<PAGE> 1
As filed with the Securities and Exchange Commission on October 17, 1997
Registration No. 33-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Form S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------------
FIRST BANKS AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 6021 75-1604965
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
135 North Meramec
Clayton, Missouri 63105
(314) 854-4600
------------------------
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Allen H. Blake John S. Daniels, Esq. Larry K. Harris, Esq.
First Banks America, Inc. 8117 Preston Road, Suelthaus & Walsh, P.C.
11901 Olive Boulevard Suite 800 7733 Forsyth Blvd.,
Creve Coeur, Missouri 63141 Dallas, Texas 75225 12th Floor
(314) 692-6317 (214) 696-3200 St. Louis, MO
(314) 727-7676
------------------------
Approximate date of proposed sale to the public: As soon as practicable
after the Effective Date of this Registration Statement
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------------
Proposed maximum
Title of each class of Amount to be offering price per Proposed maximum Amount of
securities to be registered registered share aggregate offering price registration fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.15 par 752,038 <F1> $ N.A. $ 12,268,841.50 <F2> $ 3,717.83 <F3>
value per share) ------------ ------------- ------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> The maximum number of shares of registrant's common stock to be issued
in the merger described herein.
<F2> Estimated solely for purposes of calculating the registration fee. No
shares are offered hereunder for cash.
<F3> Registration fee is calculated pursuant to Rule 457(f) based on the
market value of the common stock of First Commercial Bancorp, Inc. as of
October 13, 1997.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
First Banks America, Inc.
135 North Meramec
Clayton, Missouri 63105
, 1997
----------------------
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the
Stockholders of First Banks America, Inc. ("FBA"), which will be held on
, , 1997, at .m., local time, at ,
- ---------- ------ -- ---- - -------------
Clayton, Missouri.
The purposes of the Annual Meeting are for the holders of FBA's Common
Stock and Class B Common Stock to consider and vote upon the following
proposals:
PROPOSAL NUMBER 1: Approval and adoption of the Agreement and
Plan of Merger dated as of October 3, 1997 (the "Merger
Agreement"), between FBA and First Commercial Bancorp, Inc., a
Delaware corporation ("First Commercial"), whereby First
Commercial will merge with and into FBA (the "Merger") and the
stockholders of First Commercial will receive approximately
752,038 shares of common stock, par value $0.15 per share, of
FBA ("FBA Common"). First Commercial is a bank holding company
headquartered in Sacramento, California. Through its wholly-owned
banking subsidiary, First Commercial currently operates six
banking offices in Sacramento, Roseville (2), San Francisco,
Concord and Campbell, California;
PROPOSAL NUMBER 2: Approval of the issuance to First Banks, Inc.,
a Missouri corporation ("First Banks"), the current owner of
approximately 70.2% of the outstanding voting stock of FBA by
virtue of its ownership of 2,500,000 shares of Class B common
stock, par value $0.15 per share, ("Class B Common") of 804,000
shares of FBA Common, for an aggregate purchase price of $10
million (a purchase price per share of approximately $12.44).
The issuance of the FBA Common to First Banks is a condition to
the consummation of the Merger, and the purchase price is to be
paid by reducing the outstanding indebtedness owed by FBA to
First Banks by a like amount;
PROPOSAL NUMBER 3: Approval of the issuance of convertible
debentures in the principal amount of $6.5 million, plus accrued
interest (the "Convertible Debentures"), to First Banks. The
issuance of the Convertible Debentures is a condition to the
consummation of the Merger, as they are to be exchanged for
<PAGE> 3
outstanding debentures of First Commercial now owned by First
Banks. The Convertible Debentures will bear interest at the
rate of 12% per annum, will be convertible into shares of FBA
Common at a conversion price of $14.06 per share, and will
generally have the same terms as the debentures of First
Commercial for which they are to be exchanged;
PROPOSAL NUMBER 4: Election of the directors of FBA, to serve
until the next Annual Meeting and until their successors have
been duly elected and qualified; and to consider any other
business that may properly come before the Annual Meeting.
In order for the Merger to be consummated, it is necessary for Proposals
1, 2 and 3 to be approved at the Annual Meeting; accordingly, unless all
three of such proposals are approved, none of Proposals 1, 2 or 3 will be
implemented. If the Merger and Proposals Number 2 and 3 are approved and
completed, holders of common stock of First Commercial will receive 0.8888
shares of FBA Common in exchange for each share of common stock of First
Commercial, and subsequently First Commercial Bank will be merged with FBA's
existing California banking subsidiary. Additional information concerning
the Merger, the issuance of shares of FBA Common to First Banks pursuant to
Proposal Number 2, the issuance of the Convertible Debentures to First Banks
pursuant to Proposal Number 3 and the election of directors is contained in
the enclosed Joint Proxy Statement-Prospectus, which serves as the proxy
statement for the Annual Meeting, the proxy statement for the Special Meeting
of Stockholders of First Commercial at which the Merger will be considered,
and the prospectus for the FBA Common to be issued in the Merger. Each
stockholder of FBA is urged to read the Joint Proxy Statement-Prospectus
completely.
The Board of Directors of FBA has carefully considered and approved the
Merger Agreement and believes that the Merger and the related transactions to
be voted on at the Annual Meeting are in the best interests of FBA and its
stockholders. ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS OF FBA VOTE FOR APPROVAL OF THE MERGER AGREEMENT AND
PROPOSALS NUMBER 2 AND 3.
The Board of Directors also recommends that the stockholders of FBA
vote; for the election of the six nominees named in the Joint Proxy
Statement-Prospectus.
All stockholders of FBA are urged to sign, date and mail the enclosed
proxy card promptly in the postage-prepaid envelope provided. If you attend
the Annual Meeting, you may revoke your proxy and vote in person even if you
have already mailed your proxy card.
On behalf of the Board of Directors, we wish to thank you for your
support.
Sincerely yours,
James F. Dierberg
Chairman, President and Chief
Executive Officer
<PAGE> 4
First Banks America, Inc.
135 North Meramec
Clayton, Missouri 63105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held , , 1997
---------------- ------------- ----
To the Stockholders of First Banks America, Inc.:
Notice is hereby given that the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") of First Banks America, Inc., a Delaware corporation
("FBA"), will be held at , Clayton, Missouri, on ,
----------------- ------------
, 1997 at :00 .m., local time, for the following purposes:
- ----------- --- -- -
(1) To approve and adopt the Agreement and Plan of Merger dated
as of October 3, 1997 (the "Merger Agreement"), between FBA and First
Commercial Bancorp, Inc., a Delaware corporation ("First Commercial"),
whereby First Commercial will merge with and into FBA (the "Merger").
First Commercial is a bank holding company headquartered in Sacramento,
California which operates six banking offices in Sacramento, Roseville
(2), San Francisco, Concord and Campbell, California through its wholly
owned subsidiary, First Commercial Bank;
(2) To approve the issuance to First Banks, Inc., a Missouri
corporation ("First Banks"), of 804,000 shares of FBA Common, for an
aggregate purchase price of $10 million (a purchase price per share of
approximately $12.44);
(3) To approve the issuance of convertible debentures in the
principal amount of $6.5 million, plus accrued interest (the "Convertible
Debentures"), to First Banks in exchange for outstanding debentures of
First Commercial. The Convertible Debentures will bear interest at the
rate of 12% per annum, will be convertible into shares of FBA
Common at a conversion price of $14.06 per share, and will generally have
the same terms as the debentures of First Commercial for which they are to
be exchanged;
(4) To elect six directors to serve until the next Annual
Meeting and until their successors have been duly elected and qualified;
and
(5) To transact any and all other business as may properly be
presented at the meeting and any adjournment(s) thereof.
<PAGE> 5
The Board of Directors has fixed the close of business on ,
-------- --
1997, as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting or any
adjournment(s) thereof. The stock transfer books will not be closed. A list
of stockholders entitled to vote at the meeting will be available for
examination at the main office of the Company for ten (10) days prior to the
meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER,
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING, YOU ARE URGED TO PROMPTLY
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE
WITH YOUR WISHES.
YOUR PROXY WILL BE RETURNED TO YOU IF YOU SHOULD REQUEST SUCH RETURN IN
THE MANNER PROVIDED FOR REVOCATION OF PROXIES ON PAGE 2 OF THE ENCLOSED JOINT
PROXY STATEMENT-PROSPECTUS. PROMPT RESPONSE BY OUR STOCKHOLDERS WILL REDUCE
THE TIME AND EXPENSE OF SOLICITATION.
By Order of the Board of Directors,
ALLEN H. BLAKE
Secretary
Clayton, Missouri
- --------------, 1997
<PAGE> 6
[LOGO]
FIRST COMMERCIAL BANCORP, INC.
865 Howe Avenue
Suite 310
Sacramento, California 95825
[DATE], 1997
To the Stockholders of First Commercial Bancorp, Inc.:
You are cordially invited to attend a Special Meeting of the
Stockholders of First Commercial Bancorp, Inc. ("First Commercial") to be
held at 10:00 a.m., on [DATE], 1997, at <PLACE> (the "First Commercial
---- -----
Special Meeting"). At this important meeting, you will be asked to consider
and vote on a proposal to approve and adopt an Agreement and Plan of Merger,
dated October 3, 1997 (the "Merger Agreement"), which provides for the merger
(the "Merger") of First Commercial with and into First Banks America, Inc., a
Delaware corporation ("FBA"). A copy of the Merger Agreement is attached to
the accompanying Joint Proxy Statement-Prospectus as Appendix A.
Enclosed are the following items relating to the First Commercial
Special Meeting and the Merger:
1. Joint Proxy Statement-Prospectus;
2. Proxy card; and
3. A pre-addressed return envelope to Boston Equiserve for the proxy
card.
The Joint Proxy Statement-Prospectus and related proxy materials set
forth, or incorporate by reference, financial data and other important
information relating to First Commercial and FBA and describe the terms and
conditions of the proposed Merger. The Board of Directors urges you to
carefully review these materials before completing the enclosed proxy card or
attending the First Commercial Special Meeting.
<PAGE> 7
THE BOARD OF DIRECTORS OF FIRST COMMERCIAL CAREFULLY CONSIDERED AND
APPROVED THE TERMS OF THE MERGER AGREEMENT AS BEING IN THE BEST INTEREST OF
FIRST COMMERCIAL AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE MERGER
---
AGREEMENT.
Stockholder approval of the Merger Agreement is a condition to the
consummation of the Merger. Accordingly, it is important that your shares be
represented at the First Commercial Special Meeting, whether or not you plan
to attend the meeting in person. Please complete, sign, and date the
enclosed proxy card and return it to Boston Equiserve in the enclosed
pre-addressed envelope which requires no postage if mailed within the United
States. If you later decide to attend the First Commercial Special Meeting
and vote in person, or if you wish to revoke your proxy for any reason prior
to the vote at the First Commercial Special Meeting, you may do so and your
proxy will have no further effect. You may revoke your proxy by delivering
to the President of First Commercial a written notice of revocation or
another proxy relating to the same shares bearing a later date than the proxy
being revoked or by attending the First Commercial Special Meeting and voting
in person. Attendance at the First Commercial Special Meeting will not in
itself constitute a revocation of a proxy.
The Board of Directors and management of First Commercial appreciate
your continued support. If you need assistance in completing your proxy card
or if you have any questions about the Joint Proxy Statement-Prospectus,
please feel free to contact James E. Culleton at (916) 641-3288.
Sincerely,
Donald W. Williams
Chairman, President,
and Chief Executive Officer
<PAGE> 8
FIRST COMMERCIAL BANCORP, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [DATE], 1997
----
To the Stockholders of First Commercial Bancorp, Inc.:
Notice is hereby given that a Special Meeting of the Stockholders of
First Commercial Bancorp, Inc., a Delaware corporation ("First Commercial"),
will be held at <PLACE>, on [DATE], at 10:00 a.m. (the "First Commercial
----- ----
Special Meeting"), for the following purposes:
1. To consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger (the "Merger Agreement"), dated as
of October 3, 1997, by and between First Commercial and First
Banks America, Inc., a Delaware corporation ("FBA"). If the
Merger Agreement is approved by the stockholders of First
Commercial and FBA, First Commercial will be merged (the
"Merger") with and into FBA. Upon consummation of the Merger,
each outstanding share of First Commercial common stock, par
value $1.25 per share ("First Commercial Common"), other than
shares held in the treasury of First Commercial or its
subsidiaries and shares held by stockholders of First
Commercial who exercise their appraisal rights under the
General Corporation Law of the State of Delaware, will be
converted into the right to receive 0.8888 shares of FBA common
stock, par value $0.15 per share ("FBA Common"), with cash in
lieu of fractional shares, as set forth in detail in the
attached Joint Proxy Statement-Prospectus. A copy of the
Merger Agreement is set forth in Appendix A to the Joint Proxy
Statement-Prospectus.
2. To transact such other business as may properly come before the
First Commercial Special Meeting or any adjournment or
postponement thereof.
The record date for determining the holders of First Commercial Common
entitled to receive notice of, and to vote at, the First Commercial Special
Meeting or any adjournment or postponement thereof has been fixed as of the
close of business on [DATE], 1997. Approval by the First Commercial
----
stockholders of the Merger Agreement requires the affirmative vote of the
holders of at least a majority of the outstanding shares of First Commercial
Common entitled to vote at the First Commercial Special Meeting.
Information regarding the Merger and related matters is contained in
the accompanying Joint Proxy Statement-Prospectus and the appendices thereto,
which are incorporated by reference herein and form a part of this Notice.
WHETHER OR NOT YOU EXPECT TO ATTEND THE FIRST COMMERCIAL SPECIAL
MEETING, PLEASE COMPLETE, SIGN, AND DATE THE ENCLOSED PROXY CARD AND RETURN
IT IN THE ACCOMPANYING ENVELOPE. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR
TO THE VOTE AT THE FIRST COMMERCIAL SPECIAL MEETING BY FOLLOWING THE
PROCEDURES SET FORTH IN THE ACCOMPANYING JOINT PROXY STATEMENT-PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Donald W. Williams
Chairman, President,
and Chief Executive Officer
[DATE], 1997
----
<PAGE> 9
PROXY STATEMENT AND PROXY STATEMENT
PROSPECTUS FIRST COMMERCIAL
FIRST BANKS AMERICA, INC. BANCORP, INC.
135 North Meramec 865 Howe Avenue
Clayton, Missouri 63105 Sacramento, California 95825
(314) 854-4600 (916) 641-3288
752,038 SHARES OF COMMON STOCK
(PAR VALUE $0.15 PER SHARE)
This Prospectus of First Banks America, Inc. ("FBA") relates to 752,038
shares of common stock, par value $0.15 per share of FBA ("FBA Common") to be
issued to the stockholders of First Commercial Bancorp, Inc. ("First
Commercial") upon consummation of the proposed merger (the "Merger")
described herein, in which First Commercial will merge with and into FBA
pursuant to the terms of the Agreement and Plan of Merger, dated October 3,
1997, between FBA and First Commercial (the "Merger Agreement"). The Merger
Agreement is attached as Appendix A and is incorporated herein by reference.
This Prospectus also serves as the Joint Proxy Statement of FBA and
First Commercial for (1) the Annual Meeting of Stockholders of FBA to be held
on , 1997; and (2) the Special Meeting of
------------------------
Stockholders of First Commercial to be held on , 1997. See
-----------------
"FBA ANNUAL MEETING" and "FIRST COMMERCIAL SPECIAL MEETING."
Upon consummation of the Merger, except as otherwise provided in the
Merger Agreement, each outstanding share of common stock, par value $1.25 per
share, of First Commercial ("First Commercial Common") will be converted into
0.8888 shares of FBA Common. First Commercial stockholders will receive, in
lieu of fractional shares, cash without interest. For a more complete
description of the Merger and the terms and conditions of the Merger
Agreement, see "THE MERGER" and "THE MERGER AGREEMENT."
FBA Common is traded on the New York Stock Exchange; (the "NYSE").
First Commercial Common is traded on the SmallCap Market of the Nasdaq Stock
Market. The closing price of one share of FBA Common on the NYSE was $12.875
on July 24, 1997 (the last day prior to the public announcement of the
Merger), and $18.75 on October 8, 1997. The closing bid prices for one share
of First Commercial Common were $9.25 on July 24, 1997, and $14.50 on October
8, 1997.
FBA has recently entered into agreements providing for (1) the merger
of Surety Bank, a California banking association headquartered in Vallejo,
California ("Surety"), with and into a
10
<PAGE> 10
subsidiary of FBA (the "Surety Merger") and (2) the merger of Pacific Bay
Bank, a California banking association located in San Pablo, California
("Pacific Bay"), with and into a subsidiary of FBA (the "Pacific Bay
Merger"). Subject to potential adjustments, stockholders of Surety would
receive an aggregate of approximately 264,600 shares of FBA Common and cash
in the amount of approximately $3.55 million as consideration in the Surety
Merger. Stockholders of Pacific Bay would receive an aggregate of
approximately $4.2 million in cash as consideration in the Pacific Bay
Merger. Additional information regarding those proposed transactions, which
are subject to the approval of the stockholders of Surety and Pacific Bay,
respectively, and the fulfillment or waiver of other conditions, is contained
in this Joint Proxy Statement-Prospectus; see "BUSINESS OF FBA--Recent
Developments."
All information contained in this Joint Proxy Statement-Prospectus with
respect to FBA has been supplied by FBA, and all information with respect to
First Commercial has been supplied by First Commercial.
This Joint Proxy Statement-Prospectus is first being mailed to the
stockholders of FBA and First Commercial Common on or about
----------------,
1997.
See "Risk Factors" commencing on page for a discussion of certain
----
factors to be considered in evaluating the Merger and the shares of FBA
Common to be received in the Merger.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement-Prospectus and, if
given or made, such information or representation should not be relied upon
as having been authorized. This Joint Proxy Statement-Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Joint Proxy Statement-Prospectus or the
solicitation of a proxy in any jurisdiction in which, or to any person to
whom, it would be unlawful to make such offer or solicitation of an offer or
proxy solicitation. Neither the delivery of this Joint Proxy
Statement-Prospectus nor any distribution of the securities to which it
relates shall, under any circumstances, create an implication that there has
been no change in the affairs of FBA or First Commercial or in the information
set forth herein since the date of this Joint Proxy Statement-Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS JOINT
11
<PAGE> 11
PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Joint Proxy Statement-Prospectus is , 1997.
----------
12
<PAGE> 12
</TABLE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SUMMARY
The Parties
The FBA Annual Meeting
The First Commercial Special Meeting
Stock Held By Affiliates
The Merger
Market Prices and Dividends
Differences in Stockholders' Rights
Pending FBA Transactions
Summary of Comparative Per Share Data
RISK FACTORS
Control of FBA by First Banks, Inc.
Acquisition of Surety and Pacific Bay by FBA
Profitability of FBA and First Commercial
Dividends
Public Market for FBA Common
Operating Requirements Associated with Geographic Dispersion
Dependence on Future Growth Through Acquisitions
INTRODUCTION
THE FBA ANNUAL MEETING
Record Date; Vote Required
THE FIRST COMMERCIAL SPECIAL MEETING
Record Date; Vote Required
BENEFICIAL OWNERSHIP INFORMATION
FBA
First Commercial
PROXIES; REVOCATION; SOLICITATION
SELECTED CONSOLIDATED FINANCIAL DATA OF FBA AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA OF FIRST COMMERCIAL AND
SUBSIDIARY
PROPOSAL NUMBER ONE FOR THE FBA ANNUAL MEETING AND THE FIRST
COMMERCIAL SPECIAL MEETING (APPROVAL OF THE MERGER)
BACKGROUND AND REASONS FOR THE MERGER
FBA's Reasons for the Merger
Opinion of the Financial Advisor to the FBA Special Committee
First Commercial's Reasons for the Merger
Opinion of the Financial Advisor to the First Commercial Special
Committee
THE MERGER
Terms of the Merger
Certain Federal Income Tax Consequences of the Merger
Regulatory Approvals
Charter and By-laws of FBA
Appraisal Rights of Stockholders of First Commercial
13
<PAGE> 13
Management and Operations After the Merger
New York Stock Exchange Listing
Exchange of First Commercial Certificates
Accounting Treatment
THE MERGER AGREEMENT
The Merger
Representations and Warranties of FBA and First Commercial
Conditions to Consummation of the Merger
Conduct of Business Pending the Merger
Additional Agreements
Termination; Damages
Amendment and Waiver
Expenses
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Indemnification
BUSINESS OF FBA
Description of Business
Recent Developments
DESCRIPTION OF FBA CAPITAL STOCK
Common Stock
Class B Common Stock
Preferred Stock
BUSINESS OF FIRST COMMERCIAL
COMPARATIVE RIGHTS OF STOCKHOLDERS OF FIRST COMMERCIAL AND FBA
General
Transferability of Stock
Voting Rights; Cumulative Voting
Special Meetings of Stockholders; Action by Written Consent
Rights Plan
Amendment of Governing Documents
Stockholder Vote for Mergers and Other Reorganizations
Appraisal Rights
Summary
PRO FORMA FINANCIAL INFORMATION
PROPOSAL NUMBER TWO AT THE FBA ANNUAL MEETING (APPROVAL OF SALE
OF FBA COMMON TO FIRST BANKS)
PROPOSAL NUMBER THREE AT THE FBA ANNUAL MEETING (APPROVAL OF
ISSUANCE OF FBA DEBENTURE TO FIRST BANKS)
PROPOSAL NUMBER FOUR AT THE FBA ANNUAL MEETING (ELECTION OF
DIRECTORS)
Nominees
Executive Officers
Committees and Meetings of the Board of Directors
Director Compensation
Certain Relationships and Related Transactions
EXECUTIVE COMPENSATION
Summary Compensation Table
STOCK PERFORMANCE GRAPH
EMPLOYEE BENEFIT PLANS
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
STOCKHOLDER PROPOSALS
14
<PAGE> 14
LEGAL MATTERS
EXPERTS
Agreement and Plan of Merger Appendix A
Opinion of Mercer Capital Management, Inc. Appendix B
Opinion of Rauscher Pierce Refsnes, Inc. Appendix C
Section 262 of the General Corporation Law of the State of Delaware Appendix D
</TABLE>
15
<PAGE> 15
AVAILABLE INFORMATION
FBA and First Commercial are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith file reports, proxy statements
and other information with the Securities and Exchange Commission (the
"SEC"), relating to their business, financial statements and other matters.
The registration statement discussed below and the exhibits thereto as well
as reports, proxy statements and other information filed by FBA and First
Commercial may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the following regional offices: Chicago Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such materials may be obtained from the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The SEC also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants at
http://www.sec.gov. FBA Common is listed on the New York Stock Exchange
("NYSE") and reports, proxy statements and other information concerning FBA
are available for inspection at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
FBA has filed with the SEC a registration statement on Form S-4 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to the FBA Common to be issued pursuant to the Merger (the "Registration
Statement"). As permitted by the rules and regulations of the SEC, this
Joint Proxy Statement-Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. For such information,
reference is made to the Registration Statement and the exhibits filed as a
part thereof or incorporated by reference therein.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference into and made a part of this
Joint Proxy Statement-Prospectus the following documents filed by FBA and
First Commercial with the Securities and Exchange Commission:
(1) FBA's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
(2) FBA's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997 and June 30, 1997;
(3) FBA's Current Report on Form 8-K filed on August 7, 1997;
(4) First Commercial's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996;
16
<PAGE> 16
(5) First Commercial's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997; and
(6) First Commercial's Current Report on Form 8-K filed on August 7,
1997.
The specified portions of the following documents of FBA and First
Commercial previously filed pursuant to the Exchange Act, copies of which are
delivered together with this Joint Proxy Statement-Prospectus, are also
incorporated by reference herein. Such documents are being delivered with
this Joint Proxy Statement-Prospectus, but the remainder of FBA's 1996 Annual
Report to Stockholders and First Commercial's 1996 Annual Report to
Stockholders, other than the specific portions specified below, are not
incorporated by reference herein and are not a part of this registration
statement:
<TABLE>
<CAPTION>
FBA Document Portion(s) Incorporated by
------------ --------------------------
Reference
---------
<S> <C>
1996 Annual Report to Stockholders (1) Selected Consolidated and Other Financial Data
(2) Quarterly Condensed Financial Data
(3) Management's Discussion and Analysis
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 All
First Commercial Document
-------------------------
1996 Annual Report to Stockholders (1) Selected Consolidated and Other Financial Data
(2) Management's Discussion and Analysis
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 All
</TABLE>
Such incorporation by reference will not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K. All documents filed by FBA and First Commercial pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Joint Proxy Statement-Prospectus shall be deemed to be incorporated
17
<PAGE> 17
herein by reference and to be a part hereof from the respective dates of
filing of such documents.
Any statement contained in a document incorporated or deemed
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement-Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
is also incorporated or deemed incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed to constitute a part of this Joint Proxy
Statement-Prospectus, except as so modified or superseded.
This Joint Proxy Statement-Prospectus incorporates documents by
reference which are not presented herein or delivered herewith. FBA and
First Commercial hereby undertake, with respect to the documents listed above
filed with the Commission, to provide without charge to each person,
including any beneficial owner to whom this Joint Proxy Statement-Prospectus
has been delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above that have been or may be
incorporated into this Joint Proxy Statement-Prospectus and deemed to be part
hereof, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for
documents filed by FBA or First Commercial should be directed to Allen H.
Blake, Secretary, First Banks America, Inc., 11901 Olive Boulevard, Creve
Coeur, Missouri 63141, telephone (314) 692-6317. In order to ensure timely
delivery of documents prior to the FBA Annual Meeting and the First
Commercial Special Meeting, any request should be made by
----------------,
1997.
THIS JOINT PROXY STATEMENT-PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN CONTAIN CERTAIN FORWARD LOOKING STATEMENTS WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF FBA AND FIRST
COMMERCIAL, AND THE POTENTIAL EFFECTS OF THE MERGER. THESE FORWARD LOOKING
STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THE FORWARD
LOOKING STATEMENTS HEREIN INCLUDE GENERAL MARKET CONDITIONS AND THOSE WITH A
SPECIFIC IMPACT ON THE BANKING INDUSTRY, AS WELL AS THE SPECIFIC RISKS AND
UNCERTAINTIES IDENTIFIED IN THE SECTION OF THIS JOINT PROXY
STATEMENT-PROSPECTUS ENTITLED "RISK FACTORS."
18
<PAGE> 18
SUMMARY
The following constitutes a brief summary, for the convenience of the
stockholders of FBA and First Commercial, of the information contained in
this Joint Proxy Statement-Prospectus, including Appendices A, B, C and D
hereto, relating to the proposal to approve the Merger Agreement. The
summary is necessarily selective and is qualified in its entirety by the more
extensive discussion contained elsewhere in this Joint Proxy
Statement-Prospectus, by Appendices A, B, C and D hereto and by the documents
incorporated by reference herein. FBA and First Commercial stockholders are
encouraged to read carefully this Joint Proxy Statement-Prospectus, including
the following Appendices:
<TABLE>
<CAPTION>
<S> <C>
Appendix A Agreement and Plan of Merger
Appendix B Opinion of Mercer Capital Management, Inc. (the financial advisor to
the Special Committee of the Board of Directors of First Commercial)
Appendix C Opinion of Rauscher Pierce Refsnes, Inc. (the financial advisor to
the Special Committee of the Board of Directors of FBA)
Appendix D Section 262 of the General Corporation Law of the State of Delaware
(governing the appraisal rights of stockholders of First Commercial)
</TABLE>
The Parties
FBA
FBA is a Delaware corporation registered as a bank holding company,
with its principal executive offices at 135 North Meramec, Clayton, Missouri
(having recently relocated such offices from Houston, Texas). Through its
two wholly-owned subsidiary banks, Sunrise Bank of California ("Sunrise") and
BankTEXAS N.A. ("BankTEXAS"), FBA operates eight banking offices located in
Roseville and Rancho Cordova, California and Houston, Dallas, Irving and
McKinney, Texas. FBA had total stockholders' equity as of June 30, 1997 of
$33.9 million, total assets of $373.6 million, total loans, net of unearned
discount, of $247.6 million and total deposits of $312.8 million as of that
date. FBA's subsidiary banks offer a broad range of commercial and personal
banking services including certificates of deposit, individual retirement and
other time deposit accounts, checking and other demand deposit accounts,
interest checking accounts, savings accounts and money market accounts.
Loans include commercial and industrial, commercial and residential real
estate, real estate construction and development and consumer loans. Other
financial services include automatic teller machines, telephone banking,
lockbox deposits, cash management services, sweep accounts, credit-related
insurance and safe deposit boxes.
19
<PAGE> 19
First Commercial
First Commercial is a Delaware corporation registered as a bank holding
company, with its principal executive offices at 865 Howe Avenue, Sacramento,
California. As of June 30, 1997, First Commercial had total assets of $159.2
million, total loans, net of unearned discount, of $99.4 million, total
deposits of $141.6 million and $7.0 million in stockholders' equity. First
Commercial, through its wholly-owned subsidiary bank, First Commercial Bank,
offers a full range of commercial and personal banking services through its
main banking office in Sacramento and five branch offices in Roseville (2),
San Francisco, Concord and Campbell, California.
The FBA Annual Meeting
Time, Date, Place and Purpose
The FBA Annual Meeting will be held on , 1997 at .m.
--------------- -
(local time), at , Clayton, Missouri, to consider
---------------------
and vote upon (1) a proposal to approve and adopt the Merger Agreement and
the transactions contemplated thereby and (2) the election of directors to
serve until the next annual meeting and until their successors are elected
and qualified.
Record Date; Vote Required
The record date for determining the FBA Stockholders entitled to notice
of and to vote at the FBA Annual Meeting is , 1997 (the
---------------
"Record Date"). The presence, in person or by proxy, of the holders of at
least a majority of the total number of outstanding shares of FBA common
stock, par value $0.15 per share ("FBA Common") and Class B common stock, par
value $0.15 per share ("Class B Common"), voting as a single class, is
necessary to constitute a quorum at the FBA Annual Meeting. The affirmative
vote of the holders of at least a majority of the shares of FBA Common and
Class B Common outstanding and entitled to vote at the FBA Annual Meeting,
voting as a single class, is necessary to approve and adopt the Merger
Agreement and the Merger. First Banks, Inc., a Missouri corporation ("First
Banks") owns all of the outstanding shares of Class B Common.
In the election of directors, holders of shares of FBA Common and Class
B Common are entitled to one vote per director to be elected at the FBA
Annual Meeting for each share held of record on the Record Date, with the
shares voting as a single class. Holders of FBA Common and Class B Common
are permitted to exercise cumulative voting in a contested election of
directors. This means that, if there are more nominees for director than
positions to be elected, each holder would be permitted to cast as many votes
as equals the product of the number of directors to be elected (i.e., six at
the FBA Annual Meeting) times the number of shares held by such holder, and
to cast all these votes for one candidate or to divide the votes among two or
more candidates in any amounts chosen by the stockholder. First Banks would
also have the right to utilize cumulative voting with respect to its Class B
Common. The proxy holders
20
<PAGE> 20
authorized to vote in favor of nominees listed herein under the caption
"ELECTION OF DIRECTORS" will be permitted to vote cumulatively in the absence
of instructions to the contrary.
The First Commercial Special Meeting
Time, Date, Place and Purpose
The First Commercial Special Meeting will be held on
-------------,
1997 at .m. (local time), at , Sacramento,
---- - ---------------------
California, to consider and vote upon a proposal to approve and adopt the
Merger Agreement and the transactions contemplated thereby.
Record Date; Vote Required
The Record Date for determining the stockholders of First Commercial
entitled to notice of and to vote at the First Commercial Special Meeting is
, 1997. The presence, in person or by proxy, of the holders of at
- --------
least a majority of the total number of outstanding shares of First Commercial
Common is necessary to constitute a quorum at the First Commercial Special
Meeting. The affirmative vote of the holders of at least a majority of the
shares of First Commercial Common outstanding and entitled to vote at the First
Commercial Special Meeting is necessary to approve the Merger Agreement and
the Merger.
Stock Held by Affiliates
FBA
The directors and executive officers of FBA and their affiliates,
including First Banks, beneficially owned as of the Record Date 27,379 shares
of FBA Common and 2,500,000 shares of Class B Common entitled to vote on the
Merger Agreement and the election of directors of FBA, representing 2.58% of
the shares of FBA Common and 100% of the Class B Common (combined, 70.98% of
all shares of stock entitled to vote). See "BENEFICIAL OWNERSHIP
INFORMATION--FBA." As a result of its ownership position, First Banks is the
controlling stockholder of both FBA and First Commercial and has indicated
that it intends to vote in favor of the adoption of the Merger Agreement and
the other proposals discussed herein.
First Commercial
The directors and executive officers of First Commercial and their
affiliates, including First Banks, beneficially owned as of the Record Date
1,167,147 shares of First Commercial Common entitled to vote on the Merger
Agreement, representing 78.24% of the issued and outstanding shares of First
Commercial Common. See "BENEFICIAL OWNERSHIP INFORMATION--First Commercial."
As a result of its ownership position, First Banks is the controlling
stockholder of both FBA and First Commercial and has indicated that it
intends to vote in favor of the adoption of the Merger Agreement.
21
<PAGE> 21
The Merger
Approval and adoption of the Merger is identified in this Joint Proxy
Statement-Prospectus as "PROPOSAL NUMBER 1" to be considered at the FBA
Annual Meeting, and it is the only item of business scheduled to be
considered at the First Commercial Special Meeting. If the Merger is
approved and adopted by the requisite votes of the stockholders of FBA (the
"FBA Stockholders") and of First Commercial (the "First Commercial
Stockholders"), subject to the satisfaction or waiver of the conditions in
the Merger Agreement, and the approval by FBA Stockholders of the proposals
identified herein as "Proposal Number 2" and "Proposal Number 3," it is
presently contemplated that the Merger will occur in the fourth quarter of
1997. When the Merger becomes effective ("Effective Time"), each outstanding
share of First Commercial Common, other than (i) any shares held in the
treasury of First Commercial or by a subsidiary, and (ii) shares of First
Commercial Common as to which appraisal rights are exercised (see "THE
MERGER--Appraisal Rights"), if any, will be converted into and represent the
right to receive the appropriate number of shares of FBA Common. As soon as
practicable following the Effective Time, each holder of First Commercial
Common will receive from the agent appointed by FBA to conduct the exchange
of stock certificates (the "Exchange Agent") a letter of transmittal and
instructions for exchanging certificates representing shares of First
Commercial Common ("First Commercial Certificates"). First Commercial
Stockholders should not attempt to surrender their First Commercial
Certificates until they receive these instructions from the Exchange Agent.
See "THE MERGER AGREEMENT--Exchange of First Commercial Certificates."
Assuming that the Merger is consummated, FBA Stockholders will continue
to own the shares of FBA Common and Class B Common which they currently own,
and they need not take any action with respect to the stock certificates
representing such shares.
Two related transactions must also be approved at the FBA Annual
Meeting (but not the First Commercial Special Meeting) in order for the Merger
to occur. PROPOSAL NUMBER 2 at the FBA Annual Meeting is the approval of the
purchase by First Banks of 804,000 shares of FBA Common. The Merger
Agreement provides that consummation of the transaction contemplated by
PROPOSAL NUMBER 2 is a condition to the obligations of both FBA and First
Commercial to consummate the Merger. Approval of FBA Stockholders is
required because, under rules of the NYSE, any transaction or series of
transactions which will result in the issuance by a company, the securities
of which are listed on the NYSE, of voting securities equal to 20% or more of
the previously outstanding number of voting securities is required to be
submitted to stockholders, even though applicable corporate law of FBA's
state of incorporation, Delaware, would not require such approval.
Furthermore, the fact that the proposed issuance of stock involves First
Banks, the controlling stockholder of FBA, is also a basis for requiring such
approval under NYSE rules. These shares will not be issued unless the Merger
is consummated.
22
<PAGE> 22
PROPOSAL NUMBER 3 at the FBA Annual Meeting is the approval of the
issuance of a convertible debenture in the principal amount of $6.5 million,
plus accrued interest (the "FBA Debenture") in exchange for the outstanding
convertible debentures of First Commercial in the principal amount of $6.5
million (the "First Commercial Debentures"), which are payable to and owned
by First Banks. Because the issuance of the FBA Debenture is a part of the
series of related transactions discussed herein and it will lead to an
obligation of FBA to issue the underlying shares of FBA Common if and when
the FBA Debenture is converted, this transaction involves a sufficient number
of shares of FBA Common to make it necessary under rules of the NYSE to seek
the approval of this transaction by FBA Stockholders. Under the Merger
Agreement, the issuance of the FBA Debenture is also a condition to the
obligations of FBA and First Commercial to consummate the Merger Agreement.
The FBA Debenture will not be issued unless the Merger is consummated.
The specific terms of the transactions contemplated by PROPOSAL NUMBERS
2 and 3 are discussed in detail herein under the captions "THE MERGER--Terms
of the Merger". Such transactions were considered as important elements of
the overall transaction involving the Merger by the special committees of the
Boards of Directors of FBA and First Commercial, and the recommendations
discussed herein in favor of approval of the Merger were based on thorough
consideration of the separate but related transactions contemplated by
PROPOSAL NUMBERS 1, 2 and 3. Accordingly, in the discussions herein of the
process by which the Boards of Directors of FBA and First Commercial and the
special committees appointed by each of such boards to consider the
transactions, references to the "Merger" include all three of such
transactions, as well as the "Branch Exchange," a related transaction defined
under the caption "BACKGROUND AND REASONS FOR THE MERGER--FBA's Reasons for
the Merger."
Consideration of the Merger by Special Committees of the Boards of Directors
of FBA and First Commercial
In January 1997, the Board of Directors of FBA appointed a special
committee, composed of the two members of FBA's Board who are not officers or
employees of FBA or First Banks or otherwise affiliated with First Banks (the
"FBA Special Committee"), to recommend whether FBA should enter into the
proposed transaction with First Commercial and, if so, the terms on which
such a transaction should be structured. The FBA Special Committee undertook
a thorough analysis of a possible merger with First Commercial and engaged an
independent financial advisor to advise it concerning the fairness of the
financial terms thereof. After the FBA Special Committee had reached the
conclusion that the Merger was advisable and in the best interests of the
holders of FBA Common, it recommended to the Board of Directors that the
Merger Agreement be approved. Thereafter, the FBA Board of Directors
approved the Merger Agreement, and it unanimously recommends that the FBA
Stockholders vote to approve and adopt the Merger Agreement. Additional
information regarding the role of the FBA Special Committee and the process
by which the Merger was considered and the terms of the Merger Agreement were
determined is contained herein under the captions "BACKGROUND AND REASONS FOR
THE MERGER--FBA's Reason for the Merger" and "--First Commercial's Reasons for
the Merger."
23
<PAGE> 23
Similarly, in February 1997, the Board of Directors of First Commercial
appointed a special committee, composed of the two members of First
Commercial's Board who are not officers or employees of First Commercial or
First Banks or otherwise affiliated with First Banks (the "First Commercial
Special Committee"), to recommend whether First Commercial should enter into
the proposed transaction with FBA and, if so, the terms on which such a
transaction should be structured. The First Commercial Special Committee
undertook a thorough analysis of a possible merger with FBA and engaged an
independent financial advisor to advise it concerning the fairness of the
financial terms thereof. After the First Commercial Special Committee had
reached the conclusion that the Merger was advisable and in the best
interests of the First Commercial Stockholders, it recommended to the Board
of Directors that the Merger Agreement be approved. Thereafter, the First
Commercial Board of Directors approved the Merger Agreement, and it
unanimously recommends that the First Commercial Stockholders vote to approve
and adopt the Merger Agreement. Additional information regarding the role of
the First Commercial Special Committee and the process by which the Merger
was considered and the terms of the Merger Agreement were determined is
contained herein under the captions "BACKGROUND AND REASONS FOR THE
MERGER--First Commercial's Reasons for the Merger."
Opinion of the Financial Advisor to the FBA Special Committee
The FBA Special Committee engaged Rauscher Pierce Refsnes, Inc.,
Houston, Texas ("Rauscher Pierce") to render financial advisory services in
connection with the FBA Special Committee's consideration of the Merger.
Pursuant to such engagement, Rauscher Pierce has evaluated the financial
terms of the Merger. Rauscher Pierce has delivered to FBA an opinion dated
October , 1997, stating that, as of such date, based on the review and
---
assumptions and subject to the limitations described therein, the Merger is
fair, from a financial point of view, to FBA's stockholders. A copy of
Rauscher Pierce's opinion is attached as Appendix C to this Joint Proxy
Statement-Prospectus and should be read in its entirety. See "THE
MERGER--Opinion of FBA's Financial Advisor."
Opinion of the Financial Advisor to the First Commercial Special Committee
The First Commercial Special Committee engaged Mercer Capital
Management, Inc., Memphis, Tennessee ("Mercer Capital") to render financial
advisory services in connection with the First Commercial Special Committee's
consideration of the Merger. Pursuant to such engagement, Mercer Capital has
evaluated the financial terms of the Merger. Mercer Capital has delivered to
First Commercial an opinion dated October 6, 1997, stating that, as of such
date, based on the review and assumptions and subject to the limitations
described therein, the Merger is fair, from a financial point of view, to the
stockholders of First Commercial. A copy of Mercer Capital's opinion is
attached as Appendix B to this Joint Proxy Statement-Prospectus and should be
read in its entirety. See "THE MERGER--Opinion of First Commercial's
Financial Advisor."
24
<PAGE> 24
Appraisal Rights
Under the General Corporation Law of the State of Delaware (the
"DGCL"), each holder of First Commercial Common may, in lieu of receiving the
merger consideration, seek appraisal of the fair value of the shares held by
such stockholder and, if the Merger is consummated, receive payment of such fair
value in cash by following certain procedures set forth in Section 262 of the
DGCL, the text of which is attached hereto as Appendix D. Failure to follow
such procedures may result in a loss of such stockholder's appraisal rights.
Any First Commercial stockholder returning a blank executed proxy card will
be deemed to have voted in favor of the approval and adoption of the Merger
Agreement, thereby waiving any such appraisal rights. See "THE
MERGER--Appraisal Rights." FBA stockholders do not have appraisal rights
under the DGCL in connection with the Merger.
Accounting Treatment
It is anticipated that the Merger, when consummated, will be accounted
for using the purchase method of accounting, except First Banks' interest in
First Commercial, which will be accounted for by FBA at First Banks'
historical cost. See "THE MERGER--Accounting Treatment."
Federal Income Tax Consequences
The Merger is intended to constitute a tax-free "reorganization" for
federal income tax purposes. As such, no gain or loss will be recognized by
First Commercial stockholders who exchange their First Commercial Common
solely for FBA Common. However, cash received in lieu of fractional shares
and cash received pursuant to the exercise of appraisal rights may give rise
to taxable income. Each stockholder of First Commercial is urged to consult
his, her, or its own tax advisor to determine the specific tax consequences
of the Merger for such stockholder. See "THE MERGER--Certain Federal Tax
Consequences of the Merger."
Regulatory Approvals
The Merger Agreement contemplates that, as soon as possible following
the consummation of the Merger, First Commercial Bank will be merged into a
subsidiary of FBA (the "Subsequent Bank Merger"). Although the Merger does
not require the approval of any federal or state regulatory authority
(primarily because both FBA and First Commercial are already controlled by
First Banks), consummation of the Subsequent Bank Merger is subject to the
prior approval of the Federal Deposit Insurance Corporation (the "FDIC") and
the Commissioner of Financial Institutions of the State of California (the
"Commissioner"). See "THE MERGER--Regulatory Approvals."
25
<PAGE> 25
Conditions to the Consummation of the Merger
Consummation of the Merger is subject to the satisfaction, or waiver,
of various conditions including, among other things, the approval of the
Merger Agreement by the requisite votes of the stockholders of FBA and First
Commercial, the number of shares subject to demands for appraisal rights not
exceeding ten percent (10%) of the outstanding First Commercial Common, the
receipt of all requisite regulatory approvals and the expiration of any
required waiting periods, and the receipt by FBA and First Commercial of an
opinion regarding certain federal income tax consequences of the Merger. See
"THE MERGER AGREEMENT--Conditions to the Merger; Termination."
Interests of Certain Persons in the Merger
Directors and executive officers of First Commercial have interests in
the Merger that are in addition to the interests of stockholders of First
Commercial. These interests include: (1) indemnification of directors and
officers of First Commercial against certain claims that may arise after the
Effective Time based on services provided to First Commercial or any
subsidiary of First Commercial prior to the Effective Time; and (2) options
held by directors and executive officers of First Commercial to purchase
First Commercial Common, which are exercisable prior to the Effective Time
and which, if not so exercised, will be converted into options to purchase
FBA Common. These interests are described in more detail herein under
"INTERESTS OF CERTAIN PERSONS IN THE MERGER."
Market Prices and Dividends
FBA Common is listed and traded on the NYSE. First Commercial Common
is traded on the SmallCap Market of the Nasdaq Stock Market. The following
table presents for the periods indicated (rounded to the nearest cent), the
high and low sale prices of a share of FBA Common and a share of First
Commercial Common; the prices of FBA Common prior to the August 23, 1995 and
of First Commercial Common prior to December 6, 1996 are restated to give
effect to the 1-for-15 reverse stock split implemented by FBA and the
1-for-125 reverse stock split implemented by First Commercial. Neither FBA
nor First Commercial paid any cash dividends on FBA Common or First Commercial
Common, respectively, during the periods indicated.
<TABLE>
<CAPTION>
FBA COMMON FIRST COMMERCIAL COMMON
------------------ -----------------------
PERIOD HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1997
First Quarter $12.75 10.13 11.75 9.00
Second Quarter 13.38 12.38 11.00 8.75
Third Quarter 18.00 12.81 13.75 9.00
1996
First Quarter 12.75 9.62 50.78 15.63
Second Quarter 10.50 9.25 39.06 11.72
Third Quarter 10.37 9.37 27.34 15.63
Fourth Quarter 10.37 9.75 19.53 10.50
1995
First Quarter 18.75 12.19 167.09 113.28
Second Quarter 16.87 12.19 156.25 125.00
Third Quarter 16.87 10.87 171.88 31.25
Fourth Quarter 13.75 9.00 93.75 7.81
</TABLE>
26
<PAGE> 26
The following table presents (rounded to the nearest cent) for July 24,
1997, the last full trading day prior to the public announcement of the
execution of a letter of intent setting out the terms of the Merger, and as
of October 8, 1997, the closing prices of a share of FBA Common and a share
of First Commercial Common and the pro forma equivalent in FBA Common of a
share of First Commercial Common computed by multiplying the closing price of
FBA Common on each of the dates specified in the table by 0.8888 (the
"Exchange Ratio").
