11/05/97 3:09 PMSECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-8937
FIRST BANKS AMERICA, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-1604965
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
135 North Meramec, Clayton, Missouri 63105
(address of principal executive offices) (Zip Code)
(314) 854-4600
--------------
(Registrant's telephone number, including area code)
P. O. Box 630369, Houston, Texas 77263-0369
-------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X_ No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class October 31, 1997
- ----- ----------------
Common Stock, $.15 par value 1,060,709
Class B Common Stock, $.15 par value 2,500,000
<PAGE>
First Banks America, Inc.
INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 -1-
Consolidated Statements of Income for the three and nine
month periods ended September 30, 1997 and 1996 -3-
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and 1996 -4-
Notes to Consolidated Financial Statements -5-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -9-
PART II OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K -15-
SIGNATURES -16-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks....................................... $ 13,872 12,343
Interest-bearing deposits with other financial institutions-
with maturities of three months or less..................... 1,050 146
Federal funds sold............................................ 3,500 9,475
---------- --------
Total cash and cash equivalents........................... 18,422 21,964
---------- --------
Investment securities - available for sale, at fair value........ 86,764 86,910
Loans:
Real estate construction and development...................... 52,436 48,025
Commercial and financial...................................... 61,377 44,238
Real estate mortgage.......................................... 59,759 54,761
Consumer and installment...................................... 76,331 96,096
---------- --------
Total loans............................................... 249,903 243,120
Unearned discount............................................. (1,441) (1,246)
Allowance for possible loan losses............................ (6,565) (6,147)
--------- ---------
Net loans................................................. 241,897 235,727
---------- --------
Bank premises and equipment, net of
accumulated depreciation..................................... 6,244 6,369
Intangible asset associated with the purchase of a
subsidiary................................................... 3,129 3,127
Accrued interest receivable...................................... 2,258 2,348
Other real estate owned.......................................... 375 785
Deferred income taxes............................................ 14,664 15,519
Other assets..................................................... 2,794 2,433
----------- --------
Total assets.............................................. $ 376,547 375,182
=========== ========
</TABLE>
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Balance Sheets (unaudited)
(dollars expressed in thousands, except per share data)
(continued)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest bearing............................................ $ 54,959 56,161
Interest bearing................................................ 47,647 53,310
Savings.......................................................... 70,442 66,523
Time:
Time deposits of $100 or more................................... 28,696 31,679
Other time deposits............................................. 110,104 112,133
---------- --------
Total deposits................................................ 311,848 319,806
Short-term borrowings................................................ 8,496 2,092
Note payable......................................................... 14,500 14,000
Deferred income taxes................................................ 1,487 909
Accrued and other liabilities........................................ 5,650 4,877
---------- --------
Total liabilities............................................. 341,981 341,684
---------- --------
STOCKHOLDERS' EQUITY
Common Stock:
Common stock, $.15 par value; 6,666,666 shares
authorized; 1,416,400 and 1,412,900 shares issued
and outstanding at September 30, 1997 and
December 31, 1996, respectively................................. 212 212
Class B common stock, $.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding
at September 30, 1997 and December 31, 1996..................... 375 375
Capital surplus...................................................... 37,768 38,036
Retained deficit since elimination of accumulated deficit
of $259,117, effective December 31, 1994......................... (145) (2,251)
Common treasury stock, at cost; 356,658 shares and 280,430
shares at September 30, 1997 and December 31, 1996,
respectively..................................................... (3,817) (2,838)
Net fair value adjustment for securities available for sale.......... 173 (36)
---------- --------
Total stockholders' equity.................................... 34,566 33,498
---------- --------
Total liabilities and stockholders' equity.................... $ 376,547 375,182
========== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Income (unaudited)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans........................................ $ 6,103 4,024 16,737 11,653
Investment securities............................................. 1,222 1,101 3,815 2,344
Federal funds sold and other...................................... 170 174 529 1,292
------- ------ -------- --------
Total interest income......................................... 7,495 5,299 21,081 15,289
------- ------ -------- --------
Interest expense:
Deposits:
Interest-bearing demand......................................... 293 70 882 268
Savings......................................................... 565 438 1,660 1,300
Time deposits of $100 or more................................... 399 330 1,205 1,036
Other time deposits............................................. 1,549 1,316 4,531 4,139
Other borrowings.................................................. 404 79 1,138 416
------- ------ -------- --------
Total interest expense........................................ 3,210 2,233 9,416 7,159
------- ------ -------- --------
Net interest income........................................... 4,285 3,066 11,665 8,130
Provision for possible loan losses................................... 465 250 1,750 600
------- ------ -------- --------
Net interest income after provision for
possible loan losses...................................... 3,820 2,816 9,915 7,530
------- ------ -------- --------
Noninterest income:
Service charges on deposit accounts
and customer service fees...................................... 395 371 1,206 1,108
Gain on sales of securities, net.................................. -- -- -- 75
Other income...................................................... 105 58 772 120
------- ------ -------- --------
Total noninterest income...................................... 500 429 1,978 1,303
------- ------ -------- --------
Noninterest expenses:
Salaries and employee benefits.................................... 980 654 3,075 2,040
Occupancy, net of rental income................................... 296 237 1,062 638
Furniture and equipment........................................... 207 152 588 456
Federal Deposit Insurance Corporation premiums.................... 16 59 83 96
Postage, printing and supplies.................................... 59 42 246 184
Data processing fees.............................................. 148 79 534 236
Legal, examination and professional fees.......................... 505 339 1,496 900
Communications.................................................... 140 102 362 305
(Gain) loss on sales of foreclosed real estate, net of
expenses....................................................... (2) 38 (258) 55
Other expenses.................................................... 472 833 1,333 1,712
------- ------ -------- --------
Total noninterest expenses.................................... 2,821 2,535 8,521 6,622
------- ------ -------- --------
Income before provision for income taxes...................... 1,499 710 3,372 2,211
Provision for income taxes........................................... 566 253 1,266 855
------- ------ -------- --------
Net income.................................................... $ 933 457 2,106 1,356
======= ====== ======== ========
Earnings per common share............................................ $ .26 .12 .58 .34
======= ====== ======== ========
Weighted average shares of common stock and common
stock equivalents outstanding (in thousands)...................... 3,592 3,927 3,626 3,969
======= ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST BANKS AMERICA, INC.
Consolidated Statements of Cash Flows (unaudited)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income................................................................ $ 2,106 1,356
Adjustments to reconcile net income to net cash:
Depreciation and amortization of bank premises and equipment............ 466 407
Accretion, net of amortization.......................................... (180) (571)
Provision for possible loan losses...................................... 1,750 600
(Increase) decrease in accrued interest receivable...................... 90 (916)
Interest accrued on liabilities......................................... 9,416 7,159
Payments of interest on liabilities..................................... (8,530) (7,294)
Provision for income taxes.............................................. 1,266 855
Gain on sales of securities, net........................................ -- (75)
Other, net.............................................................. (897) (38)
---------- ---------
Net cash provided by operating activities............................. 5,487 1,483
---------- ---------
Cash flows from investing activities:
Sales of investment securities............................................ -- 10,513
Maturities of investment securities....................................... 42,990 134,417
Purchases of investment securities........................................ (42,144) (171,084)
Net (increase) decrease in loans.......................................... (8,832) 17,002
Recoveries of loans previously charged off................................ 1,032 857
Purchases of bank premises and equipment.................................. (341) (145)
Other, net................................................................ 568 201
---------- ---------
Net cash used in investing activities................................. (6,727) (8,239)
---------- ---------
Cash flows from financing activities:
Decrease in deposits...................................................... (7,958) (19,845)
Increase (decrease) in borrowed funds..................................... 6,904 (5,085)
Repurchase of common stock for treasury................................... (979) (1,140)
Other, net ............................................................... (269) 34
---------- ---------
Net cash used in financing activities................................. (2,302) (26,036)
---------- ---------
Net decrease in cash and cash equivalents............................. (3,542) (32,792)
Cash and cash equivalents, beginning of period............................... 21,964 40,922
---------- ---------
Cash and cash equivalents, end of period..................................... $ 18,422 8,130
========== =========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
FIRST BANKS AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying consolidated financial statements of First Banks
America, Inc. (FBA) are unaudited and should be read in conjunction with the
consolidated financial statements contained in the 1996 annual report on Form
10-K. In the opinion of management, all adjustments, consisting of normal
recurring accruals considered necessary for a fair presentation of the results
of operations for the interim period presented herein, have been included.
Operating results for the three and nine month periods ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. Certain reclassifications of 1996 amounts have been
made to conform with the 1997 presentation.
The consolidated financial statements include the accounts of FBA and
its subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated.
FBA operates through two banking subsidiaries, BankTEXAS N.A.,
headquartered in Houston, Texas (BankTEXAS) and Sunrise Bank of California,
headquartered in Roseville, California (Sunrise Bank), collectively referred to
as the Subsidiary Banks. Sunrise Bank was acquired on November 1, 1996. The
acquisition was accounted for under the purchase method of accounting and,
accordingly, the consolidated financial statements include the financial
position and results of operations for the periods subsequent to the acquisition
date.
(2) Transactions with Related Party
FBA purchases certain services and supplies from or through its
majority shareholder, First Banks, Inc. (First Banks) which holds all of FBA's
Class B common stock. 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 the 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 auditing, 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 $263,000 and $737,000 for the three and nine months ended
September 30, 1997, compared to $191,000 and $509,000 for the three and nine
months ended September 30, 1996, respectively.
Because of its affiliation through First Banks and the geographic
proximity of certain of their banking offices, Sunrise Bank, First Bank & Trust
(FB&T), a wholly owned subsidiary of First Banks, and First Commercial Bank
(First Commercial), a majority owned indirect subsidiary of First Banks, share
the cost of certain personnel and services used by the three banks. This
includes the salaries and benefits of certain loan and administrative personnel.
The allocation of the shared costs are charged and/or credited among the three
banks under the terms of the cost sharing agreements which were entered into
with FB&T and First Commercial during January 1997 and September 1997,
respectively. Expenses associated with loan origination personnel are allocated
based on the relative loan volume between the 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 $113,000 and $269,000 for the three and nine month periods ended
September 30, 1997, 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 under the terms of data processing agreements. Fees paid
<PAGE>
under these agreements were $145,000 and $484,000 for the three and nine months
ended September 30, 1997, compared to $78,000 and $235,000 for the three and
nine months ended September 30, 1996, respectively. The fees paid for management
services and data processing are significantly lower than FBA was previously
paying its nonaffiliated vendors.
The Subsidiary Banks had $39.7 million and $21.4 million in whole loans
and loan participations outstanding at September 30, 1997 and December 31, 1996,
respectively, that were purchased from banks affiliated with First Banks. In
addition, the Subsidiary Banks had sold $25.6 million and $26.7 million in whole
loans and loan participations to affiliates of First Banks at September 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 the Subsidiary
Banks.
FBA has borrowed $14.5 million from First Banks under a $20.0 million
promissory note payable dated November 4, 1997. This agreement replaces a $15
million note payable agreement under similar terms with First Banks. The
borrowings under the note 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 $874,000 for the nine months ended September 30, 1997. The principal
and accrued interest under the note are due and payable on October 31, 2001. The
accrued and unpaid interest under the note was $1,068,000 and $194,000 at
September 30, 1997 and December 31, 1996, respectively.
