SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): November 18, 1996 (November 1,
1996)
FIRST BANKS AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-8937 75-1604965
(Commissioner File Number) (IRS Employer Identification No.)
P.O. Box 630369, Houston, Texas 77263-0369
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713)954-2400.
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On June 24, 1996, First Banks America, Inc. (FBA) executed an
Agreement and Plan of Merger (Agreement) with Sunrise Bancorp, Roseville,
California (Sunrise) pursuant to which Sunrise will merge with a wholly owned
subsidiary of FBA. Sunrise Bank of California (Sunrise Bank), a state chartered
bank which is a wholly owned subsidiary of Sunrise, will become a wholly owned
indirect subsidiary of FBA. The Agreement provides for the shareholders of
Sunrise to receive $4.00 per share in cash for their stock, an aggregate of
approximately $18.1 million.
Upon receipt of the necessary regulatory approvals, pursuant to the
Agreement, First Banks consummated the merger on November 1, 1996.
Sunrise Bank is headquartered in Roseville, California and operates
from two banking facilities located in Roseville and Citrus Heights, California
and one loan production office in San Francisco, California. At September 30,
1996, Sunrise Bank had total assets of $112.4 million.
FBA funded the acquisition from available cash and an advance under a
$15 million note agreement with First Banks, Inc., a St. Louis based bank
holding company which owns 67.03% of FBA, of $3 million and $14 million,
respectively. The borrowings under the note agreement bear interest at an annual
rate of one-quarter percent less than the "Prime Rate" as reported in the Wall
Street Journal. Principal and accrued interest outstanding under the note
agreement are due and payable on October 31, 2001.
Except as noted above, there were no material relationships between
Sunrise, or any of its affiliates, directors or officers, or any associates of
any such directors or officers, and the Registrant, or any of its affiliates,
directors or officers, or any associates of any such directors or officers.
<PAGE>
Item 7. Financial Statements and Exhibits
a) Financial Statements of Business Acquired
Pursuant to the requirements of Article 3 of Regulation S-X, the following
consolidated financial statements for Sunrise have been included in this filing:
1. Consolidated Condensed Balance Sheet as of September 30, 1996 and
December 31, 1995 (unaudited).
2. Consolidated Condensed Statement of Income for the three and nine
months ended September 30, 1996 and 1995 (unaudited).
3. Consolidated Condensed Statement of Changes in Stockholders' Equity for
the nine months ended September 30, 1996 and 1995 (unaudited).
4. Consolidated Condensed Statement of Cash Flows for the nine months
ended September 30, 1996 and 1995 (unaudited).
5. Audited Consolidated Financial Statements as of and for the years ended
December 31, 1995 and 1994 and related Report of Independent Auditors.
(b) Pro Forma Financial Information
1. Pro Forma Combined Condensed Balance Sheet as of December 31, 1995
(unaudited).
2. Pro Forma Consolidated Condensed Statement of Income for the nine months
ended September 30, 1996 and 1995 and for the year ended December 31,
1995 (unaudited).
3. Notes to Pro Forma Combined Condensed Financial Statements
(c) Exhibits
The following exhibit is filed herewith:
Exhibit No. Exhibit
2 Amended and Restated Plan of Merger, dated August 15, 1996 by
and among Sunrise and FBA.
10(k) Revolving Credit Agreement, dated October 31, 1996,
by and between FBA and First Banks.
<PAGE>
Item 7(a)
Financial Statements of Business Acquired
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Condition
September 30, 1996 and December 31, 1995
(dollar amounts in thousands except per share data)
(unaudited
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
Unaudited)
---------- ------------
Assets
<S> <C> <C>
Cash and due from banks $ 4,954 $ 3,726
Federal funds sold and repurchase agreements 25,000 29,000
Investment securities held to maturity 18,251 20,273
(market value $17,498 at September 30, 1996
and $19,944 at December 31, 1995)
Loans 62,952 66,765
Less allowance for loan losses 1,836 2,505
-------- --------
Net loans 61,116 64,260
-------- --------
Premises and equipment 574 873
Other real estate owned 549 692
Other assets 1,915 2,160
-------- --------
$112,359 $120,984
======== ========
Liabilities and Shareholders' Equity
Deposit liabilities:
Noninterest bearing $ 13,986 $ 3,808
Interest bearing 81,494 90,075
------- ------
Total deposit liabilities 95,480 103,883
Borrowings - -
Other liabilities 379 612
------- ------
Total liabilities 95,480 104,495
Shareholders' equity:
Preferred stock, no par value. Authorized
20,000,000 shares; none issued
Common Stock, no par value. Authorized
20,000,000 shares; issues 4,263,298
shares in 1996 and 1995 18,327 18,327
Retained deficit (1,827) (1,838)
------- --------
Total shareholders' equity 16,500 16,489
-------- --------
$112,359 $120,984
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of
Operations For the three and nine months ended
September 30, 1996 and 1995
(dollar amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30 ended September 30
1996 1995 1996 1995
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest on loans $1,740 $1,779 $4,892 $5,547
Interest on investment securities 255 690 797 2,140
Interest on federal funds sold and
repos 311 36 1,033 156
------ ----- ----- -----
Total interest income 2,306 2,505 6,722 7,843
------ ------ ------ ------
Interest expense
Interest on deposit liabilities 769 940 2,424 2,593
Interest on other borrowings - - - 118
----- ----- ----- -----
Total interest expense 769 940 2,424 2,711
----- ----- ----- -----
Net interest income 1,537 1,565 4,298 5,132
Provision for loan losses 100 - 100 -
----- ----- ----- -----
Net interest income after provision
for loan losses 1,437 1,565 4,198 5,132
----- ----- ----- -----
Other income:
Service charges and fees 86 104 248 313
Other 32 13 446 15
----- ----- ----- -----
Total other income 118 117 694 328
----- ----- ----- -----
Other expenses:
Salaries and employee benefits 640 736 1,987 2,259
Occupancy 292 305 835 911
Furniture and equipment 112 142 323 441
Other 624 644 1,723 1,947
----- ----- ----- -----
Total other expenses 1,668 1,827 4,868 5,558
----- ----- ----- -----
Net income (loss) before provisions for
income taxes (113) (145) 24 (98)
Provision (benefit) for income taxes (44) (34) 13 1
----- ----- ----- -----
Net income (loss) ($69) ($111) $11 ($99)
===== ===== ===== =====
Net income (loss) per share ($0.02) ($0.03) $0.00 ($0.02)
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statement of
Shareholders' Equity For the nine months
ended September 30, 1996
(dollar amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Number of Total
Shares Common Shareholders
Outstanding Stock Deficit Equity
----------- ----- ------- ------
<S> <C> <C> <C> <C>
Balances at December 31, 1995 4,263,298 $18,327 ($1,838) $16,489
Net Earnings 11 11
--------------------------------------------------
Balances at September 30, 1996 4,263,298 $18,27 ($1,827) $16,600
==================================================
Balance at December 31, 1994 4,263,298 $18,327 (318) 18,009
Net loss - (99) (99)
--------------------------------------------------
Balances at September 30, 1995 4,263,298 $18,327 (417) 17,910
==================================================
</TABLE>
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Condensed Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995
(dollar amounts in the thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months
ended September 30,
1996 1995
---- ----
Operating activities:
<S> <C> <C>
Net income (loss) $ 11 ($99)
Adjustments to reconcile net income to cash
provided (used) by operating activities:
Accretion of deferred loan fees and costs (16) (104)
Provision for loan and other real estate
owned losses 100 225
Depreciation and amortization 349 570
Net change in other assets 245 1,659
Net change in other liabilities 456 766
----- -----
Net cash provided by operating activities 456 3,017
----- -----
Investing activities:
Purchases of investment securities - -
Maturities and repayments of investment securities 1,972 7,757
Net (increase) decrease in loans 1,464 8,492
Net sales of other real estate owned 1,739 (2,280)
----- ------
Net cash provided by investing activities 5,175 13,969
----- ------
Financing activities:
Increase in deposit liabilities (8,403) (8,990)
Decrease in other borrowings - (10,548)
----- ------
Net cash provided (used) by financing activities (8,043) (19,538)
----- ------
Decrease in cash and cash equivalents (2,772) (2,552)
Cash and cash equivalents at beginning of period 32,726 6,367
------ ------
Cash and cash equivalents at end of period $29,954 $3,815
======= ======
Supplemental disclosures of cash flow information Cash paid during
the period for:
Interest $2,469 $2,732
====== ======
Income taxes paid (refunded) $2 ($1,320)
====== ======
Supplemental schedule of non cash investing and financing activities:
Other real estate owned acquired through foreclosure
on assets securing loans $1,595 $3,386
====== ======
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this current report on Form 8-K under the Securities
Exchange Act of 1934 of First Banks America, Inc. of our report dated February
9, 1996 on the financial statements of Sunrise Bancorp as of December 31, 1995
and 1994 and for each of the three years in the period ended December 31, 1995.
DELOITTE & TOUCHE LLP
Sacramento, California
November 14, 1996
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Roseville, California
Consolidated Financial Statements
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors Report
Board of Directors and Shareholders
Sunrise Bancorp
Roseville, California:
We have audited the accompanying consolidated statements of condition of Sunrise
Bancorp and Subsidiary (the Company) as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sunrise Bankcorp and Subsidiary at
December 31, 1995 and 1994 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Note 17 to the consolidated financial statements, the Company is
subject to a Memorandum of Understanding with the Federal Reserve Board.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1994, the Company changed its method of accounting for investment
securities to conform with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
/s/Deloitte & Touche LLP
- ------------------------
Sacramento, California
February 9, 1996
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Statements of Condition
December 31, 1995 and 1994
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash and due from banks $ 3,726 6,367
Federal funds sold 1,000 -
Securities purchased under agreements to resell 28,000 -
------- -----
Total cash and cash equivalents 32,726 6,367
------- -----
Investment securities held to maturity (market value of
$19,944 in 1995 and $49,803 in 1994) 20,273 54,040
Loans 66,765 81,340
Less allowance for loan losses 2,505 4,151
------ ------
Net loans 64,260 77,189
------- -------
Premises and equipment 873 1,406
Other real estate owned 692 3,208
Other assets 2,160 4,290
------- -------
$ 120,984 146,500
======= =======
Liabilities and Shareholders' Equity
Deposit liabilities:
Noninterest bearing 13,808 29,206
Interest bearing 90,075 87,737
Total deposit liabilities 103,883 116,943
Borrowings - 10,548
Other liabilities 612 1,000
------- -------
Total liabilities 104,495 128,491
------- -------
Shareholders' equity:
Preferred stock, no par value. Authorized 20,000,000
shares; none issued - -
Common stock, no par value. Authorized 20,000,000
shares; issued 4,263,298 shares in 1995 and 1994 18,327 18,327
Deficit (1,838) (318)
------- -----
Total shareholders' equity 16,489 18,009
------- -------
$ 120,984 146,500
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Statements of Operations
For the years ended December 31, 1995, 1994, and 1993
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Interest income:
<S> <C> <C> <C>
Interest on loans $ 7,110 8,120 9,203
Interest on mortgage loans held for sale - 519 1,616
Interest on investment securities 2,747 3,161 2,127
Interest on federal funds sold and repurchase agreements 277 400 803
------ ------ ----
Total interest income 10,134 12,200 13,749
------ ------ ------
Interest expense:
Interest on deposit liabilities 3,503 2,977 2,566
Interest on other borrowings 119 396 52
---- ---- ---
Total interest expense 3,622 3,373 2,618
------ ------ ------
Net interest income 6,512 8,827 11,131
Provision for loan losses - 2,668 7,700
--- ------ ------
Net interest income after provision
for loan losses 6,512 6,159 3,431
----- ----- ------
Other income:
Gain on sale of mortgage loans and servicing - 1,828 2,888
Service charges and fees 402 584 747
Loan servicing income - 72 60
(Loss) gain on sale of investment securities (334) - 228
Other 43 103 624
----- ------ ----
Total other income 111 2,587 4,547
----- ------ ------
Other expenses:
Salaries and employee benefits 2,954 5,320 6,504
Occupancy 1,306 1,191 1,314
Furniture and equipment 579 963 937
Other 3,303 5,775 6,456
------ ------ ------
Total other expenses 8,142 13,249 15,211
------ ------ ------
Net loss before provision for
income taxes (1,519) (4,503) (7,233)
Provision (benefit) for income taxes 1 (1,461) (3,065)
----- ------ -------
Net loss before cumulative effect of a
change in accounting principle (1,520) (3,042) (4,168)
Cumulative effect of a change in accounting principle - - 250
--- --- ----
Net loss $ (1,520) (3,042) (3,918)
====== ====== ======
Net loss per share before cumulative effect of a change in
accounting principle $ (0.36) (0.71) (0.98)
Cumulative effect of a change in accounting principle - - 0.06
---- ---- ----
Net loss per share $ (0.36) (0.71) (0.92)
==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
For the years ended December 31, 1995, 1994, and 1993
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Number of Total
shares Common shareholders'
outstanding stock Deficit equity
----------- ----- ------- ------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 4,060,637 $ 17,770 7,202 24,972
Common Stock Dividend including
cash in lieu of fractional shares 202,661 557 (560) (3)
Net loss - - (3,918) (3,918)
--------- ------ ----- -------
Balances at December 31, 1993 4,263,298 18,327 2,724 21,051
Net loss - - (3,042) (3,042)
--- --- ----- -------
Balances at December 31, 1994 4,263,298 18,327 (318) 18,009
Net loss - - (1,520) (1,520)
--- --- ----- -------
Balances at December 31, 1995 4,263,298 $ 18,327 (1,838) 16,489
========= ====== ===== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SUNRISE BANCORP AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended December 31, 1995, 1994, and 1993
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Operating activities:
<S> <C> <C> <C>
Net income (loss) $ (1,520) (3,042) (3,918)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Accretion of deferred loan fees and costs (104) (144) (209)
Mortgage loans originated for sale - (123,537) (314,669)
Proceeds from sale of mortgage loans - 162,168 281,908
Gain on sale of mortgage loans - (1,828) (2,888)
Loss on sale of available for sale securities 348 - (223)
Gain on sale of OREO (121) - -
Provision for loan and other real estate owned losses 1,005 3,168 7,840
Depreciation and amortization 770 1,124 10,143
Net change in other assets 2,130 2,348 (3,900)
Net change in other liabilities (388) (235) 204
------ ----- ----
Net cash provided (used) by
operating activities 2,120 40,022 (25,712)
------ ------- --------
Investing activities:
Purchases of investment securities - (4,000) (67,569)
Proceeds for sales of available for sale securities 24,040 - 17,292
Proceeds from maturities of held to maturities
securities 9,142 7,484 9,278
Net decrease (increase) in loans 9,450 29,091 (4,017)
Sale of other real estate owned 5,215 807 4,809
Net purchases of premises and equipment - (85) (750)
--- ---- -----
Net cash used in (provided by)
investing activities 47,847 33,297 (40,957)
------ ------- --------
Financing activities:
(Decrease) increase in deposit liabilities (13,060) (167,926) 65,625
Increase (decrease) in other borrowings (10,548) 10,548 -
Cash paid in lieu of fractional shares - - (3)
Net cash provided by (used in)
financing activities (23,608) (157,378) 65,622
------ ------- -------
Increase (decrease) in cash and
cash equivalents 26,359 (84,059) (1,052)
Cash and cash equivalents at beginning of period 6,367 90,426 91,478
------ ------- -------
Cash and cash equivalents at end of period $ 32,726 6,367 90,426
====== ====== =======
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 3,607 3,343 2,619
Income taxes paid (refunded) (1,320) (2,503) 3
======= ======= ==
Supplemental schedule of noncash investing and financing activities:
Other real estate owned acquired through foreclosure on
assets securing loans $ 3,583 1,788 2,954
Stock Dividend - - 557
Transfer of securities from held to maturity to available
for sale 24,388 - -
====== ===== ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
(1) Nature of Operations
Sunrise Bancorp (the Company) is a bank holding company headquartered in
Roseville, California. Sunrise Bank of California (the Bank), a wholly
owned subsidiary of the Company, is a full-service commercial bank
chartered by the State of California with branches in Roseville and
Citrus Heights and a loan production office in San Francisco. The Bank's
business plan emphasizes service to the central California counties of
Sacramento, Placer, Yolo, and El Dorado. The Bank has concentrated on
servicing middle market companies including those in the title insurance
business and homeowner association management companies. One of the
Bank's primary target markets is small to medium-sized businesses,
"small" is defined as revenues of less than $2.5 million, "medium" is
defined as businesses with revenues between $2.5 million and $10
million. The Company itself does not engage in any business activities
other than the ownership of the Bank.
(2) Summary of Significant Accounting Policies
Theaccounting and reporting policies of the Company conform with generally
accepted accounting principles and prevailing practices within the
banking industry. The Company follows the accrual method of accounting.
Such principles require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. The following is a summary of the most significant of the
policies:
(a) Financial Statement Presentation
Theconsolidated financial statements include the accounts of
Sunrise Bancorp and its wholly owned subsidiary, Sunrise Bank of
California. All intercompany accounts transactions have been
eliminated in consolidation. Certain reclassifications to the
1994 and 1993 financial statements were made to conform to the
classifications used in the 1995 financial statements.