<TABLE>
<CAPTION>
First Commercial Pro Forma
FBA Common Common First Commercial Equivalent
---------- ---------------- ---------------------------
<S> <C> <C> <C>
July 24, 1997 $12.88 9.25 11.45
October 8, 1997 18.75 14.50 16.67
</TABLE>
Difference in Stockholders' Rights
Both FBA and First Commercial are incorporated under the laws of the
State of Delaware. Accordingly, their stockholders are generally granted the
same rights and subject to the same restrictions under Delaware law. Upon
consummation of the Merger, holders of First Commercial Common, other than
those who perfect appraisal rights, will become stockholders of FBA, and
their rights will be governed by the Restated Certificate of Incorporation
and By-laws of FBA, the provisions of which differ from the Certificate of
Incorporation, as amended, and Amended and Restated By-laws of First
Commercial. Some of the material differences between these provisions are
discussed herein under the caption "COMPARATIVE RIGHTS OF STOCKHOLDERS OF
FIRST COMMERCIAL AND FBA," which First Commercial Stockholders should
carefully review.
Pending FBA Transactions
On July 28, 1997, FBA and Surety executed an Agreement and Plan of
Reorganization whereby Surety will be merged into a subsidiary of FBA (the
"Surety Merger"). In the Surety transaction, which is subject to certain
conditions including the approval of the stockholders of Surety and necessary
regulatory approvals, the stockholders of Surety will receive approximately
264,600 shares of FBA Common and approximately $3.5 million in cash.
27
<PAGE> 27
On September 22, 1997, FBA and Pacific Bay executed an Agreement and
Plan of Reorganization whereby Pacific Bay will be merged into a subsidiary
of FBA (the "Pacific Bay Merger"). In the Pacific Bay transaction, which is
subject to certain conditions including the approval of the stockholders of
Pacific Bay and necessary regulatory approvals, the stockholders of Pacific
Bay will receive aggregate cash consideration of approximately $4.2 million
in exchange for all of the outstanding capital stock of Pacific Bay.
FBA intends to combine all of the banking operations of First
Commercial Bank, Surety, Pacific Bay and Sunrise into a single bank with
branch offices in the markets served by all of such banks.
The Surety Merger and the Pacific Bay Merger are discussed in more
detail under the caption "BUSINESS OF FBA--Recent Developments," and certain
pro forma information concerning the Surety Merger also appears under the
caption "PRO FORMA FINANCIAL INFORMATION."
Summary of Comparative Per Share Data
The following summary presents, for the periods indicated, selected
comparative per share data: (i) on a historical basis for both FBA and First
Commercial; (ii) on a pro forma combined basis for FBA, giving effect to the
Merger, assuming that the Merger had been effective at the beginning of all
periods presented; (iii) on a pro forma combined basis for FBA, assuming the
Surety Merger had been effective at the beginning of all periods presented;
and (iv) on a pro forma equivalent basis for First Commercial, assuming that
the Surety merger and the First Commercial Merger had been effective at the
beginning of all periods presented. Such data are computed on a pro forma
equivalent basis with respect to a share of First Commercial Common by
multiplying the pro forma combined amount (giving effect to both the Merger
and the Surety Merger) by the Exchange Ratio. The pro forma consolidated
statements of income do not give effect to anticipated expenses and
nonrecurring charges related to the Merger and the estimated effect of
revenue enhancements and expense savings associated with consolidation of
operations of FBA and First Commercial. The First Commercial data has been
adjusted to reflect the 1-for-125 reverse stock split effected December 6,
1996. See "SELECTED CONSOLIDATED FINANCIAL DATA OF FIRST COMMERCIAL AND
SUBSIDIARY," "SELECTED CONSOLIDATED FINANCIAL DATA OF FBA AND SUBSIDIARIES,"
"PRO FORMA FINANCIAL INFORMATION" and "FINANCIAL STATEMENTS OF FIRST
COMMERCIAL."
28
<PAGE> 28
<TABLE>
<CAPTION>
Per common share
-----------------------------------------------------------------------------
Historical Exchange Ratio
----------------------------- ---------------------------------
FBA and FBA, Surety and
First Commercial First Commercial
---------------------- ------------------
Equivalent Equivalent
per First per First
First Com- Commercial Commercial
FBA mercial Surety Combined share Combined share
----- ---------- ------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
For the six months ended June 30, 1997:
Earnings per common stock and
common stock equivalents $0.32 0.67 1.01 0.37 0.33 0.34 0.30
Book value per common stock
and common stock equivalents $9.46 8.22 25.56 10.14 9.02 10.40 9.20
===== ==== ===== ===== ==== ===== ====
For the year ended December 31, 1996:
Earnings per common stock and
common stock equivalents $0.40 0.77 0.63 0.17 0.15 0.06 0.05
Book value per common stock
and common stock equivalents $9.22 7.48 24.70 9.98 8.87 10.10 8.98
===== ==== ===== ===== ==== ===== ====
</TABLE>
RISK FACTORS
First Commercial Stockholders should carefully consider, together with
the other information contained and incorporated by reference in this Joint
Proxy Statement-Prospectus, the following risk factors in evaluating FBA and
its business and determining their vote with respect to the Merger. First
Commercial Stockholders should note, in particular, that this Joint Proxy
Statement-Prospectus contains forward-looking statements within the meaning
of Section 29A of the Securities Act and Section 21E of the Exchange Act, and
that actual results could differ materially from those contemplated by such
statements. The considerations listed below represent certain important
factors which FBA believes are specific to FBA and its business, as opposed
to general factors that may also affect the banking industry or the economy
as a whole and FBA's business indirectly. The considerations discussed
herein are not intended to represent a complete list of the general or
specific risks that may affect FBA and its business. It should be recognized
that other risks may be significant, presently or in the future, and the
risks set forth in this discussion may also affect FBA to a greater extent
than indicated.
Control of FBA by First Banks, Inc.
Like First Commercial, FBA is controlled by First Banks. All of the
Class B Common of FBA, which represents approximately 70.2% of the total
outstanding capital stock of FBA as of the date of this Joint Proxy
Statement-Prospectus, is owned by First Banks. The Class B Common is
identical to FBA Common except that it is not registered with the SEC, not
listed on any stock exchange, is transferable only in certain limited
circumstances and has less favorable dividend rights than FBA Common.
However, because the Class B Common has identical voting rights to the FBA
Common, First Banks has effective control over the management and policies of
FBA and the election of most or all of the directors of FBA. Furthermore,
executive officers of First Banks have significant management responsibility
for FBA's business activities, and First Banks performs numerous management
and other services for FBA pursuant to contracts between the two companies.
Holders of FBA Common who are not satisfied with the policies and decisions
made by the Board of Directors and management of FBA would therefore have
less of an opportunity to change such policies through the exercise of voting
rights than would stockholders in a comparable corporation with no
controlling stockholder. Current holders of First Commercial Common, other
than First Banks, will own approximately 5.4% of the issued and outstanding
voting securities of FBA, assuming (i) no stockholders exercise appraisal
rights,
29
<PAGE> 29
and (ii) the Surety Merger is consummated and the amount of FBA Common issued
pursuant thereto is approximately 264,600.
The agreement by which First Banks became the majority stockholder of
FBA provides certain anti-dilutive rights which allow First Banks to acquire
additional shares of Class B Common if its ownership is reduced below 55% of
the total outstanding voting stock of FBA. In that event, First Banks has
the right to purchase sufficient additional shares of Class B Common to
maintain 55% ownership, at 106.67% of the then current book value per share.
This right will remain effective until August 1999, after which a comparable
right will exist to maintain the same level of ownership by purchasing shares
at 113% of the then current book value through August, 2000, when the
purchase price would become 120% of the then current book value through
February 2002. Thereafter, First Banks' anti-dilutive right will lapse.
Acquisition of Surety and Pacific Bay by FBA
As discussed under the caption "BUSINESS OF FBA--Recent Developments,"
FBA has entered into agreements to acquire Surety and Pacific Bay.
Consummation of each transaction is subject to customary conditions,
including the approval of the stockholders of both companies and the receipt
of all required regulatory approvals. Because the potential cost savings and
efficiencies arising from the proximity of the markets served by Sunrise,
First Commercial Bank, Surety and Pacific Bay significantly enhance the
economic benefits of the proposed acquisitions of Surety and Pacific Bay as
well as the Merger. Failure to consummate the transactions with Surety and
Pacific Bay could limit the ability of FBA to realize all of the benefits
anticipated from the Merger.
Profitability of FBA and First Commercial
Prior to the acquisition of control of FBA in 1994 and First Commercial
in 1995 by First Banks, both FBA and First Commercial experienced several
years of significant operating losses caused by economic conditions in their
respective markets, loan losses and asset quality deterioration, high
overhead and operational problems. These losses continued to affect the
results of operations for periods of time after control was acquired by First
Banks. Consequently, FBA's positive earnings record has occurred only during
the period from January 1996 through the present, and First Commercial's
positive earnings record has occurred only since April 1996. There can be no
assurance that a recurrence of some or all of the problems which led to
earlier losses will not cause similar problems in the future, or that FBA and
First Commercial will be able to sustain the favorable recent earnings
trends.
Dividends
As of December 31, 1994, FBA completed an accounting procedure referred
to as a "quasi-reorganization" in which its assets and liabilities were
adjusted to fair values, and stockholders' equity was adjusted to eliminate
the retained deficit which had accumulated during years of substantial
operating losses. However, FBA incurred a net loss of $3.82 million in
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<PAGE> 30
1995, thereby creating a new deficit. For the year ended December 31, 1996
and the six months ended June 30, 1997, FBA had net income of $1.57 million
and $1.17 million, respectively, leaving an accumulated deficit of $1.08
million as of June 30, 1997. FBA has no current plan to pay dividends, and
in any event would be precluded from doing so until it is able to eliminate
the accumulated deficit and generate additional amounts to enable it to pay
dividends.
Public Market for FBA Common
FBA Common is listed and traded on the NYSE. However, trading volumes
have generally been lower than for many other bank holding companies, in part
because approximately 70.2% of its outstanding voting stock is owned by First
Banks and cannot be traded. Consequently, FBA Common may trade less
frequently and in smaller amounts than competing banks and holding companies,
at prices which may not be comparable to the valuations placed by the
securities markets on other comparable companies. Potential investors in
other similar banks or holding companies may associate an implicit
"acquisition premium" with those companies in determining the market prices
of their stocks. The presence of First Banks as FBA's majority stockholder
could reduce the attractiveness of FBA Common with respect to such a premium,
as well as making FBA more difficult to acquire than a company without a
controlling stockholder.
Operating Requirements Associated with Geographic Dispersion
FBA currently owns BankTEXAS, a national bank with offices in Houston,
Dallas, Irving and McKinney, Texas, and Sunrise, a California state bank with
offices in Roseville and Rancho Cordova. Because of the geographic distance
between these banks, various operating requirements are placed on FBA's
management which would not be present in other organizations operating in
contiguous markets. These include: (1) the operation of data processing and
item processing functions at remote locations; (2) the control of
correspondent accounts, reserve balances and wire transfers, particularly
where differences in time zones are involved; (3) providing administrative
support at significant distances, including accounting, human resources, loan
servicing, internal audit and credit review; and (4) establishing and
monitoring compliance with corporate policies and procedures.
Although the assistance of First Banks in many of these functions
facilitates the management of these areas and reduces the cost burden which
might otherwise exist, the geographic distance adds to the cost of
management, and the additional costs could limit the profitability which
might otherwise be expected by investors in FBA.
Dependence on Future Growth through Acquisitions
As discussed elsewhere in this Joint Proxy Statement-Prospectus, the
Board of Directors and management of FBA believe that a business strategy of
growth through acquisitions is necessary in order for FBA to achieve the size
necessary to compete with larger competitors in the banking industry. See
"THE MERGER--Background and Reasons for the Transaction" for
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<PAGE> 31
information regarding the importance of acquisitions to FBA's growth. There
are several risks associated with such a strategy, including the following:
(1) There is a general trend toward consolidation among financial
institutions, and there are a large number of potential competitors for
acquisitions viewed favorably by FBA's management, including in some cases
much larger organizations with substantially more resources than FBA.
(2) The prices at which acquisitions may be made fluctuates with
market conditions, and there is no assurance that FBA will continue to
identify acquisition prospects at prices which its management and Board of
Directors believe are reasonable. To the extent that FBA is able to identify
acquisitions that may be made using FBA Common rather than cash, the
prospects for acquisitions without dilution of FBA's stockholders will also
depend to some extent on the market for FBA Common, which is beyond FBA's
control and may fluctuate over time.
(3) The managerial and operational requirements for completing
acquisitions and realizing the benefits therefrom can be burdensome and
time-consuming. While FBA takes such factors into consideration in determining
what acquisitions should be undertaken, and utilizes the expertise of First
Banks (which has effected a substantial number of acquisitions of banks and
thrift institutions in the past several years), there is no assurance that
FBA will realize the benefits of particular acquisitions that it completes in
a timely manner or without unanticipated costs.
INTRODUCTION
This Joint Proxy Statement-Prospectus is being furnished to FBA
Stockholders and First Commercial Stockholders as of the Record Date in
connection with the solicitation of proxies by the Boards of Directors of the
respective companies to be voted at the FBA Annual Meeting and the First
Commercial Special Meeting. Such meetings are to be held as follows:
FBA Annual Meeting First Commercial Special Meeting
------------------ --------------------------------
Place: 135 North Meramec Place: -----------------
Clayton, Missouri Sacramento, California
Date: ------------, 1997 Date: -----------, 1997
Time: --o'clock --.m., Central Time: -- o'clock -.m., Pacific
Standard Time Standard Time
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<PAGE> 32
The Boards of Directors of FBA and First Commercial have approved the
Merger Agreement, and each Board of Directors unanimously recommends that the
stockholders of the respective companies vote FOR its approval and adoption.
Because of the affiliation of FBA and First Commercial arising from the
ownership of control of each company by First Banks, each Board of Directors
appointed a Special Committee, consisting solely of directors of each company
who are not employed by First Banks or any affiliate thereof, and who have no
other affiliation with First Banks, to analyze the proposed transaction and
to determine whether proceeding was in the best interests of the stockholders
of the respective companies.
Each Special Committee retained the services of an independent
financial advisor to assist in the analysis of the proposed combination and
the possible structure of such a combination, and the appropriate exchange
ratio and other financial terms of the Merger. Additional information about the
process by which each Special Committee considered the terms of the Merger, the
recommendations of the respective financial advisors, and the recommendations of
approval made by each Special Committee to the respective Boards of Directors,
appears under the caption "THE MERGER--Background and Reasons for the
Transaction."
The information contained herein with respect to FBA has been supplied
by FBA, and the information contained herein with respect to First Commercial
has been supplied by First Commercial.
THE FBA ANNUAL MEETING
Record Date; Vote Required
The securities to be voted at the FBA Annual Meeting consist of shares
of FBA Common and Class B Common, with each share entitling its owner to one
vote on proposals brought before the FBA Annual Meeting. FBA had no other
classes of voting securities outstanding at the close of business on the
Record Date. There were ---- record holders of FBA Common, of which -------
shares were outstanding on the Record Date, and 2,500,000 shares of Class B
Common outstanding as of the Record Date. It is anticipated that this Joint
Proxy Statement-Prospectus, together with the enclosed proxy card, will be
mailed to stockholders on or about --------------- ---, 1997.
Holders of shares of FBA Common, and First Banks as the holder of all
of the outstanding shares of Class B Common, are entitled to one vote at the
FBA Annual Meeting for each share held of record on the Record Date. Under
applicable law, the approval of Proposals Number 1, 2 and 3 each requires the
affirmative vote of the holders of a majority of the shares of FBA Common and
Class B Common outstanding and entitled to vote at the FBA Annual Meeting,
voting as a single class; accordingly, the failure of any holder to vote at
the FBA Annual Meeting, in person or by proxy, will have the same effect on
the outcome of the vote as
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<PAGE> 33
would a vote against such proposals. The FBA Annual Meeting may be adjourned
from time to time by a majority of those present in person or by proxy if
necessary to obtain the votes required to approve such proposals through
further solicitation of proxies or otherwise. In the event the matter of
adjournment is put to the vote of those present at the FBA Annual Meeting
either in person or by proxy, proxies voting against the Proposals Number 1,
2 or 3 will not be used by the proxy holders to vote in favor of the
adjournment pursuant to such proxy holders' discretionary voting authority.
The approval of the Merger Agreement by FBA Stockholders and the consummation
of the transactions contemplated by Proposals Number 2 and 3 are conditions
to the consummation of the Merger. See "THE MERGER AGREEMENT--Conditions to
the Merger; Termination."
As the result of an amendment to FBA's Certificate of Incorporation
adopted in 1994, holders of FBA Common and Class B Common are permitted to
exercise cumulative voting in a contested election of directors. This means
that, if there are more nominees for directors than positions to be elected,
each holder would be permitted to cast as many votes as equals the product of
the number of directors to be elected (i.e., six at the FBA Annual Meeting)
times the number of shares held by such holder, and to cast all these votes
for one candidate or to divide the votes among two or more candidates in any
amounts chosen by the stockholder. First Banks would also have the right to
utilize cumulative voting with respect to its Class B Common. The proxy
holders authorized to vote in favor of nominees listed herein under the
caption "ELECTION OF DIRECTORS" will be permitted to vote cumulatively in the
absence of instructions to the contrary.
The presence, in person or by proxy, of the holders of a majority of
the issued and outstanding shares of voting stock, including the FBA Common
and the Class B Common, is necessary to constitute a quorum to transact
business at the FBA Annual Meeting and any adjournment(s) thereof.
On each proposed action, proxies marked as withheld votes or
abstentions and broker non-votes will not be voted but will be treated as
present and entitled to vote. Such proxies will therefore have the same
effect as votes against the proposed action. Directors will be elected by a
plurality of the votes of the shares present in person or represented by
proxy and entitled to vote on such election.
Votes cast "for" and "against" the proposal will be tallied as
indicated. Abstentions and brokers non-votes will be treated as shares that
are present and entitled to vote for purposes of determining the presence of
a quorum and will have the same effect as a vote "against" Proposals Number
1, 2 and 3.
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<PAGE> 34
THE FIRST COMMERCIAL SPECIAL MEETING
Record Date; Vote Required
The securities to be voted at the First Commercial Special Meeting
consist of shares of First Commercial Common, with each share entitling its
owner to one vote on the proposal brought before the First Commercial Special
Meeting. First Commercial had no other class of voting securities
outstanding at the close of business on the Record Date, -----------------,
1997. There were ---- record holders of First Commercial Common and --------
shares of First Commercial Common outstanding and eligible to be voted at the
First Commercial Special Meeting as of the Record Date. It is anticipated
that this Joint Proxy Statement-Prospectus, together with the enclosed proxy
card, will be mailed to stockholders on or about ---------------------- ,
1997.
The presence at the First Commercial Special Meeting, in person or by
proxy, of the holders of a majority of the outstanding shares of First
Commercial Common will constitute a quorum for the transaction of business.
Under applicable law, the approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of the shares of First
Commercial Common outstanding and entitled to vote at the First Commercial
Special Meeting; accordingly, the failure of any holder to vote at the First
Commercial Special Meeting, in person or by proxy, will have the same effect
on the outcome of the vote as would a vote against the Merger.
Notwithstanding receipt of the requisite vote to approve the Merger
Agreement, should such vote be received, FBA has the right to refuse to
consummate the Merger if the number of shares of First Commercial Common for
which appraisal rights have been effectively demanded exceeds ten percent
(10%) of the First Commercial Common outstanding on the Record Date. The
First Commercial Special Meeting may be adjourned from time to time by a
majority of those present in person or by proxy if necessary to obtain the
votes necessary to approve the Merger Agreement through further solicitation
of proxies or otherwise, or, if the number of shares of First Commercial
Common as to which stockholders have perfected the right to dissent
("Dissenting Shares") exceeds 10% of the outstanding First Commercial Common,
to conduct discussions with dissenting stockholders. In the event the matter
of adjournment is put to the vote of those present at the First Commercial
Special Meeting either in person or by proxy, proxies voting against the
Merger Agreement will not be used by the proxy holders to vote in favor of
the adjournment pursuant to such proxy holders' discretionary voting
authority. The approval of the Merger Agreement by First Commercial
Stockholders is a condition to the consummation of the Merger. See "THE
MERGER AGREEMENT--Conditions to the Merger; Termination."
Votes cast "for" and "against" the proposal will be tallied as
indicated. Abstentions and broker non-votes will be treated as shares that
are present and entitled to vote for purposes of determining the presence of
a quorum and will have the same effect as a vote "against" the Merger
Agreement.
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<PAGE> 35
BENEFICIAL OWNERSHIP INFORMATION
FBA
The following table sets forth, as of October 8, 1997, certain
information with respect to the beneficial ownership of FBA Common and Class
B Common by each person known to FBA to be the beneficial owner of more than
five percent of the outstanding shares of either class of stock, by each
director, by certain executive officers and by all executive officers and
directors of FBA as a group:
<TABLE>
<CAPTION>
Number of Shares and
Name of Nature of Beneficial Percent of
Beneficial Owner Ownership<F1><F2> Class<F1>
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
First Banks, Inc.
135 North Meramec
Clayton, Missouri 63105 2,500,000<F3><F4> 100
Allen H. Blake 1,000<F6> <F*>
Charles A. Crocco, Jr. 9,272<F6> <F*>
James F. Dierberg 2,500,000<F3><F4> 100
Edward T. Story, Jr. 9,182<F7> <F*>
Mark T. Turkcan 200<F5> <F*>
David F. Weaver 6,692<F5> <F*>
Donald W. Williams 1,033<F5> <F*>
All executive officers 27,379 FBA Common 2.58% of FBA Common
and directors as a 2,500,000 Class B Common 100% of Class B Common
group (7 persons)
<FN>
- --------------------
<F*> Less than one percent.
<F1> The shares shown as beneficially owned by First Banks and James F.
Dierberg comprise 100% of the outstanding shares of Class B Common;
for all other persons listed, the shares and percentages reflected
are FBA Common. Each share of FBA Common and Class B Common is
entitled to one vote on matters subject to stockholder vote. Under
Rule 13d-3(d), shares not outstanding which are subject to options,
warrants, rights, or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but not deemed outstanding for the
purpose of calculating the percentage owned by each other person
listed.
<F2> With respect to Messrs. Crocco and Story, the indicated numbers of
shares include shares subject to vested stock options granted under
the 1990 Stock Option Plan. All of the options reflected in the
table are vested and currently exercisable.
<F3> The controlling stockholders of First Banks are (i) the James F.
Dierberg, II, Family Trust, dated December 30, 1992; (ii) Mary W.
Dierberg and Michael James Dierberg, trustees under the living trust
of Michael James Dierberg, dated July 24, 1989; (iii) the Ellen C.
Dierberg Family Trust, dated December 30, 1992; (iv) James F. Dierberg,
trustee of the James F. Dierberg living trust, dated October 8, 1985; and
(v) First Trust (Mary W. Dierberg and First Bank-Missouri, Trustees)
established U/I James F. Dierberg, dated December 12, 1992. Mr. James F.
Dierberg and Mrs. Mary W. Dierberg are husband and wife, and Messrs. James
F. Dierberg, II, Michael James Dierberg and Miss Ellen C. Dierberg are
their adult children.
<F4> Due to the relationships among James F. Dierberg, Mary W. Dierberg,
First Bank-Missouri and the three children of James F. and Mary W.
Dierberg, Mr. Dierberg is deemed to share voting and investment power
over all of the outstanding voting stock of First Banks, which in
turn exercises voting and investment power over the 2,500,000 shares
of Class B Common of FBA.
<F5> All of the shares attributed in the table to Messrs. Blake, Turkcan,
Weaver and Williams are owned by them directly.
<F6> Mr. Crocco has a vested option covering 6,666 shares; he owns directly
2,606 shares.
<F7> Mr. Story has a vested option covering 6,666 shares; he owns directly
2,516 shares.
</TABLE>
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<PAGE> 36
First Commercial
The following table sets forth, as of October 8, 1997, certain
information with respect to the beneficial ownership of First Commercial
Common by each person known to First Commercial to be the beneficial owner of
more than five percent of the outstanding shares thereof, by each director,
by certain executive officers and by all executive officers and directors of
First Commercial as a group:
<TABLE>
<CAPTION>
Name of Beneficial Owner Shares Beneficially Owned
------------------------ -------------------------
Number<F1> Percentage<F1>
---------- --------------
<S> <C> <C>
First Banks, Inc.
135 North Meramec Avenue
Clayton, Missouri 63105 1,165,600<F2><F6><F7> 78.14%
James F. Dierberg
135 North Meramec Avenue
Clayton, Missouri 63105 1,165,600<F2><F6><F7> 78.14%
Allen H. Blake 1,140<F5> <F4>
Fred L. Harris 135<F3> <F4>
Jerry Brannigan 0 0.00%
Donald W. Williams 0 0.00%
James E. Culleton 272<F8> <F4>
All Directors and Officers as a Group
(Six Persons) 1,167,147 78.24%
<FN>
- -------------
<F1> Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options,
warrants, rights, or conversion privileges exercisable within 60 days
are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but not deemed outstanding for the
purpose of calculating the percentage owned by each other person listed.
Each beneficial owner's percentage ownership is based upon 846,127 shares
of First Commercial Common issued and outstanding as of October 8, 1997
and 645,570 shares of First Commercial Common issuable upon conversion of
the Convertible Debentures.
<F2> Includes 645,570 shares which First Banks has the right to obtain upon
conversion of the entire principal amounts of the Convertible
Debentures plus accrued interest through December 8, 1997 into First
Commercial Common.
<F3> Includes options for 80 shares of First Commercial Common granted on
September 26, 1989 exercisable at $1,390 per share.
<F4> Less than one percent.
<F5> All of the shares attributed in the table to Mr. Blake are owned by him
directly.
<F6> The controlling stockholders of First Banks are (i) the James F.
Dierberg, II, Family Trust, dated December 30, 1992; (ii) Mary W.
Dierberg and Michael James Dierberg, trustees under the living trust
of Michael James Dierberg, dated July 24, 1989; (iii) the Ellen C.
Dierberg Family Trust, dated December 30, 1992; (iv) James F.
Dierberg, trustee of the James F. Dierberg living trust, dated
October 8, 1985; and (v) First Trust (Mary W. Dierberg and First
Bank-Missouri, Trustees) established U/I James F. Dierberg, dated
December 12, 1992. Mr. James F. Dierberg and Mrs. Mary W. Dierberg
are husband and wife, and Messrs. James F. Dierberg, II, Michael
James Dierberg and Miss Ellen C. Dierberg are their adult children.
<F7> Due to the relationships among James F. Dierberg, Mary W. Dierberg,
First Bank-Missouri and the three children of James F. And Mary W.
Dierberg, Mr. Dierberg is deemed to share voting and investment power
over all of the voting stock of First Banks, which in turn exercises
voting and investment power over the 1,165,600 shares of First
Commercial Common.
<F8> Includes options for 240 shares of First Commercial Common granted on
March 25, 1992 exercisable at $922.50 per share.
</TABLE>
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<PAGE> 37
PROXIES; REVOCATION; SOLICITATION
The Boards of Directors of FBA and First Commercial are soliciting the
proxies of the holders of FBA Common to be voted at the FBA Annual Meeting
and First Commercial Common to be voted at the First Commercial Special
Meeting, respectively, in favor of the approval and adoption of the Merger
Agreement and the Merger. If the enclosed form of proxy is properly executed
and returned in time to be voted at the applicable meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. Proxies that are executed, but as to which no instructions have
been marked, will be voted FOR the approval and adoption of the Merger
Agreement.
Should any other matter properly come before the FBA Annual Meeting or
the First Commercial Special Meeting, the persons named as proxies in the
accompanying proxy will have discretionary authority to vote on such matters
in accordance with their judgment. As of the time of the preparation of this
Joint Proxy Statement-Prospectus, the Boards of Directors of FBA and First
Commercial do not know of any matter other than those discussed herein to be
presented for action at the FBA Annual Meeting or the First Commercial
Special Meeting.
The costs of soliciting proxies for the FBA Annual Meeting will be
borne by FBA, and those for the First Commercial Special Meeting will be borne
by First Commercial. In addition to use of the mails, proxies may be solicited
personally or by telephone, telecopier or facsimile by officers, directors or
employees of FBA and First Commercial, respectively, who will not be
specially compensated for such solicitation activities. Arrangements will
also be made to
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<PAGE> 38
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their reasonable expenses incurred in forwarding solicitation materials to
the beneficial owners of shares held of record by such persons.
An FBA Stockholder may revoke a previously executed proxy at any time
prior to its being voted at the FBA Annual Meeting by (1) delivering a
written notice to Allen H. Blake, Secretary, First Banks America, Inc., 11901
Olive Boulevard, Creve Coeur, Missouri 63141; (2) executing and delivering to
the President of FBA a later-dated proxy; or (3) voting in person at the FBA
Annual Meeting after delivering written notice of revocation to the President
of FBA. If a stockholder of FBA holds shares of FBA Common in street name
and desires to vote such shares, such holder must obtain from the appropriate
nominee a properly executed proxy identifying such holder, authorizing the
holder to act on behalf of the nominee and identifying the number of shares
to which the authorization is granted.
A First Commercial Stockholder may revoke a previously executed proxy
at any time prior to its being voted by (1) delivering a written notice of
revocation to Donald W. Williams, President, First Commercial Bancorp, Inc.,
135 North Meramec, Clayton, Missouri 63105; (2) executing and delivering a
later-dated proxy to the President of First Commercial; or (3) voting in
person at the First Commercial Special Meeting after delivering written
notice of revocation to the President of First Commercial. If a stockholder
of First Commercial holds First Commercial Common in street name and desires
to vote such shares, such owner must obtain from the appropriate nominee a
properly executed proxy identifying such holder, authorizing holder to act on
behalf of the nominee and identifying the number of shares to which the
authorization is granted.
39
<PAGE> 39
SELECTED CONSOLIDATED FINANCIAL DATA OF
FIRST BANKS AMERICA, INC. AND SUBSIDIARIES
The selected consolidated financial data set forth below, insofar as it
relates to the five years ended December 31, 1996, are derived from the
audited consolidated financial statements of FBA and subsidiaries. The data
for the six month periods ended June 30, 1997 and 1996 has been derived from
unaudited interim financial statements. However, in the opinion of the
management, such unaudited interim statements include all adjustments
(consisting of normal recurring accruals) necessary to fairly present the
data for such periods. The results of operations for the six month period
ended June 30, 1997 are not necessarily indicative of results that will be
achieved for the full year. Such data is qualified by reference to the
consolidated financial statements incorporated by reference herein and should
be read in conjunction with such financial statements and related notes
thereto and `MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF FBA," which is also incorporated by reference.
Share data has been adjusted to reflect the 1-for-15 reverse stock split
effected December 1995.
<TABLE>
<CAPTION>
Six months ended
June 30, Year ended December 31,
---------------- --------------------------------------------
1997<F5> 1996 1996<F5> 1995 1994 1993 1992
-------- ---- -------- ---- ---- ---- ----
(dollars expressed in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income $ 13,586 9,990 21,446 22,427 22,649 21,966 24,735
Interest expense 6,206 4,926 9,993 11,218 11,072 9,750 11,229
-------- ------- ------- ------- ------- ------- -------
Net interest income 7,380 5,064 11,453 11,209 11,577 12,216 13,506
Provision for possible loan losses 1,285 350 1,250 5,826 1,258 490 507
-------- ------- ------- ------- ------- ------- -------
Net interest income after provision for possible
loan losses 6,095 4,714 10,203 5,383 10,319 11,726 12,999
Noninterest income 1,478 874 1,848 (126) (4,511) 3,068 2,629
Noninterest expense 5,700 4,087 9,480 11,160 16,174 14,575 14,562
-------- ------- ------- ------- ------- ------- -------
Income (loss) before provision (benefit) for
income taxes and extraordinary item 1,873 1,501 2,571 (5,903) (10,366) 219 1,066
Provision for income tax expense (benefit) 700 602 1,002 (2,083) (9,461) -- 364
-------- ------- ------- ------- ------- ------- -------
Income (loss) before extraordinary item 1,173 899 1,569 (3,820) (905) 219 702
Extraordinary tax benefit from net operating
loss carryforward -- -- -- -- -- -- 362
-------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 1,173 899 1,569 (3,820) (905) 219 1,064
======== ======= ======= ======= ======= ======= =======
Dividends:
Common stock $ -- -- -- -- -- -- --
Ratio of total dividends declared to
net income (loss) -- % -- % -- % -- % -- % -- % -- %
Per Share Data:
Earnings (loss) per share of common stock and
common stock equivalents outstanding $ .32 .23 .40 (.94) (.38) .14 .69
Weighted average shares of common stock and common
stock equivalents outstanding 3,644 3,990 3,915 4,052 2,397 1,544 1,541
Balance Sheet Data (at period end):
Investment securities $ 78,426 98,738 86,910 39,337 61,400 160,158 113,681
Loans, net of unearned discount 247,574 160,907 241,874 192,573 203,314 167,732 174,695
Total assets 373,592 287,554 375,182 296,583 331,790 368,608 322,769
Total deposits 312,819 245,462 319,806 249,263 241,570 242,897 270,730
Notes payable 14,500 -- 14,000 1,054 1,054 1,054 1,066
Total stockholders' equity 33,900 35,440 33,498 35,258 39,714 14,952 14,107
Earnings Ratios:
Return on average total assets<F1> .64% .61% .52% (1.20)% (.25)% .07% .34%
Return on average total stockholders' equity<F1> 7.02 5.08 4.48 (10.10) (3.66) 1.49 7.90
Asset Quality Ratios:
Allowance for possible loan losses to loans 2.52 2.56 2.54 2.71 1.36 1.57 1.74
Nonperforming loans to loans<F2> .81 .28 .87 .29 .14 .37 .82
Allowance for possible loan losses to
nonperforming loans<F2> 312.08 908.61 293.41 952.28 940.61 423.95 213.46
Nonperforming assets to loans and
foreclosed assets<F3> .96 .87 1.19 .81 .90 2.22 3.69
Net loan charge-offs to average loans<F1> 1.01 1.64 1.44 1.63 .62 .52 1.06
Capital Ratios:
Average total stockholders' equity to
average total assets 9.06 12.01 11.62 11.88 6.80 4.40 4.28
Total risk-based capital ratio 7.53 14.18 7.64 11.69 17.50 8.47 8.16
Leverage ratio 5.18 8.61 5.31 8.38 11.97 4.27 4.32
Ratio of earnings (loss) to combined fixed
charges and preferred stock dividends<F4>:
Including interest on deposits 1.29 1.30 1.25 .50 .11 1.02 1.09
Excluding interest on deposits 2.77 4.15 3.47 (1.09) (1.28) 1.08 1.53
40
<PAGE> 40
<FN>
- ----------------
<F1> Ratios for the six-month periods are annualized.
<F2> Nonperforming loans consist of nonaccrual loans and loans with
restructured terms.
<F3> Nonperforming assets consist of nonperforming loans and foreclosed
assets.
<F4> For purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, earnings consist of income
before taxes plus interest expense and rent expense. Fixed charges
consist of interest expense and rent expense.
<F5> The information for the six months ended June 30, 1997 and the year
ended December 31, 1996 includes the financial position and results of
operation of Sunrise for the period subsequent to its date of
acquisition on November 1, 1996.
</TABLE>
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<PAGE> 41
SELECTED CONSOLIDATED FINANCIAL DATA OF
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
The selected consolidated financial data set forth below, insofar as it
relates to the five years ended December 31, 1996 are derived from the
audited consolidated financial statements of First Commercial and subsidiary.
The data for the six month periods ended June 30, 1997 and 1996 have been
derived from unaudited interim financial statements. However, in the opinion
of the management of First Commercial, such unaudited interim statements
include all adjustments (consisting of normal recurring accruals) necessary
to fairly present the data for such periods. The results of operations for
the six month period ended June 30, 1997 are not necessarily indicative of
results that will be achieved for the full year. Such data is qualified by
reference to the consolidated financial statements incorporated by reference
herein and should be read in conjunction with such financial statements and
related notes thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF FIRST COMMERCIAL." Share data has
been adjusted to reflect the 1-for-125 reverse stock split effected December
6, 1996.
<TABLE>
<CAPTION>
Six months ended
June 30, Years ended December 31,
-------------- ------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(dollars expressed in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income $ 6,234 5,865 11,936 13,750 18,356 20,100 24,605
Interest expense 2,862 2,881 5,540 6,136 5,910 6,370 8,973
-------- ------- ------- ------- ------- ------- -------
Net interest income 3,372 2,984 6,396 7,614 12,446 13,730 15,632
Provision for possible loan losses -- 1,050 1,155 3,885 9,809 8,100 7,260
-------- ------- ------- ------- ------- ------- -------
Net interest income after provision for
possible loan losses 3,372 1,934 5,241 3,729 2,637 5,630 8,372
Noninterest income 415 489 1,737 1,328 1,973 2,995 2,502
Noninterest expense 2,847 4,148 8,080 12,589 20,393 19,703 16,264
-------- ------- ------- ------- ------- ------- -------
Income (loss) before provision (benefit)
for income taxes 940 (1,725) (1,102) (7,532) (15,783) (11,078) (5,390)
Provision for income tax expense (benefit) 370 (580) (532) (101) 2,407 (3,767) (1,872)
-------- ------- ------- ------- ------- ------- -------
Net income (loss) $ 570 (1,145) (570) (7,431) (18,190) (7,311) (3,518)
======== ======= ======= ======= ======= ======= =======
Dividends:
Common stock $ -- -- -- -- -- -- --
Ratio of total dividends declared to net
income (loss) -- % -- -- -- -- -- --
Per Share Data:
Earnings (loss) per share of common stock
and common stock equivalents:
Primary $ .67 (1.82) (.77) (40.69) (486.36) (195.48) (94.31)
Fully diluted .59 (1.82) (.77) (40.69) (486.36) (195.48) (94.31)
Weighted average shares of common stock and
common stock equivalents outstanding 846,127 630,392 738,260 182,608 37,400 37,400 37,304
Balance Sheet Data (at period-end):
Investment securities $ 41,266 43,306 49,729 83,249 85,189 113,701 46,224
Loans, net of unearned discount 99,385 87,804 94,497 74,015 130,172 194,377 234,923
Total assets 159,215 151,814 153,033 169,535 239,306 349,777 332,426
Total deposits 141,625 137,343 136,136 156,164 233,536 323,796 299,746
Total stockholders' equity 6,954 5,630 6,330 3,579 4,355 23,144 30,444
Earnings Ratios:
Return on average total assets<F1> .74% (1.45)% (.37)% (4.09)% (6.42)% (2.30)% (.98)%
Return on average total stockholders' equity<F1> 17.38 (66.09) (12.29) (205.11) (112.01) (26.57) (10.29)
Asset Quality Ratios:
Allowance for possible loan losses to loans 4.89 6.04 4.86 7.28 5.71 3.77 2.33
Nonperforming loans to loans<F2> 1.09 2.61 .91 6.11 9.33 11.37 11.75
Allowance for possible loan losses to
nonperforming loans<F2> 449.58 231.27 532.06 119.05 61.25 33.20 19.87
Nonperforming assets to loans and
foreclosed assets<F3> 1.23 3.73 1.12 7.83 12.83 16.99 18.03
Net loan charge-offs to average loans<F1> (.55) (2.79) 2.21 6.04 5.62 2.86 2.58
Capital Ratios:
Average total stockholders' equity to average
total assets 4.25 2.19 3.02 1.99 5.73 8.65 9.48
Total risk-based capital ratio 7.38 6.74 6.95 4.99 4.27 10.16 11.89
Leverage ratio 4.43 3.69 4.25 2.14 1.87 6.61 8.48
Ratio of earnings (loss) to combined fixed
charges and preferred stock dividends<F4>:
Including interest on deposits 1.31 .46 .82 .04 (1.29) (.51) .45
Excluding interest on deposits 2.52 (1.32) .20 (5.11) (14.44) (10.13) (4.63)
42
<PAGE> 42
<FN>
- ----------------
<F1> Ratios for the six-month periods are annualized.
<F2> Nonperforming loans consist of nonaccrual loans and loans with
restructured terms.
<F3> Nonperforming assets consist of nonperforming loans and foreclosed
assets.
<F4> For purposes of calculating the ratio of earnings to combined fixed
taxes plus interest expense and rent expense. Fixed charges consist of
interest expense and rent expense.
</TABLE>
43
<PAGE> 43
PROPOSAL NUMBER ONE FOR THE FBA ANNUAL MEETING AND THE FIRST
COMMERCIAL SPECIAL MEETING
APPROVAL OF THE MERGER
BACKGROUND AND REASONS FOR THE MERGER
FBA'S Reasons for the Merger
The Board of Directors and management of FBA believe that in the
current environment of rapid restructuring and consolidation in the banking
industry, in order for a financial institution to prosper it must achieve a
size sufficient to enable it to take advantage of many of the efficiencies
available to its larger competitors. Failure to achieve this would place it
at a competitive disadvantage relative to those larger competitors with
respect to its costs of operation which, over time, will be an increasingly
difficult obstacle to overcome. Furthermore, the Board of Directors and
management believe that internal growth alone cannot be sufficient to advance
FBA to the size which is necessary within an acceptable time frame.
Consequently, they view an acquisition strategy as the only method of
achieving the growth rate required.
It was for these reasons that in 1994 FBA negotiated a private
placement of $30 million in Class B Common with First Banks, which offered
FBA not only the capital needed to embark upon an acquisition strategy, but
also access through First Banks to many of the economies available to larger
financial institutions, thereby assisting FBA in reducing its cost structure.
Following the private placement, FBA began approaching other financial
institutions for possible acquisitions. Since FBA did not have a history of
profitable operations, it became apparent that at that time these companies
were not receptive to transactions involving FBA Common and that cash
acquisitions would be the only short-term alternative. In addition, the
prices of acquisitions in Texas, and particularly in FBA's primary market
areas of Dallas and Houston, had escalated sharply. Cash acquisitions at
these prices would have caused substantial diminution in the economic
benefits which FBA envisioned would be available in its acquisition program.
Recognizing this, FBA expanded the primary area in which it approached
acquisition candidates, first to other areas of Texas, and by late 1995, to
California, where acquisition pricing was considerably more favorable. This
led to FBA's identification of and subsequent decision to acquire Sunrise, an
acquisition completed in the fourth quarter of 1996. Although Sunrise is a
significant distance from FBA's Texas operations, it is in close proximity to
First Commercial and its subsidiary, First Commercial Bank, Sacramento,
California. A majority of the First Commercial Common had been acquired by
First Banks in 1995. Furthermore, through California's agency regulations
for financial institutions under common control, First Commercial is allowed
to service both loan and deposit customers for Sunrise, as Sunrise is allowed
to service customers for First Commercial, thereby allowing each to expand
the branch network available to its customers to the eight branches operated
by the two organizations combined.
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<PAGE> 44
In early 1997, the FBA Special Committee and the First Commercial
Special Committee began evaluating a possible transaction in which First
Commercial would be merged into FBA, and concurrent with this transaction
First Commercial Bank and Sunrise would be merged. On July 23, 1997, First
Commercial and FBA jointly announced an agreement in principle for the
Merger. In evaluating the proposed transaction, the FBA Special Committee
determined that there were three ancillary events which should occur
simultaneous with, or shortly after, the Merger, and are contingent upon the
successful consummation of the Merger. These are: (1) the exchange of the
FBA Debenture with a similar structure for the existing First Commercial
Debentures payable to First Banks, including the related unpaid accrued
interest; (2) the exchange of approximately $10 million of the FBA note
payable to First Banks for 804,000 shares of FBA Common; and (3) the exchange
of the First Commercial branch in Campbell, California for the Walnut Creek,
California branch of First Bank & Trust, a wholly owned subsidiary of First
Banks based in Irvine, California ("FB&T") (the "Branch Exchange").
In the recapitalization of First Commercial in 1995, First Banks
invested a total of $13 million in First Commercial. $6.5 million of this was
invested in First Commercial Common, with the remaining $6.5 million invested
in the First Commercial Debentures. The First Commercial Debentures bear
interest at 12% and both principal and interest are convertible at any time
by First Banks into First Commercial Common at $12.50 per share. The First
Commercial Debentures are secured by all on the outstanding stock of First
Commercial Bank. However, they are payable in cash only at the discretion of
the First Commercial Board of Directors, after receiving any necessary
regulatory approvals. At maturity, all unpaid principal and accrued interest
must be converted into First Commercial Common unless the First Commercial
Board of Directors elects to redeem the First Commercial Debentures for cash
and First Banks chooses not to exercise the right to convert these to First
Commercial Common. In the context of the Merger, the First Commercial
Debentures must be eliminated (since the corporate existence of First
Commercial is to end), either by redemption, conversion into FBA Common, or
exchange for a comparable instrument of FBA. The FBA Special Committee
agreed that, contingent upon the consummation of the Merger, the First
Commercial Debentures are to be exchanged for the FBA Debenture. However,
the FBA Debenture will be unsecured, and the conversion rate has been
adjusted to $14.06 per share of FBA Common, reflecting the Merger Agreement's
exchange rate of FBA Common for First Commercial Common.
Reviewing the total debt structure which FBA would have after the
Merger, which includes both the FBA Debenture and FBA's $14.5 million note
payable to First Banks, the FBA Special Committee sought a means of reducing
this debt. Although neither the FBA Debenture nor the note payable to First
Banks requires any current cash payments for principal or interest, combined
they represent a substantial obligation at maturity and could adversely
affect FBA's operating performance and the flexibility which it might
otherwise have in structuring future acquisitions. Consequently, the FBA
Special Committee negotiated an exchange of $10 million of the note payable
to First Banks for 804,000 shares of FBA Common. The exchange rate of $12.44
per share was determined based on the closing market value of FBA Common on
the NYSE for the ten trading days preceding the agreement with First Banks.
