UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to ________
Commission File No. 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 Identification No.)
incorporation or organization)
135 North Meramec, Clayton, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 854-4600
(Registrant's telephone number, including area code)
-------------------------------
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 practical date.
Shares outstanding
Class at July 31, 2000
----- ------------------
Common Stock, $0.15 par value 3,085,934
Class B Common Stock, $0.15 par value 2,500,000
<PAGE>
FIRST BANKS AMERICA, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS - (UNAUDITED):
<S> <C>
CONSOLIDATED BALANCE SHEETS......................................................... 1
CONSOLIDATED STATEMENTS OF INCOME................................................... 3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME........................................................ 4
CONSOLIDATED STATEMENTS OF CASH FLOWS............................................... 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................................... 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................... 21
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................... 22
SIGNATURES.......................................................................................... 23
</TABLE>
<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>
June 30, December 31,
2000 1999
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks........................................................... $ 35,436 35,644
Interest-bearing deposits with other financial institutions
with maturities of three months or less........................................ 1,761 122
Federal funds sold................................................................ 54,100 8,800
----------- ---------
Total cash and cash equivalents.............................................. 91,297 44,566
----------- ---------
Investment securities:
Available for sale, at fair value................................................. 109,185 90,658
Held to maturity, at amortized cost (fair value of $1,742 and $1,757
at June 30, 2000 and December 31, 1999, respectively).......................... 1,864 1,880
----------- ---------
Total investment securities.................................................. 111,049 92,538
----------- ---------
Loans:
Commercial and financial.......................................................... 239,564 216,780
Real estate construction and development.......................................... 214,072 204,832
Real estate mortgage.............................................................. 330,320 272,700
Consumer and installment.......................................................... 31,422 40,514
----------- ---------
Total loans.................................................................. 815,378 734,826
Unearned discount................................................................. (2,655) (2,563)
Allowance for loan losses......................................................... (16,567) (14,611)
----------- ---------
Net loans.................................................................... 796,156 717,652
----------- ---------
Bank premises and equipment, net of accumulated depreciation.......................... 13,315 13,261
Intangibles associated with the purchase of subsidiaries.............................. 21,483 16,579
Accrued interest receivable........................................................... 8,096 6,244
Deferred tax assets................................................................... 15,214 11,125
Other assets.......................................................................... 17,547 18,742
----------- ---------
Total assets................................................................. $ 1,074,157 920,707
=========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED - (UNAUDITED)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest-bearing ........................................................... $ 153,132 128,137
Interest-bearing................................................................ 84,291 74,858
Savings........................................................................... 272,202 242,543
Time deposits:
Time deposits of $100 or more................................................... 116,099 94,967
Other time deposits............................................................. 292,580 239,518
----------- ---------
Total deposits............................................................... 918,304 780,023
Note payable.......................................................................... 4,200 --
Short-term borrowings................................................................. 19,069 14,940
Accrued interest payable.............................................................. 2,913 1,989
Deferred tax liabilities.............................................................. 2,189 2,043
Accrued expenses and other liabilities................................................ 5,749 4,995
----------- ---------
Total liabilities............................................................ 952,424 803,990
----------- ---------
Guaranteed preferred beneficial interest in First Banks
America, Inc. subordinated debentures............................................. 44,249 44,218
----------- ---------
STOCKHOLDERS' EQUITY
--------------------
Common stock:
Common stock, $0.15 par value; 6,666,666 shares authorized;
3,881,363 shares and 3,874,697 shares issued
at June 30, 2000 and December 31, 1999, respectively............................ 582 581
Class B common stock, $0.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding............................. 375 375
Capital surplus....................................................................... 69,784 69,760
Retained earnings since elimination of accumulated deficit
of $259,117 effective December 31, 1994........................................... 21,060 15,163
Common treasury stock, at cost; 795,429 shares and 724,396
shares at June 30, 2000 and December 31, 1999, respectively....................... (12,633) (11,369)
Accumulated other comprehensive loss.................................................. (1,684) (2,011)
----------- ---------
Total stockholders' equity................................................... 77,484 72,499
----------- ---------
Total liabilities and stockholders' equity................................... $ 1,074,157 920,707
=========== =========
</TABLE>
<PAGE>
FIRST BANKS AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans.............................................. $19,640 15,715 37,559 28,584
Investment securities................................................... 1,885 1,600 3,421 3,428
Federal funds sold and other............................................ 836 126 1,355 224
------- ------- ------- -------
Total interest income.............................................. 22,361 17,441 42,335 32,236
------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing demand............................................... 341 285 660 553
Savings............................................................... 2,553 2,143 4,904 3,949
Time deposits of $100 or more......................................... 1,076 899 2,070 1,640
Other time deposits................................................... 4,501 2,821 8,312 5,400
Promissory note payable and short-term borrowings....................... 267 358 421 466
------- ------- ------- -------
Total interest expense............................................. 8,738 6,506 16,367 12,008
------- ------- ------- -------
Net interest income................................................ 13,623 10,935 25,968 20,228
Provision for loan losses................................................... 370 123 712 213
------- ------- ------- -------
Net interest income after provision for loan losses................ 13,253 10,812 25,256 20,015
------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts and customer service fees........... 956 900 1,838 1,630
Gain (loss) on sales of securities, net................................. -- 88 (177) 174
Other income............................................................ 525 516 967 855
------- ------- ------- -------
Total noninterest income........................................... 1,481 1,504 2,628 2,659
------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits.......................................... 3,559 2,907 6,661 5,202
Occupancy, net of rental income......................................... 877 800 1,619 1,361
Furniture and equipment................................................. 544 446 985 848
Advertising and business development.................................... 168 99 236 163
Postage, printing and supplies.......................................... 198 202 393 387
Data processing fees.................................................... 1,007 837 1,951 1,556
Legal, examination and professional fees................................ 1,273 1,144 2,476 2,247
Communications.......................................................... 128 146 260 300
(Gain) loss on sales of other real estate, net of expenses.............. (19) 7 (33) 7
Amortization of intangibles associated with the purchase
of subsidiaries....................................................... 338 306 645 508
Guaranteed preferred debentures......................................... 978 993 1,971 1,986
Other................................................................... 816 796 1,411 1,624
------- ------- ------- -------
Total noninterest expense.......................................... 9,867 8,683 18,575 16,189
------- ------- ------- -------
Income before provision for income tax expense..................... 4,867 3,633 9,309 6,485
Provision for income tax expense............................................ 1,979 1,574 3,412 2,795
------- ------- ------- -------
Net income ........................................................ $ 2,888 2,059 5,897 3,690
======= ======= ======= =======
Earnings per common share:
Basic................................................................... $ 0.52 0.36 1.05 0.65
Diluted................................................................. 0.52 0.36 1.05 0.64
======= ======= ======= =======
Weighted average common stock outstanding (in thousands).................... 5,595 5,713 5,612 5,717
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME - (UNAUDITED)
Six months ended June 30, 2000 and 1999 and six months ended December 31, 1999
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Accu-
mulated
other
compre- Total
Class B Compre- Common hensive stock-
Common common Capital hensive Retained treasury income holders'
stock stock surplus income earnings stock (loss) equity
----- ----- ------- ------ -------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated balances,
December 31, 1998................... $ 581 375 68,743 5,693 (10,088) 541 65,845
Six months ended June 30, 1999:
Comprehensive income:
Net income.......................... -- -- -- 3,690 3,690 -- -- 3,690
Other comprehensive income,
net of tax -unrealized losses
on securities, net of
reclassification adjustment (1) -- -- -- (1,683) -- -- (1,683) (1,683)
------
Comprehensive income................ 2,007
=====
Reduction of deferred tax asset
valuation allowance............... -- -- 327 -- -- -- 327
Repurchases of common stock.......... -- -- -- -- (270) -- (270)
----- --- ------ ------ ------- ------ -------
Consolidated balances June 30, 1999..... 581 375 69,070 9,383 (10,358) (1,142) 67,909
Six months ended December 31, 1999:
Comprehensive income:
Net income.......................... -- -- -- 5,780 5,780 -- -- 5,780
Other comprehensive income,
net of tax - unrealized losses
on securities, net of
reclassification adjustment (1)... -- -- -- (869) -- -- (869) (869)
-----
Comprehensive income................ 4,911
=====
Reduction of deferred tax asset
valuation allowance............... -- -- 654 -- -- -- 654
Compensation paid in stock........... -- -- 36 -- -- -- 36
Repurchases of common stock.......... -- -- -- -- (1,011) -- (1,011)
----- --- ------ ------ ------- ------ ------
Consolidated balances,
December 31, 1999.................. 581 375 69,760 15,163 (11,369) (2,011) 72,499
Six months ended June 30, 2000:
Comprehensive income:
Net income.......................... -- -- -- 5,897 5,897 -- -- 5,897
Other comprehensive income,
net of tax - unrealized gains
on securities, net of
reclassification adjustment (1)... -- -- -- 327 -- -- 327 327
-----
Comprehensive income................ 6,224
=====
Exercise of stock options............ 1 -- 24 -- -- -- 25
Repurchases of common stock.......... -- -- -- -- (1,264) -- (1,264)
----- --- ------ ------ ------- ------ ------
Consolidated balances, June 30, 2000.... $ 582 375 69,784 21,060 (12,633) (1,684) 77,484
===== === ====== ====== ======= ====== ======
</TABLE>
<PAGE>
------------------------------------------
(1) Disclosure of reclassification adjustment:
<TABLE>
<CAPTION>
Three months ended Six months ended Six months ended
June 30, June 30, December 31,
--------------- ----------------
2000 1999 2000 1999 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unrealized (losses) gains arising during the period............... $(200) (790) 212 (1,570) (869)
Less reclassification adjustment for gains (losses)
included in net income........................................ -- 5 (115) 113 --
----- ----- ---- ------ ----
Unrealized (losses) gains on investment securities................ $(200) (847) 327 (1,683) (869)
===== ===== ==== ====== ====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
FIRST BANKS AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................................ $ 5,897 3,690
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion, net..................................... 1,195 1,036
Provision for loan losses......................................................... 712 213
Provision for income tax expense.................................................. 3,412 2,795
Payments of income taxes.......................................................... (1,533) (941)
Loss (gain) on sales of securities, net........................................... 177 (174)
Increase in accrued interest receivable........................................... (1,186) (538)
Interest accrued on liabilities................................................... 16,367 12,008
Payments of interest on liabilities............................................... (15,957) (11,860)
Other operating activities, net................................................... 986 (5,353)
--------- ---------
Net cash provided by operating activities................................... 10,070 876
--------- ---------
Cash flows from investing activities:
Cash paid for acquired entities, net of cash and cash equivalents received............ (2,709) (17,244)
Proceeds from sales of investment securities.......................................... 4,592 54,414
Maturities of investment securities available for sale................................ 52,080 19,118
Maturities of investment securities held to maturity.................................. 15 14
Purchases of investment securities available for sale................................. (45,913) (13,897)
Net increase in loans................................................................. (40,330) (36,933)
Recoveries of loans previously charged-off............................................ 1,170 1,375
Purchases of bank premises and equipment.............................................. (963) (379)
Proceeds from sales of other real estate.............................................. 168 283
Other investing activities, net....................................................... (348) (292)
--------- ---------
Net cash (used in) provided by investing activities......................... (32,238) 6,459
--------- ---------
Cash flows from financing activities: Other increases (decreases) in deposits:
Demand and savings deposits......................................................... 19,456 (23,497)
Time deposits....................................................................... 42,378 7,053
(Decrease) increase in federal funds purchased and other short-term borrowings........ (9,000) 5,000
Increase (decrease) in securities sold under agreements to repurchase................. 13,129 (1,761)
Increase in promissory note payable................................................... 4,200 --
Repurchases of common stock for treasury.............................................. (1,264) (270)
--------- ---------
Net cash provided by (used in) financing activities......................... 68,899 (13,475)
--------- ---------
Net increase (decrease) in cash and cash equivalents........................ 46,731 (6,140)
Cash and cash equivalents, beginning of period............................................ 44,566 46,313
--------- ---------
Cash and cash equivalents, end of period.................................................. $ 91,297 40,173
========= =========
Noncash investing and financing activities:
Loans transferred to other real estate................................................ 75 31
Reduction of deferred tax asset valuation allowance.................................. -- 327
========= =========
</TABLE>
The accompanying notes are an integral part of the 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. and subsidiaries (FBA or the Company) are unaudited and should be
read in conjunction with the consolidated financial statements contained in the
1999 Annual Report on Form 10-K. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and conform
to predominant practices within the banking industry. Management of FBA has made
a number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to prepare
the consolidated financial statements in conformity with generally accepted
accounting principles. 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 periods presented herein, have been
included. Operating results for the three and six months ended June 30, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
The consolidated financial statements include the accounts of the
parent company and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been eliminated. Certain
reclassifications of 1999 amounts have been made to conform with the 2000
presentation.