(3) Regulatory Capital
FBA and the Subsidiary Banks are subject to various regulatory capital
requirements administered by federal and state banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on FBA and the Subsidiary Banks' assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Subsidiary Banks' capital amounts and regulatory classification
are also subject to qualitative judgments by the regulators about components,
risk weighting, and other factors which may affect possible regulatory actions.
Quantitative measures established by regulations to ensure capital
adequacy require the Subsidiary Banks to maintain certain minimum capital
ratios. The Subsidiary Banks are required to maintain a minimum risk-based
capital to risk-weighted assets ratio of 8.00%, with at least 4.00% being "Tier
1" capital. Tier 1 capital is composed of total stockholders' equity excluding
the net fair value adjustment for securities available for sale and excess net
deferred tax assets, as defined by regulation. In addition, a minimum leverage
ratio (Tier 1 capital to total assets) of 3.00% plus an additional cushion of
100 to 200 basis points is expected. In order to be well capitalized under
Prompt Corrective Action provisions, the bank is required to maintain a risk
weighted assets ratio of at least 10%, a Tier 1 to risk weighted assets ratio of
at least 6%, and a leverage ratio of at least 5%. As of December 31, 1996, the
date of the most recent notification from the Subsidiary Banks' primary
regulators, the Subsidiary Banks were categorized as well capitalized under the
regulatory framework for prompt corrective action. Management believes, as of
September 30, 1997, the Subsidiary Banks are well capitalized as defined by the
Federal Deposit Insurance Corporation Improvement Act of 1991.
At September 30, 1997 and December 31, 1996, FBA's and the Subsidiary
Banks' capital ratios were as follows:
<TABLE>
<CAPTION>
Risk-based capital ratios
Total Tier 1 Leverage Ratio
----- ------ --------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
FBA 8.16% 7.64% 6.90% 6.38% 5.70% 5.31%
BankTEXAS 12.21 10.29 10.95 9.04 8.76 7.53
Sunrise Bank 14.85 17.67 13.58 16.39 12.49 10.88
</TABLE>
<PAGE>
(4) Proposed Business Combinations
On July 28, 1997, FBA and Surety Bank entered into an Agreement and
Plan of Reorganization (Surety Agreement) providing for the acquisition of
Surety Bank. Under the terms of the Surety Agreement, both Surety Bank and
Sunrise Bank will be merged into a newly formed commercial bank (the Northern
California Bank). In the transaction, which is subject to the approval of
regulatory authorities and the shareholders of Surety Bank, the Surety Bank
common shareholders will be allowed to elect to receive either $36.12 in cash or
FBA common stock equivalent to the quotient of $38.12 divided by the exchange
price for each share of Surety common stock that they hold. The exchange price,
as defined in the Surety Agreement, is subject to a minimum and maximum price
per share of common stock of $10.89 and $14.73, respectively. Holders of Surety
Bank convertible preferred stock will receive either $30.73 in cash or FBA
common stock equivalent to the quotient of $32.43 divided by the exchange price,
which are the equivalent amounts assuming the preferred shareholders had
exercised their rights to convert into Surety Bank common stock. The Surety
Agreement requires that 51% of the Surety Bank stock be exchanged for FBA common
stock. If Surety Bank shareholders representing more than 51% of the outstanding
stock elect to receive FBA stock in the transaction, Surety Bank and FBA may
mutually agree to increase the stock portion of the transaction to a maximum of
65% of the total Surety Bank stock. Based on the market value of FBA common
stock of $18.00 as of September 30, 1997 and assuming 51% of the Surety Bank
stock is exchanged for FBA common stock, the total transaction price would be
$8.31 million. The transaction will be accounted for using the purchase method
of accounting and is expected to be completed by December 31, 1997. The
transaction will be funded from available cash and an advance under the note
payable to First Banks.
Surety Bank operates banking offices in Vallejo and Fairfield,
California. At September 30, 1997, Surety Bank had total assets of $75.21
million and reported net income of $239,000 for the nine month period then
ended.
On October 3, 1997, FBA and First Commercial Bancorp, Inc. (FCB)
executed an Agreement and Plan of Merger (Agreement) providing for the merger of
the two companies. Under the terms of the Agreement, FCB will be merged into
FBA, and FCB's wholly owned subsidiary, First Commercial, will be merged into
the Northern California Bank. In the transaction, which is subject to the
approval of regulatory authorities and the shareholders of both FBA and FCB, the
FCB shareholders will receive .8888 shares of FBA common stock for each share of
FCB common stock that they hold. In total, FCB shareholders will receive
approximately 752,000 shares of FBA common stock in the transaction. The
transaction also provides for First Banks to receive 804,000 shares of FBA
common stock in exchange for $10.0 million of FBA's note payable to First Banks,
and for the exchange of FCB convertible debentures of $6.5 million, which are
owned by First Banks, for comparable debentures of FBA. The Agreement was
negotiated and approved by special committees of the Boards of Directors of FCB
and FBA. These special committees were comprised solely of independent directors
of the two respective Boards of Directors.
First Commercial has six banking offices located in Sacramento,
Roseville (2), San Francisco, Concord and Campbell, California. At September 30,
1997, FCB had total assets of $178.9 million, and reported net income of
$785,000 for the nine month period then ended. FCB's common stock, of which
61.48% is owned by First Banks, is traded on the Nasdaq SmallCap Market. The
transaction is expected to be completed by December 31, 1997.
In connection with and contingent upon its merger into FBA, FCB has
executed an Agreement to Exchange Certain Assets and Assume Certain Liabilities
by and between First Commercial and FB&T (Exchange Agreement) pursuant to which
FCB's banking office in Campbell, California would be exchanged for FB&T's
banking office in Walnut Creek, California. Because of the close proximity of
the Walnut Creek office to FCB's Concord office and of the Campbell office to
FB&T's San Jose office, it was determined the exchange would allow a more
effective control of the costs of operating the offices, avoid unnecessary
customer confusion between the entities and more clearly delineate separate
market areas. Although the offices are approximately equivalent in size, the
<PAGE>
Exchange Agreement provides for the payment of a net premium based on the
deposit differential and composition at the date of closing. Based on the
deposits of the branches as of October 31, 1997, this would require FCB to pay
FB&T a net premium of approximately $5,000.
On September 22, 1997, FBA and Pacific Bay Bank, San Pablo, California
(Pacific Bay), announced the signing of a Definitive Agreement and Plan of
Merger (Pacific Bay Agreement) providing for the acquisition of Pacific Bay by
FBA. Under the terms of the Pacific Bay Agreement, Pacific Bay shareholders will
receive $14.00 per share in cash for their stock, an aggregate of $4.2 million.
The transaction, which is subject to regulatory approvals and the approval of
the shareholders of Pacific Bay, is expected to be completed during the first
quarter of 1998. The transaction will be accounted for using the purchase method
of accounting and will be funded from an advance under the note payable
agreement with First Banks.
Pacific Bay operates a banking office in San Pablo, California and a
loan production office in Lafayette, California. At September 30, 1997, Pacific
Bay had total assets of $37.5 million and reported net income of $35,000 for the
nine month period then ended. Pacific Bay will merge into FBA's Northern
California Bank.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
FBA is a registered bank holding company, incorporated in Delaware and
headquartered in Clayton, Missouri. At September 30, 1997, FBA had approximately
$376.5 million in total assets; $248.5 million in total loans, net of unearned
discount; $311.8 million in total deposits; and $34.6 million in total
stockholders' equity. FBA operates through its Subsidiary Banks.
Through the Subsidiary Banks' six locations in Texas and two locations
in California, FBA 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. Loans
include commercial and industrial, real estate construction and development,
commercial and residential real estate and consumer loans. Other financial
services include credit-related insurance, automatic teller machines and safe
deposit boxes.
The following table lists the Subsidiary Banks at September 30, 1997:
Loans, net of
Number of Total unearned Total
locations assets discount deposits
--------- ------ -------- --------
(dollars expressed in thousands)
BankTEXAS 6 $ 264,827 169,605 227,260
Sunrise Bank 2 107,807 78,857 84,616
Financial Condition
FBA's total assets were $376.5 million and $375.2 million at September
30, 1997 and December 31, 1996, respectively. Within the increase in total
assets from December 31, 1996 was an increase in total loans, net of unearned
discount, of $6.6 million, offset by a reduction in cash and cash equivalents of
$3.5 million. As more fully discussed under "-- Lending and Credit Management,"
the increase in total loans, net of unearned discount, is comprised of an
increase in commercial, construction and real estate mortgage loans
substantially offset by the planned reduction in the consumer and installment
loan portfolio, which consists primarily of indirect automobile loans. In
addition, FBA has purchased $979,000 of its common stock for treasury during
1997 utilizing available cash and a $500,000 advance under its note payable with
First Banks. During October 1997, the Board of Directors of FBA authorized an
additional 5% purchase of common stock for treasury.
Results of Operations
Net Income
Net income was $933,000 and $457,000 for the three months ended
September 30, 1997 and 1996, respectively. Net income for the nine months ended
September 30, 1997 was $2.11 million, compared to $1.36 million for the same
period in 1996. The improved operating results of FBA reflect the improved
performance of both BankTEXAS and Sunrise Bank. BankTEXAS' net income increased
to $909,000 and $2.39 million for the three and nine month periods ended
September 30, 1997, respectively, from $514,000 and $1.42 million for the same
periods in 1996. Sunrise Bank, which was acquired by FBA on November 1, 1996,
recorded net income of $269,000 and $180,000 for the three months periods ended
September 30, 1997 and June 30, 1997, respectively, in comparison to an
operating loss of $9,000 for the three months ended March 31, 1997. In addition,
FBA's results for the three and nine month periods ended September 30, 1997
include approximately $302,000 and $874,000 of interest expense attributable
primarily to the borrowings incurred in connection with funding the acquisition
of Sunrise Bank.
<PAGE>
Net Interest Income
Net interest income was $4.29 million, or 5.02% of average interest
earning assets, for the three months ended September 30, 1997, compared to $3.07
million, or 4.85% of average interest earning assets, for the same period in
1996. For the nine month periods ended September 30, 1997 and 1996, net interest
income increased to $11.67 million, or 4.66% of interest earning assets, from
$8.13 million, or 4.17% of interest earning assets, respectively. The improved
net interest income is reflective of the repositioning of the loan portfolio of
BankTEXAS, the acquisition of Sunrise Bank, control of deposit costs and
internal loan growth.
