos, California for $1,258,723 for future use.
The total book value of the premises, including land, equipment, furniture and
fixtures was $15,895,053 at December 31, 1993 compared to $14,767,804 at
December 31, 1992.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Bank is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders was held on December 20, 1993 to approve a
plan of conversion pursuant to which the bank will convert into a California
state licensed bank. There were 1,343,002 shares outstanding on the record
date for the meeting, November 19, 1993. There were present at said meeting in
person or by proxy shareholders of 961,424 shares of common stock entitled to
vote (71.59%). 957,498 shares were voted in favor of the conversion, 868
shares were voted against, and 3,206 shares abstained.
No other matters were voted upon at the meeting.
PART II.
ITEM 5. MARKET FOR THE BANK'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Market Information
The Common Stock of the Bank is listed on NASDAQ (National Association of
Securities Dealers Automated Quotations) under the quotation symbol UNNB.
Principal market makers for the Bank's Common Stock are: Dean Witter Reynolds,
Hoefer & Arnett, H.J. Meyer & Co., Inc., Wedbush Morgan Securities, Inc., and
Montgomery Securities. Prices reflect actual trades.
20
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<TABLE>
<CAPTION>
Quarter Ended High Low Last Volume
- ------------- ---- --- ----- --------
<S> <C> <C> <C> <C>
3-31-93 $34.00 $24.50 $33.00 34,824
6-30-93 35.00 30.50 33.00 18,482
9-30-93 37.00 33.00 37.00 28,401
12-31-93 37.00 30.50 33.00 39,387
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended High Low Last Volume
- ------------- ---- --- ----- --------
<S> <C> <C> <C> <C>
3-31-92 $26.50 $23.00 $24.50 51,126
6-30-92 25.50 22.75 23.50 68,912
9-30-92 28.00 23.50 27.50 20,603
12-31-92 28.50 24.50 25.50 16,969
</TABLE>
Holders
The Bank has authorized 3,000,000 shares of Common Stock, par value $2.50 per
share. As of March 7, 1994, 1,362,748 shares were outstanding and were held by
approximately 875 shareholders.
Dividends
On January 8, 1993, the Board of Directors declared a dividend of thirty-five
cents per share to shareholders of record February 8, 1993. On March 18, 1993,
the Board declared a dividend of thirty-five cents per share to shareholders of
record April 12, 1993. On May 20, 1993, the Board declared a dividend of
thirty-five cents per share to shareholders of record July 12, 1993. On
September 16, 1993, the Board declared a dividend of thirty-five cents per
share to shareholders of record October 8, 1993. On November 18, 1993, the
Board declared a dividend of thirty-five cents per share to shareholders of
record January 17, 1994.
Currently there are no existing contractual restrictions on the Bank's ability
to pay dividends.
The Bank's policy is that dividends shall be paid only out of current period
income. The future dividend policy of the Bank is subject to the discretion of
the Board of Directors and will depend upon a number of factors, including
future earnings and capital needs in conjunction with total liability growth.
The Bank has paid a dividend on a semi-annual basis since 1985 as is reflected
in the following chart. Quarterly payments began in January 1993.
21
<PAGE> 25
<TABLE>
<CAPTION>
History of Dividend Payout
--------------------------
Total
-----
Paid Paid Annual
---- ---- ------
Year February August Payout
---- -------- ------ ------
<S> <C> <C> <C>
1985 $0.10 $0.10 $86,722.70
1986 $0.10 $0.20 $148,685.60
1987 $0.20 $0.20 $208,872.40
1988 $0.20 $0.30 $265,671.80
1989 $0.30 $0.30 $357,012.00
1990 $0.30 $0.45 $911,567.70
1991 $0.45 $0.55 $1,260,610.95
1992 $0.55 $0.55 $1,430,162.70
</TABLE>
<TABLE>
<CAPTION>
Total
-----
Paid Paid Paid Paid Annual
---- ---- ---- ---- ------
February April July October Payout
-------- ----- ---- ------- ------
<S> <C> <C> <C> <C> <C>
1993 $0.35 $0.35 $0.35 $0.35 $1,871,232.65
1994 $0.35 $479,539.15
</TABLE>
22
<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Summary of Earnings 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income $23,501 $23,865 $25,397 $25,833 $22,693 $18,573
Interest Expense 6,418 8,101 12,251 13,499 11,300 9,205
- -----------------------------------------------------------------------------------------------------------------------------
Net Interest Income 17,083 15,764 13,146 12,334 11,393 9,368
Provision for Loan Losses 2,833 2,215 875 360 310 330
Net Interest Income after
Provision for Loan Losses 14,250 13,549 12,271 11,974 11,083 9,038
Non-Interest Income 5,150 3,895 2,518 2,240 1,600 1,255
Non-Interest Expense 13,515 11,808 10,312 9,497 8,044 6,522
- -----------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 5,885 5,636 4,477 4,717 4,639 3,771
Income Taxes 1,644 1,555 1,261 1,352 1,393 1,055
- -----------------------------------------------------------------------------------------------------------------------------
Net Income $4,241 $4,081 $3,216 $3,365 $3,246 $2,716
Per Share:
Average Number of Shares Outstanding,
Weighted (000's) 1,383 1,329 1,307 1,290 1,267 1,122
Net Income $3.07 $3.07 $2.46 $2.61 $2.56 $2.42
Dividend $1.40 $1.10 $1.00 $0.75 $0.30 $0.25
Book Value Per Share at December 31 $25.53 $21.69 $19.76 $18.30 $16.29 $13.88
- -----------------------------------------------------------------------------------------------------------------------------
Balance Sheet Averages (000's)
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $377,611 $347,533 $308,923 $273,242 $229,544 $216,994
Net Loans 218,779 206,310 168,909 156,207 126,748 96,566
Deposits 343,847 317,611 281,319 249,481 208,807 197,257
Securities Sold Under Repurchase Agreements 1,398 1,354 1 659 1,013 4,716
Total Deposits and Securities Sold Under
Repurchase Agreements 345,246 318,965 281,320 250,140 209,820 201,973
Shareholders' Equity 30,177 26,784 23,735 20,893 17,896 13,064
- -----------------------------------------------------------------------------------------------------------------------------
Trust Assets at Year-end (000's) Cost $377,195 $345,213 $364,972 $212,567 $187,377 $136,097
Market 480,947 431,994 460,583 271,520 250,136 173,311
- -----------------------------------------------------------------------------------------------------------------------------
Selected Ratios
Return on Average Assets 1.12% 1.17% 1.04% 1.23% 1.41% 1.25%
Return on Average Equity 14.05% (1) 15.24% 13.55% 16.11% 18.14% 20.79%
Loan to Deposit (Average Balances) 63.63% 64.96% 60.04% 62.61% 60.70% 48.95%
Average Daily Prime Rate 6.00% 6.25% 8.46% 10.01% 10.87% 9.31%
Per Share Dividend to Earnings Per Share 45.60% 35.83% 40.65% 28.74% 11.72% 10.33%
Average Equity to Average Total Assets 7.99% 7.71% 7.68% 7.65% 7.80% 6.02%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not reflect unrealized gain on securities per SFAS 115.
23
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital
During 1993, the Bank's capital net of dividends paid increased by $5,885,944
or 20.71%, compared to an increase of $3,233,279 or 12.83% in 1992, and an
increase of $2,794,593 or 12.48% in 1991. Sources of additional capital in
each of the periods were retained earnings, exercise of stock options and
purchases of new stock by the Bank's profit sharing plan. Additionally, in
1993, $2,776,280 of the increase is unrealized gains on securities available
for sale, net, as a result of the Bank's adoption of SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities," as of December 31, 1993.
The Consolidated Statement of Changes in Shareholders' Equity in the financial
statements reflects the detailed changes.
It is the intention of the Bank to continue capital augmentation through
earnings retention net of dividends in future years.
Liquidity
Historically, the Bank's balance sheet has shown a high degree of liquidity.
The following table shows balance sheet proportions for the years ending
December 31, 1993, December 31, 1992 and December 31, 1991:
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
12/31/93 12/31/92 12/31/91
-------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due From Banks $25,653 6.79% $21,383 6.15% $17,299 5.60%
Investment Securities 73,028 19.34% 70,134 20.18% 66,201 21.43%
Fed Funds Sold 35,212 9.32% 25,950 7.47% 27,283 8.83%
Loans 224,016 59.32% 211,204 60.77% 180,647 58.48%
Premises & Equipment 14,792 3.92% 14,611 4.20% 13,321 4.31%
Other Assets 4,910 1.30% 4,251 1.22% 4,172 1.35%
------- ------- ------- ------- ------- -------
TOTAL ASSETS $377,611 100.00% $347,533 100.00% $308,923 100.00%
======== ======= ======== ======= ======== =======
LIABILITIES
Demand Deposits $50,135 13.28% $40,712 11.71% $35,227 11.40%
Savings & Now 76,649 20.30% 67,141 19.32% 55,408 17.94%
Money Funds 193,474 51.24% 177,367 51.04% 150,012 48.56%
Time Deposits 23,589 6.25% 32,392 9.32% 40,673 13.17%
------- ------- ------- ------- ------- -------
Total Deposits $343,847 91.06% $317,612 91.39% $281,320 91.06%
Other Borrowings 1,398 0.37% 1,354 0.39% 1,181 0.38%
Other Liabilities 2,189 0.58% 1,783 0.51% 2,687 0.87%
------- ------- ------- ------- ------- -------
TOTAL LIABILITIES $347,434 92.01% $320,749 92.29% $285,188 92.32%
SHAREHOLDERS' EQUITY 30,177 7.99% 26,784 7.71% 23,735 7.68%
------- ------- ------- ------- ------- -------
TOTAL LIABILITIES
AND EQUITY $377,611 100.00% $347,533 100.00% $308,923 100.00%
======== ======= ======== ======= ======== =======
</TABLE>
24
<PAGE> 28
Totals may not add due to rounding.
Bank assets containing a high degree of liquidity are Cash & Due from Banks,
Investment Securities and Federal Funds sold. In 1993, those assets comprised
35.45% of the Bank's assets compared to 33.80% in 1992 and 35.46% in 1991.
A principal source of liquidity is new deposit generation. In the following
table, loans include bankers' acceptances. Growth rates for the last three
years are shown in the following table:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net Average Loans $224,016 $211,204 $180,647
Annual Growth Rate, Loans 6.07% 16.91% 12.49%
Average Deposits $343,847 $317,612 $281,320
Annual Growth Rate, Deposits 8.26% 12.90% 12.76%
Loan to Deposit Ratio
Average Balance 65.15% 66.50% 64.21%
</TABLE>
The investment portfolio is another source of liquidity. While a portion of
the portfolio is intended to be a long term investment, a portion is invested
in short-term obligations pending re-employment of these funds in the loan
portfolio or for deposit withdrawals. As of December 31, 1993, bonds totaling
$60,894,270 mature within one year. Additionally, at December 31, 1993, the
Bank owned bankers' acceptances totaling $5,450,193 which mature within 180
days. The securities in the portfolio are freely marketable.
Other internal sources of liquidity are the retention of earnings and cash flow
generated in the loan portfolio.
External sources of liquidity include borrowings available to the Bank. As of
December 31, 1993, the Bank has two lines of credit available totaling
$10,000,000 of which $5,000,000 is on an "as available" basis. An additional
$5,000,000 is committed to June 30, 1994, and on which commitment fees have
been paid.
Results of Operations
Average deposits and other borrowings increased $26.3 million or 8.24% from
December 31, 1992 to December 31, 1993 compared to an increase of $36.5 million
or 12.91% from December 31, 1991 to December 31, 1992. The increase was in all
deposit categories except time deposits with the largest increase in demand
deposits, 23.15%. Time deposits decreased $8.8 million, or 27.18%. In the
same period, average loans, net of bankers' acceptances, increased by $12.5
million, or 6.04%. The loan to deposit ratio including bankers' acceptances
decreased to 65.15% on an average balance basis for the period ending December
31, 1993 from 66.50% for the period ending December 31, 1992. On an average
basis, the investment portfolio increased by $2.9 million, or 4.13%, to $73.0
25
<PAGE> 29
million in 1993. Federal funds sold and bankers' acceptances were used as
alternative short-term investment vehicles.
Total average assets increased by 8.65%, or $30.1 million, to $378 million for
the year ending December 31, 1993. This compares to a growth rate of 12.50 in
1992, 13.06% in 1991, 19.04% in 1990, 5.78% in 1989, 23.23% in 1988, 37.0% in
1987, 26.0% in 1986, 31.7% in 1985 and 31.2% in 1984. Total actual assets at
December 31, 1993 were $406 million, an increase of 8.76% over 1992.
Daily average balances are expressed in thousands of dollars.
<TABLE>
<CAPTION>
Distribution of Daily Average Assets
------------------------------------
1993 1992
---- ----
ASSETS Amount Percent Amount Percent
- ------ ------ ------- ------ -------
<S> <C> <C> <C> <C>
Cash and Due From Banks $25,653 6.79% $21,383 6.15%
Investment Securities
Taxable 37,634 9.97% 36,714 10.56%
Non-Taxable 35,394 9.37% 33,420 9.62%
Federal Funds Sold 35,212 9.32% 25,950 7.47%
Bankers Acceptances 5,238 1.39% 4,893 1.41%
Loans, net 218,778 57.94% 206,311 59.36%
Premises & Equipment, net 14,792 3.92% 14,611 4.20%
Other Assets 4,910 1.30% 4,251 1.22%
-------- ------- -------- -------
Total Assets $377,611 100.00% $347,533 100.00%
======== ======= ======== =======
</TABLE>
Totals may not add due to rounding.
The distribution of daily average liabilities and shareholders' equity in the
following chart shows some changes. As a percentage of total average
liabilities and shareholders' equity, at December 31, 1993, savings and NOW
accounts increased from 19.32% to 20.30% of total liabilities. Money funds
increased from 51.04% to 51.24%. Time deposits decreased from 9.32% to 6.25%.
Shareholders' Equity increased from 7.71% to 7.99%.
<TABLE>
<CAPTION>
Distribution of Daily Average Liabilities
-----------------------------------------
1993 1992
---- ----
LIABILITIES AND Amount Percent Amount Percent
- --------------- ------ ------- ------ -------
SHAREHOLDERS' EQUITY
- --------------------
<S> <C> <C> <C> <C>
Deposits:
Demand $50,135 13.28% $40,712 11.71%
Savings and NOW 76,649 20.30% 67,141 19.32%
Money Funds 193,474 51.24% 177,367 51.04%
Time 23,589 6.25% 32,392 9.32%
Other Borrowed Funds 1,398 0.37% 1,354 0.39%
Other Liabilities 2,189 0.58% 1,783 0.51%
Shareholder's Equity 30,177 7.99% 26,784 7.71%
-------- ------- -------- --------
Total Liabilities &
Shareholders' Equity $377,611 100.00% $347,533 100.00%
======== ======= ======== =======
</TABLE>
Totals may not add due to rounding.
26
<PAGE> 30
Maturity Distribution of Time Certificates of Deposit Greater than $100,000 as
of December 31, 1993
<TABLE>
<S> <C>
Three Months or Less $13,455
Three to Six Months 1,817
Six to Twelve Months 1,500
More than Twelve Months -0-
-------
Total $16,772
=======
</TABLE>
All of the Bank's deposits are domestic deposits. At December 31, 1993,
deposits of all related parties totaled $2,799,223, or 8.88% of capital.
In the Bank's thirteenth full year of operations, net income totaled $4,241,412
compared to $4,081,170 in 1992, and $3,216,151 in 1991. Comparable per
weighted share earnings were $3.07, $3.07, and $2.46 at December 31, 1993,
1992, and 1991 respectively. Book values per common share were $25.53, $21.69,
and $19.76 for the respective periods.
The primary source of the Bank's earnings is net interest income which
represents the difference between interest earned on loans and investments and
interest paid on deposits and short-term borrowings. In 1993, net interest
income on a taxable equivalent basis was $18,355,000, an increase of 7.94% over
the $17,005,000 reported in 1992. This compares to an 18.23% increase over the
$14,383,000 reported in 1991.
Net interest margin decreased by two basis points to 5.46% for the year ending
December 31, 1993. Net interest margin was 5.48% in 1992 and 5.21% in 1991.
A more detailed discussion of the components of income and expense follows and
should be read in conjunction with the accompanying schedules, the Selected
Financial Data, the Consolidated Statements of Income and Notes to Consolidated
Financial Statements included in this report.
(Balance of this page intentionally left blank)
27
<PAGE> 31
<TABLE>
<CAPTION>
SUMMARY OF EARNINGS
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest Income $23,501,138 $23,865,369 $25,396,996 $25,832,373 $22,692,622
Interest Expense 6,417,806 8,100,810 12,251,246 13,498,650 11,299,716
----------- ----------- ----------- ----------- -----------
Net Interest Income 17,083,332 15,764,559 13,145,750 12,333,723 11,392,906
Provision for Loan Losses 2,832,799 2,215,233 875,000 360,000 310,000
----------- ----------- ----------- ----------- -----------
Net Interest Income After
Provision for Loan Losses 14,250,533 13,549,326 12,270,750 11,973,723 11,082,906
Non-Interest Income 5,150,117 3,894,502 2,518,030 2,240,042 1,599,743
Non-Interest Expense 13,515,238 11,807,658 10,311,629 9,496,669 8,043,866
----------- ----------- ----------- ----------- -----------
INCOME BEFORE TAXES 5,885,412 5,636,170 4,477,151 4,717,096 4,638,783
Income Taxes 1,644,000 1,555,000 1,261,000 1,352,000 1,393,000
----------- ----------- ----------- ----------- -----------
NET INCOME $4,241,412 $4,081,170 $3,216,151 $3,365,096 $3,245,783
=========== ========== =========== =========== ===========
Per Share: (Restated to reflect two-for-one
split in November 1989.)
Average Number of
Shares Outstanding 1,382,931 1,329,474 1,307,896 1,289,068 1,267,354
Net Income $3.07 $3.07 $2.46 $2.61 $2.56
Book Value Per Share at December 31 $25.53 $21.69 $19.76 $18.30 $16.29
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
INTEREST RATES AND NET INTEREST DIFFERENTIAL
THREE YEARS, 1991 - 1993
The following is an analysis of net interest income and margin. Balances are expressed in thousands of dollars.
1993 1992 1991
------------------ -------------------------------------- -----------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
------- ------- ------- ------- -------- ------- ------- ------- -------
Balance Expense Rate % Balance Expense Rate % Balance Expense Rate %
------- ------- ------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable $37,634 $2,468 6.56% $36,714 $2,751 7.49% $34,938 $2,883 8.25%
Non-Taxable* 35,394 3,761 10.63% 33,420 3,634 10.87% 31,263 3,490 11.16%
Federal Funds Sold 35,212 1,024 2.91% 25,950 872 3.36% 27,283 1,497 5.49%
Loans-Interest & Fees 227,959 17,527 7.69% 214,001 17,844 8.34% 182,644 18,713 10.25%
-------- ------- -------- ------- -------- -------
Total Earning Assets 336,199 $24,780 7.37% $310,085 $25,101 8.09% $276,128 $26,583 9.63%
Cash & Due From Banks $25,653 $21,383 $17,299
Premises & Equipment 14,792 14,611 13,321
Other Assets 967 1,454 2,175
-------- -------- --------
Total Assets $377,611 $347,533 $308,923
======== ======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand $50,135 0 0.00% $40,712 0 0.00% $35,227 0 0.00%
Savings & Now 76,649 865 1.13% 67,141 1,233 1.84% 55,408 1,977 3.57%
Money Funds 193,474 4,831 2.50% 177,367 5,579 3.15% 150,012 7,746 5.16%
Time 23,589 677 2.87% 32,392 1,240 3.83% 40,673 2,409 5.92%
Other Borrowed Funds 1,398 44 3.15% 1,354 44 3.25% 1,181 68 5.76%
------- ------ -------- ------ -------- -------
Total Deposits & Borrowings $345,245 $6,417 1.86% $318,966 $8,096 2.54% $282,501 $12,200 4.32%
Other Liabilities $2,189 $1,783 $2,687
Shareholders' Equity 30,177 26,784 23,735
------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $377,611 $347,533 $308,923
======== ========= ========
Interest and Loan Fee Income $24,780 7.37% $25,101 8.09% $26,583 9.63%
Interest Expense** 6,417 1.91% 8,096 2.61% 12,200 4.42%
------- ----- ------- ----- ------- ------
NET INTEREST INCOME AND MARGIN $18,363 5.46% $17,005 5.48% $14,383 5.21%
======= ===== ======= ===== ======= =====
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis using the
federal statutory tax rate of 34%. The tax equivalent adjustment was
$1,278,806, $1,235,555 in 1992, and $1,186,766 in 1991. **Interest on deposits
as a percent of earning assets.
29
<PAGE> 33
In the following Analysis of Changes in Interest Income and Expense, the change
resulting from growth is expressed as a volume change while the change in yield
is expressed as a rate change. Nonaccrual loans are included in the
calculations. Income and yields are on a fully taxable equivalent basis, using
the federal statutory income tax rate of 34% in 1993 and 1992.
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSE
--------------------------------------------------
INCREASE (DECREASE) 1993 over 1992 1992 over 1991
- ------------------- -------------- --------------
IN INTEREST INCOME Change Due To Change Due To
- ------------------ ------------- -------------
AND INTEREST EXPENSE Volume Rate Total Volume Rate Total
- -------------------- ------ ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Loans $1,073 ($1,390) ($317) $2,615 ($3,484) ($869)
Investment Securities 247 (403) (156) 358 (346) 12
Federal Funds Sold 269 (117) 152 (45) (580) (625)
---- ------ ----- ------- -------- --------
Total $1,589 ($1,910) ($321) $2,928 ($4,410) ($1,482)
====== ======== ====== ======= ======= ========
Savings and NOW
Deposits $107 ($475) ($368) $215 ($959) ($744)
Money Fund Deposits 402 (1,150) (748) 860 (3,027) (2,167)
Time Deposits (253) (310) (563) (317) (852) (1,169)
Other Borrowings 1 (1) 0 7 (31) (24)
----- ------ ------ ----- -------- --------
Total $257 ($1,936) ($1,679) $765 ($4,869) ($4,104)
====== ======== ====== ======= ======= ========
</TABLE>
Interest Rates and Interest Differentials
The primary source of the Bank's earnings is the net interest income, or
interest differential, which represents the difference between interest earned
on loans and investments and interest paid on deposits and short term
Borrowings. In 1993, net interest income on a taxable equivalent basis was
$18,363,000, an increase of 7.99% over the $17,005,000 net interest income in
1992. This compares to a 18.23% increase in 1992 over net interest income of
$14,383,000 in 1991.
Net interest margin decreased two basis points from 5.48% in 1992 to 5.46% in
1993.
Interest income on a taxable equivalent basis decreased from $25,101,000 in
1992 to $24,780,000 in 1993, which represents a 1.28% decrease. Interest
income in 1992 had decreased 5.57% over interest income in 1991, which was
$26,583,000. The decrease in 1993 was attributable to a decrease in yield from
8.09% to 7.37%. The decrease in 1992 was also attributable to a decrease in
yield from 9.63% to 8.09%. Overall, average rates earned on total earning
assets decreased by seventy two basis points. A factor in this decrease was
the decrease in the average daily prime rate from 6.25% to 6.00% in 1993.
Interest expense on deposits and borrowed money decreased by $1,679,000, or
20.74% in 1993, as compared to a decrease of $4,104,000, or 33.64%, in 1992.
Average balances of interest-bearing liabilities increased by 8.24% in 1993, as
compared to a 12.91% increase in 1992. The average rate paid on
30
<PAGE> 34
interest bearing liabilities decreased by sixty eight basis points from 2.54%
in 1992 to 1.86% in 1993. In 1991, the average rate paid on interest-bearing
liabilities was 4.32%.
Demand deposits increased $9,423,000, or 23.15% in 1993 compared to an increase
of $5,485,000 or 15.57% in 1992 over 1991. The Bank's demand deposits are held
totally by corporate depositors doing business with the Bank.
Non-Interest Revenue
The following table reflects the components on total income after provision for
loan losses in thousands for the years ending December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
% of % of % of
---- ---- ----
1993 Total 1992 Total 1991 Total
---- ----- ---- ----- ---- -----
Income Income Income
------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Total Income After
Provision for
Loan Losses $14,251 73.45% $13,549 77.68% $12,271 82.97%
Fiduciary Income 2,427 12.51% 2,046 11.73% 1,556 10.52%
Service Charges 510 2.63% 510 2.92% 477 3.23%
Other Income 2,214 11.41% 1,338 7.67% 485 3.28%
------- ------- ------- ------- ------- -------
Total Income $19,402 100.00% $17,443 100.00% $14,789 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
The following table reflects the components of non-interest income in thousands
and the percentage change for the years 1993, 1992, and 1991.
<TABLE>
<CAPTION>
Percentage Increase
-------------------
1993 1992
---- ----
Over Over
---- ----
1993 1992 1991 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Service Charges $510 $510 $477 0.00% 6.92%
Trust and Fiduciary
Fees 2,427 2,046 1,556 18.62% 31.49%
Other Income 2,214 1,338 485 65.47% 175.88%
------ ------ ------
Total $5,151 $3,894 $2,518 32.28% 54.65%
====== ====== ======
</TABLE>
Trust and fiduciary fees accounted for 47.12% of non-interest revenues in 1993
compared to 52.54% in 1992 and increased $381,000 or 18.62% in 1993. The
market value of trust assets, upon which those fees are based, was $481 million
at year end. Service charges on deposit accounts remained the same at $510,000.
Other income is derived from safe deposit rentals, traveler's cheque
commissions, miscellaneous fees for other bank services and gain on sale of
securities. The Bank adopted SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities," and classified the entire portfolio as available
for sale. As a part of that restructuring, all government securities having a
maturity greater than five years were sold producing a gain of $1,646,300.
31
<PAGE> 35
Following a change in investment policy in the second quarter of 1992, the
entire U. S. Government portfolio was sold, producing a net long term capital
gain of $790,000. Other income increased by 65.47%, or $876,000 in 1993.
Other income increased by 175.88% to $1,338,000 in 1992.
Non-Interest Expense
The following table reflects the components of non-interest expense in
thousands and the percentage change for the years 1993, 1992, and 1991.
<TABLE>
<CAPTION>
Percentage
----------
Increase
--------
1993 1992
---- ----
Over Over
---- ----
1993 1992 1991 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Salaries and Benefits $8,396 $7,253 $6,525 15.76% 11.16%
Occupancy Expense 1,235 1,087 968 13.62% 12.29%
FDIC and OCC Assessments 861 778 613 10.67% 26.92%
Data Processing 239 291 272 -17.87% 6.99%
Outside services 218 71 77 207.04% -7.79%
Marketing 381 290 254 31.38% 14.17%
Stationery & Supplies 418 365 287 14.52% 27.18%
Telephone & Postage 348 329 289 5.78% 13.84%
Other Expense 1,419 1,348 1,035 5.27% 30.24%
------- ------- -------
Total $13,515 $11,812 $10,320 14.42% 14.46%
======= ======= =======
</TABLE>
Non-interest expense increased $1,703,000 or 14.42% in 1993 over 1992. This
compares to a 14.46% increase in 1992.
Salaries and employee benefits increased 15.76% over 1992 compared to a 11.16%
increase in 1992 over 1991. The increases were due to pay increases and to
staff increases that were necessary to service the substantial increases in
deposits and earning assets. Average full-time equivalent staff in 1993 was
134.6 compared to 120.7 in 1992, an increase of 11.52%. Occupancy expense
increased $148,000, or 13.62%, in 1993, compared to an increase of 12.29% in
1992. Marketing expense increased by 31.38% in 1993 over 1992 compared to an
increase of 14.17% in 1992. The category of non-interest expense which
increased by the largest percentage was outside services which increased
$147,000 or 207.04% in 1993 over 1992 compared to a decrease of $6,000, or
7.79% in 1992 over 1991. This was caused by the employment of the Secura Group
to assist in regulatory matters. Increases in all categories of other expense
are attributed primarily to the Bank's growth in 1993 and 1992.
Loan Portfolio
The Bank's loan portfolio is primarily composed of commercial and industrial
loans with adjustable or floating interest rates. Adjustable rate loans
comprise approximately 93% of the portfolio, a factor that is critical to
maintaining a favorable spread between yields on earning assets and rates paid
on interest-bearing
32
<PAGE> 36
liabilities. All loans are domestic. There are no loan concentrations which
exceed 10% of outstanding loans.
Maturity Distribution and Rate Sensitivity Analysis
The following table shows the maturity distribution of loans on an average
balance basis for 1993, 1992, 1991, 1990 and 1989 (in thousands of dollars).
<TABLE>
<CAPTION>
One Year One to Over
-------- ------ ----
Or Less 5 Years 5 years Total
------- ------- ------- -----
<S> <C> <C> <C> <C>
1993
Commercial & Industrial $86,605 $7,809 $0 $94,414
Bankers' Acceptances 5,238 0 0 5,238
Real Estate 120,010 0 0 120,010
Consumer 6,997 1,282 18 8,297
-------- ------ --- --------
Total Loans $218,850 $9,091 $18 $227,959
======== ====== === ========
1992
Commercial & Industrial $82,944 $6,953 $0 $89,897
Bankers' Acceptances 4,893 0 0 4,893
Real Estate 113,749 0 0 113,749
Consumer 3,568 1,894 0 5,462
-------- ------ --- --------
Total Loans $205,154 $8,847 $0 $214,001
======== ====== === ========
1991
Commercial & Industrial $84,223 $3,360 $0 $87,583
Bankers' Acceptances 11,738 0 0 11,738
Real Estate 80,506 0 0 80,506
Consumer 632 2,185 0 2,817
-------- ------ --- --------
Total Loans $177,099 $5,545 $0 $182,644
======== ====== === ========
1990
Commercial & Industrial $86,243 $2,831 $0 $89,074
Bankers' Acceptances 9,170 0 0 9,170
Real Estate 70,612 0 0 70,612
Consumer 2,816 1,873 0 4,689
-------- ------ --- --------
Total Loans $168,841 $4,704 $0 $173,545
======== ====== === ========
1989
Commercial & Industrial $83,130 $1,373 $2,063 $86,566
Bankers' Acceptances 3,961 0 0 3,961
Real Estate 57,400 0 0 57,400
Consumer 624 1,390 0 2,014
-------- ------ ------ --------
Total Loans $145,115 $2,763 $2,063 $149,941
======== ====== ====== ========
</TABLE>
Loan Portfolio Distribution By Type
The following table shows the composition of the Bank's loan portfolio (in
thousands of dollars) by type of loan at the dates indicated.
33
<PAGE> 37
<TABLE>
<CAPTION>
Loan Distribution By Type
-------------------------
December 31
-----------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial & Industrial $94,623 $97,601 $95,735 $89,871 $84,475
Bankers' Acceptances 5,450 1,983 15,115 9,170 3,961
Real Estate Construction 5,116 17,339 7,315 6,310 6,759
Real Estate Mortgage 112,878 107,549 85,078 34,074 29,564
Consumer Installment 5,045 5,744 5,482 34,120 25,182
-------- -------- -------- -------- --------
Total $223,112 $230,216 $208,725 $173,545 $149,941
Less: Reserve for Loan
Losses (5,690) (3,682) (1,828) (1,724) (1,790)
-------- -------- -------- -------- --------
Net Loans $217,422 $226,534 $206,897 $171,821 $148,151
======== ======== ======== ======== ========
</TABLE>
Loss Provision and Allowance for Possible Loan Losses
The allowance for possible loan losses, which provides for the risk of losses
inherent in the credit extension process, is increased by the provision for
possible loan losses charged to expense and decreased by the amount of
charge-offs net of recoveries. There is no precise method of predicting
specific losses or amounts that ultimately may be charged off on particular
segments of the loan portfolio, especially in light of the current economic
environment. The conclusion that a loan may become uncollectible, in whole or
in part, and be charged off against the allowance, is a matter of judgment.
Similarly, the adequacy of the allowance for possible loan losses and the level
of the related provision for possible loan losses can be determined only on a
judgmental basis, after full review, including consideration of the following:
economic conditions, borrowers' financial condition, evaluation of industry
trends, loans which are contractually current as to payment terms but
demonstrate a higher degree of risk as identified by management, continuing
evaluation of the performing loan portfolio, monthly review and evaluation of
potential problem loans identified as having loss potential, and bi-monthly
review by the Board of Directors.
The Bank has established an Allowance for Loan Losses to insure that it meets
statutory and regulatory requirements. This policy provides for a systematic
and consistent approach to provide an adequate Allowance that is sufficient to
absorb all loan and lease losses.
The Bank provided $2,832,799 as an addition to the allowance for possible loan
losses in 1993. In 1992, the provision was $2,215,233 and in 1991, $875,000.
At December 31, 1993, the allowance for loan losses was $5,690,341 or 2.61% of
loans, net of banker's acceptances, compared to $3,682,064, or 1.61% of loans
at December 31, 1992, and $1,828,025, or .94% of loans at December 31, 1991.
Net losses in 1993 were $824,522, compared to net losses of $361,194 in 1992
and net losses of $770,996 in 1991.
34
<PAGE> 38
The following table summarizes the activity in the allowance for loan losses
for the years ended December 31, 1993, 1992, 1991, 1990 and 1989.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Allowance for Loan Losses
(Dollars in Thousands)
- ---------------------------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance, January 1 $3,682 $1,828 $1,724 $1,790 $1,461
Charge-offs by Loan Category:
Commercial 685 160 877 438 6
Real Estate Mortgage 119 85 0 0 0
Real Estate Construction 0 0 0 0 0
Consumer 12 119 7 5 3
Other 18 0 0 0 59
- ---------------------------------------------------------------------------
Total Charge-offs $834 $364 $884 $443 $68
- ---------------------------------------------------------------------------
Recoveries by Loan Category:
Commercial 5 0 112 11 52
Real Estate Mortgage 0 0 0 0 0
Real Estate Construction 0 0 0 0 0
Consumer 4 3 1 6 35
Other 0 0 0 0 0
- ---------------------------------------------------------------------------
Total Recoveries $9 $3 $113 $17 $87
- ---------------------------------------------------------------------------
Net Charge-offs $825 $361 $771 $426 ($19)
- ---------------------------------------------------------------------------
Provision Charged to Expense $2,833 $2,215 $875 $360 $310
- ---------------------------------------------------------------------------
Balance, December 31 $5,690 $3,682 $1,828 $1,724 $1,790
===========================================================================
Ratios:
Charge-offs to
Average Loans 0.37% 0.17% 0.40% 0.27% -0.01%
Allowance to total loans
At the End of the Year 2.61% 1.61% 0.94% 1.05% 1.23%
Allowance to Nonperforming
loans at the end of the year 141.19% 91.68% 315.72% 5224.24% 13769.00%
===========================================================================
</TABLE>
Based upon an evaluation of individual credits, historical credit loss
experienced by loan type and economic conditions, management has allocated the
allowance for loan losses at December 31, 1993, 1992, 1991, and 1990. This
method was not employed in 1989.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Allocation of the Allowance for Loan Losses
(Dollars in Thousands)
- ---------------------------------------------------------------------------
Amount of Allowance at December 31,
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial $567 $551 $530 229 N/A
Real Estate Construction 0 11 92 2 N/A
Real Estate Mortgage 1,464 1,124 412 191 N/A
Consumer 52 184 76 109 N/A
Leases 0 0 0 0 N/A
Non-Classified 783 1,270 612 537 N/A
Unallocated 2,824 542 106 656 N/A
- ---------------------------------------------------------------------------
Total $5,690 $3,682 $1,828 $1,724 $1,790
===========================================================================
</TABLE>
35
<PAGE> 39
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Percent of Loans in Each Category to Total Loans
- ----------------------------------------------------------------------------
December 31,
------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial 38.33% 37.80% 45.00% 54.00% 56.34%
Real Estate Construction 2.35% 4.90% 3.60% N/A N/A
Real Estate Mortgage 51.86% 50.00% 47.40% 42.50% 38.47%
Consumer 2.32% 2.40% 2.70% 2.80% 2.55%
Leases 3.00% 2.30% 0.50% 0.00% 0.00%
Other 2.14% 2.60% 0.80% 0.70% 2.64%
- ---------------------------------------------------------------------------
Total 100.00% 100.00% 100.00% 100.00% 100.00%
===========================================================================
</TABLE>
Non-Performing Loans
Loans for which the accrual of interest has been suspended, other loans with
principal or interest contractually past due 90 days or more, or restructured
loans are set forth in the following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Non-Performing Loans
(Dollars in Thousands)
- ---------------------------------------------------------------------------
December 31,
------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans Accounted for on a
Nonaccrual Basis $3,814 $4,015 $579 $33 $13
Other Loans with principal or
Interest contractually 0 0 0 0 0
Past Due 90 Days or More
Restructured Loans 0 0 0 0 0
- ---------------------------------------------------------------------------
Total $3,814 $4,015 $579 $33 $13
===========================================================================
</TABLE>
Nonaccrual loans totaled $3,814,202 as of December 31, 1993 compared to
$4,015,744 as of December 31, 1992, a decrease of 5.02%. Nonaccrual loans
totaled $578,725 in 1991. The substantial increase in 1992 was due to local
economic conditions and the depressed real estate market. Net income not
realized as a result of the nonaccrual status totaled $321,239 in 1993,
$108,442 in 1992, and $12,253 in 1991. It is the Bank's policy to place loans
on nonaccrual at ninety days delinquency or when it is identified as a
potential collection problem.
Other Real Estate Owned
As of December 31, 1993, the Bank owned two parcels of other real estate
totaling $1,540,522 compared to three parcels totaling $1,111,805 at December
31, 1992, a decrease of 38.56%. Other real estate owned at December 31, 1991
totaled $238,743. Expenses associated with other real estate totaled $44,364
in 1993 and $54,674 in 1992. Comparable information is not available for 1991.
In 1993, two parcels were sold at a loss of $30,115.
Prior to recording a foreclosure, the Bank provides for any expected loss in
its allowance for loan losses. At the time of foreclosure, any difference
between the loan balance and the fair value is charged to the allowance for
loan losses. Foreclosed property is recorded at the lower of its cost basis or
fair value, less estimated selling costs. Any subsequent decline in value is
charged directly to the income statement via the valuation allowance.