FBA is majority owned by First Banks, Inc., St. Louis, Missouri (First
Banks). Accordingly, First Banks has effective control over the management and
policies of FBA and the election of its directors. At June 30, 2000 and December
31, 1999, First Banks' ownership interest in FBA was 84.33% and 83.37%,
respectively.
FBA operates through three wholly owned banking subsidiaries: First
Bank Texas N.A., headquartered in Houston, Texas (FB Texas); First Bank of
California, headquartered in Sacramento, California (FB California); and Redwood
Bank, headquartered in San Francisco, California (Redwood Bank), collectively
referred to as the Subsidiary Banks.
(2) ACQUISITIONS
On February 29, 2000, FBA completed its acquisition of Lippo Bank, San
Francisco, California, in exchange for $17.2 million in cash. Lippo Bank
operated three banking locations in San Francisco, San Jose and Los Angeles,
California. The acquisition was funded from available cash of $9.2 million and
from an advance of $8.0 million under FBA's $90.0 million revolving note payable
to First Banks (Note Payable) as further discussed in Note 4 to the accompanying
consolidated financial statements. At the time of the transaction, Lippo Bank
had $85.3 million in total assets, $40.9 million in loans, net of unearned
discount, $37.4 million in investment securities and $76.4 million in total
deposits. This transaction was accounted for using the purchase method of
accounting. The excess of the cost over the fair value of the net assets
acquired was approximately $5.6 million and is being amortized over 15 years.
Lippo Bank was merged into FB California on May 31, 2000.
On June 27, 2000, FBA and Commercial Bank of San Francisco (Commercial
Bank) executed a definitive agreement providing for the acquisition of
Commercial Bank, San Francisco, California, by FBA. Under the terms of the
agreement, the shareholders of Commercial Bank will receive $17.75 per share in
cash, or a total of approximately $29.5 million. Commercial Bank operates one
branch office in the San Francisco financial district. At June 30, 2000,
Commercial Bank had $178.4 million in total assets, $97.4 million in loans, net
of unearned discount, $63.8 million in investment securities and $132.7 million
in deposits. FBA expects this transaction, which is subject to regulatory
approvals and the approval of Commercial Bank shareholders, will be completed
during the first quarter of 2001.
On June 29, 2000, FBA and First Banks executed a definitive agreement
providing for the acquisition of First Banks' wholly owned subsidiary, First
Bank & Trust, headquartered in Newport Beach, California (FB&T), by FBA. Under
the terms of the agreement, First Banks will exchange all of the outstanding
stock of FB&T for approximately 6.9 million shares of common stock of FBA, which
will increase First Banks' ownership percentage of FBA to approximately 93.0%.
This transaction and related internal reorganizations will allow FBA and First
Banks to merge their Texas and California interests. FB&T operates 26 banking
locations in the counties of Los Angeles, Orange, Ventura and Santa Barbara,
California as well as branches in San Jose and Walnut Creek, in Northern
California. At June 30, 2000, FB&T had $1.0 billion in total assets, $799.2
million in loans, net of unearned discount, $97.2 million in investment
securities and $875.0 million in deposits. FBA expects this transaction, which
is subject to regulatory and shareholder approvals, will be completed during the
fourth quarter of 2000.
<PAGE>
The following unaudited pro forma combined condensed results of
operations for the six months ended June 30, 2000 and 1999, and for the year
ended December 31, 1999, have been prepared to reflect the effects on the
historical results of FBA of the proposed acquisition of FB&T as described
above. The proposed acquisition will be accounted for as a combination of
entities under common control. Therefore, the unaudited pro forma combined
condensed results of operations give retroactive effect to the transaction and
are presented as if the combining entities had been consolidated for all periods
presented. The pro forma results of operations set forth below are unaudited and
not necessarily indicative of the results that will occur in the future.
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, December 31,
--------------------- ----------------
2000 1999 1999
---- ---- ----
(dollars expressed in thousands,
except per share data)
<S> <C> <C> <C>
Net interest income.................................................. $49,410 36,594 81,481
======= ======= ========
Net income........................................................... $12,691 6,555 17,599
======= ======= ========
Earnings Per Share:
Basic.............................................................. $ 1.01 0.52 1.39
Diluted............................................................ 1.01 0.52 1.39
======= ======= ========
</TABLE>
(3) EARNINGS PER COMMON SHARE
The following is a reconciliation o the numerators and denominators of the
basic and diluted EPS computations for the periods indicated:
<TABLE>
<CAPTION>
Income Shares Per share
(numerator) (denominator) amount
----------- ------------- ------
(dollars expressed in thousands, except per share data)
Three months ended June 30, 2000:
<S> <C> <C> <C>
Basic EPS-- income available to common stockholders.......... $2,888 5,595 $ 0.52
======
Effect of dilutive securities-- stock options................ -- --
------ ------
Diluted EPS-- income available to common stockholders........ $2,888 5,595 $ 0.52
====== ====== ======
Three months ended June 30, 1999:
Basic EPS-- income available to common stockholders.......... $2,059 5,713 $ 0.36
======
Effect of dilutive securities-- stock options................ -- 7
------ ------
Diluted EPS-- income available to common stockholders........ $2,059 5,720 $ 0.36
====== ====== ======
Six months ended June 30, 2000:
Basic EPS-- income available to common stockholders.......... $5,897 5,612 $ 1.05
======
Effect of dilutive securities-- stock options................ -- 3
------ ------
Diluted EPS-- income available to common stockholders........ $5,897 5,615 $ 1.05
====== ====== ======
Six months ended June 30, 1999:
Basic EPS-- income available to common stockholders.......... $3,690 5,717 $ 0.65
======
Effect of dilutive securities-- stock options................ -- 7
------ ------
Diluted EPS-- income available to common stockholders........ $ 3,690 5,724 $ 0.64
======== ====== ======
</TABLE>
(4) TRANSACTIONS WITH RELATED PARTIES
FBA purchases certain services and supplies from or through First
Banks. FBA's financial position and operating results could significantly differ
from those that would be obtained if FBA's relationship with First Banks did not
exist. In addition, fees payable to First Banks, its affiliates and First
Services, L.P. generally increase as FBA expands through acquisitions and
internal growth, reflecting the higher levels of service needed to operate the
Subsidiary Banks.
<PAGE>
First Banks provides management services to FBA and its Subsidiary
Banks. Management services are provided under management fee agreements whereby
FBA compensates First Banks on an hourly basis for its use of personnel for
various functions including internal audit, loan review, income tax preparation
and assistance, accounting, asset/liability management and investment services,
loan servicing and other management and administrative services. Fees paid under
these agreements were $872,000 and $1.7 million for the three and six months
ended June 30, 2000, and $724,000 and $1.4 million for the comparable periods in
1999, respectively. The fees paid for management services are at least as
favorable as could have been obtained from unaffiliated third parties.
Because of the affiliation with First Banks and the geographic
proximity of certain of their California offices, FBA shares the cost of certain
personnel and services with First Banks. This includes the salaries and benefits
of certain loan and administrative personnel. The allocation of the shared costs
is charged and/or credited under the terms of cost sharing agreements. 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 these agreements were $211,000 and $401,000 for the three
and six months ended June 30, 2000, and $220,000 and $432,000 for the comparable
periods in 1999, respectively.
First Services L.P., a limited partnership indirectly owned by First
Banks' Chairman and his adult children, provides data processing and various
related services to FB Texas and FB California under the terms of data
processing agreements. Fees paid under these agreements were $859,000 and $1.7
million for the three and six months ended June 30, 2000, and $740,000 and $1.4
million for the comparable periods in 1999, respectively. The fees paid for data
processing services are at least as favorable as could have been obtained from
unaffiliated third parties.
FBA's Subsidiary Banks had $98.2 million and $88.2 million in whole
loans and loan participations outstanding at June 30, 2000 and December 31,
1999, respectively, that were purchased from banks affiliated with First Banks.
In addition, FBA's Subsidiary Banks had sold $322.1 million and $302.9 million
in whole loans and loan participations to affiliates of First Banks at June 30,
2000 and December 31, 1999, respectively. These loans and loan participations
were acquired and sold at interest rates and terms prevailing at the dates of
their purchase or sale and under standards and policies followed by FBA's
Subsidiary Banks.
FBA had a $20.0 million revolving Note Payable to First Banks on which
the outstanding principal and accrued interest under the Note Payable were due
and payable on October 31, 2001. On June 30, 2000, FBA and First Banks renewed
this Note Payable, increasing the commitment to $90.0 million and extending the
maturity date to June 30, 2005. The borrowings under the Note Payable bear
interest at an annual rate of one-quarter percent less than the "Prime Rate" as
reported in the Wall Street Journal. At June 30, 2000, the outstanding
borrowings under the Note Payable were $4.2 million. There were no amounts
outstanding under the Note Payable at December 31, 1999. The interest expense
incurred by FBA on the Note Payable was $153,000 and $214,000 for the three and
six months ended June 30, 2000.
(5) REGULATORY CAPITAL
FBA and the Subsidiary Banks are subject to various regulatory capital
requirements administered by the 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's consolidated financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
FBA and the Subsidiary Banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities and certain off-balance-sheet items
as calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require FBA and the Subsidiary Banks to maintain minimum amounts and
ratios of total and Tier I capital (as defined in the regulations) to
risk-weighted assets, and of Tier I capital to average assets. Management
believes, as of June 30, 2000, FBA and the Subsidiary Banks were each well
capitalized under the applicable regulations.
As of June 30, 2000, the most recent notification from FBA's primary
regulator categorized FBA and the Subsidiary Banks as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, FBA and the Subsidiary Banks must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the
following table.
<PAGE>
At June 30, 2000 and December 31, 1999, FBA's and the Subsidiary Banks'
required and actual capital ratios were as follows:
<TABLE>
<CAPTION>
To be well
Actual For capital capitalized under
--------------------------
June 30, December 31, adequacy prompt corrective
2000 1999 purposes action provisions
---- ---- -------- -----------------
Total capital (to risk-weighted assets):
<S> <C> <C> <C> <C>
FBA.................................. 11.97% 13.08% 8.0% 10.0%
FB Texas............................. 12.04 12.42 8.0 10.0
FB California........................ 11.72 10.81 8.0 10.0
Redwood Bank......................... 11.55 11.17 8.0 10.0
To be well
Actual For capital capitalized under
--------------------------
June 30, December 31, adequacy prompt corrective
2000 1999 purposes action provisions
---- ---- -------- -----------------
Tier 1 capital (to risk-weighted assets):
FBA.................................. 8.64% 9.34% 4.0% 6.0%
FB Texas............................. 10.78 11.17 4.0 6.0
FB California........................ 10.46 9.56 4.0 6.0
Redwood Bank......................... 10.34 10.15 4.0 6.0
Tier 1 capital (to average assets):
FBA.................................. 7.93% 8.94% 3.0% 5.0%
FB Texas............................. 10.32 10.39 3.0 5.0
FB California........................ 9.72 9.95 3.0 5.0
Redwood Bank......................... 9.17 8.48 3.0 5.0
</TABLE>
(6) BUSINESS SEGMENT RESULTS
FBA's business segments are its Subsidiary Banks. The reportable
business segments are consistent with the management structure of FBA and the
Subsidiary Banks, the internal reporting system that monitors performance and,
in all material respects, generally accepted accounting principles and practices
predominant in the banking industry.
Through the respective branch networks, the Subsidiary Banks provide
similar products and services in their defined geographic areas. The products
and services offered include a broad range of commercial and personal banking
services, including certificates of deposit, individual retirement and other
time deposit accounts, checking and other demand deposit accounts, interest
checking accounts, savings accounts and money market accounts. Loans include
commercial and financial, commercial and residential real estate, real estate
construction and development and consumer loans. Other financial services
include mortgage banking, credit and debit cards, brokerage services,
credit-related insurance, automatic teller machines, telephone account access,
safe deposit boxes, trust and private banking services and cash management
services. The revenues generated by each business segment consist primarily of
interest income, generated from the loan and investment security portfolios, and
service charges and fees, generated from the deposit products and services. The
products and services are offered to customers primarily within their respective
geographic areas, with the exception of loan participations executed between the
Subsidiary Banks and other banks affiliated with First Banks.