The following table sets forth certain information relating to FBA's
average balance sheet, and reflects the average yield earned on interest-earning
assets, the average cost of interest-bearing liabilities and the resulting net
interest income for the three and nine month periods ended September 30:
<PAGE>
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1996 1997 1996
Interest Interest Interest Interest
Average income/ Yield/Average income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
balance expense rate balance expense rate balance expense rate balance expense rate
------- ------- ------------ ------------ ------- ----------- ------- -------------
(dollars expressed in thousands)
Assets
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans $ 247,571 6,103 9.78% $ 166,487 4,024 9.62% $ 238,717 16,737 9.37% $ 174,563 11,653 8.92%
Investment securities 78,599 1,222 6.17 71,920 1,101 6.09 82,738 3,815 6.16 53,620 2,344 5.84
Federal funds sold and other 12,503 170 5.39 12,975 174 5.34 13,161 529 5.37 32,349 1,292 5.33
-------- ------ --------- ---- --------- ------ --------- ------
Total interest-earning
assets 338,673 7,495 8.78 251,382 5,299 8.39 334,616 21,081 8.42 260,532 15,289 7.84
------ ----- ------ ------
Nonearning assets 33,021 26,345 35,324 28,547
-------- --------- --------- ---------
Total assets $371,694 $ 277,727 369,940 $ 289,079
======== ========= ========= =========
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits 49,894 293 2.34% $18,160 70 1.53% $ 50,519 882 2.33% $ 20,105 268 1.78%
Savings deposits 68,024 565 3.30 54,169 438 3.22 67,702 1,660 3.28 54,008 1,300 3.22
Time deposits of $100 or more 28,270 399 5.61 24,022 330 5.47 29,214 1,205 5.51 24,696 1,036 5.60
Other time deposits 111,013 1,549 5.55 95,184 1,316 5.50 111,306 4,531 5.44 99,645 4,139 5.55
-------- ------ -------- ----- --------- ----- -------- -----
Total interest-bearing
deposits 257,201 2,806 4.34 191,535 2,154 4.47 258,741 8,278 4.28 198,454 6,743 4.54
Fed funds, repos and
FHLB advances 6,248 103 6.56 2,861 79 10.99 4,979 265 7.12 4,759 369 10.36
Notes payable and other 14,500 301 8.26 -- -- -- 14,305 873 8.16 658 47 9.54
-------- ------ -------- ---- --------- ----- -------- ------
Total interest-bearing
liabilities 277,949 3,210 4.58 194,396 2,233 4.57 278,025 9,416 4.53 203,871 7,159 4.69
------ ----- ----- ------
Noninterest-bearing liabilities:
Demand deposits 52,997 44,070 51,739 45,758
Other liabilities 6,510 3,920 6,471 4,076
-------- -------- --------- ---------
Total liabilities 337,456 242,386 336,235 253,705
Stockholders' equity 34,238 35,341 33,705 35,374
-------- -------- --------- ---------
Total liabilities and
stockholders' equity $371,694 $277,727 $ 369,940 $ 289,079
======== ======== ========= =========
Net interest income 4,285 3,066 11,665 8,130
===== ===== ====== ======
Net interest margin 5.02% 4.85% 4.66% 4.17%
===== ===== ===== ======
</TABLE>
<PAGE>
Provision for Possible Loan Losses
The provision for possible loan losses was $465,000 and $1.75 million
for the three and nine month periods ended September 30, 1997, respectively,
compared to $250,000 and $600,000 for the same periods in 1996. Net loan
charge-offs were $151,000 and $1.33 million for the three and nine month periods
ended September 30, 1997, compared to $459,000 and $1.92 million for the same
periods in 1996. The increase in the provision for possible loan losses reflects
the overall growth in the loan portfolio, including the loans provided by the
acquisition of Sunrise Bank, and management's evaluation of the credit quality
of the loans in the portfolio and its assessment of the adequacy of the
allowance for possible loan losses. Nonperforming loans were $2.44 million at
September 30, 1997 in comparison to $2.10 million and $421,000 at December 31,
1996 and September 30, 1996, respectively. See "-- Lending and Credit
Management" for a summary of nonperforming loans and a summary of loan loss
experience.
Noninterest Income
Noninterest income was $500,000 and $1.98 million for the three and
nine month periods ended September 30, 1997, respectively, as compared to
$429,000 and $1.30 million for the same periods in 1996. Noninterest income
consists primarily of service charges on deposit accounts and customer service
fees.
Service charges on deposit accounts and customer service fees
increased to $395,000 and $1.21 million for the three and nine month periods
ended September 30, 1997, respectively, in comparison to $371,000 and $1.11
million for the same periods in 1996. This increase is attributable to the
acquisition of Sunrise Bank.
Other income increased by $47,000 and $652,000 to $105,000 and $772,000
for the three and nine month periods ended September 30, 1997, respectively,
from $58,000 and $120,000 for the same periods in 1996, respectively. The
increase is primarily attributable to legal settlements received by Sunrise Bank
for the nine month period ended September 30, 1997, and a net gain of $55,000
realized upon disposition of repossessed and other assets for the nine months
ended September 30, 1997, compared to a net loss of $144,000 for the nine months
ended September 30, 1996. Offsetting the increase in noninterest income for the
nine months ended September 30, 1997, was a gain of $75,000 recognized upon the
sale of an investment security during the nine months ended September 30, 1996.
Noninterest Expense
Noninterest expense was $2.82 million and $8.52 million for the three
and nine month periods ended September 30, 1997, respectively, compared to $2.54
million and $6.62 million for the same periods in 1996. The increase is
attributable to the noninterest expense of Sunrise Bank, which was acquired by
FBA on November 1, 1996, of $1.02 million and $3.31 million for the three and
nine month periods ended September 30, 1997, respectively, partially offset by a
reduction in the noninterest expense of BankTEXAS over these same periods.
Offsetting the increase in noninterest expense for the three and nine month
periods ended September 30, 1997, are gains, net of losses and expenses on
foreclosed real estate, of $2,000 and $258,000, respectively.
Lending and Credit Management
Interest earned on the loan portfolio is the primary source of income
of FBA. Total loans, net of unearned discount, represented 66.0% and 64.5% of
total assets as of September 30, 1997 and December 31, 1996, respectively. Total
loans, net of unearned discount, were $248.5 million and $241.9 million at
September 30, 1997 and December 31, 1996, respectively. The increase, as
summarized on the consolidated balance sheet, is attributable to the expansion
of the corporate lending function of FBA. The expansion has generated growth in
the commercial and commercial real estate mortgage loan portfolios. Offsetting
the growth in corporate lending is a decrease in the consumer indirect
automobile loan portfolio. The expected decrease in the consumer indirect
automobile loan portfolio reflects the more stringent lending practices
implemented during 1995 and 1996 to curtail the level of loan charge-offs being
experienced under the previous underwriting practices.
<PAGE>
FBA's nonperforming loans consist of loans on a nonaccrual status and
loans on which the original terms have been restructured. Impaired loans,
consisting of nonaccrual and consumer and installment loans 60 days or more past
due, were $3.2 million and $3.7 million at September 30, 1997 and December 31,
1996, respectively.
The following is a summary of nonperforming assets and past due loans
at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
(dollars expressed in thousands)
Nonperforming assets:
<S> <C> <C>
Nonperforming loans........................................ $ 2,441 2,095
Other real estate.......................................... 375 785
----------- ---------
Total nonperforming assets.............................. $ 2,816 2,880
=========== =========
Loans past due and still accruing:
Over 30 days to 90 days.................................... $ 4,350 6,471
Over 90 days............................................... 248 583
----------- ---------
Total past due loans.................................... $ 4,598 7,054
=========== =========
Loans, net of unearned discount.............................. $ 248,462 241,874
=========== =======
Asset quality ratios:
Allowance for possible loan losses to loans................ 2.64% 2.54%
Nonperforming loans to loans .............................. .98 .87
Allowance for possible loan losses to
nonperforming loans .................................... 268.95 293.41
Nonperforming assets to loans and other real estate........ 1.13 1.19
=========== =========
</TABLE>
The allowance for possible loan losses is based on past loan loss
experience, on management's evaluation of the quality of the loans in the
portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each month, the
allowance for possible loan losses is reviewed relative to FBA's internal watch
list and other data utilized to determine its adequacy. The provision for
possible loan losses is management's estimate of the amount necessary to
maintain the allowance at a level consistent with this evaluation. As
adjustments to the allowance for possible loan losses are considered necessary,
they are reflected in the results of operations.
The following is a summary of the loan loss experience:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Allowance for possible loan losses, beginning of period $..6,251 4,116 6,147 5,228
-------- ------ ------- -------
Loans charged-off (416) (729) (2,364) (2,778)
Recoveries of loans previously charged-off 265 270 1,032 857
-------- ------ ------- -------
Net loan (charge-offs) recoveries (151) (459) (1,332) (1,921)
-------- ------ ------- -------
Provision for possible loan losses 465 250 1,750 600
-------- ------ ------- -------
Allowance for possible loan losses, end of period $ 6,565 3,907 6,565 3,907
======== ====== ======= =======
</TABLE>
<PAGE>
Liquidity
The liquidity of FBA and the Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations, service debt
obligations and meet other commitments on a timely basis. The primary sources of
funds for liquidity are derived from customer deposits, loan payments,
maturities, sales of investments and operations. In addition, FBA and the
Subsidiary Banks may avail themselves of more volatile sources of funds through
issuance of certificates of deposit in denominations of $100,000 or more,
federal funds borrowed, securities sold under agreements to repurchase and
borrowings from the Federal Home Loan Bank. The aggregate funds acquired from
those sources were $37.2 million and $33.8 million at September 30, 1997 and
December 31, 1996, respectively.
At September 30, 1997, FBA's more volatile sources of funds mature as
follows:
(dollars expressed in thousands)
Three months or less $ 17,849
Over three months through six months 5,628
Over six months through twelve months 6,325
Over twelve months 7,390
----------
Total $ 37,192
==========
Management believes the available liquidity and earnings of the
Subsidiary Banks will be sufficient to provide funds for FBA's operating and
debt service requirements both on a short-term and long-term basis.
Effects of New Accounting Standard
FBA adopted the provisions of SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities (SFAS 125)
prospectively on January 1, 1997. SFAS 125 established accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities.
The standards established by SFAS 125 are based on consistent
application of a financial-components approach that focuses on control. Under
that approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
The implementation of SFAS 125 did not have a material effect on the
consolidated financial position or results of operation of
FBA.
In February 1997, the FASB issued SFAS 128, Earnings Per Share (SFAS
128). SFAS 128 supersedes Accounting Principles Board Opinion No. 15, Earnings
<PAGE>
Per Share (APB 15) and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS) for entities with publicly held common
stock or potential common stock. SFAS 128 was issued to simplify the computation
of EPS and to make the U.S. standard more compatible with the EPS standards of
other countries and that of the International Accounting Standards Committee. It
replaces the presentation of primary EPS with a presentation of basic EPS and
fully diluted EPS with diluted EPS. SFAS 128 also requires dual presentation of
basic and diluted EPS on the face of the income statement for all entities with
complex capital structures, and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB 15.
SFAS 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. After adoption, all prior-period EPS data presented shall be restated
to conform with SFAS 128.
FBA does not believe the implementation of SFAS 128 will have a
material effect on its computation of earnings per share.