(b) Investment Securities
TheCompany accounts for investments in accordance with Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. This standard
requires investment securities to be classified as either held
to maturity, trading, or available for sale. Management
determines the appropriate classification of investment
securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Debt securities are
classified as held to maturity when the Company has the intent
and ability to hold the securities to maturity. Held to maturity
securities are stated at cost, adjusted for amortization of
premiums and accretion of discounts. Such amortization together
with interest earned is included in interest income. Debt and
equity securities that are bought and held for the purpose of
selling them in the near term are classified as trading
securities and are reported at fair value, with unrealized gains
and losses included in income. Debt and equity securities not
classified as either held to maturity or trading securities are
classified as available for sale securities and are reported at
fair value, with unrealized gains and losses included as a
separate component of shareholders' equity, net of tax. Gain or
loss on sale of investment securities is recognized based on the
specific identification method.
(c) Loans, Loan Fees, and Interest Income
Loans receivable that management has the intent and ability to hold
for the foreseeable future or until maturity or payoff are
reported at their outstanding principal balances reduced by any
charge-offs and net of any deferred fees or costs or unamortized
premiums or discounts on purchased loans.
Interest on loans is accrued as earned except where reasonable
doubt exists as to the collectibility of the interest, in which
case the accrual of income is discontinued and any interest
<PAGE>
accrued but unpaid is reversed against current income. Interest
on loans with principal past due ninety days or more continues
to accrue only when management believes collectibility of
principal and interest is certain. Cash payments received on
nonaccrual loans are recognized as income only where the future
collection of the recorded value of the loan is considered by
management to be probable.
TheCompany defers loan fees and certain direct loan origination
costs, and subsequently recognizes such fees and costs as an
adjustment of yield by the interest method based on the
contractual terms of the loans.
(d) Allowance for Loan Losses
The allowance for loan losses is established through a provision
charged to expense. Loans are charged off against the allowance
when management believes the collection of loan principal is
unlikely. The allowance is maintained at a level which
management estimates to be adequate to provide for losses that
can be reasonably anticipated, although ultimate losses may
vary from estimates. In evaluating the adequacy of this
allowance and in determining the provision to be charged to
operating expense for each period, management considers such
factors as historical loan loss experience, known problem
loans, evaluations made by bank regulatory authorities and the
assessment of economic conditions and other appropriate data to
identify the risks in the loan portfolio.
The Company adopted SFAS No. 114, Accounting by Creditors for
Impairment of a Loan, and SFAS 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure, on
January 1, 1995. SFAS No. 114 requires that impaired loans be
measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or as a
practical expedient at the loan's observable market rate or the
fair value of the collateral if the loan is collateral
dependent. SFAS No. 118 amends SFAS No. 114 to allow a creditor
to use existing methods for recognizing interest income on
impaired loans and requires certain information to be
disclosed. Because the Company had previously calculated its
allowance for loan and lease losses using methods approximating
those prescribed in SFAS 114, the adoption of this standard did
not have a material impact on the Company's financial position
or results of operations.
(e) Premises and Equipment
Premises and equipment owned are stated at cost, less accumulated
depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated useful lives of three to
ten years.
(f) Other Real Estate Owned
Property acquired by the Company through foreclosure is initially
recorded at the lower of (i) estimated fair market value less
the cost to sell or (ii) cost at the date of foreclosure. At the
time a property is acquired if the fair market value is less
than the outstanding loan amount, any difference is charged
against the allowance for possible loan losses. After
acquisition, valuations of the properties are periodically
performed and, if the carrying value of the property exceeds the
fair market value less estimated costs to sell, a valuation
allowance is established by a charge to operations. Subsequent
increases in the fair market value may reduce or eliminate the
allowance.
Operating costs on foreclosed real estate are expensed as incurred.
Costs incurred for physical improvements to foreclosed real
estate are capitalized if the value is recoverable through a
future sale.
(g) Income taxes
The Company accounts for income taxes in accordance with SFAS
No. 109, Accounting for Income Taxes. The cumulative effect of
adopting SFAS No.109 on the Company's financial statements as of
<PAGE>
January 1, 1993 was to increase income from continuing
operations by $250,000 ($.06 per share).
SFAS No. 109 applies the asset and liability method in accounting
for income taxes. The provision for income tax is comprised of
the current year tax expense and the net change in deferred tax
assets and liabilities as of the balance sheet date. Deferred
tax assets and liabilities are calculated by applying the income
tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized. As changes in
tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Deferred tax assets are reduced by a valuation allowance for any
tax benefits to the extent that, in the opinion of management,
are unlikely to be realized.
(h) Net Loss Per Share
Netloss per share is computed based on the weighted average number
of share of common stock outstanding. The total number of shares
of outstanding common stock was 4,263,298 as of December 31,
1995, 1994, and 1993, respectively. Weighted average shares have
been adjusted retroactively to give effect to the 5% stock
dividend in 1993. The inclusion of stock options and warrants as
common stock equivalents have no effect on the earnings per
share calculations as they are antidilutive.
(i) New Accounting Pronouncements
Accounting for the Impairment of Long-Lived Assets - In March 1995,
the FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
SFAS No. 121 establishes standards for accounting for the
impairment of long-lived assets, certain identifiable
intangibles and goodwill. It does not apply to financial
instruments, long-term customer relationships of a financial
institution (e.g., core deposit intangibles), mortgage and other
servicing rights, or deferred tax assets. This standard will be
effective for the Company beginning January 1, 1996. The Company
has determined that the effect of adoption of this standard will
not be material.
Mortgage Servicing Rights - In May 1995, the FASB issued SFAS No.
122, Accounting for Mortgage Servicing Rights, which must be
adopted by the Company effective January 1, 1996. SFAS No. 122
requires that the Company recognize as separate assets rights to
service mortgage loans for others, whether those servicing
rights are originated or purchased. Previously, only purchased
servicing rights were capitalizable as an asset whereas
internally originated rights were expensed. SFAS No. 122 also
requires that capitalized servicing rights be assessed for
impairment based on fair market value, rather than an estimate
of undiscounted future cash flows. The Company has determined
that the effect of adoption of this standard will not be
material.
Accounting for Stock-Based Compensation - In October 1995, the FASB
issued SFAS No. 123, Accounting for Stock-Based Compensation.
The new standard defines a fair market value method of
accounting for stock options and other equity instruments, such
as stock purchase plans. Under this method, compensation costs
are measured based on the fair value of the stock award when
granted and are recognized as an expense over the service
period, which is usually the vesting period. This standard will
be effective for the Company beginning January 1, 1996, and
requires measurement of awards made beginning in 1995.
The new standard permits companies to account for equity
transactions with employees under existing accounting rules, but
requires disclosure in a note to the financial statements of the
pro forma net income and earnings per share as if the Company
had applied the new method of accounting. The Company intends to
<PAGE>
follow these disclosure requirements for its stock option plans.
Adoption of the new standard will not impact reported earnings
or earnings per share, and will have no effect on the Company's
cash flows.
(3) Cash and Due From Banks
The Bank maintains balances at the Federal Reserve Bank to comply with
reserve requirements set forth by Regulation D of the Federal Reserve
Act, as amended. At December 31, 1995 and 1994, the Bank was required to
maintain average balances of approximately $1,199,000 and $5,902,800,
respectively, to comply with these regulations. For the purposes of
reporting cash flows, cash and cash equivalents on the consolidated
statements of cash flows include cash and due from banks,
interest-bearing deposits with maturities of 90 days or less, federal
funds sold, and securities purchased under agreements to resell.
(4) Securities Purchased Under Agreement to Resell
The Company purchases securities under agreements to resell to invest
excess liquidity. The purchases are typically collateralized by U.S.
Treasury securities, U.S. government securities, mortgage-backed
securities or whole loans. These agreements generally mature on the next
business day. There were $28,000,000 in outstanding securities purchased
under agreements to resell as of December 31, 1995. Securities purchased
under agreements to resell averaged $1,641,000, $8,530,000, and
$19,652,000 during 1995, 1994, and 1993; and the maximum amounts
outstanding at any month end during the years ended December 31, 1995,
1994, and 1993 were $28,000,000, $24,500,000, and $49,000,000,
respectively.
(5) Investment Securities
Theamortized cost, unrealized gains and losses, and estimated market value
of investment securities are as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Estimated
Amortized Unrealized Unrealized market
cost gains losses value
---- ----- ------ -----
December 31, 1995
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 999 - (1) 998
Mortgage-backed securities 19,274 - (328) 18,946
------ --- ----- ------
Total investment
securities $ 20,273 - (329) 19,944
====== === ===== ======
December 31, 1994
U.S. Treasury securities $ 4,998 - (59) 4,939
Mortgage-backed securities 49,037 - (4,197) 44,840
Other securities 5 19 - 24
-- -- ------ ------
Total investment
securities $ 54,040 19 (4,256) 49,803
====== === ===== ======
</TABLE>
The following is a summary of the estimated maturities of investment
securities which are principally mortgage-backed securities held as of
December 31, 1995 (dollar amounts in thousands):
Amortized Fair
cost Value yield
---- ----- -----
Due in one year or less $ 2,136 2,099 5.62%
Due in one year through five years 18,137 17,845 5.60
------ ------ ----
$ 20,273 19,944 5.60
====== ====== ====
Maturities of mortgage-backed securities are classified in accordance with
contractual repayment schedules. Actual maturities may differ from the
contractual maturities reported above because debt security issuers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<PAGE>
Proceeds from the sale of investment securities amounted to $28,057,000,
$-0-, and $17,292,000 in 1995, 1994, and 1993, respectively, which
resulted in a gross realized loss of $334,000 in 1995 and a gross
realized gain of $228,000 in 1993.
Investment securities with an amortized cost of $400,000 at December 31,
1995 and $12,037,000 at December 31, 1994 were pledged to secure
treasury tax and loan accounts and other borrowing facilities.
In November 1995, the FASB issued additional implementation guidelines
regarding previously issued SFAS No. 115. In accordance with this
guidance and prior to December 31, 1995, companies were allowed a
one-time reassessment of their classification of securities and were
required to account for any resulting transfers at fair value. Transfers
from the held to maturity category that result from this one-time
reassessment will not call into question the intent to hold other
securities to maturity in the future. The Company transferred
approximately $24,388,000 of securities from the held to maturity
portfolio to the available for sale portfolio. These securities were
then sold and resulted in a net loss of $348,000. This transfer was made
to allow the Company greater flexibility in managing its interest rate
risk and liquidity.
(6) Loans and Allowance for Loan Losses
Major classifications of loans are summarized as follows (dollar amounts in
thousands):
December 31,
1995 1994
---- ----
Commercial $ 26,359 34,635
Agricultural 1,375 -
Real estate:
Construction and land development 4,383 5,997
Mortgage 31,267 35,165
Consumer installment 3,149 5,268
Other loans 404 551
------ ------
66,937 81,616
Deferred fees and costs (172) (276)
------ ------
Net loans $ 66,765 81,340
====== ======
The Bank's customers are located throughout Northern California with the
majority concentrated in the greater Sacramento and San Francisco Bay
regions. The Bank's real estate construction and land development loans,
which represent approximately 7% of total loans, consist primarily of
loans made to finance residential projects in Placer, El Dorado, and
Sacramento counties. The Company's real estate mortgage loans, which
represent 47% and 43% of total loans as of December 31, 1995 and 1994,
consist mainly of loans made to finance owner occupied and commercial
income property in Placer, El Dorado, and Sacramento counties. A
significant portion of these residential real estate mortgage loans
resulted from the Bank providing take-out financing on the Bank's
construction and land development loan portfolio.
At December 31, 1995, approximately 93% of the total loans were
collateralized. Generally, real estate loans are secured by real
property while commercial and other loans are secured by bank deposits,
real property, business assets or personal assets. Repayment is
generally expected from the sale of the related property for real estate
construction loans, and from cash flow of the borrower for other loans.
<PAGE>
Changes in the allowance for loan losses for each of the three years ended
December 31, 1995, 1994, and 1993 are summarized as follows (dollar
amounts in thousands):
1995 1994 1993
---- ---- ----
Balance at beginning of year $ 4,151 5,615 3,205
Provision for loan losses - 2,668 7,700
Loan charge offs (1,821) (4,196) (5,355)
Loan recoveries 175 64 65
----- ----- -----
Balance at end of year $ 2,505 4,151 5,615
===== ===== =====
Nonaccrual loans totaled $3,228,000, $7,347,000, and $5,300,000 at December
31, 1995, 1994, and 1993, respectively. Additional interest income that
would have been recognized from nonaccrual loans had they performed in
accordance with their original contractual terms, totaled $340,000,
$516,000, and $603,000 in 1995, 1994, and 1993, respectively.
At December 31, 1995, the Company's recorded investment in loans for which
an impairment has been recognized totaled $5,248,000. Included in this
amount were $3,008,000 of impaired loans for which a SFAS 114 allowance
of $484,500 is included in the allowance for loan losses, as well as
$2,240,000 of impaired loans that as a result of write downs on the fair
value of collateral, did not have a SFAS 114 allowance. The average
recorded investment in impaired loans was $5,746,500 for 1995. Except
for nonaccrual loans, interest is recognized on impaired loans when cash
is received and the future collection of principal is considered by
management to be probable. For the year ended December 31, 1995, the
Company recognized $127,500 in interest on such loans.
(7) Premises and Equipment
The major classifications of premises and equipment are as follows (dollar
amounts in thousands):
December 31,
1995 1994
---- ----
Furniture, fixtures and equipment $ 2,146 3,567
Leasehold improvements 1,199 1,331
----- -----
3,345 4,898
Accumulated depreciation and amortization 2,472 3,492
----- -----
$ 873 1,406
==== =====
Depreciation and amortization of $521,000, $745,000, and $742,000 was
recorded for the years ended December 31, 1995, 1994, and 1993, respectively.
(8) Other Real Estate Owned
Other real estate owned was $692,000 and $3,208,000 at December 31, 1995
and 1994, respectively. These balances are net of the allowance for
losses on other real estate owned of $1,113,000 and $392,000,
respectively. During 1995, $1,005,000 was added as a provision and
$284,000 was charged off. During 1994, $500,000 was added as a provision
and $248,000 was charged off.
(9) Deposit Liabilities
Time deposits of $100,000 or more amounted to $9,610,000 and $7,637,000 at
December 31, 1995 and 1994, respectively. Interest expense on time
deposits of $100,000 or more totaled $549,000, $482,000, and $531,000
for 1995, 1994, and 1993, respectively. As of December 31, 1995 and
1994, deposits included $38,693,000 and $34,063,000 or 37% and 29% of
total deposits of homeowner association management companies.
<PAGE>
(10) Borrowings
Sunrise Bank of California is eligible to borrow funds on a secured basis
from the Federal Reserve Bank of San Francisco and several
broker/dealers. The maximum available advance is dependent upon the
dollar total of the Bank's investment securities and loans pledged to
collateralize such borrowings. As of December 31, 1994, the Bank had
$10,548,000 in short-term borrowings and had $12,037,000 in securities
pledged under these borrowing facilities. As of December 31, 1995, there
were no amounts outstanding under these arrangements. There were average
borrowings for the years ended December 31, 1995 and 1994 of $2,155,000
and $7,418,000, respectively, with average interest rates of 5.5% and
5.4%, respectively.
(11) Income Taxes
The components of the provision (benefit) for income taxes are as follows
(dollar amounts in thousands):
1995 1994 1993
---- ---- ----
Current:
Federal $ 70 (838) (2,251)
State 85 (83) 2
---- ----- -----
155 (921) (2,249)
---- ----- -----
Deferred:
Federal (70) (526) (466)
State (84) (14) (350)
---- ----- ------
(154) (540) (816)
--- ----- -----
$ 1 (1,461) (3,065)
=== ===== =====
Thetotal income tax rate differs from the amount computed by applying the
U.S. federal statutory income tax rate to income before income taxes and
the cumulative effect of adopting SFAS No. 109. A reconciliation of the
statutory income tax rate to the effective income tax rate of the
Company is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory rate (35.0)% (35.0)% (35.0)%
State franchise tax rate (net of federal income
tax benefit) .1 (1.8) (7.3)
Reversal of tax reserves provided in previous
years no longer required - - (8.1)
Limitation on the utilization of tax benefits 34.1 3.2 6.1
Other .8 1.2 1.9
---- ---- ----
Effective rate - % (32.47)% (42.4)%
==== ===== ====
</TABLE>
At December 31, 1995, the Company had operating loss carryforwards for
federal tax purposes of approximately $1,303,000 which expire in 2009.
In addition, the Company had operating loss carryforwards for state tax
purposes of approximately $5,819,000 which begin to expire in 1998.
Federal and state operating loss carryforwards differ primarily because
the State of California disallows the carryback of operating losses and
limits carryforward amounts to 50% of the reported tax loss.
The Tax Reform Act of 1986, as amended, and the California Conformity Act
of 1987 impose substantial restrictions on the utilization of net
operating loss carryforwards in the event of an "ownership change," as
defined by the Internal Revenue Code. If there should be a significant
ownership change of Sunrise Bancorp, the ability to utilize the stated
federal and state loss carryforwards could be significantly reduced.
Deferred income taxes reflect the tax effect of temporary differences
existing between the financial statement basis and tax basis of assets
<PAGE>
and liabilities recognized in the financial statements. Under SFAS No.
109, deferred tax assets are reduced by a valuation allowance when it
has been determined that it is unlikely such assets will be realized.