The business segment results are summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
FB California (1) Redwood Bank (2)
---------------------------- -------------------------
June 30, December 31, June 30, December 31,
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
<S> <C> <C> <C> <C>
Investment securities................................ $ 54,250 20,743 21,242 37,539
Loans, net of unearned discount...................... 445,681 379,632 143,866 138,902
Total assets......................................... 566,314 431,838 199,256 199,988
Deposits............................................. 488,729 367,563 172,369 173,703
Stockholders' equity................................. 66,373 47,990 24,893 24,275
======== ========= ========= =========
FB California (1) Redwood Bank (2)
---------------------------- -------------------------
Three months ended Three months ended
June 30, June 30,
---------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income...................................... $ 12,329 8,132 3,951 3,750
Interest expense..................................... 4,622 2,996 1,534 1,393
-------- --------- --------- ---------
Net interest income........................... 7,707 5,136 2,417 2,357
Provision for loan losses............................ 45 20 150 73
-------- --------- --------- ---------
Net interest income after
provision for loan losses................... 7,662 5,116 2,267 2,284
-------- --------- --------- ---------
Noninterest income................................... 931 815 69 177
Noninterest expense.................................. 5,225 3,926 1,433 1,469
-------- --------- --------- ---------
Income (loss) before provision (benefit)
for income tax expense...................... 3,368 2,005 903 992
Provision (benefit) for income tax expense........... 1,314 866 477 480
-------- --------- --------- ----------
Net income.................................... $ 2,054 1,139 426 512
======== ========= ========= ==========
FB California (1) Redwood Bank (2)
---------------------------- -------------------------
Six months ended Six months ended
June 30, June 30,
---------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income...................................... $ 22,621 16,132 7,884 4,930
Interest expense..................................... 8,349 6,075 3,108 1,835
-------- --------- --------- ---------
Net interest income........................... 14,272 10,057 4,776 3,095
Provision for loan losses............................ 135 80 282 73
-------- --------- --------- ---------
Net interest income after
provision for loan losses................... 14,137 9,977 4,494 3,022
-------- --------- --------- ---------
Noninterest income................................... 1,723 1,424 (49) 203
Noninterest expense.................................. 9,282 7,625 2,933 1,907
-------- --------- --------- ---------
Income (loss) before provision (benefit)
for income tax expense...................... 6,578 3,776 1,512 1,318
Provision (benefit) for income tax expense........... 2,577 1,653 801 644
-------- --------- --------- ----------
Net income.................................... $ 4,001 2,123 711 674
======== ========= ========= ==========
</TABLE>
<PAGE>
-----------------
(1) Lippo Bank was acquired by FBA on February 29, 2000 and merged into FB
California on May 31, 2000.
(2) Redwood Bank was acquired by FBA on March 4, 1999.
(3) Corporate and other includes $636,000 and $1.3 million of guaranteed
preferred debentures expense, after applicable income tax benefit of
$342,000 and $670,000, for the three and six months ended June 30, 2000,
and $645,000 and $1.3 million of guaranteed preferred debentures expense,
after applicable income tax benefit of $348,000 and $695,000, for the
comparable periods in 1999, respectively.
<PAGE>
<TABLE>
<CAPTION>
FB Texas Corporate and other (3) Consolidated total
------------------------------ ------------------------------- ----------------------------
June 30, December 31, June 30, December 31, June 30, December 31,
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C>
31,605 30,439 3,952 3,817 111,049 92,538
222,995 213,731 181 (2) 812,723 732,263
303,570 278,988 5,017 9,893 1,074,157 920,707
257,542 244,248 (336) (5,491) 918,304 780,023
30,111 30,338 (43,893) (30,104) 77,484 72,499
========== ========= ========= ======== ========== =========
FB Texas Corporate and other (3) Consolidated total
------------------------------ ------------------------------- ----------------------------
Three months ended Three months ended Three months ended
June 30, June 30, June 30,
------------------------------ ------------------------------- ----------------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
5,990 5,481 91 78 22,361 17,441
2,431 2,163 151 (46) 8,738 6,506
---------- --------- --------- -------- ---------- --------
3,559 3,318 (60) 124 13,623 10,935
175 30 -- -- 370 123
---------- --------- --------- -------- ---------- --------
3,384 3,288 (60) 124 13,253 10,812
---------- --------- --------- -------- ---------- --------
495 513 (14) (1) 1,481 1,504
2,196 2,231 1,013 1,057 9,867 8,683
---------- --------- --------- -------- ---------- --------
1,683 1,570 (1,087) (934) 4,867 3,633
570 541 (382) (313) 1,979 1,574
---------- --------- --------- -------- ---------- --------
1,113 1,029 (705) (621) 2,888 2,059
========== ========= ========= ======== ========== ========
FB Texas Corporate and other (3) Consolidated total
--------------------------- ------------------------------- ----------------------------
Six months ended Six months ended Six months ended
June 30, June 30, June 30,
--------------------------- ------------------------------- ----------------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
11,658 11,023 172 151 42,335 32,236
4,720 4,325 190 (227) 16,367 12,008
---------- --------- --------- -------- ---------- --------
6,938 6,698 (18) 378 25,968 20,228
295 60 -- -- 712 213
---------- --------- --------- -------- ---------- --------
6,643 6,638 (18) 378 25,256 20,015
---------- --------- --------- -------- ---------- --------
986 1,056 (32) (24) 2,628 2,659
4,305 4,510 2,055 2,147 18,575 16,189
---------- --------- --------- -------- ---------- --------
3,324 3,184 (2,105) (1,793) 9,309 6,485
1,157 1,096 (1,123) (598) 3,412 2,795
---------- --------- --------- -------- ---------- --------
2,167 2,088 (982) (1,195) 5,897 3,690
========== ========= ========= ======== ========== ========
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations contains certain forward-looking
statements with respect to the financial condition, results of operations and
business of FBA. These forward-looking statements are subject to certain risks
and uncertainties, not all of which can be predicted or anticipated. Factors
that may cause actual results to differ materially from those contemplated by
the forward-looking statements herein include market conditions as well as
conditions affecting the banking industry generally and factors having a
specific impact on FBA, including but not limited to fluctuations in interest
rates and in the economy; the impact of laws and regulations applicable to FBA
and changes therein; competitive conditions in the markets in which FBA conducts
its operations, including competition from banking and non-banking companies
with substantially greater resources than FBA, some of which may offer and
develop products and services not offered by FBA; the ability of FBA to control
the composition of the loan portfolio without adversely affecting interest
income; and the ability of FBA to respond to changes in technology. With regard
to FBA's efforts to grow through acquisitions, factors that could affect the
accuracy or completeness of forward-looking statements contained herein include
the potential for higher than acceptable operating costs arising from the
geographic dispersion of the offices of FBA, as compared with competitors
operating solely in contiguous markets; the competition of larger acquirers with
greater resources than FBA; fluctuations in the prices at which acquisition
targets may be available for sale and in the market for FBA's securities; and
the potential for difficulty or unanticipated costs in realizing the benefits of
particular acquisition transactions. Readers of the Form 10-Q should therefore
not place undue reliance on forward-looking statements.
General
FBA is a registered bank holding company incorporated in
Delaware and headquartered in St. Louis County, Missouri. At June 30, 2000, FBA
had $1.07 billion in total assets, $812.7 million in total loans, net of
unearned discount, $918.3 million in total deposits and $77.5 million in total
stockholders' equity. FBA operates through three wholly owned bank subsidiaries,
First Bank Texas N.A., headquartered in Houston, Texas (FB Texas); First Bank of
California, headquartered in Sacramento, California (FB California); and Redwood
Bank, headquartered in San Francisco, California (Redwood Bank), collectively
referred to as the Subsidiary Banks.
Through the Subsidiary Banks' 17 banking locations in California and
six banking locations in the greater Houston and Dallas, Texas metropolitan
areas, 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 financial, commercial and residential real estate, real estate construction
and development and consumer loans. Other financial services include mortgage
banking, credit and debit cards, brokerage services, credit-related insurance,
automatic teller machines, telephone banking, safe deposit boxes, trust and
private banking services and cash management services.
FBA centralizes overall corporate policies, procedural and
administrative functions, and operational support functions for the Subsidiary
Banks. Primary responsibility for managing the Subsidiary Banks remains with the
officers and directors.
The following table summarizes selected data about the Subsidiary Banks
at June 30, 2000:
<TABLE>
<CAPTION>
Loans, net of
Number of Total unearned Total
Locations assets discount deposits
--------- ------ -------- --------
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
FB California.................... 13 $ 566,314 445,681 488,729
FB Texas......................... 6 303,570 222,995 257,542
Redwood Bank..................... 4 199,256 143,866 172,369
=== ========= ======= =======
</TABLE>
<PAGE>
Financial Condition
FBA's total assets were $1.07 billion and $920.7 million at June 30,
2000 and December 31, 1999, respectively. The increase in total assets is
primarily attributable to FBA's acquisition of Lippo Bank, which provided assets
of $85.3 million. Offsetting this increase and providing an additional source of
funds for continued internal loan growth was a reduction in investment
securities of $18.9 million, after consideration of the $37.4 million of
investment securities provided by Lippo Bank, to $111.0 million at June 30,
2000. Total deposits, excluding the $76.4 million of deposits provided by the
acquisition of Lippo Bank, increased by $61.9 million to $918.3 million at June
30, 2000. The funds generated from the deposit growth were temporarily invested
in cash and cash equivalents. In addition, short-term borrowings increased by
$4.1 million to $19.1 million at June 30, 2000, reflecting an increase of $13.2
million in retail repurchase agreements offset by a decrease of $9.0 million in
federal funds purchased. Furthermore, FBA's note payable increased to $4.2
million at June 30, 2000 and is reflective of FBA's $8.0 million advance under
its $90.0 million revolving note payable to First Banks utilized to fund the
Lippo Bank acquisition. This increase was partially offset by repayments on the
note payable during the six months ended June 30, 2000. See Notes 2 and 4 to the
accompanying consolidated financial statements.
During the three and six months ended June 30, 2000, FBA purchased
$384,000 and $1.3 million of its common stock for treasury at an average cost of
$17.42 per share and $17.80 per share, respectively. FBA utilized available cash
to fund its repurchases of common stock. In 1998, FBA's Board of Directors
authorized a fourth stock repurchase program allowing for the purchase of an
additional 5% of common stock for treasury representing approximately 261,418
shares of common stock. At June 30, 2000, FBA has purchased an aggregate total
of 795,429 common shares for treasury and could purchase approximately 21,449
additional shares under the existing authorization. In addition, on April 28,
2000, FBA's Board of Directors approved a fifth stock repurchase program
allowing for the repurchase of an additional 5% of common stock for treasury
representing 277,891 shares of common stock.
Results of Operations
Net Income
Net income was $2.89 million, or $0.52 per share on a diluted basis,
for the three months ended June 30, 2000, in comparison to $2.1 million, or
$0.36 per share on a diluted basis, for the comparable period in 1999. For the
six months ended June 30, 2000 and 1999, net income was $5.90 million, or $1.05
per share on a diluted basis, and $3.70 million, or $0.64 per share on a diluted
basis, respectively. The earnings progress was primarily driven by increased net
interest income generated from the acquisition of Redwood Bank, increased yields
on earning assets and internal loan growth. In addition, FB California's net
income increased to $2.1 million and $4.0 million for the three and six months
ended June 30, 2000, in comparison to $1.1 million and $2.1 million for the
comparable periods in 1999, respectively. This increase is reflective of the
progress FBA has made in the last year in assimilating the cultures of several
acquired banks into FB California to create a single effective banking
franchise.
The increase in net interest income for the three and six months ended
June 30, 2000 was partially offset by increased operating expenses and an
increase in the provision for loan losses as further discussed under
"--Provision for Loan Losses." The increased operating expenses are primarily
attributable to the operating expenses of Lippo Bank and Redwood Bank subsequent
to their respective acquisition dates, increased salaries and employee benefits
expenses, increased data processing fees and increased amortization of
intangibles associated with the purchase of subsidiaries.
Net Interest Income
Net interest income was $13.6 million, or 5.70% of average
interest-earning assets, for the three months ended June 30, 2000, in comparison
to $10.9 million, or 5.46% of average interest-earning assets, for the
comparable period in 1999. For the six months ended June 30, 2000 and 1999, net
interest income was $26.0 million, or 5.65% of average interest-earning assets,
in comparison to $20.2 million, or 5.45% of average interest-earning assets,
respectively. The improved net interest income is primarily attributable to the
net interest-earning assets provided by the acquisitions of Lippo Bank and
Redwood Bank, internal loan growth and increases in the prime lending rate.