In February 1997, the FASB issued SFAS 129, Disclosure of Information
about Capital Structure (SFAS 129). SFAS 129 establishes standards for
disclosing information about an entity's capital structure and applies to all
entities. SFAS 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB 10, Omnibus
Opinion-1966, APB 15 and SFAS 47, Disclosure of Long-Term Obligations, for
entities that were subject to the requirements of those standards. SFAS 129
eliminates the exemption of nonpublic entities from certain disclosure
requirements of APB 15 as provided by SFAS 21, Suspension of the reporting of
Earnings per Share and Segment Information by Nonpublic Enterprises. It
supersedes specific disclosure requirements of APB 10, APB 15 and SFAS 47 and
consolidates them in SFAS 129 for ease of retrieval and for greater visibility
to nonpublic entities.
SFAS 129 is effective for financial statements for periods ending
after December 15, 1997. It contains no change in disclosure requirements for
FBA as it was previously subject to the requirements of APB 10 and 15 and SFAS
47.
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive Income
(SFAS 130). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is defined as "the change in equity
(net assets) of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners."
SFAS 130 requires all items recognized under accounting standards as
components of comprehensive income to be reported in a financial statement that
is displayed with the same prominence as other financial statements. It also
requires publicly traded companies to report a total for comprehensive income in
condensed financial statements of interim periods issued to shareholders. SFAS
130 requires an entity to: (1) classify items of other comprehensive income by
their nature in a statement of financial performance and (2) display the
accumulated balances of items of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.
SFAS 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required. FBA's management is in the process of
analyzing SFAS 130 and its impact on FBA's financial position and results of
operations.
<PAGE>
In June 1997, the FASB issued SFAS 131, Disclosures about Segments of
an Enterprise and Related Information (SFAS 131). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers.
SFAS 131 requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of application, but comparative
information for interim periods in the initial year of application is to be
reported in financial statements for interim periods in the second year of
application. FBA's management is in the process of analyzing SFAS 131 and its
impact on FBA's financial position and results of operations.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Report on Form 8-K
(a) The exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
Exhibit
Number Description
2(b) Definitive Agreement and Plan of Merger
between FBA and Pacific Bay, dated September
22, 1997.
2(c) Agreement and Plan of Merger by and between
FBA and FCB, dated October 3, 1997.
10(o) Promissory Note payable to First Banks,
dated, November 4, 1997.
27 Article 9 - Financial Data Schedule (EDGAR
only)
(b) A current report on Form 8-K was filed by FBA on August 7, 1997. Items
5 and 7 of the Report described the execution by FBA on July 29, 1997
of a definitive agreement for the acquisition of Surety Bank by FBA. In
addition, Items 5 and 7 of the Report described the proposed merger of
FBA and FCB as announced on July 25, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST BANKS AMERICA, INC.
Registrant
Date: November 6, 1997 By:/s/James F. Dierberg
-----------------------
James F. Dierberg
Chairman, President
and Chief Executive Officer
Date: November 6, 1997 By:/s/Allen H. Blake
-----------------
Allen H. Blake
Vice President,
Chief Financial Officer
and Secretary
(Principal Financial Officer)
<PAGE>
Exhibit 2(b)
AGREEMENT AND PLAN OF MERGER
by and among
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
its indirect wholly-owned subsidiary,
SUNRISE BANK OF CALIFORNIA,
a California banking association,
and
PACIFIC BAY BANK,
a California banking association
September 22, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I - TERMS OF THE MERGER & CLOSING; EXCHANGE OF SHARES
<S> <C> <C>
Section 1.01.The Merger............................................................... 1
Section 1.02.Effect of the Merger..................................................... 1
Section 1.03.Conversion of Shares..................................................... 1
Section 1.04.The Closing.............................................................. 2
Section 1.05.Closing Date............................................................. 2
Section 1.06.Actions At Closing....................................................... 2
Section 1.07.Exchange Procedures; Surrender of Certificates........................... 3
Section 1.08.Internal Reorganization.................................................. 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PACIFIC
Section 2.01.Organization and Capital Stock........................................... 4
Section 2.02.Authorization; No Defaults............................................... 5
Section 2.03.Pacific Subsidiaries..................................................... 5
Section 2.04.Financial Information.................................................... 5
Section 2.05.Absence of Changes....................................................... 6
Section 2.06.Regulatory Enforcement Matters........................................... 6
Section 2.07.Tax Matters.............................................................. 6
Section 2.08.Litigation............................................................... 6
Section 2.09.Properties, Contracts, Employee Benefit Plans and Other Agreements....... 6
Section 2.10.Reports.................................................................. 8
Section 2.11.Investment Portfolio..................................................... 8
Section 2.12.Loan Portfolio........................................................... 8
Section 2.13.Employee Matters and ERISA................................................ 9
Section 2.14.Title to Properties; Insurance........................................... 10
Section 2.15.Environmental Matters.................................................... 10
Section 2.16.Compliance with Law...................................................... 11
Section 2.17.Brokerage................................................................ 11
Section 2.18.No Undisclosed Liabilities............................................... 11
Section 2.19.Statements True and Correct.............................................. 11
Section 2.20.Commitments and Contracts................................................ 11
Section 2.21.Material Interest of Certain Persons..................................... 12
Section 2.22.Conduct to Date.......................................................... 12
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FBA AND SUNRISE
Section 3.01.Organization and Capital Stock........................................... 13
Section 3.02.Authorization............................................................ 13
Section 3.03.Absence of Changes....................................................... 13
Section 3.04.Litigation............................................................... 13
Section 3.05.Statements True and Correct.............................................. 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV - AGREEMENTS OF PACIFIC
<S> <C> <C>
Section 4.01.Business in Ordinary Course.............................................. 14
Section 4.02.Breaches................................................................. 16
Section 4.03.Submission to Shareholders............................................... 16
Section 4.04.Consummation of Agreement................................................ 17
Section 4.05.Environmental Reports.................................................... 17
Section 4.06.Access to Information.................................................... 17
Section 4.07.Consents to Contracts and Leases......................................... 18
Section 4.08.Subsequent Financial Statements.......................................... 18
Section 4.09.Merger Agreement..........................................................18
ARTICLE V - AGREEMENTS OF FBA
Section 5.01.Regulatory Approvals..................................................... 18
Section 5.02.Breaches................................................................. 18
Section 5.03.Consummation of Agreement................................................ 19
Section 5.04.Indemnification.......................................................... 19
Section 5.05.Employee Benefits........................................................ 19
Section 5.06.Access to Information.................................................... 20
Section 5.07.Merger Agreement......................................................... 20
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01.Conditions to the Obligations of FBA and Sunrise......................... 20
Section 6.02.Conditions to the Obligations of Pacific................................. 21
ARTICLE VII - TERMINATION
Section 7.01.Mutual Agreement......................................................... 22
Section 7.02.Breach of Agreements..................................................... 22
Section 7.03.Failure of Conditions.................................................... 22
Section 7.04.Denial of Regulatory Approval............................................ 22
Section 7.05.Environmental Reports.................................................... 22
Section 7.06.Regulatory Enforcement Matters........................................... 22
Section 7.07.Unilateral Termination................................................... 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VIII - LIABILITY ON TERMINATION
<S> <C> <C>
Section 8.01.Liquidated Damages....................................................... 23
Section 8.02.Liability on Termination................................................. 23
ARTICLE IX - GENERAL PROVISIONS
Section 9.01.Confidential Information................................................. 23
Section 9.02.Publicity................................................................ 24
Section 9.03.Return of Documents...................................................... 24
Section 9.04.Notices.................................................................. 24
Section 9.05.Nonsurvival of Representations, Warranties and
Agreements............................................................ 25
Section 9.06.Costs and Expenses....................................................... 25
Section 9.07.Entire Agreement......................................................... 25
Section 9.08.Headings and Captions.................................................... 25
Section 9.09.Waiver, Amendment or Modification........................................ 25
Section 9.10.Rules of Construction.................................................... 25
Section 9.11.Counterparts............................................................. 26
Section 9.12.Successors and Assigns................................................... 26
Section 9.13.Governing Law............................................................ 26
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, dated as of September 22,
1997, is by and among First Banks America, Inc., a bank holding company
organized as a Delaware corporation ("FBA"), Sunrise Bank of California, a
California banking association which is an indirect wholly-owned subsidiary of
FBA ("Sunrise") and Pacific Bay Bank, a California banking association
("Pacific"). This Agreement and Plan of Reorganization is hereinafter referred
to as the "Agreement."
In consideration of the mutual representations, warranties, agreements
and covenants contained herein, FBA, Sunrise and Pacific 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 Agreement and Plan of Merger between Pacific and Sunrise (the
"Merger Agreement") attached hereto as Exhibit "A", and except as otherwise
provided in Section 1.08 hereof, Pacific shall merge with and into Sunrise
pursuant to the provisions of the California Financial Code and the California
General Corporation Law (collectively referred to herein as the "Corporate
Law").
Section 1.02.Effect of the Merger. The Merger shall have all of the
effects provided in Section 1107 of the California General Corporation Law,
Section 4888 of the California Financial Code, this Agreement and the Merger
Agreement, and the separate corporate existence of Pacific shall cease on
consummation of the Merger and be combined in Sunrise. The Articles of
Association, Bylaws, directors and officers of the resulting bank shall be as
set forth in the Merger Agreement.
Section 1.03.Conversion of Shares.
(a) At the Effective Time (as defined in Section 1.05 hereof), each
share of common stock, no par value, of Pacific ("Pacific Common") issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive cash in the amount of Fourteen Dollars ($14.00) (the "Merger
Consideration").
(b) At the Effective Time, all of the shares of Pacific Common, by
virtue of the Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of any certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Pacific Common (the "Certificate") shall cease to have any rights with respect
<PAGE>
to such shares, except the right of the holder to receive, without
interest, the Merger Consideration upon the surrender of the Certificate in
accordance with Section 1.07(b) hereof.
(c).At the Effective Time, each share of Pacific Common, if any, held
in the treasury of Pacific or by any direct or indirect subsidiary of Pacific
(other than shares held in trust accounts for the benefit of others or in other
fiduciary, nominee or similar capacities) immediately prior to the Effective
Time shall be cancelled.
(d).If holders of Pacific Common are entitled to dissent from the
Agreement and Merger and demand payment of the fair market value of their shares
under applicable Corporate Law, issued and outstanding shares of Pacific Common
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 Pacific Common outstanding
immediately prior to the Effective Time and held by a dissenting holder who
shall, after the Effective Time, withdraw his demand for appraisal or lose his
right of appraisal shall have only such rights as are provided under applicable
Corporate Law.
Section 1.04.The Closing. The closing of the Merger (the "Closing")
shall take place at the location mutually agreeable to the parties hereto at
10:00 a.m. local time on the Closing Date described in Section 1.05 of this
Agreement.
Section 1.05.Closing Date. At FBA's election, the Closing shall take
place on either (i) one of the last five (5) business days of the month, or (ii)
the first business day of the month following the month, 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
Pacific and FBA may agree (the "Closing Date"). The Merger shall be effective
upon the filing of the Merger Agreement with the Department of Financial
Institutions and the Secretary of State of the State of California (the
"Department" and the "Secretary of State, respectively") in accordance with the
California Corporations Code and the California Financial Code (the "Effective
Time").