The Company has recorded a net deferred tax asset of $2,492,000 with a
corresponding valuation allowance of $1,267,000 for a net carrying value
of $1,225,000. This asset is primarily attributable to loss
carryforwards, which expire between 1998 and 2009, and timing
differences. For the loss carryforwards, realization is dependent on
generating sufficient taxable income prior to expiration of loss
carryforwards. In addition, upon reversal of timing differences, if
sufficient taxable income is unavailable, additional loss carryforwards
would be created. Therefore, the ultimate realization of the carrying
value of the deferred tax asset is dependent on generating sufficient
taxable income in the future. Although realization is not assured,
management believes it is more likely than not that the net carrying
value of the deferred tax asset will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income are reduced.
The tax effect of the principal temporary items creating the Company's net
deferred tax benefit included in other assets at December 31, 1995 and
1994 are as follows (dollar amounts in thousands):
1995 1994
---- ----
Writedown of investments $ (136) (1,483)
Allowance for loan losses 702 1,468
Loan origination costs (39) (71)
California franchise tax (134) (132)
Premises and equipment 91 54
California net operating loss 658 548
Other real estate owned 526 178
Federal net operating loss 443 1,096
Alternative minimum tax credit 291 137
Other 90 (64)
----- -----
2,492 1,731
Less valuation allowance 1,267 660
----- -----
Total net deferred tax benefit $ 1,225 1,071
===== =====
(12) Other Expenses
The composition of other operating expenses for the years ended December
31, 1995, 1994, and 1993 respectively is set forth below (dollar amounts
in thousands):
1995 1994 1993
---- ---- ----
Stationery and supplies $ 79 229 308
OREO expense 977 634 562
Communications 234 565 540
Professional fees 586 801 1,776
State Banking Department and
FDIC insurance assessments 317 712 667
Other outside service fees 599 1,041 976
Other 511 1,793 1,627
---- ----- -----
$ 3,303 5,775 6,456
===== ===== =====
Included within other outside service fees are amounts incurred for outside
vendors to perform various banking services for depositors that are in
real estate related industries. Their services include data processing,
courier, and other deposit related services. Total amounts paid to
outside vendors amounted to $297,000, $592,000, and $709,000 in 1995,
1994, and 1993, respectively. These services were discontinued with the
reduction of title company deposits.
<PAGE>
(13) Commitments and Contingencies
Lease Commitments
Thefuture minimum lease payments for noncancelable operating leases, and
the minimum sublease rental receipts for noncancelable subleases, with
remaining terms in excess of one year are as follows (dollar amounts in
thousands):
Leases Subleases
------ ---------
Year ending December 31:
1996 $ 818 163
1997 715 163
1998 715 163
1999 299 68
Later years - -
--- --
$ 2,547 557
===== ===
Net rental expense aggregated $844,000, $760,000 and $789,000 in 1995,
1994, and 1993, respectively.
Commitments to Extend Credit
In the ordinary course of business, the Company enters into transactions
which involve financial instruments which are not reflected in the
consolidated financial statements. These financial instruments consist
of undisbursed loan commitments of $9,987,000 and stand-by letters of
credit of $510,000 at December 31, 1995. The Company applies the same
credit policies in making these "off balance sheet" commitments as it
does for "on balance sheet" instruments. The Bank's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument for loan commitments and stand-by letters of credit is equal
to the contractual amount of those instruments. The undisbursed loan
commitments relate primarily to undisbursed portions of commercial lines
of credit.
The loan commitments are typically contingent upon the borrower meeting
certain financial requirements and other covenants, and such commitments
typically have fixed expiration dates and require payment of a fee.
Since a portion of these commitments are expected to expire without
being drawn upon, the total commitments do not necessarily represent
future cash requirements. The Bank evaluates each potential borrower and
the necessary collateral on an individual basis. Collateral varies, but
may include real property, bank deposits, debt or equity securities or
business assets.
Stand-by letters of credit are conditional commitments issued by the Bank
to guarantee the performance of a customer to a third party. The credit
risk is similar to that involved in extending loan commitments to
customers, and the Bank accordingly uses evaluation and collateral
requirements similar to those for loan commitments. At December 31,
1995, $500,000 of the standby letters of credit were unsecured.
Litigation
The Company and the Bank are at times subject to threatened or filed legal
actions with regard to matters arising out of the course of their
businesses. It is the opinion of management, after consulting with legal
counsel, that the resulting liability, if any, as a result of these
legal actions will not materially affect the consolidated financial
position of the Company.
(14) Employee Benefit Plans
The Company has two Stock Option Plans (the "Plans") for full-time salaried
officers and employees who have significant responsibility for the
successful operation of the Company and the Bank. The Plans provide for
the grant of incentive and nonstatutory stock options. The options may
be granted to purchase up to a remaining aggregate of 778,649 shares (as
adjusted for stock dividends) of the Company's authorized but unissued
<PAGE>
common stock. The exercise price of all options granted under the Plans
may not be less than 100% of the fair market value of the Company's
common stock on the date of the grant, and must be paid in full in cash
or shares of the Company's common stock at the time the option is
exercised. Under the Plans, all options expire no later than ten years
after the date of the grant.
A summary of changes in outstanding options follows:
Average
Number of price per
shares share
------ -----
Balance at December 31, 1992 410,949 $ 3.39
Granted 231,534 3.27
Canceled 249,596 3.35
------- ----
Balance at December 31, 1993 392,887 3.35
Granted 217,000 2.65
Canceled 96,162 3.55
------- ----
Balance at December 31, 1994 513,725 3.35
Granted 75,000 1.56
Canceled 329,097 3.40
------- ----
Balance at December 31, 1995 259,628 $ 2.29
======= ====
Options covering 85,629 shares, at an average price of $2.98 per share,
were exercisable at December 31, 1995.
The Company has a 401(k) tax deferred savings plan under which eligible
employees may elect to defer a portion of their salary as a contribution
to the plan. The Company matches the employee contributions at a rate
set by the board of directors (currently 50% of the first 6% of deferral
of an individual's salary). The matching contribution vests ratably over
six years. The Company contributed $51,000, $47,000, and $69,000 in
1995, 1994, and 1993, respectively.
(15) Shareholders' Equity
The Company commenced a private offering of its common stock in 1991. Under
the offering, a total of 328,002 shares valued at $5.00 per share were
issued and warrants to purchase a total of 218,668 shares of common
stock of the Company at $5.00 per share were issued. Proceeds received
under this offering, net of costs incurred, amount to $1,529,000. On
December 31, 1991, the Company acquired the assets of an escrow
accounting company in exchange for 75,000 shares of common stock of the
Company and warrants to purchase 50,000 shares of common stock of the
Company at $5.00 per share. This asset purchase was valued at $375,000.
Warrants issued in connection with these transactions became exercisable
on July 2, 1993 and expire on December 31, 1997. Total shares
exercisable under these warrants amount to 296,206 at a price of $4.54
per share after adjusting for 1992 and 1993 stock dividends.
(16) Related Party Transactions
The Company has granted in the ordinary course of business, loans to
certain of its directors, executive officers, and to associates of such
persons (collectively referred as "related parties"). The aggregate
dollar amount of loans to related parties was $1,732,000 and $2,228,000
at December 31, 1995 and 1994, respectively. During 1995, $224,000 of
new loans to related parties were advanced and principal repayments
totaled $720,000. During 1994, $1,097,000 of new loans to related
parties were advanced and principal repayments totaled $616,000. None of
the loans outstanding at December 31, 1995 and 1994 were contractually
past due as to principal or interest, nor were they classified as
nonperforming or potential problem loans.
<PAGE>
(17) Regulatory Matters
Regulatory Agreements
On April 14, 1993, the Bank entered into a Memorandum of Understanding with
the Federal Deposit Insurance Corporation (the "FDIC") and the
Superintendent of Banks of the State of California (the
"Superintendent") to address various matters arising from an examination
of the Bank conducted by the FDIC as of October 5, 1992. This Memorandum
of Understanding superseded the previous Memorandum of Understanding
with the Bank dated July 16, 1991. As a result of a joint examination of
the Bank conducted by the FDIC and the Superintendent as of the close of
business October 25, 1993, and the conclusion of the FDIC and the
Superintendent that the Bank was not in compliance with the requirements
of the Memorandum of Understanding dated April 14, 1993, the Bank
entered into a revised Memorandum of Understanding with the FDIC on May
17, 1994 (the "FDIC Memorandum") and the Bank entered into a regulatory
agreement with the Superintendent on May 24, 1994, as amended on October
31, 1994 (the "State Agreement"). The FDIC Memorandum and the State
Agreement are referred to collectively as the "Agreements." As a result
of a joint examination of the Bank conducted by the FDIC and the
Superintendent as of the close of business December 18, 1995, both
Agreements were terminated.
As a result of an examination of the Company conducted by the Federal
Reserve Bank ("Reserve Bank") as of December 31, 1993, the Company
entered into a Memorandum of Understanding with the Reserve Bank on
September 2, 1994 (the "Reserve Bank Memorandum"). The Reserve Bank
Memorandum requires the Company: (i) to submit a policy for receiving
dividends from the Bank; (ii) to submit a capital plan to improve and
maintain an adequate capital position for the Company and the Bank;
(iii) to submit a plan to manage the Company's and the Bank's growth;
(iv) to submit annual budgets for the Company and the Bank; (v) to
submit an explanation of certain management and service fees and other
payments assessed or paid by the Bank to the Company since January 1,
1993, and adopt a policy addressing inter-corporate management and
service fees and other payments and make any reimbursements to the Bank
as may be required by the Reserve Bank; (vi) to obtain prior approval to
declare or pay any dividends, engage in certain financial transactions,
increase borrowings or incur debt, increase director fees, pay executive
bonuses or execute renew or modify any employment or service contracts
with executive officers, or otherwise acquire any of its shares of
common stock; and (vii) to submit quarterly written progress reports and
certain financial statements. The Reserve Bank Memorandum also requires
the Company's Board of Directors; (i) to review performance on a
quarterly basis, and to submit such reviews to the Reserve Bank; (ii) to
submit a plan to improve the condition of the Bank and the Company; and
(iii) to complete a study of employment contracts and executive officer
compensation paid during 1993 and 1994. As a result of an examination of
the Company conducted by the Reserve Bank as of December 31, 1994, the
Reserve Bank Memorandum remains in effect and unchanged. Management
believes the Company is in substantial compliance with the terms and
conditions of the Reserve Bank Memorandum.
Capital Guidelines
The Company and the Bank are subject to various regulatory capital
requirements administered by federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary, actions by regulators that, if
undertaken, could have a direct material effect on the Company's
financial statements. The regulations require the Company and the Bank
to meet specific capital adequacy guidelines that involve quantitative
measures of assets, liabilities and certain "off balance sheet" items as
calculated under regulatory accounting practices. The Company's and the
Bank's capital classifications are also subject to qualitative judgments
by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum ratios of total and Tier 1
<PAGE>
capital (as defined in the regulations) to risk-weighted assets (as
defined) and a minimum leverage ratio of Tier 1 capital to average
assets (as defined). Management believes, as of December 31, 1995, that
the Company meets all capital adequacy requirements to which it is
subject.
The following table shows the Company's and the Bank's capital ratios at
December 31, as well as the minimum regulatory capital ratios:
<TABLE>
<CAPTION>
Minimum
capital
Capital ratios 1995 1994 ratios
-------------- ---- ---- ------
Company:
<S> <C> <C> <C>
Total risk-based capital ratio 18.31% 17.27% 8.00%
Tier 1 capital to risk-weighted assets 17.05 16.02 4.00
Leverage ratio 11.75 8.98 4.00
===== ===== ====
Bank:
Total risk-based capital ratio 16.95% 16.28% 8.00%
Tier 1 capital to risk-weighted assets 15.69 15.04 4.00
Leverage ratio 10.98 8.42 4.00
===== ===== ====
</TABLE>
Dividend Limitations
California law restricts the amount of net profits of the Bank available
for distribution to the Company in the form of cash dividends to the
lesser of retained earnings to the Bank's net income for its last three
fiscal years (less any distributions to shareholders made during such
period). Where this test is met, cash dividends may, with the prior
approval of the California Superintendent of Banks, be paid in an amount
which does not exceed the greater of (i) the retained earnings of the
Bank, (ii) the net income of the Bank As of December 31, 1995, the Bank
had no retained earnings. for its current fiscal year. As of December
31, 1995, the Bank had no retained earnings.
(18) Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS 107,
Disclosures About Fair Value of Financial Instruments. The estimated
fair value amounts have been determined by using available market
information and appropriate valuation methodologies. However,
considerable judgment is required to interpret market data to develop
the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized in
a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
The following estimates and assumptions were used on December 31, 1995 to
estimate the fair value of each class of financial instruments for which
such an estimation was practicable.
Cash and Cash Equivalents - For cash and equivalents, the carrying
amount is a reasonable estimate of fair value.
Investment Securities - The fair value of investment securities is based
on quoted market prices, dealer quotes, and prices obtained from
independent pricing services.
Loans - The fair value of performing loans is estimated by discounting
the future cash flows using the current interest rates at which
similar loans would be made to borrowers with similar credit ratings
and for the same remaining maturities. The fair value of
nonperforming loans of approximately $2,684,000 and $6,115,000 at
December 31, 1995 and 1994, respectively, was based on estimated net
realizable value.
<PAGE>
Demand Deposits and Time Deposits - The fair value of demand deposits,
savings accounts, and certain money market deposits is the amount
payable on demand at the reporting date. The fair value of
fixed-maturity certificates of deposit is estimated using the rates
currently offered for deposits with similar remaining maturities.
Commitment to Extend Credit and Standby Letters of Credit - The fair
value of commitments and letters of credit is estimated using the
fees currently charged to enter into similar agreements and the
present creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also considers the difference between current
levels of interest rates and the committed rates. The difference
between the carrying value of commitments to fund loans or standby
letters of credit and their fair value is not significant and
therefore not included in the following table.
The summaries of these financial instruments and their related fair
values at December 31, 1995 and 1994 are as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------- -----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 32,726 32,726 6,367 6,367
Investment securities 20,273 19,944 54,040 49,803
Loans 64,260 63,360 77,189 75,045
====== ====== ====== ======
Liabilities:
Noninterest-bearing deposits $ 13,808 13,808 29,206 29,206
Interest-bearing deposits 90,075 89,969 87,737 87,768
Other borrowings - - 10,548 10,548
====== ====== ====== ======
</TABLE>
(19) Sunrise Bancorp (Parent Company Only)
Condensed Statements of Condition
December 31, 1995 and 1994
(Dollar amounts in thousands)
1995 1994
---- ----
Cash and interest-bearing deposits 894 1,449
Investment in bank subsidiary $ 15,430 16,877
Premises and equipment, net 40 65
Other assets 138 208
------ ----
$ 16,502 18,599
====== ======
Other liabilities 13 590
Shareholders' equity 16,489 18,009
------ ------
$ 16,502 18,599
====== ======
<PAGE>
Condensed Statements of Operations
For the years ended December 31, 1995, 1994, and 1993
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Income:
<S> <C> <C> <C>
Interest $ 27 23 48
Other 49 98 -
---- ---- ----
76 121 48
---- ---- ----
Expenses:
Salaries and benefits 26 65 272
Net occupancy expense - 31 192
Other 122 86 692
Income tax (benefit) provision 1 (12) (983)
---- ---- -----
149 170 173
---- ---- -----
Loss before equity in undistributed
income of subsidiary (73) (49) (125)
Equity in undistributed loss of subsidiary (1,447) (2,993) (4,043)
Cumulative effect of a change in accounting
principle of subsidiary - - 250
----- ----- -----
Net loss $ (1,520) (3,042) (3,918)
===== ===== =====
</TABLE>
Condensed Statements of Cash Flows
For the years ended December 31, 1995, 1994, and 1993
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
Operating activities:
<S> <C> <C> <C>
Net loss $ (1,520) (3,042) (3,918)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Undistributed loss of subsidiaries 1,447 2,993 3,793
Gain on sale of investments (17) - -
Depreciation and amortization 24 34 34
Net change in other assets and
liabilities (512) 462 (1,312)
----- ---- -----
Net cash (used) provided
by operating activities (578) 447 (1,403)
----- ---- -----
Investing activities:
Proceeds from sale of investments 23 - -
Acquisition of premises and equipment - (11) (1)
Net cash provided (used) by
investing activities 23 (11) (1)
----- ----- -----
Financing activities:
Cash paid in lieu of fractional shares - - (3)
----- ----- -----
Net cash used by financing
activities - - (3)
(Decrease) increase in cash
and cash equivalents (555) 436 (1,407)
Cash and cash equivalents at beginning
of year 1,449 1,013 2,420
------ ----- -----
Cash and cash equivalents at end of year $ 894 1,449 1,013
====== ===== =====
</TABLE>
<PAGE>
Item 7(b)
Unaudited Pro Forma Financial Information
<PAGE>
First Banks America, Inc.
Pro Forma Combined Condensed Financial Statements
The following unaudited pro forma combined condensed statement of income
sets forth the operations of First Banks America, Inc. (FBA) combined with
Sunrise Bancorp (Sunrise) for the year ended December 31, 1995, as if FBA had
completed its purchase of Sunrise's common stock as described in Item 2 on
January 1, 1995.