The improved yield earned on the interest-earning assets was partially
offset by an increased rate paid on interest-bearing liabilities. For the three
and six months ended June 30, 2000, the aggregate weighted average rate paid on
the deposit portfolio increased to 4.50% and 4.42%, respectively, from 4.00% and
4.04% for the comparable periods in 1999, reflecting FBA's increased rates paid
to provide a funding source for continued loan growth. In addition, the
aggregate weighted average rate paid on promissory notes payable and short-term
borrowings for the three and six months ended June 30, 2000 increased to 6.62%
and 6.28%, respectively, from 5.10% and 5.29% for the comparable periods in
1999, reflecting an increase in the average balance of the revolving note
payable to First Banks utilized to fund the acquisition of Lippo Bank. The
<PAGE>
revolving note payable bears interest at one quarter percent less than the prime
lending rate (which has increased during the six months ended June 30, 2000) and
represents a higher-cost funding source, thus contributing to the increase in
the aggregate weighted average rate paid on these financial instruments.
The following table sets forth certain information relating to FBA's
average balance sheets, and reflects the average yield earned on
interest-bearing assets, the average cost of interest-bearing liabilities and
the resulting net interest income for the periods indicated.
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
---------------------------------------------- ----------------------------------------------
2000 1999 2000 1999
---------------------- ---------------------- --------------------- ------------------------
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>
Loans (1)(2)(3)(4)........... $ 794,161 19,640 9.95% $690,199 15,715 9.13%$ 773,506 37,559 9.76% $628,205 28,584 9.18%
Investment securities (3).... 112,523 1,885 6.74 101,681 1,600 6.31 105,206 3,421 6.54 110,189 3,428 6.27
Federal funds sold .......... 53,369 819 6.17 10,547 126 4.79 44,842 1,322 5.93 9,046 214 4.77
Other........................ 1,066 17 6.41 370 -- -- 876 33 7.58 399 10 5.05
---------- ------ -------- ------ ---------- ------ -------- ------
Total interest-
earning assets........... 961,119 22,361 9.36 802,797 17,441 8.71 924,430 42,335 9.21 747,839 32,236 8.69
------ ------ ------ ------
Nonearning assets............... 99,319 85,850 93,672 79,921
---------- -------- ---------- --------
Total assets............... $1,060,438 $888,647 $1,018,102 $827,760
========== ======== ========== ========
Liabilities and
Stockholders' Equity
--------------------
Interest-bearing liabilities:
Interest-bearing
demand deposit............. $ 97,495 341 1.41% $ 84,133 285 1.36% $93,839 660 1.41% $ 79,987 553 1.39%
Savings deposits............. 255,887 2,553 4.01 237,084 2,143 3.63 248,650 4,904 3.97 218,676 3,949 3.64
Time deposits of $100 or more 78,949 1,076 5.48 69,514 899 5.19 76,735 2,070 5.42 63,287 1,640 5.23
Other time deposits.......... 325,021 4,501 5.57 226,319 2,821 5.00 306,812 8,312 5.45 213,807 5,400 5.09
---------- ------ ------- ------ ---------- ------ -------- ------
Total interest-
bearing deposits......... 757,352 8,471 4.50 617,050 6,148 4.00 726,036 15,946 4.42 575,757 11,542 4.04
Promissory notes payable and
short-term borrowings....... 16,231 267 6.62 28,139 358 5.10 13,472 421 6.28 17,775 466 5.29
---------- ------ ------- ------ ---------- ------ -------- ------
Total interest-bearing
liabilities............. 773,583 8,738 4.54 645,189 6,506 4.04 739,508 16,367 4.45 593,532 12,008 4.08
------
Noninterest-bearing liabilities:
Demand deposits.............. 148,240 119,033 141,669 111,782
Other liabilities............ 61,831 55,690 60,805 55,130
---------- -------- ---------- --------
Total liabilities.......... 983,654 819,912 941,982 760,444
Stockholders' equity............ 76,784 68,735 76,120 67,316
---------- -------- ---------- --------
Total liabilities and
stockholders' equity.... $1,060,438 $888,647 $1,018,102 $827,760
========== ======== ========== ========
Net interest income............. 13,623 10,935 25,968 20,228
====== ====== ====== ======
Interest rate spread............ 4.82 4.67 4.76 4.61
Net interest margin............. 5.70% 5.46% 5.65% 5.45%
==== ==== ==== ====
</TABLE>
-------------------------
(1) For purposes of these computations, nonaccrual loans are included in the
average loan amounts.
(2) Interest income on loans includes loan fees.
(3) FBA has no tax-exempt income.
(4) Includes the effects of interest rate exchange agreements.
<PAGE>
Provision for Loan Losses
The provision for loan losses was $370,000 and $712,000 for the three
and six months ended June 30, 2000, in comparison to $123,000 and $213,000 for
the comparable periods in 1999, respectively. The increase in the provision for
loan losses reflects continued growth in the loan portfolio, both internal and
through acquisitions; increased risk associated with the continued changing
composition of the loan portfolio; an increase in nonperforming assets; and, a
reduction in loan recoveries for the six months ended June 30, 2000. Loan
charge-offs were $83,000 and $725,000 for the three and six months ended June
30, 2000, in comparison to $318,000 and $798,000 for the comparable periods in
1999. For the six months ended June 30, 2000, loan charge-offs included a
charge-off of $457,000 on a single loan purchased from an affiliated bank. Loan
recoveries were $649,000 and $1.2 million for the three and six months ended
June 30, 2000, in comparison to $541,000 and $1.4 million for the comparable
periods in 1999, reflecting lower charge-off experience in recent years, which
reduced the amount of recovery opportunities. The acquisitions of Lippo Bank,
completed on February 29, 2000, and Redwood Bank, completed on March 4, 1999,
provided $799,000 and $1.5 million, respectively, in additional allowance for
loan losses.
Tables summarizing nonperforming assets, past due loans and charge-off
and recovery experience are presented under "--Loans and Allowance for Loan
Losses."
Noninterest Income
Noninterest income was $1.5 million and $2.6 million for the three and
six months ended June 30, 2000, in comparison to $1.5 million and $2.7 million
for the comparable periods in 1999, respectively. 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 $956,000 and $1.8 million for the three and six months ended June 30, 2000,
in comparison to $900,000 and $1.6 million for the comparable periods in 1999,
respectively. The increase in service charges corresponds to the increase in
deposit balances provided by internal growth, the acquisitions of Lippo Bank and
Redwood Bank and the additional services available and utilized by FBA's
expanding base of retail and corporate customers.
Noninterest income for the six months ended June 30, 2000 also included
a net loss on the sale of available-for-sale investment securities of $177,000,
in comparison to a net gain on the sale of available-for-sale investment
securities of $88,000 and $174,000 for the three and six months ended June 30,
1999, respectively. The net loss in 2000 resulted from sales of certain
investment securities held by acquired institutions that did not meet FBA's
overall investment objectives, whereas the net gains in 1999 resulted from sales
of certain investment securities to facilitate the funding of FBA's loan growth.
Other income was $525,000 and $967,000 for the three and six months
ended June 30, 2000, in comparison to $516,000 and $855,000 for the comparable
periods in 1999, respectively. The primary components of the increase are the
increased income earned on FBA's investment in bank-owned life insurance and
earnings associated with FBA's International Banking Division, which was
initially acquired in conjunction with the Lippo Bank acquisition and has
subsequently been expanded to offer these services to FBA's entire customer
base.
Noninterest Expense
Noninterest expense was $9.9 million and $18.6 million for the three
and six months ended June 30, 2000, in comparison to $8.7 million from $16.2
million for the comparable periods in 1999, respectively. The increase is
reflective of: (a) the noninterest expense of Lippo Bank and Redwood Bank
subsequent to their respective acquisition dates, including certain nonrecurring
expenses associated with those acquisitions; (b) increased salaries and employee
benefits expenses; (c) increased data processing fees; and (d) increased
amortization of intangibles associated with the purchase of subsidiaries.
Salaries and employee benefits were $3.6 million and $6.7 million for
the three and six months ended June 30, 2000, in comparison to $2.9 million and
$5.2 million for the comparable periods in 1999, respectively. The increase is
attributable to the acquisitions of Lippo Bank and Redwood Bank and is also
reflective of the competitive environment in the employment market that has
resulted in a higher demand for limited resources, thus escalating industry
salary and employee benefit costs associated with employing and retaining
qualified personnel.
<PAGE>
Data processing fees were $1.0 million and $2.0 million for the three
and six months ended June 30, 2000, in comparison to $837,000 and $1.6 million
for the comparable periods in 1999, respectively. The increased data processing
fees are attributable to growth and technological advancements consistent with
FBA's product and services offerings, and upgrades to technological equipment,
networks and communication channels.
Amortization of intangibles associated with the purchase of
subsidiaries was $338,000 and $645,000 for the three and six months ended June
30, 2000, in comparison to $306,000 and $508,000 for the comparable periods in
1999, respectively. The increase is attributable to the amortization of the cost
in excess of the fair value of the net assets acquired of Lippo Bank and Redwood
Bank, which were acquired in February 2000 and March 1999, respectively.
Other expense was $816,000 and $1.4 million for the three and six
months ended June 30, 2000, in comparison to $796,000 and $1.6 million for the
comparable periods in 1999, respectively. Other expense is comprised of numerous
general administrative expenses including but not limited to travel, meals and
entertainment, freight and courier services, correspondent bank charges and
sales taxes. The overall decrease in such expenditures for the six months ended
June 30, 2000 is reflective of management's continued efforts to control these
costs.
Provision for Income Tax Expense
The provision for income tax expense was $2.0 million and $3.4 million
for the three and six months ended June 30, 2000, representing an effective
income tax rate of 40.7% and 36.7%, respectively, in comparison to $1.6 million
and $2.8 million, representing an effective income tax rate of 43.3% and 43.1%
for the comparable periods in 1999, respectively. The decrease in the effective
income tax rate is primarily attributable to a reduction in the deferred tax
asset valuation reserve of $404,000 related to the utilization of net operating
losses associated with a previously acquired entity.
Interest Rate Risk Management
FBA utilizes off-balance-sheet derivative financial instruments to
assist in the management of interest rate sensitivity and to modify the
repricing, maturity and option characteristics of on-balance-sheet assets and
liabilities. The use of such derivative financial instruments is strictly
limited to reducing the interest rate exposure of FBA. Derivative financial
instruments held by FBA for purposes of managing interest rate risk are
summarized as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
-------------------- ----------------------
Notional Credit Notional Credit
amount exposure amount exposure
------ -------- ------ --------
(dollars expressed in thousands)
Interest rate swap agreements - pay
<S> <C> <C> <C> <C>
adjustable rate, receive fixed rate.................... $120,000 634 120,000 614
Interest rate swap agreements - pay
adjustable rate, receive adjustable rate............... -- -- 75,000 --
Interest rate cap agreement.............................. -- -- 10,000 26
======== ==== ======== =====
</TABLE>
The notional amounts of derivative financial instruments do not
represent amounts exchanged by the parties and, therefore, are not a measure of
FBA's credit exposure through its use of derivative financial instruments. The
amounts and the other terms of the derivatives are determined by reference to
the notional amounts and the other terms of the derivatives. The credit exposure
represents the accounting loss FBA would incur in the event the counterparties
failed completely to perform according to the terms of the derivative financial
instruments and the collateral held to support the credit exposure was of no
value.
During 1998, FBA entered into $65.0 million notional amount interest
rate swap agreements to effectively lengthen the repricing characteristics of
certain interest-earning assets to correspond more closely with its funding
source with the objective of stabilizing cash flow, and accordingly, net
interest income, over time. These swap agreements initially provided for FBA to
receive a fixed rate of interest and pay an adjustable rate of interest
equivalent to the 90-day London Interbank Offering Rate (LIBOR). In March 2000,
the terms of the swap agreements were modified such that FBA currently pays an
adjustable rate of interest equivalent to the daily weighted average prime
lending rate minus 2.705%. The terms of these swap agreements provide for FBA to
pay quarterly and receive payment semiannually. The amount receivable by FBA
under these swap agreements was $808,000 and $805,000 at June 30, 2000 and
December 31, 1999, respectively, and the amount payable by FBA under these swap
agreements was $170,000 and $185,000 at June 30, 2000 and December 31, 1999,
respectively.
<PAGE>
During May 1999, FBA entered into $75.0 million notional amount
interest rate swap agreements with the objective of stabilizing the net interest
margin during the six-month period surrounding the Year 2000 century date
change. These swap agreements provided for FBA to receive an adjustable rate of
interest equivalent to the daily weighted average 30-day LIBOR and pay an
adjustable rate of interest equivalent to the daily weighted average prime
lending rate minus 2.665%. The terms of these swap agreements, which had an
effective date of October 1, 1999 and a maturity date of March 31, 2000,
provided for FBA to pay and receive interest on a monthly basis. In January
2000, FBA determined these swap agreements were no longer necessary based upon
the results of the Year 2000 transition and terminated these agreements at a
cost of $23,000.