Section 1.06.Actions At Closing. (a) At the Closing, Pacific shall
deliver to FBA:
(i) a copy of the Articles of Incorporation of Pacific, certified by
the Secretary of State, and a copy of the Bylaws of Pacific,
certified by the President or Secretary of Pacific;
(ii) a certificate signed by an appropriate officer of Pacific 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 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 Pacific's Board of
Directors and shareholders, establishing the requisite approvals under
applicable Corporate Law of this Agreement, the Merger and the other
transactions contemplated hereby; (iv) a certificate issued by the
Franchise Tax Board of the State of California (the "Franchise Tax
Board"), dated a recent date, certifying that Pacific is in good
standing;
(v) a certificate of existence as to Pacific, issued by the Department,
dated a recent date; and
(vi) a legal opinion from counsel for Pacific regarding Pacific, this
Agreement and the transactions contemplated hereby, in form reasonably
satisfactory to FBA and its counsel.
<PAGE>
(b) At the Closing, FBA shall deliver to Pacific:
(i) certified copies of the Certificate of Incorporation and Bylaws
of FBA and the Articles of Incorporation and Bylaws of Sunrise;
(ii) certificates signed by appropriate officers of FBA and Sunrise
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 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 the Board of Directors and
shareholders of each of FBA and Sunrise, establishing the requisite
approvals of each of them under applicable Corporate Law of this
Agreement, the Merger and the other transactions contemplated hereby;
(iv) certificates, each dated a recent date, of the Secretary of State
of the State of Delaware, stating that FBA is in good standing, and of
the Franchise Tax Board, certifying that Sunrise is in good standing;
(v) a certificate of existence as to Sunrise, issued by the Department,
dated a recent date;
(vi) a legal opinion from counsel for FBA regarding FBA, this Agreement
and the transactions contemplated hereby, in form reasonably
satisfactory to Pacific; and
(vii) evidence reasonably satisfactory to Pacific that FBA has
established an account at Sunrise and deposited in such account the
funds required in order to pay the amount of the Merger Consideration
to the shareholders of Pacific upon submission to FBA of the
documentation required pursuant to Section 1.07.
<PAGE>
Section 1.07.Exchange Procedures; Surrender of Certificates. As soon as
reasonably practicable after the Effective Time, FBA shall mail to each record
holder of shares of Pacific Common a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to Certificates
shall pass, only upon proper delivery of the Certificates to FBA and shall be in
such form and have such other provisions as FBA may reasonably specify) (each
such letter, the "Letter of Transmittal") and instructions for use in effecting
the surrender of Certificates. At the Closing, the record holders of all of the
Pacific Common shall surrender to FBA their Certificates, together with duly
executed Letters of Transmittal and any other required documents (including,
with respect to any Certificate which has been lost or stolen, a bond or other
form of indemnity acceptable to FBA), and FBA shall pay to the record holder the
appropriate Merger Consideration. The record holder shall be entitled to receive
in exchange for the Certificate solely the Merger Consideration, without
interest.
Section 1.08.Internal Reorganization. FBA is presently involved in the
acquisition of two banks, Surety Bank, Vallejo, California, and First Commercial
Bank, Sacramento, California, both of which are California banking associations.
Depending upon the timing of the consummation of such acquisitions and the
consummation of this Agreement, Sunrise may be party to a merger with another
direct or indirect subsidiary of FBA prior to the consummation of this Agreement
(such merger is referred to herein as the "Sunrise Merger"), but in any event
Sunrise or its successor will continue to be a wholly-owned direct or indirect
subsidiary of FBA. In the event that the Sunrise Merger shall have occurred
prior to the Effective Time and Sunrise is not the surviving bank, Pacific will
be merged into the successor of Sunrise, and references in this Agreement to
Sunrise shall be deemed to be references to the successor bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PACIFIC
To induce them to enter into and consummate this Agreement, Pacific
represents and warrants to FBA and Sunrise as follows:
Section 2.01.Organization and Capital Stock.
(a) Pacific is a banking association duly organized, validly existing
and in good standing under the laws of the State of California and has the
corporate power to own all of its property and assets, to incur all of its
liabilities and to carry on its business as now being conducted. Pacific is an
insured bank as defined in the Federal Deposit Insurance Act.
(b) As of the date hereof, the authorized capital stock of Pacific
consists solely of (i) 10,000,000 shares of Pacific Common, of which 300,000
shares are outstanding, duly and validly issued, fully paid and, except as
provided in Section 600.2 of the California Financial Code, non-assessable. None
of the outstanding shares of Pacific Common has been issued in violation of any
preemptive rights. Each certificate representing shares of Pacific Common issued
<PAGE>
in replacement of any certificate theretofore issued by it which was claimed by
the record holder thereof to have been lost, stolen or destroyed was issued by
Pacific only upon receipt of an affidavit of lost stock certificate and a bond
sufficient to indemnify Pacific against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such Certificate or the
issuance of such replacement Certificate.
(c) Except as disclosed in Section 2.01(b), there are no shares of
capital stock or other equity securities of Pacific 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 Pacific or contracts,
commitments, understandings or arrangements by which Pacific is or may be
obligated to issue additional shares of its capital stock.
Section 2.02.Authorization; No Defaults. Pacific's Board of Directors
has by all requisite action approved this Agreement and the Merger and
authorized the execution hereof on its behalf by its duly authorized officers
and the performance by Pacific of its obligations hereunder. Nothing in the
Articles of Incorporation or Bylaws of Pacific 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 Pacific or any
of its subsidiaries is bound or subject would prohibit or inhibit Pacific 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
Pacific and constitutes a legal, valid and binding obligation of Pacific,
enforceable against Pacific in accordance with its terms. Neither Pacific nor
any Pacific Subsidiary (as defined in Section 2.03 hereof) is in default under
nor in violation of any provision of its articles or certificate of
incorporation, bylaws or any promissory note, indenture or evidence of
indebtedness or security therefor, lease, contract, purchase or other commitment
or other agreement which is material to Pacific and its subsidiaries taken as a
whole.
Section 2.03.Pacific Subsidiaries. Pacific has no direct and indirect
subsidiaries or equity interest in any other business nor enterprise, nor is it
a party to any partnership or joint venture.
Section 2.04.Financial Information. The audited consolidated balance
sheets of Pacific 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, in
the form previously provided to FBA; the unaudited consolidated balance sheets
of Pacific as of June 30, 1997 and related consolidated income statements and
statements of changes in shareholders' equity for the six months ended June 30,
1997, together with the notes thereto, in the form previously provided to FBA;
and Pacific's year-end and quarter-end Reports of Condition and Reports of
Income for 1996 and for the six month period ending 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 "Pacific
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except
<PAGE>
as disclosed therein and except for regulatory reporting differences required
for Pacific'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 consolidated subsidiaries as of the
dates and for the periods indicated.
Section 2.05.Absence of Changes. Except as disclosed in Section 2.05 of
that certain document delivered by Pacific to FBA entitled the "Pacific
Disclosure Schedule" and executed by both Pacific and FBA concurrently with the
execution and delivery of this Agreement (the "Pacific Disclosure Schedule"),
since December 31, 1996 there has not been any material adverse change in the
financial condition, the results of operations or the business or prospects of
Pacific, nor have there been any events or transactions having such a material
adverse effect which should be disclosed in order to make the Pacific Financial
Statements not misleading. Since July, 1996 there has been no material adverse
change in Pacific's financial condition, results of operations or business
except for any such changes as are disclosed in Pacific's Reports of Condition
and Income filed with the FDIC since such date.
Section 2.06.Regulatory Enforcement Matters. Except as disclosed in
Section 2.06 of the Pacific Disclosure Schedule, Pacific is not subject to, nor
has it 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 Pacific.
Section 2.07.Tax Matters. Pacific and the Pacific 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 Pacific Financial
Statements were made in accordance with generally accepted accounting principles
and in the aggregate do not fail to provide for material tax liabilities.
Section 2.08.Litigation. Except as disclosed in Section 2.08 of the
Pacific Disclosure Schedule, there is no litigation, claim or other proceeding
pending or, to the knowledge of Pacific, threatened against Pacific or any of
the Pacific Subsidiaries, or of which the property of Pacific or any of the
Pacific Subsidiaries is or would be subject.
Section 2.09.Properties, Contracts, Employee Benefit Plans and Other
Agreements. Section 2.09 of the Pacific Disclosure Schedule specifically
identifies the following:
(a) all real property owned by Pacific 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 Pacific is a party, identifying
the parties thereto, the annual rental, the expiration date thereof and a brief
description of the property covered;
<PAGE>
(b) all loan and credit agreements, conditional sales contracts or
other title retention agreements or security agreements relating to money
borrowed by Pacific, exclusive of deposit agreements with customers of Pacific
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 Pacific not referred to elsewhere in
this Section 2.09 which:
(i) (except for loans, loan commitments or letters
of credit) involve payment by Pacific of more than
$25,000;
(ii) involve payments based on profits of Pacific;
(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 Pacific;
(d) all contracts, agreements, plans and arrangements by which any
profit sharing, group insurance, hospitalization, stock option, pension,
retirement, bonus, deferred compensation, stock bonus, stock purchase,
collective bargaining agreements, contracts or arrangements under which
pensions, deferred compensation or other retirement benefits is being paid, or
plans or arrangements established or maintained, sponsored or undertaken by
Pacific for the benefit of officers, directors or employees, including each
trust or other agreement with any custodian or any trustee for funds held under
any such agreement, plan or arrangement, and in respect to any of them, the
latest reports or forms, if any, filed with the Department of Labor and Pension
Benefit Guaranty Corporation under ERISA (as defined below), any current
financial or actuarial reports and any currently effective IRS private ruling or
determination letters obtained by or for the benefit of Pacific;
(e) 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;
(f) all agreements for the employment, retention or engagement, or with
respect to the severance, of any officer, employee, agent, consultant or other
person or entity which by its terms is not terminable by Pacific on thirty (30)
days written notice or less without any payment by reason of such termination;
and
<PAGE>
(g) the name and annual salary as of January 1, 1997 of each director
or employee of Pacific with a salary in excess of $60,000.
Copies of each document, plan or contract identified in Section 2.09 of
the Pacific Disclosure Schedule are appended to such Schedule and are hereby
incorporated into and constitute a part of the Pacific Disclosure Schedule.
Section 2.10.Reports. Except as disclosed in Section 2.10 of the
Pacific Disclosure Schedule, Pacific and the Pacific Subsidiaries have filed all
reports and statements, together with any amendments required to be made with
respect thereto, required to be filed with the Department, the FDIC or any other
state securities or banking authorities or any other governmental authority with
jurisdiction over Pacific. As of the dates indicated thereon, each of such
reports and documents, including any financial statements, exhibits and
schedules thereto, complied in all material respects with the relevant statutes,
rules and regulations enforced or promulgated by the regulatory authority with
which they were filed, and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 2.11.Investment Portfolio. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of States and political subdivisions of the United
States and other investment securities held by Pacific and the Pacific
Subsidiaries, as reflected in the latest consolidated balance sheet of Pacific
included in the Pacific 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
Pacific Disclosure Schedule, (i) all loans and discounts shown on the Pacific
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 Pacific and the Pacific 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)
Pacific and the Pacific 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. All loans and loan
commitments extended by Pacific 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 Pacific's customary and
ordinary past practices. The reserve for possible loan and lease losses shown on
<PAGE>
Pacific's Report of Condition and Income 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) Pacific has not entered into any collective bargaining agreement
with any labor organization with respect to any group of employees, and to the
knowledge of Pacific there is no present effort nor existing proposal to attempt
to unionize any group of employees of Pacific.