The unaudited pro forma combined condensed balance sheet gives effect to
the acquisition of Sunrise by FBA as if the acquisition had been consummated on
December 31, 1995.
The acquisition of Sunrise by FBA has been accounted for using the
purchase method of accounting. The adjustments arising from the application of
the purchase method of accounting are described in the Notes to Pro Forma
Combined Condensed Financial Statements.
The unaudited pro forma condensed financial statements should be read in
conjunction with the accompanying notes and the consolidated financial
statements and notes thereto of FBA and Sunrise as of December 31, 1995. The pro
forma financial statements may not be indicative of the results that actually
would have occurred if the acquisition had been effective on the dates indicated
or which may be obtained in the future.
<PAGE>
First Banks America, Inc.
Pro Forma Combined Condensed Statement of Income (unaudited)
Nine months ended September 30, 1996
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Assets Registrant Sunrise Adjustments Combined
------ ---------- ------- ----------- --------
Interest Income:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 11,653 4,892 44 (D) 16,589
Investment securities 2,344 797 64 (D) 3,205
Other 1,292 1,033 (156)(C) 2,169
------ ----- ---- ------
Total interest income 15,289 6,722 (48) 21,963
------ ----- ----- ------
Interest expense:
Deposits 6,743 2,424 9,167
Notes payable and other 416 - 901(C) 1,317
----- ------ --- ------
Total interest income 7,159 2,424 901 10,484
----- ----- --- ------
Net interest income 8,130 4,298 (949) 11,479
Provision for possible loan losses 600 100 ____ 700
----- ----- ------
7,530 4,198 (949) 10,779
----- ----- ---- ------
Noninterest income 1,303 694 1,997
Noninterest expenses 6,622 4,868 (269)(D) 11,222
107 (D) 107
Income before provision for income
taxes 2,211 24 (680) 1,555
Provision (benefit) for income taxes 855 13 (210) (C) 734
76 (D)
------ ------ ---- -----
Net income (loss) $ 1,356 11 (546) 821
====== ====== ===== =====
Weighted average shares of common stock
outstanding (in thousands) 3,969 3,969
====== =====
Earnings per common share $ 0.34 0.21
====== =====
</TABLE>
See notes to pro forma combined condensed financial statements
<PAGE>
First Banks America, Inc.
Pro Forma Combined Condensed Statement of Income (unaudited)
Nine months ended September 30, 1995
<TABLE>
<CAPTION>
Pro Forma Pro Forma
ASSETS Registrant Sunrise Adjustments Combined
------ ---------- ------- ----------- --------
Interest Income:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 13,204 5,547 44 (D) 18,795
Investment securities 3,708 2,140 64 (D) 5,912
Other 392 156 156)(C)
------ ----- ---- ------
Total interest income 17,304 7,843 (48) 24,707
------ ----- ---- ------
Interest expense:
Deposits 6,642 2,593 9,235
Notes payable and other 1,999 118 901 (C) 3,018
----- ----- --- ------
Total interest income 8,641 2,711 901 12,253
----- ----- --- ------
Net interest income 8,663 5,132 (949) 12,454
Provision for possible loan losses 5,525 - 5,525
----- ----- ----
3,138 5,132 (949) 6,929
----- ----- ---- -----
Noninterest income 2,358 328 2,686
Noninterest expenses 8,610 5,558 (269)(D) 14,006
_____ _____ 107 (D) ______
----
Loss before provision for income taxes (3,114) (98) (680) (3,892)
Provision (benefit) for income taxes (835) 1 (210)(C) (968)
76 (D)
------ ----- ---- ------
Net loss $(2,279) (99) (546) (2,924)
====== ==== ==== ======
Weighted average shares of common stock
outstanding (in thousands) 4,106 4,106
====== ======
Earnings per common share $ (0.56) (0.71)
====== ======
</TABLE>
See notes to pro forma combined condensed financial statements
<PAGE>
First Banks America, Inc.
Pro Forma Combined condensed Balance Sheet (unaudited)
December 31, 1995
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Registrant Surise Debit Credit Combined
---------- ------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 40,922 32,726 3,562(C) 70,086
-
Investment securities 39,337 20,273 425(D) 59,185
-
Total loans 194,533 66,765 472(D) 261,770
Unearned discount (1,960) - (1,960)
Allowance for possible loan loss (5,228) (2,505) (7,733)
------- ------ ----- ----- -------
Net loans 187,345 64,260 472 - 252,077
------- ------ ----- ----- -------
Bank premises and equipment, net 6,540 873 7,413
Intangibles associated with the purchase -
of subsidiary 2,139(D) 2,139
Accrued interest receivable 665 665
Deferred income taxes, net 14,605 14,605
Other real estate owned 1,013 692 1,705
Other assets 6,156 2,160 8,316
-
-------- ------- ----- ----- -------
Total assets $296,583 120,984 2,611 3,987 416,191
======== ======= ===== ===== =======
LIABILITIES
Deposits:
Non-interest bearing 49,822 13,808 3,630
Interest bearing 199,441 90,075 289,516
-------- ------- --------
Total deposits 249,263 103,883 353,146
Notes payable and other borrowings 6,374 14,000(C) 20,374
Deferred income taxes 1,362 217(D) 1,579
Accrued and other liabilities 4,326 612 896(D) 5,834
-------- ------- ----- ------ -------
261,325 104,495 - 15,113 380,933
-------- ------- ----- ------ -------
STOCKHOLDERS' EQUITY
Common stock 585 18,327 18,327(C) 585
Capital surplus 39,271 39,271
Retained earnings (3,820) (1,838) 1,838(C) (3,820)
Treasury stock (828) (828)
Net fair value adjustment for securities -
available for sale 50 50
-------- ------ ------ ------ -------
Total stockholders' equity 35,258 16,489 18,327 1,838 35,258
-------- ------- ------ ------ -------
$296,583 120,984 18,327 16,951 416,191
======== ======= ====== ====== =======
</TABLE>
See notes to pro forma combined condensed financial statements
<PAGE>
First Banks America, Inc.
Pro Forma Combined Condensed Statement of Income (unaudited)
Year ended December 31, 1995
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Registrant Sunrise Adjustments Combined
---------- ------- ----------- --------
Interest Income:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 17,462 7,110 59 (D) 24,631
Investment securities 4,473 2,747 85 (D) 7,305
Other 492 277 (208)(C) 561
-------- ------ ---- ------
Total interest income 22,427 10,134 (64) 32,497
-------- ------ ---- ------
Interest expense:
Deposits 8,929 3,503 12,432
Notes payable and other 2,289 119 1,201 (C) 3,609
-------- ------ ----- ------
Total interest income 11,218 3,622 1,201 16,041
-------- ------ ----- ------
Net interest income 11,209 6,512 (1,266) 16,455
Provision for possible loan losses 5,826 - - 5,826
-------- ------ ------ ------
Net interest income after
provision for loan losses 5,383 6,512 (1,266) 10,629
-------- ----- ------ ------
Noninterest income (126) 111 (15)
Noninterest expenses 11,160 8,142 (358)(D) 19,086
143 (D)
Loss before provision for income
taxes (5,903) (1,519) (1,050) (8,472)
Provision (benefit) for income taxes (2,083) 1 (287)(C) (2,369)
(D)
Net loss $ (3,820) (1,520) (763) (6,103)
------- ------ --------- ------
Weighted average shares of common stock
outstanding (in thousands) 4,052 4,052
======== =====
Earnings per common share $ (0.94) (1.51)
======= =====
</TABLE>
See notes to pro forma combined condensed financial statements
<PAGE>
First Banks America, Inc.
Notes to Pro Forma Combined Condensed
Financial Statements (Unaudited)
Note A
The unaudited pro forma combined condensed financial statements have been
prepared based on the historical financial statements of FBA and Sunrise and
reflect the completion of FBA's acquisition of Sunrise, as described in Item 2
and Note C to the unaudited pro forma combined condensed financial statements.
Accordingly, FBA has included the consolidated financial information of Sunrise
in the unaudited combined condensed financial statements. The acquisition of
Sunrise by FBA has been accounted for by applying the purchase method of
accounting.
Note B
Intercompany balances between FBA and Sunrise are not material and have not
been eliminated.
Note C
Under the terms of the Agreement, the shareholders of Sunrise received
$4.00 per share in cash for their stock, an aggregate of approximately $18.1
million.
During 1995, the average federal funds and prime rates were approximately
5.85% and 8.83%, respectively. The federal funds and LIBOR rates are used in the
unaudited combined condensed pro forma statement of income to calculate the
amount of interest foregone or paid, respectively, as a result of using
available cash and borrowings to fund the acquisitions. The borrowings carry an
interest rate equal to one-quarter percent less than the "Prime Rate" as
reported by the Wall Street Journal.
Note D
Application of the purchase method of accounting gives rise to purchase
adjustments to reflect the fair value of assets acquired and liabilities
assumed. The following summarizes the purchase accounting adjustments for
Sunrise and the resulting excess cost as included in the pro forma combined
condensed balance sheet:
(in thousands)
Fair value adjustment for leased premises $ (896)
Loans receivable 472
Investment securities (425)
Deferred income taxes (217)
Excess cost 2,139
The purchase accounting adjustments are amortized (accreted) to income
over the estimated life of the related asset or liability using the interest and
straight line methods, as appropriate for the nature of the asset or liability.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: November 18, 1996
FIRST BANKS AMERICA, INC.
By:/s/Allen H. Blake
--------------------
Allen H. Blake
Chief Financial Officer and
Secretary
<PAGE>
EXHIBIT 2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
SUNRISE BANCORP,
a California corporation,
FIRST BANKS AMERICA, INC.,
a Delaware corporation
and
SUNLIGHT HOLDINGS, INC.,
a Nevada corporation
August 15, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE ONE-TERMS OF THE MERGER & CLOSING
Section 1.01. The Merger----------------------------------------------- 1
Section 1.02. Effect of the Merger------------------------------------- 1
Section 1.03. Conversion of Shares------------------------------------- 1
Section 1.04. The Closing---------------------------------------------- 2
Section 1.05. Closing Date--------------------------------------------- 2
Section 1.06. Actions At Closing--------------------------------------- 2
Section 1.07. Exchange Procedures; Surrender of Certificates----------- 3
ARTICLE TWO - REPRESENTATIONS OF BANCORP
Section 2.01. Organization and Capital Stock--------------------------- 4
Section 2.02. Authorization; No Defaults------------------------------- 5
Section 2.03. Subsidiaries--------------------------------------------- 5
Section 2.04. Financial Information------------------------------------ 6
Section 2.05. Absence of Changes--------------------------------------- 6
Section 2.06. Regulatory Enforcement Matters--------------------------- 7
Section 2.07. Tax Matters---------------------------------------------- 7
Section 2.08. Litigation----------------------------------------------- 7
Section 2.09. Properties, Contracts, Employee Benefit Plans
and Other Agreements------------------------------------- 7
Section 2.10. Reports-------------------------------------------------- 8
Section 2.11. Investment Portfolio------------------------------------- 9
Section 2.12. Loan Portfolio------------------------------------------- 9
Section 2.13. Employee Matters and ERISA------------------------------- 9
Section 2.14. Title to Properties; Insurance--------------------------- 11
Section 2.15. Environmental Matters------------------------------------ 11
Section 2.16. Compliance with Law-------------------------------------- 12
Section 2.17. Brokerage------------------------------------------------ 12
Section 2.18. No Undisclosed Liabilities------------------------------- 12
Section 2.19. Statements True and Correct------------------------------ 12
Section 2.20. Commitments and Contracts-------------------------------- 13
Section 2.21. Material Interest of Certain Persons--------------------- 13
Section 2.22. Conduct to Date------------------------------------------ 14
Section 2.23. Irrevocable Proxies-------------------------------------- 14
Section 2.24. Disclosures in Disclosure Schedule----------------------- 14
<PAGE>
ARTICLE THREE - REPRESENTATIONS OF FBA
Section 3.01. Organization---------------------------------------------- 15
Section 3.02. Authorization--------------------------------------------- 15
Section 3.03. Absence of Changes---------------------------------------- 15
Section 3.04. Litigation------------------------------------------------ 15
Section 3.05. Statements True and Correct------------------------------- 15
Section 3.06. Availability of Cash Consideration------------------------ 16
ARTICLE FOUR - AGREEMENTS OF BANCORP
Section 4.01. Business in Ordinary Course------------------------------- 16
Section 4.02. Breaches-------------------------------------------------- 19
Section 4.03. Submission to Shareholders-------------------------------- 19
Section 4.04. Consummation of Agreement--------------------------------- 19
Section 4.05. Environmental Reports------------------------------------- 19
Section 4.06. Access to Information------------------------------------- 20
Section 4.07. Consents to Contracts and Leases-------------------------- 20
Section 4.08. Subsequent Financial Statements--------------------------- 21
Section 4.09. Reserve and Provisions for Loan Losses-------------------- 21
ARTICLE FIVE - AGREEMENTS OF FBA
Section 5.01. Regulatory Approvals-------------------------------------- 21
Section 5.02. Breaches-------------------------------------------------- 21
Section 5.03. Consummation of Agreement--------------------------------- 21
Section 5.04. Indemnification and Insurance----------------------------- 22
Section 5.05. Employee Benefits----------------------------------------- 22
Section 5.06. Payment for Stock Options and Warrants-------------------- 23
Section 5.07. Access to Information------------------------------------- 23
Section 5.08. Proxy Statement------------------------------------------- 23
ARTICLE SIX - CONDITIONS PRECEDENT TO MERGER
Section 6.01. Conditions to Obligations of FBA and Holdings------------- 24
Section 6.02. Conditions to Bancorp's Obligations----------------------- 25
<PAGE>
ARTICLE SEVEN - TERMINATION OR ABANDONMENT
Section 7.01. Mutual Agreement------------------------------------------ 26
Section 7.02. Breach of Agreements-------------------------------------- 26
Section 7.03. Failure of Conditions------------------------------------- 26
Section 7.04. Approval Denial------------------------------------------- 26
Section 7.05. Environmental Reports------------------------------------- 26
Section 7.06. Regulatory Enforcement Matters---------------------------- 26
Section 7.07. Automatic Termination------------------------------------- 27
ARTICLE EIGHT - LIABILITY ON TERMINATION
Section 8.01. Liquidated Damages---------------------------------------- 27
Section 8.02. Liability on Termination---------------------------------- 28
ARTICLE NINE - GENERAL
Section 9.01. Confidential Information---------------------------------- 28
Section 9.02. Publicity------------------------------------------------- 28
Section 9.03. Return of Documents--------------------------------------- 28
Section 9.04. Notices--------------------------------------------------- 28
Section 9.05. Nonsurvival of Representations, Warranties and Agreements- 29
Section 9.06. Costs and Expenses---------------------------------------- 30
Section 9.07. Entire Agreement------------------------------------------ 30
Section 9.08. Headings and Captions------------------------------------- 30
Section 9.09. Waiver, Amendment or Modification------------------------- 30
Section 9.10. Rules of Construction------------------------------------- 30
Section 9.11. Counterparts---------------------------------------------- 30
Section 9.12. Successors and Assigns------------------------------------ 30
Section 9.13. Governing Law; Assignment--------------------------------- 30
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This is an AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") made August 15, 1996, by and among SUNRISE BANCORP, a California
corporation ("Bancorp"), FIRST BANKS AMERICA, INC., a Delaware corporation
("FBA") and SUNLIGHT HOLDINGS, INC., a Nevada corporation ("Holdings").
On June 24, 1996, Bancorp and FBA entered into an Agreement and Plan
of Merger (the "Original Agreement") providing for the acquisition of Bancorp by
FBA pursuant to a merger between Bancorp and a subsidiary of FBA, subject to the
terms and conditions set forth therein. The Original Agreement provided, inter
alia, that FBA had the option of designating a corporate affiliate other than a
subsidiary of FBA to be the corporation with which Bancorp would merge. FBA has
organized a subsidiary, Holdings, for the purpose of merging with Bancorp, and
Bancorp, FBA and Holdings desire to amend and restate the Original Agreement in
order to provide specifically for Holdings's role in the Merger (as defined
herein). It is therefore agreed that the Original Agreement is amended and
restated to read as set forth in this Agreement; provided, however, that the
parties agree and acknowledge that the provisions of Articles Two and Three
hereof are identical to the corresponding articles of the Original Agreement and
that the representations and warranties set forth in such Articles are made as
of June 24, 1996.
In consideration of the premises and the mutual terms and provisions
set forth in this Agreement, the parties agree as follows:
ARTICLE ONE
TERMS OF THE MERGER & CLOSING
Section 1.01. The Merger. Pursuant to the terms and provisions of this
Agreement and the applicable corporation laws governing the merger of Bancorp
with Holdings ("Corporate Laws"), Bancorp shall merge with Holdings in a
transaction in which Holdings will be the surviving corporation (the "Merger").
Section 1.02. Effect of the Merger. The Merger shall have all of the
effects provided by the Corporate Laws and this Agreement, and the separate
corporate existence of Bancorp shall cease on consummation of the Merger and be
combined in Holdings.
Section 1.03. Conversion of Shares.
(a) At the Effective Time (as defined in Section 1.05 below), each
share of common stock, no par value, of Bancorp ("Bancorp Common") issued and
<PAGE>
outstanding immediately prior to the Effective Time shall be converted into the
right to receive cash from FBA in the amount of Four Dollars (the "Merger
Consideration").