This exchange, which is contingent upon the consummation of the Merger,
reduces the pro forma debt of FBA, excluding any debt which would be incurred
in the acquisition of Surety and Pacific Bay, to approximately $11 million, a
level which the FBA Special Committee believes is more reasonable.
Finally, the FBA Special Committee discussed with First Banks and the
First Commercial Special Committee the existence of First Commercial branches
which have overlapping market areas with branches of FB&T. Specifically, the
Concord, California office
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<PAGE> 45
of First Commercial is less than five miles from the Walnut Creek office of
FB&T, in the San Francisco East Bay area, and the Campbell office of First
Commercial is less than three miles from the San Jose office of FB&T, in the San
Francisco South Bay area. Considering the close proximity of these offices, the
opportunity is present for the offices of different banks, under common majority
ownership, to compete for the same loan and deposit customers. This could
potentially be, or appear to be, beneficial to one bank at the expense of the
other. Although the two East Bay offices and the two South Bay offices are
close to each other, there is approximately forty miles between the East Bay and
South Bay offices. Consequently, the Special Committees agreed that the
potential problem could be averted by an exchange of the Campbell office of
First Commercial for the Walnut Creek office of FB&T. This exchange, which is
contingent upon the consummation of the Merger, would result in the two East Bay
offices being First Commercial branches, while the two South Bay offices would
be FB&T branches. Furthermore, since the Walnut Creek office and the Campbell
office both have approximately $15 million in deposits, the banks are able to
make the exchange without significant financial effect on either. In
recognition of the difference in the composition of the deposit bases of the two
branches, FB&T will pay First Commercial a deposit premium in the transaction,
based on a formula by type of deposit, estimated to be approximately $200,000.
The Merger and these ancillary transactions would result in a northern
California bank owned by FBA with approximately $260 million in assets,
comprised of eight branch offices located generally in a line of
approximately 100 miles between San Francisco, on the southwest, and
Sacramento and Roseville, on the northeast.
On September 26, 1997, the FBA Special Committee voted unanimously to
recommend to the Board of Directors of FBA that the Merger Agreement be
approved by FBA. Thereafter, the full Board of Directors approved the Merger
Agreement and authorized its submission to FBA Stockholders by unanimous
written consent.
In reaching its decision that the acquisition of First Commercial is in
the best interests of FBA and its stockholders, the FBA Special Committee and
the Board of Directors considered several factors, including the following:
(1) The potential effect of incorporating First Commercial's
financial condition, results of operation and future prospects
for growth into the FBA organization;
(2) The geographic proximity of the First Commercial Bank and Sunrise
branch offices in the Sacramento-Roseville, California area,
potentially allowing additional economies through the
consolidation of branch operations, item processing and
administrative functions, as well as enhancing customer
convenience and service within the combined bank;
(3) The benefits from the combination of the companies and the
possible economies which may be achieved in the consolidation
process, potentially including additional revenues and expense
reductions sufficient to enhance the overall stockholder value
and earnings per share for FBA Stockholders, consistent with the
objectives of the acquisition strategy discussed above;
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<PAGE> 46
(4) The relationship of the amount and type of consideration to be
paid to the First Commercial Stockholders in the transaction
relative to other similar transactions and to the economic effect
on the FBA Stockholders; and
(5) The exchange of approximately $10 million of the note payable to
First Banks for FBA Common reduces the combined debt to a
reasonable level and provides FBA additional capital strength,
increasing its flexibility in structuring future acquisitions.
Neither the Special Committee nor the Board of Directors assigned
specific weights to any of the above factors, and individual directors may
have considered other factors in analyzing the proposed transaction.
THE BOARD OF DIRECTORS OF FBA AND THE FBA SPECIAL COMMITTEE BOTH
UNANIMOUSLY RECOMMEND THAT THE HOLDERS OF FBA COMMON VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
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<PAGE> 47
Opinion of the Financial Advisor to the FBA Special Committee
In February, 1997 the FBA Special Committee engaged Rauscher Pierce
to act as its financial advisor with respect to the proposed transactions
with First Commercial and instructed Rauscher Pierce to evaluate the fairness
to the holders of FBA Common, from a financial point of view, of the Merger
and the related transactions discussed herein, including the Branch Exchange,
the sale of 804,000 shares of FBA Common to First Banks (Proposal Number 2)
and the issuance of a $6.5 million principal amount 12% convertible FBA
Debenture in exchange for $6.5 million principal amount of 12% convertible
debentures of First Commercial which are now held by First Banks (Proposal
Number 3)(the "Debenture Exchange"). These four transactions are referred to
collectively in the following discussion and in Rauscher Pierce's written
opinion as the "Transaction."
As part of its investment banking business, Rauscher Pierce is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The FBA Special
Committee selected Rauscher Pierce primarily because of its expertise and
reputation and because of its substantial experience in transactions
comparable to the Transaction.
Rauscher Pierce gave its written opinion to the FBA Special Committee
effective October 3, 1997, the date as of which the Merger Agreement was
executed by FBA and First Commercial, having previously advised the FBA
Special Committee periodically during the course of discussions and
negotiations as to Rauscher Pierce's views regarding various elements of the
Transaction and the components thereof.
The full text of Rauscher Pierce's opinion, which sets forth a
description of the assumptions, the matters considered and any limits on the
review undertaken by Rauscher Pierce, is attached as Appendix C to this Joint
Proxy Statement-Prospectus and incorporated herein by reference. The following
is a summary of Rauscher Pierce's opinion dated October 3, 1997 and the
analysis undertaken by Rauscher Pierce to arrive at its opinion. Holders of
FBA Common are encouraged to review the opinion thoroughly.
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<PAGE> 48
Rauscher Pierce's opinion states that, as of the date on which it was
issued, the Transaction is fair to the holders of FBA Common, from a
financial point of view. No limitations were imposed on Rauscher Pierce with
respect to the scope of its analysis of the Transaction or the procedures
followed by Rauscher Pierce in preparing and rendering its opinion, and the
managements of FBA, First Commercial and First Banks cooperated fully with
representatives of Rauscher Pierce in connection with its review of
information which it deemed relevant. Rauscher Pierce was not asked to
consider, and its opinion does not address, the relative merits of the
Transaction as compared to other possible transactions or business strategies
that might be undertaken by FBA, nor was it requested to seek, and it has not
sought, proposals from other parties that might be considered by FBA as
alternatives to the Transaction. In reaching the conclusion expressed in its
opinion, Rauscher Pierce relied, without independent investigation or
verification, on the accuracy and completeness of the financial and other
information which it considered, including publicly available information and
that furnished by FBA, First Banks and First Commercial for the purpose of
its analysis. Rauscher Pierce did not ascribe a specific value to, or obtain
an independent appraisal or valuation of, FBA or First Commercial or any of
their assets or liabilities, nor was it requested to do so. Instead,
Rauscher Pierce made its determination as to fairness, from a financial point
of view, of the Transaction on the basis of financial and comparable analyses
described below. Rauscher Pierce was not asked to opine as to, and its
opinion does not address, FBA's business decision to proceed with the
Transaction, and Rauscher Pierce did not express an opinion as to the
prices at which shares of FBA Common actually will trade after the
consummation of the Transaction.
In rendering its opinion, Rauscher Pierce reviewed (i) certain publicly
available business and financial information relating to FBA and First
Commercial, as well as pro forma combining financial information with respect
to FBA and First Commercial on a consolidated basis and similar information
regarding the subsidiary banks of each of such entities; (ii) the terms of
the Merger Agreement and the agreement pursuant to which shares of FBA Common
are to be sold to First Banks and the FBA Debenture is to be issued to First
Banks in exchange for the
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<PAGE> 49
currently outstanding debentures of First Commercial; (iii) an analysis
prepared by First Banks of the pro forma effect of the FBA Debenture and the
Exchange Ratio; (iv) First Commercial's internal loan watch lists as of July
1997; (v) FBA's list of other real estate owned as of July 1997; (vi) a letter
from Allen H. Blake, the chief financial officer of FBA, First Commercial and
First Banks, regarding the methodology used with respect to deposit premiums;
(vii) information relating to the assets, liabilities and deposit structure of
the branch offices involved in the Branch Exchange; (viii) information
relating to loans, other real estate owned, the provisions for loan losses and
other categories of assets of FBA and First Commercial; and (ix) such other
financial, economic and market criteria as Rauscher Pierce deemed useful in
arriving at the conclusion expressed in its opinion. In addition, Rauscher
Pierce had discussions with the managements of FBA, First Commercial and First
Banks concerning their respective businesses, operations, assets, financial
conditions and prospects and undertook such other studies, analyses and
investigations as it deemed appropriate.
In arriving at its opinion, Rauscher Pierce assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of the management of FBA
that they were not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial
projections of FBA, First Commercial and the combined company following the
consummation of the Merger provided to Rauscher Pierce by management of FBA,
Rauscher Pierce assumed that such projections were reasonably prepared, and
Rauscher Pierce relied upon such projections in arriving at its opinion. In
arriving at its opinion, Rauscher Pierce did not conduct a physical
inspection of the properties and facilities of FBA or First Commercial.
Rauscher Pierce's opinion states that it is necessarily based upon market,
economic and other conditions as they existed on, and could be evaluated as
of, the date of its opinion.
In connection with the preparation and delivery of its opinion to the
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<PAGE> 50
FBA Special Committee, Rauscher Pierce performed certain financial and
comparative analysis as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and
relevant methods of financial and comparative analysis and the application of
those methods to the particular circumstances, and, therefore, such an opinion
is not readily susceptible to summary description. Furthermore, in arriving
at its opinion, Rauscher Pierce did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Rauscher Pierce believes that its analyses must be considered as
a whole and that considering any portion of such analyses and factors,
without considering all analyses and factors, could create a misleading or
incomplete view of the process underlying its opinion. In its analyses,
Rauscher Pierce made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of FBA or First Commercial. Any estimates
contained in these analyses are not necessarily indicative of actual values
or predictive of future results or values, which may be significantly more or
less favorable than as set forth therein. In addition, analyses relating to
the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
Relative Values of FBA and First Commercial. Rauscher Pierce compared
the historical and projected book values and earnings per share of FBA Common
and First Commercial Common, taking into account the relative weight that
might be accorded to each in determining an exchange ratio that would be fair
to the holders of FBA Common. The Exchange Ratio ultimately negotiated by
the FBA Special Committee and the First Commercial Special Committee (0.8888)
was primarily based on estimated book values as of September 30, 1997. In
that regard, the FBA Special Committee advised Rauscher Pierce that it
generally viewed book value, rather than past or projected future earnings,
as a more appropriate measure of relative value per share because recent
historical earnings for both FBA and First Commercial had been relatively low
and irregular, which also affects the reliability of projections of future
levels of earnings of both entities. From the perspective of holders of FBA
Common, utilizing book values rather than projected earnings as a primary
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<PAGE> 51
measure of relative value of the two companies' securities for the purposes
of an exchange ratio would be expected to lead to a relatively favorable
treatment of FBA Common as compared with that which would result from
short-term projected earnings of the two companies.
In comparing historical market values, Rauscher Pierce reviewed the
relationship of the relative trading prices of FBA Common and First
Commercial Common over the period since January, 1996 (a period in which that
relationship changed substantially due to the decline in the market value of
First Commercial Common) and determined that the relative values implicit in
the Exchange Ratio were reasonable and fair, from a financial point of view,
to FBA and FBA Stockholders in relation to market values. Rauscher Pierce
noted that during such period (a) FBA Common traded in a range from a low of
$9.25 per share to a high of $18.00 per share and was thinly traded, and (b)
First Commercial Common traded in a range from a low of $8.75 to a high of
$50.75, and was even more thinly traded than FBA Common. Based upon such
analyses, Rauscher Pierce concluded that the Exchange Ratio is reasonable
when considered in the context of the relative historical trading prices of
the stocks of FBA and First Commercial.
Review of Historical and Projected Financial Ratios. In reviewing the
financial ratios of FBA and First Commercial, Rauscher Pierce considered the
general improvement that was observable in various balance sheet, loan
quality and financial ratios of both companies (such as asset quality ratios,
capital ratios particularly as they relate to regulatory requirements, and
returns on assets and returns on equity), indicating that the overall
financial strength and asset quality of both FBA and First Commercial had
improved in the last several years from conditions of significant weakness.
This general improvement was viewed by Rauscher Pierce as an important factor
in its ultimate determination as to fairness, from a financial point of view,
of the Transaction because of the positive effect of the combination on FBA's
overall pro forma financial capacity, capital position and asset quality.
Similarly, Rauscher Pierce noted that projected improvements in financial
ratios for 1997 (estimated), if realized, such as that of the reserve to total
loans (from 2.53% for FBA to 3.20% on a pro forma combined basis), net interest
margin (from 4.55% for FBA to 4.58% on a pro forma combined basis) and returns
on assets (from
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<PAGE> 52
0.66% for FBA to 0.68% on a pro forma combined basis) and equity (from 7.22%
for FBA to 8.81% on a pro forma combined basis) all supported the conclusion
that the Transaction is fair to holders of FBA Common.
Analysis of the Branch Exchange, the Issuance of FBA Common and the
Debenture Exchange. In evaluating the overall fairness of the Transaction,
Rauscher Pierce considered, from a financial point of view, the Branch
Exchange, the sale to First Banks of 804,000 shares of FBA Common and the
Debenture Exchange, since those components of the Transaction were an integral
part of, and were not being undertaken separately from, the Merger. Rauscher
Pierce considered the terms of the Branch Exchange, in which deposits and
branch offices will be exchanged but no real estate or loans will be included;
the difference in the relative values of the deposits assumed and assets
acquired, to be determined as of the closing of the Branch Exchange, is to be
settled in cash. Because the Branch Exchange is to be settled by a payment
equal to the net difference between the fair market values of the two branches,
based on deposit premiums which appear to be reasonably related to the
different characteristics of the deposits of the two branches, Rauscher Pierce
determined that the Branch Exchange was consistent with Rauscher Pierce's
conclusion that the Transaction, considered as a whole, is fair, from a
financial point of view, to FBA Stockholders.
In considering the Debenture Exchange in connection with its evaluation
of the Transaction, Rauscher Pierce noted that the terms of the First
Commercial Debentures to be cancelled in exchange for the FBA Debenture are
somewhat unusual in that payment of interest is deferred until maturity and all
principal and interest thereon may be paid in First Commercial Common, unless
First Commercial's Board of Directors determines that it will redeem the
debentures for cash and any required regulatory approval is obtained. The FBA
Special Committee advised Rauscher Pierce that it intended for the Debenture
Exchange to be an exchange of relatively equivalent value. Based thereon,
Rauscher Pierce noted that, since the terms of the FBA Debenture are to be
comparable to those of the First Commercial Debentures for which they are to be
exchanged, and the conversion price in the FBA Debenture was determined based
on the Exchange Ratio, the agreement to issue the FBA Debenture was a
reasonable means of resolving the status of the First
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Commercial debentures, a necessary element of the completion of the Merger and
consistent with Rauscher Pierce's conclusion that the Transaction, when
considered as a whole, is fair, from a financial point of view, to FBA
Stockholders.
With regard to the terms of the issuance of FBA Common to First Banks,
the FBA Special Committee advised Rauscher Pierce that it considered some
reduction in FBA's outstanding debt to be a necessary element of the
Transaction, since (i) FBA had incurred debt in a recent acquisition for
cash, (ii) FBA would be assuming the obligation of the FBA Debenture under the
terms of the Merger Agreement, and (iii) FBA was also engaged in another
acquisition (the Surety Merger) for which further borrowings would be
required. The terms of the purchase by First Banks were established at the
same time as those of the Merger; the issuance price of the FBA Common was
set at a slight discount to the then market price of FBA Common, and the
amount of the reduction in FBA's outstanding debt would be approximately $10
million. Rauscher Pierce analyzed the price-to-earnings and price-to-book
ratios implicit in the issuance price ($12.44) per share, compared those
ratios with similar ratios of 39 comparable banks with similar market
capitalization to that of FBA, and concluded that the price to be paid by
First Banks was consistent with Rauscher Pierce's conclusion that the
Transaction, when considered as a whole, is fair, from a financial point of
view, to FBA Stockholders.
Comparable Transactions. Rauscher Pierce considered the terms of 230
bank and bank holding company acquisitions with transaction values between
$10 million and $50 million which have occurred since January 1, 1996, and
compared the financial terms thereof to those in the Transaction. Rauscher
Pierce noted that the price-to-book value ratios of such transactions ranged
from a high of 4.3 to a low of 1.0, the price to tangible book value ratios
ranged from a high of 4.3 to a low of 1.0 and ratios of price to latest
12-months earnings per share ranged from a high of 56.2 to a low of 5.6.
Although it concluded that a quantitative transaction analysis of the
Transaction based on the terms of other transactions should be only a minor
factor to be considered in evaluating the Transaction in view of significant
inherent differences between the characteristics of the companies involved in
the reviewed acquisitions, on
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the one hand, and FBA and First Commercial, on the other, Rauscher Pierce
concluded that the ratios reflected in the Exchange Ratio, and the other
financial terms of the Transaction, were well within the range of values for
other transactions that could be considered somewhat comparable, and that this
fact was consistent with Rauscher Pierce's conclusion that the Transaction,
when considered as a whole, is fair, from a financial point of view, to FBA
Stockholders.
In the ordinary course of its business, Rauscher Pierce may actively
trade in the debt or equity securities of FBA and First Banks for its own
account and for the accounts of its customers and, accordingly, may at any
time hold a long or short position in such securities.
The FBA Special Committee engaged Rauscher Pierce to assist it in the
analysis of the Transaction and agreed that FBA would pay an advisory fee in
the amount of $50,000, of which $25,000 was paid at the time of the
engagement and the remaining amount became payable upon issuance of Rauscher
Pierce's opinion. Pursuant to the engagement, FBA is also required to
reimburse Rauscher Pierce for its out of pocket expenses incurred in
connection with its review of the Transaction and the issuance of its opinion
and to indemnify Rauscher Pierce and certain related persons against certain
liabilities relating to or arising out of its engagement, including certain
liabilities under the federal securities laws.
FIRST COMMERCIAL'S REASONS FOR THE MERGER
Background to Merger. Between 1992 and 1995, First Commercial
experienced substantial net losses primarily resulting from the downturn in
the California economy during that period, which particularly affected the
real estate market. Since First Commercial's strategy for internal growth
emphasized real estate construction and development lending, a significant
portion of which was funded by deposits from real estate title insurance and
escrow companies, it was particularly affected by the problems in the
California real estate market. By mid-1995, the losses which First
Commercial had incurred had eliminated all of the existing stockholders'
equity of First Commercial, forcing it to search for sources of additional
capital. This was accomplished by a private placement of common stock and
convertible debentures with First Banks in late 1995, and a public
stockholders rights offering of additional First Commercial Common in 1996.
The magnitude of First Commercial's financial difficulties caused the
Board of Directors and management to focus on controlling the immediate
problems and optimizing the remaining capital, rather than on business
development and long-term strategic planning. Consequently, their priorities
were: (1) the reduction of a large portfolio of problem assets; (2) the
shrinking of total assets; (3) the cutting of operating expenses; and (4) the
sale and closing of branches. In spite of these efforts, it was not until
the second quarter of 1996 that First Commercial was able to return to
profitable operations. This experience left First Commercial with total
assets which were approximately 40% of the level of three years earlier and a
significantly reduced loan and deposit customer base from which to generate
its income. Furthermore, First Commercial
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Common had been delisted from the Nasdaq National Market System and then listed
on the Nasdaq SmallCap Market.
Once First Commercial returned to profitability and to asset quality
levels considered normal for an organization its size, the Board of Directors
and management began redirecting their efforts toward rebuilding the
organization. They observed the trend toward continuing consolidation within
the banking industry and the competition which banks face from other banks,
thrifts and various non-banking entities. In order to remain competitive,
they believe that First Commercial must become more efficient in providing
services and offer a broader range of financial products in a geographically
diverse area. This suggests that First Commercial must grow to a
significantly larger size, which would enable it to establish a larger branch
network, achieve a more economic cost structure and attain greater acceptance
in its markets.
While First Commercial has been successful in recovering from its
problems, this experience has left obstacles to its ability to take advantage
of the opportunities which now exist in its marketplaces. Internal business
development efforts are more difficult due to the public perception of First
Commercial resulting from its earlier problems. First Commercial's $6.5
million of convertible debt limits its ability to borrow funds for
acquisition purposes, but the limited market for its stock, the wide bid-asked
spreads required by its market makers, and experiences of its public
stockholders, many of whom reside in First Commercial's market areas, make
its stock difficult for most potential acquisition candidates to accept.
Consequently, in early 1997, when the possibility of a merger with FBA
arose, the Board of Directors and management considered this as a possible
alternative which might accelerate its growth objectives, thereby expediting
the potential benefits to its stockholders. Specifically, it is an
opportunity to substantially increase its market presence in Northern
California through a significantly greater customer base and additional
branch offices. Those stockholders desiring to continue to benefit from
First Commercial's recovery would have the opportunity to participate in that
process, through an exchange of their stock, including a modest premium, for
FBA Common in a tax-free exchange and provide a more liquid market for the
FBA Common which they would receive in the transaction.
FBA Common is traded on the NYSE, whereas First Commercial Common is
traded on the SmallCap Market of the Nasdaq Stock Market. The
characteristics of these markets and the substantially larger trading volume
of FBA Common contribute to a significantly greater difference between the
bid and asked prices of First Commercial Common compared to that of FBA
Common. This bid-asked spread prior to the announcement of the Merger was
typically $2.00 per share for First Commercial Common, whereas it is normally
$0.50 per share for FBA Common. Consequently, the transaction costs for
stockholders desiring to buy or sell their shares is much greater for First
Commercial Common than for FBA Common. In addition, First Commercial was
recently notified by Nasdaq that in accordance with changes in the listing
requirements for the SmallCap Market which are to become effective in
February 1998, First Commercial Common would no longer qualify for quotation
on that market. If First Commercial Common were to be removed from that
market, stockholders of First Commercial Common would be faced with very
limited ability to trade their shares if they desired to do so.
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First Commercial has a significant annual expenditure to satisfy the
requirements of operating a publicly owned company. This includes the costs
of separate independent annual audits, preparing, printing and distributing
annual reports and proxy statements, conducting annual stockholders'
meetings, filing quarterly and annual reports with the SEC and maintaining
stockholder records. As another publicly owned company, FBA incurs similar
costs in connection with its corporate existence. However, those costs would
not increase significantly with the addition of First Commercial to FBA's
stockholder base. Consequently, FBA would be able to eliminate essentially
all of the costs currently incurred by First Commercial in these activities.
The proposed transaction will also allow First Commercial to join with
FBA's current banking subsidiary in Northern California, Sunrise, as well as
its two announced acquisitions, Surety and Pacific Bay, to form a
significantly larger, more efficient banking franchise. Combined, the
resulting bank would increase to approximately $336.6 million in total
assets, $225.4 million in loans, net of unearned discount, $291.0 million in
total deposits and $40.0 in total stockholders' equity. Loan and deposit
customers would have access to eleven branch offices to serve their banking
needs. In addition, the combined bank would be able to eliminate duplicative
functions, certain of which are currently provided by First Banks, in areas
such as accounting, internal audit, loan review and investments, focusing
instead on the business development and customer service areas.
Consequently, the transaction provides First Commercial access to the
immediate growth needed to compete in a rapidly consolidating industry which
might otherwise require years to accomplish.
Formation and Activities of Special Committee. In response to
communications with representatives of FBA concerning the possibility of a
merger with FBA, on February 25, 1997, the Board of Directors of First
Commercial appointed a Special Committee composed of directors who are not
officers of or employed by either of First Commercial or First Banks, or
otherwise affiliated with First Banks. The First Commercial Special
Committee was authorized to investigate and evaluate the proposed merger with
FBA, and if it determined it to be appropriate, to negotiate the terms and
conditions of such a merger. The First Commercial Special Committee engaged
its own legal counsel and financial advisor to assist it in its
deliberations.
During the second quarter of 1997, the First Commercial Special
Committee proceeded to organize, engage its advisors, and begin discussions
with the FBA Special Committee. In June 1997, in response to these
negotiations, the FBA Special Committee submitted a draft letter of intent to
the First Commercial Special Committee. This draft letter of intent served
as a basis for further negotiations between the two committees. After review
of the draft letter of intent by the First Commercial Special Committee and
analysis by its financial advisors, the First Commercial Special Committee
had further discussions and negotiations with the FBA Special Committee
regarding the terms of the draft letter of intent. These subsequent
discussions and negotiations led to the final letter of intent being executed
on July 21, 1997 which established the terms and conditions to be included in
the definitive agreement. Thereafter, the Merger Agreement was
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drafted, with participation by the two special committees and their respective
financial advisors and counsel.
Board of Directors and Special Committee Recommendations. On September
- --, 1997, the First Commercial Special Committee unanimously recommended that
the Merger Agreement be entered into by First Commercial. Thereafter, on
September 23, 1997, the full Board of Directors of First Commercial
unanimously approved the Merger Agreement. THE FIRST COMMERCIAL BOARD OF
DIRECTORS AND THE FIRST COMMERCIAL SPECIAL COMMITTEE BOTH UNANIMOUSLY
RECOMMEND THAT THE FIRST COMMERCIAL STOCKHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT BY VOTING IN FAVOR OF PROPOSAL NUMBER 1.
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Opinion of the Financial Advisor to the First Commercial Special Committee
General. The Special Committee of the Board of Directors of First
Commercial retained Mercer Capital Management, Inc. ("Mercer Capital") during
April 1997 to provide an independent analysis of the proposed Merger on
behalf of the Special Committee and prepare a fairness opinion with respect
to the Merger from a financial point of view of the stockholders of First
Commercial. Mercer Capital's opinion, dated October 6, 1997, is included as
Appendix B in the Joint Proxy Statement-Prospectus and should be read in its
entirety by stockholders of First Commercial.
Mercer Capital, as part of its financial institution practice, is regularly
engaged to value the securities of banks and bank holding companies, issue
fairness opinions, and assist in other aspects of structuring mergers among
financial institutions. The Special Committee retained Mercer Capital on the
basis of its reputation and its experience in evaluating mergers among
financial institutions and in representing the institutions in merger
transactions. No limitations were imposed by First Commercial's Special
Committee with respect to the investigations made or the procedures followed
by Mercer Capital in rendering its fairness opinion. Mercer Capital was paid
a fee of $40,000 for serving as financial advisor and rendering its opinion.
First Commercial has agreed to indemnify Mercer Capital with respect to
liabilities arising out of its provision of financial advisory services.
As part of its investigation, Mercer Capital reviewed: the Merger Agreement;
the Branch Exchange Agreement; First Commercial's and FBA's Annual Reports to
Shareholders, Forms 10-K, and Proxy Statements for fiscal years 1994, 1995
and 1996; and Forms 10-Q for the quarters ended March 31, 1997 and June 30,
1997; projected financial statements prepared by management for both FBA and
First Commercial on a stand alone basis and on a pro forma basis for fiscal
years 1997, 1998, 1999 and 2000; and public market pricing data of publicly
traded banks which Mercer Capital deemed comparable to FBA and First
Commercial.
As part of its engagement, a representative of Mercer Capital visited
FBA management in St. Louis and Houston, and First Commercial management in
St. Louis and Sacramento. Factors considered in rendering the opinion
included: terms of the Merger Agreement; terms of the Branch Exchange
Agreement; the arms' length process by which the Merger Agreement was
negotiated; the results of its analysis of the proposed Merger presented to
the Special Committee of the Board of Directors of First Commercial; an
analysis of the estimated pro forma changes in book value per share, earnings
per share, and dividends per share from the perspective of the First
Commercial Stockholders; a review of FBA's and First Commercial's historical
financial performance, historical stock pricing, the liquidity of their
shares and pricing in relation to other publicly traded bank holding
companies; and the tax consequences of the Merger for First Commercial
Stockholders.
In connection with rendering its opinion, Mercer Capital performed a
variety of financial analyses, summarized below. Mercer Capital believes
that its analyses must be considered as a whole and that selection of
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and the
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process underlying Mercer Capital's opinion. Also, Mercer Capital relied upon
management forecasts in rendering its opinion. Mercer Capital does not
represent or warrant that the actual performance would reflect that which was
projected.
Mercer Capital did not compile nor audit First Commercial's or FBA's
financial statements, nor did Mercer Capital independently verify the
information reviewed. Mercer Capital relied upon such information as being
complete and accurate in all material respects. Mercer Capital did not make
an independent valuation of the loan portfolio, adequacy of the loan loss
reserve, or other assets or liabilities of either institution.
Mercer Capital's opinion does not constitute a recommendation to any
stockholder as to how the stockholder should vote on the proposed Merger; nor
does Mercer Capital express any opinion as to the prices at which any
security of First Commercial or FBA might trade in the future.
The discussion below represents an updated summary of the analysis
which Mercer Capital presented to the Independent Committee of the Board of
Directors of First Commercial on July 15, 1997. The original analysis was
based upon the initial FBA letter of intent sent to First Commercial's
Special Committee on June 13, 1997. On July 24, 1997, FBA and First
Commercial entered into a Letter of Intent providing for an exchange ratio of
0.8888 FBA Common shares for each First Commercial Common share, and First
Banks receiving 804,000 FBA Common shares for a $10. 0 million reduction in
FBA debt held by First Banks.
On July 25, 1997, FBA and First Commercial announced that they had
agreed in principle to merge. At that time, the current market price for FBA
Common was approximately $13.00 per share. The implied value of the Merger
was $9.8 million, or $11.55 per share of First Commercial Common, as compared
to the then current market price of $10.00 per share of First Commercial
Common (based upon the mid-point of $9.00 per share / $11.00 per share bid-ask
spread). On July 25, 1997, the implied transaction value represented
141% of reported book value of First Commercial as of June 30, 1997, 8.6
times reported earnings per share for the twelve-month period ended June 30,
1997, and 12.0 times fully diluted earnings per share.
The market price for FBA Common trended up to approximately $18.25 per
share at the time Mercer Capital rendered its written opinion (October 6,
1997), which implied an aggregate transaction value of $13.7 million and a
per share value of $16.22 per share of First Commercial Common as compared to
the $13.625 mid-point of First Commercial's then current bid ($12.75 per
share) ask ($14.50 per share) spread. The implied transaction multiples on
the date the opinion was rendered were 197% of book value as of June 30,
1997, 12.0 times reported earnings per share for the twelve month period
ended June 30, 1997, and 16.8 times fully diluted earnings per share.
Mercer Capital also noted that it did not consider the proposed Merger
to be an "acquisition" because control of First Commercial passed to First
Banks in 1995 when stockholders elected to recapitalize the company by
selling a controlling interest to First Banks. Accordingly, comparisons with
acquisition multiples were not deemed appropriate in assessing
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whether the contemplated transaction was fair to First Commercial Stockholders
from a financial point of view.
Financial Review of FBA. FBA reported total assets of $374 million as
of June 30, l997, approximately $265 million of which were attributable to
BankTEXAS, with the balance accounted for by Sunrise. FBA reported net
income of $1.2 million, or $0.32 per share, for first six months of 1997 as
compared to $899,000, or $0.23 per share, recorded during the same period of
1996. FBA's respective Return on Assets ("ROA") and Return on Equity ("ROE")
for the first six months of 1997 were 0.64% and 7.05%.
FBA's balance sheet included $249 million of loans (including unearned
discount), $78 million of securities and $9 million of Fed Funds Sold at June
30, 1997. BankTEXAS has sold $40 million of participations to other First
Banks affiliates, including First Commercial Bank and Sunrise, while it has
purchased $12 million of indirect auto loans from other First Banks
subsidiaries. FBA's subsidiary banks are essentially funded with deposits.
The loan-to-deposit ratio was 79.6%. The consolidated equity-to-asset ratio
was 9.1 % as of June 30, 1997, while the parent company's debt-to-equity
ratio was 42.8%.
Credit quality was reported to be acceptable. The loan loss reserve of
$6.1 million represented 2.5% of loans at June 30, 1997. The reserve
exceeded non-performing loans by a multiple of approximately 3.0.
Financial Review of First Commercial. By way of comparison, First
Commercial generates higher earnings (as measured by ROA and ROE) than FBA
and has a stronger reserve for loan losses. A portion of the differential in
earnings reflects FBA's recent acquisition of Sunrise and the insufficient
time management has had to reduce its high expense structure, as well as
First Commercial's purchase of $17 million of participations originated by
other First Banks subsidiaries.
First Commercial reported net income of $570 thousand, or $0.67 per
share for the six-month period ended June 30, 1997, as compared to a net loss
of $1.1 million ($1.82 per share) for the six month period ended June 30,
1996. ROA and ROE totaled, respectively, 0.73% and 17.1%. First Commercial's
high ROE is a function of the relatively high degree of leverage employed at
the parent company level. As of June 30, 1997, the Company's capital
structure consisted of $7.0 million of common equity, plus $6.5 million of
convertible debentures (excluding about $1.2 million of accrued interest).
On a converted basis, First Commercial's ROE and fully diluted earnings per
share are much lower.
As a result of the purchase of $17 million of participations from
various First Banks subsidiaries, First Commercial's loan-to-deposit ratio
has risen from 47% at year-end 1995 to 70% at June 30, 1997. The loan loss
reserve totaled $4.9 million at June 30, 1997, an amount which represented
4.90% of period end loans and exceeded non-performing loans by a multiple of
4.5.
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Public Market Pricing. Mercer Capital noted that both FBA's and First
Commercial's shares are publicly traded. First Commercial Common is traded
on the SmallCap Market of the Nasdaq Stock Market, while FBA Common is listed
on the NYSE. While neither institution's shares can be described as having
substantial liquidity, FBA Common benefits from greater absolute liquidity
and, prior to the merger announcement, greater relative liquidity.
Another important difference between the two stocks is the transaction
cost involved in trading the shares. Prior to the announcement of the
Merger, First Commercial Common was quoted with a $2.00 bid-ask spread based
upon a bid price of $9.00 per share and an ask price of $11.00 per share.
FBA Common was generally quoted with only a $0.50 per share bid-ask spread
prior to announcement of the Merger. Thus an investor in First Commercial
requires a substantially larger increase in the stock price than in FBA's
shares to cover transaction costs (as measured by the bid-ask spread and
brokers' fees) in order to break-even on a purchase and subsequent sale.
Mercer Capital noted that First Commercial Common was trading at a
discount to the broader industry based upon both fully diluted earnings per
share and book value per share. FBA Common was also trading at a discount to
the broader market based upon its price to book value ratio; however, FBA
Common was trading at a premium P/E multiple due to its depressed earnings
following the acquisition of Sunrise during November 1996. Assuming that
FBA's earnings increase in. 1998, then the forward P/E in relation to 1998
earnings is expected to represent only a modest premium, to the broader
industry.
Mercer Capital also noted the relative performance of both
institutions' shares during the period following each institution's
recapitalization. Adjusting for the 1:125 reverse stock split effected
December 6, 1996, First Commercial Common declined in value from about $35.00
per share at the end of the first quarter of 1996 to about $10.00 per share
immediately before the announcement date, before rising to $13.50 by the time
the written opinion was rendered. FBA Common had essentially been in a
trading range since its recapitalization in the vicinity of $9.00 per share
to $13.00 per share; though the trading prices ranged from $10.13 per share
at year-end 1996 to $13.00 by the announcement date, before subsequently
rising to $18.25 per share by the time the written opinion was rendered. By
way of comparison, the NASDAQ Banking Index increased, respectively, 34.1%,
26.1%, and 48.7% during 1995, 1996 and, year-to-date through October 2, 1997.
Pro Forma Analysis. Mercer Capital prepared a pro forma analysis to
determine FBA's prospective consolidated net income, profitability, leverage
and the like upon consummation of the Merger. In addition, the analysis
measured the relative change in First Commercial's earnings per share and
book value per share based upon pro forma consolidated financials. The pro
forma analysis was derived from projections prepared by management based upon
two scenarios: (a) the First Commercial debentures held by First Banks are
converted; and (b) the debentures and accrued interest are redeemed for cash.
On a pro forma basis, Mercer Capital noted that FBA's consolidated
assets would increase to approximately $533 million, while leverage would
remain moderate. The
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consolidated equity/asset ratio, before giving effect to the conversion of the
debentures, would be 9.5%, while the holding company's debt to equity ratio will
be about 24%.
Mercer Capital noted the anticipated dilution in earnings per share
that First Commercial Stockholders would incur upon conversion of FBA's
debentures in 2000, and determined that the dilution analysis should focus on
fully diluted earnings per share. Mercer Capital further noted that the
conversion of the debentures in 2000 was projected to be dilutive to book
value per share.
Assuming that the Merger was consummated based upon the 0.8888 exchange
ratio and that both institutions performed as projected by management, Mercer
Capital calculated that First Commercial Stockholders would incur earnings
per share dilution of 4% in 1998 and essentially no dilution in 1999 and 2000
if the debentures are converted. If the debentures are redeemed, Mercer
Capital calculated that First Commercial Stockholders would benefit from
earnings accretion of 1% in 1998, 7% in 1999 and 10% in 2000.
With regard to book value per share, Mercer Capital calculated that the
exchange adjusted book value per share would be diluted roughly 4% in 2000
regardless of whether the debentures are converted or redeemed.
Future Value Analysis. Given the projected earnings of First
Commercial, FBA and FBA on a combined basis, a "future value" analysis was
prepared. The hypothetical value of each institution's shares was based upon
a P/E ratio times the latest twelve month fully diluted earnings per share.
Because neither institution is currently planning to pay dividends, the total
return calculation was based upon the projected change in the value of the
stock.
Before giving consideration to the run-up in FBA's price between the
date the Merger was announced and the date Mercer Capital rendered its
opinion, the analysis implied that First Commercial Stockholders would
"realize" a greater increase in value if the Merger is consummated and the
debentures are not converted. The increase in value reflected the premium
imbedded in the exchange adjusted price in relation to First Commercial
Common's market price as well as the accretion in pro-forma earnings per
share from the perspective of First Commercial Stockholders. If the
debentures are converted, then First Commercial Stockholders would realize a
smaller increase in value because the transaction was projected to be
essentially neutral to exchange adjusted earnings per share by 2000 from the
perspective of First Commercial Stockholders.
Mercer Capital also noted that the analysis was predicated upon several
assumptions, namely First Commercial experiences an expansion in its P/E
ratio and FBA's earnings (and First Commercial's earnings) improve as
projected by management.
Present Value Analysis. Mercer Capital also prepared a present value
analysis that compared the present value of the projected hypothetical future
value of each institution's stock at year-end 2000 based upon an assumed
discount rate (or required rate of return). The analysis
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was another way of analyzing whether First Commercial Stockholders would be
better off if the institution remained independent, or merged with FBA as
proposed (without giving consideration to other variables such as a liquidity
stock, etc.).
Three scenarios were considered in deriving a range of present values:
(a) First Commercial remained independent; (b) First Commercial merged with
FBA and the First Commercial Debentures converted; and, (c) First Commercial
merged with FBA and the FBA Debenture and accrued interest redeemed for cash.
Each scenario assumed a range of discount rates from 12% to 16% and a P/E
multiple applied to projected 2000 earnings per fully diluted shares at a
multiple of 12.0 times earnings to a multiple of 16.0 times earnings.
Based upon its analysis, Mercer Capital calculated the following ranges
of value: (a) $9.79 per share to $11.55 per share if First Commercial remains
independent; (b) $9.67 per share to $11.40 per share assuming the Merger is
consummated and the debentures are converted; and, (c) $10.76 per share to
$12.69 per share if the Merger is consummated and the debentures are redeemed
for cash.
Transaction Summary. Mercer Capital noted that the proposed
transaction offered a number of benefits to First Commercial Stockholders:
* Improved liquidity as a result of FBA Common's NYSE listing.
* Lower transaction costs as a result of FBA Common's much narrower
bid-ask spread.
* A premium of approximately 15% over First Commercial Common's market
price prior to the date on which the Merger was announced and a
premium of approximately 20% immediately prior to the date on which
the written opinion was rendered.
* Though by no means guaranteed, FBA may offer better growth prospects
over the long-term if First Banks' management successfully executes
its stated plans to grow both the Northern California and Texas
franchises. If successful, then, as stock swap transactions are
consummated and the size, liquidity, etc. of the institution
increases, investor interest in the institution may also increase.
If the acquisitions are poorly conceived and/or executed, then a
series of (permanently) dilutive transactions could hamper the
creation of stockholder value.
* A tax-free exchange.
On the basis of these considerations Mercer Capital concluded in its
opinion letter the consideration to be received by the First Commercial
Stockholders in the Merger is fair, from a financial point of view.
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THE MERGER
The following information concerning the Merger, insofar as it relates
to matters contained in the Merger Agreement, is qualified in its entirety by
reference to the Merger Agreement, a copy of which is attached hereto as
Appendix A and incorporated herein by reference.
The Merger Agreement provides for the merger of First Commercial with
and into FBA. Upon consummation of the Merger, each outstanding share of
First Commercial Common, other than (i) any shares held in the treasury of
First Commercial or owned by a subsidiary of First Commercial, and (ii) shares
in respect of which appraisal rights are exercised (see "THE MERGER--Appraisal
Rights") will be converted into and represent the right to receive 0.8888
shares of FBA Common.
Upon the consummation of the Merger, First Commercial's assets and
liabilities will be transferred by operation of law to FBA. The Merger
Agreement contemplates that, as soon as practicable after the Effective Time,
the Subsequent Bank Merger will also be consummated, and ultimately the
operations of Sunrise, First Commercial Bank, Surety and Pacific Bay will be
combined into a single bank owned by FBA.
Terms of the Merger
The Merger Agreement provides that, at the Effective Time, each
outstanding share of First Commercial Common (other than shares owned by
First Commercial or any of its subsidiaries and those with respect to which
appraisal rights are perfected) will be converted into the right to receive
0.8888 shares of FBA Common.
Each of the shares of First Commercial Common held by First Commercial
or any of its subsidiaries will be canceled and retired at the Effective Time
and no consideration will be issued in exchange therefor in the Merger. No
fractional shares of FBA Common will be issued to any First Commercial
Stockholder upon surrender of certificates representing First Commercial
Common. Each stockholder who would otherwise have been entitled to receive a
fraction of a share of FBA Common will receive, in lieu thereof, cash without
interest in an amount equal to such fraction of a share of FBA Common
multiplied by the closing price of one share of FBA Common at the close of
business on the trading day next preceding the Effective Time.
First Banks holds a promissory note executed by FBA in the principal
amount of $15 million, dated October 31, 1996, the outstanding principal
balance of which is $14.5 million as of the date hereof (the "FBA Promissory
Note") and the First Commercial Debentures. None of the principal
indebtedness under the First Commercial Debentures has been paid and the
accrued interest under the First Commercial Debentures as of June 30, 1997
was $1.22 million.
The Special Committees of FBA and First Commercial jointly determined
that it would not be advisable to pursue the Merger if the amount of debt
owed by FBA would be substantially
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increased as a result of the Merger. In order to reduce the debt of FBA, First
Banks has agreed to purchase 804,000 shares of FBA Common for approximately $10
million, a purchase price derived from the market price for FBA Common
immediately before the terms of the Merger were established. Payment will be
made by reducing the amount of the outstanding balance on the FBA Promissory
Note in the amount of the purchase price. This purchase of FBA Common is
contingent upon completion of the Merger.
FBA has agreed to directly assume the indebtedness evidenced by the
First Commercial Debentures, including all accrued interest thereon, by
canceling the First Commercial Debentures and exchanging therefor a debenture
issued by FBA. The FBA Debenture will generally have the same terms as the
First Commercial Debentures and will be in the principal amount of $6.5
million, with initial accrued interest equal to the then outstanding balance
of accrued interest on the First Commercial Debentures. The FBA Debenture
will (i) bear interest at the rate of 12% per year, (ii) be convertible into
shares of FBA Common at a price per share of $14.06 (at maturity, any
outstanding principal and interest automatically converts into shares of FBA
Common at the same price per share), (iii) be payable in shares of FBA Common
or cash, and (iv) be unsecured. The exchange of debentures is contingent
upon completion of the Merger.
Certain Federal Income Tax Consequences of the Merger
The discussion set forth below provides general information as to
certain anticipated federal income tax consequences of the Merger. Each
First Commercial Stockholder should consult his or her own tax advisor as to
the specific tax consequences of the Merger, including the application and
possible effect of state and local tax laws.
The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), regulations and rulings now in effect or proposed
thereunder, current administrative rulings and practices, and judicial
precedent, all of which are subject to change. Any such change, which may or
may not be retroactive, could alter the tax consequences of First Commercial
Stockholders discussed herein. The discussion is also based upon certain
assumptions regarding the factual circumstances that will exist at the
Effective Time of the Merger and thereafter, including certain
representations to be made by First Commercial and FBA, as well as First
Banks, controlling stockholder of each corporation. This discussion assumes
that stockholders of First Commercial hold their First Commercial Common as a
capital asset within the meaning of Section 1221 of the Code. If any of
these factual assumptions or representations are inaccurate, the tax
consequences of the Merger could differ from those described herein.
The Merger is intended to constitute a "reorganization" for federal
income tax purposes under Section 368(a)(1)(A) and Section 368(a)(1)(D) of
the Code, with the following federal income tax consequences:
1. Except to the extent First Commercial's liabilities exceed
the adjusted tax basis of its assets, no gain or loss will be
recognized by First Commercial or FBA as a result of the Merger.
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2. First Commercial Stockholders will recognize no gain or
loss as a result of the exchange of their First Commercial Common
solely for shares of FBA Common pursuant to the Merger, except with
respect to cash received in lieu of fractional shares, if any, as
discussed below.
3. A First Commercial Stockholder who receives only cash as a
result of the exercise of appraisal rights realizes gain or loss for
federal income tax purposes. Most likely the amount recognized will
equal the difference between (x) the amount of cash received and (y)
the stockholder's adjusted tax basis in the stockholder's shares of
First Commercial Common surrendered in exercise of appraisal rights.
The gain or loss so recognized is capital gain or loss to the
stockholder if the shares are capital assets in the stockholder's
hands. If, however, the stockholder, directly or indirectly, would
continue to own stock in First Commercial (and consequently in FBA
through the Merger) following redemption of the shares with respect to
which he or she exercised appraisal rights, the stockholder may
recognize gain, if any, but not loss, to the extent of the cash
received. Moreover, if the cash payment has the effect of the
distribution of a dividend, the gain so recognized will be ordinary
income rather than capital gain. Determination of whether the
stockholder is deemed to have continuing ownership takes into account
the stock ownership attribution rules of Section 318 of the Code.