36
<PAGE> 40
Investment Portfolio
The book value of the Bank's investment portfolio increased by $36,400,916 or
50.74% to $108,144,955 at December 31, 1993. This compares to a decrease of
$1,910,000 in 1992. The decrease in 1992 was due to increased loan demand.
The increase in 1993 was caused by the high degree of liquidity afforded by
deposit inflows. As of December 31, 1993, the Bank adopted SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities," and
classified the entire portfolio as available for sale. As a part of that
restructuring, U. S. Agency obligations having maturities greater than five
years were sold. Sales proceeds of $23,624,531 were received and gross gains
of $1,712,799 and gross losses of $80,000 were realized. The Bank also
received proceeds of $5,238,500 and recognized gross gains of $13,500 as a
result of maturities or calls of investment securities in 1993. During 1992,
proceeds of $35,453,000 were received and gross gains of $879,789 and gross
losses of $43,446 were realized upon the sale of the Bank's U. S. Treasury and
Agency security portfolios. The proceeds were re-invested in U. S. Agency
securities with maturities of five to ten years. At December 31, 1993, the
investment portfolio contained $4,705,560 net unrealized gain compared to
$3,705,730 in net unrealized gain at December 31, 1992. The following table
breaks down the Bank's investment portfolio by type, maturity and yield at
December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
Book Value Year-End
---------- --------
(000's) Yields
------- ------
1993 1992 1991 1993 (1)
---- ---- ---- ----
<S> <C> <C> <C> <C>
Type and Maturity Groupings
U. S. Treasury Securities
Within one year $14,834 $0 $0 3.22%
After one but within
five years 0 0 4,142 0.00%
------- ------ ------
Total $14,834 $0 $4,142 3.22%
U. S. Government Agencies
Within one year $44,727 $5,000 $11,579 3.21%
After one but within
five years 5,180 0 14,502 7.03%
After five but within
ten years 5,078 30,892 8,500 7.68%
------- ------- -------
Total $54,985 $35,892 $34,581 4.01%
State and Municipal Obligations
Within one year $1,167 $1,455 $1,107 11.69%
After one but within
five years 6,965 6,320 6,181 10.50%
After five but within
ten years 16,675 12,922 10,778 9.66%
Over ten years 13,187 14,846 16,573 10.91%
------- ------- -------
Total $37,994 $35,543 $34,639 10.31%
Federal Reserve Bank Stock $331 $309 $290 6.00%
------- ------- -------
Total Securities $108,144 $71,744 $73,652 6.10%
======== ======= =======
</TABLE>
37
<PAGE> 41
(1) Yield is computed on a tax-equivalent basis using a 34% statutory tax
rate.
(Balance of this page is left blank intentionally.)
38
<PAGE> 42
Summary of Quarterly Information
The following quarterly information is unaudited. However, in the opinion of
management, all adjustments have been made to present fairly the results of
operations for such periods.
<TABLE>
<CAPTION>
1993
----
Quarter Ended
-------------
December 31 September 30 June 30 March 31
----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Interest Income $5,703,026 $5,944,964 $5,974,698 $5,878,446
Interest Expense 1,562,444 1,609,567 1,637,117 1,608,679
---------- ---------- ---------- ----------
Net Interest Income 4,140,582 4,335,397 4,337,581 4,269,767
Provision for Loan Losses 1,732,799 500,000 300,000 300,000
---------- ---------- ---------- ----------
Net Interest Income after
Provision for Loan Losses 2,407,783 3,835,397 4,037,581 3,969,767
Non-Interest Income 2,547,859 893,239 863,971 845,048
Non-Interest Expense 3,574,883 3,326,599 3,311,051 3,302,699
---------- ---------- ---------- ----------
Income before Income Taxes 1,380,759 1,402,037 1,590,501 1,512,116
Income Tax Provision 319,777 412,153 467,556 444,514
---------- ---------- ---------- ----------
Net Income $1,060,982 $989,884 $1,122,945 $1,067,602
========== ========== ========== ==========
Earnings per Share $0.76 $0.71 $0.81 $0.78
</TABLE>
<TABLE>
<CAPTION>
1992
----
Quarter Ended
-------------
December 31 September 30 June 30 March 31
----------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Interest Income $5,993,862 $5,883,022 $6,024,862 $5,963,617
Interest Expense 1,711,667 1,896,145 2,219,461 2,269,171
---------- ---------- ---------- ----------
Net Interest Income 4,282,195 3,986,877 3,805,401 3,694,446
Provision for Loan Losses 225,000 675,000 1,015,233 300,000
---------- ---------- ---------- ----------
Net Interest Income after
Provision for Loan Losses 4,057,195 3,311,877 2,790,168 3,394,446
Non-Interest Income 885,285 752,553 1,504,033 752,626
Non-Interest Expense 3,159,464 2,865,522 2,921,357 2,865,671
---------- ---------- ---------- ----------
Income before Income Taxes 1,783,016 1,198,908 1,372,844 1,281,401
Income Tax Provision 492,040 330,740 378,723 353,497
---------- ---------- ---------- ----------
Net Income $1,290,976 $868,168 $994,121 $927,904
========== ========== ========== ==========
Earnings per Share $0.97 $0.65 $0.75 $0.70
</TABLE>
39
<PAGE> 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index to Financial Statements Page
- ----------------------------- ----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . 41
Balance Sheets - December 31, 1993
and December 31, 1992. . . . . . . . . . . . . . . . . . . 42
Statements of Income for the Years
ended December 31, 1993, 1992 and 1991 . . . . . . . . . . 43
Statement of Changes in Shareholders' Equity for
Years ended December 31, 1993, 1992 and 1991 . . . . . . . 44
Statement of Cash Flows for the Years
ended December 31, 1993, 1992 and 1991 . . . . . . . . . . 45
Notes to Financial Statements for Years
ended December 31, 1993, 1992 and 1991 . . . . . . . . . . 46
</TABLE>
<PAGE> 44
[LETTERHEAD]
Independent Auditors' Report
The Board of Directors
University National Bank & Trust Company:
We have audited the accompanying consolidated balance sheets of University
National Bank & Trust Company and subsidiary as of December 31, 1993 and 1992,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1993. These consolidated financial statements are the
responsibility of the Bank'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 University National
Bank & Trust Company and subsidiary as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in notes 1 and 2 to the consolidated financial statements, the
Bank adopted the provisions of the Financial Accounting Standards Board's
(FASB) Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" as of December 31 1993.
[SIG]
January 19, 1994
41
<PAGE> 45
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Consolidated Balance Sheets
December 31, 1993 and 1992
<TABLE>
<CAPTION>
Assets 1993 1992
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 27,376,337 28,320,740
Investment securities (note 2) 112,850,515 71,744,039
Federal funds sold 29,200,000 27,600,000
Bankers' acceptances purchased 5,450,193 1,983,378
Loans (note 3):
Commercial 94,622,718 97,600,906
Real estate 117,993,896 124,887,610
Consumer installment 5,045,245 5,743,961
----------- -----------
217,661,859 228,232,477
Less allowance for loan losses (note 3) 5,690,341 3,682,064
----------- -----------
Net loans 211,971,518 224,550,413
Buildings, furniture and equipment, net (note 4) 15,895,053 14,767,804
Accrued interest receivable and other assets 3,987,499 4,989,047
----------- -----------
$ 406,731,115 373,955,421
=========== ===========
<CAPTION>
Liabilities and Shareholders' Equity
------------------------------------
<S> <C> <C>
Liabilities:
Deposits:
Demand accounts $ 62,434,405 56,272,356
NOW accounts 82,700,220 82,875,126
Savings accounts 2,306,397 2,939,802
Insured money fund accounts 197,742,435 176,620,146
Time certificates of deposit, $100,000 and over
(note 5) 16,771,741 17,856,571
Other time certificates (note 5) 5,249,224 6,629,376
----------- -----------
Total deposits 367,204,422 343,193,377
Accrued interest payable and other liabilities
(note 6) 5,216,101 2,337,396
----------- -----------
Total liabilities 372,420,523 345,530,773
----------- -----------
Commitments and contingencies (note 10)
Shareholders' equity (notes 7, 8 and 12):
Common stock, $2.50 par value. Authorized: 3,000,000
shares; issued and outstanding: 1,343,952 in 1993
and 1,310,566 in 1992 3,359,880 3,276,415
Capital surplus 7,750,946 7,094,925
Unrealized gains on securities available for sale, net
(note 1) 2,776,280 -
Retained earnings 20,423,486 18,053,308
----------- -----------
Total shareholders' equity 34,310,592 28,424,648
----------- -----------
$ 406,731,115 373,955,421
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE> 46
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Consolidated Statements of Income
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest on loans and bankers'
acceptances $ 17,526,793 17,843,968 18,713,463
Interest on federal funds sold 1,024,438 872,370 1,497,104
Interest on investment securities:
Nontaxable 2,482,155 2,750,824 2,303,507
Taxable 2,467,752 2,398,207 2,882,922
---------- ---------- ----------
23,501,138 23,865,369 25,396,996
---------- ---------- ----------
Interest expense:
Interest on deposits:
Interest on NOW, savings, and
insured money fund accounts and
time certificates of deposit
under $100,000 5,864,796 7,144,152 10,409,017
Interest on time certificates of
deposit, $100,000 and over 508,919 912,392 1,774,570
---------- ---------- ----------
6,373,715 8,056,544 12,183,587
Interest on borrowed money 44,091 44,266 67,659
---------- ---------- ----------
6,417,806 8,100,810 12,251,246
---------- ---------- ----------
Net interest income 17,083,332 15,764,559 13,145,750
Provision for loan losses (note 3) 2,832,799 2,215,233 875,000
---------- ---------- ----------
Net interest income after
provision for loan losses 14,250,533 13,549,326 12,270,750
Other operating income:
Trust and fiduciary fees 2,426,916 2,046,312 1,555,783
Investment securities gain, net 1,646,299 836,343 -
Customer service charges 509,544 509,878 476,973
Other income 567,358 501,969 485,274
---------- ---------- ----------
19,400,650 17,443,828 14,788,780
---------- ---------- ----------
Other expenses:
Salaries and employee benefits 8,396,089 7,252,788 6,525,220
Occupancy 1,235,116 1,087,260 968,055
FDIC and OCC assessments 861,343 777,873 612,902
Other expenses 3,022,690 2,689,737 2,205,452
---------- ---------- ----------
13,515,238 11,807,658 10,311,629
---------- ---------- ----------
Income before income taxes 5,885,412 5,636,170 4,477,151
Income taxes (note 6) 1,644,000 1,555,000 1,261,000
---------- ---------- ----------
Net income $ 4,241,412 4,081,170 3,216,151
========== ========== ==========
Net income per common share (note 1) $ 3.07 3.07 2.46
==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
43
<PAGE> 47
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Common stock Unrealized
------------ gains on
securities Total
Capital available Retained shareholders'
Shares Amount surplus for sale, net earnings equity
------ ------ ------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1990 1,223,607 $3,059,018 5,890,997 - 13,446,761 22,396,776
Issuance of common stock 51,199 127,997 577,029 - 705,026
Tax benefits arising from
disqualifying disposition
of stock options (note 7) - - 134,027 - - 134,027
Cash dividends ($1.00 per share) - - - - (1,260,611) (1,260,611)
Net income - - - - 3,216,151 3,216,151
--------- ---------- --------- --------- ---------- ----------
Balances, December 31, 1991 1,274,806 3,187,015 6,602,053 - 15,402,301 25,191,369
Issuance of common stock 35,760 89,400 492,872 - - 582,272
Cash dividends ($1.10 per share) - - - - (1,430,163) (1,430,163)
Net income - - - - 4,081,170 4,081,170
--------- ---------- --------- --------- ---------- ----------
Balances, December 31, 1992 1,310,566 3,276,415 7,094,925 - 18,053,308 28,424,648
Issuance of common stock 33,386 83,465 590,021 - - 673,486
Tax benefits arising from
disqualifying disposition of
stock options (Note 7) - - 66,000 - - 66,000
Cash dividends ($1.40 per share) - - - - (1,871,234) (1,871,234)
Unrealized gains on securities
available for sale, net (note 1) - - - 2,776,280 - 2,776,280
Net income - - - - 4,241,412 4,241,412
--------- ---------- --------- --------- ---------- ----------
Balances, December 31, 1993 1,343,952 $3,359,880 7,750,946 2,776,280 20,423,486 34,310,592
========= ========== ========= ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 48
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,241,412 4,081,170 3,216,151
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 2,832,799 2,215,233 875,000
Depreciation and amortization 709,420 590,281 547,605
Net amortization of investment security
discounts 181,975 131,068 47,661
Gain on sale or call of investment
securities (1,646,299) (836,343) -
Decrease (increase) in deferred taxes (691,000) (705,000) 79,300
Changes in other operating assets and
liabilities:
Accrued interest receivable and
other assets (51,817) (345,224) 48,640
Accrued interest payable and
other liabilities 2,759,790 (349,058) 533,306
---------- ---------- ----------
Net cash provided by operating
activities 8,336,280 4,782,127 5,347,663
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from maturities of investment
securities 1,455,000 6,685,000 7,850,000
Proceeds from sales and calls of investment
securities prior to maturity 28,863,031 35,453,434 -
Purchase of investment securities (65,254,623) (39,524,395) (17,972,904)
Decrease in securities sold under repurchase
agreements - - (1,675,000)
Net decrease (increase) in loans 9,746,096 (34,983,267) (30,006,544)
Net decrease (increase) in bankers'
acceptances purchased (3,466,815) 13,131,315 (5,944,185)
Capital expenditures (1,836,669) (1,250,540) (4,122,594)
---------- ---------- ----------
Net cash used in investing
activities (30,493,980) (20,488,453) (51,871,227)
---------- ---------- ----------
Cash flows from financing activities:
Net increase in demand deposits, NOW
accounts, savings deposits and insured
money fund deposits 26,476,027 42,801,332 59,753,218
Net decrease in certificates of deposit (2,464,982) (8,741,782) (11,407,360)
Cash dividends (1,871,234) (1,430,163) (1,260,611)
Proceeds from common stock issued 673,486 582,272 705,026
---------- ---------- ----------
Net cash provided by financing
activities 22,813,297 33,211,659 47,790,273
---------- ---------- ----------
Net increase in cash and cash equivalents 655,597 17,505,333 1,266,709
Cash and cash equivalents, beginning of year 55,920,740 38,415,407 37,148,698
---------- ---------- ----------
Cash and cash equivalents, end of year $ 56,576,337 55,920,740 38,415,407
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
45
<PAGE> 49
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
December 31, 1993 and 1992
(1) Summary of Significant Accounting Policies
(a) General
University National Bank & Trust Company and subsidiary (collectively
the "Bank") commenced operations as a commercial bank in May 1980. The
Bank's main facility is located in downtown Palo Alto, with an
additional banking floor in downtown Menlo Park and a trust
representative office in Santa Cruz. Commercial banking services
offered by the Bank include accepting checking, savings, and time
deposits and money fund deposit accounts; advancing commercial,
installment, and certain real estate loans; and offering safe deposit
services and other customary banking services to the retail, business,
and professional community in and adjacent to Palo Alto. In
addition, the Bank offers trust and trustee services to employee
benefit plans, living trusts and testamentary trusts.
(b) Principles of Consolidation
The accompanying consolidated financial statements of the Bank include
the accounts of University National Bank & Trust Company and Lytton
Corporation, its wholly owned subsidiary. All significant intercompany
transactions have been eliminated.
(c) Fair Value of Financial Instruments
Fair value of the Bank's on- and off-balance sheet financial
instruments are determined using the estimates, methods and assumptions
as set forth below.
(i) Cash and Due from Banks, Federal Funds Sold, Bankers'
Acceptances Purchased, Accrued Interest Receivable and
Accrued Interest Payable
The book value approximates fair value because of the
short maturity of these instruments.
(ii) Investment Securities
Fair value of investment securities, except certain
state and municipal securities, is estimated based on
bid prices published in financial newspapers or bid
quotations received from securities dealers. The fair
value of certain state and municipal securities is not
readily available through market sources other than
dealer quotations, so fair value estimates are based
on quoted market prices of similar instruments,
adjusted for differences between the quoted instruments
and the instruments being valued.
(Continued)
46
<PAGE> 50
2
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(iii) Loans
Fair values are estimated for portfolios of loans with
similar financial characteristics. Loans are segregated
by type such as commercial, commercial real estate,
residential real estate and consumer installment. Each
loan category is further segmented into fixed and
adjustable rate interest terms and by performing or
nonperforming categories.
Fair value of performing fixed rate loans is
calculated by discounting scheduled cash flows on a pool
basis through estimated maturities using estimated
market discount rates that reflect the credit and
interest rate risk inherent in the loans. The estimated
maturity is based on the Bank's historical experience
with repayments for each loan classification, modified,
as required, by an estimate of the effect of current
economic and lending conditions.
For adjustable rate mortgage loans, the estimated
average repricing period is 180 days. For adjustable
rate commercial loans, the average repricing period is
one day. Based on the repricing frequency and minimal
credit concerns for these loans, the book value of
adjustable rate loans is used as an estimate of their
fair value.
Fair value for significant nonperforming loans is based
on estimated cash flows that are discounted using a
rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit
risk, cash flows, and discount rates are judgmentally
determined using available market information and
specific borrower information.
(iv) Deposit Liabilities
Fair value of deposits with no stated maturity, such as
non-interest bearing demand deposits, NOW accounts,
savings, and insured money fund accounts, is equal to
the amount payable on demand as of December 31, 1993 and
1992. The fair value of certificates of deposit is
based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining
maturities.
(Continued)
47
<PAGE> 51
3
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(v) Commitments to Extend Credit and Standby Letters of
Credit
Fair value of commitments to extend credit is estimated
using the fees currently charged to enter into
similar agreements, taking into account the original
terms of the agreements and the present creditworthiness
of the counterparties. The fair value of letters of
credit is based on fees actually charged for similar
agreements in the prior year. No fair value assigned
to loans in process.
(vi) Limitations
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 Bank's
entire holdings of a particular financial instrument.
Because no market exists for a significant portion of
the Bank's 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
and involve uncertainties and matters of significant
judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly
affect the estimates.
Fair value estimates are based on existing on- and
off-balance sheet financial instruments without
attempting to estimate the value of anticipated future
business and the value of assets and liabilities that
are not considered financial instruments. For example,
the Bank has a substantial trust department that
contributes net fee income annually. The trust
department is not considered a financial instrument, and
its value has not been incorporated into fair value
estimates. Other significant assets and liabilities
that are not considered financial assets or liabilities
include deferred taxes and buildings, furniture and
equipment. In addition, the tax ramifications related
to the realization of unrealized gains and losses can
have a significant effect on fair value estimates and
have not been considered in the fair value estimates.
(Continued)
48
<PAGE> 52
4
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(d) Investment Securities
The Bank adopted Statement of Financial Accounting Standards No.
115 (SFAS No. 115), "Accounting for Certain Investments in Debt and
Equity Securities" as of December 31, 1993. SFAS No. 115 requires
entities to classify investments in debt securities and equity
securities with readily determinable fair values as held to maturity,
available for sale, or trading, and establishes accounting and reporting
requirements for each classification. In accordance with SFAS No. 115,
the Bank has classified its investment securities as available for sale
as it does not have the intent to hold such securities until maturity.
Available for sale securities are reported at fair value, with
unrealized gains and losses, net of taxes, reported as a separate
component of shareholders equity. Amortization of premiums and
accretion of discounts arising at acquisition of investment securities
are included in income using methods that approximate the interest
method. Gains or losses on the sale of securities are determined based
on the specific identification method.
Prior to adopting SFAS No. 115, the Bank accounted for its
investment securities at cost, adjusted for the amortization of premiums
and the accretion of discounts based on its intent to hold such
securities for the foreseeable future or until maturity.
(e) Loans and Allowance for Loan Losses
Loans are stated at the amount of unpaid principal net of undisbursed
funds, reduced by an allowance for loan losses. Interest on
commercial, real estate, and consumer installment loans is accrued on a
simple interest method on daily balances of the principal amount
outstanding. The allowance for loan losses is established through a
provision for loan losses charged to expense. Loans are charged against
the allowance for loan losses when management believes that the
collectibility of principal is unlikely. The allowance is an amount
that management believes will be adequate to absorb possible losses on
existing loans that may become uncollectible, based on evaluations of
loan collectibility and prior loan loss experience. These evaluations
take into consideration such factors as changes in the nature and volume
of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the
borrowers ability to pay. Regulatory examiners may require the Bank to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examinations.
Accrual of interest is discontinued and prior accrued interest is
reversed on a loan when the payment of interest or principal is 90 or
more days past due.
Loan origination and commitment fees and certain direct loan origination
costs are deferred and the net amount amortized as an adjustment of
the related loan's yield over its estimated life.
(Continued)
49
<PAGE> 53
5
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
In June 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114 (SFAS No.
114), "Accounting by Creditors for Impairment of a Loan." SFAS No. 114
requires entities to measure certain impaired loans based on the present
value of future cash flows discounted at the loan's effective interest
rate, or at the loan's market value or the fair value of collateral if
the loan is secured. SFAS No. 114 is effective for years beginning
after December 15, 1994. The Bank does not expect that the adoption of
SFAS No. 114 will have a material effect on its consolidated financial
statements.
(f) Buildings, Furniture and Equipment
Buildings, furniture and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets.
(g) Income Taxes
In January 1993, the Bank adopted Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes."
SFAS No. 109 requires a change from the deferred method of accounting
for income taxes required under Accounting Principles Board (APB)
Opinion 11 to the asset and liability method. Under the asset and
liability method, deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
Under SFAS No. 109, deferred tax assets are recognized for
deductible temporary differences and operating loss and tax credit
carryforwards, and then a valuation allowance is established to reduce
that deferred tax asset if it is "more likely than not" that the related
tax benefits will not be realized.
The adoption of SFAS No. 109 did not have a material effect on the
Bank's consolidated financial statements.
(Continued)
50
<PAGE> 54
6
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(h) Net Income Per Common Share
Net income per common share is based on the weighted average
number of common shares outstanding of 1,382,931 in 1993, 1,329,474 in
1992, and 1,307,896 in 1991, including the effect of stock options. The
net income per common share includes net shares issuable upon assumed
exercise of stock options using the "treasury stock method," which
assumes that stock options are exercised at the beginning of the period
and the proceeds from exercise are used to purchase common stock at
average market prices.
(i) Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks and federal funds sold.
Supplemental disclosure of cash flow information follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Cash paid for interest $ 6,432,638 8,196,670 12,352,926
Cash paid for income taxes $ 1,550,000 1,945,000 1,428,682
</TABLE>
Investment securities increased by $4,705,560, and deferred taxes and
shareholders equity increased by $1,929,280 and $2,776,280,
respectively, for net unrealized gains on securities classified as
available for sale.
Capital surplus increased by $66,000 in 1993 and $134,027 in 1991 when
the Bank recognized tax benefits from the disqualifying disposition of
stock options by optionees (note 7).
(Continued)
51
<PAGE> 55
7
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(2) Investment Securities
The following tables present the amortized cost and estimated fair value
of investment securities.
<TABLE>
<CAPTION>
December 31, 1993
-----------------------------------------------------------------
Securities Obligations
of U.S. of states
U.S. government and Total
Treasury agencies and political investment
securities corporations subdivisions securities
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Maturity in years:
1 year or less $ 14,833,842 44,727,342 1,167,312 60,728,496
1 to 5 years - 5,179,728 6,965,359 12,145,087
5 to 10 years - 5,408,917 16,675,509 22,084,426
Over 10 years - - 13,186,946 13,186,946
---------- ---------- ---------- -----------
Amortized cost 14,833,842 55,315,987 37,995,126 108,144,955
Gross unrealized gains 30,408 794,170 3,887,000 4,711,578
Gross unrealized losses - - (6,018) (6,018)
---------- ---------- ---------- -----------
Estimated fair value $ 14,864,250 56,110,157 41,876,108 112,850,515
========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
------------------------------------------------
Securities Obligations
of U.S. of states
government and Total
agencies and political investment
corporations subdivisions securities
------------ ------------ ----------
<S> <C> <C> <C>
Maturity in years:
1 year or less $ - 1,455,485 1,455,485
1 to 5 years 5,000,000 6,320,038 11,320,038
5 to 10 years 30,892,283 12,922,020 43,814,303
Over 10 years 309,100 14,845,113 15,154,213
---------- ---------- -----------
Amortized cost 36,201,383 35,542,656 71,744,039
Gross unrealized gains 945,399 2,849,766 3,795,165
Gross unrealized losses (64,557) (24,878) (89,435)
---------- ---------- -----------
Estimated fair value $ 37,082,225 38,367,544 75,449,769
========== =========== ===========
</TABLE>
(Continued)
52
<PAGE> 56
8
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
The maturity distribution of investment securities at estimated fair
value follows:
<TABLE>
<CAPTION>
December 31, 1993
-----------------------------------------------------------------
Securities Obligations
of U.S. of states
U.S. government and Total
Treasury agencies and political investment
securities corporations subdivisions securities
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Maturity in years:
1 year or less $ 14,864,250 44,815,142 1,214,878 60,894,270
1 to 5 years - 5,546,530 7,432,245 12,978,775
5 to 10 years - 5,748,485 18,109,989 23,858,474
Over 10 years - - 15,118,996 15,118,996
---------- ---------- ---------- -----------
Estimated fair value $ 14,864,250 56,110,157 41,876,108 112,850,515
========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
------------------------------------------------
Securities Obligations
of U.S. of states
government and Total
agencies and political investment
corporations subdivisions securities
------------ ------------ ----------
<S> <C> <C> <C>
Maturity in years:
1 year or less $ - 1,497,438 1,497,438
1 to 5 years 5,042,180 6,802,967 11,845,147
5 to 10 years 31,730,945 13,789,449 45,520,394
Over 10 years 309,100 16,277,690 16,586,790
---------- ---------- ----------
Estimated fair value $ 37,082,225 38,367,544 75,449,769
========== ========== ==========
</TABLE>
In 1993, coincident with the adoption of SFAS No. 115, the Bank
restructured a portion of its investment portfolio to invest in
securities with shorter term maturities. Sales proceeds of $23,624,531
were received and gross gains of $1,712,799 and gross losses of $80,000
were realized as a result of this restructuring. The Bank also received
proceeds of $5,238,500 and recognized gross gains of $13,500 as a result
of maturities or calls of investment securities in 1993. In 1992,
proceeds of $35,453,434 were received and gross gains of $879,789 and
gross losses of $43,446 were realized upon sale of the Bank's U.S.
Treasury and agency securities portfolios.
As of December 31, 1993 and 1992, no investment securities were sold
under repurchase agreements, and $43,351,270 and $50,347,263,
respectively, of investment securities were pledged for the faithful
performance of the trust function and to secure certain public and trust
deposits.
(Continued)
53
<PAGE> 57
9
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(3) Loans and Allowance for Loan Losses
The following table presents the book value and estimated fair value of
loans.
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
------------------------------ --------------------------
Book Estimated Book Estimated
value fair value value fair value
----- ---------- ----- ----------
<S> <C> <C> <C> <C>
Commercial:
Fixed $ 17,040,349 16,810,445 13,570,190 13,672,275
Adjustable 77,582,369 77,368,399 84,030,716 83,273,717
Real estate:
Commercial:
Adjustable 28,057,017 28,057,017 65,994,388 65,994,388
Residential:
Adjustable 89,936,879 89,936,879 58,893,222 58,893,222
Consumer installment:
Fixed 1,649,476 1,571,620 2,238,496 2,165,327
Adjustable 3,395,769 3,395,769 3,505,465 3,505,465
----------- ----------- ----------- -----------
Total $ 217,661,859 217,140,129 228,232,477 227,504,394
=========== =========== =========== ===========
</TABLE>
Activity in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 3,682,064 1,828,025 1,724,021
Provision charged to income 2,832,799 2,215,233 875,000
Loans charged off (833,986) (363,746) (884,379)
Loan recoveries 9,464 2,552 113,383
----------- --------- ---------
Balance, end of year $ 5,690,341 3,682,064 1,828,025
=========== ========= =========
</TABLE>
Loans classified as nonaccrual as of December 31, 1993 and 1992 were
$3,814,202 and $4,015,744, respectively. The effect on interest income
had these loans been performing in accordance with contractual terms
in 1993 and 1992 was not material to the consolidated financial
statements.
Certain directors, executive officers and principal shareholders are
loan customers of the Bank. Such loans are made in the ordinary course
of business on normal credit terms, including interest rate and
collateralization, and none represent more than a normal risk of
collection. Such loans were approximately $1,153,000 and $546,000 as of
December 31, 1993 and 1992, respectively. During 1993, additional loans
of approximately $3,030,000 were made and payments of approximately
$2,423,000 were received. During 1992, additional loans of
(Continued)
54
<PAGE> 58
10
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
approximately $2,440,000 were made and payments of approximately
$4,064,000 were received.
(4) Buildings, Furniture and Equipment
Buildings, furniture and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1993 1992
---- ----
<S> <C> <C>
Land $ 3,883,237 3,180,514
Buildings 11,996,235 11,333,420
Furniture and equipment 3,674,808 3,420,531
---------- ----------
19,554,280 17,934,465
Less accumulated depreciation 3,659,227 3,166,661
---------- ----------
$ 15,895,053 14,767,804
========== ==========
</TABLE>
The Bank leases its Santa Cruz trust office under a noncancelable
operating lease which expires in September 1995. Upon expiration, the
Bank has one three year option remaining on the lease. Should
the Bank not extend the lease in 1995, the Bank has the right to
continue the lease on a month-to-month basis, and pay a monthly rent
equal to 125% of the monthly rent payable during the last month of the
current lease term. Monthly rent is based on a minimum rental plus
adjustments for cost-of-living increases.
(5) Certificates of Deposit
The following table presents the book value and estimated fair value of
certificates of deposit.
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
-------------------------- ---------------------------
Book Estimated Book Estimated
value fair value value fair value
----- ---------- ----- ----------
<S> <C> <C> <C> <C>
Certificates of deposit:
Maturing in six
months or less $ 19,221,283 19,227,450 21,532,572 21,546,412
Maturing between
six months and
one year 2,678,778 2,690,675 2,545,891 2,550,416
Maturing between
one and two
years 120,904 121,056 407,484 421,502
---------- ---------- ---------- ----------
Total $ 22,020,965 22,039,181 24,485,947 24,518,330
========== ========== ========== ==========
</TABLE>
(Continued)
55
<PAGE> 59
11
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(6) Income Taxes
As discussed in note 1, the Bank adopted SFAS No. 109 as of
January 1, 1993.
The income tax provision included in the accompanying consolidated
statements of income follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 1,499,000 1,468,000 722,500
State 836,000 792,000 459,200
--------- --------- ---------
2,335,000 2,260,000 1,181,700
--------- --------- ---------
Deferred:
Federal (512,000) (528,000) 54,800
State (179,000) (177,000) 24,500
--------- --------- ---------
(691,000) (705,000) 79,300
--------- --------- ---------
$ 1,644,000 1,555,000 1,261,000
========= ========= =========
</TABLE>
Applicable income taxes for financial reporting purposes differ from the
amount computed by applying the statutory federal income tax rate for the
reasons noted in the table below:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1993 1992 1991
-----------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory federal
income tax rate $ 2,001,040 34.0% $ 1,916,000 34.0% $ 1,522,200 34.0%
Increase (decrease) in
tax resulting from:
Tax-exempt income (802,918) (13.6) (762,000) (13.5) (698,900) (15.6)
State income tax, net
of federal tax benefit 433,913 7.3 406,000 7.2 319,200 7.1
Other, net 11,965 .2 (5,000) (.1) 118,500 2.7
----------- ----- ----------- ----- ----------- -----
Applicable income taxes $ 1,644,000 27.9% $ 1,555,000 27.6% $ 1,261,000 28.2%
=========== ===== =========== ===== =========== =====
</TABLE>
(Continued)
56
<PAGE> 60
12
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
Under SFAS No. 109, temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities that give rise
to significant components of the deferred tax asset and liability
amounts relate to the following:
<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
---- ----
<S> <C> <C>
Deferred tax assets:
Book provision for loan losses in excess of tax provision $(2,095,148) (1,271,246)
State franchise taxes (284,389) (257,759)
Loan fees and other, net (49,247) (83,615)
--------- ---------
Total deferred tax assets (2,428,784) (1,612,620)
Less valuation allowance 361,083 360,599
--------- ---------
Deferred tax assets, net (2,067,701) (1,252,021)
--------- ---------
Deferred tax liabilities:
Tax depreciation in excess of book 138,928 104,918
Difference in recognition of lease income 184,408 93,442
Tax effect of unrealized gains on securities classified as available for sale 1,929,280 -
--------- ---------
Total deferred tax liabilities 2,252,616 198,360
--------- ---------
Net deferred tax liability (asset) $ 184,915 (1,053,661)
=========== ==========
</TABLE>
The following is a summary of deferred taxes under SFAS No. 109:
<TABLE>
<CAPTION>
Deferred Valuation Deferred Net
tax asset allowance tax liability total
--------- --------- ------------- -----
<S> <C> <C> <C> <C>
Balances, January 1, 1993 $(1,612,620) 360,599 198,360 (1,053,661)
Changes (816,164) 484 2,054,256 1,238,576
----------- ------- --------- ----------
Balances, December 31, 1993 (2,428,784) 361,083 2,252,616 184,915
=========== ======= ========= ==========
</TABLE>
(Continued)
57
<PAGE> 61
13
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
Prior to 1993, the Bank accounted for income taxes on the deferred
method of accounting in accordance with APB Opinion 11. Under APB
Option 11, timing differences in the recognition of income and expenses
for tax and financial statement purposes result in deferred taxes. The
principal elements of these timing differences are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1992 1991
---- ----
<S> <C> <C>
Provision for state income taxes
deductible for federal income tax
purposes $(131,000) 23,400
Provision for loan losses for
federal income tax purposes
greater (less) than provision for
financial statements (752,000) (25,000)
Other, net 178,000 80,900
-------- ------
$(705,000) 79,300
======== ======
</TABLE>
(7) Employee Stock Option Plan
The Bank has a stock option plan for certain of its officers and key
employees. Options are granted at prices per share not less than market
price at date of grant. The options are exercisable beginning one
year from the date of grant at 20% annually and expire at various dates
through January 2003. Options that terminate without being exercised may
be reissued. Shares of common stock reserved for stock options were
6,950 and 48,950 as of December 31, 1993 and 1992, respectively.
<TABLE>
<CAPTION>
Shares
under Price
option per share
------ ---------
<S> <C> <C>
Outstanding as of January 1, 1992 154,726 $ 6.56 - $ 32.50
Granted 11,000 $ 24.75 - $ 26.25
Exercised (21,826) $ 6.56 - $ 15.19
Expired - $ - - $ -
-------
Outstanding as of December 31, 1992 143,900 $ 11.25 - $ 32.50
Outstanding as of January 1, 1993 143,900 $ 11.25 - $ 32.50
Granted 42,000 $ 26.75 - $ 35.50
Exercised (19,050) $ 11.50 - $ 24.75
Expired - $ - - $ -
-------
Outstanding as of December 31, 1993 166,850 $ 11.25 - $ 35.50
=======
</TABLE>
(Continued)
58
<PAGE> 62
14
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
As of December 31, 1993, 49,050 shares were exercisable at prices from
$11.25 to $35.50. As of December 31, 1992, 52,500 shares were
exercisable at prices from $11.25 to $32.50.
Tax benefits from the early disposition of stock by optionees under
incentive stock options of $66,000 and $134,027 were credited to capital
surplus in 1993 and 1991, respectively.
(8) Outside Directors Stock Option Plan
In January 1992, the Board and shareholders of the Bank adopted a stock
option plan for its nonemployee directors. Options are granted at prices
per share not less than market price at date of grant. The options
are exercisable beginning one year from the date of grant at 20% annually
and expire January 1998. Options that terminate without being exercised
may be reissued. Shares of common stock reserved for granting of stock
options were 11,800 and 11,000 as of December 31, 1993 and 1992,
respectively.
<TABLE>
<CAPTION>
Shares
under Price
option per share
------ ---------
<S> <C> <C>
Outstanding as of January 1, 1992 - $ 24.75
Granted 9,000 $ 24.75
Exercised - $ 24.75
Expired - $ 24.75
-----
Outstanding as of December 31, 1992 9,000 $ 24.75
======
Outstanding as of January 1, 1993 9,000 $ 24.75
Granted - $ 24.75
Exercised (200) $ 24.75
Expired (800) $ 24.75
-----
Outstanding as of December 31, 1993 8,000 $ 24.75
=====
</TABLE>
As of December 31, 1993, 1,600 shares were exercisable through January
1998 at a price of $24.75 per share.
(9) Profit-Sharing Plan
The Bank has a profit sharing plan covering substantially all of its
employees. Contributions are made to the plan at the discretion of the
Bank's Board of Directors. Plan contributions were $415,540, $408,117
and $321,615 for the years ended December 31, 1993, 1992 and 1991,
respectively.
(Continued)
59
<PAGE> 63
15
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(10) Commitments and Contingencies
(a) Financial Instruments with Off-Balance Sheet Risk
The Bank is party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing
needs of its customers. Such financial instruments include
commitments to extend credit and standby letters of credit. These
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of amounts recognized in the
accompanying consolidated balance sheets. The contractual amounts
of these instruments reflect the extent of involvement the Bank
has in particular classes of financial instruments.
The Bank s exposure to credit loss in the event of nonperformance
by the other party to financial instruments for commitments
to extend credit and standby letters of credit is represented by
the contractual amount of the instruments. The Bank uses the same
credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments. The Bank controls
the credit risk of these transactions through credit approvals,
limits, and monitoring procedures.
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. 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 varies, but may include
marketable securities, accounts receivable, inventory, property,
plant, and equipment, income-producing commercial properties and
residential properties.
Standby letters of credit are written conditional commitments
issued by the Bank to guarantee the performance of a customer
to a third party. Such guarantees are primarily issued to support
public and private borrowing arrangements. These guarantees are
extended for less than five years and expire in decreasing amounts
through 1997. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
facilities to customers.