(b) At the Effective Time, all of the shares of Bancorp Common, by
virtue of the Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of any certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Bancorp Common
(the "Certificate") shall cease to have any rights with respect to such shares,
except the right of the holder to receive, without interest, the Merger
Consideration upon the surrender of the Certificate in accordance with Section
1.07(b) hereof.
(c) At the Effective Time, each share of Bancorp Common, if any, held
in the treasury of Bancorp or by any direct or indirect subsidiary of Bancorp
(other than shares held in trust accounts for the benefit of others or in other
fiduciary, nominee or similar capacities) immediately prior to the Effective
Time shall be canceled.
(d) If holders of Bancorp Common are entitled to dissent from the
Agreement and Merger and demand payment of the fair market value of their shares
under applicable Corporate Law, issued and outstanding shares of Bancorp held by
a dissenting holder shall not be converted as described in this Section 1.03,
but from and after the Effective Time shall represent only the right to receive
such consideration as may be determined to be due pursuant to applicable
Corporate Law; provided, however, that each share of Bancorp Common outstanding
immediately prior to the Effective Time and held by a dissenting holder who
shall, after the Effective Time, withdraw his demand for appraisal or lose his
right of appraisal shall have only such rights as are provided under applicable
Corporate Law.
Section 1.04. The Closing. The closing of the Merger (the "Closing")
shall take place at the location mutually agreeable to the parties hereto at
10:00 A.M. local time on the Closing Date described in Section 1.05 of this
Agreement.
Section 1.05. Closing Date. At FBA's election, the Closing shall take
place on either (i) one of the last five (5) business days of the month, or (ii)
the first business day of the month following the month, in each case, during
which each of the conditions in Sections 6.01(d) and 6.02(d) is satisfied or
waived by the appropriate party or on such other date as Bancorp and FBA may
agree (the "Closing Date"). The Merger shall take effect upon the filing of
articles of merger with the Secretary of State of the State of Nevada (the
"Effective Time"). The parties shall use their best efforts to cause such filing
to occur on the Closing Date.
Section 1.06. Actions At Closing.
(a) At the Closing, Bancorp shall deliver to FBA:
<PAGE>
(i) a certified copy of the Articles of Incorporation and
Bylaws of Bancorp and each of its subsidiaries;
(ii) a Certificate signed by an appropriate officer of Bancorp
stating that (A) each of the representations and warranties contained
in Article Two is true and correct in all material respects at the time
of the Closing with the same force and effect as if such
representations and warranties had been made at the Closing, and (B)
all of the conditions set forth in Sections 6.01(b) and 6.01(g) have
been satisfied or waived as provided therein;
(iii) certified copies of the resolutions of Bancorp's Board
of Directors and shareholders, establishing the requisite approvals
under applicable Corporate Law of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby;
(iv) A Certificate of the Secretary of State of the State
of California, dated a recent date, stating that Bancorp is in good
standing; and
(v) a legal opinion from counsel for Bancorp as to the matters
set forth on Exhibit 1.06(a) hereto, in form reasonably satisfactory to
FBA's counsel.
(b) At the Closing, FBA shall deliver to Bancorp:
(i) a Certificate signed by an appropriate officer of FBA
stating that (A) each of the representations and warranties contained
in Article Three is true and correct in all material respects at the
time of the Closing with the same force and effect as if such
representations and warranties had been made at the Closing, and (B)
all of the conditions set forth in Section 6.02(d) (but only with
respect to approvals other than by the Bancorp's shareholders) have
been satisfied;
(ii) certified copies of the resolutions of FBA's Board of
Directors and of the Board of Directors (and, if legally required, the
shareholder) of Holdings establishing the requisite approvals under
applicable Corporate Law of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby; and
(iii) a legal opinion from counsel for FBA as to the matters
set forth on Exhibit 1.06(b), in form reasonably satisfactory to
Bancorp's counsel.
Section 1.07. Exchange Procedures; Surrender of Certificates.
(a) Boatmen's Trust Company, St Louis, Missouri, shall act as
Exchange Agent in the Merger (the "Exchange Agent"). All fees and expenses of
the Exchange Agent shall be borne by FBA.
<PAGE>
(b) The agreement between FBA and the Exchange Agent (the "Exchange
Agreement") shall require that, as soon as reasonably practicable and in any
event within ten (10) days after the Effective Time, the Exchange Agent shall
mail to each record holder of any Certificate or Certificates whose shares were
converted into the right to receive the Merger Consideration a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as the Exchange Agent may reasonably specify) (each such letter, the
"Letter of Transmittal") and instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender to the
Exchange Agent of a Certificate, together with a Letter of Transmittal duly
executed and any other required documents, the holder of a Certificate shall be
entitled to receive in exchange therefor solely the Merger Consideration, and
the Exchange Agreement shall require that the Exchange Agent transmit the Merger
Consideration to each holder not later than five (5) business days after the
receipt of a Certificate and any other documents required by the Exchange Agent.
Such Merger Consideration shall be transmitted by wire at the request of any
shareholder of Bancorp if such consideration exceeds $25,000. No interest on the
Merger Consideration shall be paid or accrued for the benefit of holders of
Certificates. If the Merger Consideration is to be paid to a person other than a
person in whose name a surrendered Certificate is registered, it shall be a
condition of payment of the Merger Consideration that the surrendered
Certificate shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay to the Exchange Agent any
required transfer or other taxes or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not applicable.
(c) At any time following six months after the Effective Time, FBA
shall be entitled to terminate the Exchange Agent relationship, and thereafter
holders of Certificates shall be entitled to look only to FBA (subject to
abandoned property, escheat or other similar laws) with respect to the Merger
Consideration payable upon surrender of Certificates.
ARTICLE TWO
REPRESENTATIONS OF BANCORP
Bancorp hereby makes the following representations and warranties to
FBA:
Section 2.01. Organization and Capital Stock.
(a) Bancorp is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has the corporate
power to own all of its property and assets, to incur all of its liabilities and
to carry on its business as now being conducted.
(b) As of the date hereof, the authorized capital stock of Bancorp
consists of 20,000,000 shares of Preferred Stock, no par value, none of which is
<PAGE>
issued and outstanding, and 20,000,000 shares of Bancorp Common, of which
4,263,298 shares are outstanding, duly and validly issued, fully paid and
non-assessable. None of the outstanding shares of Bancorp Common has been issued
in violation of any preemptive rights of the current or past shareholders of
Bancorp. Bancorp has granted and outstanding (i) stock options representing the
right to acquire an aggregate of 269,629 shares of Bancorp Common for the
aggregate exercise price of $624,789 (the "Bancorp Stock Options") and (ii)
warrants representing the right to acquire an aggregate of 296,209 shares of
Bancorp Common for the aggregate price of $1,341,827 (the"Bancorp Warrants").
Except as disclosed in Section 2.01(b) of that certain document delivered by
Bancorp to FBA and executed by both Bancorp and FBA concurrently with the
execution and delivery of this Agreement (the "Disclosure Schedule"), each
Certificate representing shares of Bancorp Common issued by Bancorp in
replacement of any Certificate theretofore issued by it which was claimed by the
record holder thereof to have been lost, stolen or destroyed was issued by
Bancorp only upon receipt of an affidavit of lost stock certificate and a bond
sufficient to indemnify Bancorp against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such Certificate or the
issuance of such replacement Certificate.
(c) Except as disclosed in Section 2.01(b), there are no shares of
capital stock or other equity securities of Bancorp issued or outstanding and no
outstanding options, warrants, rights to subscribe for, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of Bancorp or contracts,
commitments, understandings or arrangements by which Bancorp is or may be
obligated to issue additional shares of its capital stock or options, warrants
or rights to purchase or acquire any additional shares of its capital stock.
Section 2.02. Authorization; No Defaults. Bancorp's Board of Directors
has by all requisite action approved this Agreement and the Merger and
authorized the execution hereof on its behalf by its duly authorized officers
and the performance by Bancorp of its obligations hereunder. Nothing in the
Articles of Incorporation or Bylaws of Bancorp or any other agreement,
instrument, decree, proceeding, law or regulation (except as specifically
referred to in or contemplated by this Agreement) by or to which Bancorp or any
of its subsidiaries is bound or subject would prohibit or inhibit Bancorp from
entering into and consummating this Agreement and the Merger on the terms and
conditions herein contained, nor will the execution, delivery and performance of
this Agreement by Bancorp result in the loss of any material benefit under any
of the foregoing documents, laws or regulations. This Agreement has been duly
and validly executed and delivered by Bancorp and constitutes a legal, valid and
binding obligation of Bancorp, enforceable against Bancorp in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency,
moratorium or similar laws affecting California corporations or bank holding
companies generally or by general principles of equity. Bancorp and its
subsidiaries are neither in default under nor in violation of any provision of
their respective articles of incorporation, bylaws, or any promissory note,
indenture or any evidence of indebtedness or security therefor, lease, contract,
purchase or other commitment or any other agreement which is material to Bancorp
and its subsidiaries taken as a whole.
<PAGE>
Section 2.03. Subsidiaries. Each of Bancorp's direct and indirect
subsidiaries (hereinafter referred to collectively as the "Subsidiaries"), the
names and jurisdictions of incorporation of which are disclosed in Section 2.03
of the Disclosure Schedule, is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and each of
the Subsidiaries has the corporate power to own its properties and assets, to
incur its liabilities and to carry on its business as now being conducted. The
number of issued and outstanding shares of capital stock of each Subsidiary is
set forth in Section 2.03 of the Disclosure Schedule, and all of such shares
(except as may be otherwise there specified) are owned by Bancorp or a
Subsidiary, free and clear of all liens, encumbrances, rights of first refusal,
options or other restrictions of any nature whatsoever, except as may be
disclosed in Section 2.03 of the Disclosure Schedule. There are no options,
warrants or rights outstanding to acquire any capital stock of any Subsidiary,
and no person or entity has any other right to purchase or acquire any unissued
shares of stock of any Subsidiary, nor does any Subsidiary have any obligation
of any nature with respect to its unissued shares of stock. Except as may be
disclosed in Section 2.03 of the Disclosure Schedule, neither Bancorp nor any
Subsidiary is a party to any partnership or joint venture or owns an equity
interest in any other business or enterprise.
Section 2.04. Financial Information. The audited consolidated balance
sheets of Bancorp and the Subsidiaries as of December 31, 1995 and related
consolidated income statements and statements of changes in shareholders' equity
and of cash flows for the three years ended December 31, 1995, together with the
notes thereto, included in Bancorp's Annual Report on Form 10-K for the year
ended December 31, 1995, as currently on file with the Securities and Exchange
Commission (the "S.E.C."); the unaudited consolidated balance sheets of Bancorp
and the Subsidiaries as of March 31, 1996 and related consolidated income
statements and statements of changes in shareholders' equity and of cash flows
for the three months ended March 31, 1996, together with the notes thereto,
included in Bancorp's Quarterly Report on Form 10-Q for the three months ended
March 31, 1996 as currently on file with the S.E.C.; and the year-end and
quarter-end Reports of Condition and Reports of Income of Bancorp's bank
subsidiary, Sunrise Bank of California, a bank chartered by the State of
California ("Sunrise Bank") the deposits of which are insured by the Federal
Deposit Insurance Corporation (the "F.D.I.C.") for 1995 and for the three month
period ending March 31, 1996, respectively, as filed with the State Banking
Department of the State of California (the "State Banking Department") (such
financial statements and notes collectively referred to herein as the "Bancorp
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein and except for regulatory reporting differences required by Sunrise
Bank's reports) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of the respective entity and its respective consolidated subsidiaries as
of the dates and for the periods indicated.
Section 2.05. Absence of Changes. Except as reflected in Section 2.05
of the Disclosure Schedule, since March 31, 1996 there has not been any material
adverse change in the financial condition, the results of operations or the
business or prospects of Bancorp and the Subsidiaries taken as a whole, nor have
<PAGE>
there been any events or transactions having such a material adverse effect
which should be disclosed in order to make the Bancorp Financial Statements not
misleading. Since September 30, 1995, the date of the most recent examination of
Sunrise Bank by the State Banking Department and/or the FDIC, there has been no
material adverse change in the financial condition, the results of operations or
the business of Sunrise Bank except for any such changes as may be disclosed in
Sunrise Bank's Reports of Condition and Income filed with the F.D.I.C. since
such date.
Section 2.06. Regulatory Enforcement Matters. Except as reflected in
Section 2.06 of the Disclosure Schedule, neither Bancorp nor any of the
Subsidiaries is subject to, or has received any notice or advice that it may
become subject to, any order, agreement, memorandum of understanding or other
regulatory enforcement action or proceeding with or by any federal or state
agency charged with the supervision or regulation of banks or bank holding
companies or engaged in the insurance of bank deposits or any other governmental
agency having supervisory or regulatory authority with respect to Bancorp or any
of the Subsidiaries.
Section 2.07. Tax Matters. Except as reflected in Section 2.07 of the
Disclosure Schedule, Bancorp and the Subsidiaries have filed all federal, state
and local income, franchise, excise, sales, use, real and personal property and
other tax returns required to be filed. All such returns fairly reflect the
information required to be presented therein. All provisions for accrued but
unpaid taxes contained in the Bancorp Financial Statements were made in
accordance with generally accepted accounting principles and in the aggregate do
not materially fail to provide for potential tax liabilities.
Section 2.08. Litigation. Except as may be disclosed in Section 2.08 of
the Disclosure Schedule, there is no litigation, claim or other proceeding
pending or, to the knowledge of Bancorp, threatened, against Bancorp or any of
the Subsidiaries, or of which the property of Bancorp or any of the Subsidiaries
is or would be subject.
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other
Agreements. Section 2.09 of the Disclosure Schedule lists or describes the
following:
(a) All real property owned by Bancorp or the Subsidiaries and the
principal buildings and structures located thereon, together with a legal
description of such real estate, and each lease of real property to which
Bancorp or any of the Subsidiaries is a party, identifying the parties thereto,
the annual rental payable, the expiration date thereof and a brief description
of the property covered;
(b) All loan and credit agreements, conditional sales contracts or
other title retention agreements or security agreements relating to money
borrowed by Bancorp or the Subsidiaries, exclusive of deposit agreements with
customers of Sunrise Bank entered into in the ordinary course of business,
agreements for the purchase of federal funds and repurchase agreements;
<PAGE>
(c) All agreements, loans, contracts, leases, guaranties, letters of
credit, lines of credit or commitments of Bancorp or the Subsidiaries not
referred to elsewhere in this Section 2.09 which:
(i) involve payment by Bancorp or the Subsidiaries (other
than loans, loan commitments or letters of credit)
of more than $75,000;
(ii) involve payments based on profits of Bancorp or the
Subsidiaries;
(iii) relate to the future purchase of goods or services in
excess of the requirements of its respective business
at current levels or for normal operating purposes;
(iv) were not made in the ordinary course of business; or
(v) materially affect the business or financial condition
of Bancorp or the Subsidiaries.
(d) All contracts, agreements, plans and arrangements by which any
profit sharing, group insurance, hospitalization, stock option, pension,
retirement, bonus, deferred compensation, stock bonus, stock purchase,
collective bargaining agreements, contracts or arrangements under which
pensions, deferred compensation or other retirement benefits is being paid, or
plans or arrangements established or maintained, sponsored or undertaken by
Bancorp or any Subsidiary for the benefit of officers, directors or employees,
including each trust or other agreement with any custodian or any trustee for
funds held under any such agreement, plan or arrangement, and in respect to any
of them, the latest reports or forms, if any, filed with the Department of Labor
and Pension Benefit Guaranty corporation under ERISA (as defined below), any
current financial or actuarial reports and any currently effective IRS private
ruling or determination letters obtained by or for the benefit of Bancorp or any
Subsidiary;
(e) All leases or licenses with respect to personal property, whether
as lessee or licensee, with annual rental or other payments due thereunder in
excess of $5,000;
(f) All agreements for the employment, retention or engagement, or with
respect to the severance, of any officer, employee, agent, consultant or other
person or entity which by its terms is not terminable by Bancorp or such
Subsidiary on thirty (30) days written notice or less without any payment by
reason of such termination; and
(g) The name and annual salary as of January, 1, 1996 of each director
or employee of Bancorp or any Subsidiaries with a salary in excess of $80,000.
<PAGE>
Copies of each document, plan or contract listed and described in
Section 2.09 of the Disclosure Schedule are appended to such Schedule and
constitute a part of the Disclosure Schedule.
Section 2.10. Reports. Except as may be disclosed in Section 2.10 of
the Disclosure Schedule, Bancorp and each Subsidiary have filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with (i) the S.E.C.; (ii) the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"); (iii) the
F.D.I.C.; (iv) any state securities or banking authorities; and (v) any other
governmental authority with jurisdiction over Bancorp or any Subsidiary. As of
the dates indicated thereon, each of such reports and documents, including any
financial statements, exhibits and schedules thereto, complied in all material
respects with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed, and did not
contain any untrue statement of a 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 were made, not
misleading.
Section 2.11. Investment Portfolio. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of States and political subdivisions of the United
States and other investment securities held by Bancorp and the Subsidiaries, as
reflected in the latest consolidated balance sheet of Bancorp included in the
Bancorp Financial Statements, are carried in accordance with generally accepted
accounting principles.