During September 1999, FBA entered into $55.0 million notional amount
interest rate swap agreements to effectively lengthen the repricing
characteristics of certain interest-earning assets to correspond more closely
with its funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. These swap agreements provide for
FBA to receive a fixed rate of interest and pay an adjustable rate of interest
equivalent to the weighted average prime lending rate minus 2.70%. The terms of
these swap agreements provide for FBA to pay and receive interest on a quarterly
basis. The amount receivable by FBA under these swap agreements was $38,000 at
June 30, 2000 and December 31, 1999, and the amount payable by FBA under these
swap agreements was $42,000 and $44,000 at June 30, 2000 and December 31, 1999,
respectively.
The maturity dates, notional amounts, interest rates paid and received
and fair value of interest rate swap agreements outstanding as of June 30, 2000
and December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Notional Interest rate Interest rate Fair value
Maturity date amount paid received gain (loss)
------------- -------- ----------- ------------- -----------
(dollars expressed in thousands)
June 30, 2000:
<S> <C> <C> <C> <C>
September 27, 2001....................... $ 40,000 6.80% 6.14% $ (464)
September 27, 2001....................... 15,000 6.80 6.14 (174)
June 11, 2002............................ 15,000 6.80 6.00 (330)
September 16, 2002....................... 20,000 6.80 5.36 (754)
September 18, 2002....................... 30,000 6.80 5.33 (1,155)
--------- --------
$ 120,000 6.80 5.79 $ (2,877)
========= ====== ====== ========
December 31, 1999:
March 31, 2000 .......................... $ 50,000 5.84% 6.45% $ 12
March 31, 2000 .......................... 25,000 5.84 6.45 6
September 27, 2001....................... 40,000 5.80 6.14 (365)
September 27, 2001....................... 15,000 5.80 6.14 (137)
June 11, 2002............................ 15,000 6.12 6.00 (291)
September 16, 2002....................... 20,000 6.12 5.36 (751)
September 18, 2002....................... 30,000 6.14 5.33 (1,157)
--------- --------
$ 195,000 5.93 6.04 $ (2,683)
========= ====== ====== ========
</TABLE>
In the event of early termination of the interest rate swap agreements,
the net proceeds received or paid are deferred and amortized over the shorter of
the remaining contract life or the maturity of the related asset. If, however,
the amount of the underlying asset is repaid, then the fair value gains or
losses on the interest rate swap agreements are recognized immediately in the
consolidated statements of income.
FBA had a $10.0 million interest rate cap agreement outstanding to
limit the interest expense associated with certain interest-bearing liabilities.
The interest rate cap agreement matured on May 15, 2000. At December 31, 1999,
the unamortized costs associated with this agreement were $19,000 and were
included in other assets. The net amount due to FBA under this agreement was
$7,000 at December 31, 1999.
Loans and Allowance for Loan Losses
Interest earned on the loan portfolio represents the principal source
of income for FBA and its Subsidiary Banks. Interest and fees on loans were
87.8% and 90.1% of total interest income for the three months ended June 30,
2000 and 1999, respectively, and 88.7% for the six months ended June 30, 2000
and 1999. Total loans, net of unearned discount, were $812.7 million, or 75.7%
of total assets, at June 30, 2000, compared to $732.3 million, or 79.5% of total
assets, at December 31, 1999. The increase in loans, as summarized on the
consolidated balance sheets, is primarily attributable to the acquisition of
Lippo Bank, which provided loans, net of unearned discount, of $40.9 million,
and the continued growth of the commercial and financial and commercial real
<PAGE>
estate mortgage loan portfolios. This increase was partially offset by a
decrease in the consumer and installment loan portfolio, which is primarily
comprised of indirect automobile loans, to $31.4 million at June 30, 2000 from
$40.5 million at December 31, 1999. Such decrease is consistent with
management's efforts to reduce the indirect loan portfolio. Commensurate with
the growth in corporate lending and FBA's prescribed credit exposure guidelines
for extending credit to an individual borrower, loan participations sold to and
purchased from banks affiliated with First Banks were $322.1 million and $98.2
million at June 30, 2000, respectively, in comparison to $302.9 million and
$88.2 million at December 31, 1999, respectively. See Note 2 to the accompanying
consolidated financial statements for a further discussion of transactions with
related parties.
FBA's nonperforming assets include nonaccrual loans, restructured loans
and other real estate. The following table presents the categories of
nonperforming assets and certain ratios as of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
(dollars expressed in thousands)
<S> <C> <C>
Nonperforming loans........................................................ $ 5,417 3,337
Other real estate, net..................................................... -- 60
---------- --------
Total nonperforming assets........................................ $ 5,417 3,397
========== ========
Loans, net of unearned discount............................................ $ 812,723 732,263
========== ========
Loans past due:
Over 30 days to 90 days................................................ $ 5,922 2,696
Over 90 days and still accruing........................................ 73 2,944
---------- --------
Total past-due loans.............................................. $ 5,995 5,640
========== ========
Allowance for loan losses to loans......................................... 2.04% 2.00%
Nonperforming loans to loans............................................... 0.67 0.46
Allowance for loan losses to nonperforming loans........................... 305.83 437.85
Nonperforming assets to loans and other real estate........................ 0.67 0.46
========== ========
</TABLE>
Nonperforming loans, consisting of loans on nonaccrual status and
certain restructured loans, were $5.4 million at June 30, 2000, in comparison to
$3.3 million at December 31, 1999. The increase in nonperforming loans is
primarily related to a single loan in the amount of $2.4 million at FB Texas
that was placed on nonaccrual in May 2000. FBA recently initiated foreclosure
proceedings with respect to this relationship and is in the process of
liquidating the underlying collateral in settlement of this loan. In addition,
the decline in the ratio of the allowance for loan losses to nonperforming loans
is attributable to the increase in nonperforming loans, partially offset by an
increase in the allowance for loan losses.
Impaired loans, consisting of loans on nonaccrual status and indirect
consumer and installment loans 60 days or more past due, were $5.5 million and
$3.6 million at June 30, 2000 and December 31, 1999, respectively.
The following table presents a summary of loan loss experience for the
periods indicated:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses, beginning of period............ $ 15,631 14,037 14,611 12,127
Acquired allowances for loan losses................... -- -- 799 1,466
--------- -------- --------- --------
15,631 14,037 15,410 13,593
--------- -------- --------- --------
Loans charged-off..................................... (83) (318) (725) (798)
Recoveries of loans previously charged-off............ 649 541 1,170 1,375
--------- -------- --------- --------
Net loan recoveries................................... 566 223 445 577
--------- -------- --------- --------
Provision for loan losses............................. 370 123 712 213
--------- -------- --------- --------
Allowance for loan losses, end of period.................. $ 16,567 14,383 16,567 14,383
========= ======== ========= ========
</TABLE>
<PAGE>
The allowance for loan losses is monitored on a monthly basis. Each
month, the credit administration department provides FBA's management with
detailed lists of loans on the watch list and summaries of the entire loan
portfolio of each Subsidiary Bank by risk rating. These are combined with
analyses of changes in the risk profiles of the portfolios, changes in past-due
and nonperforming loans and changes in watch list and classified loans over
time. In this manner, the overall increases or decreases in the levels of risk
in the portfolios are monitored continually. Factors are applied to the loan
portfolios for each category of loan risk to determine acceptable levels of
allowance for loan losses. These factors are derived primarily from the actual
loss experience of the Subsidiary Banks and from published national surveys of
norms in the industry. The calculated allowances required for the portfolios are
then compared to the actual allowance balances to determine the provisions
necessary to maintain the allowances at appropriate levels. In addition,
management exercises judgment in its analysis of determining the overall level
of the allowance for loan losses. In its analysis, management considers the
change in the portfolio, including growth, composition and the ratio of net
loans to total assets, and the economic conditions of the regions in which FBA
operates. Based on this quantitative and qualitative analysis, provisions are
made to the allowance for loan losses. Such provisions are reflected in the
consolidated statements of income.
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 Subsidiary Banks
receive funds for liquidity from customer deposits, loan payments, maturities of
loans and investments, sales of investments and earnings. In addition, FBA and
the Subsidiary Banks may avail themselves of more volatile sources of funds
through the issuance of certificates of deposit in denominations of $100,000 or
more, federal funds borrowed, securities sold under agreements to repurchase,
borrowings from the Federal Home Loan Banks and other borrowings, including the
revolving Note Payable. The aggregate funds acquired from these more volatile
sources were $139.6 million and $109.9 million at June 30, 2000 and December 31,
1999, respectively.
The following table presents the maturity structure of volatile funds,
which consists of certificates of deposit of $100,000 or more, the revolving
Note Payable and other short-term borrowings, at June 30, 2000:
(dollars expressed in thousands)
3 months or less.......................... $ 66,291
Over 3 through 6 months................... 27,391
Over 6 through 12 months.................. 31,216
Over 12 months............................ 14,470
----------
Total................................... $ 139,368
==========
FBA has periodically borrowed from First Banks under the revolving Note
Payable. Borrowings under the revolving Note Payable have been utilized to
facilitate the funding of FBA's acquisitions (including Lippo Bank), support
repurchases of common stock from time to time and for other corporate purposes.
As further discussed in Note 4 to the accompanying consolidated financial
statements, the increase to $90.0 million of the maximum amount available under
the Note Payable is intended to provide FBA with sufficient additional liquidity
to pursue acquisition opportunities. The borrowings under the Note Payable bear
interest at an annual rate of one-quarter percent less than the "Prime Rate" as
reported in the Wall Street Journal. The principal and accrued interest under
the Note Payable is due and payable on June 30, 2005. At June 30, 2000, the
outstanding borrowings under the Note Payable were $4.2 million. There were no
amounts outstanding under the Note Payable at December 31, 1999.
In 1999, FB Texas and FB California established borrowing relationships
with the Federal Reserve Banks in their respective districts. These borrowing
relationships, which are secured by commercial loans, provide an additional
liquidity facility that may be utilized for contingency purposes. At June 30,
2000 and December 31, 1999, FBA's borrowing capacity under these agreements was
approximately $280.9 million and $255.4 million, respectively. In addition, the
Subsidiary Banks' borrowing capacity through their relationships with the
Federal Home Loan Banks was approximately $20.5 million and $35.3 million at
June 30, 2000 and December 31, 1999, respectively.
Management believes the available liquidity and operating results of
the Subsidiary Banks will be sufficient to provide funds for growth and to
permit the distribution of dividends to FBA sufficient to meet its operating and
debt service requirements, both on a short-term and long-term basis.
<PAGE>
Year 2000 Compatibility
FBA and the Subsidiary Banks were subject to risks associated with the
"Year 2000" issue, a term which referred to uncertainties about the ability of
various data processing hardware and software systems to interpret dates
correctly surrounding the beginning of the Year 2000. Financial institutions
were particularly vulnerable to Year 2000 issues because of heavy reliance in
the industry on electronic data processing and funds transfer systems.
FBA successfully completed all phases of its Year 2000 program
(Program) within the appropriate timeframes established by the regulatory
agencies. In addition, FBA did not encounter any significant business
disruptions or processing problems as a result of the Year 2000 century date
change. Furthermore, management is unaware of any Year 2000 issues encountered
by FBA's more significant borrowers and vendors that would inhibit their ability
to repay obligations or provide goods or services. The total cost of the Program
was $2.2 million, comprised of capital improvements of $1.4 million and direct
expenses reimbursable to First Services L.P. of $774,000. The capital
improvements are being charged to expense in the form of depreciation expense or
lease expense, generally over a period of 60 months. FBA incurred direct
expenses related to the Program of approximately $3,000 and $54,000 for the
three and six months ended June 30, 2000, and $135,000 and $270,000 for the
comparable periods in 1999, respectively, and $540,000 for the year ended
December 31, 1999.
Effect of New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 -- Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS 133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge in one of three categories. The accounting for changes in
the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. Under SFAS 133, an
entity that elects to apply hedge accounting is required to establish, at the
inception of the hedge, the method it will use for assessing the effectiveness
of the hedging derivative and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent with the
entity's approach to managing risk. SFAS 133 applies to all entities.