Of the standby letters of credit outstanding as of December 31,
1993, 58% are unsecured, and 42% are 100% collateralized.
(Continued)
60
<PAGE> 64
16
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
The contract amount and estimated fair value of commitments to extend
credit and standby letters of credit as of December 31, 1993 is as
follows.
<TABLE>
<CAPTION>
Contract Estimated
amount fair value
------ ----------
<S> <C> <C>
Commitments to extend credit $ 76,667,184 549,000
Standby letters of credit 5,139,135 77,000
</TABLE>
Based on the historical experience of the Bank, management does not
believe that it will be called upon to disburse all of the funds
available under these commitments.
(b) Concentration of Credit Risk
The Bank grants residential, commercial and consumer loans to customers
located primarily in the northern California Bay Area. Although the
Bank has a diversified portfolio, a substantial portion of its debtors
ability to honor their contracts is dependent upon the economic sector
of the northern California Bay Area.
(c) Available Lines of Credit
As of December 31, 1993, the Bank had available an unused line of
credit of $5,000,000 for federal fund borrowings on an "as available"
basis, and a $5,000,000 committed line of credit. Any amounts drawn on
the committed line of credit will be collateralized by marketable
securities having an aggregate market value of not less than 125% of
the loan amount.
(11) Trust Assets
The trust department of the Bank held the following types of fiduciary
assets, at cost:
<TABLE>
<CAPTION>
December 31,
-------------------------
1993 1992
-----------------------
<S> <C> <C>
Personal living trusts $ 149,920,580 120,667,545
Employee benefit trusts 33,003,395 28,906,440
Agency, safekeeping, custodian and escrow accounts 188,604,731 188,795,296
Court trusts 4,667,417 4,712,972
Plus liabilities 999,349 2,130,452
------------- -----------
$ 377,195,472 345,212,705
============= ===========
</TABLE>
The market value of the trust assets was approximately $480,947,000 and
$431,994,000 as of December 31, 1993 and 1992, respectively. These
assets are not beneficially owned by the Bank and, therefore, are not
included in the accompanying consolidated balance sheets.
(Continued)
61
<PAGE> 65
17
UNIVERSITY NATIONAL BANK & TRUST COMPANY
Notes to Consolidated Financial Statements
(12) Regulatory Matters
The Bank is subject to the Office of the Comptroller of the Currency
(OCC) governing capital adequacy. The OCC has adopted regulations for
determining capital adequacy that involve assigning assets to four
broad risk categories and that establish minimum capital ratios based
on these assignments. The regulations require a ratio of capital to
risk-weighted assets of 8.00% and a minimum Tier 1 ratio (as defined
by the regulations) of 4.00%. As of December 31, 1993, the Bank
qualified for the top capital category of "well capitalized" under the
regulations.
Additionally, banking regulations limit the amount of dividends that may
be paid without prior approval by the Bank s regulatory agency.
Retained earnings against which dividends may be paid without prior
approval is approximately $6,890,700 as of December 31, 1993, subject to
the minimum capital ratio requirements noted above.
62
<PAGE> 66
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item other than information regarding executive
officers is set forth under "Election of Directors" and "Executive Compensation
and Other Matters" in the Bank's Proxy Statement for the 1994 Annual Meeting of
Shareholders, which is herein incorporated by reference.
Executive Officers
CARL J. SCHMITT, age 59, has been Chairman and Chief Executive Officer of the
Bank since its organization in 1979. Mr. Schmitt was self-employed as a
banking consultant from 1978 to 1979 and was Superintendent of Banks of the
State of California from 1975 to 1978.
GAYLE A. ANDERSON, age 52, has been Executive Vice President and Chief
Financial Officer since December, 1984. She has 30 years banking experience
including that of President of Golden Gate Bank in San Francisco and 12 years
of experience in the California State Banking Department.
DAVID R. HOOD, age 49, has been Executive Vice President and Senior Lending
Officer since 1991. He has been with the Bank since 1985. Mr. Hood had an
eighteen year career with Wells Fargo Bank, most recently serving as Vice
President and Manager of the San Mateo Business Center.
HALL PALMER, age 53, has been Executive Vice President and Senior Trust Officer
since May, 1987. From 1984 to 1987, he was Senior Vice President and Executive
Trust Officer with Key Bank of Oregon, formerly Pacific Western Bank. Mr.
Palmer had a sixteen year career with Wells Fargo Bank, most recently serving
as Vice President and Trust Officer managing the Peninsula Trust Region from
1982 to 1984.
SUZANNE M. POWERS, age 36, has been Executive Vice President and Senior
Operations Officer since January, 1992. She has been with the Bank since 1981.
From 1975 to 1981, she was with the chartered Bank of London, most recently as
an Operations Officer in the Fremont Office.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under "Executive
Compensation and Other Matters" in the Bank's Proxy Statement for the 1994
Annual Meeting of Shareholders which is incorporated
63
<PAGE> 67
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under "General Information,
Stock Ownership of Certain Beneficial Owners and Management" in the Bank's
Proxy statement for the 1994 Annual Meeting of Shareholders which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under "Executive
Compensation and Other Matters, Certain Relationships and Transactions" in the
Bank's Proxy Statement for the 1994 Annual Meeting of Shareholders which is
incorporated herein by reference.
64
<PAGE> 68
PART IV.
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Association dated December 11, 1979 as amended.
3.2 Restated Bylaws of the Association dated July 19, 1990.
10.1 1980 Stock Option Plan, Amended and Restated as of July 21, 1988.*
10.2 Outside Directors Stock Option Plan dated January 23, 1992.*
10.3 Employees' Profit Sharing and Tax Deferred Savings Plan Effective as
of January 1, 1988 as amended.*
(b) Reports on Form 8-K
No Form 8-K was filed during the fourth quarter.
*Relates to compensation.
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
University National Bank
& Trust Company
By /s/ Carl J. Schmitt
--------------------------
Carl J. Schmitt, Chairman
and Chief Executive Officer
Date: March 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Signature Title
- -----------------------------------------------------------------
<S> <C>
Carl J. Schmitt* Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
Gayle A. Anderson* Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
Lawrence A. Aufmuth* Director
Thomas R. Brown* Director
Linda R. Meier* Director
George G. C. Parker* Director
William A. Preston* Director
Leslie M. Quist* Director
Leonard Ware* Director
</TABLE>
*By /s/ Carl J. Schmitt
-------------------
(Carl J. Schmitt,
Attorney-In-Fact)
Date: March 23, 1994
66
<PAGE> 1
EXHIBIT 99(i)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: [ ]
University National Bank & Trust Company
(Exact name of registrant as specified in charter)
National Banking Laws 94-2622607
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
250 Lytton Avenue, Palo Alto, California 94301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 327-0210
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Not applicable.
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $2.50 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ X ]
As of March 7, 1994, the aggregate market value of the voting stock
held by non-affiliates of the registrant, based upon the closing bid and asked
prices per share of registrant's Common Stock as reported by NASDAQ, was
$44,629,997.
As of March 7, 1994, the registrant had 1,362,748 shares of Common
Stock, $2.50 par value, outstanding.
THIS AMENDMENT 10-K/A CONTAINS 10 PAGES.
THERE ARE NO EXHIBITS TO THIS AMENDMENT 10-K/A.
<PAGE> 2
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Item 10 is hereby amended and restated in its entirety to read as follows:
MANAGEMENT
Directors. This section sets forth for the current Directors, each of
whom is nominated for election as a Director at the Annual Meeting, certain
information with respect to their age and background.
<TABLE>
<CAPTION>
Director
NAME POSITION(S) WITH THE BANK AGE SINCE
- ---- ------------------------- --- ---------
<S> <C> <C> <C>
Lawrence A. Aufmuth Director 49 1991
Thomas R. Brown Director 56 1991
Linda R. Meier Director 53 1979
J. Boyce Nute Director 58 1986
George G. C. Parker Director 54 1986
William A. Preston Director 57 1979
Leslie M. Quist Director 41 1984
Carl J. Schmitt Chairman of the Board, Chief Executive Officer 59 1979
and President
Leonard Ware Director 66 1979
</TABLE>
Lawrence A. Aufmuth is an attorney and since June 1988 has been a
partner in the law firm Aufmuth, Fox & Baigent. From July 1971 to June 1988,
he was a member of Ware & Freidenrich, A Professional Corporation (now Gray
Cary Ware & Freidenrich, A Professional Corporation), a law firm in Palo Alto,
California.
Thomas R. Brown has been Chairman of the Boards of Directors of
California Casualty Management Company, California Casualty Indemnity Exchange,
California Casualty Insurance Company, California Casualty & Fire Insurance
Company and California Casualty General Insurance Company since 1978. Since
1972, he has been a director and Vice President of California Casualty & Life
Insurance Co. Mr. Brown has also been a director of Pillar Point Capital
Management, Inc., an investment management company, since 1993.
Linda R. Meier is the Chair of the Board of Directors of Stanford
University Hospital and has been a member of that Board of Directors since
1978. She is Vice President of the Board of Trustees of Stanford University,
having joined the Board in 1984. Ms. Meier was Treasurer of Lucile Salter
Packard Children's Hospital at Stanford University from 1990 to 1992.
J. Boyce Nute has been the Chairman of the Board and Chief Executive
Officer of Mayfield Publishing Company (formerly National Press Publishing
Corporation) since 1972. From 1972 to 1992 Mr. Nute was also the President of
National Press Publishing Corporation. Mr. Nute is a member of the Boards of
Directors of Morgan Kaufman Publishers, Scott/Jones Publishing and Claude Laval
Corporation.
George G. C. Parker is the Associate Dean, Director of the Master of
Business Administration program and Professor of Management (Teaching) at the
Graduate School of Business of Stanford University. Mr. Parker also provides
consulting services to various corporations and banks regarding financial
management and strategy. In addition, he is a member of the Board of Managers
(Trustees) of Haverford College, Haverford, Pennsylvania.
2
<PAGE> 3
William A. Preston is Chairman and Chief Executive Officer of APM,
Inc., Palo Alto, California. Mr. Preston has been associated with this
company, which is engaged in the manufacture of plastic products, since 1969.
Leslie M. Quist was Assistant Vice President, Corporate Banking, of
Wells Fargo Bank, National Association, from January 1979 to November 1983.
She is a member of St. Luke's Hospital Junior Auxiliary of San Francisco and a
Board member of the Woodside School Foundation.
Carl J. Schmitt has been Chairman and Chief Executive Officer of the
Bank since its organization in 1979. Mr. Schmitt was self-employed as a
banking consultant from 1978 to 1979 and was Superintendent of Banks of the
State of California from 1975 to 1978. Mr. Schmitt is a member of the Board of
Directors of the Federal Reserve Bank of San Francisco.
Leonard Ware was a member of Ware & Freidenrich, A Professional
Corporation (now Gray Cary Ware & Freidenrich, A Professional Corporation), a
law firm in Palo Alto, California, from 1969 to 1981, and of counsel to that
firm from 1981 to June 1992. Mr. Ware has been self-employed as a lawyer since
June 1992.
No Director of the Bank holds directorships in other companies with a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, except William A. Preston, who is a director of Pacific
Scientific Company, a technical manufacturer, and Thomas R. Brown, who is a
director of Hexcel Corporation, an advanced materials manufacturer, and CorVel
Corporation, an independent provider of medical cost containment and managed
care services.
Meetings of the Board of Directors. The Board of Directors had six
meetings during 1993. In 1993, all incumbent Directors of the Bank attended at
least 75% of the meetings of the Board of Directors and the meetings of all
committees, including the Audit and Compensation Committees, on which each
Director serves, except for Leslie M. Quist, who attended six meetings of the
Board of Directors and ten of the sixteen meetings of the committees on which
he serves, and Leonard Ware, who attended six meetings of the Board of
Directors and five of the eight meetings of the committees on which he serves.
The Board of Directors of the Bank has established an Audit Committee
and a Compensation Committee. The members of the Audit Committee are J. Boyce
Nute, as Chairperson, Thomas R. Brown, George G. C. Parker and Leslie M. Quist.
The members of the Compensation Committee are William A. Preston, as
Chairperson, Linda R. Meier and Lawrence A. Aufmuth.
The Audit Committee met three times during 1993. The functions of the
Audit Committee are to recommend the appointment of and to oversee a firm of
independent public accountants, whose duty it is to audit the books and records
of the Bank for the fiscal year for which they are appointed, to monitor and
analyze the results of the internal and regulatory examinations, and to monitor
the Bank's financial and accounting organization and financial reporting.
The Compensation Committee met once during 1993. The function of the
Compensation Committee is to make recommendations to the Board of Directors
regarding the compensation of the executive officers of the Bank. The Board of
Directors makes the final decision regarding such matters. For additional
information concerning the Compensation Committee, see "COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION".
The Bank does not have a standing nominating committee. The Board of
Directors of the Bank performs the function of a nominating committee.
3
<PAGE> 4
Executive Officers
CARL J. SCHMITT, age 59, has been Chairman, Chief Executive Officer [and
President] of the Bank since its organization in 1979. Mr. Schmitt was
self-employed as a banking consultant from 1978 to 1979 and was Superintendent
of Banks of the State of California from 1975 to 1978.
GAYLE A. ANDERSON, age 52, has been Executive Vice President and Chief
Financial Officer since December 1984. She has 30 years banking experience,
including that of President of Golden Gate Bank in San Francisco and 12 years
of experience in the California State Banking Department.
DAVID R. HOOD, age 49, has been Executive Vice President and Senior Lending
Officer since 1991. He has been with the Bank since 1985. Mr. Hood had an 18
year career with Wells Fargo Bank, most recently serving as Vice President and
Manager of the San Mateo Business Center.
HALL PALMER, age 53, has been Executive Vice President and Senior Trust Officer
since May 1987. From 1984 to 1987, he was Senior Vice President and Executive
Trust Officer with Key Bank of Oregon, formerly Pacific Western Bank. Mr.
Palmer had a 16 year career with Wells Fargo Bank, most recently serving as
Vice President and Trust Officer managing the Peninsula Trust Region from 1982
to 1984.
SUZANNE M. POWERS, age 36, has been Executive Vice President and Senior
Operations Officer since January 1992. She has been with the Bank since 1981.
From 1975 to 1981, she was with the Chartered Bank of London, most recently as
an Operations Officer in the Fremont Office.
ITEM 11. EXECUTIVE COMPENSATION.
Item 11 is hereby amended and restated in its entirety to read as follows:
The following table sets forth information concerning the compensation
of the Chief Executive Officer of the Bank and the four other most highly
compensated executive officers of the Bank as of December 31, 1993, whose total
salary and bonus for the year ended December 31, 1993, exceeded $100,000, for
services in all capacities to the Bank and its subsidiaries, during the fiscal
years ended December 31, 1991, 1992 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation(1)
--------------------------------- ------------ ---------------
Awards
------
Options
Name and Principal Position Year Salary Bonus (Shares)
-------------------------------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Carl J. Schmitt, Chairman 1993 $213,849 $202,217 6,000 $26,023 (2)
and Chief Executive ----
Officer 1992 207,600 172,913 -0- 30,371 (3)
----
1991 200,000 178,434 3,750 --
----
Gayle A. Anderson, Executive 1993 $92,174 $101,108 4,000 $19,437 (4)
Vice President, Chief Financial ----
Officer and Secretary to 1992 89,640 93,107 -0- 20,021 (4)
The Association ----
1991 86,377 96,080 2,500 --
----
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation(1)
--------------------------------- ------------ ---------------
Awards
------
Name and Principal Options
Position Year Salary Bonus (Shares)
-------------------------------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
David Hood, Executive Vice 1993 $91,024 $88,975 4,000 $17,347 (5)
President and Senior ----
Lending Officer 1992 89,162 48,910 -0- 14,960 (5)
----
1991 85,950 31,741 5,000 --
----
Hall Palmer, Executive Vice 1993 $92,111 $101,108 4,000 $19,412 (6)
President and Senior Trust ----
Officer 1992 89,334 93,107 -0- 20,014 (6)
----
1991 86,299 96,080 2,500 --
----
Suzanne M. Powers, 1993 $92,324 $64,709 4,000 $15,406 (7)
Executive Vice President ----
and Senior Operations 1992 74,376 33,200 3,000 10,290 (7)
Officer ----
1991 67,542 26,594 1,000 --
----
</TABLE>
- ----------------------------
(1) Information for years prior to fiscal 1992 is not required to be
disclosed under the transition provisions of the rules of the
Securities and Exchange Commission.
(2) Represents an annual premium of $1,724 for disability insurance, an
annual premium of $1,455 for a $100,000 face value term life policy
covering Mr. Schmitt, and a profit-sharing contribution of $22,844 by
the Bank to Mr. Schmitt's account under the Bank's Profit Sharing and
Tax Deferred Savings Plan.
(3) Represents an annual premium of $1,754 for disability insurance, and
an annual premium of $1,289 for a $100,000 face value term life policy
covering Mr. Schmitt, and a profit-sharing contribution of $27,328 by
the Bank to Mr. Schmitt's account under the Bank's Profit Sharing and
Tax Deferred Savings Plan.
(4) Represents a profit-sharing contribution by the Bank to Ms. Anderson's
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
(5) Represents a profit-sharing contribution by the Bank to Mr. Hood's
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
(6) Represents a profit-sharing contribution by the Bank to Mr. Palmer's
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
(7) Represents a profit-sharing contribution by the Bank to Ms. Powers'
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
The following table provides the specified information concerning
grants of options to purchase the Bank's Common Stock made during the year
ended December 31, 1993, to the persons named in the Summary Compensation
Table:
5
<PAGE> 6
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants in Fiscal 1993 Option Term(1)
--------------------------------------------------------------------- ----------------------------
% of
Total
Options
Granted
to Exercise
Employees or
in Base
Options Fiscal Price Expiration
Name Granted(2) Year ($/Sh) Date 5% ($) 10% ($)
------------------- ---------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Carl J. Schmitt 6,000 14.3% $26.75 1/27/03 $261,438 $416,296
Gayle A. Anderson 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
David Hood 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
Hall Palmer 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
Suzanne M. Powers 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
</TABLE>
(1) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the Securities and Exchange Commission's
rules. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock, overall market
conditions and the optionholders' continued employment through the
vesting period. The amounts reflected in this table may not
necessarily be achieved. One share of stock purchased at $26.75 in
1993 would yield profits of $16.82 at 5% appreciation over ten years,
or $42.63 per share at 10% appreciation over the same period.
(2) Options granted under the Bank's Amended and Restated Stock Option
Plan (the "Option Plan") are exercisable in five equal installments,
commencing one year after the date the option is granted. Under the
Option Plan, the Board retains discretion to modify the terms of
outstanding options.
The following table provides the specified information concerning
exercises of options to purchase the Bank's Common Stock in the fiscal year
ended December 31, 1993, and unexercised options held as of December 31, 1993,
by the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Value of Unexercised In-
Number of Unexercised the-Money Options at
Options at 12/31/93 12/31/93
--------------------------- -----------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl J. Schmitt 0 $0 10,600 12,150 $207,456 $72,363
Gayle A. 800 $19,200 3,100 8,800 $50,375 $48,975
Anderson
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
David Hood 2,000 $29,000 1,800 10,200 $27,850 $58,650
Hall Palmer 2,000 $36,500 7,700 8,800 $137,400 $48,975
Suzanne M. 600 $8,400 1,200 9,200 $16,900 $60,400
Powers
</TABLE>
CERTAIN TRANSACTIONS
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of its business with the Bank's Directors,
officers, principal shareholders and their associates, on the same terms,
including interest rates and collateral on loans, as those prevailing at the
same time for comparable transactions with others, and which, in the opinion of
the Bank's management, do not involve more than the normal risk of
collectibility or present other unfavorable features. Furthermore, it is the
Bank's policy to preclude its executive officers, other than its Chairman of
the Board, from borrowing from the Bank, and any loan to a Director, including
the Chairman of the Board, must be approved by the entire Board of Directors.
During 1993, the Bank retained Aufmuth, Fox & Baigent, the law firm of which
Mr. Aufmuth is a shareholder and an employee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1993, William A. Preston, Linda R. Meier and Lawrence A.
Aufmuth served on the Bank's Compensation Committee. During 1993, the Bank
retained Aufmuth, Fox & Baigent, the law firm of which Mr. Aufmuth is a
shareholder and an employee.
COMPENSATION OF DIRECTORS
Non-employee directors of the Bank were reimbursed during 1993 at the
rate of $1,500 per month. The total compensation paid to all non-employee
directors in 1993 was $180,000. Under the Bank's Outside Directors Stock
Option Plan, each non-employee Director received a one-time nonqualified stock
option for 1,000 shares of the Bank's Common Stock with an exercise price equal
to closing market price on date of grant on January 23, 1992. The options
become exercisable in five equal annual installments, commencing one year after
the date of the grant.
CHANGES TO BENEFIT PLANS
In March 1994, the Bank proposed an amendment to increase the share
reserve under its Option Plan. From the date of that proposal to April 23,
1994, a Senior Vice President of the Bank, who is not an executive officer, has
received a stock option grant for 2,500 shares and there have been no stock
option grants to any executive officers of the Bank or to any other Bank
employee. Non-employee directors are not eligible to participate in the Option
Plan.
In addition to the increase in the share reserve, the Board of
Directors has amended the Option Plan, subject to shareholder approval, to
limit the numbers of shares that may be granted to any employee under the
Option Plan to 5,000 shares within any fiscal year. Although the Bank does not
typically make grants that would approach that limit, the proposed amendment
would allow option grants to executive officers under the Option Plan to meet
one of the requirements for exemption from the $1,000,000 cap on deductibility
of executive officer compensation imposed by section 162(m) of the Internal
Revenue Code of 1986.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Item 12 is hereby amended and restated in its entirety to read as follows:
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
7
<PAGE> 8
The following table sets forth as of April 23, 1994, certain
information with respect to the beneficial ownership of the Bank's Common Stock
by (i) all persons known by the Bank to be the beneficial owners of more than
5% of the outstanding Common Stock, (ii) each Director and Director-nominee of
the Bank, (iii) the Chief Executive Officer and the four other most highly
compensated executive officers of the Bank as of December 31, 1993, whose
salary and bonus for the year ended December 31, 1993, exceeded $100,000, and
(iv) all executive officers and Directors of the Bank as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF OF BANK
SHARES COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OUTSTANDING OUTSTANDING
----------------------------------- --------------------------
<S> <C> <C>
Carl J. Schmitt . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,316 (2) 6.4%
Robert Schmitt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,400 (3) 5.2%
48 Encino Road
Atherton, California
Hall Palmer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,127 (4) 2.1%
Linda R. Meier . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,538 (5) 1.9%
Gayle A. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . 25,186 (6) 1.8%
Leonard Ware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,448 (7) 1.5%
William A. Preston . . . . . . . . . . . . . . . . . . . . . . . . . . 19,784 (8) 1.4%
David Hood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,005 (9) *
Suzanne Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,203 (10) *
George G. C. Parker . . . . . . . . . . . . . . . . . . . . . . . . . 5,050 (11) *
J. Boyce Nute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,127 (12) *
Leslie M. Quist . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 (13) *
Lawrence A. Aufmuth . . . . . . . . . . . . . . . . . . . . . . . . . 1,900 (14) *
Thomas R. Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 (15) *
All Current Directors and Executive
Officers of the Bank as a Group (13 persons) . . . . . . . . . . . . . 239,184 17.5%
</TABLE>
_________________________________________
* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons named
in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
applicable community property laws. Unless otherwise indicated, the
business address of each of the beneficial owners of more than 5% of
the outstanding Common Stock is 250 Lytton Avenue, Palo Alto,
California.
(2) Includes 42 shares held by spouse, 20,061 shares held in the Bank's
Profit Sharing and Tax Deferred Savings Plan, 750 shares held in a
401(k) plan, 3,305 shares held in an individual retirement account,
50,557 shares held in the Schmitt Family Trust, as to which Carl J.
Schmitt has shared voting and investment power, and 12,600 shares
subject to options granted under the Bank's Amended and Restated Stock
Option Plan that may be exercised within 60 days of April 23, 1994.
(3) Includes 400 shares held by spouse and 70,000 shares held in trusts
for the benefit of family members, as to which Robert Schmitt has sole
voting and investment power.
(4) Includes 4,898 shares held in the Bank's Profit Sharing and Tax
Deferred Savings Plan, 4,713 shares held in 401(k) plans, 8,500 shares
held in a trust, as to which Mr. Palmer has shared voting and
investment power, and 9,600 shares subject to options granted under
the Bank's Amended and Restated Stock Option Plan that may be
exercised within 60 days of April 23, 1994.
8
<PAGE> 9
(5) Includes 26,138 shares held in the Meier Family Trust, as to which Ms.
Meier has shared voting and investment power, and 400 shares subject
to an option granted under the Bank's Outside Directors Stock Option
Plan that may be exercised within 60 days of April 23, 1994.
(6) Includes 7,736 shares held in the Bank's Profit Sharing and Tax
Deferred Savings Plan, 2,201 shares held in a 401(k) plan and 3,100
shares subject to options granted under the Bank's Amended and
Restated Stock Option Plan that may be exercised within 60 days of
April 23, 1994.
(7) Includes 6,324 shares owned by spouse, 6,400 shares held in trusts for
the children of Mr. Ware, as to which he has shared voting and
investment power and of which he disclaims beneficial ownership, and
400 shares subject to options granted under the Bank's Outside
Directors Stock Option Plan that may be exercised within 60 days of
April 23, 1994.
(8) Includes 2,646 shares held in a Keough Plan and 400 shares subject to
options granted under the Bank's Outside Directors Stock Option Plan
that may be exercised within 60 days of April 23, 1994.
(9) Includes 300 shares held by a minor child, 2,172 shares held in the
Bank's Profit Sharing and Tax Deferred Savings Plan, 533 shares held
in a 401(k) plan, and 1,800 shares subject to options granted under
the Bank's Amended and Restated Stock Option Plan that may be
exercised within 60 days of April 23, 1994.
(10) Includes 1,690 shares held in the Bank's Profit Sharing and Tax
Deferred Savings Plan, 513 shares held in a 401(k) plan, and 1,200
shares subject to options granted under the Bank's Amended and
Restated Stock Option Plan that may be exercised within 60 days of
April 23, 1994.
(11) Includes 400 shares subject to options granted under the Bank's
Outside Directors Stock Option Plan that may be exercised within 60
days of April 23, 1994.
(12) Includes 245 shares held in an individual retirement account, 244
shares held in spouse's individual retirement account and 400 shares
subject to options granted under the Bank's Outside Directors Stock
Option Plan that may be exercised within 60 days of April 23, 1994.
(13) Includes 400 shares subject to options granted under the Bank's
Outside Directors Stock Option Plan that may be exercised within 60
days of April 23, 1994.
(14) Includes 1,500 shares held in an individual retirement account and 400
shares subject to options granted under the Bank's Outside Directors
Stock Option Plan that may be exercised within 60 days of April 23,
1994.
(15) Includes 400 shares subject to options granted under the Bank's
Outside Directors Stock Option Plan that may be exercised within 60
days of April 23, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Item 13 is hereby amended and restated in its entirety to read as follows:
CERTAIN TRANSACTIONS
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of its business with the Bank's Directors,
officers, principal shareholders and their associates, on the same terms,
including interest rates and collateral on loans, as those prevailing at the
same time for comparable transactions with others, and which, in the opinion of
the Bank's management, do not involve more than the normal risk of
collectibility or present other unfavorable features. Furthermore, it is the
Bank's policy to preclude its executive officers, other than its Chairman of
the Board, from borrowing from the Bank, and
9
<PAGE> 10
any loan to a Director, including the Chairman of the Board, must be approved
by the entire Board of Directors.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
University National Bank & Trust Company
By: /s/ CARL J. SCHMITT
-----------------------------------
Carl J. Schmitt, Chairman and Chief
Executive Officer
Date: April 28, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
Signature Title
--------------------------------------------------------------------------------------------------------------
<S> <C>
Carl J. Schmitt* Chairman of the Board, Chief Executive Officer and
Director (Principal Executive Officer)
Gayle A. Anderson* Executive Vice President and Chief Financial
Officer (Principal Financial and Principal
Accounting Officer)
Lawrence A. Aufmuth* Director
Thomas R. Brown* Director
Linda R. Meier* Director
George G. C. Parker* Director
William A. Preston* Director
Leslie M. Quist* Director
Leonard Ware* Director
</TABLE>
*By: /s/ CARL J. SCHMITT
------------------------------------
(Carl J. Schmitt, Attorney-In-Fact)
Date: April 28, 1994
11
<PAGE> 1
EXHIBIT 99(j)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, JUNE 16, 1994
4:30 P.M.
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of University National Bank & Trust
Company, a national banking association (the "Bank"), will be held at the
principal executive offices of the Bank, 250 Lytton Avenue, Palo Alto,
California 94301, on June 16, 1994, at 4:30 p.m. for the following purposes:
1. To elect nine Directors to hold office for a one-year term and
until their respective successors are elected and qualified.
2. To consider and vote upon a proposal to amend the Bank's
Amended and Restated Stock Option Plan to increase the number of
shares reserved for issuance thereunder from 330,320 to 355,320
and to add a per-employee share limitation.
3. To transact such other business as may properly come
before the Annual Meeting.
The names of the Board of Directors' nominees to be Directors of the
Bank are set forth in the accompanying Proxy Statement and are incorporated
herein by this reference.
Only shareholders of record at the close of business on April 23, 1994,
are entitled to notice of and to vote at this meeting and any adjournments
thereof.
By Order of the Board of Directors
CARL J. SCHMITT
Chairman of the Board
Palo Alto, California
April 29, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POST-PAID ENVELOPE.
<PAGE> 2
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The accompanying proxy is solicited on behalf of the Board of
Directors of University National Bank & Trust Company, a national banking
association (the "Bank"), for use at its Annual Meeting of Shareholders to be
held on June 16, 1994, or any adjournment thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Shareholders. The date of this
Proxy Statement is April 29, 1994, the approximate date on which this Proxy
Statement and the accompanying form of proxy were first sent or given to
shareholders.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended December
31, 1993, is enclosed with this Proxy Statement.
Voting Securities. Only shareholders of record as of the close of
business on April 23, 1994, will be entitled to vote at the meeting and any
adjournment thereof. At the close of business on that date, the Bank had
outstanding 1,366,088 shares of its $2.50 par value Common Stock (the "Common
Stock").
Shareholders of Common Stock are entitled to one vote for each share
held, except that, in the election of Directors, each shareholder has
cumulative voting rights and is entitled to as many votes as shall equal the
number of shares held by him or her multiplied by the number of Directors to be
elected, and he or she may cast all of his or her votes for a single candidate
or may distribute his or her votes among any or all of the candidates as he or
she chooses. The Bank's By-laws provide that a majority of the outstanding
stock, whether present in person or represented by proxy, shall constitute a
quorum for the transaction of business at the Annual Meeting.
Solicitation of Proxies. The Bank will bear the entire cost of
soliciting proxies. In addition to having its regular employees solicit
shareholders by mail, the Bank will request banks and brokers, and other
custodians, nominees and fiduciaries, to solicit their customers who have
Common Stock registered in the names of such entities and will reimburse them
for their reasonable, out-of-pocket costs. The Company may use the services of
some of its officers, Directors and regular employees to solicit proxies by
telephone or personal interview, without additional compensation.
Voting of Proxies. All valid proxies received before the Annual
Meeting will be exercised. All shares of Common Stock represented by a proxy
will be voted and, where a shareholder specifies by means of his or her proxy a
choice with respect to any matter to be acted upon, the shares will be voted as
so specified. If a shareholder does not specify otherwise, his or her shares
will be voted (i) in favor of the nominees named herein for election as
Directors (and, in the proxyholders' discretion, such shares may be voted as
the proxyholders deem appropriate, including by cumulating votes or otherwise,
so as to maximize the number of named nominees that are elected), (ii) in favor
of the proposal set forth in the accompanying Notice of Annual Meeting of
Shareholders, and (iii) in the proxyholders' discretion, on all other matters,
if any, as may come before the Annual Meeting and any adjournment thereof. A
shareholder giving a proxy has the power to revoke that proxy at any time
before it is exercised by delivering to the Secretary of the Bank a written
instrument revoking that proxy or a duly executed proxy
1
<PAGE> 3
bearing a later date and has the power to suspend that proxy by attending the
Annual Meeting and voting in person.
INFORMATION ABOUT THE BANK
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 23, 1994, certain
information with respect to the beneficial ownership of the Bank's Common Stock
by (i) all persons known by the Bank to be the beneficial owners of more than
5% of the outstanding Common Stock, (ii) each Director and Director-nominee of
the Bank, (iii) the Chief Executive Officer and the four other most highly
compensated executive officers of the Bank as of December 31, 1993, whose
salary and bonus for the year ended December 31, 1993, exceeded $100,000, and
(iv) all executive officers and Directors of the Bank as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF OF BANK
SHARES COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OUTSTANDING OUTSTANDING
--------------------------------------- ----------- -----------
<S> <C> <C>
Carl J. Schmitt . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,316 (2) 6.4%
Robert Schmitt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,400 (3) 5.2%
48 Encino Road
Atherton, California
Hall Palmer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,127 (4) 2.1%
Linda R. Meier . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,538 (5) 1.9%
Gayle A. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . 25,186 (6) 1.8%
Leonard Ware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,448 (7) 1.5%
William A. Preston . . . . . . . . . . . . . . . . . . . . . . . . . . 19,784 (8) 1.4%
David Hood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,005 (9) *
Suzanne Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,203 (10) *
George G. C. Parker . . . . . . . . . . . . . . . . . . . . . . . . . 5,050 (11) *
J. Boyce Nute . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,127 (12) *
Leslie M. Quist . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 (13) *
Lawrence A. Aufmuth . . . . . . . . . . . . . . . . . . . . . . . . . 1,900 (14) *
Thomas R. Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 (15) *
All Current Directors and Executive
Officers of the Bank as a Group (13 persons) . . . . . . . . . . . . . 239,184 17.5%
</TABLE>
_________________________________________
* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons named
in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
applicable community property laws. Unless otherwise indicated, the
business address of each of the beneficial owners of more than 5% of
the outstanding Common Stock is 250 Lytton Avenue, Palo Alto,
California.
(2) Includes 42 shares held by spouse, 20,061 shares held in the Bank's
Profit Sharing and Tax Deferred Savings Plan, 750 shares held in a
401(k) plan, 3,305 shares held in an individual retirement account,
50,557 shares held in the Schmitt Family Trust, as to which Carl J.
Schmitt has shared voting and investment power, and 12,600 shares
subject to options granted under the
2
<PAGE> 4
Bank's Amended and Restated Stock Option Plan that may be exercised
within 60 days of April 23, 1994.
(3) Includes 400 shares held by spouse and 70,000 shares held in trusts
for the benefit of family members, as to which Robert Schmitt has sole
voting and investment power.
(4) Includes 4,898 shares held in the Bank's Profit Sharing and Tax
Deferred Savings Plan, 4,713 shares held in 401(k) plans, 8,500 shares
held in a trust, as to which Mr. Palmer has shared voting and
investment power, and 9,600 shares subject to options granted under
the Bank's Amended and Restated Stock Option Plan that may be
exercised within 60 days of April 23, 1994.
(5) Includes 26,138 shares held in the Meier Family Trust, as to which Ms.
Meier has shared voting and investment power, and 400 shares subject
to an option granted under the Bank's Outside Directors Stock Option
Plan that may be exercised within 60 days of April 23, 1994.
(6) Includes 7,736 shares held in the Bank's Profit Sharing and Tax
Deferred Savings Plan, 2,201 shares held in a 401(k) plan and 3,100
shares subject to options granted under the Bank's Amended and
Restated Stock Option Plan that may be exercised within 60 days of
April 23, 1994.
(7) Includes 6,324 shares owned by spouse, 6,400 shares held in trusts for
the children of Mr. Ware, as to which he has shared voting and
investment power and of which he disclaims beneficial ownership, and
400 shares subject to options granted under the Bank's Outside
Directors Stock Option Plan that may be exercised within 60 days of
April 23, 1994.
(8) Includes 2,646 shares held in a Keough Plan and 400 shares subject to
options granted under the Bank's Outside Directors Stock Option Plan
that may be exercised within 60 days of April 23, 1994.
(9) Includes 300 shares held by a minor child, 2,172 shares held in the
Bank's Profit Sharing and Tax Deferred Savings Plan, 533 shares held
in a 401(k) plan, and 1,800 shares subject to options granted under
the Bank's Amended and Restated Stock Option Plan that may be
exercised within 60 days of April 23, 1994.
(10) Includes 1,690 shares held in the Bank's Profit Sharing and Tax
Deferred Savings Plan, 513 shares held in a 401(k) plan, and 1,200
shares subject to options granted under the Bank's Amended and
Restated Stock Option Plan that may be exercised within 60 days of
April 23, 1994.
(11) Includes 400 shares subject to options granted under the Bank's
Outside Directors Stock Option Plan that may be exercised within 60
days of April 23, 1994.
(12) Includes 245 shares held in an individual retirement account, 244
shares held in spouse's individual retirement account and 400 shares
subject to options granted under the Bank's Outside Directors Stock
Option Plan that may be exercised within 60 days of April 23, 1994.
(13) Includes 400 shares subject to options granted under the Bank's
Outside Directors Stock Option Plan that may be exercised within 60
days of April 23, 1994.
(14) Includes 1,500 shares held in an individual retirement account and 400
shares subject to options granted under the Bank's Outside Directors
Stock Option Plan that may be exercised within 60 days of April 23,
1994.
(15) Includes 400 shares subject to options granted under the Bank's
Outside Directors Stock Option Plan that may be exercised within 60
days of April 23, 1994.
3
<PAGE> 5
MANAGEMENT
Directors. This section sets forth for the current Directors, each of
whom is nominated for election as a Director at the Annual Meeting, certain
information with respect to their age and background.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION(S) WITH THE BANK AGE SINCE
- ---- ------------------------- --- ---------
<S> <C> <C> <C>
Lawrence A. Aufmuth Director 49 1991
Thomas R. Brown Director 56 1991
Linda R. Meier Director 53 1979
J. Boyce Nute Director 58 1986
George G. C. Parker Director 54 1986
William A. Preston Director 57 1979
Leslie M. Quist Director 41 1984
Carl J. Schmitt Chairman of the Board, Chief Executive Officer 59 1979
and President
Leonard Ware Director 66 1979
</TABLE>
Lawrence A. Aufmuth is an attorney and since June 1988 has been a
partner in the law firm Aufmuth, Fox & Baigent. From July 1971 to June 1988,
he was a member of Ware & Freidenrich, A Professional Corporation (now Gray
Cary Ware & Freidenrich, A Professional Corporation), a law firm in Palo Alto,
California.