(b)(i) Pacific has been and are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any laws
respecting employment discrimination and occupational safety and health
requirements, and Pacific is not engaged in any unfair labor practice; (ii)
there is no unfair labor practice complaint against Pacific pending or, to the
knowledge of Pacific, threatened before the National Labor Relations Board;
(iii) there is no labor dispute, strike, slowdown or stoppage actually pending
or, to the knowledge of Pacific, threatened against or directly affecting
Pacific; and (iv) Pacific has not experienced any work stoppage or other
material labor difficulty during the past five years.
(c) Except as disclosed in Section 2.13(c) of the Pacific Disclosure
Schedule, Pacific does not maintain, contribute to or participate in or have any
liability under any employee benefit plans, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
nonqualified employee benefit plans or deferred compensation, bonus, stock or
incentive plans, or other employee benefit or fringe benefit programs for the
benefit of former or current employees (collectively, the "Employee Plans"). To
the knowledge of Pacific, no present or former employee of Pacific has been
charged with breaching or has breached a fiduciary duty under any Employee Plan.
Pacific does not participate in, nor has it in the past five years participated
in, nor has it any present or future obligation or liability under, any
multiemployer plan (as defined at Section 3(37) of ERISA). Except as separately
disclosed in Section 2.13(c) of the Pacific Disclosure Schedule, Pacific does
not maintain, contribute to, or participate in any plan that provides health,
major medical, disability or life insurance benefits to former employees of
Pacific.
(d) All liabilities of the Employee Plans have been funded on the basis
of consistent methods in accordance with sound actuarial assumptions and
practices, and no Employee Plan, at the end of any plan year, or at June 30,
1997, had an accumulated funding deficiency. No actuarial assumptions have been
changed since the last written report of actuaries on the Employee Plans. All
insurance premiums (including premiums to the Pension Benefit Guaranty
Corporation) have been paid in full, subject only to normal retrospective
adjustments in the ordinary course. Except as reflected in the Pacific Financial
Statements, Pacific and the Pacific Subsidiaries have no contingent or actual
liabilities under Title IV of ERISA. No accumulated funding deficiency (within
the meaning of Section 302 of ERISA or Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code")) has been incurred with respect to any Employee
Plan, whether or not waived. No reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Employee Plan as to which a notice would
be required to be filed with the Pension Benefit Guaranty Corporation. No claim
is pending, threatened or imminent with respect to any Employee Plan (other than
a routine claim for benefits for which plan administrative review procedures
have not been exhausted) for which Pacific would be liable, except as is
reflected in the Pacific Financial Statements. Pacific has no liability for
excise taxes under Sections 4971, 4975, 4976, 4977, 4979 or 4980B of the Code or
for a fine under Section 502 of ERISA with respect to any Employee Plan. All
Employee Plans have in all material respects been operated, administered and
maintained in accordance with the terms thereof and in compliance with the
requirements of all applicable laws, including, without limitation, ERISA.
<PAGE>
Section 2.14.Title to Properties; Insurance. Except as disclosed in
Section 2.14 of the Pacific Disclosure Schedule: (i) Pacific has 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 Pacific 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 Pacific, 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 Pacific
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 Pacific's knowledge,
threatened with respect to any of such properties; (iv) Pacific and the Pacific
Subsidiaries have valid title or other ownership rights under licenses to all
material intangible personal or intellectual property used by Pacific 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 Pacific 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 banks of
similar size.
Section 2.15.Environmental Matters. As used in this Agreement,
"Environmental Laws" means all local, state and federal environmental, health
and safety laws and regulations in all jurisdictions in which Pacific 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.
<PAGE>
Except as disclosed in Section 2.15 of the Pacific Disclosure Schedule,
neither the conduct nor operation of Pacific nor any condition of any property
presently or previously owned, leased or operated by it on its own behalf or in
a fiduciary capacity violates or violated any Environmental Law in any respect
material to the business of Pacific and the Pacific 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 Pacific and the Pacific Subsidiaries,
taken as a whole, of any Environmental Law or obligate (or potentially obligate)
Pacific to remedy, stabilize, neutralize or otherwise alter the environmental
condition of any property, where the aggregate cost of such actions would be
material to Pacific. Except as may be disclosed in Section 2.15 of the Pacific
Disclosure Schedule, Pacific has not received notice from any person or entity
that Pacific, or the operation or condition of any property ever owned, leased
or operated by Pacific on its own behalf or in a fiduciary capacity, are or were
in violation of any Environmental Law, or that Pacific is responsible (or
potentially responsible) for remedying, or the cleanup of, any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any such property.
Section 2.16.Compliance with Law. Pacific has all licenses, franchises,
permits and other governmental authorizations that are legally required to
enable it to conduct its business in all material respects. Pacific is qualified
to conduct business in every jurisdiction in which such qualification is legally
required and is in compliance in all material respects with all applicable laws
and regulations.
Section 2.17.Brokerage. 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 Pacific.
Section 2.18.No Undisclosed Liabilities. Pacific does not have any
material liability, whether known or unknown, asserted or unasserted, absolute
or contingent, accrued or unaccrued, liquidated or unliquidated, and whether due
or to become due (and there is no past or present fact, situation, circumstance,
condition or other basis for any present or future action, suit or proceeding,
hearing, charge, complaint, claim or demand against Pacific giving rise to any
such liability), except (i) liabilities reflected in the Pacific Financial
Statements, (ii) liabilities of the same type incurred in the ordinary course of
business since June 30, 1997 and (iii) as disclosed in Section 2.18 of the
Pacific Disclosure Schedule.
Section 2.19.Statements True and Correct. None of the information
supplied or to be supplied by Pacific for inclusion in any document to be filed
with the SEC or any regulatory authority or distributed to shareholders of
Pacific in connection with the transactions contemplated hereby will 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 (with
<PAGE>
respect to any document distributed to shareholders) omit to state any material
fact required to be stated in order to correct any statement in any earlier
communication to shareholders. All documents that Pacific is responsible for
filing with any regulatory authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable law and the applicable rules and regulations
thereunder.
Section 2.20.Commitments and Contracts. Except as disclosed in Section
2.20 of the Pacific 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), Pacific is not 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
Pacific Financial Statements relating to the borrowing of money by Pacific or
the guarantee by Pacific of any obligation (other than trade payables or
instruments related to transactions entered into in the ordinary course of
business by Pacific, such as deposits, federal funds borrowings and repurchase
agreements), other than agreements, indentures or instruments providing for
annual payments of less than $10,000; or
(iii) any contract containing covenants which limit the ability of
Pacific 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, Pacific may
carry on its business (other than as may be required by law or any applicable
regulatory authority).
Section 2.21.Material Interest of Certain Persons. Except as disclosed
in Section 2.21 of the Pacific Disclosure Schedule:
(a) no officer or director of Pacific 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 Pacific; and
(b) all outstanding loans from Pacific to any present officer,
director, employee or any associate or related interest of any such person which
were required to be approved by or reported to Pacific's Board of Directors
("Insider Loans") were approved by or reported to the Board of Directors in
accordance with all applicable laws and regulations.
Section 2.22.Conduct to Date. Except as disclosed in Section 2.22 of
the Pacific Disclosure Schedule, from and after December 31, 1996 through the
date of this Agreement, Pacific has not (i) failed to conduct its business in
the ordinary and usual course consistent with past practices; (ii) issued, sold,
<PAGE>
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 Pacific; (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 act of war, 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FBA AND SUNRISE
To induce Pacific to enter into and consummate this Agreement, FBA and
Sunrise each represents and warrants to Pacific as follows:
Section 3.01.Organization and Capital Stock. FBA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. FBA 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.
Section 3.02.Authorization. The Board of Directors of each of FBA and
Sunrise has by all requisite action approved this Agreement and the Merger and
authorized the execution hereof on its behalf by its duly authorized officers
and the performance by FBA and Sunrise, respectively, of its obligations
hereunder. Nothing in the Certificate of Incorporation or Bylaws of FBA, the
Articles of Incorporation or Bylaws of Sunrise, or any other agreement,
<PAGE>
instrument, decree, proceeding, law or regulation (except as specifically
referred to in or contemplated by this Agreement) by or to which FBA, Sunrise or
any of FBA's other subsidiaries is bound or subject would prohibit or inhibit
FBA or Sunrise 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 Sunrise and constitutes a legal, valid and binding
obligation of each of them, enforceable against them in accordance with its
terms.
Section 3.03.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 that would prevent FBA from
consummating this Agreement and the Merger.
Section 3.04.Litigation. There is no litigation, claim or other
proceeding pending or, to the best of FBA's knowledge, threatened against FBA or
any of its subsidiaries that would prohibit FBA or Sunrise from consummating the
Merger.
Section 3.05.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 regulatory authority or distributed to shareholders of Pacific in
connection with the transactions contemplated hereby will 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 (with respect to any
document distributed to shareholders) omit to state any material fact required
to be stated in order to correct any statement in any earlier communication to
shareholders. All documents that FBA is responsible for filing with any
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.
ARTICLE IV
AGREEMENTS OF PACIFIC
Section 4.01.Business in Ordinary Course.
(a) Pacific shall continue to carry on its 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, Pacific will not:
(i) declare or pay any dividend or make any other distribution to
shareholders, whether in cash, stock or other property; or
<PAGE>
(ii) issue any Pacific Capital Stock or other stock or any options,
warrants, or other rights to subscribe for or purchase Pacific Capital
Stock or any other stock or any securities convertible into or
exchangeable for any capital stock; or
(iii) directly or indirectly redeem, purchase or otherwise acquire any
Pacific Capital Stock or any other stock of Pacific; 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) Pacific will not, without the prior written consent of FBA:
(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, in principal amount in excess of $200,000 or that would
increase the aggregate credit outstanding to any one borrower (or group
of affiliated borrowers) to more than $400,000 (excluding for this
purpose any accrued interest or overdrafts), without the prior written
consent of FBA; or
(iv) purchase or otherwise acquire any investment security for its own
account having an average remaining life greater than three years or
any asset-backed securities other than those issued or guaranteed by
the Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation; or
(v) enter into any agreement, contract or commitment having a term in
excess of three (3) months other than letters of credit, loan
agreements, deposit agreements, and other lending, credit and deposit
agreements and documents made in the ordinary course of business; or
<PAGE>
(vi) except in the ordinary course of business, place on any of its
assets or properties any mortgage, pledge, lien, charge, or other
encumbrance; or
(vii) except in the ordinary course of business, cancel or accelerate
any material indebtedness owing to Pacific or any claims which Pacific
may possess, or waive any material rights of substantial value; or
(viii) sell or otherwise dispose of any real property or any material
amount of any tangible or intangible personal property, other than
properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness; or
(ix) foreclose upon or otherwise take title to or possession or control
of any real property without first obtaining a phase one environmental
report thereon which indicates that the property is free of pollutants,
contaminants or hazardous or toxic waste materials; provided, however,
that Pacific and the Pacific Subsidiaries shall not be required to
obtain such a report with respect to single family, non-agricultural
residential property of one acre or less to be foreclosed upon unless
the entity proposing to acquire the property has reason to believe that
such property might contain any such waste materials or otherwise might
be contaminated; or
(x) commit any act or fail to do any act which will cause a breach of
any agreement, contract or commitment and which will have a material
adverse effect on the business, financial condition or earnings of
Pacific; or
(xi) violate any law, statute, rule, governmental regulation or order,
which violation might have a material adverse effect on the business,
financial condition, or earnings of Pacific; or
(xii) purchase any real or personal property or make any other capital
expenditure where the amount paid or committed therefor is in excess of
$25,000; or
(xiii) increase or decrease the rate of interest paid on time deposits
or on certificates of deposit, except in a manner consistent with past
practices.