Under those rules, the stockholder is deemed to own shares owned by
certain members of his or her family and certain entities in which the
stockholder or certain members of his or her family own an interest.
Determination of whether the cash payment has the effect of a
distribution of a dividend will be made according to the provisions and
limitations of Section 302 of the Code. Because the determinations of
constructive ownership and dividend equivalency depend upon the facts
and circumstances of each individual stockholder of First Commercial,
First Commercial Stockholders are advised to consult their own tax
advisor concerning the tax treatment of cash they receive in the Merger
as a result of the exercise of appraisal rights.
4. A holder of shares of First Commercial Common who receives
cash in the Merger in lieu of a fractional share of FBA Common probably
will be treated as having received the cash in redemption of such
fractional share. The receipt of such cash should cause the recipient
to recognize capital gain or loss equal to the difference between the
amount of cash received and the portion of the holder's adjusted tax
basis in the shares of First Commercial Common allocable to the
fractional share.
5. The holding period of the shares of FBA Common received by
virtue of the Merger will include the holding period of the shares of
First Commercial Common exchanged therefor.
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FBA's and First Commercial's obligations to consummate the Merger are
subject to the condition that each shall have received from counsel for First
Commercial an opinion to the effect that the Merger will be a
"reorganization" for federal income tax purposes under Section 368 of the
Code, and that the other tax consequences of the Merger will in all material
respects be as described in this section. THE FEDERAL INCOME TAX DISCUSSION
SET FORTH ABOVE IS INCLUDED HEREIN FOR INFORMATIONAL PURPOSES ONLY. EACH
STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL TAX LAWS.
Regulatory Approvals
The Merger Agreement contemplates that, as soon as possible following
the consummation of the Merger, First Commercial Bank will be merged into a
subsidiary of FBA. Although the Merger does not require the approval of any
federal or state regulatory authority (primarily because both FBA and First
Commercial are already controlled by First Banks), consummation of the
Subsequent Bank Merger is subject to the prior approval of the FDIC and the
Commissioner. See "THE MERGER--Regulatory Approvals."
The Subsequent Bank Merger is subject to, and conditioned upon, receipt
of approvals from the FDIC and the Commissioner. Applications have been
submitted for each of such approvals.
Under the Bank Merger Act (the "Merger Act"), an application to the
FDIC is required in order for the Subsequent Bank Merger to be consummated
(no such approval is required for the Merger). The application is subject to
a review which takes into consideration, among other factors, the financial
and managerial resources and future prospects of the banks and the
convenience and needs of the communities to be served. The Merger Act
prohibits the approval of a merger (i) if it would result in a monopoly or be
in furtherance of any combination or conspiracy to monopolize or attempt to
monopolize the business of banking in any part of the United States or (ii)
if its effect would be to lessen competition substantially in any part of the
country or tend to create a monopoly, or if it would in any other manner be a
restraint of trade, unless the FDIC finds that anticompetitive effects of the
Subsequent Bank Merger are clearly outweighed by the public interest and
probable effects of the transaction in meeting the convenience and needs of
the communities to be served. The FDIC has the authority to disapprove an
application if it concludes that the combined entity would have an inadequate
capital position or if the acquiring organization does not meet the
requirements of the Community Reinvestment Act, as amended. Under the Merger
Act, the Subsequent Bank Merger may not be consummated until the expiration
of a waiting period following FDIC approval, during which time the U.S.
Department of Justice has the right to challenge the Subsequent Bank Merger
antitrust grounds. An Application was filed with the FDIC pursuant to the
Merger Act on October 15, 1997.
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An application for approval of the Subsequent Bank Merger must also be
submitted to the Commissioner. The California Financial Code provides that
the Commissioner shall approve such an application unless he finds that (1)
the effect of the acquisition would be to substantially lessen competition,
(2) the financial condition of the acquirer is such as might jeopardize the
financial stability of the acquired bank or prejudice the interests of the
depositors, creditors or stockholders of the acquired bank or the acquirer,
or (3) the proposed acquisition is unfair, unjust or inequitable to the
acquired bank or the acquirer. The Commissioner may impose such conditions
as he deems reasonable, necessary or advisable in the public interest. An
application for approval of the Subsequent Bank Merger was filed with the
Commissioner on October 15, 1997.
FBA anticipates the necessary approvals will be granted during the
fourth quarter of 1997, but there is no assurance that such approval will be
forthcoming or the timing thereof.
Charter and By-laws of FBA
Pursuant to the Merger Agreement, the Restated Certificate of
Incorporation and By-laws of FBA as in effect at the Effective Time will
remain its Restated Certificate of Incorporation and By-laws following the
Merger and unless and until amended.
Appraisal Rights of First Commercial Stockholders
Each of First Commercial Stockholder has the right to demand the
appraised value of the shares of First Commercial Common held by such
stockholder, in cash in lieu of the Merger consideration if the stockholder
follows the procedures set forth under Section 262 of the General Corporation
Law of the State of Delaware ("DGCL"). The following summary of the
provisions of Section 262 is qualified in its entirety by the text of Section
262, set forth in Appendix D hereto.
Under the DGCL, a First Commercial Stockholder may demand an appraisal
by the Delaware Chancery Court of the fair value (as determined pursuant to
Section 262 of the DGCL) of First Commercial Common and payment of the fair
value of the stockholder's shares in cash in lieu of the Merger
consideration, if the Merger is consummated. FBA, as the surviving
corporation, will pay such fair value to each First Commercial Stockholder
who: (a) files with First Commercial, prior to the vote at the First
Commercial Special Meeting, a written demand for an appraisal of the fair
value of his, her, or its shares of First Commercial Common; (b) does not
vote in favor of the Merger; (c) continues to hold his, her, or its shares of
First Commercial Common through the Effective Time; and (d) does not
appropriately withdraw the demand for appraisal. Such demand shall be
sufficient if it reasonably informs First Commercial of the identity of the
stockholder and that the stockholder intends thereby to demand an appraisal
of his, her, or its shares of First Commercial Common.
A VOTE AGAINST THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT WILL
NOT, BY ITSELF, BE REGARDED AS A WRITTEN OBJECTION
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FOR PURPOSES OF ASSERTING APPRAISAL RIGHTS. A VOTE IN FAVOR OF THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT WILL CONSTITUTE A WAIVER OF A STOCKHOLDER'S
APPRAISAL RIGHTS.
All written demands for appraisal should be addressed to: First
Commercial Bancorp, Inc., 135 North Meramec, St. Louis, Missouri 63105,
Attention: Donald W. Williams, President. Demands for appraisal must be
received before the taking of the vote concerning the Merger Agreement at the
First Commercial Special Meeting, and should be executed by, or on behalf of,
the holder of record.
To be effective, a demand for appraisal must be executed by or for the
stockholder of record as such stockholder's name appears on his, her, or its
stock certificate(s). Only stockholders holding shares of First Commercial
Common as of the Record Date continuously through the Effective Time may
demand appraisal rights. Demands for appraisal cannot be made by the
beneficial owner if he or she does not also hold the shares of record. The
beneficial holder must, in such case, have the registered owner submit the
required demand in respect of such shares.
Within 10 days after the Effective Time, FBA (as the surviving
corporation in the Merger) must give written notice that the Merger has
become effective to each stockholder who filed a written demand for appraisal
and who did not vote in favor of the Merger Agreement. If at any time within
the 60-day period after the Effective Time, a stockholder of First Commercial
withdraws a demand for appraisal, then the stockholder will be deemed to have
accepted the exchange terms offered pursuant to the Merger Agreement. After
the 60-day withdrawal period, a First Commercial Stockholder may effectively
withdraw a demand for appraisal only with the consent of FBA. Within 120
days after the Effective Time, any First Commercial Stockholder who has
validly perfected appraisal rights (as described above) shall be entitled,
upon written request, to receive from FBA a statement setting forth the
aggregate number of shares of First Commercial Common not voted in favor of
the Merger with respect to which demands for appraisal were received and the
aggregate number of holders of such shares. FBA shall respond to such
request within 10 days after receipt or within 10 days after the date of the
First Commercial Special Meeting, whichever is later.
Anytime within 120 days after the Effective Time, FBA or any First
Commercial Stockholder seeking appraisal may file a petition in the Delaware
Court of Chancery demanding a determination of the value of the First
Commercial Common held by all stockholders seeking appraisal. The DGCL
contemplates a single proceeding in the Delaware Court of Chancery that will
apply to all First Commercial Stockholders who have perfected appraisal
rights, whether or not such stockholders have individually filed a petition
seeking appraisal with the Court of Chancery. If neither FBA nor any of the
First Commercial Stockholders who have perfected their appraisal rights have
filed a petition in the Court of Chancery within the 120-day period following
the Effective Time, such appraisal rights will be waived, and the
stockholders will only be entitled to receive, upon surrender of a First
Commercial Certificate, the number of shares of FBA Common to which such
stockholders are entitled pursuant to the Merger Agreement.
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If a petition for appraisal is filed by a stockholder, a copy of the
petition shall be served on FBA, which then will have 20 days after such
service to file with the Register of the Delaware Court of Chancery a
verified list of First Commercial Stockholders who have perfected appraisal
rights but have not yet reached agreement as to value with FBA. If the
petition is filed by FBA, such verified list must accompany the filing. The
Register, if so ordered by the Court, will give notice of the time and place
fixed for hearing of the petition, by registered or certified mail, to FBA
and each stockholder named on the verified list. Such notice shall also be
published at least one week prior to the hearing in one or more newspapers of
general circulation in Wilmington, Delaware, and in such other publications
as directed by the Court.
The Court of Chancery shall conduct a hearing on the petition for
appraisal at which the Court will determine the First Commercial Stockholders
who have properly perfected appraisal rights with respect to their shares and
may require such stockholders to submit their First Commercial Certificates
to the Register of the Court for notation of the pendency of the appraisal
proceeding thereon. Failure to comply with such direction may result in
dismissal of the proceeding as to such non-complying stockholder. After
determining the stockholders entitled to appraisal, the Court, after taking
into account all relevant factors, will appraise the shares, determining
their fair value exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Upon application of either FBA or any of the stockholders entitled to
appraisal, the Court may permit discovery or other pretrial proceedings and
may proceed to trial prior to a final determination of the stockholders
entitled to appraisal. Any stockholder whose name appears on the verified
list submitted by FBA may participate in the appraisal proceedings until it
is finally determined by the Court that such stockholder is not entitled to
appraisal rights. The judgment shall be payable only upon and simultaneously
with the surrender to FBA of the applicable First Commercial Certificate(s).
Section 262 provides fair value is to be "exclusive of any element of
value arising from the accomplishment or expectation of the merger." The
Delaware Supreme Court has construed Section 262 to mean that "elements of
future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and are not the product of
speculation, may be considered." First Commercial Stockholders who are
considering seeking an appraisal should bear in mind that the fair value of
their shares of First Commercial Common determined under Section 262 could be
more than, the same as, or less than the consideration they are to receive
pursuant to the Merger Agreement, and that an opinion of an investment
banking firm as to fairness is not an opinion as to fair value under Section
262.
Costs of the appraisal proceeding may be assessed against the parties
thereto (i.e., FBA and the stockholders participating in the appraisal
proceeding) as the Court deems equitable in the circumstances. Additionally,
upon the application of any stockholder who has made a demand for appraisal,
the Court may determine the amount of interest, if any, to be paid
upon the value of the stock for which stockholders have perfected
appraisal rights. The Court may order all or a portion of the expenses
incurred by any stockholder, including reasonable attorneys' fees and the
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fees and expenses of experts, to be charged pro rata against the value of all
of the shares entitled to an appraisal.
Any stockholder who has demanded appraisal rights will not, after the
Effective Time, be entitled to vote the stock subject to such demand for any
purpose or to receive payment of dividends or any other distribution with
respect to such shares (other than dividends or distributions, if any,
payable to holders of record as of the Record Date) or to receive the payment
of the consideration provided for in the Merger Agreement. However, if no
petition for an appraisal is filed within 120 days after the Effective Time
or if such stockholder delivers to FBA a written withdrawal of his demand for
an appraisal and an acceptance of the Merger, either within 60 days after the
Effective Time or thereafter with the written approval of FBA, then the right
of such stockholder to an appraisal will cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery will be dismissed
as to any stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262
OF THE DGCL WILL CAUSE THE STOCKHOLDER TO LOSE HIS, HER, OR ITS APPRAISAL
RIGHTS. CONSEQUENTLY, ANY FIRST COMMERCIAL STOCKHOLDER DESIRING TO EXERCISE
APPRAISAL RIGHTS IS URGED TO CONSULT A LEGAL ADVISOR BEFORE ATTEMPTING TO
EXERCISE SUCH RIGHTS.
THE PRECEDING DISCUSSION IS A SUMMARY OF THE PROVISIONS REGARDING
APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE TEXT
OF SECTION 262 OF THE DGCL WHICH IS ATTACHED HERETO AS APPENDIX D.
FBA Stockholders do not have appraisal rights under the DGCL in
connection with the Merger.
Management and Operations After the Merger
The directors and officers of FBA immediately prior to the Effective
Time will continue to be the directors and officers following the Merger.
New York Stock Exchange Listing
FBA Common is listed and traded on the NYSE, and FBA has agreed in the
Merger Agreement to use its best efforts to cause the shares of FBA Common to
be issued in the Merger to be listed on the NYSE.
Exchange of First Commercial Certificates
Prior to the Effective Time, FBA will appoint Chase Mellon Stockholder
Services, or another entity to which First Commercial has no reasonable
objection, as the Exchange Agent. A letter of transmittal and other
appropriate and customary exchange materials will be mailed by the
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Exchange Agent to each holder of record of First Commercial Common for use in
exchanging First Commercial Certificates for FBA Certificates. No transfer
of First Commercial Common will be effected on the stock transfer books of
First Commercial at or after the Effective Time.
To effect a proper surrender and exchange, the First Commercial
Certificates must be surrendered to the Exchange Agent with properly executed
and completed letters of transmittal. The Exchange Agent will have reasonable
discretion to determine whether letters of transmittal have been properly
completed and executed and to disregard immaterial defects.
Neither certificates for fractions of shares of FBA Common nor scrip
certificates for such fractions will be issued, and holders of First
Commercial Common who would otherwise be entitled to receive fractions of
shares of FBA Common will not have the rights of an FBA Stockholder with
respect to such fractions of shares, but will receive in lieu thereof cash in
an amount equal to such fraction multiplied by the closing price of a share
of FBA Common on the day next preceding the Effective Time. If more than one
First Commercial Certificate is surrendered for the account of the same First
Commercial Stockholder, the number of full shares of FBA Common to be issued
will be computed on the basis of the aggregate number of shares of First
Commercial Common represented by all of the First Commercial Certificates so
surrendered.
First Commercial Stockholders should not surrender their First
Commercial Certificates for exchange until a letter of transmittal,
instructions and other exchange materials are received from the Exchange
Agent. However, First Commercial Stockholders may wish to notify First
Commercial prior to the receipt of such materials if their First Commercial
Certificates are lost, stolen, destroyed or not properly registered, in order
to begin the process of obtaining replacement certificates.
Accounting Treatment
The Merger will be accounted for by FBA as follows:
(1) First Banks' interest in First Commercial will be accounted for
by FBA at First Banks' historical cost. The accounting treatment for First
Banks' interest in First Commercial will be applied consistently with the
accounting procedures applicable to the combination of entities under common
control.
First Banks' historical cost basis in First Commercial was determined
under the purchase method of accounting, effective upon First Banks'
acquisition of First Commercial on August 23, 1995. Accordingly, the
consolidated financial statements of First Banks include the financial
position and results of operation for the periods subsequent to the
acquisition date, and the assets acquired and liabilities assumed were
recorded at fair value at the acquisition date.
Effective with the Merger, involving two entities under the common
control of First Banks, the consolidated financial statements of FBA will be
restated to reflect the financial
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condition and results of operations of First Commercial for the periods
subsequent to August 23, 1995.
(2) The amount attributable to the interests of the minority
stockholders of First Commercial in its net assets will be accounted for by
FBA under the purchase method of accounting. Therefore, such amount will be
reflected by FBA at fair value, as determined by the market value of FBA
Common exchanged for that minority interest pursuant to the Merger Agreement.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement, which is attached as Appendix A to this Joint Proxy Statement-
Prospectus and is incorporated herein by reference. The summary is qualified
in its entirety by reference to the Merger Agreement.
The Merger
The Merger Agreement provides that, following the approval and adoption
of the Merger by the FBA Stockholders and the First Commercial Stockholders,
the grant of all necessary regulatory approvals and the satisfaction or
waiver of the other conditions to the Merger, First Commercial will be merged
with and into FBA. The Merger will become effective at the Effective Time,
and the capital stock of First Commercial will be converted into FBA Common,
as discussed elsewhere in this Joint Proxy Statement-Prospectus. See "THE
MERGER--Terms of the Merger" and "--Exchange of First Commercial
Certificates."
Representations and Warranties of FBA And First Commercial
Representations and Warranties of FBA. The Merger Agreement contains
representations and warranties of FBA made to First Commercial generally
including, but not limited to: (i) FBA's organization, standing and similar
corporate matters; (ii) the execution, delivery and enforceability of the
Merger Agreement; (iii) the delivery to First Commercial of certain of FBA's
financial statements; (iv) the material accuracy, as of the date of this
Joint Proxy Statement-Prospectus, of information provided by FBA herein, and
the material compliance with law of the form of documents which FBA is
responsible for filing with any governmental entity in connection with the
Merger; (v) the filing of all tax returns, fairly reflecting the information
required to be presented therein, and the adequacy of all provisions for
accrued, unpaid taxes in accordance with generally accepted accounting
principles; (vi) the incidence by FBA of any fees for brokers or finders in
connection with the Merger and related transactions; (vii) the adequacy of
FBA's allowance for loan losses; (viii) except as disclosed in FBA's
financial statements or incurred in the ordinary course of business
consistent with past practice, the absence since June 30, 1997 of liabilities
material to FBA, and the absence of changes or other events involving a
material adverse change in the financial condition, the results of operations
or the business or prospects of FBA; (ix) the absence of potentially material
litigation against FBA and its subsidiaries except as disclosed to First
Commercial; (x) identification of all of FBA's subsidiaries; (xi) the absence
of any regulatory actions against FBA or any of its subsidiaries; (xii)
identification of all of its properties, contracts, employee benefit plans
and other agreements meeting certain criteria specified in the Merger
Agreement; (xiii) proper accounting for the securities in FBA's investment
portfolio; (xiv) the status of the loans in FBA's loan portfolio and the
documentation relating thereto; (xv) the status of its employee benefit plans
under applicable laws and regulations; (xvi) legal title to its properties
and the existence and nature of insurance relating thereto; (xvii) the nature
and status of any loans, contracts and other arrangements with any of FBA's
officers, directors or employees or any of their related interests; and
(xviii) the conduct of FBA as it relates to various environmental laws and
regulations.
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Representations and Warranties of First Commercial. The Merger
Agreement contains representations and warranties of First Commercial made to
FBA generally including, but not limited to: (i) First Commercial's
organization, standing and similar corporate matters; (ii) the execution,
delivery and enforceability of the Merger Agreement; (iii) the delivery to
FBA of certain of First Commercial's financial statements; (iv) the material
accuracy, as of the date of this Joint Proxy Statement-Prospectus, of
information provided by First Commercial herein, and the material compliance
with law of the form of documents which First Commercial is responsible for
filing with any governmental entity in connection with the Merger; (v) the
filing of all tax returns, fairly reflecting the information required to be
presented therein, and the adequacy of all provisions for accrued, unpaid
taxes in accordance with generally accepted accounting principles; (vi) the
incurrence by First Commercial of any fees for brokers or finders in
connection with the Merger and related transactions; (vii) the adequacy of
First Commercial's allowance for loan losses; (viii) except as disclosed in
First Commercial's financial statements or incurred in the ordinary course of
business consistent with past practice, the absence since June 30, 1997 of
liabilities material to First Commercial, and the absence of changes or other
events involving a material adverse change in the financial condition, the
results of operations or the business or prospects of First Commercial; (ix)
the absence of potentially material litigation against First Commercial and
its subsidiaries except as disclosed to FBA; (x) identification of all of
First Commercial's subsidiaries; (xi) the absence of any regulatory actions
against First Commercial or any of its subsidiaries; (xii) identification of
all of its properties, contracts, employee benefit plans and other agreements
meeting certain criteria specified in the Merger Agreement; (xiii) proper
accounting for the securities in First Commercial's investment portfolio;
(xiv) the status of the loans in First Commercial's loan portfolio and the
documentation relating thereto; (xv) the status of its employee benefit plans
under applicable laws and regulations; (xvi) legal title to its properties
and the existence and nature of insurance relating thereto; (xvii) the nature
and status of any loans, contracts and other arrangements with any of First
Commercial's officers, directors or employees or any of their related
interests; and (xviii) the conduct of First Commercial as it relates to
various environmental laws and regulations.
Conditions to Consummation of the Merger
Conditions to the Obligations of Each Party to Effect the Merger. The
obligations of each of FBA and First Commercial to effect the Merger are
subject to various conditions (which may be waived), including, in addition
to other customary closing conditions, the following:
(i) The FBA Stockholders and the First Commercial Stockholders shall
have approved the Merger by the votes required by applicable
Corporate Law;
(ii) The Subsequent Bank Merger and the Branch Exchange shall have
been approved by all necessary parties, all necessary
governmental approvals for the Merger and the Subsequent Bank
Merger shall have been obtained, and any waiting periods imposed
by any applicable law or regulation for the consummation of the
Merger and the Subsequent Bank Merger shall have expired;
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(iii) There shall not be any injunction or restraining order preventing
the consummation of the Merger in effect, nor shall any
proceeding by any governmental entity seeking the same be
pending, nor shall the Merger be illegal under any applicable
law;
(iv) FBA and First Commercial shall each have received the opinion of
Suelthaus & Walsh, P.C., counsel to First Commercial, to the
effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368 of
the Code, that no gain or loss will be recognized by FBA or First
Commercial as a result of the Merger, and that all stockholders
of First Commercial, to the extent they receive only shares of
FBA Common, will recognize no gain or loss as a result of the
Merger; and
(v) First Banks shall have exchanged approximately $10 million in
outstanding debt of FBA for 804,000 shares of FBA Common.
Conditions to the Obligations of FBA to Effect the Merger. The
obligations of FBA to effect the Merger are subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional
conditions:
(i) As of the Closing Date of the Merger, the representations and
warranties of First Commercial set forth in the Merger Agreement
shall be true in all material respects;
(ii) First Commercial shall have performed in all material respects
its obligations under the Merger Agreement;
(iii) FBA shall have received certain documents required to be
delivered by First Commercial, including certificates relating to
the legal status of First Commercial and a legal opinion from
counsel to First Commercial;
(iv) First Commercial Stockholders owning no more than ten percent of
the outstanding First Commercial Common shall have perfected the
right to dissent from the Merger; and
(v) FBA shall have received an opinion from Rauscher Pierce to the
effect that the transactions contemplated by the Merger Agreement
are fair to the FBA Stockholders from a financial point of view,
and such opinion shall not have been withdrawn as of the date of
mailing of this Joint Proxy Statement-Prospectus.
Conditions to the Obligations of First Commercial to Effect the Merger.
The obligations of First Commercial to effect the Merger are subject to the
fulfillment or waiver prior to the Effective Time of the following additional
conditions:
(i) As of the Closing Date of the Merger, the representations and
warranties of FBA set forth in the Merger Agreement shall be true
in all material respects;
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(ii) FBA shall have performed in all material respects its obligations
under the Merger Agreement;
(iii) First Commercial shall have received certain documents required
to be delivered by FBA, including certificates relating to the
legal status of FBA and a legal opinion from counsel to FBA; and
(iv) First Commercial shall have received an opinion from Mercer
Financial to the effect that the transactions contemplated by the
Merger Agreement are fair to the First Commercial Stockholders
from a financial point of view, and such opinion shall not have
been withdrawn as of the date of mailing of this Joint Proxy
Statement-Prospectus.
Conduct of Business Pending the Merger
Pursuant to the terms of the Merger Agreement, FBA and First Commercial
are generally required to conduct their respective businesses only in the
ordinary and usual course consistent with past practices. Furthermore, the
Merger Agreement contains certain specific restrictions upon the conduct of
each company's business pending the Merger. In particular, the Merger
Agreement provides that neither FBA nor First Commercial will: (i) declare or
pay any dividend or make any other distribution to stockholders, whether in
cash, stock or other property; or (ii) effect a reclassification,
recapitalization, split-up, exchange of shares, readjustment or other similar
change in or to any capital stock, or otherwise reorganize or recapitalize.
First Commercial is also prohibited from borrowing funds or guaranteeing the
obligations of others, except in the ordinary course of business. The Merger
Agreement does not prohibit First Commercial's paying to its stockholders (i)
dividends which were accrued but not paid as of the date of the Merger
Agreement, or (ii) "Appreciation Rights" arising from the agreement pursuant
to which First Banks acquired control of First Commercial, as such payments
become due and owing.
The Merger Agreement further provides that without the prior written
consent of the other party, FBA, First Commercial and their respective
subsidiaries will not: (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 employees, grant any stock options or, except
as required by law, adopt or make any change in any employee benefit plan,
agreement, payment or arrangement made to, for or with any such officers or
employees; (ii) 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, except in the ordinary course of business; (iii) enter into any
agreement, contract or commitment having a term in excess of three 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; (iv) except in the ordinary course of business, place on
any of its assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; (v) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to such entity or any claims which
such entity may possess, or waive any material rights of substantial value;
(vi) sell or otherwise dispose of any real property or any material amount of
any tangible or intangible personal property, other than properties acquired in
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foreclosure or otherwise in the ordinary collection of indebtedness; (vii)
violate any law, statute, rule, governmental regulation or order, which
violation might have a material adverse effect on such entity's business,
financial condition, or earnings; (viii) 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 (ix) increase or decrease the
rate of interest paid on time deposits or on certificates of deposit, except
in a manner consistent with past practices.
FBA and First Commercial are also required to use their respective best
efforts to perform and fulfill all conditions and obligations to be performed
or fulfilled under the Merger Agreement and to effect the Merger in
accordance with the terms and provisions thereof. The Merger Agreement
requires each party to furnish to the other in a timely manner all
information, data and documents requested to obtain any necessary regulatory
or other approvals of the Merger and to deliver monthly unaudited
consolidated balance sheets and profit and loss statements prepared for
internal use, Reports of Condition and Income for each quarterly period
completed prior to the Closing Date, and all other financial reports or
statements submitted to regulatory authorities.
Additional Agreements
Additional Covenants of FBA and First Commercial. The Merger Agreement
contains additional covenants of each of FBA and First Commercial to, among
other things: (i) allow the other party reasonable access to its books,
records and properties; (ii) cooperate with one another and use their best
efforts to obtain required regulatory approvals of the Merger; (iii) consult
with one another as to the form of any press release or other public
disclosures related to the Merger; (iv) promptly notify the other party in
the event of any breach of the Merger Agreement and use its best efforts to
prevent or remedy such a breach; (v) perform and fulfill its obligations
under the Merger Agreement; and (vi) maintain the confidentiality of
information received from the other party and to cooperate in the development
and distribution of public disclosures regarding the Merger.
Additional Covenants of FBA. The Merger Agreement requires FBA to file
the Registration Statement, use its best efforts to cause the Registration
Statement to become effective and to hold a meeting of FBA Stockholders to
vote on the Merger. It also contains the covenant of FBA following the
Effective Time, to indemnify, defend and hold harmless the present and former
officers, directors, employees and agents of First Commercial and its
subsidiaries for all losses, expenses, claims, damages or liabilities arising
out of actions or omissions occurring at or prior to the Effective Time to
the full extent permitted by law and under First Commercial's Certificate of
Incorporation; see "INTERESTS OF CERTAIN PERSONS IN THE MERGER."
Additional Covenants of First Commercial. The Merger Agreement
contains additional covenants of First Commercial, among other things: (i) to
cooperate in the preparation and filing of the Registration Statement and in
calling and holding the First Commercial Special Meeting; and (ii) to obtain
any necessary consents for the Merger under applicable leases, licenses,
contracts and other instruments.
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Termination; Damages
Termination. The Merger Agreement may be terminated at any time prior
to the Closing Date, either before or after approval by the stockholders of
FBA or First Commercial, by the mutual consent of the parties; or by either
FBA or First Commercial at any time (i) if the other party materially
breaches any of its representations, warranties and agreements made under the
Merger Agreement and the breach is not cured within 30 days after written
notice has been provided to the breaching party; (ii) the conditions to the
obligations of a party are not satisfied or waived prior to the Closing Date
and if the applicable 30-day cure period has lapsed, after written notice has
been provided by such party to the other party; (iii) the Effective Time has
not occurred prior to March 15, 1998; or (iv) if, as a condition to any
required regulatory approval, FBA would be required to change its business or
operations in a manner material and adverse to FBA.
In addition, the Merger Agreement will be deemed to have terminated if
regulatory approval of the Merger has been finally denied. Either party may
terminate the Merger Agreement if the other party becomes a party to or
subject to any new or amended written agreement, memorandum, cease and desist
order seeking or imposing civil money penalties or other written regulatory
enforcement action or formal legal proceeding of any federal or state
regulatory authority.
Damages. The Merger Agreement provides that a party breaching any of
its obligations or failing to consummate the Merger for any reason other than
the failure of the other party to perform its obligations or the fact that
one or more of the conditions to such party's obligation to consummate the
Merger shall not have been satisfied, may be liable to the other party for
damages, which would be measured by the out-of-pocket expenses of the non-
breaching party incurred in connection with the Merger Agreement, including
any fees paid to third parties. The amount of such damages are limited by
the Merger Agreement to a maximum of $100,000.
Amendment and Waiver
The Merger Agreement may be amended at any time by action authorized by
the Boards of Directors of FBA and First Commercial, and each party may
extend the time for performance of the obligations of the other party, waive
inaccuracies in representations and warranties and waive compliance with any
agreements or conditions contained in the Merger Agreement.
Expenses
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expense, except
as otherwise provided with respect to damages recoverable by a party due to a
breach of the Merger Agreement by the other party. See "--Additional
Agreements--Termination; Damages."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Directors and executive officers of First Commercial have interests in
the Merger that are in addition to their interests as First Commercial
Stockholders. These interests are described in more detail below.
Indemnification
In the Merger Agreement, FBA has agreed to indemnify and to advance
expenses in matters that may be subject to indemnification to persons who
served as directors and officers of First Commercial or any subsidiary of
First Commercial on or before the Effective Time with respect to liabilities
and claims (and related expenses) made against them resulting from their
service as such prior to the Effective Time, in accordance with and subject
to the provisions of the First Commercial Certificate and By-laws in effect
on the date the Merger Agreement was executed.
BUSINESS OF FBA
Description of Business
FBA, a bank holding company, was organized as a Delaware corporation in
1978 and was known as BancTEXAS Group, Inc. until the corporate name changed
in 1995. FBA's executive office was recently relocated from Houston, Texas
to 135 North Meramec, Clayton, Missouri. The principal function of FBA is to
assist the management of its two banking subsidiaries, which operate under
the day-to-day management of their own officers with guidance from FBA.
At June 30, 1997, FBA had approximately $373.6 million in total assets,
$247.6 million in total loans net of unearned discount, $312.8 million in
total deposits and $33.9 million in total stockholders' equity.
Through eight banking locations of Sunrise and BankTEXAS in Roseville
and Rancho Cordova, California and Houston, Dallas, Irving and McKinney,
Texas, FBA offers a broad range of commercial and personal banking services
including certificates of deposit, individual retirement and other time
deposit accounts, checking and other demand deposit accounts, interest
checking accounts, savings accounts and money market accounts. Loans include
commercial and industrial, commercial and residential real estate, real
estate construction and development and consumer loans. Other financial
services include automatic teller machines, telephone banking, lockbox
deposits, cash management services, savings accounts, credit-related
insurance and safe deposit boxes.
FBA and its subsidiary banks purchase certain services and supplies,
including data processing services, internal auditing, loan review, income
tax preparation and assistance, accounting, asset/liability and investment
services, loan servicing and other management and
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administrative services, through FBA's majority stockholder, First Banks.
Additional information regarding FBA, including descriptions of its management
and Board of Directors, the compensation of its executive officers and the
payment to First Banks for services provided to FBA pursuant to management and
other contracts, is set forth herein under the captions "BENEFICIAL OWNERSHIP
INFORMATION--FBA" and "PROPOSAL NUMBER FOUR AT THE FBA ANNUAL MEETING--ELECTION
OF DIRECTORS."
Recent Developments
On July 28, 1997, FBA and Surety entered into a definitive agreement
for the Surety Merger, which is subject to certain conditions including the
approval of the stockholders of Surety (but not of FBA) and necessary
regulatory approvals. In the Surety Merger, Surety will be merged with a
subsidiary of FBA and, subject to certain potential adjustments, the
shareholders of Surety will receive a combination of cash consideration of
approximately $3.5 million and approximately 264,600 shares of FBA Common, as
determined based on a formula set forth in the agreement between FBA and
Surety. The pro forma financial information included in this Joint Proxy
Statement-Prospectus includes detailed information about the pro forma
financial effects of the Surety Merger on FBA (based in part on certain
assumptions regarding the actual number of shares of FBA Common and the
absence of any adjustments in the relative amount of consideration to be paid
to the shareholders of Surety in the form of cash and FBA Common), as well as
comparable information reflecting certain effects of the merger of FBA and
First Commercial. See "PRO FORMA FINANCIAL INFORMATION."
It is currently anticipated that the Surety Merger will be consummated
during the fourth quarter of 1997, although there can be no assurance that
all of the conditions to that merger will be satisfied or the timing thereof.
On September 22, 1997, FBA executed an agreement providing for the
acquisition of Pacific Bay. The agreement provides that FBA will acquire
Pacific Bay, which had total assets of $38.7 million as of June 30, 1997, for
aggregate cash consideration of $4.2 million. Subject to the approval of
regulatory authorities and the shareholders of Pacific Bay and the
satisfaction of other customary conditions, FBA anticipates that the
acquisition will occur during the first quarter of 1998.
DESCRIPTION OF FBA CAPITAL STOCK
FBA is presently authorized by its Certificate of Incorporation to
issue three classes of capital stock: FBA Common, Class B Common and
preferred stock. The following description of the three classes of stock
does not purport to be complete and is subject in all respects to the
applicable provisions of Delaware law and FBA's Restated Certificate of
Incorporation.
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Common Stock
The Restated Certificate of Incorporation of FBA authorizes the
issuance of up to 6,666,666 shares of FBA Common. The holders of FBA Common
are entitled to one vote for each share with respect to all matters voted
upon by stockholders, including the election of directors, and are entitled
to receive dividends when, as and if declared by the FBA Board of Directors
out of funds legally available therefor. No preemptive rights attach to the
ownership of shares of FBA Common, and no personal liability is imposed on
the holder thereof under Delaware law. Chase Mellon Stockholder Services is
the transfer agent and registrar for the FBA Common. As of October 8, 1997,
1,060,709 shares of FBA Common were outstanding.
Class B Common
FBA's Restated Certificate of Incorporation authorizes the issuance of
up to 4,000,000 shares of Class B Common. As of October 8, 1997, 2,500,000
shares were outstanding. In 1994, FBA sold 2,500,000 shares of Class B
Common to First Banks in a private placement in exchange for $30 million
cash. As a result of this transaction, First Banks became the owner of
approximately 65% of the then outstanding voting stock of FBA, which includes
the Class B Common and FBA Common. The Class B Common has the same voting
rights per share as FBA Common, with which the Class B Common votes as a
single class, unless otherwise required by law or FBA's Restated Certificate
of Incorporation, and the two classes of stock are generally equivalent
except that the Class B Common is not registered with the SEC and not listed
on any exchange. In the event FBA were to commence the payment of dividends
to its stockholders, the Class B Common would receive dividends only to the
extent that dividends on FBA Common exceed $0.45 per share annually. Subject
to limited exceptions, First Banks is precluded by agreement with FBA from
transferring shares of Class B Common prior to August 31, 1999, except to an
affiliate of First Banks. First Banks has the contractual right to purchase
additional shares of Class B Common if a sufficient number of additional
shares of FBA Common are issued to cause First Banks' voting power to fall
below 55%, at prices to be determined based on a formula related to the book
value per share of common stock. Each share of Class B Common issued in 1994
is convertible into one share of FBA Common at any time after August 31, 1999
at the option of First Banks.
Preferred Stock
FBA's Restated Certificate of Incorporation authorizes the issuance of
up to 3,000,000 shares of preferred stock, $1.00 par value per share. The
Board of Directors of FBA is authorized to establish one or more series of
such stock and to fix the voting powers, designations, preferences and the
rights, qualifications, limitations or restrictions of each series
authorized. No shares of preferred stock were outstanding as of the date of
this Joint Proxy Statement-Prospectus, nor have any series been authorized
for issuance by the Board of Directors.
BUSINESS OF FIRST COMMERCIAL
First Commercial is a Sacramento, California-based bank holding company
reincorporated in the State of Delaware in 1990. First Commercial operates
through its sole
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subsidiary, First Commercial Bank, a California state chartered bank which
commenced operations in 1979. First Commercial Bank operates a commercial
banking business through a main banking house in Sacramento and five branch
offices located in Roseville (2), San Francisco, Concord, and Campbell,
California.
At June 30, 1997, First Commercial had approximately $159.2 million in
total assets, $99.4 million in total loans, net of unearned discount, $141.6
million in total deposits, and $7.0 million in total stockholders' equity.
First Commercial Bank offers a broad range of commercial and personal
banking services, including certificate of deposit accounts, individual
retirement and other time deposit accounts, checking and other demand deposit
accounts, interest checking accounts, savings accounts, and money market
accounts. The Bank's lending services include commercial and industrial,
agricultural, real estate construction and development, residential real
estate, and consumer loans. Other financial services include credit-related
insurance, automatic teller machines, telephone banking, cash management
services and safe deposit boxes.
First Commercial Bank focuses on marketing a full range of financial
services to its business and consumer customers in the metropolitan areas of
California where its six offices are located. First Commercial Bank's
business customer base is diversified in the areas of manufacturing, service
industries, wholesale and retail trade, transportation, and real estate
construction. The commercial banking activities of First Commercial Bank are
directed toward developing and supporting small- to medium-sized businesses
within its service area, by providing a full range of financial services.
First Commercial Bank also markets its financial services to individuals in
order to develop core deposits and additional sources of noninterest income.
First Commercial grew substantially during the 1980's, primarily
through acquisitions. Between 1988 and 1992, First Commercial focused its
lending activities on real estate construction loans and loans to small- and
medium-sized businesses. First Commercial funded a substantial portion of
its lending activities through deposits from title insurance and escrow
companies, and from small- to medium-sized businesses. By December 31, 1993,
First Commercial's total assets had reached $349.8 million. Included in this
were $83.7 million of real estate construction and secured real estate loans,
which represented 42.9% of the loan portfolio. This asset growth was funded
by $323.8 million of deposits, of which $86.5 million, or 26.7%, were title
and escrow accounts. This focused lending and deposit generation strategy
subjected the Company to certain risks which contributed significantly to
First Commercial's poor financial performance throughout the mid-1990's.
The downturn in the California economy during the early 1990's,
particularly related to the real estate market, led to significant asset
quality problems at First Commercial. As a result, First Commercial reported
losses of $3.5 million, $7.3 million, $18.2 million, and $7.4 million for the
years ended December 31, 1992, 1993, 1994, and 1995, respectively. These
substantial losses, and related asset quality problems, caused regulatory
authorities to place First Commercial and First Commercial Bank under certain
regulatory orders, which placed significant restrictions on their operations.
As a result of the recapitalization discussed below,
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combined with numerous other actions which have been taken by First Commercial
these regulatory orders have been terminated. Although First Commercial incurred
a loss of $570,000 for the year ended December 31, 1996, this loss was comprised
of a loss of $1.16 million during the first quarter of 1996, followed by net
income of $590,000 during the remainder of 1996.
As a result of its continuing losses, by June 30, 1995, First
Commercial's leverage capital ratio had decreased to (.23)%, reflecting its
negative capital position, and First Commercial Bank's leverage capital ratio
had decreased to 1.08%, causing it to be classified as "critically
undercapitalized" for regulatory purposes and subject to the Prompt
Corrective Action provisions of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989. As a consequence, First Commercial was required
to seek additional capital or face the possible imposition of a
conservatorship or receivership within 90 days.
In response to its continuing financial deterioration, as of June 30,
1995, First Commercial and First Commercial Bank entered into a Stock
Purchase Agreement with First Banks and Mr. James F. Dierberg, President and
Chief Executive Officer of First Banks, and was later amended and restated.
The Stock Purchase Agreement, and subsequent agreements entered into with
First Banks, resulted in the following series of transactions (numbers of
shares of First Commercial Common are adjusted to reflect the 1-for-125
reverse stock split effected December 6, 1996):
a. As of June 30, 1995, First Commercial Bank issued 750,000 shares
of non-voting preferred stock in exchange for $1.5 million.
b. On August 23, 1995, First Banks purchased 116,666,666 shares of
First Commercial Bank common stock for $3.5 million.
c. On October 31, 1995, First Banks purchased a convertible
debenture of First Commercial for $1.5 million, the proceeds of
which were used to increase the capital of First Commercial Bank.
d. Following the completion of a Special Stockholders' Meeting on
December 27, 1995, the shares of First Commercial Bank preferred
stock and common stock held by First Banks were exchanged for
400,000 shares of First Commercial Common. In addition, First
Banks purchased a convertible debenture of First Commercial for
$5.0 million, the proceeds of which, except for $250,000 retained
by First Commercial, were contributed to the capital of First
Commercial Bank.
e. On December 28, 1995, First Banks purchased an additional 120,000
shares of First Commercial Common for $1.5 million, the proceeds
of which were used to increase the capital of First Commercial
Bank.
As of December 31, 1996, First Commercial's Board of Directors elected
to implement an accounting change which is referred to as a
"quasi-reorganization." This is an accounting procedure which resulted in
restating the carrying values of First Commercial's assets and
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liabilities to the then current fair values and eliminating the deficit that had
accumulated in previous years.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF
FIRST COMMERCIAL AND FBA
General
FBA is a Delaware corporation subject to the provisions of the DGCL,
its Restated Certificate of Incorporation (the "FBA Certificate"), and its
Amended and Restated By-laws (the "FBA By-laws"). First Commercial is a
Delaware corporation subject to the provisions of the DGCL, its Certificate
of Incorporation, as amended (the "First Commercial Certificate"), and its
Amended and Restated By-laws (the "First Commercial By-laws"). Those
stockholders of First Commercial who receive FBA Common pursuant to the
Merger will become stockholders of FBA and their rights as stockholders will
then be governed by the DGCL, the FBA Certificate, and the FBA By-laws.
The FBA Certificate authorizes the issuance by the Board of Directors,
without stockholder approval, of up to 3,000,000 shares of preferred stock,
par value $1.00 per share, in one or more series. Subject to applicable
limitations, the Board of Directors is authorized to determine the relative
voting powers, designations and preferences and the rights, qualifications,
limitations or restrictions for each series of preferred stock that may be
issued. Such rights and preferences could adversely affect the rights of
holders of FBA Common. At the present time, there are no shares of preferred
stock of FBA outstanding or authorized for issuance. The possible effect of
any such issuance upon the rights of the holders of FBA Common is not
discussed herein.
Under applicable regulatory policies, holding companies of federally
insured financial institutions such as FBA and First Banks are required to
serve as a "source of strength" for their FDIC insured subsidiaries. This
could result in FBA and/or First Banks being required by regulatory order or
directive to contribute additional capital to its bank subsidiaries, to
guarantee certain obligations of such subsidiaries or to take other actions
for the benefit of such subsidiaries requiring the investment or holding of
its capital or resources. Such a regulatory order or directive could have an
adverse impact upon the FBA Common. Financial institutions which are under
the common control of a holding company (such as FBA and First Commercial)
are also subject to assessment if one of the controlled institutions fails
and the FDIC incurs losses therefrom. No order or directive is in effect or
threatened with regard to FBA under the "source of strength" or "cross
guarantee" policies.
The following is a summary of the material differences between the
rights of holders of First Commercial Common and the rights of holders of FBA
Common. This summary is not intended to be complete and is qualified in its
entirety by reference to the applicable provisions of the DGCL, the FBA
Certificate, the FBA By-laws, the First Commercial Certificate, and the First
Commercial By-laws.
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Transferability of Stock
FBA. FBA Common is listed and traded on the NYSE. FBA has agreed in
the Merger Agreement to use its best efforts to cause the shares of FBA
Common to be issued in the Merger to be listed on the NYSE. The shares of
FBA Common into which shares of First Commercial Common are converted on the
Effective Date will be freely transferable under the Securities Act except
for shares issued to any stockholder who may be deemed to be an "affiliate"
of First Commercial for purposes of Rule 145 under the Securities Act.
First Commercial. First Commercial Common is traded on the SmallCap
Market of the Nasdaq Stock Market under the symbol "FCOB". First Commercial
was recently notified by Nasdaq that in accordance with changes in the
listing requirements for the SmallCap Market which are to become effective in
February 1998, First Commercial Common would no longer qualify for quotation
on that market. If First Commercial Common were to be removed from that
market, stockholders of First Commercial Common would be faced with very
limited ability to trade their shares if they desired to do so.
Voting Rights; Cumulative Voting
FBA. Unless otherwise required by law or the FBA Certificate, holders
of shares of FBA Common vote together with holders of FBA Class B Common, as
a single class, on all matters submitted to a vote of stockholders, with each
share being entitled to one vote per share. Pursuant to the FBA Certificate,
in all elections for directors of FBA, each holder of FBA Common and FBA
Class B Common has the right to cumulate votes by casting as many votes in
the aggregate as shall equal the number of voting shares held by such
stockholder in FBA, multiplied by the number of directors to be elected. Such
votes may be cast for one candidate or distributed among two or more
candidates.
The FBA Certificate provides that none of the provisions therein
affecting the powers, preferences, rights, qualifications, limitations or
restrictions of the FBA Class B Common may be amended or repealed without the
affirmative vote of the holders of a majority of the shares of the FBA Common
then outstanding, voting as a separate class.