Thomas R. Brown has been Chairman of the Boards of Directors of
California Casualty Management Company, California Casualty Indemnity Exchange,
California Casualty Insurance Company, California Casualty & Fire Insurance
Company and California Casualty General Insurance Company since 1978. Since
1972, he has been a director and Vice President of California Casualty & Life
Insurance Co. Mr. Brown has also been a director of Pillar Point Capital
Management, Inc., an investment management company, since 1993.
Linda R. Meier is the Chair of the Board of Directors of Stanford
University Hospital and has been a member of that Board of Directors since
1978. She is Vice President of the Board of Trustees of Stanford University,
having joined the Board in 1984. Ms. Meier was Treasurer of Lucile Salter
Packard Children's Hospital at Stanford University from 1990 to 1992.
J. Boyce Nute has been the Chairman of the Board and Chief Executive
Officer of Mayfield Publishing Company (formerly National Press Publishing
Corporation) since 1972. From 1972 to 1992 Mr. Nute was also the President of
National Press Publishing Corporation. Mr. Nute is a member of the Boards of
Directors of Morgan Kaufman Publishers, Scott/Jones Publishing and Claude Laval
Corporation.
George G. C. Parker is the Associate Dean, Director of the Master of
Business Administration program and Professor of Management (Teaching) at the
Graduate School of Business of Stanford University. Mr. Parker also provides
consulting services to various corporations and banks regarding financial
management and strategy. In addition, he is a member of the Board of Managers
(Trustees) of Haverford College, Haverford, Pennsylvania.
William A. Preston is Chairman and Chief Executive Officer of APM,
Inc., Palo Alto, California. Mr. Preston has been associated with this
company, which is engaged in the manufacture of plastic products, since 1969.
4
<PAGE> 6
Leslie M. Quist was Assistant Vice President, Corporate Banking, of
Wells Fargo Bank, National Association, from January 1979 to November 1983.
She is a member of St. Luke's Hospital Junior Auxiliary of San Francisco and a
Board member of the Woodside School Foundation.
Carl J. Schmitt has been Chairman and Chief Executive Officer of the
Bank since its organization in 1979. Mr. Schmitt was self-employed as a
banking consultant from 1978 to 1979 and was Superintendent of Banks of the
State of California from 1975 to 1978. Mr. Schmitt is a member of the Board of
Directors of the Federal Reserve Bank of San Francisco.
Leonard Ware was a member of Ware & Freidenrich, A Professional
Corporation (now Gray Cary Ware & Freidenrich, A Professional Corporation), a
law firm in Palo Alto, California, from 1969 to 1981, and of counsel to that
firm from 1981 to June 1992. Mr. Ware has been self-employed as a lawyer since
June 1992.
No Director of the Bank holds directorships in other companies with a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, except William A. Preston, who is a director of Pacific
Scientific Company, a technical manufacturer, and Thomas R. Brown, who is a
director of Hexcel Corporation, an advanced materials manufacturer, and CorVel
Corporation, an independent provider of medical cost containment and managed
care services.
Meetings of the Board of Directors. The Board of Directors had six
meetings during 1993. In 1993, all incumbent Directors of the Bank attended at
least 75% of the meetings of the Board of Directors and the meetings of all
committees, including the Audit and Compensation Committees, on which each
Director serves, except for Leslie M. Quist, who attended six meetings of the
Board of Directors and ten of the sixteen meetings of the committees on which
he serves, and Leonard Ware, who attended six meetings of the Board of
Directors and five of the eight meetings of the committees on which he serves.
The Board of Directors of the Bank has established an Audit Committee
and a Compensation Committee. The members of the Audit Committee are J. Boyce
Nute, as Chairperson, Thomas R. Brown, George G. C. Parker and Leslie M. Quist.
The members of the Compensation Committee are William A. Preston, as
Chairperson, Linda R. Meier and Lawrence A. Aufmuth.
The Audit Committee met three times during 1993. The functions of the
Audit Committee are to recommend the appointment of and to oversee a firm of
independent public accountants, whose duty it is to audit the books and records
of the Bank for the fiscal year for which they are appointed, to monitor and
analyze the results of the internal and regulatory examinations, and to monitor
the Bank's financial and accounting organization and financial reporting.
The Compensation Committee met once during 1993. The function of the
Compensation Committee is to make recommendations to the Board of Directors
regarding the compensation of the executive officers of the Bank. The Board of
Directors makes the final decision regarding such matters. For additional
information concerning the Compensation Committee, see "COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION".
The Bank does not have a standing nominating committee. The Board of
Directors of the Bank performs the function of a nominating committee.
5
<PAGE> 7
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation
of the Chief Executive Officer of the Bank and the four other most highly
compensated executive officers of the Bank as of December 31, 1993, whose total
salary and bonus for the year ended December 31, 1993, exceeded $100,000, for
services in all capacities to the Bank and its subsidiaries, during the fiscal
years ended December 31, 1991, 1992 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term All Other
Annual Compensation Compensation Compensation(1)
---------------------------------- ------------ ---------------
Awards
------
Options
Name and Principal Position Year Salary Bonus (Shares)
----------------------------- ----- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
Carl J. Schmitt, Chairman 1993 $213,849 $202,217 6,000 $26,023 (2)
and Chief Executive 1992 207,600 172,913 -0- 30,371 (3)
Officer 1991 200,000 178,434 3,750 --
Gayle A. Anderson, 1993 $92,174 $101,108 4,000 $19,437 (4)
Executive Vice President, 1992 89,640 93,107 -0- 20,021 (4)
Chief Financial Officer and 1991 86,377 96,080 2,500 --
Secretary to The
Association
David Hood, Executive Vice 1993 $91,024 $88,975 4,000 $17,347 (5)
President and Senior 1992 89,162 48,910 -0- 14,960 (5)
Lending Officer 1991 85,950 31,741 5,000 --
Hall Palmer, Executive Vice 1993 $92,111 $101,108 4,000 $19,412 (6)
President and Senior Trust 1992 89,334 93,107 -0- 20,014 (6)
Officer 1991 86,299 96,080 2,500 --
Suzanne M. Powers, 1993 $92,324 $64,709 4,000 $15,406 (7)
Executive Vice President 1992 74,376 33,200 3,000 10,290 (7)
and Senior Operations 1991 67,542 26,594 1,000 --
Officer
</TABLE>
(1) Information for years prior to fiscal 1992 is not required to be
disclosed under the transition provisions of the rules of the
Securities and Exchange Commission.
(2) Represents an annual premium of $1,724 for disability insurance, an
annual premium of $1,455 for a $100,000 face value term life policy
covering Mr. Schmitt, and a profit-sharing contribution of $22,844 by
the Bank to Mr. Schmitt's account under the Bank's Profit Sharing and
Tax Deferred Savings Plan.
6
<PAGE> 8
(3) Represents an annual premium of $1,754 for disability insurance, and
an annual premium of $1,289 for a $100,000 face value term life policy
covering Mr. Schmitt, and a profit-sharing contribution of $27,328 by
the Bank to Mr. Schmitt's account under the Bank's Profit Sharing and
Tax Deferred Savings Plan.
(4) Represents a profit-sharing contribution by the Bank to Ms. Anderson's
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
(5) Represents a profit-sharing contribution by the Bank to Mr. Hood's
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
(6) Represents a profit-sharing contribution by the Bank to Mr. Palmer's
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
(7) Represents a profit-sharing contribution by the Bank to Ms. Powers'
account under the Bank's Profit Sharing and Tax Deferred Savings Plan.
The following table provides the specified information concerning
grants of options to purchase the Bank's Common Stock made during the year
ended December 31, 1993, to the persons named in the Summary Compensation
Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants in Fiscal 1993 Option Term(1)
-------------------------------------------------------------------- ---------------------------------
% of
Total
Options
Granted
to Exercise
Employees or
in Base
Options Fiscal Price Expiration
Name Granted (2) Year ($/Sh) Date 5% ($) 10% ($)
-------------------------------------------------------------------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Carl J. Schmitt 6,000 14.3% $26.75 1/27/03 $261,438 $416,296
Gayle A. Anderson 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
David Hood 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
Hall Palmer 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
Suzanne M. Powers 4,000 9.5% $26.75 1/27/03 $174,292 $277,530
- ------------------------------------------
</TABLE>
(1) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent certain assumed rates of
appreciation only, based on the Securities and Exchange Commission's
rules. Actual gains, if any, on stock option exercises are dependent
on the future performance of the Common Stock, overall market
conditions and the optionholders' continued employment through the
vesting period. The amounts reflected in this table may not
necessarily be achieved. One share of stock purchased at $26.75 in
1993 would yield profits of $16.82 at 5% appreciation over ten years,
or $42.63 per share at 10% appreciation over the same period.
7
<PAGE> 9
(2) Options granted under the Bank's Amended and Restated Stock Option
Plan (the "Option Plan") are exercisable in five equal installments,
commencing one year after the date the option is granted. Under the
Option Plan, the Board retains discretion to modify the terms of
outstanding options.
8
<PAGE> 10
The following table provides the specified information concerning
exercises of options to purchase the Bank's Common Stock in the fiscal year
ended December 31, 1993, and unexercised options held as of December 31, 1993,
by the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at 12/31/93 at 12/31/93
---------------------- ---------------------------
Shares
Acquired
on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl J. Schmitt 0 $0 10,600 12,150 $207,456 $72,363
Gayle A. 800 $19,200 3,100 8,800 $50,375 $48,975
Anderson
David Hood 2,000 $29,000 1,800 10,200 $27,850 $58,650
Hall Palmer 2,000 $36,500 7,700 8,800 $137,400 $48,975
Suzanne M. 600 $8,400 1,200 9,200 $16,900 $60,400
Powers
</TABLE>
CERTAIN TRANSACTIONS
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of its business with the Bank's Directors,
officers, principal shareholders and their associates, on the same terms,
including interest rates and collateral on loans, as those prevailing at the
same time for comparable transactions with others, and which, in the opinion of
the Bank's management, do not involve more than the normal risk of
collectibility or present other unfavorable features. Furthermore, it is the
Bank's policy to preclude its executive officers, other than its Chairman of
the Board, from borrowing from the Bank, and any loan to a Director, including
the Chairman of the Board, must be approved by the entire Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1993, William A. Preston, Linda R. Meier and Lawrence A.
Aufmuth served on the Bank's Compensation Committee. During 1993, the Bank
retained Aufmuth, Fox & Baigent, the law firm of which Mr. Aufmuth is a
shareholder and an employee.
COMPENSATION OF DIRECTORS
Non-employee directors of the Bank were reimbursed during 1993 at the
rate of $1,500 per month. The total compensation paid to all non-employee
directors in 1993 was $180,000. Under the Bank's Outside Directors Stock
Option Plan, each non-employee Director received a one-time nonqualified stock
option for 1,000 shares of the Bank's Common Stock with an exercise price equal
to closing market price on date of grant on January 23, 1992. The options
become exercisable in five equal annual installments, commencing one year after
the date of the grant.
CHANGES TO BENEFIT PLANS
In March 1994, the Bank proposed an amendment to increase the share
reserve under its Option Plan. From the date of that proposal to April 23,
1994, a Senior Vice President of the Bank, who is not an executive
9
<PAGE> 11
officer, has received a stock option grant for 2,500 shares and there have been
no stock option grants to any executive officers of the Bank or to any other
Bank employee. Non-employee directors are not eligible to participate in the
Option Plan.
In addition to the increase in the share reserve, the Board of
Directors has amended the Option Plan, subject to shareholder approval, to
limit the numbers of shares that may be granted to any employee under the
Option Plan to 5,000 shares within any fiscal year. Although the Bank does not
typically make grants that would approach that limit, the proposed amendment
would allow option grants to executive officers under the Option Plan to meet
one of the requirements for exemption from the $1,000,000 cap on deductibility
of executive officer compensation imposed by section 162(m) of the Internal
Revenue Code of 1986.
The following table also sets forth grants of stock options received
under the Option Plan during the fiscal year ended December 31, 1993, by (1)
the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company as of December 31, 1993, whose
total salary and bonus for the fiscal year ended December 31, 1993, exceed
$100,000; (2) all current executive officers as a group; (3) all current
directors who are not executive officers as a group; and (4) all employees,
including all officers who are not executive officers, as a group. Grants
under the Option Plan are made at the discretion of the Board of Directors.
ACCORDINGLY, FUTURE GRANTS UNDER THE OPTION PLAN ARE NOT YET DETERMINABLE.
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
UNIVERSITY NATIONAL BANK & TRUST COMPANY
AMENDED AND RESTATED STOCK OPTION PLAN
------------------------------------------
EXERCISE PRICE NUMBER OF
NAME AND POSITION (PER SHARE) SHARES
--------------------------------------- ---------- --------
<S> <C> <C>
Carl J. Schmitt $26.75 6,000
Chairman and Chief Executive Officer
Gayle A. Anderson $26.75 4,000
Executive Vice President, Chief Financial
Officer and Secretary to The Association
David Hood $26.75 4,000
Executive Vice President and Senior
Lending Officer
Hall Palmer $26.75 4,000
Executive Vice President and Senior Trust
Officer
Suzanne M. Powers $26.75 4,000
Executive Vice President and Senior
Operations Officers
Executive Group (5 persons) $26.75 22,000
Non-Executive Director Group (7 persons) --(1) --(1)
Non-Executive Officer Employee Group $26.75 20,000
</TABLE>
10
<PAGE> 12
(1) Only full-time salaried employees (including officers and directors
who are full-time salaried employees) of the Bank are eligible to
participate in the Option Plan.
11
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, after deliberation, felt that the Bank's
compensation policy relative to its Executive Officers should continue. This
policy encompasses the following:
. That none of the Executive Officers shall have an employment
contract nor a golden parachute.
. That each of the Executive Officers will have a salary base
that will be adjusted annually for a change in the CPI.
(Chairman and CEO's base for 1993 was $213,849, and the
adjustment for all Executive Officers for 1994 is 3.01%.)
. That the Executive Officers and Senior Vice Presidents will be
awarded a participation at the beginning of the fiscal year of
a bonus pool which in the aggregate will equal 10% of pre-tax
earnings. (Chairman and CEO's allotment of the Bonus Pool for
1993 was 23.25%, and it will be 22.5% for 1994.)
. That the Bank allocated 10% of after tax profits before
reporting as a contribution to the Bank's Profit Sharing Plan,
which is allocated amongst the employees in accordance to each
employee's share of the total compensation of the Bank with
provisions that prevent top-heavy allocations to the CEO.
. That options are considered to be a major ingredient in the
compensation package of the Executive Officers. (The Chairman
and CEO received a new option of 6,000 shares at the
then-current market value as part of the 1993 compensation
package.)
In awarding percentage participation in the bonus pool to Executive
Officers (including the Chairman and CEO) and Senior Vice Presidents and in
recommending to the Board of Directors stock option grants to employees
(including the Chairman and CEO), the Compensation Committee subjectively
evaluated each recipient's relative position and responsibilities and his or
her historical and expected contributions to the Bank during 1994.
Because of the above, a major portion of the Executive Officers'
compensation is in fact variable and dependent upon the profit performance of
the Bank, i.e., if the Bank's profits are seriously down, the cash bonus pool
will be down by the same proportional amount, and the Executive Officers will
share in that loss. On the other hand, the stronger the profits of the Bank
are, the higher the compensation to the participants in the pool are. In
addition to the Chairman and CEO and the Executive Vice Presidents, all of the
Senior Vice Presidents also have allocations in the pool, but the percentage of
their compensation derived from the pool is much less.
Since there are no employment contracts nor golden parachutes, the
Executive Officers' performance is always subject to review.
The Bank reviewed the recent amendments to the Internal Revenue Code
and related regulations of the Internal Revenue Service that restrict
deductibility of executive compensation paid to any of the five most highly
compensated officers at the end of any fiscal year to the extent such
compensation exceeds $1,000,000 in any year and does not qualify for an
exemption under the statute or proposed regulations. The Compensation
Committee concluded in January 1994 that it would be advisable to establish
certain restrictions on the granting of Options under the Option Plan to assist
in the exemption of compensation realized in connection with the future
exercise of such options. See "PROPOSAL TO AMEND THE UNIVERSITY NATIONAL BANK
& TRUST COMPANY AMENDED AND RESTATED STOCK OPTION PLAN". The Committee does
not believe that other components of the Company's compensation will be likely
in the aggregate to exceed $1,000,000 for any executive
12
<PAGE> 14
officer in any year in the foreseeable future, and therefore concluded that no
further action with respect to qualifying such compensation for deductibility
was necessary at this time.
January 11, 1994 COMPENSATION COMMITTEE
William A. Preston, Chairperson
Linda R. Meier
Lawrence A. Aufmuth
COMPARISON OF SHAREHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Bank's Common Stock with the cumulative
total return of the S&P 500 Composite Index and California Independent Bank
Proxy for the period commencing on December 31, 1988, and ending on
December 31, 1993.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 31, 1988
THROUGH DECEMBER 31, 1993:1
UNIVERSITY NATIONAL BANK & TRUST COMPANY, S&P 500 COMPOSITE INDEX,
CALIFORNIA INDEPENDENT BANK PROXY
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
UNB $100.00 $160.45 $131.74 $136.91 $140.04 $188.80
S&P 500 $100.00 $131.59 $127.49 $166.17 $178.81 $196.75
CAL. IND. BANK $100.00 $136.18 $112.17 $112.18 $106.18 $123.34
PROXY
</TABLE>
Source: Montgomery Securities Western Bank Monitor
- --------------------
1 Assumes that $100.00 was invested on December 31, 1988, at the closing
sales price in the Bank's Common Stock and each index, and that all
dividends were reinvested. Shareholder returns over the indicated
period should not be considered indicative of future shareholder
returns.
13
<PAGE> 15
ELECTION OF DIRECTORS
The By-laws of the Bank provide that the Board of Directors may fix
the number of Directors at any number between five and twenty-five, inclusive.
The Board of Directors, pursuant to its authority, has set the number of
Directors at nine and all nine Directors are to be elected at this meeting to
hold office until the next Annual Meeting of Shareholders and until their
successors are elected and qualify. Unless otherwise cumulatively voted so as
to maximize the number of recommended nominees elected, all proxies will be
voted for the election of the nine nominees recommended by the Board of
Directors, unless authority to vote for the election of Directors or any
Director is withheld. All of the nominees are incumbent Directors of the Bank.
See "INFORMATION ABOUT THE BANK--Management". If any of the nominees should
unexpectedly decline or be unable to act as a Director, the proxies may be
voted for a substitute nominee to be designated by the Board of Directors. The
Board of Directors has no reason to believe that any nominee will become
unavailable and has no present intention to nominate persons in addition to or
in lieu of the incumbent Directors.
The By-laws of the Bank provide for the nomination of Directors in the
following manner:
Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder of any outstanding class of capital
stock of the Bank entitled to vote for the election of Directors. Nominations,
other than those made by or on behalf of the existing management of the Bank,
shall be made in writing and shall be delivered or mailed to the Chief
Executive Officer of the Bank not less than 14 days nor more than 50 days prior
to any meeting of shareholders called for the election of Directors; provided,
however, that if less than 21 days' notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the Chief
Executive Officer of the Bank not later than the close of business on the
seventh day following the day on which the notice was mailed. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the Bank that will be voted for each proposed nominee; (d) the
name and residence address of the notifying shareholder; and (e) the number of
shares of capital stock of the Bank owned by the notifying shareholder.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the Chairman of the meeting, and upon his instructions, the
inspector of elections shall disregard all votes cast for each such nominee.
If a quorum is present and voting, the nine nominees for Director
receiving the highest number of votes will be elected as Directors.
Abstentions and shares held by brokers that are present, but not voted because
the brokers were prohibited from exercising discretionary authority, i.e.,
"broker non-votes", will be counted as present for purposes of determining if a
quorum is present.
PROPOSAL TO AMEND THE UNIVERSITY
NATIONAL BANK & TRUST COMPANY
AMENDED AND RESTATED STOCK OPTION PLAN
The University National Bank and Trust Company Amended and Restated
Stock Option Plan was adopted by the Board of Directors in 1980, and approved
by the shareholders in 1980. From the inception of the Option Plan through
April 23, 1994, a total of 330,320 shares of Common Stock have been authorized
for issuance under the Option Plan, of which 138,473 shares have previously
been issued upon the exercise of corresponding stock options (subject to
adjustment in the event of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, consolidation
of shares or other changes in the capital structure of the Bank) and 156,200
shares are reserved for issuance upon the exercise of previously granted stock
options. As of April 23, 1994, there remain only 5,450 shares available for
future grants under the Option Plan.
The Option Plan was created in order to assist the Company in the
recruitment, retention and motivation of key employees who are highly qualified
and in a position to make material contributions to the Bank's success. The
Option Plan is intended to offer these individuals a significant incentive by
enabling them
14
<PAGE> 16
to acquire options to purchase Common Stock at a price equal to its market
value on the date the option is granted.
The Company believes that an adequate reserve of shares for issuance
under the Option Plan is necessary to enable it to successfully compete with
other companies to secure and retain valuable employees. At a meeting held in
March 1994, subject to shareholder approval being sought at the Annual Meeting,
the Board of Directors unanimously adopted an amendment to the Option Plan to
increase the number of shares of Common Stock reserved for issuance upon the
exercise of options granted under the Option Plan by 25,000 to a total of
355,320 shares. If the proposed amendments to the Option Plan were adopted,
the number of shares available for grant would be increased to 30,450.
Effective January 1, 1994, the Internal Revenue Code was amended to
impose a cap on the amount of executive compensation recognized by a
corporation's five most highly compensated executive officers that the
corporation may deduct, set at $1,000,000 per executive per year. To
facilitate the Bank's ability to continue to deduct in full all amounts of
income recognized by the Bank's executive officers upon exercise of stock
options, as discussed below under "Summary of Federal Income Tax Consequences
of the Option Plan", the Board also adopted an amendment to the Option Plan,
subject to shareholder approval, to impose a per-employee share limitation of
5,000 shares per fiscal year, although Bank grants typically do not approach
this limit.
SUMMARY OF THE PROVISIONS OF THE OPTION PLAN
The following summary of the Option Plan, including the proposed
amendment, is qualified in its entirety by the specific language of the Option
Plan, a copy of which is available to any shareholder upon request.
The Option Plan is administered by the Board of Directors or a duly
appointed committee of the Board of Directors. Options granted under the
Option Plan may be either incentive stock options, that is, options which are
intended to satisfy the requirements of Section 422 of the Internal Revenue
Code of 1986 (the "Code") or nonqualified stock options. The Board of
Directors or the committee of the Board of Directors, if appointed, determines
the criteria upon which options are granted. The criteria typically includes
job classification for grants to new employees, and job classification and
performance for grants to existing employees. All options must be granted, if
at all, on or before January 23, 2002.
All full-time salaried employees (including officers and directors who
are full-time salaried employees) of the Bank are eligible to participate in
the Option Plan. Non-employee directors of the Bank are not eligible to
participate in the Option Plan. As of April 23, 1994, 145 employees were
eligible to participate in the Option Plan.
The exercise price of any option granted under the Option Plan may not
be less than 100% of the fair market value of the Common Stock of the Bank on
the date of grant; provided, however, that any option granted to a person who
owns stock possessing more than 10% of the total combined voting power or value
of all classes of stock of the Bank shall have an exercise price not less than
110% of the fair market value of the Common Stock of the Bank on the date of
grant. On April 13, 1994, the average of the closing bid and asked prices per
share of the Bank's Common Stock as reported by NASDAQ was $31.25.
Under the Option Plan, options are exercisable only to the extent
vested and options generally vest 20% one year from the date of grant and vest
thereafter in equal annual increments over five years. No option shall be
exercisable after the expiration of ten years after the date such option is
granted. Shares subject to an option granted under the Option Plan may be
purchased for cash or by check or equivalent thereof acceptable to the Bank.
If an optionee ceases to be an employee of the Bank for any reason,
except for termination for cause or death or disability, the optionee may
exercise his or her option (to the extent unexercised and exercisable on the
date of termination) within 30 days after the date of termination, but in any
event not later than the expiration of the option term. If an optionee is
terminated for cause, the option will expire immediately upon
15
<PAGE> 17
notice of such termination. If an optionee ceases to be an employee of the
Bank due to death or disability, the optionee (or his or her legal
representative) may exercise the option (to the extent unexercised and
exercisable on the date of termination) within 12 months after the date of
termination, but in any event not later than the expiration of the option term.
During the lifetime of the optionee, an option may be exercised only
by the optionee. An option may not be transferred or assigned, except by will
or the laws of descent and distribution.
Options granted are subject to the "sequential exercise rule" which
means that these options must be exercised in the sequences in which they are
granted, and that an employee must completely exercise a prior option before
exercising a subsequent option. Compliance with the sequential exercise rule
is not required for federal or California income tax purposes for options
granted after January 1, 1987. However, the management of the Bank has
determined that compliance with the sequential exercise rule is in the best
interests of the Bank and will be required as a condition to the exercise of an
option.
Generally, in the event of a transfer of control of the Bank, all
outstanding options will be terminated to the extent unexercised if the Bank is
unable to arrange for the surviving, successor, or acquiring entity to assume
such options.
The Board of Directors may terminate or amend the Option Plan at any
time, however, without the approval of shareholders and the U.S. Comptroller
of the Currency, the Board of Directors may not amend the Option Plan to (i)
increase the maximum number of shares for which options may be granted under
the Option Plan, either in the aggregate or to any individual, (ii) change the
computation of the minimum exercise price at which an option may be granted,
(iii) extend the period during which options granted under the Option Plan may
be granted or exercised, or (iv) amend the requirements as to the class of
employees or officers eligible to receive options under the Option Plan.
Summary of Federal Income Tax Consequences of the Option Plan. The
following summary is intended only as a general guide as to the United States
federal income tax consequences under current law with respect to participation
in the Option Plan and does not attempt to describe all possible federal or
other tax consequences of such participation. Furthermore, the tax
consequences of options are complex and subject to change, and a taxpayer's
particular situation may be such that some variation of the described rules is
applicable.
Optionees should consult their own tax advisors before the exercise of
any option and before the disposition of any shares of Common Stock acquired
upon the exercise of an option.
Incentive Stock Options. Options designated as incentive stock
options are intended to fall within the provisions of Section 422 of the Code.
An optionee recognizes no taxable income as the result of the grant or exercise
of such an option.
For optionees who do not dispose of their shares within two years
following the date the option was granted nor within one year following the
transfer of the shares upon exercise of the option, the gain on sale of the
shares (which is defined to be the difference between the sale price and the
purchase price of the shares) will be taxed as long-term capital gain. If an
optionee is entitled to a long-term capital gain treatment upon a sale of the
stock, the Bank will not be entitled to any deduction for federal income tax
purposes. If an optionee disposes of shares within two years after the date of
grant or within one year from the date of exercise (a "disqualifying
disposition"), the difference between the option price and the fair market
value of the shares on the determination date of the option, which is generally
the date of exercise (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained, would
be recognized), will be taxed at ordinary income rates at the time of
disposition. Any gain in excess of that amount will be a capital gain. If a
loss is recognized, there will be no ordinary income, and such loss will be a
capital loss. A capital gain or loss will be long-term if the optionee's
holding period is more than 12 months. Any ordinary income recognized by the
optionee upon the disposition of the stock should be deductible by the Bank for
federal income tax purposes.
16
<PAGE> 18
The difference between the option price and the fair market value of
the shares on the determination date of an incentive stock option (which is
generally the date of exercise) is an adjustment in computing the optionee's
alternative minimum taxable income and may be subject to an alternative minimum
tax which is paid if such tax exceeds the regular tax for the year. Special
rules may apply with respect to certain subsequent sales of the shares in a
disqualifying disposition, certain basis adjustments for purposes of computing
the alternative minimum taxable income on a subsequent sale of the shares and
certain tax credits which may arise with respect to optionees subject to the
alternative minimum tax.
Nonqualified Stock Options. Nonqualified stock options have no
special tax status. An optionee generally recognizes no taxable income as the
result of the grant of such an option. Upon exercise of an option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option price and the fair market value of the shares on the
determination date (which is generally the date of exercise). If the optionee
is an employee, such ordinary income generally is subject to withholding of
income and employment taxes.
Upon the sale of stock acquired by the exercise of a nonqualified
stock option, any gain or loss, based on the difference between the sale price
and the fair market value on the date of recognition of income, will be taxed
as capital gain or loss. A capital gain or loss will be long-term if the
optionee's holding period is more than 12 months from the date of recognition
of income. No tax deduction is available to the Bank with respect to the grant
of the option or the sale of the stock acquired pursuant to such grant. The
Bank should be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of the option.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present or represented
by proxy and entitled to vote at the Annual Meeting of Shareholders, at which a
quorum representing a majority of all outstanding shares of Common Stock of the
Bank is present and voting, either in person or by proxy, is required for
approval of this proposal. Abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a quorum.
Abstentions will have the same effect as a negative vote on this proposal.
Broker non-votes, on the other hand, will not be counted in determining whether
the proposal has received the required affirmative vote.
The Board believes that the proposed amendment of the Option Plan is
in the best interest of the Bank and the shareholders for the reasons stated
above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF THIS PROPOSAL TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED BUT
UNISSUED COMMON STOCK OF THE BANK RESERVED FOR ISSUANCE AND TO IMPLEMENT A
PER-EMPLOYEE SHARE LIMITATION UNDER THE UNIVERSITY NATIONAL BANK & TRUST
COMPANY AMENDED AND RESTATED STOCK OPTION PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick as independent
public accountants for the Bank's fiscal year ending December 31, 1994. The
appointment was made upon the recommendation of the Audit Committee.
KPMG Peat Marwick has served as the Bank's independent public
accountants since May 1989. Audit services provided to the Bank by KPMG Peat
Marwick for 1993 consisted of the examination of the financial statements of
the Bank for the year ended December 31, 1993.
Each professional service provided by KPMG Peat Marwick either was
approved in advance or was subsequently approved, and the possible effect on
the auditor's independence was considered, by the Audit Committee.
17
<PAGE> 19
A representative of KPMG Peat Marwick is expected to be present at the
Annual Meeting of Shareholders with the opportunity to make a statement if he
or she desires to do so and is expected to be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders of the Bank must be received by the Bank at 250 Lytton
Avenue, Palo Alto, California 94301, no later than December 30, 1994, and
satisfy the conditions established by the Securities and Exchange Commission
for shareholder proposals to be included in the Bank's proxy statement for that
meeting. Only one proposal from any one shareholder may be submitted in any
one year.
ANNUAL REPORT
The Annual Report of the Bank containing audited financial statements
for the fiscal year ended December 31, 1993, accompanies this Proxy Statement.
THE BANK HEREBY UNDERTAKES TO DELIVER, AT NO CHARGE, TO EACH
SHAREHOLDER OF THE BANK, UPON WRITTEN REQUEST, A COPY OF THE BANK'S ANNUAL
REPORT ON FORM 10-K (WITHOUT EXHIBITS) INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO. ALL REQUESTS FOR SUCH ANNUAL REPORT ON FORM 10-K SHOULD BE
SENT TO GAYLE A. ANDERSON, SECRETARY, AT THE BANK, 250 LYTTON AVENUE, PALO
ALTO, CALIFORNIA 94301.
OTHER BUSINESS
The Board of Directors knows of no business that will be brought
before the Annual Meeting other than as described in this Proxy Statement, but
if such matters are properly presented to the meeting, proxies solicited hereby
will be voted in accordance with the judgment of the persons holding such
proxies. All shares represented by duly executed proxies will be voted at the
meeting.
Palo Alto, California
April 29, 1994
UNIVERSITY NATIONAL BANK & TRUST COMPANY, a
national banking association, is a member of
the Federal Deposit Insurance Corporation and
the Federal Reserve System.
18
<PAGE> 20
[FACE]
UNIVERSITY NATIONAL BANK & TRUST COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Linda R. Meier, George G. C. Parker and
Leonard Ware, and each of them, with full power of substitution, to represent
the undersigned and shares of stock in University National Bank & Trust Company
(the "Bank"), that the undersigned is entitled to vote at the annual meeting of
the shareholders of the Bank to be held on Thursday, June 16, 1994, at 4:30
p.m., local time, and at any adjournment thereof (1) as specified below upon
the proposals listed on the reverse side and as described in the Proxy
Statement For Annual Meeting of Shareholders of the Bank dated April 29, 1994,
receipt of which is hereby acknowledged, and (2) in their discretion upon such
other matters as may properly come before the meeting. The undersigned hereby
acknowledges receipt of the Bank's 1993 Annual Report to Shareholders.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THESE SHARES SHALL BE VOTED FOR PROPOSALS 1 AND 2.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
1
<PAGE> 21
[REVERSE]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS
NOMINEES: L. A. Aufmuth, T. R. Brown, L. R. Meier, J.B. Nute,
G. G. C. Parker, W. A. Preston, L. M. Quist,
C. J. Schmitt, L. Ware
/ / FOR ALL NOMINEES / / WITHHELD FROM
ALL NOMINEES
/ / ____________________________________________
For, except vote withheld from the nominee or nominees whose
names are written on the line provided above.
2. To approve an amendment to the Bank's Amended and Restated Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 330,320 to 355,320 and to add a per-employee share
limitation, as set forth in full in the Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
/ / PLEASE MARK HERE FOR / / PLEASE MARK HERE IF
ADDRESS CHANGE YOU PLAN TO ATTEND
AND NOTE AT LEFT. THE MEETING.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS Date:_________________________
ON YOUR STOCK CERTIFICATES. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD Signature:____________________
SIGN. WHEN SIGNING AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE Signature:____________________
GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF
A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP
NAME BY AUTHORIZED PERSON.
2
<PAGE> 1
EXHIBIT 99(k)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
Commission File Number
UNIVERSITY NATIONAL BANK & TRUST COMPANY
(Exact name of registrant as specified in its charter)
National Banking Laws 94-2622607
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 LYTTON AVENUE, PALO ALTO, CALIFORNIA 94301
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code, (415)327-0210
Not Applicable
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports, and (2) has been subject to such filing requirements for the past
90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common shares outstanding as of May 10, 1994 - 1,366,288
<PAGE> 2
UNIVERSITY NATIONAL BANK & TRUST COMPANY
QUARTERLY REPORT FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 4
Consolidated Balance Sheets 4
Consolidated Statements of Income for The
Three Months Ended March 31, 1994 and 1993 5
Consolidated Statements of Cash Flows for
The Three Months Ended March 31, 1994 and 1993 6
Statement of Changes in Undivided Profits for
The Quarter Ended March 31, 1994 and 1993 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security
Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE> 3
UNIVERSITY NATIONAL BANK & TRUST COMPANY
AND CONSOLIDATED SUBSIDIARY
PART I
FINANCIAL INFORMATION
University National Bank & Trust Company (the "Bank") commenced business as a
general commercial bank on May 13, 1980. The Bank's wholly-owned subsidiary,
Lytton Corporation, is inactive. Consolidated financial statements are filed
for the Bank and Lytton Corporation.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results of the
interim period ended March 31, 1994. The results for this period are not
necessarily indicative of the result to be expected for the year. The
financial statements included herein are unaudited.