In June 1999, the FASB issued SFAS No. 137 - Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, an Amendment of FASB Statement No. 133, which defers the
effective date of SFAS 133 from fiscal years beginning after June 15, 1999 to
fiscal years beginning after June 15, 2000. Initial application should be as of
the beginning of an entity's fiscal quarter; on that date, hedging relationships
must be designated and documented pursuant to the provisions of SFAS 133, as
amended. Earlier application of all of the provisions is encouraged but is
permitted only as of the beginning of any fiscal quarter that begins after the
issuance date of SFAS 133, as amended. Additionally, SFAS 133, as amended,
should not be applied retroactively to financial statements of prior periods.
In June 2000, the FASB issued SFAS No. 138 - Accounting for Derivative
Instruments and Hedging Activities, an Amendment of FASB Statement No. 133,
which addresses a limited number of issues causing implementation difficulties
for numerous entities that apply SFAS 133, as amended. SFAS 138 amends the
accounting and reporting standards of SFAS 133, as amended, for certain
derivative instruments, certain hedging activities and for decisions made by the
FASB relating to the Derivatives Implementation Group (DIG) process.
FBA is currently evaluating the requirements of SFAS 133, as amended,
to determine its potential impact on the consolidated financial statements.
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, FBA's risk management program's simulation model
indicated a loss of projected net interest income in the event of a decline in
interest rates. While a decline in interest rates of less than 100 basis points
was projected to have a minimal impact on the earnings of FBA, a decline in
interest rates of 100 basis points indicated a projected pre-tax loss equivalent
to approximately 8.0% of net interest income based on assets and liabilities at
December 31, 1999. At June 30, 2000, FBA remains in an "asset-sensitive"
position and thus, remains subject to a higher level of risk in a declining
interest-rate environment. FBA's asset-sensitive position, coupled with
increases in the prime lending rate throughout the last six months, is reflected
in FBA's increased net interest income for the three and six months ended June
30, 2000 as further discussed under "--Results of Operations." During the three
and six months ended June 30, 2000, FBA's asset-sensitive position and overall
susceptibility to market risks have not changed materially.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits are numbered in accordance with the Exhibit Table of Item 60
of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C> <C>
10(cc) Promissory note payable to First Banks, Inc., dated June 30, 2000 - filed herewith.
10(dd) Agreement and Plan of Reorganization by and between First Banks America, Inc. and
Commercial Bank of San Francisco, dated June 27, 2000 - filed herewith.
10(ee) Agreement and Plan of Reorganization by and among First Banks America, Inc., Redwood
Bank, First Banks, Inc. and First Bank & Trust, dated June 29, 2000 - filed herewith.
27 Article 9 - Financial Data Schedule (EDGAR only)
(b) FBA filed no reports on Form 8-K during the three months ended June 30, 2000.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ James F. Dierberg
---------------------
James F. Dierberg
Chairman of the Board of Directors,
President and Chief Executive Officer
August 8, 2000 (Principal Executive Officer)
By: /s/ Frank H. Sanfilippo
-----------------------
Frank H. Sanfilippo
Executive Vice President and
Chief Financial Officer
August 8, 2000 (Principal Financial and
Accounting Officer)
<PAGE>
Exhibit 10(cc)
PROMISSORY NOTE
$90,000,000.00 CLAYTON, MISSOURI June 30, 2000
On or before June 30, 2005, 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 Ninety Million Dollars ($90,000,000.00), 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 July 1, 2000, 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 June 30, 2005.
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 November 4, 1997 in the principal amount of twenty million dollars
($20,000,000.00) (the "1997 Note"), and the accrued interest on the 1997 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 prime rate, based upon comparable information,
and Lender will give Borrower notice of such change.
EXECUTED effective as of the 30th day of June, 2000.
BORROWER:
FIRST BANKS AMERICA, INC.
ADDRESS: By:/s/ Allen H. Blake
-------- ------------------
Allen H. Blake
Executive Vice President
135 North Meramec
Clayton, Missouri 63105
<PAGE>
EXHIBIT 10(dd)
AGREEMENT AND PLAN OF REORGANIZATION
by and between
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
and
COMMERCIAL BANK OF SAN FRANCISCO,
a California banking corporation
June 27, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I - TERMS OF THE MERGER & CLOSING; CONVERSION 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. The Closing Date...................................................................... 2
Section 1.06. Actions At Closing.................................................................... 3
Section 1.07. Exchange Procedures; Surrender of Certificates........................................ 3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF COMMERCIAL BANK
Section 2.01. Organization and Capital Stock........................................................ 4
Section 2.02. Authorization; No Defaults............................................................ 4
Section 2.03. Commercial Bank Subsidiaries.......................................................... 5
Section 2.04. Financial Information................................................................. 5
Section 2.05. Absence of Changes.................................................................... 5
Section 2.06. Regulatory Enforcement Matters........................................................ 5
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............................................................ 8
Section 2.14. Title to Properties; Licenses; Insurance............................................. 10
Section 2.15. Environmental Matters................................................................ 10
Section 2.16. Compliance with Laws and Regulations................................................. 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FBA
<S> <C> <C>
Section 3.01. Organization......................................................................... 14
Section 3.02. Authorization........................................................................ 14
Section 3.03. Litigation........................................................................... 14
Section 3.04. Statements True and Correct.......................................................... 14
ARTICLE IV - AGREEMENTS OF COMMERCIAL BANK
Section 4.01. Business in Ordinary Course.......................................................... 15
Section 4.02. Breaches............................................................................. 17
Section 4.03. Meeting of Shareholders.............................................................. 18
Section 4.04. Consummation of Agreement............................................................ 18
Section 4.05. Environmental Reports................................................................ 18
Section 4.06. Access to Information................................................................ 19
Section 4.07. Consents of Third Parties............................................................ 19
Section 4.08. Subsequent Financial Statements...................................................... 19
Section 4.09. Merger Agreement......................................................................19
ARTICLE V - AGREEMENTS OF FBA
Section 5.01. Regulatory Approvals................................................................. 19
Section 5.02. Breaches............................................................................. 20
Section 5.03. Consummation of Agreement............................................................ 20
Section 5.04. Employee Benefits.................................................................... 20
Section 5.05. Merger Agreement..................................................................... 20
Section 5.06. Indemnification...................................................................... 20
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01. Conditions to the Obligations of FBA................................................. 21
Section 6.02. Conditions to the Obligations of Commercial Bank..................................... 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII - TERMINATION
<S> <C> <C>
Section 7.01. Mutual Agreement..................................................................... 23
Section 7.02. Breach of Agreements................................................................. 23
Section 7.03. Failure of Conditions................................................................ 23
Section 7.04. Denial of Regulatory Approval........................................................ 23
Section 7.05. Environmental Reports................................................................ 24
Section 7.06. Regulatory Enforcement Matters....................................................... 24
Section 7.07. Unilateral Termination............................................................... 24
Section 7.08. Acquisition Proposal................................................................. 24
Section 7.09. Liquidated Damages................................................................... 24
Section 7.10. Break-up Fee......................................................................... 24
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01. Confidential Information............................................................. 27
Section 8.02. Publicity............................................................................ 27
Section 8.03. Return of Documents.................................................................. 27
Section 8.04. Notices.............................................................................. 27
Section 8.05. Nonsurvival of Representations, Warranties and Agreements............................ 28
Section 8.06. Costs and Expenses................................................................... 28
Section 8.07. Entire Agreement..................................................................... 28
Section 8.08. Headings and Captions................................................................ 28
Section 8.09. Waiver, Amendment or Modification.................................................... 28
Section 8.10. Rules of Construction................................................................ 29
Section 8.11. Counterparts......................................................................... 29
Section 8.12. Successors and Assigns............................................................... 29
Section 8.13. Governing Law........................................................................ 29
Signatures............................................................................................. 30
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, dated as of June 27, 2000 is
by and between First Banks America, Inc., a bank holding company organized as a
Delaware corporation ("FBA"), and Commercial Bank of San Francisco, a California
banking corporation ("Commercial Bank"). 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 and Commercial Bank hereby agree as follows:
ARTICLE I
TERMS OF THE MERGER & CLOSING; CONVERSION
OF SHARES
Section 1.01. The Merger. Pursuant to the terms and provisions of this
Agreement and the Agreement and Plan of Merger between Commercial Bank and Newco
(the "Merger Agreement") attached hereto as Exhibit "A," FBA will organize an
interim subsidiary as a California corporation ("Newco"). Subject to the receipt
of required regulatory approvals and the satisfaction or waiver of the
conditions set forth in Article VI of this Agreement, Newco shall merge with and
into Commercial Bank (the "Merger") pursuant to 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 the Corporate Law, this Agreement and the Merger Agreement,
and the separate corporate existence of Newco shall cease on consummation of the
Merger and be combined in Commercial Bank. Following the Merger, the Articles of
Association and Bylaws of the resulting bank shall be as stated in the Merger
Agreement, and the directors and officers of the resulting bank shall be the
persons serving as directors and officers of Newco immediately prior to the
Merger.
Section 1.03. Conversion of Shares
(a) At the Effective Time (as defined in Section 1.05 hereof), subject
to the remaining provisions of this Section 1.03, each share of common stock, no
par value, of Commercial Bank ("Commercial Bank Common") outstanding immediately
prior to the Effective Time shall be converted into the right to receive the
price per share (the "Per Share Merger Price") equal to the sum of (i) seventeen
dollars and seventy five cents ($17.75), plus (ii) the amount per fully diluted
share of the gain, if any, realized by Commercial Bank on the sale prior to the
Closing (as defined herein) of the business of its International Banking Group.
Such gain shall be determined net of the costs incurred in selling such business
and the net book value of any assets transferred in such sale, in accordance
with generally accepted accounting principles.
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(b) Each share of Commercial Bank Common held in the treasury of
Commercial Bank or by any direct or indirect subsidiary of Commercial Bank
immediately prior to the Effective Time shall be canceled and shall not be
considered in determining the allocation of any consideration in the Merger.
(c) The stock transfer books of Commercial Bank shall be closed, and no
share transfers will be permitted after the Effective Time. 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 Commercial Bank Common shall cease to be
outstanding and be canceled.
(d) If holders of Commercial Bank Common are entitled to require
appraisal of their shares under applicable Corporate Law, issued and outstanding
shares of Commercial Bank Common held by a dissenting holder who has perfected
the right to obtain an appraisal of his shares 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
pursuant to applicable Corporate Law; provided, however, that each share of
Commercial Bank 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 thereafter have only
such rights as are provided under applicable Corporate Law.
(e) Any options to purchase shares of Commercial Bank Common
("Commercial Bank Options") which are outstanding immediately prior to the
Effective Time and exercisable at a price less than the Per Share Merger Price
may be surrendered to Commercial Bank as of the Closing Date. FBA shall pay for
each share of Commercial Bank Common covered by such a surrendered option an
amount equal to the difference between the Per Share Merger Price and the
exercise price per share of the options surrendered. All Commercial Bank Options
that are not exercised or surrendered in accordance with the preceding sentence
shall be canceled as of the Effective Time.
(f) At the Effective Time, the outstanding shares of common stock of
Newco shall be converted into an equal number of shares of Commercial Bank
Common, so that immediately following the effective time of the Merger, the
number of outstanding shares of common stock of Commercial Bank shall be equal
to the number of outstanding shares of common stock of Newco immediately prior
to the Merger.
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.
Section 1.05. The Closing Date. At FBA's election, the Closing shall
take place on either (i) one of the last five (5) business days of the month or
(ii) the first business day of the month following the month, in either 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 Commercial Bank and
FBA may agree (the "Closing Date"). The Merger shall be effective upon the
filing of the Merger Agreement with the Secretary of State of the State of
California in accordance with the California Corporations Code (the "Effective
Time").
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Section 1.06. Actions At Closing (a) At the Closing, Commercial Bank
shall deliver to FBA:
(i) certified copies of the Articles of Incorporation and
Bylaws of Commercial Bank;
(ii) a certificate signed by an appropriate officer of
Commercial Bank 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 Commercial Bank'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) tax clearance certificates with regard to Commercial
Bank, issued by the Franchise Tax Board of the State of California,
dated a recent date, satisfactory in form and substance to FBA; and
(v) a legal opinion from counsel for Commercial Bank with
respect to the matters listed in Exhibit 1.06(a) hereto, in form
reasonably satisfactory to FBA and its counsel.
(b) At the Closing, FBA shall deliver to Commercial Bank:
(i) 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 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;
(ii) certified copies of the resolutions of the Board of
Directors of each of FBA and Newco, establishing the requisite
approvals of each of them under applicable Corporate Law of this
Agreement, the Merger and the other transactions contemplated hereby;
and
(iii) a legal opinion from counsel for FBA with respect to the
matters listed in Exhibit 1.06(b) hereto, in form reasonably
satisfactory to Commercial Bank and its counsel.