First Commercial. Except as otherwise required by law or the First
Commercial Certificate, the holders of the First Commercial Common have
exclusive voting rights and powers, with each share of First Commercial
Common being entitled to one vote per share. The holders of First Commercial
Common do not have the right to cumulate their votes in elections for
directors.
Special Meetings of Stockholders; Action by Written Consent
FBA. The FBA By-laws provide that special meetings of the
stockholders, for any purpose or purposes, may be called by the Chairman of
the Board, the President, a majority of
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the Board of Directors, or the holders of not less than 50% of the outstanding
shares entitled to vote at the meeting.
The FBA By-laws further provide that any action required to be, or
which may be, taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous consent must be given to those stockholders who did not consent in
writing.
First Commercial. The First Commercial By-laws provide that special
meetings of the stockholders, for any purpose or purposes, may be called by
the Chairman of the Board, the President, a majority of the Board of
Directors, or the holders of such percentage of the outstanding shares of
First Commercial Common as may be set forth in the First Commercial
Certificate. The First Commercial Certificate provides that holders of 10
percent or more of the shares of First Commercial Common may call special
meetings of the stockholders.
The First Commercial By-laws further provide that no action required to
be, or which may be, taken at any annual or special meeting of stockholders
may be taken without a meeting of the First Commercial Stockholders.
Rights Plan
FBA. FBA has not adopted a stockholders' rights plan or any other
similar plan that would grant stockholders rights to acquire shares of FBA
Common in the event that a change-in-control or similar event occurs.
First Commercial. First Commercial has adopted a stockholders' rights
plan (the "Rights Plan") which provides that the holder of each outstanding
share of First Commercial Common is entitled to a right ("Right") to purchase
from First Commercial a unit consisting of one-hundredth of a share (a
"Unit") of Series A Participating Preferred Stock, par value $0.01 per share,
at a price of $50 in cash per Unit, subject to adjustment. The Right
attaches to each share of First Commercial Common outstanding and no separate
Rights Certificates have been distributed. The Rights would separate from
the First Commercial Common and a "Distribution Date" would occur only upon
the occurrence of certain defined events generally relating to a possible
change-in-control of First Commercial. No Distribution Date has occurred to
date. The Rights Plan provides that Rights are not exercisable until a
Distribution Date occurs.
The Rights Plan provides that any time following the Distribution Date,
if certain defined events generally relating to a possible change-in-control
of First Commercial occurs, each holder of a Right will have the right to
receive, upon exercise of the Right, shares of First Commercial Common (or,
in certain circumstances, cash, property or other securities of First
Commercial)
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<PAGE> 88
having a value equal to two times the exercise price of the Right.
Notwithstanding the foregoing, all Rights that are, or (under certain
circumstances specified in the Rights Plan) were, beneficially owned by any
Acquiring Person (as defined in the Rights Plan) will be null and void.
As described above, the Rights Plan contains certain provisions that
could deter certain takeover proposals.
Amendment of Governing Documents
FBA. Under the DGCL, the FBA Certificate may be amended if such
amendment is approved by the Board of Directors, a majority of the
outstanding stock entitled to vote thereon and a majority of the outstanding
stock of each class entitled to vote thereon, unless the certificate of
incorporation requires the vote of a greater proportion of the outstanding
stock or any class thereof. Pursuant to the foregoing, the affirmative vote
of 75% of the capital stock of FBA entitled to vote in elections of
directors, voting as a single class, is required to amend, alter, change or
repeal certain super majority voting provisions.
The FBA Certificate further provides that none of the provisions
thereof affecting the FBA Class B Common may be amended or repealed unless,
in addition to any other vote required by law or the FBA Certificate, such
amendment is approved by the affirmative vote of the holders of a majority of
the shares of the FBA Common then outstanding, voting as a separate class.
Pursuant to the FBA Certificate, the Board of Directors has the power
to make, alter or repeal the FBA By-laws only with the prior approval of the
holders of a majority of the shares of FBA Class B Common, subject to such
restrictions as may be imposed by the stockholders in the FBA By-laws.
The FBA By-laws provide that they may be altered, amended or repealed
or new By-laws adopted by either: (a) the affirmative vote of the holders
of a majority of the shares entitled to vote at a meeting at which a quorum
is present; or (b) with the affirmative vote of the holders of a majority of
the shares of FBA Class B Common, by the affirmative vote of a majority of
the whole Board of Directors.
First Commercial. The First Commercial Certificate and By-laws provide
that the First Commercial By-laws may be altered, amended, or repealed or new
By-laws adopted by either: (a) the affirmative vote of the holders of 66 2/3
percent of the shares entitled to vote at a meeting at which a quorum is
present; or (b) by the affirmative vote of a majority of the whole Board of
Directors.
Stockholder Vote for Mergers and Other Reorganizations
FBA. The FBA Certificate provides that whenever under the laws of the
State of Delaware a vote of stockholders is required to approve or authorize
certain transactions, the
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<PAGE> 89
affirmative vote or consent of 75% of the capital stock of FBA entitled to vote
in elections of directors, voting as a single class, is required to authorize
or approve such transactions, but only if the other party to the transaction
owns at least 5% of the total outstanding shares of stock of FBA entitled to
vote in elections of directors. Those transactions subject to this super
majority provision are:
(a) a merger or consolidation with or into any other corporation; or
(b) any sale, lease or exchange of all or substantially all of the
property and assets of FBA to any other corporation, person or
other entity; or
(c) any purchase or lease of all or substantially all of the assets
of any corporation, person or other entity by FBA; or
(d) any combination of the outstanding shares of FBA Common into a
smaller number of shares.
The FBA Certificate further provides an exemption from the super
majority voting provisions described above in connection with (i) any merger
or similar transaction with any corporation if the Board of Directors of FBA
has approved a memorandum of understanding with such other corporation prior
to the time that such other corporation became a 5% stockholder; or (ii) any
merger or consolidation of FBA with, or any sale or lease to FBA or any
subsidiary of any assets of, or any sale or lease by FBA or any subsidiary of
any assets to, any corporation of which FBA and its subsidiaries own a
majority of the outstanding shares of all classes of stock entitled to vote
in elections of directors.
The FBA Certificate further provides that, except as otherwise
described above or required by statute, an agreement of merger or
consolidation must be approved by a majority vote of the issued and
outstanding shares entitled to vote on the matter.
The DGCL generally provides that, unless required by the certificate of
incorporation of the surviving corporation, no vote of stockholders of the
surviving corporation is necessary to authorize a merger if (a) the merger
agreement does not amend in any respect the certificate of incorporation of
the surviving corporation; (b) each share of stock of the surviving
corporation outstanding immediately prior to the merger is to be an identical
outstanding or treasury share of the surviving corporation after the merger;
and (c) the authorized unissued shares or the treasury shares of common stock
of the surviving corporation to be issued or delivered under the plan of
merger do not exceed 20% of the shares of common stock of the surviving
corporation outstanding immediately prior to the merger.
First Commercial. The First Commercial Certificate does not contain
any provision respecting a merger, consolidation, recapitalization, issuance
of shares, or other changes in control of First Commercial. Accordingly,
the statutory provisions of the DGCL respecting such transactions applies.
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<PAGE> 90
Appraisal Rights
FBA. Pursuant to the DGCL, unless a corporation's certificate of
incorporation provides otherwise, no right of appraisal exists with respect
to a merger or consolidation of a corporation, the shares of which are listed
on a national securities exchange, designated as a national market system
security by NASDAQ or held of record by more than 2,000 stockholders, if such
stockholders receive stock of the surviving corporation or of such a listed
or widely held corporation. Appraisal rights are also unavailable in
Delaware to the stockholders of a corporation surviving a merger if no vote
of such stockholders is required. FBA Common is listed on the NYSE, and, as
such, appraisal rights will not be available to holders of FBA Common in a
merger or consolidation transaction.
First Commercial. Section 262 of the DGCL, respecting appraisal
rights, applies to merger transactions involving First Commercial. For a
discussion of appraisal rights under Section 262 of the DGCL, see "APPRAISAL
RIGHTS OF STOCKHOLDERS OF FIRST COMMERCIAL."
Summary
Although certain of the specific differences between the voting and
other rights of the holders of FBA Common and First Commercial Common are
discussed above, the foregoing summary is not intended to be a complete
statement of the comparative rights of such stockholders under Delaware law,
or the rights of such persons under the respective certificates and by-laws
of FBA and First Commercial. The identification of certain specific
differences is not intended to indicate that other differences do not exist.
The foregoing summary is qualified in its entirety by reference to the
statutes and instruments referred to therein.
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<PAGE> 91
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed balance sheet as of
June 30, 1997 and unaudited pro forma combined condensed statements of income
for the six months ended June 30, 1997 and 1996, and for the year ended
December 31, 1996, have been prepared to reflect the effects on the historical
results of FBA of the proposed acquisitions of First Commercial and Surety.
The unaudited pro forma combined condensed balance sheet has been prepared as
if the acquisitions occurred on June 30, 1997. The unaudited pro forma
combined condensed statements of income have been prepared assuming the
acquisitions occurred on January 1, 1996. The pro forma financial information
set forth below is unaudited and not necessarily indicative of the results
that will occur in the future.
<TABLE>
Unaudited Pro Forma Combined Condensed Balance Sheet
<CAPTION>
June 30, 1997
------------------------------------------------------------------------------------
First Com- Pro Forma Pro Forma Pro Forma Pro Forma
FBA mercial Adjustments Combined Surety Adjustments Combined<F1>
--- ------- ----------- -------- ------ ----------- ------------
(dollars expressed in thousands, except per share data)
Assets
------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 16,340 8,676 -- 25,016 2,267 -- 27,283
Interest bearing deposits 433 -- -- 433 -- -- 433
Federal funds sold 8,400 11,000 -- 19,400 975 -- 20,375
-------- ------- ------- ------- ------ ------- -------
Total cash and cash equivalents 25,173 19,676 -- 44,849 3,242 -- 48,091
-------- ------- ------- ------- ------ ------- -------
Investment securities - available for sale,
at fair value 78,426 41,266 -- 119,692 10,763 -- 130,455
Loans:
Commercial and financial 52,928 35,230 -- 88,158 5,250 -- 93,408
Real estate construction and development 46,542 21,376 -- 67,918 2,966 -- 70,884
Real estate mortgage 61,110 36,155 -- 97,265 40,592 -- 137,857
Consumer and installment 88,275 7,052 -- 95,327 730 -- 96,057
Loans held for sale -- -- -- -- 6,691 -- 6,691
-------- ------- ------- ------- ------ ------- -------
Total loans 248,855 99,813 -- 348,668 56,229 -- 404,897
Unearned discount (1,281) (428) -- (1,709) (234) -- (1,943)
Allowance for possible loan losses (6,251) (4,860) -- (11,111) (582) -- (11,693)
-------- ------- ------- ------- ------ ------- -------
Net loans 241,323 94,525 -- 335,848 55,413 -- 391,261
-------- ------- ------- ------- ------ ------- -------
Bank premises and equipment, net 6,254 1,791 8,045 2,385 200 <F7> 10,630
Intangibles associated with the purchase of
subsidiaries 3,184 -- 1,697 <F2> 4,881 -- 2,415 <F7> 7,296
Accrued interest receivable 2,347 1,195 -- 3,542 492 -- 4,034
Other real estate owned 374 145 -- 519 181 -- 700
Deferred tax assets 15,316 171 -- 15,487 -- 156 <F7> 15,643
Other assets 1,195 446 -- 1,641 262 210 <F7> 2,113
-------- ------- ------- ------- ------ ------- -------
Total assets $373,592 159,215 1,697 534,504 72,738 2,981 610,223
======== ======= ======= ======= ====== ======= =======
Liabilities
-----------
Deposits:
Demand:
Noninterest bearing deposits $ 56,295 27,055 -- 83,350 4,559 -- 87,909
Interest bearing deposits 48,107 15,652 -- 63,759 10,652 -- 74,411
Savings 69,454 31,678 -- 101,132 19,608 -- 120,740
Time deposits:
Time deposits of $100 or more 29,137 10,593 -- 39,370 10,244 -- 49,974
Other time deposits 109,826 56,647 -- 166,473 21,521 -- 187,994
-------- ------- ------- ------- ------ ------- -------
Total deposits 312,819 141,625 -- 454,444 66,584 -- 521,028
Note payable to First Banks 14,500 -- (10,000)<F3> 4,500 -- 3,548 <F8> 8,048
12% convertible debentures -- 6,500 -- 6,500 -- -- 6,500
Other borrowings 6,097 598 -- 6,695 -- -- 6,695
Deferred tax liabilities 1,431 50 -- 1,481 235 164 <F7> 1,880
Accrued expenses and other liabilities 4,845 3,488 -- 8,333 903 389 <F7> 9,625
-------- ------- ------- ------- ------ ------- -------
Total liabilities 339,692 152,261 (10,000) 481,953 67,722 4,101 553,776
-------- ------- ------- ------- ------ ------- -------
Stockholders' Equity
--------------------
Convertible preferred stock -- -- -- -- 61 (61)<F7><F8> --
Common stock:
Common stock 212 1,058 (824)<F2><F3> 446 149 (104)<F7><F8> 491
Class B common stock 375 -- 375 -- -- 375
Capital surplus 37,755 5,275 12,792 <F2><F3> 55,822 2,541 1,310 <F7><F8> 59,673
Retained earnings (1,078) 570 (220)<F2><F3> (728) 2,286 (2,286)<F7><F8> (728)
Treasury stock (3,365) -- -- (3,365) -- -- (3,365)
Net fair value adjustment for securities
available for sale 1 51 (51)<F2> 1 (21) 21 <F7> 1
-------- ------- ------- ------- ------ ------- -------
Total stockholders' equity 33,900 6,954 11,697 52,551 5,018 (1,120) 56,447
-------- ------- ------- ------- ------ ------- -------
Total liabilities and
stockholders' equity $373,592 159,215 1,697 534,504 72,738 2,981 610,223
======== ======= ======= ======= ====== ======= =======
See notes to pro forma combined condensed financial statements.
</TABLE>
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<PAGE> 92
<TABLE>
Unaudited Pro Forma Combined Condensed Statement of Income
For the six months ended June 30, 1997
--------------------------------------------------------------------------------
First Com- Pro Forma Pro Forma Pro Forma Pro Forma
FBA mercial Adjustments Combined Surety Adjustments Combined<F1>
--- ------- ----------- -------- ------ ----------- ------------
(dollars expressed in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $10,634 4,700 -- 15,334 2,308 -- 17,642
Interest on investment securities 2,593 1,206 -- 3,799 341 -- 4,140
Interest on federal funds sold 359 328 -- 687 18 -- 705
------- ----- ---- ------ ----- ---- ------
Total interest income 13,586 6,234 -- 19,820 2,667 -- 22,487
------- ----- ---- ------ ----- ---- ------
Interest expense:
Interest on deposits 5,472 2,408 -- 7,880 1,234 -- 9,114
Note payable and other borrowings 734 454 (403)<F6> 785 3 143 <F9> 931
------- ----- ---- ------ ----- ---- ------
Total interest expense 6,206 2,862 (403) 8,665 1,237 143 10,045
------- ----- ---- ------ ----- ---- ------
Net interest income 7,380 3,372 403 11,155 1,430 (143) 12,442
Provision for possible loan losses 1,285 -- -- 1,285 65 -- 1,350
------- ----- ---- ------ ----- ---- ------
Net interest income after provision
for possible loan losses 6,095 3,372 403 9,870 1,365 (143) 11,092
------- ----- ---- ------ ----- ---- ------
Noninterest income:
Service charges on deposit accounts and
customer service fees 811 338 -- 1,149 141 -- 1,290
Other income 667 77 -- 744 505 (10)<F9> 1,239
------- ----- ---- ------ ----- ---- ------
Total noninterest income 1,478 415 -- 1,893 646 (10) 2,529
------- ----- ---- ------ ----- ---- ------
Noninterest expense:
Salary and employee benefits 2,095 1,024 -- 3,119 888 -- 4,007
Occupancy, net of rental income 766 329 -- 1,095 52 -- 1,147
Furniture and equipment 381 175 -- 556 143 -- 699
Legal, examination and professional fees 991 170 -- 1,161 61 -- 1,222
Data processing fees 386 181 -- 567 98 -- 665
Losses and expenses on foreclosed real
estate, net of gains (256) 37 -- (219) 29 -- (190)
Other noninterest expense 1,337 931 87 <F6> 2,355 491 80 <F9> 2,926
------- ----- ---- ------ ----- ---- ------
Total noninterest expense 5,700 2,847 87 8,634 1,762 80 10,476
------- ----- ---- ------ ----- ---- ------
Income before provision for income
tax expense (benefit) 1,873 940 316 3,129 249 (233) 3,145
Provision for income tax expense (benefit) 700 370 161 <F6> 1,231 94 (61) 1,264
------- ----- ---- ------ ----- ---- ------
Net income $ 1,173 570 155 1,898 155 (172) 1,881
======= ===== ==== ====== ===== ==== ======
Weighted average common stock and common
stock equivalents outstanding
(in thousands) 3,644 -- -- 5,200 -- -- 5,515 <F10>
Earnings per common stock and
common stock equivalents outstanding $ 0.32 -- -- 0.37 -- -- 0.34 <F10>
See notes to pro forma combined condensed financial statements.
</TABLE>
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<PAGE> 93
<TABLE>
Unaudited Pro Forma Combined Condensed Statement of Income
<CAPTION>
For the six months ended June 30, 1996
-------------------------------------------------------------------------------
First Com- Pro Forma Pro Forma Pro Forma Pro Forma
FBA mercial Adjustments Combined Surety Adjustments Combined<F1>
--- ------ ----------- -------- ------ ----------- ------------
(dollars expressed in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $7,629 3,933 -- 11,562 2,152 -- 13,714
Interest on investment securities 1,243 1,668 -- 2,911 302 -- 3,213
Interest on federal funds sold 1,118 264 -- 1,392 25 -- 1,407
------ ----- --- ------ ----- ---- ------
Total interest income 9,990 5,865 15,855 2,479 18,334
------ ----- --- ------ ----- ---- ------
Interest expense:
Interest on deposits 4,589 2,429 -- 7,018 1,137 -- 8,155
Note payable and other borrowings 337 452 -- 789 6 143 <F9> 938
------ ----- --- ------ ----- ---- ------
Total interest expense 4,926 2,881 -- 7,807 1,143 143 9,093
------ ----- --- ------ ----- ---- ------
Net interest income 5,064 2,984 -- 8,048 1,336 (143) 9,241
Provision for possible loan losses 350 1,050 -- 1,400 90 -- 1,490
------ ----- --- ------ ----- ---- ------
Net interest income after provision
for possible loan losses 4,714 1,934 -- 6,648 1,246 (143) 7,751
------ ----- --- ------ ----- ---- ------
Noninterest income:
Service charges on deposit accounts and
customer service fees 737 404 -- 1,141 113 -- 1,254
Other income 137 85 -- 222 237 (10)<F9> 449
------ ----- --- ------ ----- ---- ------
Total noninterest income 874 489 -- 1,363 350 (10) 1,703
------ ----- --- ------ ----- ---- ------
Noninterest expense:
Salary and employee benefits 1,386 1,234 -- 2,620 672 -- 3,292
Occupancy, net of rental income 401 485 -- 886 72 -- 958
Furniture and equipment 304 232 -- 536 86 -- 622
Legal, examination and professional fees 561 305 -- 866 53 -- 919
Other noninterest expense 1,435 1,892 87 <F6> 3,414 553 80 <F9> 4,047
------ ----- --- ------ ----- ---- ------
Total noninterest expense 4,087 4,148 87 8,322 1,436 80 9,838
------ ----- --- ------ ----- ---- ------
Income before provision for income
tax expense (benefit) 1,501 (1,725) (87) (311) 160 (233) (384)
Provision for income tax expense (benefit) 602 (580) -- 22 64 (61)<F9> 25
------ ----- --- ------ ----- ---- ------
Net income $ 899 (1,145) (87) (333) 96 (172) (409)
====== ===== === ====== ===== ==== ======
Weighted average common stock and common
stock equivalents outstanding
(in thousands) 3,990 -- -- 5,546 -- -- 5,859 <F10>
Earnings per common stock and
common stock equivalents outstanding $ 0.23 -- -- (0.06) -- -- (0.07)<F10>
See notes to pro forma combined condensed financial statements.
</TABLE>
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<PAGE> 94
<TABLE>
Unaudited Pro Forma Combined Condensed Statement of Income
<CAPTION>
For the year ended December 31, 1996
-------------------------------------------------------------------------------
First Com- Pro Forma Pro Forma Pro Forma Pro Forma
FBA mercial Adjustments Combined Surety Adjustments Combined<F1>
--- ------- ----------- -------- ------ ----------- ------------
(dollars expressed in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $16,494 8,643 -- 25,137 4,428 -- 29,565
Interest on investment securities 3,519 2,738 -- 6,257 647 -- 6,904
Interest on federal funds sold 1,433 555 -- 1,988 56 -- 2,044
------- ------ ---- ------ ----- ---- ------
Total interest income 21,446 11,936 -- 33,382 5,131 -- 38,513
------- ------ ---- ------ ----- ---- ------
Interest expense:
Interest on deposits 9,301 4,635 -- 13,936 2,359 -- 16,295
Note payable and other borrowings 692 905 (134)<F6> 1,463 8 285 <F9> 1,756
------- ------ ---- ------ ----- ---- ------
Total interest expense 9,993 5,540 (134) 15,399 2,367 285 18,051
------- ------ ---- ------ ----- ---- ------
Net interest income 1,453 6,396 134 17,983 2,764 -- 20,462
Provision for possible loan losses 1,250 1,155 -- 2,405 325 (285) 2,730
------- ------ ---- ------ ----- ---- ------
Net interest income after provision
for possible loan losses 10,203 5,241 134 15,578 2,439 (285) 17,732
------- ------ ---- ------ ----- ---- ------
Noninterest income:
Service charges on deposit accounts and
customer service fees 1,507 751 -- 2,258 291 -- 2,549
Other income 341 986 -- 1,327 421 (21)<F9> 1,727
------- ------ ---- ------ ----- ---- ------
Total noninterest income 1,848 1,737 -- 3,585 712 (21) 4,276
------- ------ ---- ------ ----- ---- ------
Noninterest expense:
Salary and employee benefits 3,072 2,177 -- 5,249 1,474 -- 6,723
Occupancy, net of rental income 951 881 -- 1,832 148 -- 1,980
Furniture and equipment 613 390 -- 1,003 188 -- 1,191
Postage printing and supplies 267 477 -- 744 125 -- 869
Legal, examination and professional fees 1,276 1,501 -- 2,777 97 -- 2,874
Data processing fees 334 401 -- 735 283 -- 1,018
Communications 421 202 -- 623 77 -- 700
Other noninterest expense 2,546 2,051 175 4,772 1,097 160 <F9> 6,029
------- ------ ---- ------ ----- ---- ------
Total noninterest expense 9,480 8,080 175 17,735 3,489 160 21,384
------- ------ ---- ------ ----- ---- ------
Income before provision for income
tax expense (benefit) 2,571 (1,102) (41) 1,428 (338) (466) 624
Provision for income tax expense (benefit) 1,002 (532) 54 <F6> 524 (135) (122) 266
------- ------ ---- ------ ----- ---- ------
Net income $ 1,569 (570) (95) 904 (203) (344) 358
======= ====== ==== ====== ===== ==== ======
Weighted average common stock and common
stock equivalents outstanding
(in thousands) 3,915 -- -- 5,471 -- -- 5,784<F10>
Earnings per common stock and
common stock equivalents outstanding $ 0.40 -- -- 0.17 -- -- 0.06<F10>
<FN>
See notes to pro forma combined condensed financial statements.
Notes to Pro Forma Combined Condensed Financial Statements
<F1> The unaudited pro forma combined condensed balance sheet has been prepared based on the historical financial
statements of FBA, First Commercial and Surety as if the proposed transactions had occurred on June 30, 1997. The
unaudited pro forma combined condensed statements of income for the six months ended June 30, 1997 and 1996, and for
the year ended December 31, 1996, set forth the results of operations as if the proposed transactions had occurred
as of January 1, 1996. Intercompany balances between FBA, First Commercial and Surety are not material and have not been
eliminated.
The accompanying share data has been restated to reflect reverse stock splits for both FBA and First Commercial.
See "Market Prices and Dividends."
Merger of FBA / First Commercial:
- --------------------------------
<F2> The application of the purchase method of accounting gives rise to purchase adjustments to reflect the fair value
of assets acquired and liabilities assumed. Additions to intangibles associated with the purchase of subsidiaries include
$1.7 million in goodwill generated by the transaction between FBA and First Commercial. This amount includes $880,000 which
represents the difference between the purchase price of
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<PAGE> 95
the minority shareholders' interest in the net assets of First Commercial as of June 30, 1997 of $3.04 million and the
estimated market value of that interest. In addition, this amount includes $820,000, which represents the excess cost
of the net assets of First Commercial under the common control of First Banks, the majority shareholder of FBA and First
Commercial. First Banks' interest in First Commercial is accounted for by FBA at First Banks' historical cost.
<F3> Stockholders' equity has been adjusted for the following to reflect the merger of FBA and First Commercial:
(a) The assumed issuance of approximately 752,038 shares of FBA Common and the elimination of First
Commercial's $6.95 million in equity, as the First Commercial shares are exchanged for FBA Common.
(b) The issuance of 804,000 shares of FBA Common in exchange for a $10.0 million reduction in FBA's note
payable to First Banks.
(c) Adjustments to stockholders' equity also reflect the application of the purchase method of accounting.
<F4> In a related transaction, First Commercial will exchange its Campbell, California office, with approximately
$14.8 million in deposits, for an office in Walnut Creek, California, with approximately $15.1 million in deposits,
operated by First Bank & Trust, a wholly owned subsidiary of First Banks. The Branch Exchange will provide for a
payment equal to the net difference between the fair market values of the two branch offices, based on the values
of the assets and liabilities exchanged by the two parties. This transaction is not reflected in the pro forma combined
condensed financial statements as the operating results of the branches are similar and would not have a material impact
on the pro forma combined condensed financial statements.
<F5> On November 1, 1996, FBA completed its acquisition of Sunrise, and its wholly owned subsidiary, Sunrise Bank
of California. At the time of the transaction, Sunrise had $110.8 million in total assets, cash and cash equivalents and
investment securities of $45.5 million; $61.1 million in loans, net of unearned discount; and $91.1 million in total
deposits. The pro forma combined condensed balance sheet at June 30, 1997, and the pro forma combined condensed statement
of income for the six months then ended, reflect the assets and liabilities of Sunrise, as well as the results of operations
during the period. The results of operations of Sunrise are not included in the pro forma combined condensed statements
of income for the six months ended June 30, 1996 and for the year ended December 31, 1996 due to the fact the historical
results of operations for these periods are not representative of normal operating results since its acquisition by FBA.
<F6> Adjustments to the pro forma combined condensed statements of income include the amortization of goodwill
generated by the proposed transaction as discussed in footnote (2), amortized over a fifteen year period using the
straight line method.
During 1997 and 1996, the average prime rate of interest was approximately 8.375% and 8.27%, respectively.
The prime rate is used in the unaudited combined condensed pro forma statements of income to calculate the reduction
in external financing associated with the exchange of FBA Common for $10.0 million of the note payable to First Banks.
The external financing carries an interest rate equal to 25 basis points below the prime rate.
No adjustments have been made for any operational synergies that may occur as a result of the proposed transaction.
Acquisition of Surety:
- ---------------------
<F7> Adjustments to intangibles associated with the purchase of subsidiaries include $2.40 million in goodwill generated
by the transaction between FBA and Surety, representing the difference between the purchase price of $7.45 million and the
fair value of the net assets acquired. The fair value of net assets acquired reflects increases of $200,000 and $210,000
relating to bank premises and purchased mortgage servicing rights, respectively, offset by the accrual of $389,000 in estimated
acquisition costs. The deferred tax effects of these adjustments were recorded using an effective tax rate of 40%.
<F8> Adjustments to stockholders' equity to reflect the merger of FBA and Surety include the assumed issuance of
approximately 299,836 shares of FBA Common with a value of $3.89 million, and the elimination of $5.02 million in
equity as the Surety shares are exchanged for FBA Common and cash. The amount of FBA Common to be issued is based on
the assumption that the purchase price at June 30, 1997 would have been $7.45 million, $3.55 million of which has
been distributed in cash funded through an advance on FBA's note payable with First Banks.
Adjustments to stockholders' equity also reflect the application of the purchase method of accounting.
<F9> Adjustments to the pro forma combined condensed statements of income include the amortization of goodwill generated
by the proposed transaction, amortized over a fifteen year period using the straight line method.
During 1997 and 1996, the average prime rate of interest was approximately 8.375% and 8.27%, respectively. The prime
rate is used in the unaudited combined condensed pro forma statements of income to calculate the amount of interest expense
which would have been paid on the external financing required to fund the cash portion of the Surety acquisition. The
external financing carries an interest rate equal to 25 basis points below the prime rate.
No adjustments have been made for any operational synergies that may occur as a result of the proposed transaction.
Earnings Per Share:
- ------------------
<F10> Pro forma earnings per share for the year ended December 31, 1996 were calculated based upon FBA's weighted average
shares outstanding plus 752,038 shares assumed to be issued in the proposed merger of FBA and First Commercial, 804,000 shares
assumed to be issued in exchange
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<PAGE> 96
for $10.0 million of the note payable to First Banks, 299,836 shares assumed to be issued
in the proposed transaction between FBA and Surety, and options to purchase Surety common stock totaling 13,462 which will be
exchanged for equivalent options to purchase FBA Common.
Pro forma earnings per share for the six months ended June 30, 1997 and 1996 were calculated based upon FBA's weighted
average shares outstanding plus 752,038 shares assumed to be issued in the proposed merger of FBA and First Commercial, 804,000
shares assumed to be issued in exchange for $10.0 million of the note payable to First Banks, 299,836 shares assumed to be
issued in the proposed transaction between FBA and Surety, and 15,063 and 13,188 shares, respectively, of options to purchase
Surety common stock which will be exchanged for equivalent options to purchase FBA Common.
</TABLE>
97
<PAGE> 97
PROPOSAL NUMBER TWO AT THE
FBA ANNUAL MEETING
APPROVAL OF SALE OF FBA COMMON TO FIRST BANKS
As discussed elsewhere in this Joint Proxy Statement-Prospectus,
PROPOSAL NUMBER 2 is the approval of the sale to First Banks of 804,000
shares of FBA Common for an aggregate purchase price of $10 million.
Reference is made to the detailed discussion of this transaction, which is
closely related to the Merger, in the section of this Joint Proxy Statement-
Prospectus entitled "THE MERGER--Terms of the Merger" For the reasons
discussed therein, the FBA Special Committee found that the proposed sale of
FBA Common, and the corresponding reduction in the amount of the outstanding
debt of FBA, is in the best interest of FBA and FBA Stockholders and approved
the proposed transaction as part of its review and approval of the Merger.
Subsequently, the Board of Directors of FBA also approved PROPOSAL NUMBER 2
unanimously. To be approved, a majority of votes cast must be voted in favor
of the PROPOSAL.
THE BOARD OF DIRECTORS OF FBA AND THE FBA SPECIAL COMMITTEE UNANIMOUSLY
RECOMMEND THAT FBA STOCKHOLDERS VOTE FOR THE APPROVAL OF PROPOSAL NUMBER 2.
PROPOSAL NUMBER THREE AT THE
FBA ANNUAL MEETING
APPROVAL OF ISSUANCE OF DEBENTURES TO FIRST BANKS
As discussed elsewhere in this Joint Proxy Statement-Prospectus,
PROPOSAL NUMBER 3 is the approval of the issuance to First Banks convertible
debentures of FBA, convertible into shares of FBA Common at a conversion
price of $14.06 per share. Approval of PROPOSAL NUMBER 3 will constitute the
authorization to issue the FBA Debenture and the shares of FBA Common to be
issued upon conversion thereof. For this purpose, FBA Stockholders are asked
to approve the issuance of up to 739,687 shares of FBA Common upon conversion
of the FBA Debenture. That number represents the maximum number of shares of
FBA Common that would be issued if (i) the FBA Debenture are not redeemed by
FBA or voluntarily converted by First Banks prior to maturity (in which case
the number of shares needed would be lower, since the number of shares
issuable upon conversion in part reflects the amount of interest which has
accrued, and the accrual of interest would cease in either of such events);
and (ii) at maturity, the FBA Debenture are redeemed by the issuance of FBA
Common. The actual number of shares of FBA Common that will be issued is not
presently determinable, because it is not known whether interest will accrue
thereon until the maturity date October 31, 2000. Reference is made to the
detailed discussion of the issuance of the FBA Debenture in the section of
this Joint Proxy Statement-Prospectus entitled "THE MERGER--Terms of the
Merger."
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<PAGE> 98
For the reasons discussed therein, the FBA Special Committee found that
the proposed issuance of the FBA Debenture, which is necessary in order to
provide for the disposition of the First Commercial Debentures in connection
with the merger of First Commercial's separate corporate existence into FBA
at the Effective Time, is in the best interest of FBA and FBA Stockholders
and approved the transaction as part of its review and approval of the
Merger. Subsequently, the Board of Directors of FBA also approved PROPOSAL
NUMBER 2. To be approved, a majority of votes cast must be voted in favor of
the PROPOSAL.
THE BOARD OF DIRECTORS OF FBA AND THE FBA SPECIAL COMMITTEE UNANIMOUSLY
RECOMMEND THAT FBA STOCKHOLDERS VOTE FOR THE APPROVAL OF PROPOSAL NUMBER 3.
PROPOSAL NUMBER FOUR AT THE
FBA ANNUAL MEETING
ELECTION OF DIRECTORS
The Board of Directors recommends that the stockholders vote to re-elect
Messrs. Blake, Crocco, Dierberg, Story, Turkcan and Williams as
directors, each for a one-year term.
Nominees
As of the Record Date, the Board of Directors of FBA consisted of six
members, who are identified in the following table which sets forth the
information indicated as of that date. Each of the directors was elected or
appointed to serve a one-year term and until his successor has been duly
qualified for office.
<TABLE>
<CAPTION>
Name Age Director Principal Occupation During Last Five Years and
Since Directorships of Public Companies
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Allen H. Blake 54 1994 Vice President, Chief Financial Officer and Secretary of FBA since 1994;
Director and Executive Vice President of First Commercial since 1995;
Executive Vice President of First Banks since April 1996; Senior Vice
President of First Banks from 1992 until April 1996; Secretary and
Director of First Banks since 1988; joined First Banks as Vice President
and Chief Financial Officer in 1984.
Charles A. Crocco, Jr.<F1> 59 1988 Partner in the law firm of Crocco & De Maio, P.C., New York City since
1970; director of The Hallwood Group Incorporated (merchant banking).
James F. Dierberg 60 1994 Chairman of the Board of Directors, Chief Executive Officer and
President of FBA since 1995; Chairman of the Board and Chief Executive
Officer of First Banks since 1988; director of First Banks since 1979;
President of First Banks, 1979-1992 and 1994-present.
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<PAGE> 99
Edward T. Story, Jr.<F1> 53 1987 President, Chief Executive Officer and Director of SOCO International,
Inc. plc, a subsidiary of Snyder Oil Corporation, engaged in
international oil and gas operations, since 1991; from 1990 until 1991,
Chairman of Thaitex Petroleum Company; from 1981 to 1990, Vice Chairman
and Chief Financial Officer of Conquest Exploration Company; director of
Hi-Lo Automotive, Inc., Cairn Energy, Hallwood Realty Corporation, Snyder
Oil Corporation and Seaunion Holdings, Ltd.
Mark T. Turkcan 42 1994 Executive Vice President (Retail Banking), First Banks, since April 1996;
Senior Vice President (Retail Banking), First Banks, since 1994 and Vice
President from 1990 until 1994; joined First Banks when Clayton Savings
and Loan Association, St. Louis, Missouri (now First Bank FSB), for whom
Mr. Turkcan was employed in various capacities since 1985, was acquired
by First Banks in 1990.
Donald W. Williams 50 1995 Executive Vice President of First Banks since April 1996; Senior Vice
President of First Banks from 1993 until April 1996; Director of First
Commercial since 1995; Chief Credit Officer of First Banks and executive
officer of various subsidiaries of First Banks since 1993; previously
served as Senior Vice President in charge of commercial credit approval,
commercial loan operations, international operations and the credit
department of Mercantile Bank of St. Louis, N.A. from 1989 until 1993.
Mr. Williams currently serves as Executive Vice President and Chief
Credit Officer of First Banks and Chairman and Chief Executive Officer of
the California subsidiaries thereof, including Sunrise, First Commercial
and its subsidiary First Commercial Bank.
<FN>
- -----------------
<F1> Member of the Audit Committee.
</TABLE>
Although FBA does not anticipate that any of the above-named nominees
will refuse or be unable to serve as a director of FBA, the persons named in
the enclosed form of proxy intend, if any nominee becomes unavailable, to
vote the shares represented by the proxy for the election of such other
person or persons as may be nominated or designated by management, unless
they are directed by proxy to do otherwise.
Assuming the presence of a quorum, the six nominees receiving the
largest number of the votes cast, including those cast by holders of the FBA
Common and the Class B Common represented at the FBA Annual Meeting, will be
elected as directors. FBA's By-laws require that any nominations by a
stockholder comply with certain procedural and disclosure requirements,
including advance written notice to the Secretary of FBA.
In connection with the Surety Merger, FBA agreed that, following the
consummation thereof, FBA would cause one person designated by Surety's board
of directors to be elected or appointed as an additional director of FBA.
Assuming that the Surety Merger is consummated, FBA intends to expand the
size of the Board of Directors from six members to seven (which is within the
authority of the Board) and to designate the additional director at that
time.
100
<PAGE> 100
Executive Officers
The executive officers of FBA as of the Record Date were as follows:
<TABLE>
<CAPTION>
Name Age Office(s) Held
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
James F. Dierberg 60 Chairman of the Board, Chief Executive Officer and President.
Allen H. Blake 54 Vice President, Chief Financial Officer and Secretary.
David F. Weaver 50 Executive Vice President of FBA since January, 1995; Chairman of the Board, Chief
Executive Officer and President of BankTEXAS since 1994; President of BankTEXAS
Houston N.A. from 1988 until the bank became part of BankTEXAS as a result of
merger.
</TABLE>
The executive officers were each elected by the Board of Directors to
the office indicated. There is no family relationship between any of the
nominees for director, directors or executive officers of FBA or its
subsidiaries.
Committees and Meetings of the Board of Directors
Two members of the Board of Directors of FBA serve on the Audit
Committee; there are no other committees of the Board. The duties of the
Audit Committee include the making of recommendations to the Board of
Directors for engaging and discharging FBA's independent auditors; reviewing
and approving the engagement of the independent auditors for audit and
nonaudit services and considering the independence of the auditors prior to
engaging them; reviewing with the independent auditors the fee, scope and
timing of the audit and nonaudit services; reviewing the completed audit with
the independent auditors regarding the conduct of the audit, accounting
adjustments, recommendations for improving internal controls and any other
significant findings during the audit; meeting periodically with management
and internal audit and loan review staff to discuss planning, scheduling and
the extent and nature of internal audit and loan review procedures to be
performed and the results therefrom; accounting and financial controls;
reviewing internal accounting and auditing procedures with FBA's financial
staff; and initiating and supervising any special investigations it deems
necessary.
Board and Committee Meetings. The Board of Directors held five
meetings in 1996, including regular and special meetings, and there were four
meetings of the Audit Committee. During 1996, all directors of FBA attended
more than 75% of the aggregate of the number of meetings of the Board of
Directors and the meetings held by all committees of the Board of Directors
on which they served.
101
<PAGE> 101
Director Compensation
Directors who are not officers of FBA or First Banks (Messrs. Crocco
and Story) were paid fees for their service as directors in 1996, consisting
of an annual retainer of $7,500, a fee for each meeting of the Board of
Directors attended of $3,000 and a fee of $500 for each committee meeting
attended, and they also participate in the 1993 Directors' Stock Bonus Plan
(the "Stock Bonus Plan"). The Stock Bonus Plan provides for an annual grant
of 500 shares of FBA Common to each non-employee director of FBA. Future
grants would apply equally to current directors and to any individual who
becomes a director of FBA in the future. The maximum number of shares that
may be issued will not exceed 16,666 shares, and the plan will expire on July
1, 2001. Directors' compensation expense of $10,000 was incurred in 1996 in
connection with the Stock Bonus Plan.
FBA has revised the method of compensating the directors who are not
officers of FBA or First Banks, effective January 1, 1998. FBA's policy for
1998 and subsequent years is to pay to its directors who are not officers or
employees of FBA and have no affiliation with First Banks ("Unaffiliated
Directors") a fee for each meeting of the Board of Directors attended of
$2,000 and a fee of $500 for each committee meeting attended. The
Unaffiliated Directors will also participate in the Stock Bonus Plan.
None of the four directors of FBA who are also executive officers of
First Banks (Messrs. Dierberg, Blake, Turkcan and Williams) receives any
compensation from FBA for service as a director, nor do they participate in
the Stock Bonus Plan or any other compensation plan of FBA. First Banks, of
which Messrs. Dierberg, Blake, Turkcan and Williams are executive officers
and Messrs. Dierberg and Blake are directors, provides various services to
FBA and its subsidiary banks for which it is compensated (see "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION").
Certain Relationships and Related Transactions
Following the private placement of the Class B Common in August 1994,
FBA began purchasing certain services and supplies from or through its
majority stockholder, First Banks. FBA's financial position and operating
results could significantly differ from those that would be obtained if FBA's
relationship with First Banks did not exist.
First Banks provides management services to FBA and it subsidiary
banks. Management services are provided under a management fee agreement
whereby FBA compensates First Banks on an hourly basis for its use of
personnel for various functions including internal audit, loan review, income
tax preparation and assistance, accounting, asset/liability and investment
services, loan servicing and other management and administrative services.
Fees paid under this agreement were $271,000 and $474,000 for the three and
six months ended June 30, 1997, compared to $175,000 and $318,000 for the
three and six months ended June 30, 1996.
Because of this affiliation with First Banks and the geographic
proximity of certain of their banking offices, Sunrise and FB&T share the
costs of certain personnel and services used by both banks. This includes
the salaries and benefits of certain loan and administrative personnel. In
January 1997, Sunrise and FB&T entered into a cost sharing agreement for the
purpose of
102
<PAGE> 102
allocating these expenses between them. Expenses associated with loan
origination personnel are allocated based on the relative loan volume of
the two banks. Costs of most other personnel are allocated on an hourly
basis. Because this involves distributing essentially fixed costs over a
larger asset base, it allows each bank to receive the benefit of personnel
and services at a reduced cost. Fees paid under this agreement were $74,000
and $157,000 for the three and six month periods ended June 30, 1997.
Under a data processing agreement, a subsidiary of First Banks provided
data processing and various related services to FBA through March 31, 1997.
Fees paid under this agreement were $196,000 for the six months ended June
30, 1997, compared to $77,000 and $157,000 for the three and six months ended
June 30, 1996, respectively. Effective April 1, 1997, First Services L.P., a
limited partnership indirectly owned by First Banks' Chairman and his
children through its General Partners and Limited Partners, began providing
data processing and various related services to FBA. Fees paid under this
agreement were $143,000 for the three and six months ended June 30, 1997.
The fees paid for management services and data processing are significantly
lower than FBA was paying its nonaffiliated vendors.
FBA's subsidiary banks had $33.3 million and $21.4 million in whole
loans and loan participations outstanding at June 30, 1997 and December 31,
1996, respectively, that were purchased from banks affiliated with First
Banks. In addition, FBA's subsidiary banks had sold $19.5 million and $26.7
million in whole loans and loan participations to affiliates of First Banks
at June 30, 1997 and December 31, 1996, respectively. These loans and loan
participations were acquired and sold at interest rates and terms prevailing
at the dates of their purchase or sale and under standards and policies
followed by FBA's subsidiary banks.
FBA has borrowed $14.5 million from First Banks under a $15 million
note payable agreement. 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. The interest expense was $573,000
for the six months ended June 30, 1997. The principal and accrued interest
under the note agreement are due and payable on October 31, 2001. The
accrued and unpaid interest under the note agreement was $767,000 and
$194,000 at June 30, 1997 and December 31, 1996, respectively.
Information regarding transactions between FBA and First Banks appears
under the caption "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION."
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation of Mr. Weaver, the most highly compensated executive officer of
FBA, for each of the last three years. Neither Mr. Dierberg, the Chief
Executive Officer and President of FBA, nor Mr. Blake, FBA's Vice President,
Chief Financial Officer and Secretary, receives any compensation from FBA,
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<PAGE> 103
BankTEXAS or Sunrise. FBA has entered into various contracts with First
Banks, of which Messrs. Dierberg and Blake are directors and executive
officers, pursuant to which services are provided to FBA, BankTEXAS and
Sunrise (see "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"
for additional information regarding contracts with First Banks). No
information is included in the table with respect to executive officers whose
combined salary and bonus did not exceed $100,000 in any year covered by the
table.
<TABLE>
SUMMARY COMPENSATION TABLE FOR YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Salary All Other Compensation
Name and Principal Position Year <F1> Bonus <F2>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David F. Weaver, Executive 1996 $86,875 $20,625 $2,172
Vice President of FBA;
Chairman of the Board, Chief 1995 107,500 0 3,225
Executive Officer and President
of BankTEXAS. 1994 107,500 0 538
<FN>
- --------------------
<F1> The total of all other annual compensation for Mr. Weaver is less than
the amount required to be reported, which is the lesser of (a) $50,000
or (b) ten percent (10%) of the total of the annual salary and bonus
paid to that person.
<F2> All items reported are FBA's matching contributions to the 401(k) Plan
for the year indicated.
</TABLE>
FBA has omitted tables which would disclose information regarding stock
options granted during 1996, stock options exercised during 1996 and long
term incentive plan awards. No options were granted to or exercised by
executive officers in 1996, and FBA does not have any Long Term Incentive
Plans.