3
<PAGE> 4
ITEM 1. Financial Statements
UNIVERSITY NATIONAL BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(In Thousands)
<S> <C> <C>
ASSETS
Cash and Due From Banks $28,698 $27,376
Securities 111,062 112,850
Federal Funds Sold 61,000 29,200
Loans and Lease Financing
Commercial, Financial & Industrial 34,024 36,610
Real Estate Construction 4,847 5,116
Real Estate Mortgage 134,934 141,192
Instalment Loans 22,761 23,055
Lease Financing 7,053 6,535
Bankers Acceptances 8,870 5,450
Other Loans 5,957 6,009
Less: Unearned Income (770) (855)
-------- --------
Total Gross Loans 217,676 223,112
Less Reserve for Loan Losses (5,976) (5,690)
-------- --------
Net Loans 211,700 217,422
Premises and Fixed Assets 15,800 15,895
Other Real Estate Owned 1,541 1,541
Accrued Interest Receivable
And Other Assets 3,696 2,447
-------- --------
Total Assets $433,497 $406,731
======== ========
LIABILITIES
Deposits
Demand $58,671 $62,434
Savings & Super NOW accounts 90,550 85,007
Money Fund Accounts 227,879 197,743
Time Deposits $100,000 and over 14,819 16,772
Time Deposits under $100,000 5,219 5,249
-------- --------
Total Deposits $397,138 $367,205
Securities sold under Repurchase
Agreement 0 0
Accrued Interest Payable and
Other Liabilities 2,432 5,216
-------- --------
Total Liabilities $399,570 $372,421
EQUITY CAPITAL
Common Stock, $2.50 par value
Authorized, 3,000,000 shares
Issued and Outstanding, 1,343,952 Shares at
12/31/93 & 1,364,348 at 3/31/94 3,411 3,360
Capital Surplus 8,173 7,751
Retained Earnings 20,755 20,423
Unrealized Gain on Securities
Available for Sale 1,588 2,776
-------- --------
TOTAL SHAREHOLDERS' EQUITY $33,927 $34,310
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $433,497 $406,731
======== ========
</TABLE>
4
<PAGE> 5
UNIVERSITY NATIONAL BANK & TRUST COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
Fiscal Year-to-Date &
Three Months Ended
March 31, March 31,
1994 1993
(In Thousands)
<S> <C> <C>
Interest Income
Interest and fees on loans $3,970 $4,353
Income from financing lease receivables 132 114
Interest on Securities (Note 1)
Taxable 696 656
Non-Taxable 621 614
Interest income on Federal funds sold 277 141
--- ---
Total Interest Income $5,696 $5,878
Interest Expense
Interest on Deposits
Time Certificates over $100M $111 $127
Other Time Deposits 1,488 1,466
Securities Sold Under Repurchase
Agreements 7 16
- --
Total Interest Expense $1,606 $1,609
------ ------
Net Interest Income $4,090 $4,269
Provision for Loan and Lease Losses 300 300
--- ---
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES $3,790 $3,969
Non-Interest Income
Income from Fiduciary Activities 678 553
Service Charges on Deposit Accounts 129 129
Other Income 156 163
Gains (Losses) on securities not held in
trading accounts 5 0
- -
Total Non-Interest Income $968 $845
Non-Interest Expense
Salaries and Benefits 2,231 2,023
Occupancy Expense 328 294
Other Expense 1,073 985
----- ---
Total Non-Interest Expense $3,632 $3,302
INCOME BEFORE INCOME TAXES $1,126 $1,512
Applicable Income Taxes 321 444
--- ---
NET INCOME $805 $1,068
==== ======
Earnings Per Share $0.58 $0.78
Dividends Per Share $0.35 $0.35
</TABLE>
5
<PAGE> 6
UNIVERSITY NATIONAL BANK & TRUST COMPANY
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
<S> <C> <C>
Net Income $805 $1,068
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 300 300
Depreciation and amortization 190 167
Net amortization of investment security
discounts 28 45
(Gain) loss on call of investment securities (5) 0
(Gain) loss on sale of fixed assets 1 4
Decrease (increase) in interest receivable (145) (576)
and other assets
(Decrease) increase in interest payable (3,064) 233
and other liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES ($1,890) $1,241
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities or calls of investment
securities 75,103 0
Purchase of investment securities (75,352) (1,680)
Increase (decrease) in securities sold under
repurchase agreements 0 467
Net (increase) decrease in loans receivable 8,856 (33)
Principal collected on bankers' acceptances 5,450 2,382
Bankers' acceptances originated or acquired (8,870) (1,393)
Capital expenditures (94) (106)
Net loan (losses) recoveries (14) (147)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES $5,079 ($510)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW
accounts, savings deposits and money fund deposits 31,917 (1,398)
Net increase (decrease) in certificates of deposit (1,983) (2,477)
Cash dividends (474) (466)
Proceeds from common stock issued 473 440
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,933 (3,901)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $33,122 ($3,170)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $56,576 $55,921
CASH AND CASH EQUIVALENTS AT END OF PERIOD $89,698 $52,751
</TABLE>
6
<PAGE> 7
UNIVERSITY NATIONAL BANK & TRUST COMPANY
STATEMENT OF CHANGES IN
UNDIVIDED PROFIT
Fiscal Quarter Ended March 31, 1994
<TABLE>
<S> <C>
Balance at beginning of current fiscal year $20,423,486
Net income to date 804,857
Transfer to Dividends Payable (473,539)
-----------
Balance at end of interim period $20,754,804
</TABLE>
(The balance of this page intentionally left blank.)
7
<PAGE> 8
UNIVERSITY NATIONAL BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
Quarter ended March 31, 1994
The financial statements included herein are unaudited. The information
furnished herein reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of the interim period
ended March 31, 1994.
NOTE A - Summary of Significant Accounting Policies
Investment Securities
The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as of
December 31, 1993. The Bank has classified its investment securities as
available for sale. Available for sale securities are reported at fair value,
with unrealized gains and losses, net of taxes, reported as a separate
component of shareholders' equity. Amortization of premiums and accretion of
discounts arising at acquisition of investment securities are included in
income using methods that approximate the interest method.
Loans
Loans are stated net of undisbursed funds. Interest on commercial, consumer
installment and real estate loans is accrued on a simple interest basis.
Interest on loans is not accrued in those instances where management considers
principal amounts doubtful of collection.
Loan Fees
Nonrefundable fees for loan origination and commitments in excess of direct
costs of originating the loan or commitment are amortized over the life of the
loan using the straight line method. Fees originated since 1988 are recognized
as income using the interest method as required by FASB 91.
Allowance for Loan Losses
The allowance for loan losses is established through charges to earnings in the
form of a provision for loan losses. Loans which are determined to be
uncollectible are charged against this allowance, and subsequent recoveries, if
any, are credited to the allowance.
The allowance for loan losses is an amount that management believes will be
adequate to absorb possible losses on existing loans that
8
<PAGE> 9
may become uncollectible, based on evaluations of the collectability of
loans and prior loan experience. The evaluations take into consideration such
factors as changes in the nature and volume of specific problem loans and
current or anticipated economic conditions that may affect the borrowers'
ability to pay.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight line method over
estimated useful lives of the assets.
Income Per Share of Common Stock
Net income per share is based upon the weighted average number of common shares
outstanding adjusted by the dilutive effect of stock options outstanding on a
fully diluted basis.
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1994 1993
---- ----
(Amounts in thousands)
<S> <C> <C>
Weighted average shares:
Primary 1,398 1,364
Fully Diluted 1,398 1,373
</TABLE>
NOTE B - Provision for Income Taxes
No portion of income tax provision is attributable to foreign operations. The
provision for income tax has been calculated taking into account the tax-exempt
status of portions of municipal bond income. Of the federal statutory income
tax rate of 34%, the following are the components of the current quarter
provision:
<TABLE>
<S> <C>
Statutory tax rate 100.0%
Tax effect of municipal income (26.5%)
-------
Current provision tax rate 73.5%
</TABLE>
(The balance of this page intentionally left blank.)
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital
During the first quarter of 1994, the Bank's capital increased by $4,460,518,
or 13.15%, compared to an increase of $1,041,456, or 13.15% in the same period
of 1993. $1,588,119, or 35.60%, of the increase in the current quarter was
caused by the adoption of SFAS 115, "Accounting for Certain Investments in Debt
and Equity Securities" as of December 31, 1993 which is discussed elsewhere in
this report. Additional sources of additional capital in each of the periods
were retained earnings, exercise of stock options and purchases of new stock by
the Bank's profit sharing and 401K plans. The Bank paid a dividend of
thirty-five cents a share to shareholders of record January 17, 1994, or a
total of $473,539 compared to a dividend of thirty-five cents per share, or a
total of $466,285 in the same period of 1993. Dividend payments continued on a
quarterly basis in 1993 and 1994.
The Bank is subject to Office of the Comptroller of the Currency's regulations.
In 1989, the Comptroller established risk-based capital guidelines for national
banks. The Federal Reserve Board and the FDIC have issued similar guidelines
for bank holding companies and state banks. The guidelines define Tier 1
Capital and Total Capital. Tier 1 Capital consists of common and qualifying
preferred shareholders' equity and minority interests in equity accounts of
consolidated subsidiaries. Total Capital consists of, in addition to Tier 1
Capital, mandatory convertible debt, preferred stock not qualifying as Tier 1
Capital, subordinated debt and other qualifying term debt and a portion of the
allowance for loan losses less the remaining 50% of investments in
unconsolidated subsidiaries. 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 minimum required qualifying total capital ratio is 8%, of which
at least 4% must consist of Tier 1 Capital. At March 31, 1994, the Bank's Tier
1 Capital totaled $32,339,000 and Total Capital was $35,661,000. The Bank's
Tier 1 capital to total risk weighted assets ratio was 12.29% and its Total
Capital to total risk weighted assets ratio was 13.56%.
It is the intention of the Bank to continue capital augmentation through
earnings retention net of dividends in future years.
Liquidity
Historically, the Bank's balance sheet has shown a high degree of liquidity.
The following table shows balance sheet proportions for the quarter ending
March 31, 1994 and for the years ending December 31, 1993 and December 31,
1992.
10
<PAGE> 11
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
3/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due From Banks $28,402 6.98% $25,653 6.79% $21,383 6.15%
Investment Securities 108,165 26.57% 73,028 19.34% 70,134 20.18%
Fed Funds Sold 36,486 8.96% 35,212 9.32% 25,950 7.47%
Loans 213,422 52.42% 224,016 59.32% 211,204 60.77%
Premises & Equipment 15,869 3.90% 14,792 3.92% 14,611 4.20%
Other Assets 4,776 1.17% 4,910 1.30% 4,251 1.22%
-------- -------- --------
TOTAL ASSETS $407,120 100.00% $377,611 100.00% $347,533 100.00%
======== ======== ========
LIABILITIES
Demand Deposits $54,809 13.46% $50,135 13.28% $40,712 11.71%
Savings & Now 86,478 21.24% 76,649 20.30% 67,141 19.32%
Money Funds 209,414 51.44% 193,474 51.24% 177,367 51.04%
Time Deposits 21,353 5.24% 23,589 6.25% 32,392 9.32%
-------- -------- --------
Total Deposits $372,054 91.39% $343,847 91.06% $317,612 91.39%
Other Borrowings 635 0.16% 1,398 0.37% 1,354 0.39%
Other Liabilities 2,498 0.61% 2,189 0.58% 1,783 0.51%
-------- -------- --------
TOTAL LIABILITIES $375,187 92.16% $347,434 92.01% $320,749 92.29%
SHAREHOLDERS EQUITY 31,933 7.84% 30,177 7.99% 26,784 7.71%
-------- ------ -------- ------ -------- ------
TOTAL LIABILITIES $407,120 100.00% $377,611 100.00% $347,533 100.00%
AND EQUITY ======== ====== ======== ====== ======== ======
</TABLE>
Totals may not add due to rounding.
Bank assets containing a high degree of liquidity are Cash & Due From Banks,
Investment Securities and Federal Funds Sold. For the quarter ending March
31, 1994, those assets comprised 42.51% of the Bank's assets compared to
35.45% in 1993 and 33.80% in 1992.
A principal source of liquidity is new deposit generation. Historically,
loan generation had lagged deposit growth. The loan to deposit ratio
decrease from 66.50% in 1992 to 65.15% in 1993 and to 57.36% in the first
quarter of 1994. Loans decreased by 4.73% in the first quarter of 1994.
Growth rates for the first quarter of 1994 and for the years 1993 and 1992
are shown in the following table.
<TABLE>
<CAPTION>
March, 1994 1993 1992
----------- ---- ----
<S> <C> <C> <C>
Net Loans $213,422 $224,016 $211,204
Growth Rate (4.73%) 6.07% 16.92%
Deposits $372,054 $343,847 $317,612
Growth Rate 8.20% 8.26% 12.90%
Loans to Deposits 57.36% 65.15% 66.50%
</TABLE>
The investment portfolio is another source of liquidity. While a portion of
the portfolio is intended to be a permanent investment, a portion is invested
in short-term obligations pending re-employment of these funds in the loan
portfolio or for deposit withdrawals. As of March 31, 1994, book value of the
investment
11
<PAGE> 12
portfolio totaled $108,370,327. Of that amount, $61,204,694, or 56.48%
of the total portfolio matures within one year. Additionally, the securities
in the portfolio are freely marketable. The portfolio contains $2,691,727 in
unrealized appreciation.
Within the loan portfolio are investments in short term bankers' acceptances
totaling $8,869,862 at March 31, 1994. These acceptances all mature within 180
days.
Other internal sources of liquidity are the retention of earnings and cash flow
generated in the loan portfolio.
External sources of liquidity include borrowings available to the Bank. As of
March 31, 1994, the Bank has two lines available totaling $10,000,000 of which
$5,000,000 is committed until June 30, 1994, and on which commitment fees have
been paid. $5,000,000 is on an "as available" basis.
Indebtedness of Management
The Bank has had, and expects to have in the future, banking transactions in
the ordinary course of its business with directors, officers, principal
shareholders and their associates, on the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others, and which, in the opinion of the Bank's Management,
do not involve a greater risk of collectibility. Furthermore, it is the Bank's
policy to preclude its executive officers, with the exception of the Chairman
of the Board, from borrowing from the Bank and any loan to the Chairman or a
director must be approved by the entire Board of Directors.
The following table summarizes the loans to Directors and Principal Holders of
Equity Securities in the quarter ended March 31, 1994:
<TABLE>
<S> <C>
Outstanding Balances as of December 31, 1993 $ 1,153,078.98
Aggregate Amount of New Loans Made 211,000.00
Aggregate Amount of Repayments 1,097,325.18
Aggregate Amount of Other Changes 801,719.11
Aggregate Amount of Outstandings at March 31, 1994 1,068,472.91
</TABLE>
During the period ended March 31, 1994, none of these loans became past due or
was placed on non-accrual.
Results of Operations
In the quarter ended March 31, 1994, average daily assets increased
12
<PAGE> 13
by $47.3 million or 13.15% over the first quarter 1993 and increased by $12.7
million, or 3.21%, over the fourth quarter of 1993. Deposits and other
borrowings increased $43.8 million, or 13.31% over the first quarter of 1993
and increased $13.8 million, or 3.85% over the fourth quarter of 1993.
The mix in earning assets reflects a decrease in loan demand. Loans, net of
bankers' acceptances, as a percent of earning assets were 71.31% for the
quarter ended March 31, 1993, 63.39% for the fourth quarter of 1993 and 60.25%
for the current quarter.
Net Interest Income and Margin
In the three months ended March 31, 1994, net interest income on a fully
taxable equivalent basis decreased $47,000, or 1.05% from the preceding quarter
and decreased $176,000, or 3.84%, over the same period in 1993.
Interest-earning assets averaged $363.9 million, an increase of $43.5 million,
or 13.59%, over the same period in 1993. Interest earned on those assets
decreased $178,000, or 2.87%, for a total of $6,017,000 in this period. The
composite fully taxable equivalent yield on interest-earning assets decreased
from 7.84% in the first quarter of 1993 to 6.71% in the current period.
Compared with the preceding period, interest on earning assets decreased
$178,000, or 2.87%. Yields decreased one hundred thirteen basis points from
7.84% to 6.71%.
Average interest-bearing liabilities increased by $43.8
million to $372.7 million, or 13.31% over the same period in 1993. Interest
expense decreased $2,000, or 0.12%. The composite average cost of funds
decreased from 1.98% to 1.75%. In this quarter, compared to the prior quarter,
the cost of funds increased by two basis points from 1.73% to 1.75%. Net
interest margin decreased from 5.81% in the first quarter of 1993 to 5.06% in
the fourth quarter of 1993 and to 4.91% in the current quarter.
Non-Interest Income
In this period, non-interest income increased $118,026, or 13.67% over the same
period in 1993 and increased $46,100, or 5.03% from the prior period.
Non-interest income is derived from Trust Department fees, service charges on
deposit accounts, other fees and charges and safe deposit rentals. In this
period, trust fees accounted for $667,500 or 69.31% of non-interest revenue.
Increases in non-interest income over the prior year are due to increased
volume of trust business.
Non-Interest Expense
Non-interest expense increased $328,600, or 9.95%, in this period compared to
the same period in 1993, and increased $56,400 or 1.58% over the prior period.
Overall increases in non-interest expense are due to increases in deposits and
earning assets and increased
13
<PAGE> 14
staff and other costs necessary to service this growth. Total FTE increased by
15.95 positions, or 12.63%, to 142.25 from the first quarter of 1993 to the
current quarter.
Provision for Loan and Lease Losses
The Bank provided $300,000 for loan losses in this period compared to $300,000
in the first quarter of 1993 and to $1,732,800 in the fourth quarter of 1993.
The Bank's Reserve for Loan Losses is maintained at a level that Management
believes will be adequate to absorb possible losses. Management evaluations
take into consideration such factors as changes in the nature and volume of
specific problem loans and current economic conditions that may affect the
borrower's ability to repay.
The balance of the reserve for loan losses was $5,976,175 at March 31, 1994
compared to $5,690,341 at December 31, 1993 and to $3,835,096 at March 31,
1993. Net losses totaled $14,167 in the first quarter of 1994 compared to
$146,967 in the first quarter of 1993 and to $86,697 in the fourth quarter of
1993.
Loans on non-accrual totaled $3,905,956 at March 31, 1994 compared to
$4,084,400 at March 31, 1993 and to $3,814,202 at December 31, 1993. The
volume of non-accrual loans is due to deterioration in the local economy,
particularly in real estate.
Investment Portfolio
The Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt &
Equity Securities," as of December 31, 1993. SFAS requires entities to
classify investments in debt securities and equity securities with readily
determinable fair values as held to maturity, available for sale, or trading
and establishes accounting and reporting requirements for each classification.
The Bank has classified all of its investments as available for sale as it does
not have the intent to hold such securities until maturity. Available for sale
securities are reported at fair value, with unrealized gains and losses, net of
taxes, reported as a separate component of shareholders' equity. At March 31,
1994, this separate component of equity was $1,588,119.
The portfolio increased by $34,991,447, or 47.69% to $108,370,327 book value
from March 31, 1993 to March 31, 1994. Large deposit generation coupled with
low loan demand created excess liquidity.
Letters of Credit
At March 31, 1994, the Bank's commitments under unused letters of credit were
$4,417,800 of which 20% are reasonably expected to be exercised within the next
twelve months. At March 31, 1993, such commitments totaled $7,897,000 and at
December 31, 1993, $5,139,135.
14
<PAGE> 15
The following table is a summary of the major elements of income and expenses
for the quarter ended March 31, 1994 compared with the same quarter of 1993 and
the quarter ended December 31, 1993.
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
March 31 March 31 Percent March 31 December 31 Percent
1994 1993 Change 1994 1993 Change
<S> <C> <C> <C> <C> <C> <C>
Interest Income $5,696,001 $5,878,446 -3.10% $5,696,001 $5,703,026 -0.12%
Interest Expense 1,606,251 1,608,679 -0.15% 1,606,251 1,562,444 2.80%
---------- ---------- ---------- ----------
Net Interest Income $4,089,750 $4,269,767 -4.22% $4,089,750 $4,140,582 -1.23%
Provision for Loan Losses 300,000 300,000 0.00% 300,000 1,732,799 -82.69%
---------- ---------- ---------- ----------
Net Interest Income after
Provision for Loan Losses $3,789,750 $3,969,767 -4.53% $3,789,750 $2,407,783 57.40%
Non-Interest Income 963,074 845,048 13.97% 963,074 916,935 5.03%
Non-Interest Expense 3,631,278 3,302,699 9.95% 3,631,278 3,574,883 1.58%
---------- ---------- ---------- ----------
Income Before Securities
Gain $1,121,546 $1,512,116 -25.83% $1,121,546 ($250,165) 548.32%
Gain on Call of Securities 4,595 0 100.00% 4,595 1,630,924 -99.72%
---------- ---------- ---------- ----------
Income Before Income Taxes $1,126,141 $1,512,116 -25.53% $1,126,141 $1,380,759 -18.44%
Income Taxes 321,285 444,514 -27.72% 321,285 319,777 0.47%
---------- ---------- ---------- ----------
Net Income $804,856 $1,067,602 -24.61% $804,856 $1,060,982 -24.14%
========= ========== ======== ==========
Earnings per Share of
Common Stock:
Net Income $0.58 $0.78 -25.64% $0.58 $0.76 -23.68%
Dividends per Share of
Common Stock $0.35 $0.35 0.00% $0.35 $0.35 0.00%
</TABLE>
15
<PAGE> 16
INTEREST RATES AND NET INTEREST DIFFERENTIAL
The major portion of the Bank's income results from the difference between
interest income derived from earning assets and interest expense paid on
liabilities incurred primarily for the funding of those assets. The
difference is referred to as net interest income. Net interest income
expressed as a percent of average total earning assets is referred to as net
interest margin. Net interest income and net interest margin are summarized
in the following comparisons for the three months ended March 31, 1994 over
the same period in 1993 and for the three months ended December 31, 1993.
Average balances are expressed in thousands of dollars:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1994 March 31, 1993
----------------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate % Balance Expense Rate %
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable $71,172 696 3.97% $37,373 657 7.13%
Non-Taxable* 36,993 942 10.33% 34,808 930 10.84%
Federal Funds Sold 36,486 277 3.08% 19,736 141 2.90%
Loans-Interest & Fees 219,272 4,102 7.59% 228,468 4,467 7.93%
-------- ----- -------- -----
Total Earning Assets 363,923 6,017 6.71% 320,385 6,195 7.84%
Cash & Due From Banks 28,402 23,818
Premises & Equipment 15,869 14,744
Other Assets (1,074) 861
------ --------
Total Assets $407,120 $359,808
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand $54,809 $0 0.00% $48,529 $0 0.00%
Savings & Now 86,478 190 0.89% 73,749 247 1.36%
Money Funds 209,414 1,262 2.44% 180,482 1,170 2.63%
Time 21,353 148 2.81% 23,880 176 2.99%
Other Borrowed Funds 635 7 4.47% 2,267 16 2.86%
-------- ----- -------- -----
Total Deposits & Borrowings 372,689 1,607 1.75% 328,907 1,609 1.98%
Other Liabilities 2,498 1,614
Shareholders' Equity 31,933 29,287
------ --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $407,120 $359,808
======== ========
Interest and Loan Fee Income 6,017 6.71% 6,195 7.84%
Interest Expense** 1,607 1.79% 1,609 2.04%
----- -----
NET INTEREST INCOME AND MARGIN $4,410 4.91% $4,586 5.81%
====== ======
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis
using the federal statutory rate of 34%. The tax equivalent adjustment
was $320,092 for the quarter ending March 31, l994 and $316,219 for the
quarter ending March 31, 1993.
**Interest on deposits as a percent of earning assets.
16
<PAGE> 17
INTEREST RATES AND NET INTEREST DIFFERENTIAL (CONTINUED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1994 December 31, 1993
--------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate % Balance Expense Rate %
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable $71,172 696 3.97% $41,822 $595 5.64%
Non-Taxable* 36,993 942 10.33% 35,761 929 10.31%
Federal Funds Sold 36,486 277 3.08% 50,400 367 2.89%
Loans-Interest & Fees 219,272 4,102 7.59% 221,634 4,128 7.39%
------- ----- ------- -----
Total Earning Assets 363,923 6,017 6.71% 349,617 6,019 6.83%
Cash & Due From Banks 28,402 28,117
Premises & Equipment 15,869 14,858
Other Assets (1,074) 1,868
------- -----
Total Assets $407,120 $394,460
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand $54,809 $0 0.00% $54,685 $0 0.00%
Savings & Now 86,478 190 0.89% 79,909 178 0.88%
Money Funds 209,414 1,262 2.44% 199,212 1,213 2.42%
Time 21,353 148 2.81% 24,155 163 2.68%
Other Borrowed Funds 635 7 4.47% 895 8 3.55%
------- ----- ======= =====
Total Deposits & Borrowings 372,689 1,607 1.75% 358,856 1,562 1.73%
Other Liabilities 2,498 4,307
Shareholders' Equity 31,933 31,297
------ -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $407,120 $394,460
======== ========
Interest and Loan Fee Income 6,017 6.71% 6,019 6.83%
Interest Expense** 1,607 1.79% 1,562 1.77%
----- -----
NET INTEREST INCOME AND MARGIN $4,410 4.91% $4,457 5.06%
====== ======
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis
using the federal statutory rate of 34%. The tax equivalent adjustment
was $320,092 for the quarter ending March 31, 1994 and $315,965 for the
quarter ending December 31, 1993.
**Interest on deposits as a percent of earning assets.
17
<PAGE> 18
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the bank is a party.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
An index of all financial statements files as a part of this quarterly report
is set forth at page 2 and is incorporated herein by reference.
There are no other applicable exhibits to be filed as a part of this report.
No Form 8-K Report was required to be filed in the first quarter of 1994.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
University National Bank
& Trust Company
By /s/ Carl J. Schmitt
-----------------------------
Carl J. Schmitt, Chairman
and Chief Executive Officer
Date: May 13, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated.
Signature Title
Carl J. Schmitt* Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
Gayle A. Anderson* Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
Lawrence A. Aufmuth* Director
Thomas R. Brown* Director
Linda R. Meier* Director
George G. C. Parker* Director
William A. Preston* Director
Leslie M. Quist* Director
Leonard Ware* Director
*By /s/ Carl J. Schmitt
- ---------------------------
(Carl J. Schmitt,
Attorney-In-Fact)
Date: May 13, 1994
<PAGE> 20
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
Commission File Number
University Bank & Trust Company
(Exact name of registrant as specified in its charter)
California 77-0376213
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Lytton Avenue, Palo Alto, California 94301 94301
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code, (415) 327-0210
University National Bank & Trust Company
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common shares outstanding as of August 8, 1994 - 1,388,497
<PAGE> 21
UNIVERSITY BANK & TRUST COMPANY
QUARTERLY REPORT FORM 10-Q
INDEX
<TABLE>
Page
<S> <C>
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 4
Consolidated Balance Sheets 4
Consolidated Statements of Income for The
Three Months Ended June 30, 1994 and 1992 5
Consolidated Statements of Income for The
Three Months Ended June 30, 1994 and March 31,
1994 6
Consolidated Statements of Cash Flows for
The Six Months Ended June 30, 1994 and 1993 7
Statement of Changes in Undivided Profits for
The Six Months Ended June 30, 1994 and 1993 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
</TABLE>
2
<PAGE> 22
UNIVERSITY BANK & TRUST COMPANY
AND CONSOLIDATED SUBSIDIARY
PART I
FINANCIAL INFORMATION
University Bank & Trust Company (the "Bank") commenced business as a general
commercial bank on May 13, 1980. The Bank's wholly-owned subsidiary, Lytton
Corporation, is inactive. Consolidated financial statements are filed for the
Bank and Lytton Corporation.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results of the
interim period ended June 30, 1994. The results for this period are not
necessarily indicative of the results to be expected for the year. The
financial statements included herein are unaudited.
3
<PAGE> 23
Quarterly Balance Sheet
June 30, 1994 10-Q
ITEM 1. Financial Statements
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
June 30, December 31, Net %
1994 1993 Change Change
(In Thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and Due From Banks $26,809 $27,376 (567) -2.07%
Securities 99,351 112,850 (13,499) -11.96%
Federal Funds Sold 53,600 29,200 24,400 83.56%
Loans and Lease Financing
Commercial, Financial & Industrial 40,488 36,610 3,878 10.59%
Real Estate Construction 5,001 5,116 (115) -2.25%
Real Estate Mortgage 132,597 141,192 (8,595) -6.09%
Instalment Loans 21,745 23,055 (1,310) -5.68%
Lease Financing 8,264 6,535 1,729 26.46%
Bankers Acceptances 11,821 5,450 6,371 116.90%
Other Loans 3,029 6,009 (2,980) -49.59%
Less: Unearned Income (761) (855) 94 -10.99%
Total Gross Loans 222,184 223,112 (928) -0.42%
Less Reserve for Loan Losses (4,877) (5,690) 813 -14.29%
Net Loans 217,307 217,422 (115) -0.05%
Premises and Fixed Assets 15,729 15,895 (166) -1.04%
Other Real Estate Owned 3,945 1,541 2,404 156.00%
Accrued Interest Receivable
And Other Assets 5,036 2,447 2,589 105.80%
Total Assets $421,777 $406,731 15,046 3.70%
LIABILITIES
Deposits
Demand $61,012 $62,434 (1,422) -2.28%
Savings & Super NOW accounts 83,633 85,007 (1,374) -1.62%
Money Fund Accounts 216,660 197,743 18,917 9.57%
Time Deposits $100,000 and over 16,652 16,772 (120) -0.72%
Time Deposits under $100,000 5,472 5,249 223 4.25%
Total Deposits $383,429 $367,205 16,224 4.42%
Securities sold under Repurchase
Agreement 1,800 0 1,800 0.00%
Accrued Interest Payable and
Other Liabilities 2,250 5,216 (2,966) -56.86%
Total Liabilities $387,479 $372,421 15,058 4.04%
EQUITY CAPITAL
Common Stock, $2.50 par value
Authorized, 3,000,000 shares
Issued and Outstanding, 1,343,952 Shares at
12/31/93 & 1,385,131 at 6/30/94 3,463 3,360 103 3.07%
Capital Surplus 8,517 7,751 766 9.88%
Retained Earnings 21,447 20,423 1,024 5.01%
Unrealized Gain on Securities
Available for Sale 871 2,776 (1,905) -68.62%
TOTAL SHAREHOLDERS EQUITY $34,298 $34,310 (12) -0.03%
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $421,777 $406,731 15,046 3.70%
</TABLE>
<PAGE> 24
Quarterly Report of Income
June 30, 1994, 10-Q
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
Three Months Ended Net %
June 30, March 31, Change Change
1994 1994
(In Thousands)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $4,282 $3,970 312 7.86%
Income from financing lease receivables 141 132 9 6.82%
Interest on Securities (Note 1)
Taxable 881 696 185 26.58%
Non-Taxable 628 621 7 1.13%
Interest income on Federal funds sold 438 277 161 58.12%
Total Interest Income $6,370 $5,696 674 11.83%
Interest Expense
Interest on Deposits
Time Certificates over $100M $121 $111 10 9.01%
Other Time Deposits 1,634 1,488 146 9.81%
Securities Sold Under Repurchase
Agreements 6 7 (1) -14.29%
Total Interest Expense $1,761 $1,606 155 9.65%
Net Interest Income $4,609 $4,090 519 12.69%
Provision for Loan and Lease Losses 100 300 (200) -66.67%
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES $4,509 $3,790 719 18.97%
Non-Interest Income
Income from Fiduciary Activities 581 678 (97) -14.31%
Service Charges on Deposit Accounts 127 129 (2) -1.55%
Other Income 140 156 (16) -10.26%
Gains (Losses) on securities not held in
trading accounts 0 5 (5) 100.00%
Total Non-Interest Income $848 $968 (120) -12.40%
Non-Interest Expense
Salaries and Benefits 2,295 2,231 64 2.87%
Occupancy Expense 344 328 16 4.88%
Other Expense 1,080 1,073 7 0.65%
Total Non-Interest Expense $3,719 $3,632 87 2.40%
INCOME BEFORE INCOME TAXES $1,638 $1,126 512 45.47%
Applicable Income Taxes 467 321 146 45.48%
NET INCOME $1,171 $805 366 45.47%
Earnings Per Share $0.83 $0.58 0 43.10%
Dividends Per Share $0.35 $0.35 0 0.00%
</TABLE>
<PAGE> 25
Quarterly Report of Income P&L-2
June 30, 1994, 10-Q
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
Six Months Ended Net %
June 30, June 30, Change Change
1994 1993
(In Thousands)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $8,253 $8,701 (448) -5.15%
Income from financing lease receivables 273 236 37 15.68%
Interest on Securities (Note 1)
Taxable 1,576 1,288 288 22.36%
Non-Taxable 1,250 1,242 8 0.64%
Interest income on Federal funds sold 715 386 329 85.23%
Total Interest Income $12,067 $11,853 214 1.81%
Interest Expense
Interest on Deposits
Time Certificates over $100M $233 $240 (7) -2.92%
Other Time Deposits 3,123 2,977 146 4.90%
Securities Sold Under Repurchase
Agreements 12 29 (17) -58.62%
Total Interest Expense $3,368 $3,246 122 3.76%
Net Interest Income $8,699 $8,607 92 1.07%
Provision for Loan and Lease Losses 400 600 (200) -33.33%
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES $8,299 $8,007 292 3.65%
Non-Interest Income
Income from Fiduciary Activities 1,258 1,162 96 8.26%
Service Charges on Deposit Accounts 256 253 3 1.19%
Other Income 296 294 2 0.68%
Gains (Losses) on securities not held in
trading accounts 5 0 5 100.00%
Total Non-Interest Income $1,815 $1,709 106 6.20%
Non-Interest Expense
Salaries and Benefits 4,525 4,096 429 10.47%
Occupancy Expense 672 608 64 10.53%
Other Expense 2,152 1,910 242 12.67%
Total Non-Interest Expense $7,349 $6,614 735 11.11%
INCOME BEFORE INCOME TAXES $2,765 $3,102 (337) -10.86%
Applicable Income Taxes 789 912 (123) -13.49%
NET INCOME $1,976 $2,190 (214) -9.77%
Earnings Per Share $1.41 $1.59 (0) -11.32%
Dividends Per Share $0.70 $0.70 0 0.00%
</TABLE>
<PAGE> 26
UNIVERSITY BANK & TRUST COMPANY
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
<S> <C> <C>
Net Income $1,976 $2,191
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 400 600
Depreciation and amortization 385 341
Net amortization of investment security
discounts 209 92
(Gain) loss on sale of fixed assets 5 4
(Gain) loss on call of investment
securities (5)
Changes in assets and liabilities
Accrued interest receivable and
other assets (4,882) 344
Interest payable and other
liabilities (2,966) (1,315)
NET CASH PROVIDED BY OPERATING ACTIVITIES ($4,878) $2,257
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from calls or maturities of
investment securities $209,779 $4,215
Proceeds from sales of investment securities 0 0
Purchase of investment securities (199,713) (2,722)
Increase (decrease) in securities sold under
repurchase agreements 1,800 2,455
Net (increase) decrease in loans receivable 7,299 331
Net (increase) decrease in bankers'
acceptances (6,371) (5,069)
Capital expenditures (224) (355)
NET CASH PROVIDED BY INVESTING ACTIVITIES $12,570 ($1,145)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, NOW
accounts, savings deposits and money
fund deposits $16,122 $11,365
Net increase (decrease) in certificates of deposit 102 (2,563)
Cash dividends (952) (933)
Proceeds from common stock issued 869 507
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,141 8,376
INCREASE IN CASH AND CASH EQUIVALENTS $23,833 $9,488
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $56,576 $55,921
CASH AND CASH EQUIVALENTS AT END OF PERIOD $80,409 $65,409
Check. Should equal decrease in cash equivalents 23,833 9,488
Difference 0 0
</TABLE>
<PAGE> 27
UNIVERSITY BANK & TRUST COMPANY
STATEMENT OF CHANGES IN
UNDIVIDED PROFIT
Six Months Ended June 30, 1994
<TABLE>
<S> <C>
Balance at beginning of current fiscal year $20,423,486
Net income to date 1,975,549
Transfer to Dividends Payable (951,670)
----------
Balance at end of interim period $21,447,365
</TABLE>
(The balance of this page intentionally left blank.)
8
<PAGE> 28
Historically, the Bank's balance sheet has shown a high degree of liquidity.
The following table shows balance sheet proportions for the quarter ended June
30, 1994 and for the years ending December 31, 1993 and December 31, 1992.
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
6/30/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due From Bank $26,823 6.51% $25,653 6.79% $21,383 6.15%
Investment Securities 105,058 25.49% 73,028 19.34% 70,134 20.18%
Fed Funds Sold 45,643 11.07% 35,212 9.32% 25,950 7.47%
Loans 213,453 51.79% 224,016 59.32% 211,204 60.77%
Premises & Equipment 15,815 3.84% 14,792 3.92% 14,611 4.20%
Other Assets 5,396 1.31% 4,910 1.30% 4,251 1.22%
TOTAL ASSETS $412,188 100.00% $377,611 100.00% $347,533 100.00%
LIABILITIES
Demand Deposits $55,857 13.55% $50,135 13.28% $40,712 11.71%
Savings & Now 85,682 20.79% 76,649 20.30% 67,141 19.32%
Money Funds 216,159 52.44% 193,474 51.24% 177,367 51.04%
Time Deposits 20,761 5.04% 23,589 6.25% 32,392 9.32%
Total Deposits $378,459 91.82% $343,847 91.06% $317,612 91.39%
Other Borrowings 460 0.11% 1,398 0.37% 1,354 0.39%
Other Liabilities 562 0.14% 2,189 0.58% 1,783 0.51%
TOTAL LIABILITIES $379,481 92.07% $347,434 92.01% $320,749 92.29%
SHAREHOLDERS EQUITY 32,707 7.93% 30,177 7.99% 26,784 7.71%
TOTAL LIABILITIES $412,188 100.00% $377,611 100.00% $347,533 100.00%
AND EQUITY
</TABLE>
<PAGE> 29
UNIVERSITY BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
Quarter ended June 30, 1994
The financial statements included herein are unaudited. The information
furnished herein reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of the interim period
ended June 30, 1994.
NOTE A - Summary of Significant Accounting Policies
Investment Securities
The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as of
December 31, 1993. The Bank has classified its investment securities as
available for sale. Available for sale securities are reported at fair value,
with unrealized gains and losses, net of taxes, reported as a separate
component of shareholders' equity. Amortization of premiums and accretion of
discounts arising at acquisition of investment securities are included in
income using methods that approximate the interest method.
Loans
Loans are stated net of undisbursed funds. Interest on commercial, consumer
installment and real estate loans is accrued on a simple interest basis.
Interest on loans is not accrued in those instances where management considers
principal amounts doubtful of collection.
Loan Fees
Nonrefundable fees for loan origination and commitments in excess of direct
costs of originating the loan or commitment are amortized over the life of the
loan using the straight line method. Fees originated since 1988 are recognized
as income using the interest method as required by FASB 91.
Allowance for Loan Losses
The allowance for loan losses is established through charges to earnings in the
form of a provision for loan losses. Loans which are determined to be
uncollectible are charged against this allowance, and subsequent recoveries, if
any, are credited to the allowance.
9
<PAGE> 30
The allowance for loan losses is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectability of loans and prior
loan experience. The evaluations take into consideration such factors as
changes in the nature and volume of specific problem loans and current or
anticipated economic conditions that may affect the borrowers' ability to pay.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight line method over
estimated useful lives of the assets.
Income Per Share of Common Stock
Net income per share is based upon the weighted average number of common shares
outstanding adjusted by the dilutive effect of stock options outstanding on a
fully diluted basis.
<TABLE>
<CAPTION>
Three Months Ended June 30
1994 1993
(Amounts in thousands)
<S> <C> <C>
Weighted average shares:
Primary 1,402 1,384
Fully Diluted 1,413 1,388
</TABLE>
NOTE B - Provision for Income Taxes
No portion of income tax provision is attributable to foreign operations. The
provision for income tax has been calculated taking into account the tax-exempt
status of portions of municipal bond income. Of the federal statutory income
tax rate of 34%, the following are the components of the current quarter
provision:
<TABLE>
<S> <C>
Statutory tax rate 100.0%
Tax effect of municipal income (57.0%)
-----
Current provision tax rate 43.0%
</TABLE>
10
<PAGE> 31
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital
During the second quarter of 1994, the Bank's capital increased by $371,456, or
1.10%, compared to an increase of $723,219, or 2.45% in the same period of
1993. Without the effect of the adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of December 31, 1993, this
increase was $987,655 or 3.05%. Sources of additional capital in each of the
periods were retained earnings, exercise of stock options and purchases of new
stock by the Bank's profit sharing and 401K plans. The Bank paid a dividend of
thirty-five cents a share to shareholders of record April 13, 1994, or a total
of $478,131. A dividend of $.35 per share, totaling $466,845 was paid in the
second quarter of 1993. Dividend payments continued on a quarterly basis in
1993 and 1994.