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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 Commercial Bank Common a letter of transmittal in form
reasonably satisfactory to Commercial Bank (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) and instructions for
use in effecting the surrender of certificates, and FBA shall promptly pay the
appropriate consideration to former holders of Commercial Bank Common who make
proper delivery of certificates or comply with FBA's reasonable instructions and
requirements with respect to any certificate that has been lost or stolen.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMMERCIAL BANK
Commercial Bank represents and warrants to FBA as follows:
Section 2.01. Organization and Capital Stock (a) Commercial Bank 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. Commercial Bank's deposits are insured by the
Federal Deposit Insurance Corporation ("FDIC").
(b) As of the date hereof, the authorized capital stock of Commercial
Bank consists of (i) 4,000,000 shares of Commercial Bank Common, of which
1,389,372 shares are outstanding, duly and validly issued, fully paid and
non-assessable, and 2,000,000 shares of serial preferred stock, none of which is
outstanding. None of the outstanding shares of Commercial Bank Common has been
issued in violation of any preemptive rights. Each certificate representing
shares of Commercial Bank Common issued 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 Commercial Bank only upon receipt
of an affidavit of lost stock certificate and a bond sufficient to indemnify
Commercial Bank against any claim that may be made against it on account of the
alleged loss, theft or destruction of a certificate or the issuance of a
replacement certificate.
(c) Except as disclosed in Section 2.01(c) of that certain document
delivered by Commercial Bank to FBA entitled "Disclosure Schedule" and executed
by both Commercial Bank and FBA concurrently with the execution and delivery of
this Agreement (the "Disclosure Schedule"), there are no shares of capital stock
or other equity securities of Commercial Bank 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 Commercial Bank or
contracts, commitments, understandings or arrangements by which Commercial Bank
is or may be obligated to issue additional shares of its capital stock.
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Section 2.02. Authorization; No Defaults. Commercial Bank's Board of
Directors has by all requisite action approved this Agreement and the Merger and
authorized the execution on its behalf by its duly authorized officers of this
Agreement and the performance by Commercial Bank of its obligations hereunder.
Nothing in the Articles of Incorporation or Bylaws of Commercial Bank or any
other agreement, instrument, decree, proceeding, law or regulation (except as
specifically referred to in this Agreement) by or to which Commercial Bank or
any of its assets is bound or subject prohibits or inhibits Commercial Bank 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
Commercial Bank and constitutes the legal, valid and binding obligation of
Commercial Bank, enforceable against Commercial Bank in accordance with its
terms. Commercial Bank is not in default under nor in violation of any provision
of its 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 Commercial Bank.
Section 2.03. Commercial Bank Subsidiaries. Commercial Bank has no
direct and indirect subsidiaries. Except as disclosed in Section 2.03 of the
Disclosure Schedule, Commercial Bank is not a party to any partnership or joint
venture or nor does it own an equity interest in any other business or
enterprise.
Section 2.04. Financial Information. The audited balance sheets of
Commercial Bank as of December 31, 1999 and related income statements and
statements of changes in shareholders' equity and of cash flows for the three
years ended December 31, 1999, together with the notes thereto, in the form
previously furnished to FBA; and Commercial Bank's year-end and quarter-end
Reports of Condition and Reports of Income for 1999 and for the three month
period ended March 31, 2000, respectively, as filed with the Department of
Financial Institutions of the State of California (the "Financial Institutions
Department") (such financial statements and notes collectively referred to
herein as the "Commercial Bank Financial Statements"), have been or will be
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 for Commercial Bank's reports) and fairly present
or will fairly present the financial position and the results of operations,
changes in shareholders' equity and cash flows of Commercial Bank as of the
dates and for the periods indicated.
Section 2.05. Absence of Changes. Since March 31, 2000 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of Commercial Bank, nor have there been
any events or transactions having such a material adverse effect which should be
disclosed in order to make the Commercial Bank Financial Statements not
misleading. Since November 15, 1999 (the date of the most recent examination of
Commercial Bank by the Financial Institutions Department and/or the FDIC), there
has been no material adverse change in Commercial Bank's financial condition,
results of operations or business except for any such changes as are disclosed
in Commercial Bank's Reports of Condition and Income filed with the FDIC since
such date.
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Section 2.06. Regulatory Enforcement Matters. Except as disclosed in
Section 2.06 of the Disclosure Schedule, Commercial Bank 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 Commercial Bank.
Section 2.07. Tax Matters. (a) Commercial Bank has filed all federal,
state, local and foreign 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 Commercial Bank 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.
(b) Commercial Bank has not (i) executed an extension or waiver that is
currently in effect with respect to any statute of limitations on the assessment
or collection of any tax; (ii) entered into any tax sharing or tax allocation
agreement or been a part of a consolidated group filing a consolidated tax
return (other than a group of which Commercial Bank was the parent); (iii)
become liable for a tax of any other person or entity pursuant to Treasury
Regulation 1.1502-6 (or any similar provision of state, local or foreign laws)
as a transferee or successor or by contract or otherwise; or (iv) made any
payment, become obligated to make any payment or been party to a contract or
agreement that would obligate it to make any payment that would be disallowed as
a deduction under Section 280G or 162(m) of the Internal Revenue Code.
(c) All material elections with respect to taxes affecting Commercial
Bank have been and will be timely made.
Section 2.08. Litigation. Except as disclosed in Section 2.08 of the
Disclosure Schedule, there is no litigation, claim, investigation, governmental
inquiry or other proceeding pending or, to the best of Commercial Bank's
knowledge, threatened against Commercial Bank, or to which the property of
Commercial Bank is or would be subject.
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other
Agreements. Section 2.09 of the Disclosure Schedule specifically identifies the
following:
(a) all real property owned by Commercial Bank and the principal
buildings and structures located thereon, together with a legal description of
such property, and each lease of real property to which Commercial Bank 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 Commercial Bank, exclusive of deposit agreements with customers of
Commercial Bank, agreements for the purchase of federal funds and repurchase
agreements, in each case entered into in the ordinary course of business;
(c) all agreements, loans, contracts, leases, guaranties, letters of
credit, lines of credit or commitments of Commercial Bank not referred to
elsewhere in this Section 2.09 which:
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(i) involve payment by Commercial Bank of more than $150,000
(other than loans, loan commitments or letters of credit);
(ii) involve payments based on profits of Commercial Bank;
(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;
(v) materially affect the business or financial condition of
Commercial Bank; or
(vi) require the consent or approval of any third party for
the Merger to be consummated.
(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
Commercial Bank 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 Commercial Bank;
(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 $75,000;
(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 Commercial Bank on
thirty (30) days written notice or less without any payment by reason of such
termination; and
(g) the name and annual salary as of December 31, 1999 of each director
or employee of Commercial Bank with a salary in excess of $100,000.
Copies of each document, plan and contract identified in Section 2.09
of the Disclosure Schedule are appended to such Schedule and are hereby
incorporated into and constitute a part of the Disclosure Schedule.
Section 2.10. Reports. Commercial Bank has filed all reports and
statements, together with any amendments required to be made with respect
thereto, required to be filed with the Financial Institutions Department, the
FDIC and all other federal and state banking or securities authorities and any
other governmental authority with jurisdiction over Commercial Bank. As of the
dates thereof, such reports and documents, including any financial statements,
exhibits and schedules, complied in all material respects with applicable
statutes, rules and regulations 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 Commercial Bank, as reflected in
the latest balance sheet of Commercial Bank included in the Commercial Bank
Financial Statements, are carried in accordance with generally accepted
accounting principles.
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Section 2.12. Loan Portfolio. (a) All loans and discounts shown on the
Commercial Bank Financial Statements at March 31, 2000 or which were or will be
entered into after March 31, 2000 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, in accordance with sound lending practices,
and they are not subject to any known defenses, setoffs or counterclaims,
including without limitation any such as are afforded by usury or truth in
lending laws;
(b) 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 enforceable, valid, true and genuine and what they
purport to be;
(c) Commercial Bank has 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 interfere
with the collection of any loan. All loans and loan commitments extended by
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 Commercial Bank's customary and ordinary
past practices; and
(d) the reserve for loan losses reflected in the Commercial Bank
Financial Statements as of March 31, 2000 is adequate in all material respects
under the requirements of generally accepted accounting principles to provide
for losses on loans outstanding as of March 31, 2000.
Section 2.13. Employee Matters and ERISA.
(a) Commercial Bank has not entered into any collective bargaining
agreement with any labor organization with respect to any group of employees,
and to the best of Commercial Bank's knowledge there is no present effort nor
existing proposal to attempt to unionize any group of employees of Commercial
Bank.
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(b)(i) Commercial Bank has been and is 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 Commercial Bank is not engaged in any unfair labor practice;
(ii) there is no unfair labor practice complaint against Commercial Bank pending
or, to the best of Commercial Bank's knowledge, threatened before the National
Labor Relations Board; (iii) there is no labor dispute, strike, slowdown or
stoppage actually pending or, to the best of Commercial Bank's knowledge,
threatened against or directly affecting Commercial Bank; and (iv) Commercial
Bank 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 Disclosure Schedule,
Commercial Bank 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, fringe benefit or other written or
oral benefit, contract or arrangement with one or more former or current
employees of Commercial Bank (collectively, the "Employee Plans"). No present or
former employee of Commercial Bank has been charged with breaching nor has
breached a fiduciary duty under any Employee Plan. Commercial Bank 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 Disclosure Schedule, Commercial Bank doe not maintain, contribute
to, or participate in any plan that provides health, major medical, disability,
life insurance, severance, salary continuation or other benefits to one or more
former employees of Commercial Bank.
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(d) All liabilities of the Employee Plans have been funded on the basis
of consistent methods in accordance with sound actuarial assumptions and
practices, and no Employee Plan, at the end of any plan year, or at March 31,
2000, 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 Commercial Bank
Financial Statements, Commercial Bank has 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 Commercial Bank would be liable, except as is
reflected in the Commercial Bank Financial Statements. Commercial Bank 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.
Section 2.14. Title to Properties; Licenses; Insurance. (a) Commercial
Bank has marketable title, insurable at standard rates, free and clear of all
liens, charges, encumbrances (except taxes which are not yet payable and liens,
charges or encumbrances reflected in the Commercial Bank Financial Statements),
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 Commercial Bank, rights of
redemption under applicable law, to all of their real properties;
(b) all leasehold interests for real property and material personal
property used by Commercial Bank in its business are held pursuant to lease
agreements which are valid and enforceable in accordance with their terms;
(c) 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 best of Commercial Bank's knowledge, threatened with respect
to any of such properties;
(d) Commercial Bank has valid title or other ownership rights under
licenses to all material intangible personal or intellectual property used 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
(e) all material insurable properties owned or held by Commercial Bank
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 Commercial Bank
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.
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During the period of Commercial Bank's ownership, lease or operation
(on its own behalf or in a fiduciary capacity) of all properties (and, to the
best of Commercial Bank's knowledge, during periods prior to such ownership,
lease or operation), neither the conduct nor operation of Commercial Bank nor
any condition of any property violates or violated any Environmental Law in any
respect material to the business of Commercial Bank, 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 Commercial Bank, of any Environmental Law or obligate (or
potentially obligate) Commercial Bank to remedy, stabilize, neutralize or
otherwise alter the environmental condition of any property, where the aggregate
cost of such actions would be material to Commercial Bank. Commercial Bank has
not received notice from any person or entity that Commercial Bank or the
operation or condition of any property ever owned, leased or operated by
Commercial Bank on its own behalf or in a fiduciary capacity, are or were in
violation of any Environmental Law, or that Commercial Bank 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 Laws and Regulations. Commercial Bank has
all licenses, franchises, permits and other governmental authorizations that are
legally required to enable them to conduct their respective businesses, 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 2.17. Brokerage. Except as disclosed in Section 2.17 of the
Disclosure Schedule, there are no claims, agreements or obligations for
brokerage commissions, finders' fees, financial advisory fees, investment
banking fees or similar compensation in connection with the transactions
contemplated by this Agreement payable by Commercial Bank.
Section 2.18. No Undisclosed Liabilities. Commercial Bank 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 Commercial Bank
giving rise to any such liability), except (i) liabilities reflected in the
Commercial Bank Financial Statements and (ii) liabilities of the same type
incurred in the ordinary course of business since March 31, 2000.
Section 2.19. Statements True and Correct. None of the information
supplied or to be supplied by Commercial Bank for inclusion in any document to
be filed with any regulatory authority in connection with the transactions
contemplated hereby or in the Proxy Statement described in Section 4.03 will, at
the respective times such documents are filed or distributed, 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. All documents
that Commercial Bank is responsible for filing with any regulatory authority in
connection with the transactions contemplated hereby will comply with applicable
laws, rules and regulations.