104
<PAGE> 104
STOCK PERFORMANCE GRAPH
The following graph sets forth a comparison of the cumulative total
stockholder returns of FBA Common, the NYSE Market Value Index and the Media
General Index of Banks located in the West South Central Region, for the five
year period from December 31, 1991 through December 31, 1996. The FBA Common
and the securities of 36 other banks primarily located in Texas, Louisiana,
Oklahoma and Arkansas are currently included in the Media General West South
Central Banks index. The graph and the table which follows are based on the
assumption that the value of the investment in FBA Common and in each index
was $100 at December 31, 1991 and that all dividends were reinvested (FBA did
not pay any dividends during such period).
[Insert graph]
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
First Banks America, Inc. 100.00 430.72 338.42 215.36 201.00 166.13
NYSE Market Value Index 100.00 104.70 118.88 116.57 151.15 182.08
Media General West South Central Banks 100.00 170.98 200.56 92.86 111.47 141.97
</TABLE>
EMPLOYEE BENEFIT PLANS
FBA maintains various employee benefit plans. Directors are not
currently eligible to participate in such plans, except that, as discussed
above, Unaffiliated Directors are eligible to receive annual grants of FBA
Common pursuant to the 1993 Directors' Stock Bonus Plan. Although Messrs.
Blake and Dierberg are executive officers, they are not participants in any
employee benefit plans of FBA.
Pension Plan. The Employees Retirement Plan (the "Pension Plan") is a
noncontributory, defined benefit plan for all eligible officers and employees
of FBA and its subsidiaries. Benefits under the Pension Plan are based upon
annual base salaries and years of service and are payable only upon
retirement or disability and, in some instances, at death. An employee is
eligible to participate in the Pension Plan after completing one year of
employment if he or she was hired before attaining age 60, is at least 21
years of age and worked 1,000 hours or more in the first year of employment.
A participant who has fulfilled the eligibility and tenure requirements will
receive, upon reaching the normal retirement age of 65, monthly benefits
based upon average monthly compensation during the five consecutive calendar
years out of his or her last ten calendar years that provided the highest
average compensation.
During 1994, FBA discontinued the accumulation of benefits under the
Pension Plan. While the Pension Plan continues in existence and provides
benefits previously accumulated, no additional benefits accrued to
participants in 1996, and no new participants will become eligible for
benefits thereunder.
105
<PAGE> 105
The following table sets forth, based upon certain assumptions, the
approximate annual benefits payable under the Pension Plan at normal
retirement age to persons retiring with the indicated average base salaries
and years of credited service:
<TABLE>
<CAPTION>
Remuneration<F1> Years of Credited Service<F2>
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 15 20 25 30 35
$100,000 $14,700 $22,050 $29,400 $36,750 $44,100 $51,450
$150,000<F3> 22,200 33,300 44,400 55,500 66,600 77,700
<FN>
- ---------------------
<F1> Benefits payable under the Pension Plan are determined based on
compensation levels prior to the discontinuance of the accumulation
of benefits in 1994.
<F2> Benefits shown are computed based on straight life annuities with a
10-year guarantee and are not subject to deduction for social
security, but are subject to withholding for federal income tax
purposes.
<F3> Maximum annual retirement income of $120,000 is permitted under the
Internal Revenue Code, as amended; the maximum compensation allowed
for retirement benefit computations is $150,000.
</TABLE>
As of December 31, 1996, Mr. Weaver had accumulated eight years credited
service under the Pension Plan.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of FBA is comprised of its entire Board of
Directors. Four of the current directors, including Mr. Dierberg, who is
Chairman of the Board, Chief Executive Officer and President, and Mr. Blake,
who is Vice President, Chief Financial Officer and Secretary, are executive
officers of First Banks, which is compensated for their services on an hourly
basis under the provisions of a management fee agreement between FBA and
First Banks. None of the current directors has ever been compensated by FBA
or its subsidiary banks as an executive officer.
The purpose of the Compensation Committee is to consider the levels and
components of executive compensation relative to those generally available in
its market place, to the overall long-term objectives of FBA and to the
interest of its stockholders. By maintaining appropriate balance in these
factors, the Committee believes that it will be most effective in attracting
and retaining well-qualified executives who will be capable of contributing
to the success of FBA.
The paramount objective of FBA is building the long-term value of the
stockholders' investment, within the framework of operating its subsidiary
financial institutions in a safe and sound manner. This is accomplished by
achieving substantial improvements and consistency in earnings, strengthening
the subsidiary banking franchises, and entering into strategic, economically-
viable acquisitions of other financial institutions. Consequently, the
compensation of executives should be structured to attract individuals
capable of contributing to the
106
<PAGE> 106
achievement of these objectives and to align the welfare of those individuals
with that of the stockholders.
The Committee periodically reviews the various components of FBA's
executive compensation programs as outlined below:
Base Salary. In determining the appropriate base salaries of its
executive officers, the Committee evaluates the performance of FBA,
considering general business and industry conditions, among other factors,
and the contributions of specific executives toward that performance.
Particular measurements to which the Committee assigns significance are net
income, earnings per share, expense control, net interest margin, regulatory
reports and the performance of FBA Common. The Committee also evaluates each
officer's areas of responsibility and the Company's performance in those
areas. Finally, FBA considers the level of compensation paid comparable
executives by other financial institutions of comparable size in its market
places.
Bonus. The Committee may elect to award bonuses to selected executive
officers based largely upon the same criteria as the evaluations of base
salaries, emphasizing the need to maintain competitive compensation packages
and the desire to recognize outstanding performance by the officers.
Stock Option Program. The Committee recognizes that one way to
align the interests of FBA's executive officers with those of its
stockholders is the encouragement of ownership of FBA stock through stock
options granted under its 1990 Stock Option Plan. Under this Plan, executive
officers are eligible to receive stock options from time to time, giving them
the right to purchase shares of common stock of FBA at a specified price in
the future. Considering the number of options granted prior to 1993, the
Committee has elected not to grant any additional options since that time.
The difficulties which FBA experienced in recent years has limited its
success in accomplishing its objectives. As a result of the private
placement of Class B Common in 1994, FBA was in a better position to direct
its attention toward its future development. In anticipation of this, the
Committee began re-examining FBA's benefit programs during 1994, and
restructuring or eliminating certain of them which it believed to be
excessively expensive for the benefits provided. This process resulted in
the discontinuation of the accumulation of benefits under the FBA defined
benefit pension plan, the elimination of FBA's contributions for coverage of
new retirees under the FBA post-retirement health care and life insurance
plans and the increase in FBA's matching contributions under the 401(k) Plan.
Furthermore, various functions within FBA have been eliminated, or combined
with those of First Banks, resulting in significant staff reductions and
organizational restructuring.
During the fourth quarter of 1996, the Committee reviewed the
performance of FBA relative to its earnings, business development and asset
quality. The Committee determined that while performance in all of these
areas had significantly improved from previous years, its
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<PAGE> 107
objectives had not yet been reached. However, the Committee believed that the
progress which was achieved by FBA, as well as the individual accomplishments of
certain executive officers, warranted recognition in the form of adjustments in
base salaries, which adjustments were approved. In addition, the Committee
determined that in a few instances recognition of the efforts of particular
executives in the form of bonuses was appropriate, which bonuses were
granted.
Compensation of Chief Executive Officer. As noted elsewhere in
this Proxy Statement, Mr. Dierberg, the Chief Executive Officer of FBA, does
not receive any compensation from FBA, Sunrise or BankTEXAS. First Banks
receives fees from FBA pursuant to data processing and management fee
agreements (see "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION").
THE FOREGOING REPORT HAS BEEN PRESENTED BY THE ENTIRE BOARD OF DIRECTORS
OF FBA CONSISTING OF MESSRS. BLAKE, CROCCO, DIERBERG, STORY, TURKCAN AND
WILLIAMS.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
Messrs. Dierberg and Blake, who are executive officers of FBA but do not
receive any compensation for their services as such, are also members of the
Board of Directors and executive officers of First Banks, and Mr. Blake is a
director and executive officer of First Commercial, a majority-owned
subsidiary of First Banks. Neither First Banks nor First Commercial has a
compensation committee, but each Board of Directors performs the functions of
such a committee. Except for the foregoing, no executive officer of FBA
served during 1996 as a member of the Compensation Committee, or any other
committee performing comparable functions, or as a director, of another
entity any of whose executive officers or directors served on FBA's
Compensation Committee.
Following the private placement of Class B Common in August 1994, FBA
began purchasing certain services and supplies from or through its majority
stockholder, First Banks. FBA's financial position and operating results
could significantly differ from those that would be obtained if FBA's
relationship with First Banks did not exist.
First Banks provides management services to FBA and it subsidiary banks.
Management services are provided under a management fee agreement whereby FBA
compensates First Banks on an hourly basis for its use of personnel for
various functions including internal audit, loan review, income tax
preparation and assistance, accounting, asset/liability and investment
services, loan servicing and other management and administrative services.
Fees paid under this agreement were $271,000 and $474,000 for the three and
six months ended June 30, 1997, compared to $175,000 and $318,000 for the
three and six months ended June 30, 1996.
108
<PAGE> 108
Because of this affiliation with First Banks and the geographic
proximity of certain of their banking offices, Sunrise and First Bank &
Trust, a wholly-owned subsidiary of First Banks, share the costs of certain
personnel and services used by both banks. This includes the salaries and
benefits of certain loan and administrative personnel. In January 1997,
Sunrise and First Bank & Trust entered into a cost sharing agreement for the
purpose of allocating these expenses between them. Expenses associated with
loan origination personnel are allocated based on the relative loan volume of
the two banks. Costs of most other personnel are allocated on an hourly
basis. Because this involves distributing essentially fixed costs over a
larger asset base, it allows each bank to receive the benefit of personnel
and services at a reduced cost. Fees paid under this agreement were $74,000
and $157,000 for the three and six month periods ended June 30, 1997.
Under a data processing agreement, a subsidiary of First Banks provided
data processing and various related services to FBA through March 31, 1997.
Fees paid under this agreement were $196,000 for the six months ended June
30, 1997, compared to $77,000 and $157,000 for the three and six months ended
June 30, 1996, respectively. Effective April 1, 1997, First Services L.P., a
limited partnership indirectly owned by First Banks' Chairman and his
children through its General Partners and Limited Partners, began providing
data processing and various related services to FBA. Fees paid under this
agreement were $143,000 for the three and six months ended June 30, 1997.
The fees paid for management services and data processing are significantly
lower than FBA was paying its nonaffiliated vendors.
FBA's subsidiary banks had $33.3 million and $21.4 million in whole
loans and loan participations outstanding at June 30, 1997 and December 31,
1996, respectively, that were purchased from banks affiliated with First
Banks. In addition, FBA's subsidiary banks had sold $19.5 million and $26.7
million in whole loans and loan participations to affiliates of First Banks
at June 30, 1997 and December 31, 1996, respectively. These loans and loan
participations were acquired and sold at interest rates and terms prevailing
at the dates of their purchase or sale and under standards and policies
followed by FBA's subsidiary banks.
FBA has borrowed $14.5 million from First Banks under a $15 million note
payable agreement. 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. The interest expense was $573,000 for the six
months ended June 30, 1997. The principal and accrued interest under the
note agreement are due and payable on October 31, 2001. The accrued and
unpaid interest under the note agreement was $767,000 and $194,000 at June
30, 1997 and December 31, 1996, respectively.
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SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the executive officers and
directors of FBA, and persons who beneficially own more than ten percent of a
registered class of its equity securities, to file reports of ownership and
changes in ownership with the SEC and the NYSE. Based solely upon a review
of the reports received by FBA and the written representations from certain
reporting persons that no Forms 5 were required for such persons, FBA
believes that during the year ended December 31, 1996, all executive
officers, directors and ten percent beneficial owners complied with the
applicable filing requirements.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in FBA's proxy statement for consideration at
its Annual Meeting of Stockholders by submitting proposals to FBA in a timely
manner. In order to be included for FBA's 1998 Annual Meeting of
Stockholders, a stockholder proposal must have been received by FBA a
reasonable time prior to the meeting and must otherwise comply with the
requirements of Rule 14a-8 and with FBA's By-laws.
LEGAL MATTERS
The legality of the FBA Common offered hereby will be passed upon for
FBA by John S. Daniels, Attorney at Law, Dallas, Texas.
EXPERTS
The consolidated financial statements of First Banks America, Inc. and
subsidiaries as of December 31, 1996 and 1995 and for each of the years in
the three-year period ended December 31, 1996, included in First Banks
America, Inc.'s Annual Report on Form 10-K, have been incorporated by
reference herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of First Commercial Bancorp, Inc.
and subsidiary as of December 31, 1996 and 1995 and for each of the years in
the two-year period ended December 31, 1996, included in First Commercial
Bancorp, Inc.'s Annual Report on Form 10-K, have been incorporated by
reference herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of First Commercial Bancorp, Inc.
and subsidiary as of December 31, 1994 and for the year ended December 31,
1994, included in First Commercial Bancorp, Inc.'s Annual Report on Form 10-K,
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of Arthur Andersen LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
and
FIRST COMMERCIAL BANCORP, INC.
a Delaware corporation
October 3, 1997
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TABLE OF CONTENTS
ARTICLE I - TERMS OF THE MERGER & CLOSING; EXCHANGE OF SHARES
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 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF FIRST COMMERCIAL
Section 2.01.Organization and Capital Stock 5
Section 2.02.Authorization; No Defaults 6
Section 2.03.First Commercial Subsidiaries 6
Section 2.04.Financial Information 7
Section 2.05.Absence of Changes 7
Section 2.06.Regulatory Enforcement Matters 8
Section 2.07.Tax Matters 8
Section 2.08.Litigation 8
Section 2.09.Properties, Contracts, Employee Benefit Plans and
Other Agreements 8
Section 2.10.Reports 9
Section 2.11.Investment Portfolio 9
Section 2.12.Loan Portfolio 10
Section 2.13.Employee Matters and ERISA 10
Section 2.14.Title to Properties; Insurance 11
Section 2.15.Compliance with Law 11
Section 2.16.Brokerage 11
Section 2.17.No Undisclosed Liabilities 11
Section 2.18.Statements True and Correct 12
Section 2.19.Commitments and Contracts 12
Section 2.20.Material Interest of Certain Persons 13
Section 2.21.Conduct to Date 13
Section 2.22.Environmental Matters 14
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FBA
Section 3.01.Organization and Capital Stock 14
Section 3.02.Authorization; No Defaults 15
Section 3.03.FBA Subsidiaries 15
Section 3.04.Financial Information 16
Section 3.05.Absence of Changes 16
Section 3.06.Regulatory Enforcement Matters 17
Section 3.07.Tax Matters 17
Section 3.08 Litigation 17
Section 3.09.Properties, Contracts, Employee Benefit Plans and
Other Agreements 17
Section 3.10.Reports 18
Section 3.11.Investment Portfolio 18
Section 3.12.Loan Portfolio 19
Section 3.13.Employee Matters and ERISA 19
Section 3.14.Title to Properties; Insurance 19
Section 3.15.Compliance with Law 20
Section 3.16.Brokerage 20
Section 3.17.No Undisclosed Liabilities 20
Section 3.18.Statements True and Correct 20
Section 3.19.Commitments and Contracts 21
Section 3.20.Material Interest of Certain Persons 21
Section 3.21.Conduct to Date 22
Section 3.22.Environmental Matters 22
ARTICLE IV - AGREEMENTS OF FIRST COMMERCIAL
Section 4.01.Business in Ordinary Course 23
Section 4.02.Breaches 25
Section 4.03.Submission to Stockholders 25
Section 4.04.Consummation of Agreement 26
Section 4.05.Access to Information 26
Section 4.06.Consents to Contracts and Leases 26
Section 4.07.Subsequent Financial Statements 26
Section 4.08.Merger of Banks; Branch Exchange 26
ARTICLE V - AGREEMENTS OF FBA
Section 5.01.Business in Ordinary Course 27
Section 5.02.Regulatory Approvals 28
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Section 5.03.Breaches 28
Section 5.04.Consummation of Agreement 29
Section 5.05.Indemnification 29
Section 5.06.Access to Information 29
Section 5.07.Registration Statement, Prospectus and Joint Proxy
Statement; Listing Application 29
Section 5.08.Subsequent Financial Statements 30
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01.Conditions to the Obligations of FBA 31
Section 6.02.Conditions to the Obligations of First Commercial 32
ARTICLE VII - TERMINATION
Section 7.01.Mutual Agreement 33
Section 7.02.Breach of Agreements 33
Section 7.03.Failure of Conditions 34
Section 7.04.Denial of Regulatory Approval 34
Section 7.05.Regulatory Enforcement Matters 34
Section 7.06.Unilateral Termination 34
Section 7.07.Damages and Limitation on Damages 34
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01.Confidential Information 35
Section 8.02.Publicity 35
Section 8.03.Return of Documents 35
Section 8.04.Notices 36
Section 8.05.Nonsurvival of Representations, Warranties
and Agreements 37
Section 8.06.Costs and Expenses 37
Section 8.07.Entire Agreement 37
Section 8.08.Headings and Captions 37
Section 8.09.Waiver, Amendment or Modification 37
Section 8.10.Rules of Construction 38
Section 8.11.Counterparts 38
Section 8.12.Successors and Assigns 38
Section 8.13.Governing Law 38
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of October 3, 1997, is by
and between First Banks America, Inc., a bank holding company organized as a
Delaware corporation ("FBA"), and First Commercial Bancorp, Inc., a bank
holding company organized as a Delaware corporation ("First Commercial").
This Agreement and Plan of Merger is hereinafter referred to as the
"Agreement."
In consideration of the mutual representations, warranties, agreements
and covenants contained herein, FBA and First Commercial hereby agree as
follows:
ARTICLE I
TERMS OF THE MERGER & CLOSING; EXCHANGE
OF SHARES
Section 1.01. The Merger. Pursuant to the terms and provisions of this
Agreement and the corporation law of the State of Delaware governing the
merger of First Commercial with FBA ("Corporate Law"), First Commercial shall
merge with and into FBA, and FBA will be the surviving corporation (the
"Merger"). This Agreement also contemplates that, immediately following the
Effective Time (as defined in Section 1.05 hereof), the Bank Merger and the
Branch Exchange (as such terms are defined in Section 4.0 8) will occur.
Section 1.02. Effect of the Merger. The Merger shall have all of the
effects provided by Corporate Law and this Agreement, and the separate
corporate existence of First Commercial shall cease on consummation of the
Merger and be combined in FBA.
Section 1.03. Conversion of Shares.
(a) At the Effective Time, each share of common stock, $1.25 par value,
of First Commercial ("First Commercial Common") issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive 0.8888 shares of common stock, par value $.15 per share, of FBA ("FBA
Common Stock"); provided, however, that (i) no fractional shares of FBA
Common Stock shall be issued as a result of the Merger, but cash shall be
paid in lieu thereof as provided in Section 1.07 hereof; and (ii) each share
of First Commercial Common held in the treasury of First Commercial or by any
direct or indirect subsidiary of First Commercial immediately prior to the
Effective Time shall be cancelled.
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(b) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, all of the shares of First
Commercial Common shall cease to be outstanding and be cancelled. Upon the
surrender of any certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of First Commercial Common (the
"Certificate"), each holder thereof shall cease to have any rights with
respect to such shares, except the right of the holder to receive (i) a new
certificate representing the number of whole shares of FBA Common Stock, and
(ii) the amount of cash in lieu of fractional shares, if any, into which the
shares of First Commercial Common represented by the Certificate have been
converted.
(c) Issued and outstanding shares of First Commercial 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 First
Commercial 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.
(d)(i) Each option granted by First Commercial to purchase shares of
First Commercial Common (each a "First Commercial Option") outstanding
immediately prior to the Effective Time shall cease to represent the right to
acquire shares of First Commercial Common and shall be converted
automatically into an option to purchase shares of FBA Common Stock. The
number of shares of FBA Common Stock subject to a new option shall be the
product of the number of shares of First Commercial Common subject to the
First Commercial Option times 0.8888, and the exercise price of the new
option shall be the quotient obtained by dividing the exercise price of the
First Commercial Option by 0.8888.
(ii) Promptly after the Effective Time, FBA and each holder of an
option subject to such conversion shall enter into an option agreement
setting forth the terms of the new option into which the corresponding First
Commercial Option has been converted, having substantially the same terms as
those of the First Commercial Option except as otherwise provided herein.
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, or (iii) the
first business day of the first month of the next calendar quarter following
the month, in each case, during which each of the conditions in Sections 6.01
and 6.02 is satisfied or waived by the appropriate party or on such other
date as First Commercial and FBA may agree (the "Closing Date"). The Merger
shall be effective upon the filing of Articles of Merger with the Secretary
of State of the State of Delaware (the "Effective Time").
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Section 1.06. Actions At Closing. (a) At the Closing, First
Commercial shall deliver to FBA:
(i) certified copies of the Certificate of Incorporation and Bylaws
of First Commercial and the certificate or articles of incorporation and
bylaws of each of its subsidiaries;
(ii) a Certificate signed by an appropriate officer of First
Commercial stating that (A) each of the representations and warranties
contained in Article II is true and correct in all material respects at
the time of the Closing (except for those made as of a specified date),
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 6.01 have been satisfied or waived as provided therein;
(iii) certified copies of the resolutions of First Commercial's Board
of Directors and stockholders, establishing the requisite approvals
under applicable Corporate Law of this Agreement, the Merger and the
other transactions contemplated hereby;
(iv) a Certificate of the Secretary of State of the State of
Delaware, dated a recent date, stating that First Commercial is in good
standing; and
(v) a legal opinion from counsel for First Commercial regarding
First Commercial, this Agreement and the transactions contemplated
hereby, in form reasonably satisfactory to FBA and its counsel.
(b) At the Closing, FBA shall deliver to First Commercial:
(i) certified copies of the Certificate of Incorporation and Bylaws
of FBA and the certificate or articles of incorporation and bylaws of
each of its subsidiaries;
(ii) a Certificate signed by an appropriate officer of FBA stating
that (A) each of the representations and warranties contained in Article
III is true and correct in all material respects at the time of the
Closing (except for those made as of a specified date), 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
have been satisfied or waived as provided therein;
(iii) certified copies of the resolutions of FBA's Board of Directors
and stockholders, establishing the requisite approvals under applicable
Corporate Law of this Agreement, the Merger and the other transactions
contemplated hereby;
(iv) a Certificate of the Secretary of State of the State of
Delaware, dated a recent date, stating that FBA is in good standing; and
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(v) a legal opinion from counsel for FBA regarding FBA, this
Agreement and the transactions contemplated hereby, in form reasonably
satisfactory to First Commercial and its counsel.
Section 1.07. Exchange Procedures; Surrender of Certificates.
(a) Chase Mellon Shareholder Services, or another firm selected by FBA
to which First Commercial has no reasonable objection, shall act as Exchange
Agent in the Merger (the "Exchange Agent").
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each record holder of shares of First Commercial
Common a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to Certificates representing such shares
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
Certificates. Upon surrender to the Exchange Agent of a Certificate,
together with a duly executed Letter of Transmittal and any other required
documents, the holder of a Certificate shall be entitled to receive in
exchange therefor solely the Merger Consideration, without interest. If
shares of FBA Common Stock are to be issued in a name other than a person in
whose name a surrendered Certificate is registered, it shall be a condition
of acceptance of the surrendered Certificate that the same 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) Each holder of shares of First Commercial Common who would
otherwise be entitled to receive a fraction of a share of FBA Common Stock
(after taking into account all Certificates delivered by such holder) shall
receive in lieu thereof cash, without interest, in an amount equal to such
fraction multiplied by the product of the closing price of a share of FBA
Common Stock on the New York Stock Exchange--Composite Transactions List on
the business day immediately preceding the Effective Time times 0.8888.
(d) 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 surrender of any Certificate.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST COMMERCIAL
First Commercial represents and warrants to FBA as follows:
Section 2.01. Organization and Capital Stock.
(a) First Commercial 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 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 First
Commercial consists of 10,000,000 shares of common stock, par value $ 1.25
per share ("First Commercial Common"), of which 846,127 are outstanding, duly
and validly issued, fully paid and non-assessable, and 5,000,000 shares of
preferred stock, par value $.01 per share, none of which is outstanding. A
certificate of designation has been filed with the Delaware Secretary of
State designating 500,000 shares of such preferred stock as "Series A
Participating Preferred Stock," none of which has been issued. None of the
outstanding shares of First Commercial Common has been issued in violation of
any preemptive rights. There are currently outstanding First Commercial
Options representing the right to acquire an aggregate of 240 shares of First
Commercial Common Stock for the aggregate exercise price of $221,400. To the
best of First Commercial's knowledge, First Commercial does not have a
material liability arising from the issuance of stock certificates in
replacement of certificates which have been lost, stolen or destroyed.
The stockholders of First Commercial adopted a stockholders rights plan
(the "Rights Plan") in 1990. Under the Rights Plan, holders of outstanding
shares of First Commercial Common are entitled to purchase a fractional
interest in First Commercial's Series A Participating Preferred Stock under
certain circumstances. The rights granted under the Rights Plan attach to
each share of First Commercial Common and no separate certificates for such
rights have been issued. No "Distribution Date," as such term is defined in
the Rights Plan, has occurred.
(c) Except as disclosed in Section 2.01(b), and except for convertible
debentures in the principal amount of $6.5 million which are convertible into
shares of First Commercial Common (the "Debentures"), there are no shares of
capital stock or other equity securities of First Commercial 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 First Commercial or contracts, commitments, understandings or arrangements
by which First Commercial is or may be obligated to issue additional shares
of its capital stock.
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(d) Pursuant to that certain Stock Purchase Agreement dated as of
August 7, 1995 by and between First Commercial and First Banks, Inc. ("First
Banks"), as amended by that certain Additional Investment Agreement dated as
of October 31, 1995, by and between First Commercial and First Banks, and as
further amended by that certain Standby Agreement dated as of December 28,
1995 by and between First Commercial and First Banks (collectively, the
"Stock Purchase Agreement"), stockholders of First Commercial as of October
6, 1995 were issued certain appreciation rights by First Commercial (the
"Appreciation Rights"). Holders of Appreciation Rights are entitled to
receive certain payments from First Commercial based upon recoveries First
Commercial Bank experiences on certain specified assets. The Stock Purchase
Agreement sets forth those specified assets, certain measurement formulas,
and the three dates as of which such measurement formulas are to be applied
to determine whether any payment is due to holders of the Appreciation
Rights. The first measurement date was June 30, 1996, and no payments were
due under the measurement formulas as of that date. The second measurement
date is December 31, 1997, and the third measurement date is October 31,
1998. Under the terms of the Stock Purchase Agreement, payments for the
second and third measurement dates may be in the form of cash or stock, as
determined in the sole discretion of the First Commercial Board of Directors.
First Commercial anticipates that some payment will be made with respect to
the second measurement date, but the precise amount cannot be determined at
this time.
Section 2.02. Authorization; No Defaults. First Commercial's Board of
Directors has by all requisite action approved this Agreement and the Merger
and authorized the execution and delivery hereof on its behalf by its duly
authorized officers and the performance by First Commercial of its
obligations hereunder. Nothing in the Certificate of Incorporation or Bylaws
of First Commercial 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 First Commercial or any of its subsidiaries is
bound or subject would prohibit or inhibit First Commercial from consummating
this Agreement and the Merger on the terms and conditions herein contained.
This Agreement has been duly and validly executed and delivered by First
Commercial and constitutes a legal, valid and binding obligation of First
Commercial, enforceable against First Commercial in accordance with its
terms. First Commercial and its subsidiaries are neither in default under
nor in violation of any provision of their respective articles or
certificates 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 First
Commercial and its subsidiaries taken as a whole.
Section 2.03. First Commercial Subsidiaries. Each of First
Commercial's direct and indirect subsidiaries (hereinafter referred to singly
as a "First Commercial Subsidiary" and collectively as the "First Commercial
Subsidiaries"), the names and jurisdictions of incorporation of which are
disclosed in Section 2.03 of that certain document delivered by First
Commercial to FBA, entitled the "First Commercial Disclosure Schedule" and
executed by both First Commercial and FBA concurrently with the execution and
delivery of this Agreement (the "First Commercial Disclosure Schedule"), is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and each of the First Commercial
Subsidiaries has the corporate power to own its properties and assets, to
incur its liabilities and to
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carry on its business as now being conducted. The number of issued and
outstanding shares of capital stock of each First Commercial Subsidiary and the
ownership of such shares is set forth in Section 2.03 of the First Commercial
Disclosure Schedule; and all of such shares are owned by First Commercial or a
First Commercial Subsidiary, free and clear of all liens, encumbrances, rights
of first refusal, options or other restrictions of any nature whatsoever, except
that the common stock of First Commercial Bank is pledged to secure the
repayment of the Debentures. There are no options, warrants or rights
outstanding to acquire any capital stock of any First Commercial Subsidiary, and
no person or entity has any other right to purchase or acquire any unissued
shares of stock of any First Commercial Subsidiary, nor does any First
Commercial Subsidiary have any obligation of any nature with respect to its
unissued shares of stock. Except as disclosed in Section 2.03 of the First
Commercial Disclosure Schedule, neither First Commercial nor any First
Commercial 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. All of (i) the audited
consolidated balance sheets of First Commercial and the First Commercial
Subsidiaries as of December 31, 1996 and related consolidated income
statements and statements of changes in shareholders' equity and of cash
flows for the three years ended December 31, 1996, together with the notes
thereto, included in First Commercial's Annual Report on Form 10-K for the
year ended December 31, 1996, as currently on file with the Securities and
Exchange Commission (the "SEC"); (ii) the unaudited consolidated balance
sheets of First Commercial and the First Commercial Subsidiaries as of June
30, 1997 and related consolidated income statements and statements of changes
in shareholders' equity and of cash flows for the six months ended June 30,
1997, together with the notes thereto, included in First Commercial's
Quarterly Report on Form 10-Q for the six months ended June 30, 1997 as
currently on file with the SEC; and (iii) the year-end and quarter-end
Reports of Condition and Reports of Income of First Commercial Bank for 1996
and for the six-month period ended June 30, 1997, respectively, as filed with
the Federal Deposit Insurance Corporation (the "FDIC") (such financial
statements and notes collectively referred to herein as the "First Commercial
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 First Commercial 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. Since June 30, 1997 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of First Commercial and its
subsidiaries taken as a whole, nor have there been any events or transactions
having such a material adverse effect which should be disclosed in order to
make the First Commercial Financial Statements not misleading. Since June
30, 1996, there has been no material adverse change in the financial
condition, the results of operations or the business of First Commercial Bank
except for any such changes as are disclosed in First Commercial Bank's
Reports of Condition and Income filed with the FDIC since such date.
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Section 2.06. Regulatory Enforcement Matters. Neither First Commercial
nor any First Commercial Subsidiary 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 First Commercial or any of its subsidiaries.
Section 2.07. Tax Matters. First Commercial and the First Commercial
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 First Commercial 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 disclosed in Section 2.08 of the
First Commercial Disclosure Schedule, there is no litigation, claim or other
proceeding involving an amount in controversy in excess of $50,000 pending
or, to the knowledge of First Commercial, threatened against First Commercial
or any of the First Commercial Subsidiaries, or of which the property of
First Commercial or any of the First Commercial Subsidiaries is or would be
subject.
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other
Agreements. Section 2.09 of the First Commercial Disclosure Schedule
specifically identifies the following:
(a) all real property owned by First Commercial or any First Commercial
Subsidiary 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 First Commercial or any First Commercial Subsidiary 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 First Commercial or a First Commercial Subsidiary, exclusive of
deposit agreements with customers of First Commercial Bank entered into in
the ordinary course of business, agreements for the purchase of federal
funds, repurchase agreements and the Debentures;
(c) all agreements, loans, contracts, guaranties, letters of credit,
lines of credit or commitments of First Commercial or any First Commercial
Subsidiary not referred to elsewhere in this Section 2.09 which:
(i) (except for loans, loan commitments or lines of
credit) involve payment by First Commercial or
any First Commercial Subsidiary of more than
$25,000;
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(ii) involve payments based on profits of First
Commercial or any First Commercial Subsidiary;
(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 First Commercial or any First
Commercial Subsidiary;
(d) all leases, subleases or licenses with respect to real or personal
property, whether as lessor, lessee, licensor or licensee, with annual rental
or other payments due thereunder in excess of $25,000;
(e) 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 First
Commercial or a First Commercial Subsidiary on thirty (30) days written
notice or less without any payment by reason of such termination; and
(f) the name and annual salary as of January 1, 1997 of each director
or employee of First Commercial or any First Commercial Subsidiary with a
salary in excess of $100,000.
Copies of each document, plan or contract identified in Section 2.09 of
the First Commercial Disclosure Schedule have been made available for
inspection by FBA and shall remain available at all times prior to the
Closing Date.
Section 2.10. Reports. First Commercial and the First Commercial
Subsidiaries have filed all reports and statements, together with any
amendments required to be made with respect thereto, required to be filed
with the SEC, the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the Department of Financial Institutions of the
State of California (the "Financial Institutions Department"), the FDIC and
any other governmental authority with jurisdiction over First Commercial or
any First Commercial 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
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subdivisions of the United States and other investment securities held by First
Commercial or any First Commercial Subsidiary, as reflected in the latest
consolidated balance sheet of First Commercial included in the First Commercial
Financial Statements, are carried in accordance with generally accepted
accounting principles.
Section 2.12. Loan Portfolio. Except as disclosed in Section 2.12 of
the First Commercial Disclosure Schedule, to the best of First Commercial's
knowledge: (i) all loans and discounts shown on the First Commercial
Financial Statements at June 30, 1997 or which were or will be entered into
after June 30, 1997 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 First Commercial and the First Commercial
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, valid, true and genuine and
what they purport to be; and (iii) First Commercial and the First Commercial
Subsidiaries have complied and will through 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. To the best of First Commercial's
knowledge, except as disclosed in Section 2.12 of the First Commercial
Disclosure Schedule, all loans and loan commitments extended by First
Commercial 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 First Commercial Bank. The reserve for possible loan and
lease losses shown on the Report of Condition and Income of First Commercial
Bank as of June 30, 1997 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 June 30, 1997.
Section 2.13. Employee Matters and ERISA.
(a) Neither First Commercial nor any First Commercial Subsidiary has
entered into any collective bargaining agreement with any labor organization
with respect to any group of employees of First Commercial or any First
Commercial Subsidiary, and to the knowledge of First Commercial there is no
present effort nor existing proposal to attempt to unionize any group of
employees of First Commercial or any First Commercial Subsidiary.
(b) All arrangements of First Commercial and the First Commercial
Subsidiaries relating to employees, including all benefit plans and deferred
compensation, bonus, stock or incentive plans for the benefit of current or
former employees (the "First Commercial Employee Plans") are administered by
First Banks, Inc. All costs, liabilities and obligations arising from the
First
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Commercial Employee Plans are properly reflected in accordance with
generally accepted accounting principles in the First Commercial Financial
Statements.
Section 2.14. Title to Properties; Insurance. Except as disclosed in
Section 2.14 of the First Commercial Disclosure Schedule: (i) First
Commercial and the First Commercial 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 First Commercial 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 First
Commercial or any First Commercial 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 First
Commercial or a First Commercial Subsidiary in its business 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 First Commercial, threatened with
respect to any of such properties; (iv) First Commercial and the First
Commercial Subsidiaries have valid title or other ownership rights under
licenses to all material intangible personal or intellectual property used by
First Commercial or any First Commercial 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 First Commercial or a First Commercial Subsidiary 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. Compliance with Law. First Commercial and the First
Commercial 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, are qualified
to conduct business in every jurisdiction in which such qualification is
legally required and are in compliance in all material respects with all
applicable laws and regulations.
Section 2.16. Brokerage. Except for fees payable by First Commercial
to Mercer Capital Management, Inc., there are no existing claims or
agreements for brokerage commissions, finders' fees, financial advisory fees
or similar compensation in connection with the transactions contemplated by
this Agreement payable by First Commercial or any First Commercial
Subsidiary.
Section 2.17. No Undisclosed Liabilities. Neither First Commercial nor
any First Commercial Subsidiary has 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
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other basis for any present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against First Commercial or any First
Commercial Subsidiary giving rise to any such liability), except (i) liabilities
reflected in the First Commercial Financial Statements and (ii) liabilities
of the same type incurred in the ordinary course of business of First
Commercial and the First Commercial Subsidiaries since June 30, 1997.
Section 2.18. Statements True and Correct. None of the information
supplied or to be supplied by First Commercial for inclusion in any document
to be filed with the SEC 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 the Joint Proxy Statement
(as defined in Section 5.07), when first mailed to the stockholders of First
Commercial and at the times of the First Commercial Stockholders' Meeting (as
defined in Section 4.03) and the FBA Stockholders' Meeting (as defined in
Section 5.07), 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 not misleading, or omit to state any material fact required to be
stated in order to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the First Commercial
Stockholders' Meeting. All documents that First Commercial is responsible for
filing with the SEC or any banking or other regulatory authority in
connection with the transactions contemplated hereby will comply in all
material respects with the provisions of applicable law and the applicable
rules and regulations thereunder.
Section 2.19. Commitments and Contracts. Except as disclosed in
Section 2.19 of the First Commercial 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 First Commercial nor any First
Commercial Subsidiary 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 First Commercial Financial Statements relating to the
borrowing of money by First Commercial or a First Commercial
Subsidiary or the guarantee by First Commercial or a First
Commercial Subsidiary of any obligation, other than (A) trade
payables or instruments related to transactions entered into in
the ordinary course of business by First Commercial or a First
Commercial Subsidiary, such as deposits, federal funds
borrowings and repurchase agreements, (B) the Appreciation
Rights, or (C) agreements, indentures or instruments providing
for annual payments of less than $25,000; or
(iii) any contract containing covenants which limit the ability of
First Commercial 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, First Commercial or any First
Commercial Subsidiary may carry on its business (other than as
may be required by law or any applicable regulatory authority).
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Section 2.20. Material Interest of Certain Persons. (a) Except as
disclosed in Section 2.20 of the First Commercial Disclosure Schedule, no
officer or director of First Commercial or any "associate" (as such term is
defined in Rule 14a-1 under the Securities Exchange Act of 1934, as amended
(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 First Commercial or any
First Commercial Subsidiary.
(b) All outstanding loans from First Commercial Bank to any present
officer, director, employee or any associate or related interest of any such
person which was required to be approved by or reported to First Commercial
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 2.21. Conduct to Date. Except as disclosed in Section 2.21 of
the First Commercial Disclosure Schedule, from and after June 30, 1997
through the date of this Agreement, neither First Commercial nor any First
Commercial 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 First Commercial or any First Commercial 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) cancelled 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.
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Section 2.22. 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 First
Commercial or any First Commercial Subsidiary has done business or owned,
leased or operated property, including, 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 disclosed in Section 2.22 of the First Commercial Disclosure
Schedule, neither the conduct nor operation of First Commercial or any First
Commercial 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 First Commercial and the First Commercial
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 First
Commercial and the First Commercial Subsidiaries, taken as a whole, of any
Environmental Law or obligate (or potentially obligate) First Commercial or
any First Commercial 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 First Commercial and the First
Commercial Subsidiaries, taken as a whole. Except as may be disclosed in
Section 2.22 of the First Commercial Disclosure Schedule, neither First
Commercial nor any First Commercial Subsidiary has received notice from any
person or entity that First Commercial or any First Commercial 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 First Commercial or any First
Commercial 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FBA
FBA represents and warrants to First Commercial as follows:
Section 3.01. Organization and Capital Stock.
(a) 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 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 FBA consists
of 6,666,666 shares of FBA Common Stock, of which 1,059,042 are outstanding,
duly and validly issued,
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fully paid and non-assessable; 4,000,000 shares of FBA Class B Stock, par value
$.15 per share ("FBA Class B Stock"), of which 2,500,000 are outstanding, duly
and validly issued, fully paid and non-assessable; and 3,000,000 shares of
preferred stock, par value $1.00 per share, none of which is outstanding. None
of the outstanding shares of FBA Common Stock or FBA Class B Stock has been
issued in violation of any preemptive rights. FBA has granted and outstanding
(i) stock options representing the right to acquire an aggregate of 15,001
shares of FBA Common Stock for the aggregate exercise price of $56,256 (the "FBA
Stock Options") and (ii) warrants representing the right to acquire an aggregate
of 65,663 shares of common Stock for the aggregate price of $5,328,552 (the "FBA
Warrants").
(c) Except as disclosed in (i) Section 3.01(b) and (ii) Section 3.01 of
that certain document delivered by FBA to First Commercial entitled the "FBA
Disclosure Schedule" and executed by both FBA and First Commercial
concurrently with the execution and delivery of this Agreement (the "FBA
Disclosure Schedule"), there are no shares of capital stock or other equity
securities of FBA 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 FBA or contracts, commitments, understandings
or arrangements by which FBA is or may be obligated to issue additional
shares of its capital stock.
Section 3.02. Authorization; No Defaults. FBA's Board of Directors has
by all requisite action approved this Agreement and the Merger and authorized
the execution and delivery hereof on its behalf by its duly authorized
officers and the performance by FBA of its obligations hereunder. 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
consummating this Agreement and the Merger on the terms and conditions herein
contained. 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. FBA and its
subsidiaries are neither in default under nor in violation of any provision
of their respective articles or certificates 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 FBA and its subsidiaries taken as a whole.
Section 3.03. FBA Subsidiaries. Each of FBA's direct and indirect
subsidiaries (hereinafter referred to singly as an "FBA Subsidiary" and
collectively as the "FBA Subsidiaries"), the names and jurisdictions of
incorporation of which are disclosed in Section 3.03 of the FBA Disclosure
Schedule, is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and each of the FBA
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 FBA
Subsidiary and the ownership of such shares is set forth in Section 3.03 of
the FBA Disclosure Schedule; and all of such shares are owned by FBA or an
FBA Subsidiary, free and
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clear of all liens, encumbrances, rights of first refusal, options or other
restrictions of any nature whatsoever, except as disclosed in Section 3.03 of
the FBA Disclosure Schedule. There are no options, warrants or rights
outstanding to acquire any capital stock of any FBA Subsidiary, and no person or
entity has any other right to purchase or acquire any unissued shares of stock
of any FBA Subsidiary, nor does any FBA Subsidiary have any obligation of any
nature with respect to its unissued shares of stock. Except as disclosed in
Section 3.03 of the FBA Disclosure Schedule, neither FBA nor any FBA Subsidiary
is a party to any partnership or joint venture or owns an equity interest in any
other business or enterprise.
Section 3.04. Financial Information. All of (i) the audited
consolidated balance sheets of FBA and the FBA Subsidiaries as of December
31, 1996 and related consolidated income statements and statements of changes
in shareholders' equity and of cash flows for the three years ended December
31, 1996, together with the notes thereto, included in FBA's Annual Report on
Form 10-K for the year ended December 31, 1996, as currently on file with the
SEC; (ii) the unaudited consolidated balance sheets of FBA and the FBA
Subsidiaries as of June 30, 1997 and related consolidated income statements
and statements of changes in shareholders' equity and of cash flows for the
six months ended June 30, 1997, together with the notes thereto, included in
FBA's Quarterly Report on Form 10-Q for the six months ended June 30, 1997 as
currently on file with the SEC; and (iii) the year-end and quarter-end
Reports of Condition and Reports of Income of BankTEXAS and Sunrise Bank,
respectively, for 1996 and for the six-month period ended June 30, 1997, as
filed with the Office of the Comptroller of the Currency (the "OCC") with
respect to BankTEXAS and the Financial Institutions Department with respect
to Sunrise Bank (such financial statements and notes collectively referred to
herein as the "FBA 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 reports of either bank) 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 consolidated subsidiaries as of the dates and for the periods indicated.
Section 3.05. Absence of Changes. Since June 30, 1997 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of FBA and its subsidiaries taken as
a whole, nor have there been any events or transactions having such a
material adverse effect which should be disclosed in order to make the FBA
Financial Statements not misleading. Since the dates of the most recent
examinations of Sunrise Bank and BankTEXAS (collectively, the "FBA Banks") by
the applicable regulatory authorities, there has been no material adverse
change in the financial condition, the results of operations or the business
of either of the FBA Banks except for any such changes as are disclosed in
their Reports of Condition and Income filed with the FDIC and the OCC,
respectively, since such date.
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Section 3.06. Regulatory Enforcement Matters. Neither FBA nor any FBA
Subsidiary 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
FBA or any of its subsidiaries.
Section 3.07. Tax Matters. FBA and the FBA 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 FBA 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 3.08. Litigation. Except as disclosed in Section 3.08 of the
FBA Disclosure Schedule, there is no litigation, claim or other proceeding
involving an amount in controversy in excess of $50,000 pending or, to the
knowledge of FBA, threatened against FBA or any of the FBA Subsidiaries, or
of which the property of FBA or any of the FBA Subsidiaries is or would be
subject.
Section 3.09. Properties, Contracts, Employee Benefit Plans and Other
Agreements. Section 3.09 of the FBA Disclosure Schedule specifically
identifies the following:
(a) all real property owned by FBA or any of the FBA 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 FBA
or any FBA 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 FBA or an FBA Subsidiary, exclusive of deposit agreements with
customers of Bank entered into in the ordinary course of business, agreements
for the purchase of federal funds and repurchase agreements;
(c) all agreements, loans, contracts, leases, guaranties, letters of
credit, lines of credit or commitments of FBA or any FBA Subsidiary not
referred to elsewhere in this Section 3.09 which:
(i) (except for loans, loan commitments or lines
of credit) involve payment by FBA or any FBA
Subsidiary of more than $25,000;
(ii) involve payments based on profits of FBA or
any FBA Subsidiary;
(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;
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(iv) were not made in the ordinary course of
business; or
(v) materially affect the business or financial
condition of FBA or any FBA Subsidiary;
(d) all leases, subleases or licenses with respect to real or personal
property, whether as lessor, lessee, licensor or licensee, with annual rental
or other payments due thereunder in excess of $25,000;
(e) 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 FBA or an FBA
Subsidiary on thirty (30) days written notice or less without any payment by
reason of such termination; and
(f) the name and annual salary as of January 1, 1997 of each director
or employee of FBA or any FBA Subsidiary with a salary in excess of $100,000.
Copies of each document, plan or contract identified in Section 3.09 of
the FBA Disclosure Schedule have been made available for inspection by First
Commercial and shall remain available at all times prior to the Closing Date.