(c) Pacific and the Pacific 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 Pacific contained in Article Two hereof, if such representations and
warranties were given immediately following such transaction or action.
(d) Pacific shall promptly notify FBA of the occurrence of any matter
or event known to and directly involving Pacific that is materially adverse to
the business, operations, properties, assets, or condition (financial or
otherwise) of Pacific and the Pacific Subsidiaries, taken as a whole.
<PAGE>
(e) Pacific shall not solicit or encourage, or hold discussions or
negotiations with or provide information to, any person or entity in connection
with any proposal for the acquisition of all or a substantial portion of the
business, assets, shares of Pacific Capital Stock or other securities or assets
of Pacific. Pacific shall promptly advise FBA of its receipt of any such
proposal or inquiry and the substance thereof.
Section 4.02.Breaches. Pacific shall, in the event it has knowledge of
the occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to FBA and use its best efforts to prevent or promptly
remedy the same.
Section 4.03.Submission to Shareholders. Pacific shall take all actions
legally necessary to obtain the approval of its shareholders of this Agreement,
the Merger Agreement and the Merger as required by Corporate Law, either at a
meeting of shareholders called for such purpose or by unanimous written consent.
The Board of Directors of Pacific shall recommend the approval of the Agreement,
the Merger Agreement and the Merger and use its best efforts to obtain such
approval.
Section 4.04.Consummation of Agreement. Pacific shall perform and
fulfill all conditions and obligations on its part to be performed or fulfilled
under this Agreement and to cause the Merger to be consummated as expeditiously
as reasonably practicable. Pacific shall furnish to FBA in a timely manner all
information, data and documents requested by FBA for filing with any regulatory
authority or otherwise required to effect the transactions contemplated by this
Agreement and shall join with FBA and/or Sunrise in making any application with
respect to which FBA determines it is necessary or desirable for Pacific to do
so.
Section 4.05.Environmental Reports. Pacific shall provide to FBA, as
soon as reasonably practical, but not later than forty-five (45) days after the
date hereof, a report of a phase one environmental investigation on all real
property owned, leased or operated by Pacific as of the date hereof (other than
space in retail and similar establishments leased by Pacific for automatic
teller machines), and within ten (10) days after the acquisition or lease of any
real property acquired or leased by Pacific after the date hereof (other than
space in retail and similar establishments leased or operated for automatic
teller machines), except as otherwise provided in Section 4.01(b)(ix). If
required by the phase one investigation, in FBA's reasonable opinion, Pacific
shall obtain and provide to FBA a report of a phase two investigation on
properties requiring such additional study. FBA shall have fifteen (15) business
days from the receipt of any such phase two report to notify Pacific of any
objection to the contents of such report. Should the cost of taking all remedial
and corrective actions and measures (i) required by applicable law or (ii)
recommended or suggested by such report or prudent in light of serious life,
<PAGE>
health or safety concerns, in the aggregate, exceed the sum of $100,000 as
reasonably estimated by an environmental expert retained for such purpose by FBA
and reasonably acceptable to Pacific, or if the cost of such actions and
measures cannot be so reasonably estimated by such expert to be $100,000 or less
with a reasonable degree of certainty, then FBA shall have the right pursuant to
Section 7.05 hereof, for a period of ten (10) business days following receipt of
such estimate or indication that the cost of such actions and measures can not
be so reasonably estimated, to terminate this Agreement, which shall be FBA's
sole remedy in such event.
Section 4.06.Access to Information. Pacific shall permit FBA reasonable
access, in a manner which will avoid undue disruption or interference with
Pacific's normal operations to its properties and shall cause the Pacific
Subsidiaries to provide to FBA comparable access to their properties, and
Pacific 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 Pacific and the Pacific Subsidiaries including,
but not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and shareholders' meetings, organizational
documents, material contracts and agreements, loan files, filings with any
regulatory authority, accountants' workpapers (if available and subject to the
respective independent accountants' consent), litigation files, plans affecting
employees, and any other business activities or prospects in which FBA may have
a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. FBA will hold any nonpublic information in
confidence in accordance with the provisions of Section 8.01 hereof.
Section 4.07.Consents to Contracts and Leases. Pacific shall obtain all
necessary consents with respect to all interests of Pacific and the Pacific
Subsidiaries in any material leases, licenses, contracts, instruments and rights
which require the consent of another person for the Merger.
Section 4.08.Subsequent Financial Statements. As soon as available
after the date hereof, Pacific shall deliver to FBA the monthly unaudited
consolidated balance sheets and profit and loss statements of Pacific prepared
for its internal use, its Report of Condition and Income 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 Pacific Financial
Statements"). The Subsequent Pacific 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 4.09.Merger Agreement. As soon as practicable after the
execution of this Agreement, Pacific will enter into the Merger Agreement (as
amended, if necessary, to conform to any requirements imposed by any regulatory
authority having jurisdiction over the Merger), and Pacific will perform all of
its obligations thereunder.
<PAGE>
ARTICLE V
AGREEMENTS OF FBA
Section 5.01.Regulatory Approvals. Not later than 45 days after the
date of this Agreement FBA shall file all regulatory applications required in
order to consummate the Merger, including but not limited to the necessary
applications for the prior approval of the Federal Reserve Board. After such
applications have been filed, FBA shall diligently and in good faith pursue the
approval of such applications and use its best efforts to obtain all necessary
approvals and authorizations required to consummate the transactions
contemplated by this Agreement, keep Pacific reasonably informed as to the
status of such applications and make available to Pacific, upon reasonable
request by Pacific from time to time, copies of such applications and any
supplementally filed materials.
Section 5.02.Breaches. FBA shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to Pacific and use its best efforts to prevent or
promptly remedy the same.
Section 5.03.Consummation of Agreement. FBA shall perform and fulfill
all conditions and obligations on its part to be performed or fulfilled under
this Agreement and to cause the Merger to be consummated as expeditiously as
reasonably practicable.
Section 5.04.Indemnification.
(a) For four years after the Effective Time, Sunrise shall indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of Pacific and the Pacific 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 Pacific's Articles of
Incorporation as in effect on the date hereof.
(b) If after the Effective Time Sunrise 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
guarantees to Pacific that the successors and assigns of Sunrise will assume any
remaining obligations set forth in this Section 5.04. If Sunrise shall
liquidate, dissolve or otherwise wind up its business, then FBA shall indemnify,
<PAGE>
defend and hold harmless each Indemnified Party to the same extent and on the
same terms that Sunrise was so obligated pursuant to this Section 5.04.
Section 5.05.Employee Benefits. FBA shall provide the benefits
described in this Section 5.05 with respect to each person who remains an
employee of Pacific following the Closing Date (each a "Continued Employee").
Subject to FBA's ongoing right to adopt subsequent amendments or modifications
of any plan referred to in this Section 5.05 or to terminate any such plan, in
FBA's sole discretion, each Continued Employee shall be entitled, as a new
employee of a subsidiary of FBA, to participate in such employee benefit plans,
as defined in Section 3(3) of ERISA, or any non-qualified employee benefit plans
or deferred compensation, stock option, bonus or incentive plans, or other
employee benefit or fringe benefit programs as may be in effect generally for
employees of all of FBA's subsidiaries (the "FBA Plans"), if and as a Continued
Employee shall be eligible and, if required, selected for participation therein
under the terms thereof and otherwise shall not be participating in a similar
plan which is maintained by Pacific after the Effective Time. Pacific employees
shall participate therein on the same basis as similarly situated employees of
other subsidiaries of FBA. All such participation shall be subject to the terms
of such plans as may be in effect from time to time, and this Section 5.05 is
not intended to give Continued Employees any rights or privileges superior to
those of other employees of subsidiaries of FBA. FBA may terminate or modify all
Employee Plans, and FBA's obligation under this Section 5.05 shall not be deemed
or construed so as to provide duplication of similar benefits but, subject to
that qualification, FBA shall credit each Continued Employee with his or her
term of service with Pacific and the Pacific Subsidiaries, for purposes of
vesting and any age or period of service requirements for commencement of
participation with respect to any FBA Plan in which Continued Employees may
participate.
Section 5.06.Access to Information. FBA shall permit Pacific reasonable
access, in a manner which will avoid undue disruption or interference with FBA's
normal operations, to its properties and shall disclose and make available to
Pacific all books, documents, papers and records relating to its operations,
obligations and liabilities, including, but not limited to, minute books of
directors' and shareholders' meetings, organizational documents, material
contracts and agreements, filings with any regulatory authority, plans affecting
employees, and any other business activities or prospects in which Pacific may
have a reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. Pacific will hold any nonpublic information in
confidence in accordance with the provisions of Section 8.01 hereof.
Section 5.07.Merger Agreement. As soon as practicable after the
execution of this Agreement, FBA will cause Sunrise to enter into the Merger
Agreement (as amended, if necessary, to conform to any requirements imposed by
any regulatory authority having jurisdiction over the Merger), and FBA will
cause Sunrise to perform all of its obligations thereunder.
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.01.Conditions to the Obligations of FBA and Sunrise. The
obligations of FBA and Sunrise 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 Pacific in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date;
(b) Pacific 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 approval of the
shareholders of Pacific 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 the environmental reports required by
Section 4.05 hereof and shall not have elected pursuant to Section 7.05 hereof
to terminate this Agreement;
(f) FBA shall have received all documents required to be received from
Pacific on or prior to the Closing Date, all in form and substance reasonably
satisfactory to FBA;
(g) shareholders owning no more than twenty percent (20%) of the
outstanding Pacific Common shall have perfected the right to dissent from the
Merger; and
(i) the Pacific Financial Statements and the Subsequent Pacific
Financial Statements shall not be inaccurate in any material respect.
Section 6.02.Conditions to the Obligations of Pacific. The obligations
of Pacific to effect the Merger and the other transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver by Pacific) prior to
or on the Closing Date of the following conditions:
<PAGE>
(a) the representations and warranties made by FBA and Sunrise in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
or given on the Closing Date;
(b) FBA and Sunrise shall have performed and complied in all material
respects with all of their 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 approval of the
shareholders of Pacific and all legally required regulatory approvals, shall
have been obtained, and all waiting periods required by law shall have expired;
and
(e) Pacific 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 Pacific.
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
shareholders of Pacific 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 Sunrise, on the one hand, or Pacific, on the other hand, which breach is
not cured within thirty (30) 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
shareholders of Pacific 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.