Section 2.12. Loan Portfolio. Except as may be disclosed in Section
2.12 of the Disclosure Schedule, (i) all loans and discounts shown on the
Bancorp Financial Statements at March 31, 1996 or which were or will be entered
into after March 31, 1996 but before the Closing Date were and will be made in
all material respects for good, valuable and adequate consideration in the
ordinary course of the business of Bancorp and the Subsidiaries, in accordance
in all material respects with sound lending practices, and they are not subject
to any material known defenses, setoffs or counterclaims, including without
limitation any such as are afforded by usury or truth in lending laws, except as
may be provided by bankruptcy, insolvency or similar laws or by general
principles of equity; (ii) the notes and other evidences of indebtedness
evidencing such loans and all forms of pledges, mortgages and other collateral
documents and security agreements are and will be in all material respects
enforceable (except as may be limited by bankruptcy, insolvency or similar laws
or by general principles of equity), valid, true and genuine and what they
purport to be; and (iii) Bancorp and the Subsidiaries have complied and will
prior to the Closing Date comply with all laws and regulations relating to such
loans, or to the extent there has not been such compliance, such failure to
comply will not materially interfere with the collection of any loan. All loans
and loan commitments extended by Sunrise Bank and any extensions, renewals or
continuations of such loans and loan commitments were made in accordance with
its customary lending standards in the ordinary course of business. Such loans
are evidenced by appropriate and sufficient documentation based upon customary
and ordinary past practices of Sunrise Bank. The reserve for possible loan and
lease losses shown on the Report of Condition and Income of Sunrise Bank as of
<PAGE>
March 31, 1996 is adequate in all material respects under the requirements of
generally accepted accounting principles to provide for possible losses, net of
recoveries relating to loans previously charged off, on loans outstanding
(including, without limitation, accrued interest receivable) as of March 31,
1996.
Section 2.13. Employee Matters and ERISA.
(a) Except as may be disclosed in Section 2.13 (a) of the Disclosure
Schedule, neither Bancorp nor any Subsidiary has entered into any collective
bargaining agreement with any labor organization with respect to any group of
employees of Bancorp or any Subsidiary, and to the knowledge of Bancorp there is
no present effort nor existing proposal to attempt to unionize any group of
employees of Bancorp or any Subsidiary.
(b) Except may be disclosed in Section 2.13 (b) of the Disclosure
Schedule, (i) Bancorp and the Subsidiaries are and have been in material
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, any laws respecting employment discrimination and
occupational safety and health requirements, and neither Bancorp nor any of the
Subsidiaries is engaged in any unfair labor practice; (ii) there is no material
unfair labor practice complaint against Bancorp or any Subsidiary pending or, to
the knowledge of Bancorp, threatened before the National Labor Relations Board;
(iii) there is no labor dispute, strike, slowdown or stoppage actually pending
or, to the knowledge of Bancorp, threatened against or directly affecting
Bancorp or any Subsidiary; and (iv) neither Bancorp nor any Subsidiary has
experienced any material work stoppage or other material labor difficulty during
the past five years.
(c) Except as may be disclosed in Section 2.13(c) of the Disclosure
Schedule, neither Bancorp nor any Subsidiary maintains, contributes to or
participates in or has any liability under any employee benefit plans, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any nonqualified employee benefit plans or deferred
compensation, bonus, stock or incentive plans, or other employee benefit or
fringe benefit programs for the benefit of former or current employees of
Bancorp or any Subsidiary (collectively, the "Employee Plans"). To the knowledge
of Bancorp, no present or former employee of Bancorp or any Subsidiary has been
charged with breaching nor has breached a fiduciary duty under any Employee
Plan. Neither Bancorp nor any Subsidiary participates in, nor has it in the past
five years participated in, nor has it any present or future obligation or
liability under, any multiemployer plan (as defined at Section 3(37) of ERISA).
Except as may be separately disclosed in Section 2.13(c) of the Disclosure
Schedule, neither Bancorp nor any Subsidiary maintains, contributes to, or
participates in any plan that provides health, major medical, disability or life
insurance benefits to former employees of Bancorp or any Subsidiary.
(d) All liabilities of the Employee Plans have been funded on the basis
of consistent methods in accordance with sound actuarial assumptions and
practices, and no Employee Plan, at the end of any plan year, or at March 31,
1996, had an accumulated funding deficiency. No actuarial assumptions have been
changed since the last written report of actuaries on the Employee Plans. All
<PAGE>
insurance premiums (including premiums to the Pension Benefit Guaranty
Corporation) have been paid in full, subject only to normal retrospective
adjustments in the ordinary course. Except as may be noted on the Bancorp
Financial Statements, Bancorp and the Subsidiaries have no contingent or actual
liabilities under Title IV of ERISA. No accumulated funding deficiency (within
the meaning of Section 302 of ERISA or Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code")) has been incurred with respect to any Employee
Plan, whether or not waived. No reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Employee Plan as to which a notice would
be required to be filed with the Pension Benefit Guaranty Corporation. No claim
is pending, threatened or imminent with respect to any Employee Plan (other than
a routine claim for benefits for which plan administrative review procedures
have not been exhausted) for which Bancorp or any Subsidiary would be liable,
except as is reflected in the Bancorp Financial Statements. After December 31,
1993, Bancorp and the Subsidiaries have no liability for excise taxes under
Sections 4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under
Section 502 of ERISA with respect to any Employee Plan. All Employee Plans have
in all material respects been operated, administered and maintained in
accordance with the terms thereof and in compliance with the requirements of all
applicable laws, including, without limitation, ERISA.
Section 2.14. Title to Properties; Insurance. Except as may be
disclosed in Section 2.14 of the Disclosure Schedule: (i) Bancorp and the
Subsidiaries have marketable title, insurable at standard rates, free and clear
of all liens, charges and encumbrances (except taxes which are a lien but not
yet payable and liens, charges or encumbrances reflected in the Bancorp
Financial Statements and easements, rights-of-way, and other restrictions which
are not material, and further excepting in the case of other Real Estate Owned
("OREO"), as such real estate is internally classified on the books of Bancorp
or any Subsidiary, rights of redemption under applicable law) to all of their
real properties; (ii) all leasehold interests for real property and any material
personal property used by Bancorp and the Subsidiaries in their businesses are
held pursuant to lease agreements which are valid and enforceable in accordance
with their terms; (iii) all such properties comply in all material respects with
all applicable private agreements, zoning requirements and other governmental
laws and regulations relating thereto, and there are no condemnation proceedings
pending or, to the knowledge of Bancorp, threatened with respect to any of such
properties; (iv) Bancorp and the Subsidiaries have valid title or other
ownership rights under licenses to all material intangible personal or
intellectual property used by Bancorp or any Subsidiary in its business, free
and clear of any material claim, defense or right of any other person or entity,
subject only to rights of the licensors pursuant to applicable license
agreements, which rights do not materially and adversely interfere with the use
of such property; and (v) all material insurable properties owned or held by
Bancorp and the Subsidiaries are adequately insured by financially sound and
reputable insurers in such amounts and against fire and other risks insured
against by extended coverage and public liability insurance, as is customary
with bank holding companies of similar size.
Section 2.15. Environmental Matters. As used in this Agreement,
"Environmental Laws" means all local, state and federal environmental, health
and safety laws and regulations in all jurisdictions in which Bancorp or any
Subsidiary has done business or owned, leased or operated property, including,
<PAGE>
without limitation, the Federal Resource Conservation and Recovery Act, the
Federal Comprehensive Environmental Response, Compensation and Liability Act,
the Federal Clean Water Act, the Federal Clean Air Act, and the Federal
Occupational Safety and Health Act.
Except as may be disclosed in Section 2.15 of the Disclosure Schedule,
neither the conduct nor operation of Bancorp or any Subsidiary nor any condition
of any property presently or previously owned, leased or operated by any of them
on their own behalf or in a fiduciary capacity violates or violated any
Environmental Law in any respect material to the business of Bancorp and the
Subsidiaries taken as a whole, and no condition or event has occurred with
respect to any of them or any property that, with notice or the passage of time,
or both, would constitute a violation material to the business of Bancorp and
the Subsidiaries taken as a whole of any Environmental Law or obligate (or
potentially obligate) Bancorp or any Subsidiary to remedy, stabilize, neutralize
or otherwise alter the environmental condition of any property, where the
aggregate cost of such actions would be material to Bancorp and the Subsidiaries
taken as a whole. Except as may be disclosed in Section 2.15 of the Disclosure
Schedule, neither Bancorp nor any Subsidiary has received notice from any person
or entity that Bancorp or any Subsidiary, or the operation or condition of any
property ever owned, leased or operated by any of them on their own behalf or in
a fiduciary capacity, are or were in violation of any Environmental Law, or that
Bancorp or any Subsidiary is responsible (or potentially responsible) for
remedying, or the cleanup of, any pollutants, contaminants, or hazardous or
toxic wastes, substances or materials at, on or beneath any such property.
Section 2.16. Compliance with Law. Bancorp and the Subsidiaries have
all licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses in all
material respects and are in compliance in all material respects with all
applicable laws and regulations.
Section 2.17. Brokerage. Except for fees payable by Bancorp to Smith &
Crowley, Inc., there are no existing claims or agreements for brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by Bancorp or any
Subsidiary.
Section 2.18. No Undisclosed Liabilities. Bancorp and the Subsidiaries
do not have any material liability, whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due (and there is no past or present
fact, situation, circumstance, condition or other basis for any present or
future action, suit or proceeding, hearing, charge, complaint, claim or demand
against Bancorp or any Subsidiary giving rise to any such liability), except (i)
for liabilities set forth in the Bancorp Financial Statements, and (ii) for
liabilities of the same type incurred in the ordinary course of business of
Bancorp and the Subsidiaries since March 31, 1996, and (iii) as may be disclosed
in Section 2.18 of the Disclosure Schedule.
Section 2.19. Statements True and Correct. None of the information
supplied or to be supplied by Bancorp for inclusion in any document to be filed
<PAGE>
with the S.E.C. or any banking or other regulatory authority in connection with
the transactions contemplated hereby will, at the respective times such
documents are filed, and, in the case of Bancorp's proxy statement, when first
mailed to the shareholders of Bancorp and at the time of the Shareholders'
Meeting (as defined in Section 4.03 hereof), be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading, or omit to state any material fact required to be
stated, in the light of the circumstances under which a statement is made, in
order to correct such statement in any earlier communication with respect to the
solicitation of any proxy for the Shareholders' Meeting. All documents that
Bancorp is responsible for filing with the S.E.C. or any other regulatory
authority in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable law and the
applicable rules and regulations thereunder.
Section 2.20. Commitments and Contracts.
(a) Except as set forth in Section 2.20 of the Disclosure Schedule (and
with a true and correct copy of the document or other item in question having
been made available to FBA for inspection), neither Bancorp nor any of the
Subsidiaries is a party or subject to any of the following (whether written or
oral, express or implied):
(i) any agreement, arrangement or commitment not made in the ordinary
course of business;
(ii) any agreement, indenture or other instrument not reflected in the
Bancorp Financial Statements relating to the borrowing of money by Bancorp or
any of the Subsidiaries or the guarantee by Bancorp or any of the Subsidiaries
of any obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by Bancorp or any
of the Subsidiaries, such as deposits, Fed Funds borrowings and repurchase
agreements), other than such agreements, indentures or instruments providing for
annual payments of less than $10,000;
(iii) any contract containing covenants which limit the ability of
Bancorp to compete in any line of business or with any person or containing any
restriction of the geographical area in which, or method by which, Bancorp or
any of the Subsidiaries may carry on its business (other than as may be required
by law or any applicable regulatory authority); or
(iv) any lease with annual rental payments aggregating $25,000 or more.
Section 2.21. Material Interest of Certain Persons. Except as set forth
in Section 2.21 of the Disclosure Schedule:
(a) No officer or director of Bancorp or any "associate" (as such term
is defined in Rule 14a-1 under the Securities Exchange Act of 1934, as amended
<PAGE>
(the "Exchange Act")) of any such officer or director, has any material interest
in any material contract or property (real or personal, tangible or intangible),
used in or pertaining to the business of Bancorp and any Subsidiary.
(b) All outstanding loans from Sunrise Bank to any present officer,
director, employee or any associate or related interest of any such person which
was or would be required under any rule or regulation to be approved by or
reported to Sunrise Bank's Board of Directors ("Insider Loans") were approved by
or reported to the Board of Directors in accordance with all applicable laws and
regulations.
Section 2.22. Conduct to Date. Except as set forth in Section 2.22 of
the Disclosure Schedule, from and after March 31, 1996 through the date of this
Agreement, neither Bancorp nor any Subsidiary has (i) failed to conduct its
business in the ordinary and usual course consistent with past practices; (ii)
issued, sold, granted, conferred or awarded any common or other stock, or any
corporate debt securities which would be classified under generally accepted
accounting principles applied on a consistent basis as long-term debt on the
balance sheets of Bancorp or any Subsidiary; (iii) effected any stock split or
adjusted, combined, reclassified or otherwise changed its capitalization; (iv)
declared, set aside or paid any dividend or other distribution in respect of its
capital stock, or purchased, redeemed, retired, repurchased, or exchanged, or
otherwise directly or indirectly acquired or disposed of any of its capital
stock; (v) incurred any material obligation or liability (absolute or
contingent), except normal trade or business obligations or liabilities incurred
in the ordinary course of business, or subjected to lien any of its assets or
properties other than in the ordinary course of business consistent with past
practice; (vi) discharged or satisfied any material lien or paid any material
obligation or liability (absolute or contingent), other than in the ordinary
course of business; (vii) sold, assigned, transferred, leased, exchanged, or
otherwise disposed of any of its properties or assets other than for a fair
consideration in the ordinary course of business; (viii) except as required by
contract or law, (A) increased the rate of compensation of, or paid any bonus
to, any of its directors, officers, or other employees, except merit or
promotion increases in accordance with existing policy, (B) entered into any
new, or amended or supplemented any existing, employment, management,
consulting, deferred compensation, severance, or other similar contract, (C)
entered into, terminated or substantially modified any of the Employee Plans, or
(D) agreed to do any of the foregoing; (ix) suffered any material damage,
destruction, or loss, whether as the result of fire, explosion, earthquake,
accident, casualty, labor trouble, requisition, or taking of property by any
regulatory authority, flood, windstorm, embargo, riot, act of God or the enemy,
or other casualty or event, and whether or not covered by insurance; (x)
canceled or compromised any debt, except for debts charged off or compromised in
accordance with past practice; (xi) entered into any material transaction,
contract or commitment outside the ordinary course of its business or (xii) made
or guaranteed any loan to any of the Employee Plans.
Section 2.23. Irrevocable Proxies. Bancorp has delivered to FBA
concurrently with the execution of this Agreement the valid and binding
irrevocable proxies of all of its directors (the "Proxies"), in the form of
Exhibit 2.23.
Section 2.24. Disclosures in Disclosure Schedule. Any information which
is set forth or specifically referred to in a section of the Disclosure Schedule
<PAGE>
shall be deemed to be disclosed to FBA for the purpose of the representations
and warranties of Bancorp set forth in the section of this Agreement to which
such section of the Disclosure Schedule relates.
ARTICLE THREE
REPRESENTATIONS OF FBA
FBA hereby makes the following representations and warranties to
Bancorp:
Section 3.01. Organization. FBA is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted.
Section 3.02. Authorization. The execution and delivery of this
Agreement and the consummation of the Merger have been duly authorized by all
necessary action on the part of FBA. Nothing in the Certificate of Incorporation
or Bylaws of FBA or any other agreement, instrument, decree, proceeding, law or
regulation (except as specifically referred to in or contemplated by this
Agreement) by or to which FBA or any of its subsidiaries is bound or subject
would prohibit or inhibit FBA from entering into and consummating this Agreement
and the Merger on the terms and conditions herein contained, nor will the
execution, delivery and performance of this Agreement by FBA result in the loss
of any material benefit under any of the foregoing documents, laws or
regulations. This Agreement has been duly and validly executed and delivered by
FBA and constitutes a legal, valid and binding obligation of FBA, enforceable
against FBA in accordance with its terms except as may be limited by bankruptcy,
insolvency or similar laws or by general principles of equity, and no other
corporate acts or proceedings are required to be taken by FBA to authorize the
execution, delivery and performance of this Agreement. Except for the requisite
approval of the Federal Reserve Board and the State Banking Department, no
notice to, filing with, authorization by, or consent or approval of, any federal
or state regulatory authority is necessary for the execution and delivery of
this Agreement or consummation of the Merger by FBA. To the best of FBA's
knowledge, the regulatory approvals required for the consummation of the Merger
by FBA will be received prior to the Effective Time. The approval of the Merger
by the stockholders of FBA is not legally required in order to permit FBA to
execute and deliver this Agreement or to consummate the Merger.
Section 3.03. Absence of Changes. Since March 31, 1996 there has not
been any material adverse change in the financial condition or the business of
FBA that would prevent FBA from consummating this Agreement and the Merger.
Section 3.04. Litigation. There is no litigation, claim or other
proceeding pending, or, to the knowledge of FBA threatened, against FBA or any
of its subsidiaries which would prohibit FBA from consummating the Merger.