Section 3.10. Reports. FBA and the FBA Subsidiaries have filed all
reports and statements, together with any amendments required to be made with
respect thereto, required to be filed with the SEC, the Federal Reserve
Board, the Financial Institutions Department, the OCC, the FDIC and any other
governmental authority with jurisdiction over FBA or any FBA 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 3.11. 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 FBA or an FBA Subsidiary, as
reflected in the latest consolidated balance sheet of FBA included in the FBA
Financial Statements, are carried in accordance with generally accepted
accounting principles.
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Section 3.12. Loan Portfolio. Except as disclosed in Section 3.12 of
the FBA Disclosure Schedule, to the best of FBA's knowledge, (i) all loans
and discounts shown on the FBA Financial Statements at June 30, 1997 or which
were or will be entered into after June 30, 1997 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 FBA and the
FBA Banks, 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, valid, true and genuine and what they
purport to be; and (iii) FBA and the FBA Banks have complied and will through
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. To the best of
FBA's knowledge, all loans and loan commitments extended by the FBA Banks and
any extensions, renewals or continuations of such loans and loan commitments
were made in accordance with their 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 the FBA
Banks. The reserves for possible loan and lease losses shown on the Reports
of Condition and Income of the FBA Banks as of June 30, 1997 are 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 June 30, 1997.
Section 3.13. Employee Matters and ERISA.
(a) Neither FBA nor any FBA Subsidiary has entered into any collective
bargaining agreement with any labor organization with respect to any group of
employees of FBA or any FBA Subsidiary, and to the knowledge of FBA there is
no present effort nor existing proposal to attempt to unionize any group of
employees of FBA or any FBA Subsidiary.
(b) All arrangements of FBA and the FBA Subsidiaries relating to
employees, including all benefit plans and deferred compensation, bonus,
stock or incentive plans for the benefit of current or former employees (the
"FBA Employee Plans") are administered by First Banks, Inc. All costs,
liabilities and obligations arising from the FBA Employee Plans are properly
reflected in accordance with generally accepted accounting principles in the
FBA Financial Statements.
Section 3.14. Title to Properties; Insurance. Except as disclosed in
Section 3.14 of the FBA Disclosure Schedule: (i) FBA and the FBA
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 FBA
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 FBA or any FBA 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 FBA or a FBA Subsidiary
in its business 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
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condemnation proceedings pending or, to the knowledge of FBA, threatened with
respect to any of such properties; (iv) FBA and the FBA Subsidiaries have valid
title or other ownership rights under licenses to all material intangible
personal or intellectual property used by FBA or any FBA 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 FBA or a FBA Subsidiary 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 3.15. Compliance with Law. FBA and the FBA 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, are qualified to conduct business in every
jurisdiction in which such qualification is legally required and are in
compliance in all material respects with all applicable laws and regulations.
Section 3.16. Brokerage. Except for fees payable by FBA to Rauscher
Pierce Refsnes, Inc., there are no existing claims or agreements for
brokerage commissions, finders' fees, financial advisory fees or similar
compensation in connection with the transactions contemplated by this
Agreement payable by FBA or any FBA Subsidiary.
Section 3.17. No Undisclosed Liabilities. Neither FBA nor any FBA
Subsidiary has 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 FBA or any FBA Subsidiary giving rise to any such
liability), except for (i) liabilities reflected in the FBA Financial
Statements, and (ii) liabilities of the same type incurred in the ordinary
course of business of FBA and the FBA Subsidiaries since June 30, 1997.
Section 3.18. Statements True and Correct. None of the information
supplied or to be supplied by FBA for inclusion in any document to be filed
with the SEC 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 the Joint Proxy Statement, when
first mailed to the stockholders of First Commercial and FBA and at the time
of the First Commercial Stockholders' Meeting and the FBA Stockholders'
Meeting, 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 not
misleading, or omit to state any material fact required to be stated in order
to correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Stockholders' Meeting. All documents that
FBA is responsible for filing with the SEC 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.
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Section 3.19. Commitments and Contracts. Except as disclosed in
Section 3.19 of the FBA Disclosure Schedule (and with a true and correct copy
of the document or other item in question having been made available to
First Commercial for inspection), neither FBA nor any FBA Subsidiary 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 FBA Financial Statements relating to the borrowing of money
by FBA or any FBA Subsidiary or the guarantee by FBA or any FBA
Subsidiary of any obligation, other than (A) trade payables or
instruments related to transactions entered into in the ordinary
course of business by FBA or an FBA Subsidiary, such as
deposits, federal funds borrowings and repurchase agreements or
(B) agreements, indentures or instruments providing for annual
payments of less than $25,000; or
(iii) any contract containing covenants which limit the ability of FBA
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, FBA or any FBA Subsidiary may carry on its
business (other than as may be required by law or any applicable
regulatory authority).
Section 3.20. Material Interest of Certain Persons. (a) Except as
disclosed in Section 3.20 of the FBA Disclosure Schedule, no officer or
director of FBA or any "associate" (as such term is defined in Rule 14a-1
under the Securities Exchange Act of 1934, as amended (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 FBA or any FBA Subsidiary.
(b) All outstanding loans from either of the FBA Banks to any present
officer, director, employee or any associate or related interest of any such
person which was required to be approved by or reported to the Board of
Directors of the lending bank ("Insider Loans") were approved by or reported
to the Board of Directors in accordance with all applicable laws and
regulations.
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Section 3.21. Conduct to Date. Except as disclosed in Section 3.21 of
the FBA Disclosure Schedule, from and after June 30, 1997 through the date of
this Agreement, neither FBA nor any FBA 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 FBA or any FBA 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,
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) cancelled 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 3.22. 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 FBA or any FBA
Subsidiary has done business or owned, leased or operated property,
including, 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 disclosed in Section 3.22 of the FBA Disclosure Schedule,
neither the conduct nor operation of FBA or any FBA 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 FBA
and the FBA 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 FBA and the FBA Subsidiaries, taken as a whole, of any
Environmental Law or obligate (or potentially obligate) FBA or any FBA
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 FBA and the FBA Subsidiaries, taken as a whole.
Except as may be disclosed in Section 3.22 of the FBA Disclosure Schedule,
neither FBA nor any FBA Subsidiary has received notice from any person or
entity that FBA or any FBA 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
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violation of any Environmental Law, or that FBA or any FBA 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.
ARTICLE IV
AGREEMENTS OF FIRST COMMERCIAL
Section 4.01. Business in Ordinary Course.
(a) First Commercial shall, and shall cause each First Commercial
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, First Commercial
and each First Commercial Subsidiary will not:
(i) declare or pay any dividend or make any other distribution to
stockholders, whether in cash, stock or other property (provided, however,
that this provision shall not prohibit (A) First Commercial Bank from
declaring and paying a dividend of up to $200,000 on its common stock, (B)
First Commercial from paying any and all dividends declared prior to the
date of this Agreement but unpaid as of the date of this Agreement,
together with all interest accrued thereon, or (C) First Commercial from
paying any Appreciation Rights as the same become due and owing); 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 First
Commercial Stock Options 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 First Commercial or
any First Commercial Subsidiary; or
(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 certificate or articles of incorporation or
association, as the case may be, or bylaws, nor enter into any
agreement to merge or consolidate with, or sell a significant
portion of its assets to, any person or entity.
(b) First Commercial and each First Commercial Subsidiary will not,
without the prior written consent of FBA, from and after the date hereof:
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(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; 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, except in the ordinary course of business in
compliance with applicable laws, regulations and lending
policies of the entity making the loan or advance; or
(iv) 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
(v) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or
other encumbrance; or
(vi) except in the ordinary course of business, cancel or accelerate
any material indebtedness owing to First Commercial or a First
Commercial Subsidiary or any claims which First Commercial or
any First Commercial Subsidiary may possess, or waive any
material rights of substantial value; or
(vii) 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; or
(viii) 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 First
Commercial or a First Commercial Subsidiary; or
(ix) increase or decrease the rate of interest paid on time deposits
or on certificates of deposit, except in a manner consistent
with past practices.
(c) First Commercial and the First Commercial 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 First Commercial contained in Article Two
hereof, if such representations and warranties were given immediately
following such transaction or action.
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(d) First Commercial shall promptly notify FBA of the occurrence of any
matter or event known to and directly involving First Commercial that is
materially adverse to the business, operations, properties, assets, or
condition (financial or otherwise) of First Commercial and the First
Commercial Subsidiaries, taken as a whole.
(e) Nothing in this Section 4.01 shall restrict the right of First
Commercial to enter into and perform its obligations under the Branch
Exchange Agreement.
Section 4.02. Breaches. First Commercial 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 Stockholders. First Commercial shall
cooperate with FBA in the preparation and filing of the Registration
Statement, Prospectus and Joint Proxy Statement defined in Section 5.07 and,
promptly following the effectiveness thereof, cause to be duly called and
held a meeting of its stockholders (such meeting together with any
adjournments is referred to as the "First Commercial Stockholders' Meeting")
for approval of this Agreement and the Merger as required by Corporate Law.
The Special Committee of the Board of Directors of First Commercial
established to consider the transactions contemplated by this Agreement shall
unanimously recommend to the stockholders of First Commercial the approval of
this Agreement and the Merger, and the Board of Directors shall then adopt
the same recommendations and cause the Joint Proxy Statement to be mailed to
stockholders of First Commercial and use its best efforts to obtain such
stockholder approval; provided, however, that neither the Special Committee
nor the Board of Directors of First Commercial shall be obligated to make
such recommendation if, having consulted and considered the advice of outside
legal counsel, the Special Committee and the Board of Directors have
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 or of the Special Committee of the Board of Directors under
applicable law.
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Section 4.04. Consummation of Agreement. First Commercial shall
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. First Commercial shall
furnish to FBA in a timely manner all information, data and documents in the
possession of First Commercial requested by FBA as may be required to obtain
any necessary regulatory or other approvals of the Merger and shall cooperate
fully with FBA in seeking such approvals and in consummating the transactions
contemplated by this Agreement.
Section 4.05. Access to Information. First Commercial shall permit FBA
reasonable access, in a manner which will avoid undue disruption or
interference with First Commercial's normal operations, to its properties and
shall cause the First Commercial Subsidiaries to provide to FBA comparable
access to their properties, and First Commercial shall disclose and make
available to FBA all books, documents, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities
of First Commercial and the First Commercial Subsidiaries including, but not
limited to, all books of account (including the general ledger), tax records,
minute books of directors' and stockholders' 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 8.01 hereof.
Section 4.06. Consents to Contracts and Leases. First Commercial shall
obtain all necessary consents with respect to all interests of First
Commercial and the First Commercial Subsidiaries in any material leases,
licenses, contracts, instruments and rights which require the consent of
another person for the Merger.
Section 4.07. Subsequent Financial Statements. As soon as available
after the date hereof, First Commercial shall deliver to FBA the monthly
unaudited consolidated balance sheets and profit and loss statements of First
Commercial prepared for its internal use, the Report of Condition and Income
of First Commercial 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 First Commercial Financial Statements"). The
Subsequent First Commercial Financial Statements shall be prepared on a basis
consistent with past accounting practices, shall fairly present the financial
condition and results of operations for the dates and periods presented and
shall 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 4.08. Merger of Banks; Branch Exchange. First Commercial shall
cooperate with FBA in causing First Commercial Bank to execute such documents
and file such applications and notices as may be required or desirable in
order to enable First Commercial Bank to enter into and consummate the
following transactions: (i) a merger with Sunrise Bank (or a successor
thereto) (the "Bank Merger") to be consummated immediately following the
Effective Time; and (ii) an agreement whereby First Commercial Bank will
exchange the banking operations and liabilities of its Campbell, California
branch for the banking operations and liabilities of the Walnut Creek branch
now operated by First Bank & Trust, Irvine, California (the "Branch
Exchange").
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ARTICLE V
AGREEMENTS OF FBA
Section 5.01. Business in Ordinary Course.
(a) FBA shall, and shall cause each FBA 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, FBA and each FBA Subsidiary will not:
(i) declare or pay any dividend or make any other distribution to
stockholders, whether in cash, stock or other property; or
(ii) effect a reclassification, recapitalization, splitup, exchange
of shares, readjustment or other similar change in or to any
capital stock, or otherwise reorganize or recapitalize (but
nothing herein shall be interpreted to prohibit FBA from issuing
FBA Common Stock in exchange for debt currently owed to First
Banks, as contemplated by Section 6.01(j)).
(b) FBA and each FBA Subsidiary will not, without the prior written
consent of First Commercial, from and after the date hereof:
(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; or
(ii) 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, except in the ordinary course of business in
compliance with applicable laws, regulations and lending
policies of the entity making the loan or advance; or
(iii) enter into any agreement, contract or commitment having a term
in excess of three (3) months other than letters of credit, loan
agreements and other agreements and documents made in the
ordinary course of business; or
(iv) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or
other encumbrance; or
(v) except in the ordinary course of business, cancel or accelerate
any material indebtedness owing to FBA or an FBA Subsidiary or
any claims which FBA or any FBA Subsidiary may possess, or waive
any material rights of substantial value; or
(vi) 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; or
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(vii) 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 FBA or an FBA
Subsidiary; or
(viii) increase or decrease the rate of interest paid on time deposits
or on certificates of deposit, except in a manner consistent
with past practices.
(c) FBA and the FBA Subsidiaries shall not, without the prior written
consent of First Commercial, engage in any transaction or take any action
that would render untrue in any material respect any of the representations
and warranties of FBA contained in Article Three hereof, if such
representations and warranties were given immediately following such
transaction or action.
(d) FBA shall promptly notify First Commercial of the occurrence of any
matter or event known to and directly involving FBA that is materially
adverse to the business, operations, properties, assets, or condition
(financial or otherwise) of FBA and the FBA Subsidiaries, taken as a whole.
Section 5.02. Regulatory Approvals. FBA shall file all regulatory
applications required in order to consummate the Merger, the Bank Merger and
the Branch Exchange, including but not limited to the necessary applications
for the prior approval of the Federal Reserve Board. FBA shall keep First
Commercial reasonably informed as to the status of such applications and make
available to First Commercial, upon reasonable request by First Commercial
from time to time, copies of such applications and any supplementally filed
materials.
Section 5.03. 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 First Commercial and use its
best efforts to prevent or promptly remedy the same.
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Section 5.04. 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.
Section 5.05. Indemnification.
(a) FBA shall indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of First Commercial and the
First Commercial 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 Corporate Law and by First Commercial's
Certificate of Incorporation as in effect on the date hereof.
(b) If after the Effective Time FBA or its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving 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, FBA shall make provision so that its successors and assigns shall
assume any remaining obligations set forth in this Section 5.05. If FBA
shall liquidate, dissolve or otherwise wind up its business, then the
successors and assigns of FBA shall be obligated to assume any remaining
obligations set forth in this Section 5.05.
Section 5.06. Access to Information. FBA shall permit First Commercial
reasonable access, in a manner which will avoid undue disruption or
interference with FBA's normal operations, to its properties and shall cause
the FBA Subsidiaries to provide to First Commercial comparable access to
their properties, and FBA shall disclose and make available to First
Commercial all books, documents, papers and records relating to the assets,
stock ownership, properties, operations, obligations and liabilities of FBA
and the FBA Subsidiaries including, but not limited to, all books of account
(including the general ledger), tax records, minute books of directors' and
stockholders' 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 First Commercial may have a
reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. First Commercial will hold any such
information which is nonpublic in confidence in accordance with the
provisions of Section 8.01 hereof.
Section 5.07. Registration Statement, Prospectus and Joint Proxy
Statement; Listing Application.
(a) FBA shall promptly (i) prepare and file with the SEC, as soon as
reasonably practicable, a registration statement for the offer and sale of
the FBA Common Stock to be issued in the Merger (the "Registration
Statement"), which shall contain a prospectus relating to such offer and sale
and a joint proxy statement (the "Joint Proxy Statement") for the First
Commercial Stockholders Meeting and a meeting of the stockholders of FBA to
be held promptly after the Registration Statement becomes effective (the "FBA
Stockholders' Meeting"); (ii) hold the FBA Stockholders' Meeting; (iii) use
its best efforts to cause the Registration Statement to become effective;
(iv) take any action required to be taken under any applicable state Blue Sky
or securities laws in connection with the Merger; and (v) file an application
with the NYSE seeking the approval of the NYSE for the listing of the shares
of FBA Common Stock to be issued in the Merger, and use its best efforts to
obtain the approval of such application. The Special Committee of the Board
of Directors of FBA established to consider the transactions contemplated by
this Agreement shall unanimously recommend to the stockholders of FBA the
approval of this Agreement and the Merger, and the Board of Directors shall
then adopt the same
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recommendations and cause the Joint Proxy Statement to be mailed to stockholders
of FBA and use its best efforts to obtain such stockholder approval; provided,
however, that neither the Special Committee nor the Board of Directors of FBA
shall be obligated to make such recommendation if, having consulted and
considered the advice of outside legal counsel, the Special Committee and the
Board of Directors have 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 or of the Special Committee of the Board of
Directors under applicable law.
(b) FBA shall cooperate and use its best efforts (i) to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties, regulatory authorities and
other authorities necessary to consummate the transactions contemplated by
this Agreement, including, without limitation, approval by the stockholders
of FBA and First Commercial, and (ii) to cause the Merger to be consummated
as expeditiously as reasonably practicable.
Section 5.08. Subsequent Financial Statements. As soon as available
after the date hereof, FBA shall deliver to First Commercial the monthly
unaudited consolidated balance sheets and profit and loss statements of FBA
prepared for its internal use, the Report of Condition and Income of each of
the FBA Banks 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 FBA Financial Statements"). The Subsequent FBA Financial
Statements shall be prepared on a basis consistent with past accounting
practices, shall fairly present the financial condition and results of
operations for the dates and periods presented and shall 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.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.01 Conditions to the Obligations of FBA. FBA's obligations to effect
the Merger and the other transactions contemplated by this Agreement shall be
subject to the satisfaction (or waiver by FBA) prior to or on the Closing
Date of the following conditions:
(a) the representations and warranties made by First Commercial in this
Agreement shall be true in all material respects on and as of the Closing
Date (except for those made as of a specified date) with the same effect as
though such representations and warranties had been made or given on and as
of the Closing Date;
(b) First Commercial 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;
(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 approvals of the
stockholders of First Commercial and FBA and all legally required regulatory
approvals, shall have been obtained, and all waiting periods required by law
shall have expired;
(e) FBA shall have received all documents required to be received from
First Commercial on or prior to the Closing Date, all in form and substance
reasonably satisfactory to FBA;
(f) stockholders of First Commercial Common owning no more than ten
percent (10%) of the outstanding First Commercial Common shall have perfected
the right to dissent from the Merger;
(g) FBA shall have obtained within thirty (30) days after the date of
this Agreement a fairness opinion of FBA's financial advisor to the effect
that the transactions contemplated by this Agreement are fair to the
stockholders of FBA 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 Joint Proxy Statement to the stockholders of FBA;
(h) the Bank Merger and the Branch Exchange shall have been authorized
by all necessary parties, and any regulatory approvals required for the
consummation of the Bank Merger shall have been granted;
(i) FBA shall have received an opinion of Suelthaus & Walsh, P.C.
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"); that,
accordingly, no gain or loss will be recognized by FBA or First Commercial as
a result of the Merger; and that all shareholders of First Commercial, to the
extent they receive only shares of FBA Common, will recognize no gain or loss
as a result of the Merger; and
(j) First Banks shall have (i) purchased 804,000 shares of FBA Common
Stock for a purchase price of $12.43 per share, with the purchase price paid
by a reduction in the balance of the outstanding debt owed by FBA to First
Banks and (ii) exchanged the Debentures for a convertible debenture of FBA in
the principal amount of $6.5 million, with initial accrued interest equal to
the outstanding balance of the Debentures as of the Closing Date (the
debenture to be issued by FBA is to bear interest at the rate of 12% per
annum, have terms generally
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equivalent to those of the Debentures and will be convertible into FBA Common
Stock at a price of $14. 06 per share).
Section 6.02. Conditions to the Obligations of First Commercial. The
obligations of First Commercial to effect the Merger and the other
transactions contemplated by this Agreement shall be subject to the
satisfaction (or waiver by First Commercial) 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 (except
for those made as of a specified 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;
(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 approvals of the
stockholders of First Commercial and FBA and all legally required regulatory
approvals, shall have been obtained, and all waiting periods required by law
shall have expired;
(e) First Commercial 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 First Commercial;
(f) First Commercial shall have obtained within thirty (30) days after
the date of this Agreement a fairness opinion of First Commercial's financial
advisor to the effect that the transactions contemplated by this Agreement
are fair to the stockholders of First Commercial 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 stockholders of First Commercial;
(g) First Commercial shall have received an opinion of Suelthaus &
Walsh, P.C. substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
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"Code"); that, accordingly, no gain or loss will be recognized by FBA or
First Commercial as a result of the Merger; and that all shareholders of
First Commercial, to the extent they receive only shares of FBA Common, will
recognize no gain or loss as a result of the Merger.
(h) First Banks shall have (i) purchased 804,000 shares of FBA Common
Stock for a purchase price of $12.43 per share, with the purchase price paid
by a reduction in the balance of the outstanding debt owed by FBA to First
Banks and (ii) exchanged the Debentures for a convertible debenture of FBA in
the principal amount of $6.5 million, with initial accrued interest equal to
the outstanding balance of the Debentures as of the Closing Date (the
debenture to be issued by FBA is to bear interest at the rate of 12% per
annum, have terms generally equivalent to those of the Debentures and will be
convertible into FBA Common Stock at a price of $14. 06 per share).
ARTICLE VII
TERMINATION
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 approval of this Agreement and the Merger by the
stockholders of First Commercial or FBA shall have been previously obtained.
Section 7.02. Breach of Agreements. In the event that there is a
material breach of any of the representations and warranties or agreements of
FBA or First Commercial, which breach is not cured within thirty 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 approval
of this Agreement and the Merger by the stockholders of First Commercial of
FBA, or both, shall have been previously obtained, may terminate and cancel
this Agreement by providing written notice of such action to the other
parties hereto.
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Section 7.03. Failure of Conditions. In the event that any of the
conditions to the obligations of a 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
approval of the transactions contemplated by this Agreement by the
stockholders of First Commercial or FBA, or both, shall have been previously
obtained, terminate and cancel this Agreement by delivery of written notice
of such action to the other parties.
Section 7.04. Denial of Regulatory Approval. If any regulatory
application filed pursuant to Section 5.02 hereof should be finally denied or
disapproved by a regulatory authority, then this Agreement thereupon shall be
deemed terminated and cancelled; 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 and continues to pursue an Appeal seeking the
necessary approval. In the event that, as a condition of any required
regulatory approval, FBA would be required to change its business or operations
in a manner material and adverse to FBA, then this Agreement may be terminated
by either party by giving written notice to the other party.
Section 7.05. Regulatory Enforcement Matters. (a) In the event that
First Commercial or any First Commercial Subsidiary shall become a party or
subject to any material written agreement, memorandum of understanding, cease
and desist order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with any regulatory authority after the date
of this Agreement, then FBA may terminate this Agreement by giving written
notice of such termination to First Commercial.
(b) In the event that FBA or any FBA Subsidiary shall become a party or
subject to any material written agreement, memorandum of understanding, cease
and desist order, imposition of civil money penalties or other regulatory
enforcement action or proceeding with any regulatory authority after the date
of this Agreement, then First Commercial may terminate this Agreement by
giving written notice of such termination to FBA.
Section 7.06. Unilateral Termination. If the Closing Date does not
occur on or prior to March 15, 1998, then this Agreement may be terminated by
any party by giving written notice to the other party.
Section 7.07. Damages and Limitation on Damages. In the event that
either FBA or First Commercial shall have (i) breached any provision of this
Agreement and the other party shall have properly terminated this Agreement
pursuant to Section 7.02; or (ii) failed or refused to consummate the Merger
for any reason other than (A) the failure of the other party to perform its
obligations as set forth in this Agreement or (B) the fact that one or more
of the conditions to such party's obligations to consummate the Merger set
forth in Article VI hereof shall not have been satisfied, then the party
breaching this Agreement or failing or refusing to consummate the Merger
shall be liable to the other party (the "Non-Breaching Party") for damages in
the amount of all out-of-pocket costs and expenses incurred by the Non-
Breaching Party in connection with this Agreement and the transactions
contemplated hereby, including the fees and expenses paid to third parties,
but the amount of any recovery shall be limited to a maximum of $100,000.
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ARTICLE VIII
GENERAL PROVISIONS
8.01 Confidential Information. The parties acknowledge the
confidential and proprietary nature of the "Information" (as herein defined)
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 others, 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
implementing the Merger, who shall be informed of the confidential nature of
the Information and directed individually to abide by the restrictions set
forth in this Section 8.01. 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. Neither FBA nor First Commercial will
purchase or sell any security issued by the other party for so long as this
Agreement remains in effect.
Section 8.02. Publicity. FBA and First Commercial 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 disclosure.
Section 8.03. Return of Documents. Upon termination of this Agreement
without the Merger becoming effective, each party shall deliver to the others
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.
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Section 8.04. 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 by facsimile telecopy or any other means, addressed
(in any case) as follows:
(a) if to FBA: Special Committee of the Board of Directors
First Banks America, Inc.
c/o Charles A. Crocco, Jr., Esq.
Crocco & De Maio, P.C.
241 East 49th Street
New York, New York 10017
Facsimile: (212) 355-2435
and
First Banks America, Inc.
Attention: Allen H. Blake
Chief Financial Officer
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Facsimile: (314) 567-3490
with a copy to: John S. Daniels, Esq.
8117 Preston Road, Suite 800
Dallas, Texas 75225
Facsimile: (214) 692-0508
(b) if to First Commercial: Special Committee of the Board of Directors
First Commercial Bancorp, Inc.
c/o Fred L. Harris, Esq.
12401 Folsom Blvd., Suite 310
Rancho Cordova, California 95742
Facsimile: (916) 482-8644
and
First Commercial Bancorp, Inc.
Attention: James E. Culleton, Secretary
865 Howe Avenue, Suite 310
Sacramento, California 95825
Facsimile: (916) 924-0157
with copies to: Larry K. Harris, Esq.
Suelthaus & Walsh, P.C.
7733 Forsyth Boulevard, 12th Floor
St. Louis, Missouri 63105
Facsimile: (314) 727-7166
and
Scott E. Bartell, Esq.
Bartell Eng Linn & Schroder
300 Capitol Mall, Suite 1100
Sacramento, California 95814
Facsimile: 916-442-3442
or to such other address as any party may from time to time designate by
notice to the others.
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Section 8.05. Nonsurvival of Representations, Warranties and
Agreements. Except for and as provided in this Section 8.05, 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 Section 5.05 shall survive the Closing Date and the
agreements set forth in Section 7.07 shall survive the earlier termination of
this Agreement.
Section 8.06. 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 8.07. Entire Agreement. This Agreement constitutes the entire
agreement among the parties and supersedes and cancels any and all prior
discussions, negotiations, undertakings, agreements in principle and other
agreements among the parties relating to the subject matter hereof.
Section 8.08. 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 8.09. Waiver, Amendment or Modification. The conditions of this
Agreement which may be waived may only be waived by a written instrument
delivered to the other party. 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.
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Section 8.10. 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 8.11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
shall be deemed one and the same instrument.
Section 8.12. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. There shall be no third party beneficiaries hereof.
Section 8.13. Governing Law. This Agreement shall be governed by the
laws of the State of Delaware and any applicable federal laws and
regulations.
IN WITNESS WHEREOF, FBA and First Commercial have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as
of the date first written above.
FIRST BANKS AMERICA, INC.
By: /s/ Allen H. Blake
---------------------------------
Its: Vice President
---------------------------------
FIRST COMMERCIAL BANCORP, INC.
By: /s/ Donald W. Williams
---------------------------------
Its: President
---------------------------------
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APPENDIX B
OPINION OF MERCER CAPITAL MANAGEMENT, INC.
October 6, 1997
The Special Committee of the Board of Directors
of First Commercial Bancorp, Inc.
c/o Mr. James E. Culleton
Secretary
First Commercial Bancorp
865 Howe Avenue, Ste. 310
Sacramento, California 95825
Re: Fairness Opinion Regarding the Proposed Merger of First Banks
America, Inc. and First Commercial Bancorp, Inc. and the related
Branch Exchange between First Commercial Bank and First Bank &
Trust
Dear Directors:
Mercer Capital Management, Inc. ("Mercer Capital") has been retained by the
Special Committee of the Board of Directors of First Commercial Bancorp, Inc.
("First Commercial") to issue a fairness opinion for the proposed merger
between First Commercial and First Banks America, Inc. ("FBA"). As part of
the contemplated merger, First Commercial's subsidiary, First Commercial Bank
("FCB"), has entered into an agreement to exchange a branch with First Bank &
Trust ("FBT"). The fairness opinion is issued from a financial point of view
on behalf of First Commercial shareholders.
Under the terms of the Agreement and Plan of Merger by and between First
Banks America, Inc. and First Commercial Bancorp, Inc. ("the Merger
Agreement"), dated October 3, 1997, the following will occur:
* First Commercial will be merged into FBA, and First Commercial will
cease to exist as a separate entity;
* FBA's California bank subsidiary, Sunrise Bank, will be merged into
FCB;
* FBA will issue approximately 752,000 common shares to First Commercial
shareholders based upon the exchange ratio of 0.8888 FBA shares for
each First Commercial common share;
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* FBA will assume First Commercial's convertible debenture and accrued
interest, with all terms remaining the same, except that the
conversion price will be increased from $12.50 per share to $14.06 per
share; and,
* $10.0 million of FBA debt owed to First Banks, Inc. ("FBI") will be
converted into 804,000 FBA shares.
Under the terms of the Agreement to Exchange Certain Assets and Assume
Certain Liabilities by and between First Commercial Bank and First Bank &
Trust, dated October 3, 1997, the following will occur:
* FCB will exchange its Campbell Branch, located at 94 San Thomas Aquino
Road, Campbell, California, for FBT's Walnut Creek Branch, located at
590 Ygnacio Valley Road, Walnut Creek, California.
* On the effective date the assets, excluding any loans, and all
liabilities, including all deposits and accrued interest, will be
transferred to the respective institutions; and,
* If the sum of (a) Campbell's assets minus Walnut Creek's assets; (b)
Walnut Creek's deposits minus Campbell's deposits; and, (c) Campbell's
deposit premium (as defined) minus Walnut Creek's deposit premium (as
defined) is positive, then FBT shall pay the sum to FCB. If the sum
is negative, then FCB shall pay the sum to FBT.
Based upon the terms of the Merger Agreement and the approximate trading
value of FBA's shares immediately prior to the date of this opinion, First
Commercial shareholders would receive FBA common shares with an aggregate
market value of $13.8 million, or $16.22 per share. The ultimate value
received by First Commercial shareholders will be contingent, however, upon
the market value of FBA common stock at the effective date given the fixed
exchange ratio.
As part of the engagement, a representative of Mercer Capital visited FBA
management in St. Louis and Houston, and First Commercial management in St.
Louis and Sacramento. Factors considered in rendering the opinion included:
* Terms of the Merger Agreement;
* Terms of the Branch Exchange Agreement;
* The arms' length process by which the Merger Agreement was negotiated;
* An analysis of the proposed merger presented to the Special Committee
of the Board of Directors of First Commercial by Mercer Capital on
July 15, 1997;
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* An analysis of the estimated pro-forma changes in book value per share
and earnings per share from the perspective of the First Commercial
shareholders;
* A review of FBA's and First Commercial's historical financial
performance, historical stock pricing, the liquidity of their shares
and public market pricing in relation to other publicly traded bank
holding companies; and,
* Tax consequences of the merger for First Commercial shareholders.
Mercer Capital did not compile nor audit First Commercial's or FBA's
financial statements, nor did Mercer Capital independently verify the
information reviewed. Mercer Capital relied upon such information as being
complete and accurate in all material respects. Mercer Capital did not make
an independent valuation of the loan portfolio, adequacy of the loan loss
reserve or other assets or liabilities of either institution.
Mercer Capital's opinion does not constitute a recommendation to any
shareholder as to how the shareholder should vote on the proposed merger; nor
did Mercer Capital express any opinion as to the prices at which any security
of First Commercial or FBA would trade in the future.
Based upon our analysis of the proposed transaction, it is our opinion that
the consideration which will be paid to First Commercial shareholders as part
of the merger between FBA and First Commercial is fair, from a financial
point of view, to the common shareholders of First Commercial.
Sincerely yours,
MERCER CAPITAL MANAGEMENT, INC.
Jeff K. Davis, ASA, CFA
Vice President
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APPENDIX C
OPINION OF RAUSCHER PIERCE REFSNES, INC.
[LETTERHEAD OF RAUSCHER PIERCE REFSNES, INC.]
October 3, 1997
First Banks America, Inc.
8820 Westheimer
Houston, TX 77063
Attention: Special Committee of the Board of Directors
Gentlemen:
You have advised Rauscher Pierce Refsnes, Inc. ("RPR") that First Banks
America, Inc. ("FBA"):
(a) has proposed to acquire, via a merger, 100% of the outstanding
common stock of First Commercial Bancorp, Inc., ("FCB") in exchange for common
stock of FBA, whereby FBA agrees to issue 0.8888 shares of common stock in
exchange for each outstanding share of FCB common stock;
(b) has agreed to a branch exchange in which FCB would receive the
banking operations and liabilities of the Walnut Creek, California Branch
of First Bank & Trust, a wholly-owned subsidiary of First Banks, Inc.
("FBI"), in exchange for the operations and liabilities of the Campbell,
California Branch (plus a payment equal to the net difference between the
fair market values of the two branch offices) (the "Branch Exchange");
(c) has agreed that the existing FCB 12% convertible debentures with
a face value of $6,500,000 would be exchanged for new convertible debentures,
convertible into FBA shares with generally equivalent terms as the FCB
debentures and a conversion rate of $14.06 per share; and
(d) has agreed that FBI will purchase 804,000 shares of FBA common
stock for $12.43 per share with payment evidenced by a credit in that amount
to the outstanding balance of the FBA promissory note to FBI. All four
elements (a-d) are collectively referred to as the "Transaction."
You have requested that RPR issue an opinion ("Opinion") as to the
fairness to the common stockholders of FBA of the financial terms of the
proposed Transaction as set forth in the Agreement and Plan of Merger
by and between FBA and FCB as well as the Letters of Intent dated July 21,
1997 (a) to the Special Committee of the Board of
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First Banks America, Inc.
October 3, 1997
Page 2
Directors of FCB from the Special Committee of the Board of Directors of
FBA, and (b) to the Special Committee of the Board of Directors of FCB and
FBI from the Special Committee of the Board of Directors of FBA.
RPR, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities, private placements, and valuations for
estate, corporate and other purposes.
In arriving at our opinion, we have, among other things:
1. Reviewed the Agreement and Plan of Merger by and between FBA
and FCB dated 10/3/97;
2. Reviewed Pro Forma Combining financial statement forecasts for
1997, 1998, 1999 and 2000 prepared by the parent company, FBI,
on 7/1/97;
3. Reviewed Pro Forma Effect of Convertible Debentures prepared
by FBI on 6/23/97;
4. Reviewed Pro Forma Effect of Exchange Rate as of 12/31/96 prepared
by FBI;
5. Reviewed FBA's 1996 and 1995 Annual Reports and Form 10-K reports;
6. Reviewed FBA's Form 10-Q reports for the quarters ended 6/30/97,
3/31/97, 9/30/96, 6/30/96, and 3/31/96;
7. Reviewed FBA's internal financial statements as of 7/31/97
prepared by FBI;
8. Reviewed FCB's 1996 and 1995 Annual Reports and Form 10-K reports;
9. Reviewed FCB's Form 10-Q reports for the quarters ended 6/30/97,
3/31/97, 9/30/96, 6/30/96, and 3/31/96;
10. Reviewed FCB's internal financial statements as of 7/31/97 prepared
by FBI;
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First Banks America, Inc.
October 3, 1997
Page 3
11. Reviewed internal loan watch lists as of 7/97 for FCB;
12. Reviewed list of other real estate owned as of 7/97 for FBA;
13. Reviewed calculations of the provision for loan losses for the month
of 7/97 prepared in 8/97;
14. Reviewed a letter regarding deposit premiums dated October 8, 1997
from Allen H. Blake, Executive Vice President of FBI;
15. Considered such other information, financial studies, analyses and
investigations as we deemed relevant under the circumstances; and
16. Discussed with management of FBA the outlook for future operating
results, the assets and liabilities of FBI, material in the foregoing
documents, and other matters we considered relevant to our inquiry.
In our review and in arriving at our opinion, we have, with your
permission, (i) not independently verified any of the foregoing information
and have relied upon its being complete and accurate in all material respects,
and (ii) not made an independent evaluation or appraisal of specific assets of
FBA or FCB. Our opinion is provided solely for your benefit in connection
with the proposed transaction, according to the terms of our engagement letter.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the proposed four-part Transaction (as defined) is fair to
the common stockholders of FBA from a financial point of view.
RAUSCHER PIERCE REFSNES, INC.
By: /s/ G. Clyde Buck
----------------------------------
G. Clyde Buck
Managing Director
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APPENDIX D
SECTION 262 OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION CODE
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Sec.228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder s shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this Section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest
in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Sec. 251 (other than a merger effected pursuant to
Sec. 251(g) of this title), Sec. 252, Sec. 254, Sec. 257, Sec. 258, Sec. 263
or Sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this Section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting of stockholders to act upon the agreement of merger
or consolidation, were either (i) listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or (ii) held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the stockholders of
the surviving corporation as provided in subsection (f) of Sec. 251 of
this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation
pursuant to Sec.Sec. 251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in
respect thereof;
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<PAGE> 159
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares, or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares. A proxy
or vote against the merger or consolidation shall not constitute such a
demand. A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective date
of such merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied with
this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Sec. 228 or
Sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or
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<PAGE> 160
series of stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective date of
the merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective of the
merger or consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holders
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder s shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder s
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and that notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
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<PAGE> 161
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If the
petition shall be filed by the surviving or resulting corporation, the petition
shall be accompanied by such as duly verified list. The Register in Chancery,
if so ordered by the Court, shall give notice of the time and place fixed for
the hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by one or more
publications at least one week before the day of the hearing, in a newspaper
of general circulation in the City of Wilmington, Delaware or such
publications as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate fully
in all proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as
the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this
State or of any other state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
of the shares entitled to an appraisal.
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<PAGE> 162
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal shall
be filed within the time provided in subsection (e) of this section, or if
such stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
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<PAGE> 163
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the DGCL permits a corporation to indemnify its directors
and officers or former directors or officers and to purchase insurance with
respect to liability arising out of their capacity or status as directors and
offices. Such law provides further that the indemnification permitted
thereunder shall not be deemed exclusive of any other rights to which the
directors and officers may be entitled under FBA's Restated Certificate of
Incorporation, By-laws, any agreement or otherwise.
Reference is made to Article X of FBA's By-laws, which provides for
indemnification of directors, officers, employees and agents of FBA under
certain circumstances. The provisions of such By-laws and Section 145 of the
DGCL may be sufficiently broad to indemnify FBA's directors, officers,
employees and agents for certain liabilities arising under the Securities
Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling FBA
pursuant to the foregoing provisions, FBA has been informed that, in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
An index to Exhibits appears at pages II-5 through II-7 hereof.
(b) Financial Statement Schedules.
Not applicable.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-1
<PAGE> 164
The undersigned registrant further undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy Statement-
Prospectus pursuant to Items 4, 11, or 13 of Form S-4, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
POWER OF ATTORNEY
Each person whose signature appears below authorizes James F. Dierberg
and Allen H. Blake, or either of them, to execute in the name of such person
who is then an officer or director of the Registrant, and to file, any
amendments to this Registration Statement necessary or advisable to enable
the Registrant to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the registration of the FBA Common
Stock which is the subject of this Registration Statement, which amendment
may make such changes in such Registration Statement as the above-named
attorneys, or any one of them, may deem appropriate.
II-2
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 16th day of
October, 1997.
FIRST BANKS AMERICA, INC.
By: /s/ James F. Dierberg
---------------------------------
James F. Dierberg
Chairman of the Board, Chief Executive Officer
and President
By: /s/ Allen H. Blake
---------------------------------
Allen H. Blake
Chief Financial Officer, Principal Accounting
Officer and Director
II-3
<PAGE> 166
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Charles A. Crocco, Jr. Director October 16, 1997
- --------------------------
Charles A. Crocco, Jr.
/s/Edward T. Story, Jr. Director October 16, 1997
- --------------------------
Edward T. Story, Jr.
/s/Mark T. Turkcan Director October 16, 1997
- --------------------------
Mark T. Turkcan
/s/Donald W. Williams Director October 16, 1997
- --------------------------
Donald W. Williams
</TABLE>
II-4
<PAGE> 167
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------
<C> <S>
2(a) Agreement and Plan of Merger dated October 3, 1997, by and between First Banks America, Inc. ("FBA" or
the "Company") and First Commercial Bank (included as Appendix A to the Joint Proxy Statement-Prospectus
and hereby incorporated by reference).
3(a) Restated Certificate of Incorporation of the Company effective August 31, 1995 (filed as Exhibit 3(a) to
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference).
3(b) Amended and Restated By-laws of the Company (as amended April 21, 1995) (filed as Exhibit 3(b) to
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and incorporated herein by
reference).
4(a) Specimen Stock Certificate for Common Stock (filed as Exhibit 1.01 to the Company's Amendment No. 1 to
Form 8-A on Form 8, dated September 4, 1987, and incorporated herein by reference).
5 Opinion of John S. Daniels, counsel to FBA, with respect to the legality of the securities registered--
filed herewith.
8 Form of Opinion of Suelthaus & Walsh, P.C., counsel to First Commercial, with respect to certain tax
matters--filed herewith.
10(a) BancTEXAS Group, Inc. 1990 Stock Option Plan (as amended July 22, 1993) (filed as Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, and incorporated herein by
reference).
10(b) 1993 Directors' Stock Bonus Plan (filed as Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993 and incorporated herein by reference).
10(c) Stock Purchase and Operating Agreement by and between First Banks, Inc., a Missouri Corporation and the
Company, dated May 19, 1994 (filed as Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994 and incorporated herein by reference).
10(d) Management Agreement by and between First Banks, Inc. and BankTEXAS N.A., dated November 17, 1994 (filed
as Exhibit 10(h) to the Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference).
10(e) Data Processing Agreement by and between FirstServ, Inc. (a subsidiary of First Banks, Inc.) and
BankTEXAS N.A., dated December 1, 1994 (filed as
II-5
<PAGE> 168
Exhibit 10(i) to the Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference).
10(f) Financial Management Policy by and between First Banks, Inc. and FBA, dated September 15, 1994 (filed as
Exhibit 10(j) to the Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference).
10(g) Federal Funds Agency Agreement by and between First Banks, Inc. and FBA, dated September 15, 1994 (filed
as Exhibit 10(k) to the Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference).
10(h) Funds Management Policy by and between First Banks, Inc. and BancTEXAS, N.A., dated September 15, 1994
(filed as Exhibit 10(l) to the Annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10(i) Revolving Credit Agreement dated October 31, 1996 by and between FBA and First Banks, Inc. (filed as
Exhibit 10(k) to the Company's Current Report on Form 8-K dated November 18, 1996 and incorporated
herein by reference).
10(j) Management Services Agreement by and between First Banks, Inc. and Sunrise Bank of California dated
December 16, 1996. (filed as Exhibit 10(j) to FBA's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).
10(k) Service Agreement by and between FirstServ, Inc. and Sunrise Bank of California (relating to data
processing services) dated November 21, 1996. (filed as Exhibit 10(k) to FBA's Annual Report on Form 10-
K for the year ended December 31, 1996 and incorporated herein by reference).
10(l) Federal Funds Agency Agreement by and between First Banks, Inc. and Sunrise Bank of California dated
November 19, 1996. (filed as Exhibit 10(l) to FBA's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).
10(m) Funds Management Policy by and between First Banks, Inc. and Sunrise Bank of California dated November
19, 1996. (filed as Exhibit 10(m) to FBA's Annual Report on Form 10-K for the year ended December 31,
1996 and incorporated herein by reference).
10(n) Form of FBA Debenture--filed herewith
13(a) FBA 1996 Annual Report to Stockholders--incorporated by reference.
13(b) FBA Form 10-Q for the quarter ended March 31, 1997--incorporated by reference.
II-6
<PAGE> 169
13(c) FBA Form 10-Q for the quarter ended June 30, 1997--incorporated by reference.
21 Subsidiaries of FBA -- (filed as Exhibit 21 to FBA's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated herein by reference).
23(a) Consent of KPMG Peat Marwick LLP--filed herewith.
23(b) Consent of Arthur Andersen LLP--filed herewith
23(c) Consent of John S. Daniels--included in opinion filed as Exhibit 5 to this Registration Statement.
23(d) Consent of Suelthaus & Walsh, P.C.--included in opinion filed as Exhibit 8 to this Registration
Statement.
99.1 Form of Proxy (First Banks America, Inc.)--filed herewith.
99.2 Form of Proxy (First Commercial Bancorp, Inc.)--filed herewith.
99.3 Consent of Mercer Capital, Inc.--filed herewith.
99.4 Consent of Rauscher Pierce Refsnes, Inc.--filed herewith.
</TABLE>
II-7
<PAGE> 1
Exhibit 5
[LETTERHEAD OF JOHN S. DANIELS ATTORNEY AT LAW]
October 16, 1997
First Banks America, Inc.
135 North Meramec
Clayton, Missouri 63105
Re: Registration Statement on Form
S-4 of First Banks America, Inc.
to be filed with the Securities
and Exchange Commission on or
about October 16, 1997
Gentlemen:
I am acting as counsel for First Banks America, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the sale of up to 752,038
shares of common stock, $.15 par value, of the Company (the "FBA Common")
issuable pursuant to the Agreement and Plan of Reorganization dated October
3, 1997 by and between the Company and First Commercial Bancorp, Inc., as
described in the above referenced registration statement (the "Registration
Statement").
I have examined the Restated Certificate of Incorporation and the
Restated By-laws of the Company, and I have relied upon the originals or
certified copies of such other documents, certificates and instruments as I
deem necessary or appropriate to render the opinions expressed herein. I
have assumed the genuineness of all signatures on original documents, the
authenticity of all documents submitted to me as originals and the conformity
to original documents of all copies submitted to me.