<PAGE>
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 shareholders of Pacific 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 5.08 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 an Appeal and continues the
appellate process for purposes of obtaining the necessary approval.
Section 7.05.Environmental Reports. FBA may terminate this Agreement to
the extent provided in Section 4.05 by giving written notice of such termination
to Pacific.
Section 7.06.Regulatory Enforcement Matters. In the event that Pacific
shall become a party or subject to any new or amended 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 Pacific.
Section 7.07.Unilateral Termination. If the Closing Date does not occur
on or prior to June 30, 1998, then this Agreement may be terminated by any party
by giving written notice to the other parties.
ARTICLE VIII
LIABILITY ON TERMINATION
Section 8.01. Liquidated Damages. (a) In the event that (i) Pacific
fails to consummate the Merger following the receipt of notice from FBA that FBA
has obtained all required regulatory approvals and is prepared to consummate the
Merger in accordance with the terms of this Agreement; (ii) the Board of
Directors of Pacific fails to make the recommendation contemplated by Section
4.03 or withdraws or modifies such recommendation in a manner adverse to FBA; or
(iii) Pacific takes any action in breach of any provision of this Agreement as a
result of which the consummation of the Merger is rendered impossible, then
Pacific shall, within two (2) business days following the receipt of a written
<PAGE>
demand from FBA, pay to FBA in immediately available funds the sum of two
hundred thousand dollars ($200,000.00) as liquidated damages.
(b) In the event that FBA has obtained all required regulatory
approvals for the Merger but fails to consummate the Merger following the
receipt of notice from Pacific that Pacific is prepared to do so in accordance
with the terms of this Agreement, then FBA shall, within two (2) business days
following the receipt of a written demand from Pacific, pay to Pacific in
immediately available funds the sum of two hundred thousand dollars
($200,000.00) as liquidated damages.
Section 8.02. Liability on Termination. In the event that this
Agreement is terminated or the Merger is abandoned pursuant to Section 7.02
hereof on account of a knowing and material breach of any of the representations
or warranties or any material breach of any of the agreements of the other party
hereto, and Section 8.01 is inapplicable, then the non-breaching party shall be
entitled to institute an action for appropriate damages against the breaching
party.
ARTICLE IX
GENERAL PROVISIONS
9.01.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 Pacific nor any person to whom it discloses
Information shall purchase or sell any security issued by FBA for so long as
this Agreement remains in effect.
Section 9.02.Publicity. FBA and Pacific shall cooperate with each other
in the development and distribution of all news releases and other public
<PAGE>
disclosures concerning this Agreement and the Merger. Neither party shall issue
any news release or make any other public disclosure without the prior consent
of the other party, unless such is required by law upon the written advice of
counsel or is in response to published newspaper or other mass media reports
regarding the transaction contemplated hereby, in which latter event the parties
shall consult with each other to the extent practicable regarding such
responsive public disclosure.
Section 9.03.Return of Documents. Upon termination of this Agreement
without the Merger becoming effective, each party shall deliver to the 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.
Section 9.04.Notices. Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:
(a) if to FBA: First Banks America, Inc. c/o First Banks, Inc.
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
with a copy to: John S. Daniels
Attorney at Law
8117 Preston Road, Suite 800
Dallas, Texas 75225
Facsimile: (214) 692-0508
(b) if to Pacific: Pacific Bay Bank
13830A San Pablo Avenue
San Pablo, California 94806
Attention: Joseph F. Reidy
Chairman of the Board
Facsimile: (510) 237-4115
with a copy to: Thomas P. Gilliss
Gilliss & Valla
180 Montgomery Street, Suite 820
San Francisco, California 94104
Facsimile: (415) 782-3998
or to such other address as any party may from time to time designate by notice
to the others.
<PAGE>
Section 9.05.Nonsurvival of Representations, Warranties and Agreements.
Except for the agreements set forth in Sections 5.04 and 5.05, no
representation, warranty or agreement contained herein shall survive the
Closing. In the event that this Agreement is terminated prior to Closing, the
representations, warranties and agreements set forth herein shall survive such
termination.
Section 9.06.Costs and Expenses. Except as may be otherwise provided
herein, each party shall pay its own costs and expenses incurred in connection
with this Agreement and the matters contemplated hereby, including without
limitation all fees and expenses of attorneys, accountants, brokers, financial
advisors and other professionals.
Section 9.07.Entire Agreement. This Agreement, together with the Merger
Agreement and the Proxies, 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 9.08.Headings and Captions. The captions of Articles and
Sections hereof are for convenience only and shall not control or affect the
meaning or construction of any of the provisions of this Agreement.
Section 9.09.Waiver, Amendment or Modification. The conditions of this
Agreement which may be waived may only be waived by written notice delivered to
the other parties. 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.
Section 9.10.Rules of Construction. Unless the context otherwise
requires: (a) a term has the meaning assigned to it; (b) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles; (c) "or" is not exclusive; and (d) words in the
singular may include the plural and in the plural include the singular.
Section 9.11.Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
Section 9.12.Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. There shall be no third party beneficiaries hereof.
Section 9.13.Governing Law. This Agreement shall be governed by the
laws of the State of California, the general corporate laws of the State of
Delaware applicable to FBA and any applicable federal laws and regulations.
<PAGE>
IN WITNESS WHEREOF, FBA, Sunrise and Pacific 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
---------------
SUNRISE BANK OF CALIFORNIA
By: /s/ Donald W. Williams
-----------------------
Its: President
----------
PACIFIC BAY BANK
By: /s/ Joseph F. Reidy
--------------------
Its: Chairman
---------
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
This Agreement of Merger is entered into between Pacific Bay Bank, a
banking association chartered by the State of California ("Merging
Corporation"), and Sunrise Bank of California ("Surviving Corporation"), a
banking association chartered by the State of California.
1.......Merging Corporation shall be merged into Surviving Corporation.
2.......The outstanding shares of Merging Corporation shall be
converted into the right to receive cash in the amount of $14.00 per share,
except as otherwise provided in that certain Agreement and Plan of
Reorganization dated September , 1997 by and among First Banks America, Inc., a
Delaware corporation which is the parent company of Surviving Corporation,
Surviving Corporation and Merging Corporation.
3.......The outstanding shares of Surviving Corporation shall remain
outstanding and are not affected by the merger.
4........Merging Corporation shall from time to time, as and when
requested by Surviving Corporation, execute and deliver all such documents and
instruments and take all such action as is necessary or desirable to evidence or
carry out the merger.
5........The effect of the merger and the effective date of the merger
are as prescribed by law.
In Witness Whereof, the parties have executed this Agreement as of ,
1997.
PACIFIC BAY BANK
By:
Its:
SUNRISE BANK OF CALIFORNIA
By:
Its:
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Exhibit 2(c)
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
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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
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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
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
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ARTICLE VIII - GENERAL PROVISIONS
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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.
(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
<PAGE>
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").
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:
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(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
(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.
(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
<PAGE>
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 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
<PAGE>
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.
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;
(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 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,
<PAGE>
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
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
<PAGE>
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 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
<PAGE>
(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).
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.
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,
<PAGE>
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, 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.
<PAGE>
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
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
<PAGE>
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.
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;
(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;
<PAGE>
(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.
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.
<PAGE>
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 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.
<PAGE>
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.
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.
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
<PAGE>
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.
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 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:
<PAGE>
(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, o
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:
(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
<PAGE>
(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.
(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.
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.
<PAGE>
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").
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
<PAGE>
(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
(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.
<PAGE>
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.
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
<PAGE>
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
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.
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;
<PAGE>
(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 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
<PAGE>
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 "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.
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
<PAGE>
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.
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.
<PAGE>
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.
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
<PAGE>
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.
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.
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.
<PAGE>
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
<PAGE>
Exhibit 10(o)
PROMISSORY NOTE
$20,000,000.00 CLAYTON, MISSOURI November 4, 1997
On or before October 31, 2001, First Banks America, Inc., a Delaware
corporation (hereinafter called "Borrower"), promises to pay to the order of
First Banks, Inc., a Missouri corporation (hereinafter called "Lender") at its
offices at 135 North Meramec, Clayton, Missouri, in lawful money of the United
States of America, the sum of Twenty Million Dollars ($20,000,000.00), or so
much thereof as is advanced from time to time and remains outstanding, together
with interest thereon from the date hereof until maturity at a varying rate per
annum which is one-quarter percent ((0)%) per annum less than the "Prime Rate"
as hereinafter defined (but in no event to exceed the maximum rate of
non-usurious interest allowed from time to time by law, hereinafter called the
"Highest Lawful Rate"), with adjustments in such varying rate to be made on the
first day of each month beginning on December 1, 1997, and adjustments due to
changes in the Highest Lawful Rate to be made on the effective date of any
change in the Highest Lawful Rate. All past due principal and interest shall, at
the option of Lender, bear interest at the Highest Lawful Rate from maturity
until paid. Interest shall be computed on a per annum basis of a year of 365
days and for the actual number of days (including the first but excluding the
last day) elapsed.
Principal and accrued interest owing on this Promissory Note (the
"Note") shall be due and payable on October 31, 2001.
If any default shall occur in the payment of any amount due pursuant to
this Note, then, at the option of Lender, the unpaid principal balance and
accrued, unpaid interest shall become due and payable forthwith without any
further demand, notice of default, notice of acceleration, notice of intent to
accelerate the maturity hereof, notice of nonpayment, presentment, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower. Lender
may waive any default without waiving any prior or subsequent default.
If this Note is not paid at maturity and is placed in the hands of an
attorney for collection, or suit is filed hereon, or proceedings are had in
probate, bankruptcy, receivership, reorganization, arrangement or other legal
proceedings for collection hereof, Borrower agrees to pay Lender its collection
costs, including a reasonable amount for attorneys' fees. Borrower hereby
expressly waives bringing of suit and diligence in taking any action to collect
any sums owing hereon.
Borrower reserves the option of prepaying the principal of this note,
in whole or in part, at any time after the date hereof without penalty. Unless
otherwise agreed at the time of payment, the amount of any partial payment shall
be applied first to accrued unpaid interest, then to any amount due as
collection costs, and then to the unpaid principal of the Note.
This Note is given by Borrower in replacement of that certain Note
dated October 31, 1996 in the principal amount of fifteen million dollars
($15,000,000.00) (the "1996 Note"), and the accrued interest on the 1996 Note as
of the date of this Note shall become accrued interest on this Note from and
after the date hereof. This Note shall be construed under and governed by the
laws of the State of Missouri.
"Prime Rate" shall mean at any time that variable rate of interest per
annum published under "Money Rates" in the Wall Street Journal and defined
therein as "the base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks," or any successor to such rate announced as such by
the Wall Street Journal. If the foregoing rate ceases to be published, Lender
will choose a new basis for the determination of the prime rate, based upon
comparable information, and Lender will give Borrower notice of such change.
<PAGE>
EXECUTED effective as of the 4th day of November, 1997.
BORROWER:
FIRST BANKS AMERICA, INC.
ADDRESS: By:------------------
Allen H. Blake
Vice President
135 North Meramec
Clayton, Missouri 63105
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000310979
<NAME> First Banks America, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 13,872
<INT-BEARING-DEPOSITS> 1,050
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0
0
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