<PAGE>
Section 3.05. Statements True and Correct. None of the information
supplied or to be supplied by FBA for inclusion in any documents to be filed
with the S.E.C. or any banking or other regulatory authority in connection with
the transactions contemplated hereby will, at the respective times such
documents are filed, and, in the case of Bancorp's proxy statement, when first
mailed to the shareholders of Bancorp and at the time of the Shareholders'
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they are made, not misleading, or omit to state
any material fact required to be stated, in the light of the circumstances under
which a statement is made, in order to correct such statement in any earlier
communication with respect to the solicitation of any proxy for the
Shareholders' Meeting. All documents that FBA is responsible for filing with any
regulatory authority in connection with the transactions contemplated by this
Agreement will comply as to form in all material respects with the provisions of
applicable law and the applicable rules and regulations thereunder.
Section 3.06. Availability of Cash Consideration. FBA has available
cash or cash equivalents in amounts necessary to fund its obligations under
Section 1.03(a) hereof. First Banks, Inc., a Missouri corporation which owns
2,500,000 shares of Class B Common Stock of FBA, has provided to Bancorp a
written guarantee (the "Guarantee") in the form of Exhibit 3.06.
ARTICLE FOUR
AGREEMENTS OF BANCORP
Section 4.01. Business in Ordinary Course.
(a) Bancorp shall, and shall cause each Subsidiary to, continue to
carry on after the date hereof its respective business and the
discharge or incurrence of obligations and liabilities only in the
usual, regular and ordinary course of business, as heretofore
conducted, and by way of amplification and not limitation, Bancorp and
each Subsidiary will not:
(i) declare or pay any dividend or make any other distribution
to shareholders, whether in cash, stock or other property; or
(ii) issue any common stock or other capital stock or any options,
warrants, or other rights to subscribe for or purchase common stock or
any other capital stock or any securities convertible into or
exchangeable for any capital stock (except for the issuance of common
stock pursuant to the valid exercise of Bancorp Stock Options and
Bancorp Warrants described in Section 2.01(b) hereof); or
(iii) directly or indirectly redeem, purchase or otherwise acquire any
common stock or any other capital stock of Bancorp or any Subsidiary;
or
<PAGE>
(iv) effect a reclassification, recapitalization, splitup, exchange
of shares, readjustment or other similar change in or to any capital
stock, or otherwise reorganize or recapitalize; or
(v) change its articles of incorporation or bylaws nor, subject to the
fiduciary duties of the directors of Bancorp under the California
Corporations Code, enter into any agreement to merge or consolidate
with, or sell a significant portion of its assets to, any person or
entity.
(b) Bancorp and each Subsidiary will not, without the prior written
consent of FBA (which shall not be unreasonably withheld):
(i) grant any increase (other than ordinary and normal increases
consistent with past practices) in the compensation payable or to
become payable to officers or salaried employees, grant any stock
options or, except as required by law, adopt or make any change in any
bonus, insurance, pension, or other Employee Plan, agreement, payment
or arrangement made to, for or with any of such officers or employees;
provided, however, that FBA has given its approval for Bancorp to adopt
a compensation program to encourage officers and employees designated
by Bancorp to continue their employment through the date which is sixty
(60) days after the Effective Time, provided that Bancorp will consult
with FBA regarding the structure of such program and the aggregate cost
thereof does not exceed $150,000; or
(ii) borrow or agree to borrow any amount of funds except in the
ordinary course of business, or directly or indirectly guarantee or
agree to guarantee any obligations of others; or
(iii) make or commit to make any new loan or letter of credit or any
new or additional discretionary advance under any existing line of
credit, in principal amounts in excess of $200,000 or that would
increase the aggregate credit outstanding to any one borrower (or group
of affiliated borrowers) to more than $400,000 (excluding for this
purpose any accrued interest or overdrafts), without the prior written
consent of FBA; or
(iv) purchase or otherwise acquire any investment security for its own
account having an average remaining life to maturity greater than five
years or any asset-backed securities other than those issued or
guaranteed by the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage
Corporation; or
(v) enter into any agreement, contract or commitment having a term in
excess of three (3) months other than letters of credit, loan
agreements, deposit agreements, and other lending, credit and deposit
agreements and documents made in the ordinary course of business; or
<PAGE>
(vi) except in the ordinary course of business, place on any of
its assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(vii) except in the ordinary course of business, cancel or accelerate
any material indebtedness owing to Bancorp or any Subsidiary or any
claims which Bancorp or any Subsidiary may possess, or waive any
material rights of substantial value; or
(viii) sell or otherwise dispose of any real property or any material
amount of any tangible or intangible personal property, other than
properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness to Bancorp and the Subsidiaries; or
(ix) foreclose upon or otherwise take title to or possession or control
of any real property without first obtaining a phase one environmental
report thereon which indicates that the property is free of pollutants,
contaminants or hazardous or toxic waste materials; provided, however,
that neither Bancorp nor a Subsidiary shall be required to obtain such
a report with respect to single family, non-agricultural residential
property of one acre or less to be foreclosed upon unless it has reason
to believe that such property might contain any such waste materials or
otherwise might be contaminated; or
(x) commit any act or fail to do any act which will cause a breach of
any agreement, contract or commitment and which will have a material
adverse effect on the business, financial condition or earnings of
Bancorp and the Subsidiaries, taken as a whole; or
(xi) violate any law, statute, rule, governmental regulation or order,
which violation might have a material adverse effect on the business,
financial condition, or earnings of Bancorp or a Subsidiary; or
(xii) purchase any real or personal property or make any other capital
expenditure where the amount paid or committed therefor is in excess of
$25,000; or
(xiii) increase or decrease the rate of interest paid on time deposits
or on certificates of deposit, except in a manner consistent with past
practices.
Bancorp and FBA shall promptly devise a procedure to assure that, if
Bancorp makes a request for FBA's written consent to take one or more of such
actions, the request will be promptly reviewed and a response promptly given by
FBA.
(c) Bancorp and the Subsidiaries shall not, without the prior written
consent of FBA, engage in any transaction or take any action that would render
untrue in any material respect any of the representations and warranties of
Bancorp contained in Article Two hereof, if such representations and warranties
were given as of the date of such transaction or action.
<PAGE>
(d) Bancorp shall promptly notify FBA of the occurrence of any matter
or event known to and directly involving Bancorp that is materially adverse to
the business, operations, properties, assets, or condition (financial or
otherwise) of Bancorp and the Subsidiaries taken as a whole.
(e) Subject to the fiduciary duties of the directors of Bancorp under
the California Corporations Code, Bancorp shall not solicit or encourage, or
hold discussions or negotiations with or provide information to, any person or
entity in connection with any proposal for the acquisition of all or any
substantial portion of the business, assets, shares of Bancorp Common or other
securities or assets of Bancorp or any Subsidiary. Bancorp shall promptly advise
FBA of its receipt of any such proposal or inquiry concerning any possible such
proposal and the substance of such proposal or inquiry.
Section 4.02. Breaches. Bancorp shall, in the event it has knowledge of
the occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to FBA and use its best efforts to prevent or promptly
remedy the same.
Section 4.03. Submission to Shareholders. Bancorp shall cause to be
duly called and held, as soon as practicable, a meeting of its shareholders
(such meeting together with any adjournments thereof referred to as the
"Shareholders' Meeting") for submission of this Agreement and the Merger for
approval of such shareholders as required by applicable Corporate Law.
In connection with the Shareholders' Meeting, Bancorp shall prepare and
file with the S.E.C., no more than sixty (60) days after the date of this
Agreement, at its sole cost and expense, a Proxy Statement (the "Proxy
Statement"), and Bancorp shall thereafter take all actions reasonably required
in order to permit the Proxy Statement to be mailed to the shareholders of
Bancorp. The Board of Directors of Bancorp shall unanimously recommend to its
shareholders the approval of the Agreement and the Merger, mail the Proxy
Statement to its shareholders, and use its best efforts to obtain such
shareholder approval; provided, however, that the Board of Directors of Bancorp
shall not be obligated to make such recommendation or use its best efforts to
obtain shareholder approval if, having consulted and considered the advice of
outside legal counsel, the Board has reasonably determined in good faith that
the making of such recommendation would constitute a breach of the fiduciary
duties of the members of the Board of Directors under applicable law.
Section 4.04. Consummation of Agreement. Bancorp shall use its best
efforts to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Merger in
accordance with the terms and provisions hereof. Bancorp shall furnish to FBA in
a timely manner all information, data and documents in the possession of Bancorp
requested by FBA as may be required to obtain any necessary regulatory or other
approvals of the Merger and shall otherwise cooperate fully with FBA to carry
out the purpose and intent of this Agreement.
<PAGE>
Section 4.05. Environmental Reports. Bancorp shall provide to FBA, as
soon as reasonably practical, but not later than sixty (60) days after the date
hereof, a report of a phase one environmental investigation on all real property
owned, leased or operated by Bancorp or any Subsidiary as of the date hereof
(other than the loan production office of Sunrise Bank located at 220 Sansome
Street, San Francisco, California, single-family non-agricultural residential
property of one acre or less with respect to which Bancorp has not received any
notice of the type referred to in Section 2.15 hereof, and space in retail and
similar establishments leased by Bancorp for automatic teller machines) and
within ten days after the acquisition or lease of any real property acquired or
leased by Bancorp or any Subsidiary after the date hereof (other than the loan
production office of Sunrise Bank referred to above, single-family
non-agricultural residential property of one acre or less, and space in retail
and similar establishments leased or operated by the Bancorp for automatic
teller machines), except as otherwise provided in Section 4.01(b)(ix). If
required by the phase one investigation in FBA's reasonable opinion Bancorp
shall provide to FBA a report of a phase two investigation on properties
requiring such additional study. FBA shall have 15 business days from the
receipt of any such phase two investigation report to notify Bancorp of any
objection to the contents of such report. Should the cost of taking all remedial
and corrective actions and measures (i) required by applicable law, or (ii)
recommended or suggested by such report or reports or prudent in light of
serious life, health or safety concerns, in the aggregate, exceed the sum of
Four Hundred Thousand Dollars ($400,000) as reasonably estimated by an
environmental expert retained for such purpose by FBA and reasonably acceptable
to Bancorp,or if the cost of such actions and measures cannot be so reasonably
estimated by such expert to be $400,000 or less with a reasonable degree of
certainty, then FBA shall have the right pursuant to Section 7.05 hereof, for a
period of 10 business days following receipt of such estimate or indication that
the cost of such actions and measures can not be so reasonably estimated, to
terminate this Agreement, which shall be FBA's sole remedy in such event.
Section 4.06. Access to Information. Bancorp shall permit FBA
reasonable access in a manner which will avoid undue disruption or interference
with Bancorp's normal operations to its properties and shall disclose and make
available to FBA all books, documents, papers and records relating to its
assets, stock ownership, properties, operations, obligations and liabilities,
including, but not limited to, all books of account (including the general
ledger), tax records, minute books of directors' and shareholders' meetings,
organizational documents, material contracts and agreements, loan files, filings
with any regulatory authority, accountants' workpapers (if available and subject
to the respective independent accountants' consent), litigation files, plans
affecting employees, and any other business activities or prospects in which FBA
may have a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. FBA will hold any such information which is
nonpublic in confidence in accordance with the provisions of Section 9.01
hereof.
Section 4.07. Consents to Contracts and Leases. Bancorp shall use its
best efforts to obtain all necessary consents with respect to all interests of
Bancorp and the Subsidiaries in any material leases, licenses, contracts,
instruments and rights which require the consent of another person for the
Merger.
<PAGE>
Section 4.08. Subsequent Financial Statements. As soon as available
after the date hereof, Bancorp shall deliver to FBA the monthly unaudited
consolidated balance sheets and profit and loss statements of Bancorp prepared
for its internal use, the Report of Condition and Income of Sunrise Bank for
each quarterly period completed prior to the Closing, and all other financial
reports or statements submitted to regulatory authorities after the date hereof,
to the extent permitted by law (collectively, the "Subsequent Company Financial
Statements"). The Subsequent Company Financial Statements shall be prepared on a
basis consistent with past accounting practices and shall fairly present the
financial condition and results of operations for the dates and periods
presented. The Subsequent Company Financial Statements will not include any
material assets or omit to state any material liabilities, absolute or
contingent, or other facts, which inclusion or omission would render such
financial statements misleading in any material respect.
Section 4.09. Reserve and Provisions for Loan Losses. Bancorp will
provide to FBA each month, beginning in June, 1996 a copy of the internal review
and analysis of its reserve for possible loan and lease losses and the
appropriate amount to be included in its provision for loan and lease losses,
and Bancorp will consider in good faith FBA's reasonable analysis of the reserve
and provision and any reasonable suggestions made by FBA with respect to the
appropriate level of the provision to be made each month.
ARTICLE FIVE
AGREEMENTS OF FBA
Section 5.01. Regulatory Approvals. FBA shall as soon as reasonably
practicable and no more than sixty (60) days after the date of this Agreement
file all regulatory applications required in order to consummate the Merger,
including but not limited to the necessary application for the prior approval of
the Federal Reserve Board. FBA shall keep Bancorp reasonably informed as to the
status of such applications and make available to Bancorp, upon reasonable
request by Bancorp from time to time, copies of such applications and any
supplementally filed materials.
Section 5.02. Breaches. FBA shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to Bancorp and use its best efforts to prevent or
promptly remedy the same.
Section 5.03. Consummation of Agreement. FBA shall use its best efforts
to perform and fulfill all conditions and obligations on its part to be
performed or fulfilled under this Agreement and to effect the Merger in
accordance with the terms and conditions of this Agreement.
<PAGE>
Section 5.04. Indemnification and Insurance.
(a) For six years after the Effective Time, FBA shall (i) cause the
surviving corporation of the Merger of Bancorp and Holdings (the "Surviving
Corporation") to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of Bancorp and the Subsidiaries (each,
an "Indemnified Party") against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the full extent then permitted under applicable Corporate Law
and by the Articles of Incorporation and Bylaws of Bancorp and Sunrise Bank as
in effect on the date hereof; and (ii) purchase and maintain in effect for a
three year period insurance in the form of an extension of coverage under
Bancorp's existing insurance policy Number 04 DO 00227-3 issued by California
Bankers Assurance Company insuring the Indemnified Parties against such losses,
expenses, claims, damages or liabilities; provided, however, that FBA shall not
be obligated to purchase or maintain such insurance if the total cost thereof
for the three year period exceeds $75,000.
(b) If after the Effective Time Sunrise Bank, the Surviving Corporation
or any of their respective 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, proper
provision shall be made so that the successors and assigns of Sunrise Bank or
the Surviving Corporation, as the case may be, shall assume any remaining
obligations set forth in this Section 5.04. If Sunrise Bank or the Surviving
Corporation shall liquidate, dissolve or otherwise wind up its business, then
FBA shall indemnify, defend and hold harmless each Indemnified Party to the same
extent and on the same terms that Sunrise Bank or the Surviving Corporation, as
the case may be, was so obligated.
Section 5.05. Employee Benefits. FBA shall, with respect to each person
who remains an employee of Bancorp or any Subsidiary following the Closing Date
(each a "Continued Employee"), provide the benefits described in this Section
5.05. Subject to the right of subsequent amendment, modification or termination
in FBA's sole discretion, each Continued Employee shall be entitled, as a new
employee of a subsidiary of FBA, to participate in such employee benefit plans,
as defined in Section 3(3) of ERISA, or any non-qualified employee benefit plans
or deferred compensation, stock option, bonus or incentive plans, or other
employee benefit or fringe benefit programs that may be in effect generally for
employees of all of FBA's subsidiaries (the "FBA Plans"), if and as a Continued
Employee shall be eligible and, if required, selected for participation therein
under the terms thereof and otherwise shall not be participating in a similar
plan which is maintained by the Bancorp or a Subsidiary after the Effective
Time. Bancorp employees shall participate therein on the same basis as similarly
situated employees of other subsidiaries of FBA. All such participation shall be
subject to the terms of such plans as may be in effect from time to time, and
this Section 5.05 is not intended to give Continued Employees any rights or
privileges superior to those of other employees of subsidiaries of FBA. FBA may
terminate or modify all Employee Plans, and FBA's obligation under this Section
5.05 shall not be deemed or construed so as to provide duplication of similar
benefits but, subject to that qualification, FBA shall, for purposes of vesting
<PAGE>
and any age or period of service requirements for commencement of participation
with respect to any FBA Plans in which Continued Employees may participate,
credit each Continued Employee with his or her term of service with Bancorp and
the Subsidiaries.
Section 5.06. Payment for Stock Options and Warrants. (a) Any Bancorp
Stock Options and Bancorp Warrants outstanding immediately prior to the
Effective Time may be exercised and surrendered to Bancorp at the Closing, and
FBA shall permit Bancorp to pay the holder of each such option and warrant
having an exercise price of less than $4.00 per share of Bancorp Common an
amount equal to the difference between $4.00 per share and the applicable per
share exercise price of such Stock Option (without the necessity of the tender
of the exercise price of such Stock Option by such holder thereof).
(b) Bancorp and FBA shall cooperate in arranging for the disposition of
all Bancorp Warrants having an exercise price of $4.00 or more per share of
Bancorp Common. FBA will agree to pay or permit Bancorp to pay up to twenty-five
cents ($0.25) per share, or fifty cents ($0.50) per warrant, to redeem such
outstanding warrants from any holders who desire to dispose of same.