Based and relying solely on the foregoing, it is my opinion that, when
the shares of FBA Common are issued as described in the Registration
Statement, such shares will be legally issued, fully paid and nonassessable.
I consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to me under the caption "Legal Matters."
Very truly yours,
/s/ John S. Daniels
------------------------
John S. Daniels
<PAGE> 1
[DATE] Exhibit 8
----
Board of Directors Board of Directors
First Banks America, Inc. First Commercial Bancorp, Inc.
135 North Meramec Avenue 865 Howe Ave., Suite 310
St. Louis, Missouri 63105 Sacramento, California 95825
Re: Agreement and Plan of Merger by and between First Banks
America, Inc. and First Commercial Bancorp, Inc., dated
[DATE], as amended
Gentlemen:
You have requested our opinion with regard to certain federal income tax
consequences of the proposed merger (the Merger) of First Commercial
Bancorp, Inc. (First Commercial) with and into First Banks America, Inc.
(First Banks America), and the resulting acquisition by First Banks America
of all the issued and outstanding capital stock of First Commercial.
In connection with the preparation of our opinion, we have examined and
have relied upon the following:
(i) The Agreement and Plan of Merger by and between First Banks
America and First Commercial dated [DATE] (the Plan);
----
(ii) The draft Proxy Statement-Prospectus contained in the
Registration Statement on Form S-4 of First Banks America to be
filed with the Securities and Exchange Commission on [DATE];
----
(iii) The representations on behalf of First Banks America set forth
in Exhibit A hereto (the First Banks America Certificate);
(iv) The representations on behalf of First Commercial and its Board
of Directors set forth in Exhibit B hereto (the First
Commercial Certificate).
Our opinion is based solely upon the factual information contained in
the above-referenced documents. In rendering our opinion, we have assumed
the accuracy of all information contained in each document (including
information in the First Banks America Certificate and First Commercial
Certificate represented to be accurate only to the best knowledge of the
person issuing the Certificate), and we have also assumed the authenticity of
all original documents, the conformity of all copies to the original
documents, and the genuineness of all signatures. We have not attempted to
verify independently the accuracy of any information in any such document.
If the actual facts relating to any aspect of the Merger differ in any
material respect from those facts set forth in any such document or those
facts and assumptions described below in the section captioned Statement of
Facts, any or all the
<PAGE> 2
opinions expressed herein may be inapplicable. All terms appearing, but not
otherwise defined in this opinion letter, shall have the meaning ascribed to
them in the Plan.
OPINIONS
--------
Based upon the foregoing and on the facts and representations described
in the Statement of Facts, and subject to the more detailed analyses of the
issues set forth in the Legal Analysis section of this letter and the
conditions and limitations expressed elsewhere herein, we are of the opinion
that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended to the date hereof (the Code),
and First Banks America and First Commercial each will constitute
a party to a reorganization within the meaning of Section 368(b)
of the Code.
2. Neither First Banks America nor First Commercial will recognize
gain or loss as a result of the Merger.
3. Each stockholder of First Commercial who exchanges his, her, or
its shares of First Commercial Common Stock (as defined in the
Statement of Facts following) solely for shares of First Banks
America Common Stock (as defined in the Statement of Facts
following):
(a) will recognize no gain or loss;
(b) will have an aggregate tax basis in the shares of First
Banks America Common Stock the stockholder receives equal to
the stockholder's aggregate tax basis in the shares of First
Commercial Common Stock the stockholder surrenders in the
Merger; and
(c) will have a holding period for the shares of First Banks
America Common Stock the stockholder receives which includes
the stockholder's holding period for the First Commercial
Common Stock the stockholder surrenders in the Merger.
4. A stockholder of First Commercial Common Stock who receives cash
in the Merger in lieu of a fractional share interest in First
Banks America Common Stock will be treated as having received the
cash in redemption of such fractional share interest.
Accordingly, the recipient will recognize gain or loss equal to
the difference between the amount of cash received and such
stockholder's adjusted tax basis in the fractional share interest.
The stockholder's adjusted tax basis in the fractional share
interest will be determined as if First Banks America issued a
fractional share of First Banks America Common Stock in the Merger
and then redeemed such fractional share. Thus, the stockholder's
adjusted tax basis in First Commercial Common Stock will be
allocated to the First Banks America Common Stock the stockholder
receives, including the fractional share so redeemed. If the
stockholder's First Commercial Common Stock is a capital asset in
the stockholder's hands, the gain or loss will be capital, long-
or short-term depending upon the stockholder's holding period.
5. The receipt of cash rather than First Banks America Common Stock
by any stockholder who effectively exercises appraisal rights and
does not withdraw his, her, or its demand therefor is a taxable
transaction. In most cases, such stockholder will recognize gain
or loss from the sale of First Commercial Common
<PAGE> 3
Stock equal to the difference between the cash received and the
stockholder's adjusted tax basis in his, her, or its First
Commercial Common Stock. Such gain or loss will be capital if the
First Commercial Common Stock is a capital asset in the
stockholder's hands, and long- or short-term depending on the
stockholder's holding period. However, continued ownership of First
Banks America Common Stock, directly or constructively, could result
in the stockholder realizing ordinary income, possibly to the extent
of the cash the stockholder receives. Definitive resolution of this
issue with respect to a stockholder who effectively exercises
appraisal rights and does not withdraw his, her, or its demand
therefor requires analysis of specific facts applicable to such
stockholder.
* * * * * * * * * *
We express no opinion with regard to federal, state, or local taxes, or
any other federal or state laws not specifically referred to and discussed
herein. Further, our opinions are based upon the Code, regulations
promulgated by the United States Department of the Treasury under the Code
(Treasury Reg.), and interpretations and judicial precedents as of the date
hereof, all of which are subject to change at any time, possibly with
retroactive effect, and we assume no obligation to advise you of any
subsequent change thereto. If there is any change in the applicable law or
regulations, or if there is any new administrative or judicial interpretation
of the applicable law or regulations, any or all of the opinions expressed
herein may become inapplicable.
The foregoing opinions reflect our legal judgment solely on the issues
represented and discussed herein. While these opinions reflect our best
professional judgment with respect to the matters they address, they have no
official status and, therefore, are not binding on the Internal Revenue
Service (the Service) or the courts.
STATEMENT OF FACTS
------------------
Parties to the Proposed Merger
First Commercial Bancorp, Inc. First Commercial is a Delaware
corporation that was reincorporated in Delaware in 1990 to act as a
registered bank holding company under the federal Bank Holding Company Act of
1956, as amended (the Act). First Commercial owns all of the issued and
outstanding stock of one subsidiary bank, First Commercial Bank, a California
state-chartered bank that began operations in 1979. Through the subsidiary
bank, First Commercial offers a complete line of commercial banking services
in Sacramento, Roseville, San Francisco, Concord, and Campbell, California.
Such banking services include commercial, real estate construction and
development, commercial and residential real estate, and consumer and
installment loans.
First Commercial has two classes of authorized capital stock, consisting
of (i) 10,000,000 shares of voting Common Stock, $1.25 par value (First
Commercial Common Stock), of which 846,127 shares were issued and
outstanding as of [DATE] and (ii) 5,000,000 shares of Preferred Stock, par
----
value $0.01, the rights and preferences of which may be designated in one or
more series by resolution of the Board of Directors of First Commercial, and
of which 500,000 have been designated as Series A Participated Preferred
Stock, but none of which have been issued. First Commercial has
approximately <ZZZ> stockholders.
---
First Banks America, Inc. First Banks America is a Delaware corporation
that was organized in 1978 to act as a registered bank holding company under
the Act. First Banks America, directly and through its subsidiaries, offers
a broad range of banking services in Roseville, Rancho Cordova, and Citrus
Heights, California and Houston, Dallas, Irving, and McKinney, Texas. The
commercial and personal banking services offering by First Banks America
include certificate of deposit, individual retirement and other time deposit
accounts,
<PAGE> 4
checking and other demand deposit accounts, interest checking accounts, savings
accounts, and money market accounts. Loans include commercial and industrial,
commercial and residential real estate, real estate construction and
development, and consumer loans. Other financial services include automatic
teller machines, telephone banking, lockbox deposits, cash management services,
savings accounts, credit-related insurance, and safe deposit boxes.
First Banks America will have, at the time of the Merger, 10,666,666
shares of authorized capital stock divided into two classes consisting of (i)
<1,412,900> issued and outstanding shares of Class A Common Stock $0.15 par
---------
value (FIRST BANKS AMERICA COMMON STOCK), and (ii) <2,500,000> issued
---------
and outstanding shares of Class B Common Stock, $0.15 par value. First
Banks America Common Stock will be the only class of stock tendered by First
Banks America in the Merger. First Banks America Common Stock is traded on
the New York Stock Exchange under the symbol FBA. On [DATE], the last sale
----
price for First Banks America Common Stock as reported by the NYSE was
$<XX.XX>.
-----
The Proposed Merger
Background; Business Purposes. First Commercial's Board of Directors
has determined that the Merger will result in a combined entity that is (i)
capable of competing more effectively with larger financial institutions that
have exerted increasing competitive pressures on First Commercial, (ii) well-
capitalized and capable of enjoying significant market penetration throughout
the Sacramento, California and surrounding metropolitan area banking market,
(iii) capable of offering, directly or in cooperation with First Banks
America and its current subsidiaries, certain customer services in a more
cost-effective manner, and (iv) committed to serving the banking and other
financial needs of First Commercial's depositors, employees, customers, and
communities.
First Banks America's Board of Directors has determined that the Merger
will enable First Banks America to (i) take advantage of a unique opportunity
to First Banks America to increase its presence in the Sacramento, California
and surrounding area banking market, through the acquisition of an
established banking franchise in an area where First Banks America does not
currently have a strong presence, and (ii) enhance First Banks America's
ability to compete in the increasingly competitive banking and financial
services industry.
The Plan of Reorganization. As a result of the foregoing
determinations and arm's-length negotiations, First Banks America and First
Commercial entered into the Plan on [DATE]. First Commercial's Board of
----
Directors has unanimously approved the Plan and will recommend to its
stockholders approval and adoption of the Plan pursuant to which First
Commercial will merge with and into First Banks America.
Upon approval by holders of at least a majority of the issued and
outstanding shares of First Commercial Common Stock and of at least a
majority of the issued and outstanding shares of First Banks America Common
Stock and the First Banks America Class B Common Stock, and upon satisfaction
of certain conditions in the Plan, including approval by the requisite state
and federal regulatory agencies, First Commercial will be merged with and
into First Banks America. The Merger will be a statutory merger pursuant to
the Delaware General Corporation Law.
On the date the Merger is consummated (the EFFECTIVE DATE), each
stockholder of First Commercial, except stockholders who effectively exercise
appraisal rights and do not withdraw their demand therefor, will convert his,
her, or its First Commercial Common Stock into shares of First Banks America
Common Stock.
The conversion ratio is based upon arm's-length negotiations. No
fractional share of First Banks America Common Stock will be issued in the
Merger. Cash will be paid by First Banks America in lieu of fractional
shares, if any.
<PAGE> 5
First Commercial stockholders may exercise appraisal rights in
compliance with the requirements of Section 262 of the Delaware General
Business Corporation Law and will be entitled to receive, in cash, an amount
equal to the appraised value of his, her, or its shares of First Commercial
Common Stock upon consummation of the Merger. Payments to stockholders who
effectively exercise appraisal rights and do not withdraw their demand
therefor will be made solely by First Banks America.
LEGAL ANALYSIS
--------------
Sections 368(a)(1)(A) and 368(a)(1)(D) Requirements
Overview. Section 368(a)(1)(A) of the Code provides that the term
reorganization includes a statutory merger or consolidation. Section
368(a)(1)(D) of the Code provides that a reorganization includes a transfer
of some or all assets from one corporation to another when the transferor, or
one or more of its shareholders, or the transferor and one or more of its
shareholders are in control of the transferee corporation following the
transfer of assets. To constitute a reorganization, in addition to being a
statutory merger the Merger also must satisfy the nonstatutory requirements
of business purpose, continuity of business enterprise, and continuity
of proprietary interest as set forth in Treasury Reg. Sec.1.368-1(b).
Statutory Merger. The Merger will qualify as a statutory merger under
Delaware law and will result in the transfer of substantially all of First
Commercial's assets to First Banks America.
Control Requirement. Following the Merger, First Banks and others,
who or which were shareholders of First Commercial before the Merger, will
own more than fifty percent of all classes of stock of First Banks America.
Under Section 368(a)(2)(H) of the Code, such level of control satisfies the
control requirement of Section 368(a)(1)(D) of the Code, so long as the
transferee corporation acquires substantially all the assets of the
transferor, as it will in the Merger, and the stock of the transferee passes
to the shareholders of the transferor pursuant to the plan of reorganization,
as it will in the Merger.
Business Purpose Requirement. This requirement is satisfied if the
reorganization is undertaken for reasons germane to the continuance of the
business of a corporation in modified corporate form. Treasury Reg.
Sec.Sec.1.368-1(b), -2(g). Based on the business reasons for the Merger
identified in the section hereof entitled The Proposed Merger, the accuracy
of which we assume, this requirement is satisfied.
Continuity of Business Enterprise Requirement. This requirement is
satisfied if the acquiring corporation (First Banks America) continues the
historic business of the target corporation (First Commercial) or uses a
significant portion of the target corporation's historic business assets in a
business. Treasury Reg. Sec.1.368-1(d)(2). Based on the representations
contained in the First Banks America Certificate, following the Merger First
Banks America will continue to conduct the historic businesses currently
conducted by First Commercial. As a result, the continuity of business
enterprise test will be satisfied. Rev. Rul. 85-198,1985-2 C.B. 120.
Continuity of Proprietary Interest Requirement. The Merger must
satisfy the continuity of proprietary interest requirement, which, in the
context of a statutory merger, means that the stockholders of the target
corporation (First Commercial) must receive stock of the acquiring
corporation (First Banks America) which represent(s) a material part of the
value of the transferred assets. Helvering v. Minnesota Tea Co., 296 U.S.
378, 386 (1935); LeTulle v. Scofield, 308 U.S. 415 (1940); Cortland
Speciality Co. v. Commissioner, 60 F.2d 937 (2d Cir. 1932); Treasury Reg.
Sec.Sec.1.368-1(b), -2(a).
First Banks America Common Stock qualifies as the type of consideration
that will satisfy the foregoing test. With regard to whether the fair market
value of the aggregate amount of First Banks America Common Stock to be
exchanged pursuant to the Plan will be sufficient,
<PAGE> 6
the Service generally has required, as a condition to issuing a favorable
advance ruling under Section 368(a)(1)(A), that the former stockholders of the
target corporation receive stock in the acquiring corporation having a value on
the effective date of the merger equal to at least 50 percent of the value of
the formerly outstanding stock of the target corporation as of the same date,
including, for purposes of determining shares outstanding, shares redeemed as
part of the (or to facilitate the plan of) reorganization (the 50 percent
continuity test). Rev. Proc. 77-37, 1977-2 C.B. 568; Rev. Proc. 86-42, 1986-2
C.B. 722.
The 50 percent continuity test will be satisfied if the First Banks
America Common Stock received by First Commercial stockholders in the Merger
and retained by them following the Merger has a value at least equal to 50
percent of the aggregate fair market value of the issued and outstanding
First Commercial Common Stock on the Effective Date. For the purpose of our
opinions, we have assumed that the fair market value of the First Banks
America Common Stock issued as consideration in the Merger will be in excess
of 50 percent of the aggregate fair market value of the issued and
outstanding First Commercial Common Stock on the Effective Date, and the
structure of the pricing mechanism in the Plan supports this assumption. If
this assumption is incorrect, or if First Commercial stockholders dispose of
First Banks America Common Stock following the Merger so as to cause the
retained First Banks America Common Stock to have a value less than 50
percent of the value of the issued and outstanding First Commercial Common
Stock, the 50 percent continuity test will not be satisfied, and the merger
may fail to qualify as a reorganization described in Section 368(a)(1)(A) of
the Code.
Existing judicial decisions suggest that a lesser percentage of
continuity will satisfy the continuity of interest requirement. See, for
example, John A. Nelson Co. v. Helvering, 296 U.S. 374 (1935). Thus, failure
to meet the Service's advance ruling guidelines is not necessarily critical
and does not necessarily render the reorganization taxable. We recommend,
however, that the parties comply with the Service's advance ruling guideline
so as to minimize the risk that the Service will challenge the reorganization
for lack of continuity of proprietary interest.
Federal Income Tax Consequences to the Parties
A reorganization qualifying under Section 368(a)(1)(A) and Section
368(a)(1)(D) of the Code will result in the following federal income tax
consequences:
No Corporate Level Gain. Unless the liabilities of First Commercial
which First Banks takes subject to or assumes in the Merger exceed the
aggregate adjusted tax basis of First Commercial's assets (Code Section
357(c)) neither First Commercial nor First Banks America will recognize gain
or loss as a result of the Merger. First Banks America will hold the assets
it receives from First Commercial with their historical adjusted tax bases
and their tax attributes, including their holding period, as if First
Commercial continued to own the assets. Code Section 362(b).
Solely Stock Received. Except for (i) cash received in lieu of
fractional share interests which will result in the recognition of gain or
loss by the recipient stockholders, and (ii) stockholders who effectively
exercise appraisal rights and do not withdraw their demand therefor and
receive only cash, First Commercial stockholders will receive only First
Banks America Common Stock. Pursuant to Code Section 354(a)(1), a First
Commercial stockholder who receives solely First Banks America Common Stock
in exchange for his, her, or its First Commercial Common Stock recognizes no
gain or loss in the Merger.
Basis. First Commercial stockholders who receive First Banks America
Common Stock in the Merger will have a tax basis in such First Banks America
Common Stock equal to the tax basis of the First Commercial Common Stock they
surrender in exchange therefor. Code Section 358(a)(1).
Cash in Lieu of Fractional Shares. Each former stockholder of First
Commercial who receives cash in lieu of fractional share of First Banks
America Common Stock will be treated as
<PAGE> 7
if the fractional shares were distributed as part of the Merger and were then
redeemed. Such stockholder will recognize gain or loss in an amount equal to
the difference between the adjusted tax basis of such fractional shares and the
cash received in lieu thereof, inasmuch as the First Banks America Certificate
and the First Commercial Certificate indicate that the cash to be paid in lieu
of fractional shares is not a bargained part of the Merger consideration, but a
matter of convenience to avoid the expense of issuing fractional shares. See
Rev. Proc. 77-41, 1977-2 C.B. 574, for the Service's advance ruling position
on this issue. Any such gain or loss a First Commercial stockholder
recognizes should constitute a capital gain or loss if the shares of First
Commercial Common Stock were a capital asset to the stockholder. Code
Section 1221. Any capital gain or loss such stockholder recognizes will
constitute a long-term gain or loss if the stockholder held the shares for
more than one year before the Merger. Code Section 1222(3) and (4).
Appraisal Rights. First Commercial stockholders who effectively
exercise appraisal rights and do not withdraw their demand therefor will be
deemed to have sold their First Commercial Common Stock for the cash they
receive. Normally, they will recognize gain or loss on that sale under Code
Section 1001. It is possible, however, although unlikely in view of the
disparity in size of the corporations involved in the Merger, that continued
actual or constructive ownership of First Banks America Common Stock by such
a First Commercial stockholder could cause that stockholder's receipt of cash
to be treated in whole or in part, as a realization of ordinary income
equivalent to a dividend. Code Sections 356, 302, and 318 together might
generate such a result. Since we do not know which stockholders, if any, may
effectively exercise appraisal rights and not withdraw their demand therefor,
and because the inquiry would be factually intensive with respect to any such
stockholder, we are unable to render an opinion with respect to this matter.
CONSENT
-------
We hereby consent to the filing of this letter as an exhibit to
Registration Statement <XXXX> in connection with the proposed Merger and to
----
all references made to this letter in such Registration Statement.
Very truly yours,
SUELTHAUS & WALSH, P.C.
<PAGE> 8
EXHIBIT A
---------
Certificate of First Banks America, Inc.
----------------------------------------
The undersigned Allen H. Blake, Vice President, Chief Financial Officer,
and Secretary of First Banks America, Inc., a Delaware corporation (First
Banks America), on behalf of First Banks America and its Board of Directors,
HEREBY CERTIFIES that: (a) I am familiar with the terms and conditions of
the Agreement and Plan of Merger by and between First Banks America, a
Delaware corporation and First Commercial Bancorp, Inc., a Delaware
corporation (First Commercial), dated [DATE], as amended (the Plan); and
----
(b) I am aware that (i) this Certificate will be relied on by Suelthaus &
Walsh, P.C., counsel for First Commercial, in rendering its opinion that the
merger (the Merger) of First Commercial into First Banks America will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the Code), and (ii) the facts
and representations recited herein will survive the Merger. All terms used
in this Certificate but not defined herein shall have the meanings assigned
to them in the Plan.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF FIRST BANKS
AMERICA AND ITS BOARD OF DIRECTORS, as follows:
1. The fair market value of the First Banks America Common Stock and
any cash to be received in lieu of fractional shares by each First Commercial
shareholder will be approximately equal to the fair market value of the First
Commercial Common Stock surrendered in the Merger by each such shareholder.
2. First Banks America has no plan or intention to redeem or
otherwise reacquire any of the First Banks America Common Stock issued to the
shareholders of First Commercial in the Merger.
3. First Banks America has no plan or intention to sell or otherwise
dispose of any assets of First Commercial (or its subsidiaries) acquired in
the Merger, except for dispositions made in the ordinary course of business.
4. Following the Merger, First Banks America will continue the
historic businesses of First Commercial.
5. Expenses, if any, incurred in connection with the Merger that are
properly attributable to the shareholders of First Commercial or to First
Commercial will not be paid by First Banks America. First Banks America will
pay its own expenses which are incurred in connection with the Merger.
6. No intercorporate indebtedness exists or will exist prior to the
Merger between First Commercial and First Banks America that was issued or
acquired, or will be settled, at a discount.
7. The payment of cash in lieu of fractional shares of First Banks
America Common Stock will be solely for the purposes of avoiding the expense
and inconvenience to First Banks America of issuing fractional shares and
will not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to the First Commercial
shareholders in lieu of fractional shares of First Banks America Common
Stock will not exceed one percent of the total consideration that will be
issued in the transaction to the First Commercial shareholders in exchange
for their shares of First Commercial Common stock. The fractional share
interests of each First Commercial shareholder will be aggregated, and no
First Commercial shareholder will receive cash in an amount equal to or
greater than the value of one full share of First Banks America Common Stock
except shareholders who effectively exercise appraisal rights and do not
withdraw their demand therefor.
8. None of the compensation to be received by any shareholder-
employees of First Commercial will be separate consideration for, or
allocable to, any of their shares of First
<PAGE> 9
Commercial Common Stock; none of the shares of First Banks America Common Stock
to be received by any First Commercial shareholder-employees will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any First Commercial shareholder-employees will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
9. The terms of the exchange of First Commercial Common Stock for
First Banks America Common Stock in the Merger were arrived at in arm's
length negotiations between First Commercial and First Banks America.
10. First Banks America is not an investment company as defined in
Sec.368(a)(1)(A) of the Code.
11. The majority shareholder of First Banks America, which is also the
majority shareholder of First Commercial, did not acquire its majority
ownership of First Commercial pursuant to a plan to merge First Commercial
into First Banks America.
IN WITNESS WHEREOF, I have executed this Certificate of First Banks
America pursuant to authority granted me by First Banks America's Board of
Directors, on behalf of First Banks America and its Board of Directors, this
- ----- day of ----------------, 1997.
-------------------------------------------------
Allen H. Blake, Vice President, Chief Financial
Officer, and Secretary
For and on behalf of First Banks America and its
Board of Directors
<PAGE> 10
EXHIBIT B
---------
Certificate of First Commercial Bancorp, Inc.
---------------------------------------------
The undersigned Donald W. Williams, President and Chief Executive
Officer of First Commercial Bancorp, Inc., a Delaware corporation (First
Commercial), on behalf of First Commercial and its Board of Directors,
HEREBY CERTIFIES that: (a) I am familiar with the terms and conditions of
the Agreement and Plan of Merger by and among First Banks America, Inc., a
Delaware corporation (First Banks America) and First Commercial Bancorp,
Inc., dated [DATE], as amended (the Plan); and (b) I am aware that (i)
----
Suelthaus & Walsh, P.C., counsel for First Commercial, will rely on this
Certificate in rendering its opinion that the merger (the Merger) of First
Commercial into First Banks America will constitute a reorganization within
the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the Code), and (ii) the facts and representations recited herein
will survive the Merger. All terms used in this Certificate but not defined
herein shall have the meanings assigned to them in the Plan.
The undersigned HEREBY FURTHER CERTIFIES, ON BEHALF OF FIRST COMMERCIAL
AND ITS BOARD OF DIRECTORS, as follows:
1. The fair market value of the First Banks America Common Stock and
any cash to be received in lieu of fractional shares by each First Commercial
shareholder will be approximately equal to the fair market value of the First
Commercial Common Stock surrendered in the Merger by each such shareholder.
2. First Commercial has not disposed of any of its assets, except in
the ordinary course of business, in contemplation of or anticipation of the
consummation of the Merger.
3. To the best knowledge of First Commercial and its Board of
Directors, taking into account payments to shareholders who effectively
exercise their appraisal rights and do not withdraw their demand therefor,
there is no plan or intention on the part of any of the holders of First
Commercial Common Stock to sell, exchange, or otherwise dispose of any First
Banks America Common Stock to be received in the Merger, with the exception
of shares to be exchanged for cash in lieu of fractional shares of First
Banks America Common Stock.
4. The total adjusted basis of First Commercial's assets will equal
or exceed the sum of the liabilities assumed by First Banks America, plus the
amount of liabilities, if any, to which the assets First Commercial will
transfer to First Banks America are subject.
5. All liabilities of First Commercial were incurred in the ordinary
course of its business.
6. First Commercial is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
7. First Commercial is not an investment company as defined in
Section 368(a)(2)(F) of the Code.
8. First Commercial and its shareholders each will pay its or their
own expenses which are incurred in connection with the Merger.
9. No intercorporate indebtedness exists or will exist prior to the
Merger between First Commercial and First Banks America that was issued or
acquired, or will be settled, at a discount.
10. The payment of cash in lieu of fractional shares of First Banks
America Common Stock will be solely for the purposes of avoiding the expense
and inconvenience to First Banks
<PAGE> 11
America of issuing fractional shares and will not represent separately
bargained-for consideration.
11. None of the compensation to be received by any shareholder-
employees of First Commercial will be separate consideration for, or
allocable to, any of their shares of First Commercial Common Stock; none of
the shares of First Banks America Common Stock to be received by any First
Commercial shareholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
First Commercial shareholder-employees will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
12. The terms of the exchange of First Commercial Common Stock for
First Banks America Common Stock in the Merger were arrived at in arm's
length negotiations between First Commercial and First Banks America.
13. The majority shareholder of First Commercial, which is also the
majority shareholder of First Banks America, did not acquire its majority
ownership of First Commercial pursuant to a Plan to merge First Commercial
into First Banks America.
IN WITNESS WHEREOF, I have executed this Certificate of First Commercial
pursuant to authority granted me by First Commercial's Board of Directors, on
behalf of First Commercial and its Board of Directors, this _____ day of
________________, 1997.
-------------------------------------------------
Donald W. Williams, President and Chief Executive
Officer
For and on behalf of First Commercial and its
Board of Directors
<PAGE> 1
FIRST BANKS AMERICA, INC.
A DELAWARE CORPORATION
DEBENTURE
---------
THIS IS THE SOLE DEBENTURE OF
AN ISSUANCE OF DEBENTURES TOTALING
$6,500,000.00
BY FIRST BANKS AMERICA, INC. ON THIS DATE
Amount of Debenture: $6,500,000.00 [DATE], 1997
Due: October 31, 2000
1. Promise to Pay. FIRST BANKS AMERICA, INC., A Delaware
--------------
corporation (the "COMPANY"), for value received, promises to pay to FIRST
BANKS, INC., A Missouri corporation, or its successors and assigns (the
"HOLDER"), the sum of Six Million Five Hundred Thousand Dollars
($6,500,000.00), together with interest on the principal amount hereof (not
compounded) at the rate of interest of twelve percent (12%) annually. Unless
otherwise provided herein, payments on this Debenture shall be in dollars of
the United States of America and payments shall be made to the address of the
Holder specified in Section 13 below.
2. Assumption of Accrued Interest. This Debenture is
------------------------------
intended to replace certain indebtedness of First Commercial Bancorp, Inc., a
Delaware corporation that was merged with and into the Company, to the Holder
under that certain convertible debenture in the principal amount of $1.5
million, dated October 31, 1995, and that certain convertible debenture in the
principal amount of $5.0 million, dated December 28, 1995 (collectively the
"FCB DEBENTURES"). The Company hereby agrees to repay the accrued and
unpaid interest under the FCB Debentures as if such interest had accrued
under this Debenture in accordance with the terms of this Debenture.
3. Payments. The Company shall make payments on this Debenture
--------
when, in the sole and absolute discretion of the Board of Directors of the
Company, the Company has sufficient funds to make such a payment of interest
or principal on this Debenture and can make such a payment in accordance with
law and all applicable regulatory requirements; provided, however, if and to
the extent the Company has not previously paid interest or principal on this
Debenture, then (i) prior to October 31, 2000 ("MATURITY"), the Holder of
this Debenture shall have the right to convert unpaid interest or principal
at the times and in the manner described in Section 5, and upon such
conversion, that portion of interest or principal so converted shall be
deemed paid in full and (ii) upon Maturity, the Debenture shall be payable
and convert to common stock, $0.15 par value per share (the "COMPANY
COMMON"), pursuant to the provisions of Section 5(b). Notwithstanding
anything to the contrary herein, Company shall give Holder ten (10) days
prior written notice of Company's intention to make any payment to Holder on
the Debenture.
Debenture Page 1
<PAGE> 2
4. No Security. The obligations of Company hereunder shall not
-----------
be secured by any assets of the Company.
5. Conversion Rights.
-----------------
(a) Right to Convert. At the sole option and discretion
----------------
of the Holder of this Debenture, unpaid principal and accrued but unpaid
interest may be converted into shares of Company Common at the Conversion
Price set forth in Subsection (c) below. A Holder desiring to convert shall
follow the conversion procedure set forth in Subsection (d). On the date
that the conversion is effective as provided in Subsection (d) below, all or
any portion of the unpaid principal and interest which has then accrued but
remains unpaid, and which Holder elects to convert, shall be converted into
shares of Company Common.
(b) Automatic Conversion. Notwithstanding the provisions
--------------------
of Section 5(a) above and absent an Event of Default, at Maturity, all unpaid
principal and accrued but unpaid interest shall be automatically converted
into Company Common at the Conversion Price set forth in Subsection (c)
below. Once the automatic conversion has occurred, no further interest shall
accrue, and the Holder shall be deemed to be paid in full.
(c) Conversion Price. The price per share of Company
----------------
Common at which the convertible portion of the interest or principal of this
Debenture may be converted (the "CONVERSION PRICE") shall be equal to
$14.06 per share.
(d) Conversion Procedure. If Holder desires to convert
--------------------
all or any portion of the unpaid principal or accrued but unpaid interest of
this Debenture, then Holder shall deliver a written notice to the Company
stating that the Holder desires to convert and specifying the amount of unpaid
principal and accrued by unpaid interest that Holder wishes to convert.
Promptly after receipt of such written notice, the Company shall deliver to
the Holder of this Debenture any and all documents which the Company shall
require in order to permit the conversion, including, without limitation, any
and all documents necessary to comply with applicable securities law
exemptions or to satisfy any and all requirements of applicable law and
regulations, including any requirements of any regulatory bodies having
jurisdiction over the Company. Promptly after receipt from Holder by the
Company of such documents as the Company may require to permit conversion,
the Company shall send written notice to the Holder and the Holder shall
execute the written notice that the portion of this Debenture that the Holder
requested be converted has in fact been converted into common stock of the
Company at the Conversion Price and specifying the number of shares of
Company Common to which the Holder will be entitled as a result of such
conversion. The conversion shall be deemed to have taken effect as of the
date of such written notice from the Holder to the Company, and, promptly
thereafter, the Company shall cause to be delivered to the Holder from the
Company or its transfer agent, a certificate representing such shares of
Company Common, which shares shall bear a legend substantially in the form of
that set forth in Section 8 of this Debenture (with such changes as are
necessary to reflect that the legend condition affects the shares represented
by that certificate in lieu of the language pertaining to this Debenture).
With respect to an automatic
Debenture Page 2
<PAGE> 3
conversion of the Debenture on and as of October 31, 2000, such conversion
shall occur automatically as set forth herein, except that no notice shall be
required.
6. Adjustment for Dividends, Subdivisions, Combinations or
-------------------------------------------------------
Reclassifications. In case the Company shall: (a) pay a dividend or make
- -----------------
a distribution in shares of its capital stock (whether shares of Company
Common Stock or of capital stock of any other class); (b) subdivide the
outstanding shares of Company Common Stock into a greater number of shares;
(c) combine the outstanding shares of Company Common Stock into a smaller
number of shares; or (d) reclassify shares of Company Common Stock such that
additional shares of capital stock of the Company are issued to holders of
Company Common Stock; then, and in each such case, the per share Conversion
Price in effect immediately prior to such action shall be adjusted so that
the Holder of this Debenture thereafter upon the Conversion hereof shall be
entitled to receive the number of shares of capital stock of the Company
which such Holder would have owned immediately following such action had this
Debenture been converted immediately prior thereto. An adjustment made
pursuant to this Section 6 shall become effective immediately after the
record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination, or reclassification. If, as a result of an adjustment made
pursuant to this Section 6, the Holder of this Debenture shall become
entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive) shall determine the allocation of the adjusted Conversion Price
between or among shares of such classes of capital stock.
All calculations under this Section 6 shall be made to the nearest
one-hundredth of a cent or to the nearest one-hundredth of a share, as the
case may be, but in no event shall the Company be obligated to issue fractional
shares upon the conversion of this Debenture.
7. Reservation. The Company shall, at all times, reserve and
-----------
keep available, out of its authorized but unissued shares of Company Common,
solely for the purpose of effecting the conversion of this Debenture, the
full number of shares of Company Common deliverable upon the conversion of
all Debentures from time to time outstanding. The Company shall from time to
time in accordance with Delaware law, increase the authorized number of
shares of Company Common if at any time the authorized number of such shares
remaining unissued shall not be sufficient to permit the conversion of all of
the Debentures at the time outstanding.
8. Restricted Nature of Debenture. The Holder of this
------------------------------
Debenture understands that the Company may require, upon the conversion of
this Debenture into Company Common, that the Holder make certain
representations to the Company to comply with applicable securities law
exemptions. The Holder understands that this Debenture and Company Common
into which this Debenture is convertible are "restricted securities" under
the Securities Act of 1933 and this Debenture and the Company Common into
which this Debenture is convertible is and will be subject to the following
legend condition:
Debenture Page 3
<PAGE> 4
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THE DEBENTURE HAS BEEN ACQUIRED BY
THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF:
(1) AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
THAT ACT; (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED; OR (3) A "NO ACTION LETTER" FROM
THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT THE STAFF
OF THE COMMISSION WILL NOT RECOMMEND THAT ANY ACTION BE TAKEN
UNDER THE ACT AGAINST THE COMPANY IF SUCH PROPOSED SALE IS CONSUMMATED
WITHOUT REGISTRATION UNDER THE ACT.
The issuance of the Company Common may be delayed in order for the Company to
obtain any and all necessary regulatory approvals and to comply with federal
and securities laws.
9. Default. Each of the following shall constitute an event of
-------
default ("EVENTS OF DEFAULT") under this Debenture:
(a) Default or breach by the Company in the due observance or
performance of any of the terms, covenants or agreements set forth in
this Debenture if such default is not remedied by such the Company or
waived by Holder within 30 days following the Company's receipt of
notice thereof.
(b) The Company (i) fails to pay, or admits in writing such
Borrower's inability to pay, such Borrower's debts as they become
due, or otherwise becomes insolvent (however evidenced); (ii) makes
an assignment for the benefit of creditors; (iii) files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver or any trustee of the
Company or any substantial part of the Company's property; (iv)
commences any proceeding relating to the Company under any
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; (v) if there is commenced against the Company
any such proceeding which remains undismissed for a period of thirty
(30) days, or the Company by any act indicates its consent to,
approval of, or acquiescence in any such proceeding or the
appointment of any receiver of or any trustee for such Borrower or of
any substantial part of the Company's property, or suffers any such
receivership or trusteeship to continue undischarged for a period of
30 days or the Company takes any partnership or corporate action to
authorize any of the foregoing; or (vi) is placed in receivership by
any federal or state agency with regulatory authority over the
Company.
(c) The Company files a certificate of dissolution under
applicable state law or is liquidated or dissolved or suspends or
terminates the operation of its business, or has
Debenture Page 4
<PAGE> 5
commenced against it any action or proceeding for its liquidation or
dissolution or the winding up of its business, or takes any corporate
action in furtherance thereof.
10. Rights and Remedies in the Event of Default. Upon any
-------------------------------------------
Event of Default, and at any time thereafter, Holder may, at its option, do
any one or more of the following: (a) Declare this Debenture to be
immediately due and payable in cash; or (b) exercise any other rights or
remedies available to holder under this Debenture or otherwise available to
Holder at law or in equity.
11. Modification. The terms of this Debenture may be amended or
------------
modified by the Company with the written consent of the Holder. If the
Holder transfers or assigns all or a portion of this Debenture to a permitted
assignee or transferee, then the Holders, by vote of Holders holding a
majority of the principal amount of this Debenture, may authorize any
amendment, modification, or waiver of compliance by the Company of the
provisions or defaults under this Debenture. Any such consent or waiver by
the Holder (or majority in interest of subsequent Holders) of the Debenture
shall be conclusive and binding upon the Holder (and all other Holders) and
upon all future holders of this Debenture.
12. Governing Law and Attorneys' Fees. This Debenture and the
---------------------------------
rights and obligations of the parties hereunder are to be governed by and
construed and interpreted in accordance with the laws of the State of
Missouri applicable to contracts made and to be performed wholly within
Missouri, without regard to choice or conflict of laws rules. If either
party incurs legal expenses in any action arising out of this Debenture, then
the prevailing party in such action shall be entitled to recover from the
nonprevailing party all reasonably attorneys' fees, expert witness fees, and
other costs, in addition to any other relief to which such party may be
entitled. This Debenture and the agreements referred to herein constitute
the entire agreement among the parties pertaining the subject matter hereof
and fully supersede any and all prior agreements between the parties hereto
respecting the subject matter hereof.
13. Notices. Any notice required to be given to the Holder of
-------
this Debenture shall be deemed given if it is set forth in writing addressed to
the Holder at the Holder's address appearing on the books of the Company.
Notices to the Company shall be in writing and sent to the President, or any
Executive Vice President of the Company in care of the then present principal
place of business of the Company. Such notices shall be deemed effectively
delivered: (a) three business days after deposit in the United States mail,
postage prepaid; (b) when actually received if delivered by personal
delivery; or (c) as of two business days after delivery to Federal Express or
some other third-party who will guarantee delivery by overnight courier
addressed to the address of such party as provided in this Section.
14. Usury Law Provision. All payments due hereunder are hereby
-------------------
expressly limited so that in no contingency or event whatsoever shall the
amount paid or agreed to be paid to the Holder
Debenture Page 5
<PAGE> 6
of this Debenture for the use, forbearance, or detention of the money exceed
the highest lawful rate permissible. If, from any circumstance, whatsoever,
fulfillment of any of the provisions of this Debenture, or any other
agreement referred to herein, as of the time performance of such provision
shall be due, shall involve a payment that exceeds the lawful amount
permissible under law which a court of competent jurisdiction may deem
applicable, then the obligations to be fulfilled shall be reduced to the
limit of such validity, and if from any circumstance the Holder of this
Debenture shall ever receive as interest an amount which would exceed the
highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of unpaid principal balance due hereunder, and not
to the payment of interest, or, if such excessive interest exceeds the unpaid
principal balance due hereunder, the excess shall be refunded to the
undersigned.
15. Non-Transferable. Except with the consent of the Company
----------------
(which consent shall not be unreasonably withheld) or to an entity controlled
by or under common control with Holder, this Debenture is not transferable by
the Holder hereof.
FIRST BANKS AMERICA, INC.
By
---------------------------------------
James F. Dierberg
Chairman of the Board, President, and
Chief Executive Officer
Debenture Page 6
<PAGE> 1
Exhibit 23(a)
Independent Auditors' Consent
The Board of Directors
First Commercial Bancorp, Inc.:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
s/s KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
St. Louis, Missouri
October 15, 1997
<PAGE> 1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 29, 1995
incorporated by reference in First Commercial Bancorp, Inc.'s Form 10-K for
the year ended December 31, 1996 and to all references to our Firm included
in this registration statement.
/s/ Arthur Andersen LLP
- -------------------------
Arthur Andersen LLP
San Francisco, California
October 15, 1997
<PAGE> 1
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FIRST BANKS AMERICA, INC.
ANNUAL MEETING OF STOCKHOLDERS--________________ __, 1997
The undersigned hereby appoints Allen H. Blake and Mark T. Turkcan, and
each of them with full power of substitution, the attorney and proxy of the
undersigned to attend the Annual Meeting of Stockholders of First Banks
America, Inc. to be held in Clayton, Missouri on ____________ __, 1997, at
__:00 __.m. local time and at any adjournments thereof, and to vote the stock
of the undersigned with all powers the undersigned would possess if present upon
the following matters and upon any other business that may properly come
before the meeting or any adjournment thereof.
The proxy when properly executed will be voted as specified herein. If
no specification is made with respect to any particular proposal, it is the
intention of the proxies to vote FOR each of the following proposals.
===============================================================================
1. To approve and adopt the Agreement and Plan of Merger dated October 3,
1997 between First Banks America, Inc. and First Commercial Bancorp, Inc.
FOR
AGAINST
ABSTAIN
2. To approve the issuance to First Banks, Inc. of 804,000 shares of Common
Stock, for a purchase price of $10,000,000.00.
FOR
AGAINST
ABSTAIN
3. To approve the issuance of convertible debentures in the principal amount
of $6.5 million to First Banks, Inc. in exchange for debentures of First
Commercial Bancorp, Inc.
FOR
AGAINST
ABSTAIN
4. Election of Directors
FOR all nominees
AGAINST all nominees
WITHHOLD all nominees
NOMINEES: Allen H. Blake, Charles A. Crocco, Jr., James F. Dierberg, Edward
T. Story, Jr., Mark T. Turkcan, Donald W. Williams
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name below:
- ------------------------------------------------------------------
5. In their discretion, upon any other matters which may properly come before
the meeting or any adjournments thereof, hereby revoking any proxy heretofore
given by the undersigned for such meeting.
- -------------------------------------------------
Signature
- -------------------------------------------------
Signature if owned jointly
Date:
-------------------------------------------
===============================================================================
<PAGE> 1
PROXY SOLICITED BY THE BOARD OF DIRECTORS Exhibit 99.2
FIRST COMMERCIAL BANCORP, INC.
SPECIAL MEETING OF STOCKHOLDERS [DATE], 1997
----
The undersigned hereby appoints DONALD W. WILLIAMS and ALLEN H. BLAKE, and
each of them, proxies, with full power of substitution and revocation, to
vote the shares of Common Stock of First Commercial Bancorp, Inc. (the
Company), which the undersigned is entitled to vote at the Special Meeting
of Stockholders scheduled to occur on [DATE], 1997, and at any adjournment(s)
----
thereof (the "Meeting"), with all the powers the undersigned would possess
if personally present, including authority to vote on the matters stated
below in the manner directed and upon any other matter which may properly
come before the Meeting in such manner as the proxies may in their discretion
determine. The undersigned hereby revokes any proxy previously given to vote
such shares at the Meeting or any adjournment thereof.
Item 1. Approval and adoption of the Agreement and Plan of Merger (the
Merger Agreement), by and between the Company and First Banks America,
Inc., a Delaware corporation (FBA). If the Merger Agreement is approved by
the stockholders of the Company and FBA, the Company will be merged (the
Merger) with and into FBA. Upon consummation of the Merger, each
outstanding share of the Company's common stock, par value $1.25 per share,
and other than shares held by stockholders of the Company who exercise their
appraisal rights under the General Corporation Law of the State of Delaware,
will be converted into the right to receive, 0.8888 shares of FBA Class A
Common Stock, par value $0.15 per share, with cash in lieu of fractional
shares.
_____ FOR _____ AGAINST _____ ABSTAIN
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
<PAGE> 2
THE PROXIES ARE DIRECTED TO VOTE AS SPECIFIED ABOVE AND IN THEIR DISCRETION
ON ALL OTHER MATTERS COMING BEFORE THE MEETING. EXCEPT AS SPECIFIED TO THE
CONTRARY ABOVE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
MATTER REPRESENTED IN ITEM 1 ABOVE.
PLEASE PROMPTLY MARK, SIGN, DATE AND DATED __________________, 1997
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
______________________________________________
Signature
______________________________________________
Signature
Sign exactly as name appears at left. Where stock is
issued in two or more names, all should sign. If
signing as attorney, administrator, executor,
trustee, guardian, or other fiduciary, give full
title as such. A corporation should sign by
authorized officer and affix seal. If this Proxy is
executed by two or more persons or entities it shall
pertain to all shares of common stock of the Company
held in the individual name of each person or entity
as well as all shares of common stock of the Company
held in joint name by any two or more such persons or
entities.
[THE ABOVE TEXT TO APPEAR AS REVERSE OF PROXY, BELOW PERFORATION]
<PAGE> 1
Exhibit 99.3
Consent of Financial Advisor
We hereby consent to the references to our firm in the Proxy Statement
included in First Banks America, Inc. Registration Statement of Form
S-4.
Mercer Capital Management
By: /s/ Jeff Davis
----------------------
Vice President
<PAGE> 1
Exhibit 99.4
[LETTERHEAD OF RAUSCHER PIERCE REFSNES, INC.]
Consent of Financial Advisor
We consent to the inclusion of our Fairness Opinion dated October 3, 1997
issued to First Banks America, Inc. In this registration statement on Form
S-4.
/s/Rauscher Pierce Refsnes, Inc.
- ----------------------------------
Rauscher Pierce Refsnes, Inc.
Houston, Texas
October 15, 1997