The Bank is subject to the Federal Reserve Bank's regulations. In 1989, the
Federal Reserve Bank established risk-based capital guidelines for member
banks. The Comptroller of the Currency and the FDIC have issued similar
guidelines for national banks. The guidelines define Tier 1 Capital and Total
Capital. Tier 1 Capital consists of common and qualifying preferred
shareholders' equity and minority interests in equity accounts of consolidated
subsidiaries. Total Capital consists of, in addition to Tier 1 Capital,
mandatory convertible debt, preferred stock not qualifying as Tier 1 Capital,
subordinated and other qualifying term debt and a portion of the allowance for
loan losses less the remaining 50% of investments in unconsolidated
subsidiaries. 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 minimum required qualifying total capital ratio is 8%, of which at least 4%
must consist of Tier 1 Capital. At June 30, 1994, the Bank's Tier 1 Capital
totaled $33,427,000 and Total Capital was $36,844,000. The Bank's Tier 1
capital to total risk weighted assets ratio was 12.23% and its Total Capital to
total risk weighted assets ratio was 13.48%.
It is the intention of the Bank to continue capital augmentation through
earnings retention net of dividends in future years.
Liquidity
12
<PAGE> 32
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
6/30/94 12/31/93 12/31/92
------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due From Banks $26,823 6.51% $25,653 6.79% $21,383 6.15%
Investment Securities 105,058 25.49% 73,028 19.34% 70,134 20.18%
Fed Funds Sold 45,643 11.07% 35,212 9.32% 25,950 7.47%
Loans 213,453 51.79% 224,016 59.32% 211,204 60.77%
Premises & Equipment 15,815 3.84% 14,792 3.92% 14,611 4.20%
Other Assets 5,396 1.31% 4,910 1.30% 4,251 1.22%
-------- ------- -------- ------- -------- -------
TOTAL ASSETS $412,188 100.00% $377,611 100.00% $347,533 100.00%
======== ====== ======== ====== ======== ======
LIABILITIES
Demand Deposits $55,857 13.55% $50,135 13.28% $40,712 11.71%
Savings & Now 85,682 20.79% 76,649 20.30% 67,141 19.32%
Money Funds 216,159 52.44% 193,474 51.24% 177,367 51.04%
Time Deposits 20,761 5.04% 23,589 6.25% 32,392 9.32%
-------- ------- -------- ------- -------- -------
Total Deposits $378,459 91.82% $343,847 91.06% $317,612 91.39%
Other Borrowings 460 0.11% 1,398 0.37% 1,354 0.39%
Other Liabilities 562 0.14% 2,189 0.58% 1,783 0.51%
-------- ------- -------- ------- -------- -------
TOTAL LIABILITIES $379,481 92.07% $347,434 92.01% $320,749 92.29%
SHAREHOLDERS EQUITY 32,707 7.93% 30,177 7.99% 26,784 7.71%
-------- ------- -------- ------- -------- -------
TOTAL LIABILITIES $412,188 100.00% $377,611 100.00% $347,533 100.00%
AND EQUITY ======== ====== ======== ====== ======== ======
</TABLE>
Totals may not add due to rounding.
Bank assets containing a high degree of liquidity are Cash & Due From Banks,
Investment Securities and Federal Funds Sold. For the quarter ending June 30,
1994, those assets comprised 43.07% of the Bank's assets compared to 34.83% in
1993 and 33.80% in 1992.
A principal source of liquidity is new deposit generation. Historically, loan
generation has periodically lagged deposit growth. The loan to deposit ratio
decreased from 66.50% in 1992 to 65.15% in 1993 and to 56.40% in the second
quarter of 1994. Growth rates for the second quarter of 1994 and for the years
1993 and 1992 are shown in the following table.
<TABLE>
<CAPTION>
June 30, 1994 1993 1992
-------------- ---- ----
<S> <C> <C> <C>
Net Loans $213,453 $224,016 $211,204
Growth Rate (4.72%) 6.07% 16.92%
Deposits $378,459 $343,847 $317,612
Growth Rate 10.07% 8.26% 12.90%
Loans to Deposits 56.40% 65.15% 66.50%
</TABLE>
13
<PAGE> 33
The investment portfolio is another source of liquidity. While a portion of
the portfolio is intended to be a permanent investment, a portion is invested
in short-term obligations pending re-employment of these funds in the loan
portfolio or for deposit withdrawals. As of June 30, 1994, the investment
portfolio totaled $97,874,455. Of that amount, $1,425,254, or 1.46% of the
total portfolio matures within one year. Additionally, the securities in the
portfolio are freely marketable. The portfolio contains $1,476,300 in
unrealized appreciation.
Within the loan portfolio are investments in short term bankers acceptances
totaling $11,820,900 at June 30, 1994. These acceptances all mature within 180
days.
Other internal sources of liquidity are the retention of earnings and cash flow
generated in the loan portfolio.
External sources of liquidity include borrowings available to the Bank. As of
June 30, 1994, the Bank has two lines available totaling $10,000,000 of which
$5,000,000 is committed until June 30, 1995, and on which commitment fees have
been paid. $5,000,000 is on an "as available" basis.
Indebtedness of Management
The Bank has had, and expects to have in the future, banking transactions in
the ordinary course of its business with directors, officers, principal
shareholders and their associates, on the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others, and which, in the opinion of the Bank's Management,
do not involve a greater risk of collectibility. Furthermore, it is the Bank's
policy to preclude its executive officers, with the exception of the Chairman
of the Board, from borrowing from the Bank and any loan to the Chairman or a
director must be approved by the entire Board of Directors.
The following table summarizes the loans to Directors and Principal Holders of
Equity Securities in the quarter ended June 30, 1994:
Outstanding Balances as of March 31, 1994 $1,068,472.91
Aggregate Amount of New Loans Made -0-
Aggregate Amount of Repayments 269,186.46
Aggregate Amount of Other Changes 916,916.05
Aggregate Amount of Outstandings at June 30, 1994 $1,716,202.50
During the period ended June 30, 1994, none of these loans became past due or
was placed on non-accrual.
Results of Operations
In the quarter ended June 30, 1994, average daily assets increased
14
<PAGE> 34
by $34.7 million or 9.20% over the second quarter 1993 and increased by $5.1
million, or 1.24%, over the first quarter of 1994. Deposits and other
borrowings increased $32.5 million, or 9.37% over the second quarter of 1993
and increased $6.2 million, or 1.67% over the first quarter of 1994.
The mix in earning assets reflects a decrease in loan demand. Loans, net of
banker's acceptances, as a percent of earning assets were 59.28% for the
quarter ended June 30, 1994, compared to 68.26% for the second quarter of 1993
and 60.25% for the first quarter of 1994.
Net Interest Income and Margin
In the three months ended June 30, 1994, net interest income on a fully taxable
equivalent basis increased $521,000, or 11.81% from the preceding quarter and
increased $270,000, or 5.79%, over the same period in 1993.
Interest-earning assets averaged $370.1 million, an increase of $32.3 million,
or 9.55%, over the same period in 1993. Interest earned on those assets
increased $396,000, or 6.29%, for a total of $6,694,000 in this period. The
composite fully taxable equivalent yield on interest- earning assets decreased
from 7.48% in the second quarter of 1993 to 7.25% in the current period.
Compared with the preceding period, interest on earning assets increased
$677,000, or 11.25%. Yields increased fifty four basis points from 6.71% to
7.25%.
Average interest-bearing liabilities increased by $32.5 million to $378.9
million, or 9.37% over the same period in 1993. Interest expense increased
$126,000, or 7.07%. The composite average cost of funds decreased from 1.90%
to 1.87%. In this quarter, compared to the prior quarter, the cost of funds
increased by twelve basis points from 1.75% to 1.87%. Net interest margin
decreased from 5.53% in the second quarter of 1993 to 4.91% in the first
quarter of 1994 and increased to 5.34% in the current quarter.
Non-Interest Income
In this period, non-interest income decreased $16,000, or 1.85% over the same
period in 1993 and decreased $120,000, or 12.40% from the prior period.
Non-interest income is derived from Trust Department fees, service charges on
deposit accounts, other fees and charges and safe deposit rentals. In this
period, trust fees accounted for $581,000 or 68.51% of non-interest revenue.
Decreases in non-interest income over the prior quarter are due to decreased
market value of trust assets upon which those fees are based.
Non-Interest Expense
Non-interest expense increased $408,000, or 12.32%, in this period compared to
the same period in 1993, and increased $87,000 or 2.40% over the prior period.
Overall increases in non-interest expense are due to increases in deposits and
earning assets and increased
15
<PAGE> 35
staff and other costs necessary to service this growth.
Provision for Loan and Lease Losses
The Bank provided $100,000 for loan losses in this period compared to $300,000
in the second quarter of 1993 and to $300,000 in the first quarter of 1994.
The Bank's Reserve for Loan Losses is maintained at a level that Management
believes will be adequate to absorb possible losses. During this quarter, the
Bank adopted a new loan loss adequacy policy to conform to the new federal
guidelines "Interagency Policy Statement on the Allowance for Loan and Lease
Losses (ALLL)" which was issued December 21, 1993. Management evaluations take
into consideration such factors as changes in the nature and volume of specific
problem loans and current economic conditions that may affect the borrower's
ability to repay.
The balance of the reserve for loan losses was $4,877,101 at June 30, 1994
compared to $3,952,216 at June 30, 1993 and to $5,976,175 at March 31, 1994.
Net losses totaled $1,199,074 in the second quarter of 1994 compared to
$182,880 in the second quarter of 1993 and to $14,166 in the first quarter of
1994.
Loans on non-accrual totaled $1,189,529 at June 30, 1994 compared to $4,897,000
at June 30, 1993 and to $3,905,956 at March 31, 1994. The previous increase
was due to deterioration in the local economy, particularly in real estate. As
of June 30, 1994, the Bank owned two parcels of other real estate with a book
value totaling $3,945,373 compared to one parcel having a book value of
$608,732 at June 30, 1993.
Investment Portfolio
The Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt &
Equity Securities," as of December 31, 1993. SFAS 115 requires entities to
classify investments in debt securities and equity securities with readily
determinable fair values as held to maturity, available for sale, or trading
and establishes accounting and reporting requirements for each classification.
The Bank has classified all of its investments as available for sale as it does
not have the intent to hold such securities until maturity. Available for sale
securities are reported at fair value, with unrealized gains and losses, net of
taxes, reported as separate component of shareholders' equity. At June 30,
1994, this separate component of equity was $870,920.
The portfolio increased by $27,715,487, or 39.50% to $97,874,455 book value
from June 30, 1993 to June 30, 1994. Large deposit generation coupled with low
loan demand created excess liquidity.
Letters of Credit
At June 30, 1994, the Bank's commitments under unused letters of credit were
$4,477,000 of which 20% are reasonably expected to be exercised within the next
twelve months. At June 30, 1993, such commitments totaled $7,238,000 and at
March 31, 1994, $4,417,800.
16
<PAGE> 36
Interest Analysis
June 30, 1994, 10-Q
The following table is a summary of the major elements of income and expenses
for the quarter ended June 30, 1994 compared with the same quarter of 1993 and
the quarter ended March 31, 1994.
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
June 30 June 30 Percent June 30 March 31 Percent
1994 1993 Change 1994 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Interest Income $6,370,588 $5,974,698 6.63% $6,370,588 $5,696,001 11.84%
Interest Expense 1,761,620 1,637,117 7.61% 1,761,620 1,606,251 9.67%
Net Interest Income $4,608,968 $4,337,581 6.26% $4,608,968 $4,089,750 12.70%
Provision for Loan Losses 100,000 300,000 -66.67% 100,000 300,000 -66.67%
Net Interest Income after
Provision for Loan Losses $4,508,968 $4,037,581 11.67% $4,508,968 $3,789,750 18.98%
Non-Interest Income 847,560 863,971 -1.90% 847,560 963,074 -11.99%
Non-Interest Expense 3,718,514 3,311,051 12.31% 3,718,514 3,631,278 2.40%
Income Before Securities
Gain $1,638,014 $1,590,501 2.99% $1,638,014 $1,121,546 -46.05%
Gain on Call of Securities 0 0 100.00% 0 4,595 -100.00%
Income Before Income Taxes $1,638,014 $1,590,501 2.99% $1,638,014 $1,126,141 45.45%
Income Taxes 467,323 467,556 -0.05% 467,323 321,285 45.45%
Net Income $1,170,691 $1,122,945 4.25% $1,170,691 $804,856 45.45%
Earnings per Share of
Common Stock:
Net Income $0.83 $0.81 2.47% $0.83 $0.58 43.10%
Dividends per Share of
Common Stock $0.35 $0.35 0.00% $0.35 $0.35 0.00%
</TABLE>
<PAGE> 37
Interest Differential
June, 1994/June, 1993
INTEREST RATES AND NET INTEREST DIFFERENTIAL
The major portion of the Bank's income results from the difference between
interest income derived from earning assets and interest expense paid on
liabilities incurred primarily for the funding of those assets. The difference
is referred to as net interest income. Net interest income expressed as a
percent of average total earning assets is referred to as net interest margin.
Net interest income and net interest margin are summarized in the following
comparisons for the three months ended June 30, 1994 over the same period in
1993 and for the three months ended March 31, 1994. Average balances are
expressed in thousands of dollars:
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 1994 June 30, 1993
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate % Balance Expense Rate %
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable $67,185 881 5.26% $36,308 632 6.98%
Non-Taxable* 37,873 952 10.08% 36,128 952 10.57%
Federal Funds Sold 45,643 438 3.85% 34,778 244 2.81%
Loans-Interest & Fees 219,390 4,423 8.09% 230,622 4,470 7.77%
Total Earning Assets 370,091 6,694 7.25% 337,836 6,298 7.48%
Cash & Due From Banks 26,823 24,258
Premises & Equipment 15,815 14,780
Other Assets (541) 598
Total Assets $412,188 $377,472
LIABILITIES & SHAREHOLDERS EQUITY
Deposits & Borrowings
Demand $55,857 $0 0.00% $45,647 $0 0.00%
Savings & Now 85,682 181 0.85% 76,960 229 1.19%
Money Funds 216,159 1,416 2.63% 200,434 1,241 2.48%
Time 20,761 160 3.09% 21,543 153 2.85%
Other Borrowed Funds 460 6 5.23% 1,880 14 2.99%
Total Deposits & Borrowings 378,919 1,763 1.87% 346,464 1,637 1.90%
Other Liabilities 562 1,314
Shareholders' Equity 32,707 29,694
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $412,188 $377,472
Interest and Loan Fee Income 6,694 7.25% 6,298 7.48%
Interest Expense** 1,763 1.91% 1,637 1.94%
NET INTEREST INCOME AND MARGIN $4,931 5.34% $4,661 5.53%
<CAPTION>
Change In % Change In % Change In %
Average Change Income/ Change Rates Paid/ Change
ASSETS Balance Expense Earned
<S> <C> <C> <C> <C> <C> <C>
Investment Securities:
Taxable 30,877 85.04% 249 39.40% -1.72% -24.67%
Non-Taxable* 1,745 4.83% 0 0.00% -0.49% -4.61%
Federal Funds Sold 10,865 31.24% 194 79.51% 1.03% 36.78%
Loans-Interest & Fees (11,232) -4.87% (47) -1.05% 0.31% 4.01%
Total Earning Assets 32,255 9.55% 396 6.29% -0.22% -2.98%
Cash & Due From Banks
Premises & Equipment
Other Assets
Total Assets
LIABILITIES & SHAREHOLDERS EQUITY
Deposits & Borrowings
Demand 10,210 22.37% 0 0.00% 0.00% 0.00%
Savings & Now 8,722 11.33% (48) -20.96% -0.35% -29.01%
Money Funds 15,725 7.85% 175 14.10% 0.14% 5.80%
Time (782) -3.63% 7 4.58% 0.24% 8.51%
Other Borrowed Funds (1,420) 100.00% (8) -57.14% 2.24% 75.16%
Total Deposits & Borrowings 32,455 9.37% 126 7.70% -0.03% -1.53%
Other Liabilities
Shareholders' Equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest and Loan Fee Income 396 6.29% -0.22% -2.98%
Interest Expense** 126 7.70% -0.03% -1.69%
NET INTEREST INCOME AND MARGIN 270 5.79% -0.19% -3.43%
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis
using the federal statutory rate of 34%. The tax equivalent adjustment
was $323,782 for the quarter ending June 30, l994 and $323,660 for the
quarter ending June 30, 1993.
**Interest on deposits as a percent of earning assets.
<PAGE> 38
Interest Differential
June, 1994/ March, 1994
INTEREST RATES AND NET INTEREST DIFFERENTIAL (CONTINUED)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 1994 March 31, 1994
------------------------------------ -------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Change in
Balance Expense Rate % Balance Expense Rate % Average
Balance
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable $67,185 881 5.26% $71,172 696 3.97% (3,987)
Non-Taxable* 37,873 952 10.08% 36,993 942 10.33% 880
Federal Funds Sold 45,643 438 3.85% 36,486 277 3.08% 9,157
Loans-Interest & Fees 219,390 4,423 8.09% 219,272 4,102 7.59% 118
Total Earning Assets 370,091 6,694 7.25% 363,923 6,017 6.71% 6,168
Cash & Due From Banks 26,823 28,402
Premises & Equipment 15,815 15,869
Other Assets (541) (1,074)
Total Assets $412,188 $407,120
LIABILITIES & SHAREHOLDERS EQUITY
Deposits & Borrowings
Demand $55,857 $0 0.00% $54,809 $0 0.00% 1,048
Savings & Now 85,682 181 0.85% 86,478 190 0.89% (796)
Money Funds 216,159 1,416 2.63% 209,414 1,262 2.44% 6,745
Time 20,761 160 3.09% 21,353 148 2.81% (592)
Other Borrowed Funds 460 6 5.23% 635 7 4.47% (175)
Total Deposits & Borrowings 378,919 1,763 1.87% 372,689 1,607 1.75% 6,230
Other Liabilities 562 2,498
Shareholders' Equity 32,707 31,933
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $412,188 $407,120
Interest and Loan Fee Income 6,694 7.25% 6,017 6.71%
Interest Expense** 1,763 1.91% 1,607 1.79%
NET INTEREST INCOME AND MARGIN $4,931 5.34% $4,410 4.91%
<CAPTION>
% Change in % Change in %
Change Income/ Change Rate Paid/ Change
ASSETS Expense Earned
<S> <C> <C> <C> <C> <C>
Investment Securities:
Taxable -5.60% 185 26.58% 1.29% 32.62%
Non-Taxable* 2.38% 10 1.06% -0.24% -2.37%
Federal Funds Sold 25.10% 161 58.12% 0.77% 25.01%
Loans-Interest & Fees 0.05% 321 7.83% 0.50% 6.58%
Total Earning Assets 1.69% 677 11.25% 0.55% 8.20%
Cash & Due From Banks
Premises & Equipment
Other Assets
Total Assets
LIABILITIES & SHAREHOLDERS EQUITY
Deposits & Borrowings
Demand 1.91% 0 0.00% 0.00% 0.00%
Savings & Now -0.92% (9) -4.74% -0.04% -4.91%
Money Funds 3.22% 154 12.20% 0.18% 7.51%
Time -2.77% 12 8.11% 0.28% 9.97%
Other Borrowed Funds -27.56% (1) -14.29% 0.76% 17.02%
Total Deposits & Borrowings 1.67% 156 9.71% 0.12% 6.72%
Other Liabilities
Shareholders' Equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest and Loan Fee Income 677 11.25% 0.55% 8.20%
Interest Expense** 156 9.71% 0.12% 6.69%
NET INTEREST INCOME AND MARGIN 521 11.81% 0.43% 8.74%
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis
using the federal statutory rate of 34%. The tax equivalent adjustment
was $323,782 for the quarter ending June 30, 1994 and $320,092 for the
quarter ending March 31, 1994.
**Interest on deposits as a percent of earning assets.
<PAGE> 39
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the bank is a party.
ITEM 2. CHANGES IN SECURITIES
On June 17, 1994, the Bank changed its name from University National Bank &
Trust Company to University Bank & Trust Company and changed its charter from a
national banking association to a state member bank chartered in the state of
California. The new Cusip number of the Bank's common stock is 914093109.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 16, 1994, the annual meeting of the Shareholders of the Bank was held.
There were issued and outstanding on April 23, 1994, the record date, 1,366,088
shares of Common Stock. There were present at said meeting in person or by
proxy, shareholders of 1,047,419 shares of common stock entitled to vote
(76.67%). The following Directors were elected:
<TABLE>
<CAPTION>
Votes Outstanding
<S> <C> <C>
Lawrence A. Aufmuth 1,048,459 76.75%
Thomas R. Brown 1,048,235 76.73%
Linda R. Meier 1,048,459 76.75%
J. Boyce Nute 1,048,459 76.75%
George G. C. Parker 1,048,459 76.75%
William A. Preston 1,048,459 76.75%
Leslie M. Quist 1,045,813 76.55%
Carl J. Schmitt 1,048,459 76.75%
Leonard Ware 1,048,459 76.75%
</TABLE>
The shareholders approved an amendment to the Bank's Amended and Restated Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 330,320 to 355,320 and add a per-employee share
limitation by the following vote:
II-1
<PAGE> 40
<TABLE>
<CAPTION>
Votes Outstanding
----- -----------
<S> <C> <C>
For 1,018,144 74.75%
Against 12,534 .92%
Abstain 18,741 1.37%
</TABLE>
No other matters were voted upon at the meeting.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
An index of all financial statements filed as a part of this quarterly report
is set forth at page 2 and is incorporated herein by reference.
There are no other applicable exhibits to be filed as a part of this report.
A Form 8-K Report was filed on June 17, 1994 which reported that University
National Bank & Trust Company converted into University Bank & Trust Company, a
California banking corporation which is a member of the Federal Reserve System,
pursuant to a Plan of conversion approved by the shareholders of University
National Bank & Trust Company, resulting in the shareholders of University
National Bank & Trust Company becoming shareholders of the Registrant. The
conversion was effective June 17, 1994.
(The balance of this page is intentionally left blank.)
II-2
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
University Bank & Trust Company
By /s/ Carl J. Schmitt
---------------------------
Carl J. Schmitt, Chairman
and Chief Executive Officer
Date: August 12, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Signature Title
- --------------------------------------------------------------------------------
<S> <C>
Carl J. Schmitt* Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
Gayle A. Anderson* Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
Lawrence A. Aufmuth* Director
Thomas R. Brown* Director
Linda R. Meier* Director
George G. C. Parker* Director
William A. Preston* Director
Leslie M. Quist* Director
Leonard Ware* Director
*By /s/ Carl J. Schmitt
-------------------------
(Carl J. Schmitt,
Attorney-In-Fact)
Date: August 12, 1994
</TABLE>
II-3
<PAGE> 42
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
Commission File Number
UNIVERSITY BANK & TRUST COMPANY
(Exact name of registrant as specified in its charter)
California 77-0376213
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 LYTTON AVENUE, PALO ALTO, CALIFORNIA 94301
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code, (415) 327-0210
University National Bank & Trust Company
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common shares outstanding as of November 7, 1994 - 1,402,197
<PAGE> 43
UNIVERSITY BANK & TRUST COMPANY
QUARTERLY REPORT FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 4
Consolidated Balance Sheets 4
Consolidated Statements of Income for The
Three Months Ended September 30, 1994 and 1993 5
Consolidated Statements of Income for The
Three Months Ended September 30 and June 30, 1994 6
Consolidated Statements of Income for The
Nine Months Ended September 30, 1994 and 1993 7
Consolidated Statements of Cash Flows for
The Nine Months Ended September 30, 1994 and 1993 8
Statement of Changes in Undivided Profits for
The Nine Months Ended June 30, 1994 and 1993 9
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
</TABLE>
2
<PAGE> 44
UNIVERSITY BANK & TRUST COMPANY
AND CONSOLIDATED SUBSIDIARY
PART I
FINANCIAL INFORMATION
University Bank & Trust Company (the "Bank") commenced business as a general
commercial bank on May 13, 1980. The Bank's wholly-owned subsidiary, Lytton
Corporation, is inactive. Consolidated financial statements are filed for the
Bank and Lytton Corporation.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary to a fair statement of the results of the
interim period ended September 30, 1994. The results for this period are not
necessarily indicative of the results to be expected for the year. The
financial statements included herein are unaudited.
3
<PAGE> 45
Quarterly Balance Sheet
September 30, 1994 10-Q
ITEM 1. Financial Statements
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
September 30, December 31, Net %
1994 1993 Change Change
(In Thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash and Due From Banks $30,363 $27,376 2,987 10.91%
Securities 113,162 112,850 312 0.28%
Federal Funds Sold 46,500 29,200 17,300 59.25%
Loans and Lease Financing
Commercial, Financial & Industrial 40,967 36,610 4,357 11.90%
Real Estate Construction 5,211 5,116 95 1.86%
Real Estate Mortgage 138,414 141,192 (2,778) -1.97%
Instalment Loans 22,176 23,055 (879) -3.81%
Lease Financing 8,269 6,535 1,734 26.53%
Bankers Acceptances 14,672 5,450 9,222 169.21%
Other Loans 2,469 6,009 (3,540) -58.91%
Less: Unearned Income (900) (855) (45) 5.26%
Total Gross Loans 231,278 223,112 8,166 3.66%
Less Reserve for Loan Losses (4,738) (5,690) 952 -16.73%
Net Loans 226,540 217,422 9,118 4.19%
Premises and Fixed Assets 15,626 15,895 (269) -1.69%
Other Real Estate Owned 3,945 1,541 2,404 156.00%
Accrued Interest Receivable
And Other Assets 6,020 2,447 3,573 146.02%
Total Assets $442,156 $406,731 35,425 8.71%
LIABILITIES
Deposits
Demand $69,274 $62,434 6,840 10.96%
Savings & Super NOW accounts 81,526 85,007 (3,481) -4.09%
Money Fund Accounts 223,362 197,743 25,619 12.96%
Time Deposits $100,000 and over 23,630 16,772 6,858 40.89%
Time Deposits under $100,000 5,752 5,249 503 9.58%
Total Deposits $403,544 $367,205 36,339 9.90%
Securities sold under Repurchase
Agreement 0 0 0 0.00%
Accrued Interest Payable and
Other Liabilities 3,179 5,216 (2,037) -39.05%
Total Liabilities $406,723 $372,421 34,302 9.21%
EQUITY CAPITAL
Common Stock, $2.50 par value
Authorized, 3,000,000 shares
Issued and Outstanding, 1,343,952 Shares at
12/31/93 & 1,399,697 at 9/30/94 3,499 3,360 139 4.14%
Capital Surplus 8,806 7,751 1,055 13.61%
Retained Earnings 22,688 20,423 2,265 11.09%
Unrealized Gain on Securities
Available for Sale 440 2,776 (2,336) -84.15%
TOTAL SHAREHOLDERS' EQUITY $35,433 $34,310 1,123 3.27%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $442,156 $406,731 35,425 8.71%
</TABLE>
4
<PAGE> 46
Quarterly Report of Income
September 30, 1994 F-4
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1994 1993 Net Percent
(In Thousands) Change Change
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $4,779 $4,336 443 10.22%
Income from financing lease receivables 159 126 33 26.19%
Interest on Securities
Taxable 986 585 401 68.55%
Non-Taxable 639 627 12 1.91%
Interest income on Federal funds sold 564 271 293 108.12%
Total Interest Income $7,127 $5,945 1,182 19.88%
Interest Expense
Interest on Deposits
Time Certificates over $100M $181 $145 36 24.83%
Other Time Deposits 1,768 1,459 309 21.18%
Securities Sold Under Repurchase Agreements 26 6 20 333.33%
Total Interest Expense $1,975 $1,610 365 22.67%
Net Interest Income $5,152 $4,335 817 18.85%
Provision for Loan and Lease Losses 75 500 (425) -85.00%
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES $5,077 $3,835 1,242 32.39%
Non-Interest Income
Income from Fiduciary Activities 754 621 133 21.42%
Service Charges on Deposit Accounts 127 129 (2) -1.55%
Other Income 197 128 69 53.91%
Gains (Losses) on securities not held in
trading accounts 10 15 (5) -33.33%
Total Non-Interest Income $1,088 $893 195 21.84%
Non-Interest Expense
Salaries and Benefits 2,355 2,091 264 12.63%
Occupancy Expense 356 322 34 10.56%
Other Expense 1,038 913 125 13.69%
Total Non-Interest Expense $3,749 $3,326 423 12.72%
INCOME BEFORE INCOME TAXES $2,416 $1,402 1,014 72.33%
Applicable Income Taxes 689 412 277 67.23%
NET INCOME $1,727 $990 737 74.44%
Earnings Per Share $1.21 $0.71 $0.50 70.42%
Dividends Per Share $0.35 $0.35 $0.00 100.00%
</TABLE>
5
<PAGE> 47
Quarterly Report of Income
September 30,1994 F-4
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
Three Months Ended
September 30, June 30,
1994 1994 Net Percent
(In Thousands) Change Change
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $4,779 $4,282 497 11.61%
Income from financing lease receivables 159 141 18 12.77%
Interest on Securities
Taxable 986 881 105 11.92%
Non-Taxable 639 628 11 1.75%
Interest income on Federal funds sold 564 438 126 28.77%
Total Interest Income $7,127 $6,370 757 11.88%
Interest Expense
Interest on Deposits
Time Certificates over $100M $181 $121 60 49.59%
Other Time Deposits 1,768 1,634 134 8.20%
Securities Sold Under Repurchase Agreements 26 6 20 333.33%
Total Interest Expense $1,975 $1,761 214 12.15%
Net Interest Income $5,152 $4,609 543 11.78%
Provision for Loan and Lease Losses 75 100 (25) -25.00%
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES $5,077 $4,509 568 12.60%
Non-Interest Income
Income from Fiduciary Activities 754 581 173 29.78%
Service Charges on Deposit Accounts 127 127 0 0.00%
Other Income 197 140 57 40.71%
Gains (Losses) on securities not held in
trading accounts 10 0 10 ERR
Total Non-Interest Income $1,088 $848 240 28.30%
Non-Interest Expense
Salaries and Benefits 2,355 2,295 60 2.61%
Occupancy Expense 356 344 12 3.49%
Other Expense 1,038 1,080 (42) -3.89%
Total Non-Interest Expense $3,749 $3,719 30 0.81%
INCOME BEFORE INCOME TAXES $2,416 $1,638 778 47.50%
Applicable Income Taxes 689 467 222 47.54%
NET INCOME $1,727 $1,171 556 47.48%
Earnings Per Share $1.21 $0.83 $0.38 45.78%
Dividends Per Share $0.35 $0.35 $0.00 100.00%
</TABLE>
6
<PAGE> 48
Quarterly Report of Income
September 30, 1994
UNIVERSITY BANK & TRUST COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, 000's omitted)
<TABLE>
<CAPTION>
Fiscal Year-to-Date Net %
September 30, September 30, Change Change
1994 1993
(In Thousands)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $13,032 $13,040 (8) -0.06%
Income from financing lease receivables 432 359 73 100.00%
Interest on Securities
Taxable 2,562 1,873 689 36.79%
Non-Taxable 1,889 1,869 20 1.07%
Interest income on Federal funds sold 1,279 657 622 94.67%
Total Interest Income $19,194 $17,798 1,396 7.84%
Interest Expense
Interest on Deposits
Time Certificates over $100M $414 $384 30 7.81%
Other Time Deposits 4,891 4,435 456 10.28%
Securities Sold Under Repurchase Agreements 38 36 2 5.56%
Total Interest Expense $5,343 $4,855 488 10.05%
Net Interest Income $13,851 $12,943 908 7.02%
Provision for Loan and Lease Losses 475 1,100 (625) -56.82%
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES $13,376 $11,843 1,533 12.94%
Non-Interest Income
Income from Fiduciary Activities 2,011 1,784 227 12.72%
Service Charges on Deposit Accounts 383 382 1 0.26%
Other Income 494 421 73 17.34%
Gain (loss) on securities sold 15 15
Total Non-Interest Income $2,903 $2,602 301 11.57%
Non-Interest Expense
Salaries and Benefits 6,880 6,187 693 11.20%
Occupancy Expense 1,028 930 98 10.54%
Other Expense 3,191 2,824 367 13.00%
Total Non-Interest Expense $11,099 $9,941 1,158 11.65%
INCOME BEFORE INCOME TAXES $5,195 $4,519 676 14.96%
Applicable Income Taxes 1,478 1,324 154 11.63%
NET INCOME $3,717 $3,195 522 16.34%
Earnings Per Share $2.63 $2.31 $0.32 13.85%
Dividends Per Share $1.05 $1.05 $0.00 0.00%
</TABLE>
7
<PAGE> 49
UNIVERSITY BANK & TRUST COMPANY
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
CASH FLOWS FROM OPERATING ACTIVITIES: 1994 1993
<S> <C> <C>
Net Income $3,702 $3,180
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 475 1,100
Depreciation and amortization 581 524
Net amortization of investment security 468 140
Discounts
(Gain) loss on sale of fixed assets 1 4
(Gain) loss on call of securities (15)
Changes in assets and liabilities
Interest receivable and other assets (5,781) (15)
Interest payable and other liabilities (2,037) (823)
NET CASH USED BY OPERATING ACTIVITIES ($2,606) $4,110
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from calls or maturities of investment $210,839 $5,455
securities
Proceeds from sale of investment securities 0
Purchase of investment securities (215,564) (2,996)
Increase (decrease) in securities sold under
repurchase agreements 0
Net (increase) decrease in loans receivable 1,055 12,400
Net (increase) decrease in bankers' acceptances (9,222) (7,408)
Capital expenditures (312) (498)
NET CASH USED BY INVESTING ACTIVITIES ($13,204) $6,953
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand, NOW,
savings, and money fund deposits $28,979 $16,050
Net increase (decrease) in certificates of
deposits 7,361 (4,527)
Cash dividends (1,437) (1,401)
Proceeds from common stock issued 1,194 526
NET CASH PROVIDED BY FINANCING ACTIVITIES 36,097 10,648
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $20,287 $21,711
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $56,576 $55,921
CASH AND CASH EQUIVALENTS AT END OF PERIOD $76,863 $77,632
Check. Should equal decrease in cash equivalents 20,287 21,711
Difference 0 0
</TABLE>
8
<PAGE> 50
UNIVERSITY BANK & TRUST COMPANY
STATEMENT OF CHANGES IN
UNDIVIDED PROFIT
Nine Months Ended September 30, 1994
<TABLE>
<S> <C>
Balance at beginning of current fiscal year $20,423,486
Net income to date 3,702,135
Transfer to Dividends Payable (1,437,293)
-----------
Balance at end of interim period $22,688,328
</TABLE>
(The balance of this page intentionally left blank.)
9
<PAGE> 51
UNIVERSITY BANK & TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
Quarter ended September 30, 1994
The financial statements included herein are unaudited. The information
furnished herein reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of the interim period
ended September 30, 1994.
NOTE A - Summary of Significant Accounting Policies
Investment Securities
The Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" as of
December 31, 1993. The Bank has classified its investment securities as
available for sale. Available for sale securities are reported at fair value,
with unrealized gains and losses, net of taxes, reported as a separate
component of shareholders' equity. Amortization of premiums and accretion of
discounts arising at acquisition of investment securities are included in
income using methods that approximate the interest method.
Loans
Loans are stated net of undisbursed funds. Interest on commercial, consumer
installment and real estate loans is accrued on a simple interest basis.
Interest on loans is not accrued in those instances where management considers
principal amounts doubtful of collection.
Loan Fees
Nonrefundable fees for loan origination and commitments in excess of direct
costs of originating the loan or commitment are amortized over the life of the
loan using the straight line method. Fees originated since 1988 are recognized
as income using the interest method as required by FASB 91.
Allowance for Loan Losses
The allowance for loan losses is established through charges to earnings in the
form of a provision for loan losses. Loans which are determined to be
uncollectible are charged against this allowance, and subsequent recoveries, if
any, are credited to the allowance.
10
<PAGE> 52
The allowance for loan losses is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectability of loans and prior
loan experience. The evaluations take into consideration such factors as
changes in the nature and volume of specific problem loans and current or
anticipated economic conditions that may affect the borrowers' ability to pay.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight line method over
estimated useful lives of the assets.
Income Per Share of Common Stock
Net income per share is based upon the weighted average number of common shares
outstanding adjusted by the dilutive effect of stock options outstanding on a
fully diluted basis.
<TABLE>
<CAPTION>
Three Months Ended September 30
-------------------------------
1994 1993
---- ----
(Amounts in thousands)
<S> <C> <C>
Weighted average shares:
Primary 1,428 1,389
Fully Diluted 1,434 1,393
</TABLE>
NOTE B - Provision for Income Taxes
No portion of income tax provision is attributable to foreign operations. The
provision for income tax has been calculated taking into account the tax-exempt
status of portions of municipal bond income. Of the federal statutory income
tax rate of 34%, the following are the components of the current quarter
provision:
<TABLE>
<S> <C>
Statutory tax rate 100.0%
Tax effect of municipal income (51.6%)
------
Current provision tax rate 48.4%
</TABLE>
11
<PAGE> 53
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Capital
During the third quarter of 1994, the Bank's capital increased by $1,134,933,
or 3.31%, compared to an increase of $540,288, or 1.79% in the same period of
1993. Without the effect of the adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of December 31, 1993, this
increase was $870,920 or 2.61%. Sources of additional capital in each of the
periods were retained earnings, exercise of stock options and purchases of new
stock by the Bank's profit sharing and 401K plans. The Bank paid a dividend of
thirty-five cents a share to shareholders of record July 13, 1994, or a total
of $485,624. A dividend of $.35 per share, totaling $468,053 was paid in the
third quarter of 1993. Dividend payments continued on a quarterly basis in
1993 and 1994.