Section 5.07. Access to Information. FBA shall permit Bancorp
reasonable access in a manner which will avoid undue disruption or interference
with FBA's normal operations to its properties and shall disclose and make
available to Bancorp all books, documents, papers and records relating to its
operations, obligations and liabilities, including, but not limited to, minute
books of directors' and stockholders' meetings, organizational documents,
material contracts and agreements, filings with any regulatory authority, plans
affecting employees, and any other business activities or prospects in which
Bancorp may have a reasonable and legitimate interest in furtherance of the
transactions contemplated by this Agreement. Bancorp will hold any such
information which is nonpublic in confidence in accordance with the provisions
of Section 9.01 hereof.
Section 5.08. Proxy Statement. FBA will cooperate with Bancorp in the
preparation and filing of the Proxy Statement and furnish to Bancorp all
financial and other information concerning FBA and its affiliates which is
required for the preparation and filing of the Proxy Statement.
ARTICLE SIX
CONDITIONS PRECEDENT TO MERGER
Section 6.01. Conditions to Obligations of FBA and Holdings. The
obligations of FBA and Holdings to effect the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver
by FBA and Holdings) prior to or on the Closing Date of the following
conditions:
<PAGE>
(a) The representations and warranties made by Bancorp in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date;
(b) Bancorp shall have performed and complied in all material respects
with all of its obligations and agreements required to be performed prior to the
Closing Date under this Agreement;
(c) No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any regulatory authority or other person
seeking any of the foregoing be pending. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal;
(d) All necessary approvals, consents and authorizations required by
law for consummation of the Merger, including the requisite approval of the
shareholders of Bancorp and all required regulatory approvals, shall have been
obtained, and all waiting periods required by law shall have expired;
(e) FBA shall have received the environmental reports required by
Section 4.05 hereof and shall not have elected pursuant to Section 7.05 hereof
to terminate this Agreement;
(f) FBA shall have received all documents required to be received from
Bancorp on or prior to the Closing Date, all in form and substance reasonably
satisfactory to FBA;
(g) Shareholders of Bancorp Common owning no more than twenty percent
(20%) of the outstanding Bancorp Common shall have perfected the right to
dissent from the Merger; and
(h) The Bancorp Financial Statements shall not be inaccurate in any
material respect.
Section 6.02. Conditions to Bancorp's Obligations. Bancorp's obligation
to effect the Merger and the other transactions contemplated by this Agreement
shall be subject to the satisfaction (or waiver by Bancorp) prior to or on the
Closing Date of the following conditions:
(a) The representations and warranties made by FBA in this Agreement
shall be true in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made or given
on the Closing Date;
(b) FBA shall have performed and complied in all material respects with
all of its obligations and agreements hereunder required to be performed prior
to the Closing Date under this Agreement;
<PAGE>
(c) No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any bank regulatory authority or other
person seeking any of the foregoing be pending. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger which makes the consummation of the Merger or
the other transactions contemplated hereby illegal;
(d) All necessary approvals, consents and authorizations required by
law for consummation of the Merger, including the requisite approval of the
shareholders of Bancorp and all required regulatory approvals, shall have been
obtained, and all waiting periods required by law shall have expired;
(e) Bancorp shall have received all documents required to be received
from FBA on or prior to the Closing Date, all in form and substance reasonably
satisfactory to Bancorp;
(f) Bancorp shall have obtained within thirty (30) days after the date
of this Agreement a fairness opinion of Bancorp's financial advisor to the
effect that the Merger is fair to the shareholders of Bancorp from a financial
point of view, and such fairness opinion shall not have been withdrawn by such
financial advisor on or before the date of mailing of the Proxy Statement to the
shareholders of Bancorp; and
(g) All documents relating to the procedures for surrender and exchange
of certificates representing shares of Bancorp Common, including the Exchange
Agreement, shall be reasonably satisfactory to Bancorp.
<PAGE>
ARTICLE SEVEN
TERMINATION OR ABANDONMENT
Section 7.01. Mutual Agreement. This Agreement may be terminated by the
mutual written agreement of the parties at any time prior to the Closing Date,
regardless of whether shareholder approval of this Agreement and the Merger by
the shareholders of Bancorp shall have been previously obtained.
Section 7.02. Breach of Agreements. In the event that there is a
material breach in any of the representations and warranties or agreements of
FBA or Bancorp, which breach is not cured within twenty (20) days after notice
to cure such breach is given to the breaching party by the non-breaching party,
then the non-breaching party, regardless of whether shareholder approval of this
Agreement and the Merger shall have been previously obtained, may terminate and
cancel this Agreement by providing written notice of such action to the other
party hereto.
Section 7.03. Failure of Conditions. In the event that any of the
conditions to the obligations of either party are not satisfied or waived on or
prior to the Closing Date, and if any applicable cure period provided in Section
7.02 hereof has lapsed, then such party may, regardless of whether shareholder
approval of the transactions contemplated by this Agreement shall have been
previously obtained, terminate and cancel this Agreement by delivery of written
notice of such action to the other party.
Section 7.04. Approval Denial. If any regulatory application filed
pursuant to Section 5.01 hereof should be finally denied or disapproved by a
regulatory authority, then this Agreement thereupon shall be deemed terminated
and canceled; provided, however, that a request for additional information or
undertaking by FBA, as a condition for approval, shall not be deemed to be a
denial or disapproval so long as FBA diligently provides the requested
information or undertaking. In the event an application is denied pending an
appeal, petition for review, or similar such act on the part of FBA (hereinafter
referred to as the "Appeal") then the application will be deemed denied unless
FBA prepares and timely files an Appeal and continues the appellate process for
purposes of obtaining the necessary approval.
Section 7.05. Environmental Reports. FBA may terminate this
Agreement to the extent provided in Section 4.05 and this Section 7.05 by giving
written notice to Bancorp.
Section 7.06. Regulatory Enforcement Matters. In the event that Bancorp
or any Subsidiary shall become a party or subject to any new or amended written
agreement, memorandum of understanding, cease and desist order, order seeking or
imposing civil money penalties or other written regulatory enforcement action or
formal legal proceeding of any federal or state agency charged with the
supervision or regulation of banks or bank holding companies after the date of
this Agreement, then FBA may terminate this Agreement.
<PAGE>
Section 7.07. Automatic Termination. If the Closing Date does not occur
on or prior to February 28, 1997, then this Agreement may be terminated by
either party by giving written notice to the other.
ARTICLE EIGHT
LIABILITY ON TERMINATION
Section 8.01. Liquidated Damages. (a)(1) In the event that the
conditions set forth in Section 6.02 have been satisfied and (i) Bancorp fails
to consummate the Merger following the receipt of notice from FBA that FBA has
obtained all required regulatory approvals and is prepared to consummate the
Merger in accordance with the terms of this Agreement; (ii) the Board of
Directors of Bancorp fails to make the recommendation contemplated by Section
4.03 or withdraws or modifies such recommendation in a manner adverse to FBA
(whether or not such failure, withdrawal or modification is excused by the last
clause of Section 4.03); or (iii) Bancorp takes any action in breach of any
provision of this Agreement which prevents the consummation of the Merger, then
Bancorp shall, within two (2) business days following the receipt of a written
demand from FBA, pay to FBA in immediately available funds the sum of one
million dollars ($1,000,000) as liquidated damages. Payment under this Section
8.01(a)(1) shall discharge any obligation under Section 8.01(a)(2).
(2) In the event that Section 8.01(a)(1) is inapplicable solely because
the approval of the Merger by Bancorp's shareholders has not been obtained (but
the other conditions in Section 6.02 have been satisfied), and a Triggering
Event (as defined in the following sentence) has occurred, then Bancorp shall,
within two (2) business days following the receipt of a written demand from FBA,
pay to FBA in immediately available funds the sum of one million dollars
($1,000,000) as liquidated damages. As used herein, the term "Triggering Event"
means the consummation of any transaction announced before or within one (1)
year following the termination of this Agreement and consummated within two (2)
years after such termination, whereby a third party has acquired, merged or
consolidated with Bancorp, purchased all or a substantial part of the assets of
Bancorp or directly or indirectly acquired beneficial ownership of forty percent
(40%) or more of the outstanding shares of voting stock of Bancorp. Payment
under this Section 8.01(a)(2) shall discharge any obligation under Section
8.01(a)(1).
(b) In the event that the conditions set forth Section 6.01 have been
satisfied and (i) FBA fails to consummate the Merger following the receipt of
notice from Bancorp that Bancorp is prepared to do so in accordance with the
terms of this Agreement; or (ii) FBA takes any action in breach of any provision
of this Agreement which prevents the consummation of the Merger, then FBA shall,
within two (2) business days following the receipt of a written demand from
Bancorp, pay to Bancorp in immediately available funds the sum of one million
dollars ($1,000,000) as liquidated damages.
<PAGE>
Section 8.02. Liability on Termination. In the event that this
Agreement is terminated or the Merger is abandoned pursuant to Section 7.02 and
Section 8.01 is inapplicable, then the non-breaching party shall be entitled to
institute an action for appropriate damages against the breaching party.
ARTICLE NINE
GENERAL
Section 9.01. Confidential Information. The parties acknowledge the
confidential and proprietary nature of the "Information" (as herein described)
which has heretofore been exchanged and which will be received from each other
hereunder and agree to hold and keep the same confidential. Such Information
will include any and all financial, technical, commercial, marketing, customer
or other information concerning the business, operations and affairs of a party
that may be provided to the other, irrespective of the form of the
communications, by such party's employees or agents. Such Information shall not
include information which is or becomes generally available to the public other
than as a result of a disclosure by a party or its representatives in violation
of this Agreement. The parties agree that the Information will be used solely
for the purposes contemplated by this Agreement and that such Information will
not be disclosed to any person other than employees and agents of a party who
are directly involved in evaluating the transaction. The Information shall not
be used in any way detrimental to a party, including use directly or indirectly
in the conduct of the other party's business or any business or enterprise in
which such party may have an interest, now or in the future, and whether or not
now in competition with such other party.
Section 9.02. Publicity. FBA and Bancorp shall cooperate with each
other in the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Merger. Neither party shall issue
any news release or make any other public disclosure without the prior consent
of the other party, unless such is required by law upon the written advice of
counsel or is in response to published newspaper or other mass media reports
regarding the transaction contemplated hereby, in which latter event the parties
shall consult with each other to the extent practicable regarding such
responsive public disclosure.
Section 9.03. Return of Documents. Upon termination of this Agreement
without the Merger becoming effective, each party shall deliver to the other
originals and all copies of all Information made available to such party and
will not retain any copies, extracts or other reproductions, in whole or in
part, of such Information.
Section 9.04. Notices. Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
<PAGE>
by facsimile telecopy or any other means, addressed (in any case) as follows:
(a) if to FBA: First Banks America, Inc. c/o First Banks, Inc.
11901 Olive Boulevard
Creve Coeur, MO 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
with a copy to: John S. Daniels
Attorney at Law
8117 Preston Road, Suite 800
Dallas, Texas 75225
Facsimile: (214) 692-0508
If to Holdings: Sunlight Holdings, Inc.
1325 Airmotive Way, Suite 130
Reno, Nevada 89502
with a copy to: John S. Daniels
Attorney at Law
8117 Preston Road, Suite 800
Dallas, Texas 75225
Facsimile: (214) 692-0508
(b) if to Bancorp: Harold G. Giomi, President and CEO
Sunrise Bancorp
Five SierraGate Plaza
Roseville, California 95678
Facsimile: (916) 783-2650
with a copy to: Victor J. Bacigalupi, Esquire
Bronson, Bronson & McKinnon LLP
505 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 982-1394
or to such other address as any party may from time to time designate by notice
to the others.
Section 9.05. Nonsurvival of Representations, Warranties and
Agreements. Except for and as provided in this Section 9.05, no representation,
warranty or agreement contained in this Agreement shall survive the Closing Date
or the earlier termination of this Agreement. The agreements set forth in
Sections 5.04, 5.05 and 5.06 shall survive the Closing Date and the agreements
set forth in Sections 8.01, 8.02, 9.01, 9.03 and 9.13 shall survive the Closing
Date or the earlier termination of this Agreement.
<PAGE>
Section 9.06. Costs and Expenses. Except as may be otherwise provided
herein, each party shall pay its own costs and expenses incurred in connection
with this Agreement and the matters contemplated hereby, including without
limitation all fees and expenses of attorneys, accountants, brokers, financial
advisors and other professionals.
Section 9.07. Entire Agreement. This Agreement, the Guarantee and the
Proxies together constitute the entire agreement among the parties and supersede
and cancel any and all prior discussions, negotiations, undertakings, agreements
in principle and other agreements between the parties relating to the subject
matter hereof.
Section 9.08. Headings and Captions. The captions of Articles and
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
Section 9.09. Waiver, Amendment or Modification. The conditions of this
Agreement which may be waived may only be waived by written notice to the other
party waiving such condition. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce the same. This Agreement may not be amended or
modified except by a written document duly executed by the parties hereto;
provided, however, that after approval of this Agreement and the Merger by the
shareholders of Bancorp, no amendment shall be made which is required by law to
be approved by such shareholders without such further approval.
Section 9.10. Rules of Construction. Unless the context otherwise
requires: (a) a term has the meaning assigned to it; (b) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles; (c) "or" is not exclusive; and (d) words in the
singular may include the plural and in the plural include the singular.
Section 9.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
shall be deemed one and the same instrument.
Section 9.12. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Except following the consummation of the Merger as
provided in Sections 5.04, 5.05 and 5.06, there shall be no third party
beneficiaries hereof. Except as provided in Section 1.01, this Agreement shall
not be assigned by either party, by operation of law or otherwise, without the
prior written consent of the other party.
Section 9.13. Governing Law; Assignment. This Agreement shall be
governed by the laws of the State of Delaware and any applicable federal laws
and regulations.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SUNRISE BANCORP
By: /s/ Harold G. Giomi
-----------------------
Harold G. Giomi
President and CEO
By: /s/ Sean E. McCarthy
------------------------
Sean E. McCarthy
Chairman of the Board of Directors
FIRST BANKS AMERICA, INC.
By: /s/ Allen H. Blake
----------------------
Allen H. Blake
Vice President
SUNLIGHT HOLDINGS, INC.
By: /s/ Allen H. Blake
----------------------
Allen H. Blake
Vice President
<PAGE>
EXHIBIT 10K
NOTE
----
$15,000,000.00 CLAYTON, MISSOURI October 31, 1996
On or before October 31, 2001, First Banks America, Inc., a Delaware
corporation (hereinafter called "Borrower"), promises to pay to the order of
First Banks, Inc., a Missouri corporation (hereinafter called "Lender") at its
offices at 135 North Meramec, Clayton, Missouri, in lawful money of the United
States of America, the sum of Fifteen Million dollars ($15,000,000.00), or so
much thereof as is advanced from time to time and remains outstanding, together
with interest thereon from the date hereof until maturity at a varying rate per
annum which is one-quarter percent (1/4%) per annum less than the "Prime Rate"
as hereinafter defined (but in no event to exceed the maximum rate of
non-usurious interest allowed from time to time by law, hereinafter called the
"Highest Lawful Rate"), with adjustments in such varying rate to be made on the
first day of each month beginning on December 1, 1996, and adjustments due to
changes in the Highest Lawful Rate to be made on the effective date of any
change in the Highest Lawful Rate. All past due principal and interest shall, at
the option of Lender, bear interest at the Highest Lawful Rate from maturity
until paid. Interest shall be computed on a per annum basis of a year of 365
days and for the actual number of days (including the first but excluding the
last day) elapsed.
Principal and accrued interest owing on the Note shall be due and
payable on October 31, 2001.
If any default shall occur in the payment of any amount due pursuant to
this Note, then, at the option of Lender, the unpaid principal balance and
accrued, unpaid interest shall become due and payable forthwith without any
further demand, notice of default, notice of acceleration, notice of intent to
accelerate the maturity hereof, notice of nonpayment, presentment, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower. Lender
may waive any default without waiving any prior or subsequent default.
If this Note is not paid at maturity and is placed in the hands of an
attorney for collection, or suit is filed hereon, or proceedings are had in
probate, bankruptcy, receivership, reorganization, arrangement or other legal
proceedings for collection hereof, Borrower agrees to pay Lender its collection
costs, including a reasonable amount for attorneys' fees. Borrower hereby
expressly waives bringing of suit and diligence in taking any action to collect
any sums owing hereon.
Borrower reserves the option of prepaying the principal of this note,
in whole or in part, at any time after the date hereof without penalty. Unless
otherwise agreed at the time of payment, the amount of any partial payment shall
be applied first to accrued unpaid interest, then to any amount due as
collection costs, and then to the unpaid principal of the Note.
This note shall be construed under and governed by the laws of the
State of Missouri.
<PAGE>
"Prime Rate" shall mean at any time that variable rate of interest per
annum published under "Money Rates" in the Wall Street Journal and defined
therein as "the base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks," or any successor to such rate announced as such by
the Wall Street Journal. If the foregoing rate ceases to be published, Lender
will choose a new basis for the determination of the prime rate, based upon
comparable information, and Lender will give Borrower notice of such change.
EXECUTED effective as of the 31st day of October, 1996.
BORROWER:
FIRST BANKS AMERICA, INC.
ADDRESS: By:/s/Allen H. Blake
--------------------
Allen H. Blake
8820 Westheimer Vice President
Houston, Texas 77063