The Bank is subject to the Federal Reserve Bank's regulations. In 1989, the
Federal Reserve Bank established risk-based capital guidelines for member
banks. The Comptroller of the Currency and the FDIC have issued similar
guidelines for national banks. The guidelines define Tier 1 Capital and Total
Capital. Tier 1 Capital consists of common and qualifying preferred
shareholders' equity and minority interests in equity accounts of consolidated
subsidiaries. Total Capital consists of, in addition to Tier 1 Capital,
mandatory convertible debt, preferred stock not qualifying as Tier 1 Capital,
subordinated and other qualifying term debt and a portion of the allowance for
loan losses less the remaining 50% of investments in unconsolidated
subsidiaries. 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 minimum required qualifying total capital ratio is 8%, of which at least 4%
must consist of Tier 1 Capital. At September 30, 1994, the Bank's Tier 1
Capital totaled $34,993,000 and Total Capital was $38,210,000. The Bank's Tier
1 capital to total risk weighted assets ratio was 13.60% and its Total Capital
to total risk weighted assets ratio was 14.85%.
It is the intention of the Bank to continue capital augmentation through
earnings retention net of dividends in future years.
Liquidity
Historically, the Bank's balance sheet has shown a high degree of liquidity.
The following table shows balance sheet proportions for the quarter ending
September 30, 1994 and for the years ending December 31, 1993 and December 31,
1992.
12
<PAGE> 54
AVERAGE BALANCE SHEET
<TABLE>
<CAPTION>
9/30/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due From Bank $26,603 6.26% $25,653 6.79% $21,383 6.15%
Investment Securities 102,256 24.04% 73,028 19.34% 70,134 20.18%
Fed Funds Sold 50,783 11.94% 35,212 9.32% 25,950 7.47%
Loans 221,363 52.05% 224,016 59.32% 211,204 60.77%
Premises & Equipment 15,691 3.69% 14,792 3.92% 14,611 4.20%
Other Assets 8,594 2.02% 4,910 1.30% 4,251 1.22%
----- ----- ----- ----- ----- -----
TOTAL ASSETS $425,290 100.00% $377,611 100.00% $347,533 100.00%
======== ======= ======== ======= ======== =======
LIABILITIES
Demand Deposits $60,634 14.26% $50,135 13.28% $40,712 11.71%
Savings & Now 80,919 19.03% 76,649 20.30% 67,141 19.32%
Money Funds 219,184 51.54% 193,474 51.24% 177,367 51.04%
Time Deposits 24,451 5.75% 23,589 6.25% 32,392 9.32%
----- ----- ----- ----- ----- -----
Total Deposits $385,188 90.57% $343,847 91.06% $317,612 91.39%
Other Borrowings 4,208 0.99% 1,398 0.37% 1,354 0.39%
Other Liabilities 1,745 0.41% 2,189 0.58% 1,783 0.51%
----- ----- ----- ----- ----- -----
TOTAL LIABILITIES $391,141 91.97% $347,434 92.01% $320,749 92.29%
SHAREHOLDERS' EQUITY 34,149 8.03% 30,177 7.99% 26,784 7.71%
----- ----- ----- ----- ----- -----
TOTAL LIABILITIES $425,290 100.00% $377,611 100.00% $347,533 100.00%
AND EQUITY ======== ======= ======== ======= ======== =======
</TABLE>
Totals may not add due to rounding.
Bank assets containing a high degree of liquidity are Cash & Due From Banks,
Investment Securities and Federal Funds Sold. For the quarter ending September
30, 1994, those assets comprised 42.24% of the Bank's assets compared to 34.83%
in 1993 and 33.80% in 1992.
A principal source of liquidity is new deposit generation. Historically, loan
generation has periodically lagged deposit growth. The loan to deposit ratio
decreased from 66.50% in 1992 to 65.15% in 1993 and to 57.44% in the third
quarter of 1994. Growth rates for the third quarter of 1994 and for the years
1993 and 1992 are shown in the following table.
<TABLE>
<CAPTION>
September 30, 1994 1993 1992
------------------- ---- ----
<S> <C> <C> <C>
Net Loans $221,363 $224,016 $211,204
Growth Rate (1.18%) 6.07% 16.92%
Deposits $385,188 $343,847 $317,612
Growth Rate 12.02% 8.26% 12.90%
Loans to Deposits 57.47% 65.15% 66.50%
</TABLE>
13
<PAGE> 55
The investment portfolio is another source of liquidity. While a portion of
the portfolio is intended to be a permanent investment, a portion is invested
in short-term obligations pending re-employment of these funds in the loan
portfolio or for deposit withdrawals. As of September 30, 1994, the investment
portfolio totaled $112,416,814. Of that amount, $1,447,256, or 1.29% of the
total portfolio matures within one year. Additionally, the securities in the
portfolio are freely marketable. The portfolio contains $745,049 in unrealized
appreciation.
Within the loan portfolio are investments in short-term bankers acceptances
totaling $14,672,051 at September 30, 1994. These acceptances all mature
within 180 days.
Other internal sources of liquidity are the retention of earnings and cash flow
generated in the loan portfolio.
External sources of liquidity include borrowings available to the Bank. As of
September 30, 1994, the Bank has two lines available totaling $10,000,000 of
which $5,000,000 is committed until June 30, 1995, and on which commitment fees
have been paid. $5,000,000 is on an "as available" basis.
Indebtedness of Management
The Bank has had, and expects to have in the future, banking transactions in
the ordinary course of its business with directors, officers, principal
shareholders and their associates, on the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others, and which, in the opinion of the Bank's Management,
do not involve a greater risk of collectibility. Furthermore, it is the Bank's
policy to preclude its executive officers, with the exception of the Chairman
of the Board, from borrowing from the Bank and any loan to the Chairman or a
director must be approved by the entire Board of Directors.
The following table summarizes the loans to Directors and Principal Holders of
Equity Securities in the quarter ended September 30, 1994:
<TABLE>
<S> <C>
Outstanding Balances as of June 31, 1994 $1,716,202.50
Aggregate Amount of New Loans Made -0-
Aggregate Amount of Repayments 2,488,436.95
Aggregate Amount of Other Changes 2,399,720.99
Aggregate Amount of Outstandings at September 30,1994 $1,627,486.54
</TABLE>
During the period ended September 30, 1994, none of these loans became past due
or was placed on non-accrual.
Results of Operations
In the quarter ended September 30, 1994, average daily assets increased
14
<PAGE> 56
by $46.6 million or 12.30% over the third quarter 1993 and increased by $13.1
million, or 3.18%, over the second quarter of 1994. Deposits and other
borrowings increased $42.6 million, or 12.30% over the third quarter of 1993
and increased $10.5 million, or 2.76% over the first quarter of 1994.
The mix in earning assets reflects a decrease in loan demand. Loans, net of
banker's acceptances, as a percent of earning assets were 59.63% for the
quarter ended September 30, 1994, compared to 66.26% for the third quarter of
1993 and 59.28% for the second quarter of 1994.
Net Interest Income and Margin
In the three months ended September 30, 1994, net interest income on a fully
taxable equivalent basis increased $551,000, or 11.17% from the preceding
quarter and increased $824,000, or 17.69%, over the same period in 1993.
Interest-earning assets averaged $379.2 million, an increase of $42.2 million,
or 12.53%, over the same period in 1993. Interest earned on those assets
increased $1,188,000, or 18.95%, for a total of $7,456,000 in this period. The
composite fully taxable equivalent yield on interest-earning assets increased
from 7.38% in the third quarter of 1993 to 7.80% in the current period.
Compared with the preceding period, interest on earning assets increased
$762,000, or 11.38%. Yields increased fifty five basis points from 7.25% to
7.80%.
Average interest-bearing liabilities increased by $42.6 million to $389.4
million, or 12.30% over the same period in 1993. Interest expense increased
$364,000, or 22.61%. The composite average cost of funds increased from 1.84%
to 2.01%. In this quarter, compared to the prior quarter, the cost of funds
increased by fourteen basis points from 1.87% to 2.01%. Net interest margin
decreased from 5.48% in the third quarter of 1993 to 5.34% in the second
quarter of 1994 and increased to 5.74% in the current quarter.
Non-Interest Income
In this period, non-interest income increased $200,000, or 22.79% over the same
period in 1993 and increased $240,000, or 28.30% from the prior period.
Non-interest income is derived from Trust Department fees, service charges on
deposit accounts, other fees and charges and safe deposit rentals. In this
period, trust fees accounted for $753,000 or 69.92% of non-interest revenue.
Increases in non-interest income over the prior quarter are due to increased
volume of trust business.
Non-Interest Expense
Non-interest expense increased $423,000, or 12.72%, in this period compared to
the same period in 1993, and increased $30,000 or 0.81% over the prior period.
Overall increases in non-interest expense are due to increases in deposits and
earning assets and increased
15
<PAGE> 57
staff and other costs necessary to service this growth.
Provision for Loan and Lease Losses
The Bank provided $75,000 for loan losses in this period compared to $500,000
in the third quarter of 1993 and to $100,000 in the second quarter of 1994.
The Bank's Reserve for Loan Losses is maintained at a level that Management
believes will be adequate to absorb possible losses. During the preceeding
quarter, the Bank adopted a new loan loss adequacy policy to conform to the new
federal guidelines "Interagency Policy Statement on the Allowance for Loan and
Lease Losses (ALLL)" which was issued December 21, 1993. Management
evaluations take into consideration such factors as changes in the nature and
volume of specific problem loans and current economic conditions that may
affect the borrower's ability to repay.
The balance of the reserve for loan losses was $4,738,343 at September 30, 1994
compared to $4,044,239 at September 30, 1993 and to $4,877,101 at June 30,
1994. Net losses totaled $213,757 in the third quarter of 1994 compared to
$407,977 in the third quarter of 1993 and to $1,199,074 in the second quarter
of 1994.
Loans on non-accrual totaled $1,371,058 at September 30, 1994 compared to
$4,817,855 at September 30, 1993 and to $1,189,529 at June 30, 1994. The
previous increase was due to deterioration in the local economy, particularly
in real estate. As of September 30, 1994, the Bank owned two parcels of other
real estate with a book value totaling $3,945,373 compared to one parcel having
a book value of $608,732 at September 30, 1993.
Investment Portfolio
The Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt &
Equity Securities," as of December 31, 1993. SFAS 115 requires entities to
classify investments in debt securities and equity securities with readily
determinable fair values as held to maturity, available for sale, or trading
and establishes accounting and reporting requirements for each classification.
The Bank has classified all of its investments as available for sale as it does
not have the intent to hold such securities until maturity. Available for sale
securities are reported at fair value, with unrealized gains and losses, net of
taxes, reported as separate component of shareholders' equity. At September
30, 1994, this separate component of equity was $439,579.
The portfolio increased by $43,256,989, or 62.55% to $112,416,814 book value
from September 30, 1993 to September 30, 1994. Large deposit generation
coupled with low loan demand created excess liquidity.
Letters of Credit
At September 30, 1994, the Bank's commitments under unused letters of credit
were $4,045,000 of which 20% are reasonably expected to be exercised within the
next twelve months. At September 30, 1993, such commitments totaled $6,985,222
and at June 30, 1994, $4,477,000.
16
<PAGE> 58
Interest Analysis
September 30, 1994
The following table is a summary of the major elements of income and expenses
for the quarter ended September 30, 1994, compared with the same quarter of
1993 and the quarter ended June 30, 1994.
<TABLE>
<CAPTION>
For the Three Months Ended For the Three Months Ended
September 30 September 30 Percent September 30 June 30 Percent
1994 1993 Change 1994 1994 Change
<S> <C> <C> <C> <C> <C> <C>
Interest Income $7,127,192 $5,944,964 19.89% $7,127,192 $6,370,588 11.88%
Interest Expense 1,975,212 1,609,567 22.72% 1,975,212 1,761,620 12.12%
Net Interest Income $5,151,980 $4,335,397 18.84% $5,151,980 $4,608,968 11.78%
Provision for Loan Losses 75,000 500,000 -85.00% 75,000 100,000 -25.00%
Net Interest Income after
Provision for Loan Losses $5,076,980 $3,835,397 32.37% $5,076,980 $4,508,968 12.60%
Non-Interest Income 1,077,892 877,864 22.79% 1,077,892 847,560 27.18%
Non-Interest Expense 3,749,473 3,326,599 12.71% 3,749,473 3,718,514 0.83%
Income Before Securities Gains $2,405,399 $1,386,662 73.47% $2,405,399 $1,638,014 46.85%
Net Gain on Sale of Securities 10,421 15,375 0.00% 10,421 0 100.00%
Net Income Before Income Taxes $2,415,820 $1,402,037 72.31% $2,415,820 $1,638,014 47.48%
Income Taxes 689,232 412,153 67.23% 689,232 467,323 47.49%
Net Income $1,726,588 $989,884 74.42% $1,726,588 $1,170,691 47.48%
Earnings per Share of
Common Stock:
Net Income $1.21 $0.71 70.42% $1.21 $0.83 45.78%
Dividends per Share of
Common Stock $0.35 $0.35 0.00% $0.35 $0.35 0.00%
</TABLE>
17
<PAGE> 59
Interest Differential
September, 1994/September, 1993
INTEREST RATES AND NET INTEREST DIFFERENTIAL
The major portion of the Bank's income results from the difference between
interest income derived from earning assets and interest expense paid on
liabilities incurred primarily for the funding of those assets. The
difference is referred to as net interest income. Net interest income
expressed as a percent of average total earning assets is referred to as
net interest margin. Net interest income and net interest margin are
summarized in the following comparisons for the three months ended
September 30, 1994 over the same period in 1993 and for the three months
ended June 30, 1994. Average balances are expressed in thousands of
dollars:
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, 1994 September 30, 1993
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate % Balance Expense Rate %
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable $63,341 $986 6.18% $35,031 $585 6.63%
Non-Taxable* 38,915 968 9.87% 34,879 950 10.81%
Federal Funds Sold 50,783 564 4.41% 35,935 271 2.99%
Loans-Interest & Fees 226,141 4,938 8.66% 231,110 4,462 7.66%
Total Earning Assets 379,180 7,456 7.80% 336,955 6,268 7.38%
Cash & Due From Banks 26,603 26,416
Premises & Equipment 15,691 14,787
Other Assets 3,816 544
Total Assets $425,290 $378,702
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand $60,634 $0 0.00% $51,680 $0 0.00%
Savings & Now 80,919 175 0.86% 75,979 211 1.10%
Money Funds 219,184 1,550 2.81% 193,768 1,208 2.47%
Time 24,451 223 3.62% 24,779 185 2.96%
Other Borrowed Funds 4,208 26 2.45% 551 6 4.32%
Total Deposits & Borrowings 389,396 1,974 2.01% 346,757 1,610 1.84%
Other Liabilities 1,745 1,517
Shareholders' Equity 34,149 30,428
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $425,290 $378,702
Interest and Loan Fee Income 7,456 7.80% 6,268 7.38%
Interest Expense** 1,974 2.07% 1,610 1.90%
NET INTEREST INCOME AND MARGIN $5,482 5.74% $4,658 5.48%
<CAPTION>
Balance Percent Inc./Exp. Percent
Change Change Change Change
<S> <C> <C> <C> <C>
ASSETS
Investment Securities:
Taxable 28,310 80.81% 401 68.55%
Non-Taxable* 4,036 11.57% 18 1.89%
Federal Funds Sold 14,848 41.32% 293 108.12%
Loans-Interest & Fees (4,969) -2.15% 476 10.67%
Total Earning Assets 42,225 12.53% 1188 18.95%
Cash & Due From Banks 187 0.71%
Premises & Equipment 904 6.11%
Other Assets 3,272 601.47%
Total Assets 46,588 12.30%
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand 8,954 17.33% 0 0.00%
Savings & Now 4,940 6.50% -36 -17.06%
Money Funds 25,416 13.12% 342 28.31%
Time (328) -1.32% 38 20.54%
Other Borrowed Funds 3,657 663.70% 20 333.33%
Total Deposits & Borrowings 42,639 12.30% 364 22.61%
Other Liabilities 228 15.03%
Shareholders' Equity 3,721 12.23%
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 46,588 12.30%
Interest and Loan Fee Income 1188 18.95%
Interest Expense** 364 22.61%
NET INTEREST INCOME AND MARGIN 824 17.69%
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis using
the federal statutory rate of 34%. The tax equivalent adjustment was
$329,093 for the quarter ending September 30, 1994 and $322,965 for the
quarter ending September 30, 1993.
**Interest on deposits as a percent of earning assets.
18
<PAGE> 60
Interest Differential
September, 1994/June, 1994
INTEREST RATES AND NET INTEREST DIFFERENTIAL (CONTINUED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, 1994 June 30, 1994
--------------------------------------- ------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Change in
Balance Expense Rate % Balance Expense Rate % Average
ASSETS Balance
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
Taxable $63,341 986 6.18% $67,185 881 5.26% (3,844)
Non-Taxable* 38,915 968 9.87% 37,873 952 10.08% 1,042
Federal Funds Sold 50,783 564 4.41% 45,643 438 3.85% 5,140
Loans-Interest & Fees 226,141 4,938 8.66% 219,390 4,423 8.09% 6,751
Total Earning Assets 379,180 7,456 7.80% 370,091 6,694 7.25% 9,089
Cash & Due From Banks 26,603 26,823
Premises & Equipment 15,691 15,815
Other Assets 3,816 (541)
Total Assets $425,290 $412,188
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand $60,634 $0 0.00% $55,857 $0 0.00% 4,777
Savings & Now 80,919 175 0.86% 85,682 181 0.85% (4,763)
Money Funds 219,184 1,550 2.81% 216,159 1,416 2.63% 3,025
Time 24,451 223 3.62% 20,761 160 3.09% 3,690
Other Borrowed Funds 4,208 26 2.45% 460 6 5.23% 3,748
Total Deposits & Borrowings 389,396 1,974 2.01% 378,919 1,763 1.87% 10,477
Other Liabilities 1,745 562
Shareholders' Equity 34,149 32,707
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $425,290 $412,188
Interest and Loan Fee Income 7,456 7.80% 6,694 7.25%
Interest Expense** 1,974 2.07% 1,763 1.91%
NET INTEREST INCOME AND MARGIN $5,482 5.74% $4,931 5.34%
<CAPTION>
% Change in % Change in %
Change Income/ Change Rate Paid/ Change
ASSETS Expense Earned
<S> <C> <C> <C> <C> <C>
Investment Securities:
Taxable -5.72% 105 11.92% 0.92% 17.42%
Non-Taxable* 2.75% 16 1.68% -0.21% -2.12%
Federal Funds Sold 11.26% 126 28.77% 0.56% 14.48%
Loans-Interest & Fees 3.08% 515 11.64% 0.58% 7.13%
Total Earning Assets 2.46% 762 11.38% 0.55% 7.53%
Cash & Due From Banks
Premises & Equipment
Other Assets
Total Assets
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits & Borrowings
Demand 8.55% 0 0.00% 0.00% 0.00%
Savings & Now -5.56% (6) -3.31% 0.01% 1.26%
Money Funds 1.40% 134 9.46% 0.18% 6.78%
Time 17.77% 63 39.38% 0.53% 17.06%
Other Borrowed Funds 814.78% 20 333.33% -2.78% -53.14%
Total Deposits & Borrowings 2.76% 211 11.97% 0.15% 7.77%
Other Liabilities
Shareholders' Equity
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest and Loan Fee Income 762 11.38% 0.55% 7.53%
Interest Expense** 211 11.97% 0.15% 8.10%
NET INTEREST INCOME AND MARGIN 551 11.17% 0.39% 7.33%
</TABLE>
*Interest income is calculated on a fully taxable equivalent basis
using the federal statutory rate of 34%. The tax equivalent adjustment
was $329,093 for the quarter ending September 30, 1994 and $323,782 for the
quarter ending June 30, 1994.
**Interest on deposits as a percent of earning assets.
19
<PAGE> 61
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the bank is a party.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
An index of all financial statements files as a part of this quarterly report
is set forth at page 2 and is incorporated herein by reference.
There are no other applicable exhibits to be filed as a part of this report.
On October 4, 1994, the Bank filed Form 8-K reporting that it had executed an
agreement to merge with Comerica Incorporated on October 4, 1994 as described
in Items 1 and 5.
II-1
<PAGE> 62
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
University Bank & Trust Company
By /s/ Carl J. Schmitt
---------------------------
Carl J. Schmitt, Chairman
and Chief Executive Officer
Date: November 13, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Signature Title
- --------------------------------------------------------------------------------
<S> <C>
Carl J. Schmitt* Chairman of the Board, Chief
Executive Officer and Director
(Principal Executive Officer)
Gayle A. Anderson* Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
Lawrence A. Aufmuth* Director
Thomas R. Brown* Director
Linda R. Meier* Director
George G. C. Parker* Director
William A. Preston* Director
Leslie M. Quist* Director
Leonard Ware* Director
*By /s/ Carl J. Schmitt
-------------------------
(Carl J. Schmitt,
Attorney-In-Fact)
Date: November 13, 1994
</TABLE>
<PAGE> 1
EXHIBIT 99(l)
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of Earliest event reported): JUNE 17, 1994
UNIVERSITY BANK & TRUST COMPANY
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2622607
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 LYTTON AVENUE, PALO ALTO, CALIFORNIA 94301
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (415) 327-0210
UNIVERSITY NATIONAL BANK & TRUST COMPANY
(Former name or former address, if changed since last report)
THIS REPORT INCLUDES A TOTAL OF 14 PAGES
EXHIBIT INDEX IS ON PAGE 2
-1-
<PAGE> 2
ITEM 5. OTHER EVENTS
(a) Effective June 17, 1994, University National Bank & Trust Company
("UNBT") converted into University Bank & Trust Company, a California banking
corporation which is a member of the Federa Reserve System, ("Registrant")
pursuant to a Plan of Conversion approved by the shareholders of UNBT,
resulting in the shareholders of UNBT becoming the shareholders of the
Registrant (the "Conversion").
A summary of the Conversion is set forth a pages 6-15, inclusive of the
definitive proxy material of UNBT filed pursuant to Section 14A of the
Securities Exchange Act of 1934 (the "Exchange Act"). A copy of pages 6-15,
described above, is attached hereto and incorporated herein by reference.
(b) Prior to the Conversion, the securities of UNBT were registered
pursuant to Section 12(g) of the Exchange Act, and the UNBT filed reports
required by Section 13 of the Exchange Act with the Office of the Comptroller
of the Currency pursuant to Section 12(i) of the Exchange Act.
As stated in (a), upon consummation of the Conversion, all shareholders
of UNBT, other than those electing to exercise dissenters rights, became
shareholders of the Registrant on a share for share basis. Accordingly, the
securities of Registrant became registered pursuant to Section 12(g) of the
Exchange Act as of June 17, 1994.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
EXHIBIT NO. PAGE
----
(2) Plan of Conversion 14
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNIVERSITY BANK & TRUST COMPANY
June 17, 1994 /s/ CARL J. SCHMITT
Carl J. Schmitt
-3-
<PAGE> 4
PROPOSAL NO. 1
APPROVAL OF PLAN OF CONVERSION
Provisions of the California Financial Code and regulations of the
California Superintendent of Banks (the "Superintendent") allow a national
banking association, such as the Bank, to convert into a California licensed
bank. The Board of Directors has determined that it is in the best interests of
the Bank to undertake such a conversion (the "Conversion"). Following the
Conversion, the Bank will be known as University Bank & Trust Company (the
"State Bank").
The Conversion was approved by the Board of Directors of the Bank on
August 26, 1993 and requires the approval of the Bank's shareholders, the
Superintendent and the Board of Governors of the Federal Reserve System (the
"FRB").
The Bank does not propose to make any changes in the operations or
management of the Bank as a result of the Conversion except insofar as may be
required from time to time to comply with the requirements of state and federal
law and the regulations of the Superintendent or any other applicable regulatory
agency promulgated thereunder. The Board of Directors of the State Bank will be
identical to the Board of Directors of the Bank, assuming that the Conversion
is approved by the shareholders, except that Director Elizabeth Morgenthaler
has chosen not to stand for election to the Board of the State Bank.
The Bank has filed an Application for Conversion (the "Application")
with the Superintendent, which has been approved subject to shareholder
approval. Approval of the Application by the Superintendent does not constitute
a recommendation for or endorsement of the Conversion. As the State Bank, like
the Bank, will be a member of the Federal Reserve System, an application for
membership in the Federal Reserve System has also been filed with the FRB.
The Bank anticipates that the Conversion will become effective shortly
after the Special Meeting but not later than January 31, 1994.
REASON FOR THE CONVERSION
The Board of Directors of the Bank has determined that as a California
licensed bank which is a member of the Federal Reserve System (a "state member
bank"), the State Bank would have greater flexibility with respect to corporate
and banking matters, including, but not limited to, branching, operation of a
courier service, expansionary procedures such as mergers and acquisitions, and
general corporate governance. See "Description of State Bank Capital Stock and
Comparison of Rights of Holders of State Bank Common Stock and Bank Common
Stock."
Additionally, the Board of Directors has determined that the Conversion
would result in a cost savings to the Bank as yearly assessments and fees
imposed by the Office of the Comptroller of the Currency ("OCC"), the Bank's
primary regulator, have been consistently higher than those imposed by the
Superintendent. For example, while the OCC's annual assessment of the Bank over
the past 12 months totalled $93,000, as a California state licensed bank, such
assessment would have been $31,000. Also, while the OCC charges $101 per hour
for a trust examination, the Superintendent charges $200 per day.
Accordingly, the Board of Directors deems it to be in the best
interests and to the advantage of the Bank and its shareholders to convert from
a national banking association to a state member bank.
-6-
<PAGE> 5
ASPECTS OF THE CONVERSION
The Plan of Conversion and Exchange of Shares
A copy of the Plan of Conversion appears as Appendix A to this Proxy
Statement. The Plan of Conversion provides that the State Bank will be the
legal successor to the Bank for purposes of creditor obligations. The Plan of
Conversion sets forth a mechanism by which the outstanding shares of Bank
Common Stock will be exchanged on a one-for-one basis for shares of common
stock of the State Bank, so that the existing shareholders of the Bank
thereafter will be shareholders of the State Bank.
The Plan of Conversion was submitted to and approved by the Board of
Directors of the Bank and must be approved by two-thirds of the outstanding
shares of Bank common Stock as a condition of the approval of the Conversion by
the Superintendent. The approval of the shareholders of this PROPOSAL NO. 1
will constitute the approval of the Plan of Conversion.
Articles and Bylaws of the State Bank
Upon conversion to the State Bank, the State Bank will be governed by new
Articles of Incorporation and Bylaws, copies of which may be obtained on
request of the Bank. The Bank has submitted its proposed Articles of
Incorporation and Bylaws to the Superintendent for comment and approval as a
part of the Application. The Superintendent may request changes to the proposed
Articles of Incorporation or Bylaws. Shareholder approval of this PROPOSAL
NO. 1 will constitute approval of the State Bank's Articles of Incorporation, a
copy of which is attached as Exhibit A to the Plan of Conversion, and, to the
extent that changes requested by the Superintendent are not material, approval
of this PROPOSAL NO. 1 will be deemed to constitute approval of such requested
changes.
DISSENTERS' RIGHT OF APPRAISAL
Shareholders of the Bank who dissent from the Conversion may obtain the
rights and remedies of dissenting shareholders by following the procedures set
forth in Title 12 United States Code Section 214a(b), set forth in full in
Appendix B, hereto.
IMPORTANT DETAILS CONCERNING THESE PROCEDURES ARE SET FORTH BELOW;
FAILURE TO TAKE THESE ACTIONS TIMELY AND PROPERLY WILL RESULT IN THE
LOSS OF DISSENTERS' RIGHTS OF APPRAISAL.
TO OBTAIN THE RIGHTS OF A DISSENTING SHAREHOLDER, A SHAREHOLDER MUST
EITHER (A) VOTE AGAINST THE CONVERSION OR (B) GIVE NOTICE OF HIS OR HER DISSENT
IN WRITING TO THE BANK AT OR PRIOR TO THE SPECIAL MEETING. Once a shareholder
has taken the foregoing steps, his or her dissenter's rights will be perfected
and such shareholder will be entitled to receive the cash value of his or her
shares of the Bank Common Stock by following the procedures set forth below.
Immediately upon the effectiveness of the Conversion, the State Bank
will forward to each shareholder who has perfected dissenter's rights a notice
stating that the Conversion has been consummated. A form requesting a cash
payment for shares of the Bank's Common Stock (the "Cash Payment Request") will
accompany the notice and must be signed by the shareholder and promptly
returned to the State Bank in order to receive such cash payment.
DISSENTING SHAREHOLDERS MUST RETURN THE CASH PAYMENT REQUEST FORM TO
THE STATE BANK WITHIN THIRTY (30) DAYS OF THE CONSUMMATION OF THE CONVERSION IN
ORDER TO RECEIVE THE CASH VALUE OF THEIR SHARES.
-7-
<PAGE> 6
The value of the dissenting shareholders' shares of Bank Common Stock
will be determined as of December 20, 1993, the date of the Special Meeting,
and the valuation will be made by a committee of three (3) persons, one of
whom is elected by the dissenting shareholders, one of whom is elected by the
State Bank and the third of whom is appointed by the other two. Should a
dissenting shareholder object to this valuation, he or she may appeal to the
OCC for a reappraisal within five (5) days of notification of the valuation.
Such reappraisal by the OCC will be final and binding upon the dissenting
shareholder. The expenses of any such reappraisal will be paid by the State
Bank.
The receipt of a cash payment for dissenting shares will result in
recognition of gain or loss for federal income tax purposes by such dissenting
shareholders. See "Tax Consequences," herein.
THE FOREGOING PURPORTS ONLY TO SUMMARIZE A COMPLEX AREA OF LAW AND
SHAREHOLDERS CONSIDERING EXERCISING DISSENTERS' RIGHTS SHOULD READ IN FULL
APPENDIX B HERETO AND SHOULD CONSULT THEIR OWN LEGAL AND TAX ADVISORS.
DESCRIPTION OF STATE BANK CAPITAL STOCK AND COMPARISION OF RIGHTS OF HOLDERS OF
STATE BANK COMMON STOCK AND BANK COMMON STOCK
Description of State Bank Capital Stock
The State Bank will be authorized by its Articles of Incorporation to
issue Six Million, (6,000,000) shares of common stock, no par value (the "State
Bank Common Stock"). The Bank currently is authorized to issue Three Million
(3,000,000) shares of Common Stock. The Board of Directors has determined that
it is in the best interests of the Bank to increase the number of shares of
common stock which the State Bank will be authorized to issue. The Board of
Directors of the Bank/State Bank has no present intention to issue additional
shares of common stock.1/ As of November 19, 1993, there were 1,343,002 shares
of Bank Common Stock issued and outstanding. Also, at November 19, 1993, there
were 167,000 shares subject to outstanding options under the Bank's Stock
Option Plan and 9,000 shares subject to outstanding options granted under the
Bank's Directors' Stock Option Plan, at a exercise prices ranging from $11.25
to $32.50 per share. An additional 6,950 and 11,000 shares of Bank Common Stock
have been reserved for future grants of options under the Bank's Stock Option
Plan and Directors' Stock Option Plan, respectively, and will be so reserved
under State Bank's successor stock option plans.
The State Bank, like the Bank, will not be authorized to issue shares
of preferred stock.
State Bank Common Stock
Each holder of State Bank common stock will be entitled to one vote for
each share held on all matters to be voted on by shareholders. In any election
of directors, each shareholder will have the right to cumulate votes, giving
one candidate a number of votes equal to the number of directors to be elected
multiplied by the number of shares held by the shareholder, or distributing
such number of votes among as many candidates as the shareholder sees fit.
Shareholders will have no preemptive rights or other rights to subscribe for
additional shares. There will be no conversion rights, redemption rights or
sinking fund provisions with respect to shares of State Bank common stock. All
of the shares offered in exchange for shares of Bank Common Stock pursuant to
the Conversion will, when issued, be fully paid and will not be subject to
further calls or assessments, except as set forth in "Assessability of State
Bank Common Stock," below.
- ----------------------
1/ The difference in the par value of the Bank and State Bank
common stock is immaterial to the rights of Bank shareholders.
-8-
<PAGE> 7
Subject to the preferential rights, if any, of the holders of
outstanding senior securities, the holders of Common Stock are entitled to
receive dividends when and as declared by State Bank's Board of Directors out
of funds legally available therefor, subject to the restrictions set forth in
the California Corporations Code (the "Corporations Code"). For a description
the provisions of the Corporations Code and other restrictions with respect
to the payment of dividends, see "Comparison of Rights of Shareholders -
Dividends," herein.
Subject to the preferential rights, if any, of the holders of
outstanding senior securities, if State Bank were to liquidate, dissolve or
wind up, the holders of State Bank common stock would be entitled to receive
pro rata the net assets of State Bank remaining after the payment of all its
creditors.
Assessability of State Bank Common Stock
Shares of State Bank common stock when issured will be non-assessable,
except as provided in Section 662 of the California Financial Code. Whenever
it appears that the contributed capital of a bank is impaired, Section 662
requires the Superintendent to order the bank to correct the impairment within
sixty (60) days. The contributed capital of a bank (total shareholders' equity
other than retained earnings) is considered impaired if the bank has deficit
retained earnings in an amount exceeding 40% of contributed capital. Unless
the impairment is corrected, the directors of the bank must levy and collect an
assessment on the outstanding shares of stock of the bank. If the assessment is
not paid, the shares may be sold or forfeited to satisfy the assessment.
Shareholders have no other personal liability for the assessment.
Comparison of Rights of Shareholders
The rights of the shareholders of Bank are governed by the terms of the
National Bank Act and regulations promulgated by the OCC. Shareholders of State
Bank, which is a California corporation, will have the rights set forth in
the Corporations Code and the California Financial Code. Accordingly, the
rights of Bank shareholders who receive State Bank common stock in the
Conversion will thereafter be governed by California law. Some of the
significant differences in the laws governing California corporations and
national banks are discussed below.
The following also summarizes certain terms of the Articles of
Association and Bylaws of Bank and the Articles of Incorporation and Bylaws of
State Bank, and is in all respects qualified by the provisions thereof.
Similarly, the discussions herein of the provisions of the National Bank Act
and the Corporations Code are qualified in their entirety by the terms and
provisions thereof and should be read in conjunction therewith.
-9-
<PAGE> 8
Indemnification
The Bank's Articles of Association permit the Bank to indemnify and
reimburse any person for reasonable expenses actually incurred in connection
with any civil or criminal action, suit or proceeding to which he or she is
made a party by reason of being or having been an officer, director or employee
of the Bank. However, indemnification or reimbursement is not permitted with
respect to any action, suit or proceeding as to which the officer, director or
employee is ultimately found guilty of or liable for gross negligence, willful
misconduct or criminal acts in the performance of duties to the Bank. In
addition, court approval is required, or alternatively the affirmative vote of
a majority of the shareholders or disinterested directors is required, for
payments made in respect of a settlement of such an action or proceeding. The
Bank's Articles of Association specifically provide that the right of
indemnification or reimbursement provided for therein is not exclusive of any
other rights which may be provided by law.
State Bank's Articles of Incorporation include a provision under
California law authorizing indemnification of its agents(2) in excess of the
indemnification provided under California law generally. State Bank's Articles
of Incorporation also limit the personal liability of directors for monetary
damages to State Bank or its shareholders to the fullest extent permitted by
law, including damages resulting from a breach of fiduciary duty, except in
certain instances. These provisions generally provide a broad ability to
indemnify persons acting on State Bank's behalf, as well as protection for
directors' action taken in good faith.
Under Section 317 of the Corporations Code, a California corporation
may adopt a provision in its articles of incorporation eliminating the
liability of a director to the corporation or its shareholders for monetary
damages from breach of the directors' fiduciary duty of care. Such a provision
may not, under California law, eliminate or limit the liability of directors
stemming from acts of bad faith or an abdication of duty. Specifically, under
California law, the articles cannot limit or eliminate the liability of a
director resulting from the following:
(i) acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law;
(ii) acts or omissions that a director believes to be contrary to
the best interests of the corporation or its shareholders or
that involve the absence of good faith on the part of the
director;
(iii) transactions from which a director derived an improper personal
benefit;
(iv) acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in
circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's
duties, or a risk of serious injury to the corporation or its
shareholders;
(v) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's
duty to the corporation or its shareholders;
(vi) acts which violate the provisions of Corporations Code Section
310 governing transactions or contracts with or by the
corporation in which a director has a material financial
interest; or
- --------------------
2 "Agent" is defined is Section 317 of the California Corporations Code to
include, among others, any person who is or was a director, officer,
employee or other agent of the corporation.
-10-
<PAGE> 9
(vii) acts which violate the provisions under Corporations Code
Section 316 governing distributions to shareholders contrary to
rules regulating such distributions and for the making of
prohibited loans or guarantees.
The elimination of a director's monetary liability applies only to
claims against a director arising out of his or her role as a director and not,
in the case of a director who also serves as an officer, to claims against the
person in the capacity of an officer or in any other non-director capacity.
Similarly, the limitations permitted by Section 317 apply only to derivative
actions and not to third party claims. This means that actions brought by
State Bank's customers, discharged employees or regulatory agencies, for
example, are not affected by this provision of State Bank's Articles of
Incorporation. Further, the Articles provision does not eliminate or limit a
director's liability based on a breach of the director's duty of loyalty to
State Bank or its shareholders (which generally concerns directors'
self-interested dealings) or to liability arising under federal or state
securities laws or federal or state laws regulating bank holding companies.
Section 317 of the Corporations Code also permits indemnification of
"agents" of a corporation. State Bank's Articles of Incorporation authorize
State Bank, through bylaw provisions, agreements or otherwise, to indemnify its
corporate agents to the maximum extent permitted under California law. State
Bank has included a provision in its Bylaws providing for such indemnification.
Pursuant to Section 317, State Bank's Articles of Incorporation also authorize
broader indemnification of its agents than that which is expressly permitted by
Section 317 for a breach of duty by the agent to State Bank and its
shareholders under certain circumstances and subject to certain limitations set
forth in the Code. Because the indemnification provisions of Section 317
are nonexclusive, it is possible that certain claims beyond the
specific scope of Section 317 may be indemnifiable.
Under Section 317 of the Corporations Code and pursuant to State Bank's
Bylaws, State Bank shall indemnify an agent who was or is threatened to be made
a party in a third party action against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such
action. With respect to derivative actions, State Bank shall indemnify an
agent who was or is a party or is threatened to be made a party to any
threatened, pending or completed action against expenses actually and
reasonably incurred in connection with the defense or settlement of such
derivative action. However, any specific instance of indemnification must be
approved either by a majority of the disinterested directors, upon receipt of a
legal opinion if a quorum of directors is not available, a majority of the
disinterested shares voting at a meeting or upon application to the court in
which the action was pending.
In order to qualify for indemnification, the agent must have acted in
good faith and in a manner the agent believed (or reasonably believed in the
case of third party actions) to be in the best interests of State Bank and its
shareholders.
Under the Corporations Code, State Bank may not provide indemnification
for any liability arising out of acts, omissions or transactions set forth in
the seven exceptions of director liability summarized in (i) to (vii) in the
discussion above. In addition, State Bank cannot indemnify an agent in the
following two sets of circumstances:
(i) Indemnification of expenses is prohibited where the agent is
found to be liable to the corporation, unless and only to the
extent that such indemnification of expenses is expressly
allowed by the court. If the action is settled without court
approval, neither the settlement amount nor expenses incurred
in defending the action can be recovered through
indemnification; and
(ii) Indemnification is prohibited (with certain exceptions) if such
indemnification would be inconsistent with a provision of
State Bank's Articles of Incorporation, Bylaws, shareholder
-11-
<PAGE> 10
resolutions or an agreement which prohibits or otherwise limits
indemnification or would be inconsistent with any condition
expressly imposed by a court in approving a settlement.
Further, the Board of Directors of State Bank may authorize State Bank
to enter into indemnification agreements with its agents. No such agreements
presently exist.
Finally, under the Corporations Code, the State Bank may advance funds
to cover the expenses of defending an action or proceeding only upon receipt of
an undertaking by or on behalf of the agent to repay the amount advanced if it
is ultimately determined that the agent is not entitled to be indemnified as
authorized by California law.
Removal of Directors
The National Bank Act contains no provision with respect to removal of
Bank directors. Under California law, a director may be removed from office for
cause if he or she has been declared of unsound mind by an order of court or
has been convicted of a felony. A director of a California corporation may be
removed without cause upon the affirmative vote of a majority of the
outstanding shares of the corporation, except when the votes cast against
removal or not consenting in writing to the removal would be sufficient to
elect the director if voted cumulatively at an election at which the same total
number of votes were cast. In other words, the Corporations Code provides for
certain protections against removal of directors who represent minority
shareholders interests.
Supermajority Approval Requirements
The National Bank Act contains several provisions which require a
two-thirds (2/3) vote of the outstanding shares in order to authorize a
particular activity or event. For example, a national bank may only reduce or
increase its capital upon the vote of two-thirds of the outstanding shares of
the bank, assuming that regulatory approval is obtained. Similarly, a national
bank may not merge with or into another financial institution without the
approval of two-thirds of the outstanding shares of such national bank. A
national bank may elect to go into voluntary liquidation and be closed only
upon the vote of shareholders owning two-thirds of the outstanding shares of
the bank.
By contrast, the Corporations Code allows a corporation to increase its
authorized capital stock upon the vote of a majority of the outstanding shares
of the corporation. Similarly, a California corporation may elect to
voluntarily wind up and dissolve upon the vote of a majority of outstanding
shares of the corporation. Under California law, a California corporation may
merge with another corporation upon the approval of a majority of the
outstanding shares. In the instance where after consummation of the merger the
shareholders of a California corporation would retain 5/6 of the voting power
which such shareholders had prior to the merger, no shareholder approval is
required.
Stock Dividends and Stock Splits
Under the National Bank Act, an increase in capital through the
payment of a stock dividend requires the approval of two-thirds (2/3) of the
outstanding shares, assuming that other requirements are met. A stock split
requires the approval of a majority of the bank's shareholders because of the
reduction in par value which is effected thereby. By contrast under the
Corporations Code, a stock split may be approved by the California corporation's
board of directors alone. Similarly, the distribution of a stock dividend under
the Corporations Code does not required the approval of the shareholders.
-12-
<PAGE> 11
Dividends
National banks are restricted from paying dividends until both a
capital and earnings component are met. With respect to capital, no dividend
may be paid if it results in a withdrawal of capital. In addition, a national
bank may not pay a dividend if losses have been sustained which equal or exceed
the bank's undivided profits then on hand. Similarly, cash dividends may not
be paid in an amount greater than the net profits then on hand, after deducting
from net profits the losses and bad debts of the bank. With respect to
earnings requirements, no national bank may pay a quarterly or semi-annual cash
dividend as an initial matter until its surplus account equals its common
equity account, unless the bank carries to the surplus account an amount which
is not less than one-tenth of its profits for the preceding half year. In the
case of annual dividends, the bank may carry to surplus not less than one-tenth
of its profits for the preceding year. OCC approval is required for cash
dividends in an amount which exceeds the bank's net profits of the current
year combined with its retained net profits for the preceding two years less
any required transfers to surplus.
A California chartered bank may not make a distribution to shareholders
(which includes a payment of dividends but not stock dividends) which exceeds
the lesser of (a) the retained earnings of the bank, or (b) the net income of
the bank for its last three (3) fiscal years, less the amount of any previous
distributions during such period. With the approval of the Superintendent, a
California bank may make a distribution not exceeding its retained earnings,
its net income for the past fiscal year or its net income for the current
fiscal year.
Approval by Written Consent of Shareholders
The shareholders of a national bank are not permitted to consent in
writing to actions which may otherwise be taken at a meeting of shareholders.
Except with respect to the election of a director to a vacancy on the board of
directors caused by the removal of a director, the Corporations Code generally
permits shareholders to consent in writing to any action which may be taken at
an annual or special meeting of shareholders, so long as the consent is signed
by the holders of not less than the minimum number of shares 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, and so long as a notice of the
action so taken is given to any shareholders whose consents were not solicited
or received.
Dissenters' Rights
Shareholders of a California chartered bank may be entitled to
dissenters' rights of appraisal in the event that such bank is being sold to or
merged with or into another bank or financial institution, so that such bank is
the "disappearing" bank. In such a case, shareholders of the bank who do not
vote in favor of a merger or other reorganization, either by voting against the
merger or other reorganization or by abstaining from voting, are entitled to
certain rights under Chapter 13 of the Corporations Code.
If the transaction is consummated, those shareholders who elect to
exercise their dissenters' rights and who properly and timely perfect such
rights are entitled to receive the "fair market value" in cash of their shares
in lieu of the amount of consideration which they would otherwise receive
pursuant to the transaction. Unlike a national bank, where the value of
dissenting shares is determined as of the date of shareholder approval, in the
case of a California corporation, the value of the dissenting shares is
deteriminted the day before the first announcement of the terms of the
transaction, excluding any appreciation or depreciation caused as a consequence
of the transaction.
Under California law, the parties to the transaction determine the fair
market value of shares of the respective corporation's common stock. However,
the determination by the respective corporations of fair market value is not
binding on their respective shareholders, and if a dissenting shareholder
chooses not to
-13-
<PAGE> 12
accept that offer, he or she has the right during a period of six (6) months
following the mailing of a Notice of Approval to commence a lawsuit to have the
fair market value determined by a court.
The Corporations Code also provides that no shareholder of a California
corporation is entitled to dissenters' rights in certain transactions to which
dissenters' rights would apply, if the corporation, or the shareholders of the
corporation immediately before the transaction, shall own, immediately after the
transaction, equity securities possessing more than five-sixths (5/6) of the
voting power of the surviving or acquiring corporation.
Moreover, with respect to a corporation, such as State Bank, whose
stock will be listed on the NASDAQ National Market System, no dissenters'
rights are applicable in any transaction unless demands for payment are filed
with the corporation, not later than the date of the shareholders meeting, with
respect to 5% or more of the outstanding shares, and such shares are voted
against the transaction.
Amendment of Articles
Under the National Bank Act, the Articles of Association of a national
bank may be amended by approval of shareholders owning a majority of the
national bank's common stock. However, certain amendments, such as amendments
increasing the national bank's authorized, but unissued common stock require
the approval of shareholders owning two-thirds (2/3) of the outstanding shares.
Under the Corporations Code, any amendment to the Articles of
Incorporation of a California corporation may be made with the approval of a
majority of the outstanding voting shares of the corporation, unless the
Articles require a greater vote. The Articles of Incorporation of State Bank do
not contain such a supermajority provision.
-14-
<PAGE> 13
TAX CONSEQUENCES
Exchange of Shares
The Bank believes that the Conversion will constitute a tax-free
reorganization for federal income tax purposes and that shareholders will
recognize no gain or loss as a result thereof. The federal income tax
consequences of the Conversion are complex, and shareholders are urged to
consult their own tax advisors as to the precise federal, state, local or other
tax consequences of the Conversion.
Payments on Dissenters' Shares
Where a shareholder of the Bank dissents to the Conversion and receives
solely cash in exchange for his or her shares, such cash will be treated as
having been received by the shareholder as a distribution in redemption of his
or her shares subject to the provisions and limitations of Section 302 of the
Internal Revenue Code of 1986, as amended (the "Code"). Generally, such
distribution will be treated as payment in exchange for stock as provided in
Section 302(a) of the Code if (a) the redemption is not essentially
equivalent to a dividend; (b) the distribution is substantially
disproportionate to the shareholder; or (c) the redemption results in a
complete termination of the shareholder's interest in the corporation. If the
redemption is treated as an exchange under any of the foregoing tests, and if
the shares are held as a capital asset at the effective time of the Conversion,
such Bank shareholder will recognize capital gain or loss measured by the
difference between the amount of cash received and his or her adjusted basis in
the shares of Bank Common Stock surrendered. If, however, the distribution
does not qualify as an exchange under Section 302 of the Code, a dissenting
shareholder will be treated as having received a dividend to the extent of the
lesser of the cash received or said shareholder's ratable share of the amount
of the Bank's earnings and profits (both current and accumulated). Such a
dividend will be treated as ordinary income.
In determining whether the foregoing tests for exchange treatment are
met, the constructive ownership rules of Section 318 of the Code apply.
Generally, under Section 318 of the Code: (a) a dissenting shareholder may be
considered to own stock that is owned by such shareholder's spouse, children,
grandchildren and parents; (b) a shareholder will be treated as owning stock
owned, directly or indirectly, by or for a trust of which such shareholder is
a beneficiary in proportion to the actuarial interest of such shareholder in
such trust; (c) a shareholder is considered as owning stock owned, directly or
indirectly, by a partnership in which the shareholder is a partner; (d) a
shareholder which owns 50% or more of a corporation is treated as owning a
proportionate amount of any stock held by the corporation; and (e) a
shareholder is considered to own shares underlying any option to purchase
stock. In some cases, stock constructively owned by a shareholder under the
foregoing rules is considered as actually owned by the shareholder for purposes
of again applying the constructive ownership rules.
Under current law, as amended by the Revenue Reconciliation Act of
1993, individuals are subject to a maximum federal income tax rate on long-term
capital gains of 28% and ordinary income is taxed at a maximum rate of 39.6%.
Generally, corporations are subject to a maximum 35% rate on all income
(whether ordinary income or capital gain.)
The Board of Directors recommends a vote FOR the Conversion. THE
CONVERSION MUST BE APPROVED BY THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF
THE OUTSTANDING SHARES OF THE BANK'S COMMON STOCK.
FINANCIAL INFORMATION
The following documents are incorporated herein by reference and copies
of which are being provided to shareholders together with the Proxy Statement:
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<PAGE> 14
PLAN OF CONVERSION
1. University National Bank & Trust Company (the "Bank") shall
convert into a California state commercial bank with a trust department (the
"State Bank"). This conversion of the Bank into a State Bank is subject to the
approval of the shareholders of the Bank, the California Superintendent of
Banks (the "Superintendent") and the Board of Governors of the Federal Reserve
System. Upon conversion, the State Bank will be the legal successor of the
Bank for purposes of creditor obligations.
2. Following conversion, the State Bank will be known as
University Bank & Trust Company.
3. Upon conversion, the State Bank will be governed by new
Articles of Incorporation, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference.
4. At the time the conversion of the Bank into the State Bank
becomes effective, the issued and outstanding shares of the Bank's common stock
shall be converted on a one-to-one basis for shares of State Bank common stock.
Upon this exchange, the existing shareholders of the Bank's common stock will
become shareholders of the State Bank's common stock.
5. The conversion of the Bank to a state-licensed bank known as
University Bank & Trust Company, shall become effective when the Superintendent
issues to the State Bank a certificate of authority authorizing it to engage in
commercial banking and trust business.
6. Any shares not taken by dissenting shareholders of the Bank
shall be deemed to be securities of the State Bank, and no new certificates
shall be issued.
EXHIBIT 2
<PAGE> 1
EXHIBIT 99(m)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 4, 1994
University Bank & Trust Company
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
California 94-2622607
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
250 Lytton Avenue, Palo Alto, California 94301
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (415) 327-0210
This Current Report, including exhibits, contains 23 pages.
The Exhibit Index is located on page 5.
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
In connection with the execution of the Merger Agreement (as defined in Item
12 below) dated October 4, 1994, each director-shareholder of University Bank &
Trust Company (the "Company") has agreed to enter into a form of Shareholder
Agreement (the "Shareholder Agreement") within 10 business days from the date
of the Merger Agreement. Pursuant to the terms of the Shareholder Agreement,
each director-shareholder of the Company will vote or cause to be voted all
shares of common stock of the Company each director-shareholder owns,
thereafter acquires and any other shares of capital stock of the Company over
which the director-shareholder has voting power as a trustee of comparable
capacity to approve the Merger (as defined in Item 12 below) on the terms
provided in the Merger Agreement at any meeting of shareholders of the Company
held prior to August 31, 1995 or in connection with any solicitation of the
written consent of shareholders of the Company considered prior to August 31,
1995. The director-shareholders presently beneficially own shares of common
stock of the Company representing, in the aggregate, approximately 11.5% of the
Company's outstanding capital stock. A copy of the form of Shareholder
Agreement is attached hereto as Exhibit 1 and is incorporated herein by
reference.
In addition, in connection with the execution of the Merger Agreement, the
Company granted Comerica (as defined in Item 12) an option to purchase up to
137,718 shares of Common Stock of the Company under the circumstances specified
in the Stock Option Agreement, dated as of October 4, 1994, between Comerica
and the Company (the "Stock Option Agreement"), for a purchase price per option
share to be determined by calculating the average of the closing prices for the
Company's common stock on the NASDAQ for the seven trading days ending on the
date of the Stock Option Agreement, payable by wire transfer. A copy of the
Stock Option Agreement is attached hereto as Exhibit 2 and is incorporated
herein by reference.
ITEM 5. OTHER EVENTS.
On October 4, 1994, University Bank & Trust Company, a California banking
corporation (the "Company") entered into an Agreement and Plan of
Reorganization and Merger (the "Merger Agreement") with Comerica Incorporated,
a Delaware corporation and bank holding company ("Comerica"), and Comerica
Interim Incorporated, a California corporation and wholly-owned subsidiary of
Comerica ("Interim"), whereby Interim will be merged with and into the Company
and the Company will become a wholly-owned subsidiary of Comerica in accordance
with the applicable provisions of the California Financial Code and the
California Corporations Code (the "Merger"). Subject to the terms and
conditions of the Merger Agreement (including, without limitation, approval by
the stockholders of the Company and approval by various regulatory agencies)
upon the effective time of the Merger, each outstanding share of Common Stock
of the Company will be converted into the right to receive up to 1.7456 shares
of Common Stock of Comerica.
2
<PAGE> 3
A copy of the press release announcing the execution of the Merger Agreement
is attached as Exhibit 3 and is incorporated herein by reference.
ITEM 7. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1 Form of Shareholder Agreement dated as of October , 1994 between
Comerica Incorporated, a Delaware corporation, and a director-
shareholder of University Bank & Trust company, a California Bank.
2 Stock Option Agreement dated October 4, 1994 between University Bank &
Trust Company and Comerica Incorporated, a Delaware corporation.
3 Press Release dated October 5, 1994.
</TABLE>
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the bank
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
UNIVERSITY BANK & TRUST COMPANY
Date: October 17, 1994 By: /s/ Carl J. Schmitt
Carl J. Schmitt
Chief Executive Officer
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
----------- ----------- --------------
<S> <C> <C>
1 Form of Shareholder Agreement dated as of October ___, 1994 6
between Comerica Incorporated, a Delaware corporation, and a
director-shareholder of University Bank & Trust company, a
California Bank.
2 Stock Option Agreement dated October 4, 1994 between University 16
Bank & Trust Company and Comerica Incorporated, a Delaware
corporation.
3 Press Release dated October 5, 1994. 22
</TABLE>
5
<PAGE> 6
EXHIBIT 1
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT
This Stock Option Agreement, dated as of October 4, 1994 (the
"Agreement"), is made by and between University Bank & Trust Company, a
California Bank ("Issuer"), and Comerica Incorporated, a Delaware corporation
("Grantee") .
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Reorganization and Merger dated as of the date hereof (the "Merger Agreement"),
providing for, among other things, the merger of a subsidiary of Grantee with
and into Issuer, with Issuer as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 137,718 (as adjusted as set forth herein) shares (the "Option
Shares") of Common Stock, par value $.01 per share ("Issuer Common Stock"), of
Issuer at a purchase price per Option Share determined by calculating the
average of the closing prices for Issuer Common Stock on the NASDAQ for the
seven trading days ending on the date hereof (the "Purchase Price").
3. Exercise of Option. (a) If not in material breach of the Merger
Agreement, Grantee may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as defined
below); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) immediately prior to the Effective
Time, (ii) 12 months after the first occurrence of a Purchase Event, (iii) 18
months after the termination of the Merger Agreement following the occurrence
of a Preliminary Purchase Event (as defined below), (iv) termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence
of a Purchase Event or a Preliminary Purchase Event (other than a termination
of the Merger Agreement by Grantee pursuant to Section 8.1.6 thereof or by
Grantee and Issuer pursuant to Section 8.1.1 thereof if Grantee shall at that
time have been entitled to
<PAGE> 7
terminate the Merger Agreement pursuant to Section 8.1.6 thereof) or (v) 12
months after the termination of the Merger Agreement by Grantee pursuant to
Section 8.1.6 thereof or by Grantee and Issuer pursuant to Section 8.1.1
thereof if Grantee shall at that time have been entitled to terminate the
Merger Agreement pursuant to Section 8.1.6 thereof (provided, however, that if
within 12 months after such termination of the Merger Agreement a Purchase
Event or a Preliminary Purchase Event shall occur, then notwithstanding
anything to the contrary contained herein, this Option shall terminate 12
months after the first occurrence of such an event); and provided further, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, the California
Financial Code.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Issuer shall have authorized, recommended,
publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction or failed to
publicly oppose a Tender Offer or an Exchange Offer (as
defined below). As used herein, the term Acquisition
Transaction shall mean (A) a merger, consolidation or similar
transaction involving Issuer or any of its Subsidiaries (other
than internal mergers, reorganizations, consolidations or
dissolutions involving only existing Subsidiaries), (B) the
disposition, by sale, lease, exchange or otherwise, of assets
of Issuer or any of its Subsidiaries representing 15% or more
of the consolidated assets of Issuer and its Subsidiaries or
(C) the issuance, sale or other disposition of (including by
way of merger, consolidation, share exchange or any similar
transaction) securities representing 10% or more of the voting
power of Issuer or any of its Subsidiaries; or
(ii) any person (other than Grantee or any Subsidiary
of Grantee) shall have acquired beneficial ownership (as such
term is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of or
the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to
acquire beneficial ownership of 15% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary
of Grantee) shall have commenced (as such term is defined in
Rule 14d-2 under the Exchange Act) or shall have filed a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender
offer or exchange offer to purchase any shares of Issuer
Common Stock such that, upon consummation of such offer, such
person would own or control 15% or more of the then
2
<PAGE> 8
outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer
respectively); or
(ii) the holders of Issuer Common Stock shall not
have approved the Merger Agreement at the meeting of such
stockholders held for the purpose of voting on the Merger
Agreement, such meeting shall not have been held or shall have
been cancelled prior to termination of the Merger Agreement,
or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Merger
Agreement, in each case after it shall have been publicly
announced that any person (other than Grantee or any
Subsidiary of Grantee) shall have (A) made or disclosed an
intention to make a proposal to engage in an Acquisition
Transaction or (B) commenced a Tender Offer or filed a
registration statement under the Securities Act with respect
to an Exchange Offer.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Grantee wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which is referred to as the "Notice
Date") specifying (i) the total number of Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier than three
business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") or any other regulatory authority is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of any such approval.
4. Payment and Delivery of Certificates. (a) On each Closing Date,
Grantee shall (i) pay to Issuer, in immediately available funds by wire
transfer to a bank account designated by Issuer, an amount equal to the
Purchase Price multiplied by the number of Option Shares to be purchased on
such Closing Date and (ii) present and surrender this Agreement to the Issuer
at the address of the Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a),
(i) Issuer shall deliver to Grantee (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever, and (B) if the Option is exercised in part only, an
executed new agreement with the same terms as this Agreement evidencing the
right to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder, and (ii) Grantee shall deliver to Issuer a letter agreeing that
Grantee shall not offer to sell or otherwise dispose of such Option Shares in
violation of the provisions of this Agreement.
3
<PAGE> 9
(c) Certificates for the Option Shares delivered at each Closing shall
be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED
AS OF OCTOBER 4, 1994, A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO
THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A
WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals referred
to herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Issuer. This Agreement has been duly executed and delivered by
Issuer.
(b) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, shares of Issuer Common Stock necessary for
Grantee to exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of Issuer
Common Stock or other securities which may be issued pursuant to Section 7 upon
exercise of the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer Common Stock
or other securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid and nonassessable
(except for assessments made pursuant to Section 662 of the California
Financial Code), and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including any
preemptive rights of any stockholder of Issuer.
(c) Board Action. The performance by Issuer of this Agreement and the
transactions contemplated hereby (including the exercise of the Option) do not
require any approval of the stockholders of Issuer.
4
<PAGE> 10
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) Purchase Not for Distribution. This Option is not being, and any
Option Shares or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
7. Adjustment Upon Changes in Capitalization, etc. (a) In the event of
any change in Issuer Common Stock by reason of a stock dividend, stock split,
split up, recapitalization, combination, exchange of shares or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Grantee shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 9.9% of
the number of shares of Issuer Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the
Option. Issuer agrees that in no event shall the number of shares of Issuer
Common Stock issued after the date of this Agreement pursuant to the preceding
sentence, together with the number of shares of Issuer Common Stock subject to
the Option, adjusted as aforesaid, exceed the number of available authorized
but unissued and unreserved shares of Issuer Common Stock.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one
of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise
5
<PAGE> 11
transfer all or substantially all of its assets to any person other than
Grantee or one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Grantee, of either (A) the
Acquiring Corporation (as defined below), (B) any person that controls the
Acquiring Corporation, or (C) in the case of a merger described in clause (ii),
the Issuer (such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then holder or holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as is hereinafter defined) as is equal
to the Assigned Value (as is hereinafter defined) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as is hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common
Stock (the "Substitute Purchase Price") shall then be equal to the Purchase
Price multiplied by a fraction in which the numerator is the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable and
the denominator is the number of shares of the Substitute Common Stock for
which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in a merger in which Issuer is the continuing or surviving
person, and (C) the transferee of all or any substantial part of the Issuer's
assets (or the assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (A) the price per
share of the Issuer Common Stock at which a tender offer or exchange offer
therefor has been made by any person (other than Grantee), (B) the price per
share of the Issuer Common Stock to be paid by any person (other than the
Grantee) pursuant to an agreement with Issuer, and (C) the highest bid price
per share of Issuer Common Stock as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source within the six-month period immediately preceding the agreement;
provided, however, that in the event of a
6
<PAGE> 12
sale of less than all of Issuer's assets, the Assigned Value shall be the sum
of the price paid in such sale for such assets and the current market value of
the remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by Grantee (or by a majority in interest of
the Grantees if there shall be more than one Grantee (a"Grantee Majority")),
divided by the number of shares of the Issuer Common Stock outstanding at the
time of such sale. In the event that an exchange offer is made for the Issuer
Common Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for the Issuer Common Stock shall
be determined by a nationally recognized investment banking firm mutually
selected by Grantee and Issuer (or if applicable, Acquiring Corporation),
provided that if a mutual selection cannot be made as to such investment
banking firm, it shall be selected by Grantee (or a Grantee Majority).
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person merging into Issuer or by
any company which controls or is controlled by such merging person, as Grantee
may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 9.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option.
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder and take all other actions that may be
necessary so that the provisions of this Section 7 are given full force and
effect (including, without limitation, any action that may be necessary so that
the shares of Substitute Common Stock are in no way distinguishable from or
have lesser economic value than other shares of common stock issued by the
Substitute Option Issuer).
(h) The provisions of Sections 8 and 9 shall apply, with appropriate
adjustments, to any securities for which the Option becomes exercisable
pursuant to this Section 7 and as applicable, references in such sections to
"Issuer", "Option", "Purchase Price" and "Issuer Common Stock" shall be deemed
to be references to "Substitute Option Issuer", "Substitute Option",
"Substitute Purchase Price" and "Substitute Common Stock", respectively.
8. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation on the
NASDAQ, the New York Stock Exchange (NYSE) or any securities exchange, Issuer,
upon the request of Grantee, will promptly file an application to authorize for
quotation the shares of Issuer Common Stock or other securities to be
7
<PAGE> 13
acquired upon exercise of the Option on the NASDAQ, NYSE or such other
securities exchange and will use its best efforts to obtain approval of such
listing as soon as practicable.
9. Division of Option. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Grantee, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Issuer
Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
10. Miscellaneous. (a) Expenses. Except as otherwise provided in
Section 8, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the grant or exercise of
this Option, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein (i) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (ii) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
regulatory agency to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to repurchase,
the full number of shares of Issuer Common Stock as provided in Sections 3 and
8 (as adjusted pursuant to Section 7), it is the express intention of Issuer to
allow Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
8
<PAGE> 14
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of California without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by personal delivery,
by telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) to the parties as follows:
If to Issuer:
UNIVERSITY BANK & TRUST COMPANY
250 Lytton Avenue
Palo Alto, California 94301
Attention: Carl J. Schmitt
If to Grantee:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
or to such other address as a party may have furnished to the others in writing
in accordance with this paragraph, except that notices of change of address
shall only be effective upon receipt. Any notice, demand or other
communication given pursuant to the provisions of this Section 11(f) shall be
deemed to have been given on the date actually delivered or three days
following the date mailed, as the case may be.
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to
9
<PAGE> 15
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
University Bank & Trust Company
By: /s/ Carl J. Schmitt
---------------------------
Name: Carl J. Schmitt
Title: Chief Executive Officer
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
-----------------------------------
Name: Mark W. Yonkman
Title: Vice President and Assistant
Secretary
10
<PAGE> 16
EXHIBIT 2
SHAREHOLDER AGREEMENT
This Shareholder Agreement ("Agreement") is made as of October ____,
1994, by Comerica Incorporated, a Delaware corporation ("Comerica") and the
other person executing the last page of this Agreement (a "Shareholder"). All
terms not otherwise defined in this Agreement shall have the meanings ascribed
to them in the Merger Agreement (as that term is defined below).
A. Comerica and University Bank & Trust, a California bank
("University") Company have entered into an Agreement and Plan of
Reorganization and Merger (the "Merger Agreement"), dated as of October 4, 1994
pursuant to which a wholly-owned subsidiary of Comerica will be merged with and
into University (the "Merger").
B. In order to induce Comerica to enter into the Merger
Agreement, the Shareholder, solely in the Shareholder's capacity as a
shareholder, desires to undertake to take certain actions and to refrain from
taking other actions in connection with the Merger.
NOW, THEREFORE, in consideration of these premises and of the
representations, warranties, covenants, and agreements contained in this
Agreement and in the Merger Agreement, the parties agree as follows:
1. Agreements of the Shareholder
1.1 Agreement to Vote. At any meeting of shareholders of
University held prior to August 31, 1995, or in connection with any
solicitation of the written consent of shareholders of University
considered prior to August 31, 1995, to approve the Merger on the
terms provided in the Merger Agreement, the Shareholder shall vote or
cause to be voted all shares of common stock of University
("University Stock") the Shareholder owns or hereafter acquires, and,
subject to fiduciary obligations, any other shares of University Stock
over which the Shareholder has voting power as a trustee or comparable
capacity (the "Shareholder's University Stock"), in favor of, and to
approve, the Merger on the terms provided in the Merger Agreement and
any other matters provided in the Merger Agreement that require the
approval of shareholders of University.
1.2 Restrictions on Dispositions. The Shareholder agrees
that until the earlier of (i) the adjournment of the meeting of
shareholders called to approve the Merger on the terms provided in the
Merger Agreement, (ii) the termination of the Merger Agreement in
accordance with its terms, or (iii) August 31, 1995, the Shareholder
will not pledge or otherwise encumber, or sell, assign or otherwise
dispose of, any shares of the Shareholder's University Stock or enter
into any agreement to do the foregoing other than with Comerica or an
affiliate of Comerica (unless the Shareholder shall have retained full
voting power with respect to such shares or the person to whom such
shares shall have been pledged, sold, assigned or otherwise disposed
of shall have agreed to be bound by the provisions of this Agreement),
except (a) with the prior written consent of Comerica or (b) pursuant
to the Merger.
<PAGE> 17
1.3 Cooperation. At any time during which the
Shareholder's agreements contained in Section 1.2 above are in effect,
the Shareholder agrees not to directly or indirectly solicit or
initiate any inquiries, proposals or offers from any person or entity
other than Comerica or any affiliate of Comerica relating to, or vote
in favor of, any proposal or transaction for disposition of, the
business or assets of University or any of its Subsidiaries, the
acquisition of securities of University or any Subsidiary of
University, or any business combination with any person other than
Comerica or any affiliate of Comerica.
2. Representations and Warranties of the Shareholder
The Shareholder represents and warrants to Comerica as follows:
2.1 Capacity. The Shareholder has the requisite capacity
and authority to enter into and perform the Shareholder's obligations
under this Agreement.
2.2 Binding Agreement. This Agreement constitutes the
valid and legally binding obligation of the Shareholder.
2.3 Noncontravention. The execution and delivery of this
Agreement by the Shareholder does not, and the performance by the
Shareholder of the Shareholder's obligations under this Agreement and
the consummation by the Shareholder of the transactions contemplated
by this Agreement will not in any material respect, violate or
conflict with or constitute a material default under any agreement,
instrument, contract or other obligation, any order, arbitration
award, judgment or decree to which the Shareholder is a party or by
which the Shareholder is bound, or any statute, rule or regulation to
which the Shareholder or any of the Shareholder's property is subject.
2.4 Ownership of Shares. Schedule 1 correctly sets forth
the number of shares of University Stock owned by the Shareholder, or
with respect to which the Shareholder has sole voting power, as of the
date of this Agreement. The Shareholder has full power to vote all of
the shares of University Stock set forth on Schedule 1.
3. Enforcement
3.1 Damages Inadequate; Specific Performance. In the
event of a threatened or actual breach of this Agreement by the
Shareholder, it is agreed that damages would not be an adequate remedy
to compensate Comerica. Accordingly, each party agrees that the
Shareholder's obligations will be enforceable by court order requiring
specific performance without proof of damages or posting of any bond.
In the event of a threatened or actual breach of this Agreement by the
Shareholder, Comerica will be entitled to a temporary restraining
order and to temporary and permanent injunctive relief to prevent or
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terminate such threatened or actual breach, provided that nothing in
this Agreement shall be construed to limit the damages otherwise
recoverable by Comerica in any such event.
3.2 Notice to Third Parties. In addition, after notice
to the Shareholder, Comerica will have the right to inform any person
or entity that Comerica reasonably believes to be, or to be
contemplating, participating with the Shareholder (or receiving
assistance from the Shareholder) in violation of this Agreement, and
that participation by any such entity or person with the Shareholder
in activities in violation of this Agreement may give rise to claims
by Comerica against such entity or person.
4. Miscellaneous
4.1 Expenses. Each party will pay that party's costs and
expenses, including attorney and accountant fees, in connection with
this Agreement and the transactions contemplated by this Agreement.
4.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt
requested), sent by confirmed overnight courier or telecopied (with
electronic confirmation and verbal confirmation of the person to whom
such telecopy is addressed), on the date such notice is so delivered,
mailed or sent, as the case may be, to the parties at the following
addresses or (or any such other address for a party as shall be
specified by like notice):
If to Comerica:
COMERICA INCORPORATED
Corporate Secretary - Corporate Legal Department
500 Woodward Avenue, 33rd Floor
Detroit, Michigan 48226
Attention: Mark W. Yonkman
If to the Shareholder:
or to such other address as a party may have furnished to the others
in writing in accordance with this paragraph, except that notices of
change of address shall only be effective upon receipt. Any notice,
demand or other communication given pursuant to the provisions of this
paragraph 4.2 shall be deemed to have been given on the date actually
delivered or three days following the date mailed, as the case may be.
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4.3 Successors and Assigns. All terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the
parties and their permitted transferees, successors and permitted
assigns. This Agreement and the rights, privileges, duties and
obligations of the parties may not be assigned or delegated by any
party without the prior written consent of the other party. Any
purported assignment in violation of this paragraph 4.3 shall be null
and void.
4.4 Third Party Beneficiaries. Each party 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. As used
in this Agreement, the term party or parties shall refer only to
Comerica and the Shareholder.
4.5 Counterparts. This Agreement may be executed in one
or more counterparts, all of which taken together shall constitute one
instrument. An executed counterpart received by telecopy shall have
the same effect as an originally- executed counterpart.
4.6 Governing Law. This Agreement will be governed by
Delaware law, except those provisions concerning choice of law.
4.7 Captions. The captions contained in this Agreement
are for convenience of reference only and do not form a part of this
Agreement.
4.8 Waiver and Modification. No waiver of any term,
provision or condition of this Agreement, whether by conduct or
otherwise, shall be deemed to be a further or continuing waiver of any
such term, provision or condition. This Agreement may be modified or
amended only by an instrument signed by the parties.
4.9 Attorney Fees. If any of the parties brings an
action or suit against any other party by reason of any breach of any
covenant, agreement, representation, warranty or other provision of
this Agreement, or any breach of any duty or obligation created under
this Agreement by such other party, the prevailing party in whose
favor final judgment is entered shall be entitled to recover from the
losing party all reasonable costs and expenses incurred by the
prevailing party in connection with such suit or action, including
legal fees and court costs (whether or not taxable as such).
4.10 Entire Agreement. This Agreement embodies the entire
understanding of the parties with respect to its subject matter, and
there are no other agreements or understandings, written or oral, in
effect between the parties relating to the subject matter of this
Agreement, unless expressly referred to in this Agreement.
4.11 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be valid
under applicable law. However, if any provision shall be invalid or
unenforceable, it shall be construed and limited to effectuate its
purpose to the maximum legally permissible extent. If it cannot be so
construed so as to be valid
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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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
COMERICA INCORPORATED
By: /s/ Mark W. Yonkman
--------------------
Name:
Title:
SHAREHOLDER:
/s/ Carl J. Schmitt
- -------------------
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SCHEDULE 1
SHAREHOLDER'S University STOCK
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[UNIVERSITY BANK & TRUST COMPANY LETTERHEAD]
For Release 8:00 a.m. Pacific Time
UNIVERSTITY BANK & TRUST TO JOIN FORCES
WITH COMERICA INCORPORATED
Palo Alto, October 5, 1994.---University Bank & Trust Company (NASDAQ:UNNB)
announced today it has reached a definitive agreement to be acquired by
Comerica Incorporated (NYSE:CMA), a $32 billion bank holding company
headquartered in Detroit, Michigan, with banking affiliates in California,
Michigan, Texas, Illinois, and Florida.
Shareholders of University Bank & Trust will receive up to 1.7456 shares of
Comerica Incorporated stock for each University Bank & Trust Company share. The
current value of this transaction is approximately $73 million, or 2.1 times
current book value. The transaction is subject to regulatory approval and is
expected to close in the spring of 1995. Goldman, Sachs & Company represented
University Bank & Trust Company in the transaction.
University Bank & Trust Company represents an in-market expansion for Comerica
Incorporated's California subsidiary. Comerica Bank-California, with $2 billion
in assets. University is expected to merge into Comerica Bank-California in
late 1995 and it is anticipated that it will operate as a division maintaining
its identity.
"This affiliation with Comerica represents an opportunity to expand our service
capabilities and capacity within our market, and at the same time maintain the
unique qualities that we have become known for," said Carl J. Schmitt, chairman
and chief executive officer of University Bank & Trust Company. "The approach
to this
Continued
"a Different Experience in Banking"
<PAGE> 23
[UNIVERSITY BANK & TRUST COMPANY LETTERHEAD]
Continued
UNIVERSITY BANK & TRUST TO JOIN FORCES
WITH COMERICA INCORPORATED
union by Comerica has been driven by the understanding of our deep commitment
to developing and maintaining special banking 'relationships' with our
customers. This philosophy of operation is fundamental to Comerica nationally
and represents the common ground that this combination has been built on. And
yes, we will continue the annual Walla Walla Sweet Onions offering to our
customers (44,000 pounds in 1994)."
"This transaction adds approximately $400 million of core deposits to our
California franchise and supports our strategy of serving business and private
banking customers," stated Eugene A. Miller, chairman and chief executive
officer of Comerica Incorporated. "University Bank & Trust is an outstanding
company with a long renowned reputation for exceptional customer service
leading to steady growth, good credit quality and strong earnings."
The addition of University Bank & Trust's Banking Floors (offices) in Palo
Alto, Menlo Park and Los Altos (to be opened), and trust office in Santa Cruz
will bring the number of Comerica Bank-California offices to 31 in Northern
California, along with 3 in the Los Angeles area. Comerica Bank-California is
headed by J. Michael Fulton, president and chief executive officer.
Additional information:
Carl J. Schmitt (415) 462-6001
J. Michael Fulton (408) 291-6645
"a Different Experience in Banking"