Section 2.20. Commitments and Contracts. Except as disclosed in Section
2.20 of the Disclosure Schedule (and with a true and correct copy of the
document or other item in question having been made available to FBA for
inspection), Commercial Bank is not a party or subject to any of the following
(whether written or oral, express or implied):
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(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 Commercial Bank Financial Statements relating to the
borrowing of money by Commercial Bank or the guarantee by Commercial
Bank of any obligation (other than trade payables or instruments
related to transactions entered into in the ordinary course of
business, such as deposits, federal funds borrowings and repurchase
agreements), other than agreements, indentures or instruments providing
for annual payments of less than $75,000; or
(iii) any contract containing covenants which limit the
ability of Commercial Bank 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, Commercial Bank may carry on its business.
Section 2.21. Material Interest of Certain Persons. Except as disclosed
in Section 2.21 of the Disclosure Schedule:
(a) no officer or director of Commercial Bank 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 Commercial Bank; and
(b) all outstanding loans from Commercial Bank to any present officer,
director, principal shareholder, employee or any associate or related interest
of any such person were approved by or reported to the Board of Directors in
accordance with all applicable laws and regulations.
Section 2.22. Conduct to Date. From and after December 31, 1999 through
the date of this Agreement, except as disclosed in Section 2.22 of the
Disclosure Schedule, Commercial Bank has not done the following:
(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 properly classified under
generally accepted accounting principles applied on a consistent basis
as long-term debt on the balance sheets of Commercial Bank;
(iii) effected any stock split or adjusted, combined,
reclassified or otherwise changed its capitalization;
(iv) declared, set aside or paid any cash or stock 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;
<PAGE>
(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 accordance with its terms 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, (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, taking of property by any governmental
authority, flood, windstorm, embargo, riot, act of God, act of war or
other casualty or event, whether or not covered by insurance;
(x) canceled or compromised any debt, except for debts
charged off or compromised in accordance with past practice;
(xi) entered into any material transaction, contract or
commitment outside the ordinary course of its business; or
(xii) made or guaranteed any loan to any of the Employee Plans.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FBA
FBA represents and warrants to Commercial Bank as follows:
Section 3.01. Organization 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, and it is
registered as a bank holding company with the Board of Governors of the Federal
Reserve System (the "Federal Reserve").
Section 3.02. Authorization. The Board of Directors of FBA 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 of its obligations hereunder. Nothing in the Articles of
Incorporation or Bylaws of FBA or any other agreement, instrument, decree,
proceeding, law or regulation (except as specifically referred to in this
Agreement) by or to which FBA any of its subsidiaries is bound or subject
prohibits or inhibits 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.
Section 3.03. Litigation. There is no litigation, claim or other
proceeding pending or, to the best of FBA's knowledge, threatened that would
prohibit FBA from consummating the transactions contemplated by this Agreement.
Section 3.04. Statements True and Correct. None of the information
supplied or to be supplied by FBA for inclusion in any document to be filed with
any regulatory authority in connection with the transactions contemplated hereby
will, at the respective times such documents are filed 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. All documents that FBA
is responsible for filing with any other regulatory authority in connection with
the transactions contemplated hereby will comply with applicable laws, rules and
regulations.
<PAGE>
ARTICLE IV
AGREEMENTS OF COMMERCIAL BANK
Section 4.01. Business in Ordinary Course.
(a) Commercial Bank shall continue to carry on after the date hereof
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, Commercial Bank will not:
(i) declare or pay any dividend or make any other distribution
to shareholders, whether in cash, stock or other property, except in
amounts not exceeding any dividends actually declared and paid during
the comparable periods of the preceding year as set forth in Section
4.01 of the Disclosure Schedule;
(ii) issue any capital stock or other stock or any options,
warrants, or other rights to subscribe for or purchase capital stock or
any securities convertible into or exchangeable for any capital stock;
(iii) directly or indirectly redeem, purchase or otherwise
acquire any Commercial Bank Common or any other stock of Commercial
Bank;
(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;
(v) amend 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; provided, however, that
Commercial Bank shall be permitted to engage in a transaction disposing
of the portion of its business conducted as of February 29, 2000 by its
International Banking Group and any assets and liabilities directly
related thereto, provided that such transaction is conducted in
accordance with all legal and regulatory requirements applicable to
Commercial Bank and does not materially and adversely affect the
business, operations or financial condition of Commercial Bank;
(vi) engage in any transaction with (A) a person or entity
directly or indirectly controlling, controlled by or under common
control with Commercial Bank or (B) an officer, director or direct or
indirect beneficial owner of 10% or more of a class of Commercial Bank
Common; or
<PAGE>
(vii) make any material change in tax or accounting methods or
systems of internal accounting controls, except as appropriate to
conform to changes in tax laws and regulations, generally accepted
accounting policies or regulatory accounting requirements.
(b) Commercial Bank 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;
(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;
(iii) make or commit to make any new loan or letter of credit
or any new or additional discretionary advance under any existing line
of credit, in principal amounts in excess of $1,000,000 or that would
increase the aggregate credit outstanding to any one borrower (or group
of affiliated borrowers) to more than $1,500,000 (excluding for this
purpose any accrued interest or overdrafts);
(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;
(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, in each case in the ordinary course of
business;
(vi) except in the ordinary course of business, place on any
of its assets or properties any mortgage, pledge, lien, charge, or
other encumbrance;
(vii) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to Commercial Bank or any
claims which Commercial Bank may possess, or waive any material rights
of substantial value;
(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;
<PAGE>
(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 Commercial Bank 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;
(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 Commercial Bank;
(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 Commercial Bank;
(xii) purchase any real or personal property or make any other
capital expenditure where the amount paid or committed therefor is in
excess of $50,000; or
(xiii) increase or decrease the rate of interest paid on
deposits, except in a manner consistent with past practices.
(c) Commercial Bank 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 Commercial
Bank contained in Article II hereof, if such representations and warranties were
given immediately following such transaction or action.
(d) Commercial Bank shall promptly notify FBA of the occurrence of any
matter or event known to and directly involving Commercial Bank that is
materially adverse to the business, operations, properties, assets, or condition
(financial or otherwise) of Commercial Bank.
(e) Commercial Bank shall not solicit or encourage, 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 Commercial Bank Common or other securities or assets
of Commercial Bank, except for the transaction contemplated in subsection (a)(v)
above ("Acquisition Proposal"). Commercial Bank shall promptly advise FBA of its
receipt of any Acquisition Proposal or inquiry regarding a potential acquisition
transaction and the substance thereof.
<PAGE>
Section 4.02. Breaches. Commercial Bank 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. Meeting of Shareholders. Commercial Bank shall cause to
be duly called and held, as soon as practicable, a meeting of its shareholders
(such meeting together with any adjournments thereof referred to as the
"Shareholders' Meeting") for submission of this Agreement and the Merger for
approval as required by applicable Corporate Law. Commercial Bank shall prepare,
at its sole cost and expense, a Proxy Statement (the "Proxy Statement") and take
all actions as are required in order to permit the Proxy Statement to be legally
distributed to its shareholders and to obtain the lawful approval of the Merger
by its shareholders. The Board of Directors of Commercial Bank shall recommend
the approval of the Agreement and the Merger to the shareholders, mail the Proxy
Statement to its shareholders, convene the Shareholders' Meeting and use its
best efforts to obtain prompt shareholder approval of the Agreement and the
Merger.
Section 4.04. Consummation of Agreement. Commercial Bank 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. Commercial Bank 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 Newco in making
any application with respect to which FBA determines it is necessary or
desirable for Commercial Bank to do so.
Section 4.05. Environmental Reports. Commercial Bank 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 Commercial Bank as of the date
hereof (other than space in retail and similar establishments leased by
Commercial Bank for automatic teller machines), and within ten (10) days after
the acquisition or lease of any real property acquired or leased by Commercial
Bank 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, Commercial Bank 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 Commercial Bank 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,
health or safety concerns, in the aggregate, exceed the sum of $250,000 as
reasonably estimated by an environmental expert retained for such purpose by FBA
and reasonably acceptable to Commercial Bank, or if the cost of such actions and
measures cannot be so estimated with a reasonable degree of certainty by such
expert to be $250,000 or less, 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.
<PAGE>
Section 4.06. Access to Information. Commercial Bank shall permit FBA
reasonable access, in a manner which will avoid undue disruption or interference
with Commercial Bank's normal operations, to its properties, and Commercial Bank
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 Commercial Bank 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), correspondence and 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 of Third Parties. Commercial Bank shall obtain
all consents of third parties necessary or desirable for the consummation of the
Merger.
Section 4.08. Subsequent Financial Statements. As soon as available
after the date hereof, Commercial Bank shall deliver to FBA all monthly
unaudited balance sheets and profit and loss statements of Commercial Bank
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 Commercial Bank Financial
Statements"). The Subsequent Commercial Bank 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, Commercial Bank 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 Commercial
Bank will perform all of its obligations thereunder.
ARTICLE V
AGREEMENTS OF FBA
Section 5.01. Regulatory Approvals. FBA shall promptly file all
required regulatory applications and use its best efforts to obtain the approval
thereof, including but not limited to the approval of the Federal Reserve. FBA
shall keep Commercial Bank reasonably informed as to the status of such
applications and make available to Commercial Bank, upon reasonable request,
copies of such applications and any supplementally filed materials.
<PAGE>
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 Commercial Bank 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. Employee Benefits. FBA shall provide the benefits
described in this Section 5.04 with respect to each person who remains an
employee of Commercial Bank 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 5.04 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 Commercial Bank
after the Effective Time. Commercial Bank 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 5.04 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 5.04 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 Commercial Bank, 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. Nothing in this Agreement
shall obligate FBA, Commercial Bank or any other entity to employ any person or
to continue to employ any person for any period of time.
Section 5.05. Merger Agreement. As soon as practicable after the
execution of this Agreement, FBA will cause Newco 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 Newco to perform all of its obligations thereunder.
<PAGE>
Section 5.06. Indemnification. (a) For four years after the Closing
Date, FBA will cause Commercial Bank to indemnify, defend and hold harmless the
present and former officers, directors, employees and agents of Commercial Bank
(each, an "Indemnified Party") against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions related to their positions at
Commercial Bank occurring on or prior to the Closing Date (including, without
limitation, the transactions contemplated by this Agreement) to the extent
permitted by applicable corporate laws and required by Bank's Articles of
Incorporation as in effect on February 29, 2000.
(b) If after the Closing Date Commercial Bank 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 cause Commercial Bank's successors and assigns to assume any
remaining obligations set forth in this Section 5.06. If Commercial Bank shall
liquidate, dissolve or otherwise wind up its business, then FBA shall indemnify,
defend and hold harmless each Indemnified Party to the same extent and on the
same terms that Commercial Bank was so obligated pursuant to this Section 5.06.
(c) FBA shall purchase insurance in the form of an extension of
coverage under Commercial Bank's existing insurance policy Number 45483693
issued by Progressive Casualty Insurance Company, insuring the Indemnified
Parties against such losses, expenses, claims, damages or liabilities, provided
that the cost of doing so does not substantially exceed the estimates therefor
previously provided to FBA by Commercial Bank.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.01. Conditions to the Obligations of FBA. The obligations of FBA
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 Commercial Bank 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) Commercial Bank 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 approval of the
shareholders of Commercial Bank and all legally required regulatory approvals,
shall have been obtained, and all required waiting periods shall have expired;
(e) FBA shall have received the environmental reports required by
Section 4.05 hereof and shall not have terminated this Agreement pursuant to
Section 7.05 hereof;
(f) FBA shall have received all documents required to be received from
Commercial Bank on or prior to the Closing Date, all in form and substance
reasonably satisfactory to FBA;
(g) shareholders owning no more than fifteen percent (15%) of the
outstanding Commercial Bank Common shall have perfected the right to dissent
from the Merger; and
(h) the Commercial Bank Financial Statements shall not be inaccurate in
any material respect.
Section 6.02. Conditions to the Obligations of Commercial Bank. The
obligations of Commercial Bank to effect the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver
by Commercial Bank) prior to or on the Closing Date of the following conditions:
(a) the representations and warranties made by FBA in this Agreement
shall be true in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made or given
on the Closing Date;
(b) FBA shall have performed and complied in all material respects with
all of 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 Commercial Bank and all legally required regulatory approvals,
shall have been obtained, and all required waiting periods shall have expired;
and
<PAGE>
(e) Commercial Bank 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 Commercial Bank.
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 Commercial Bank 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 Commercial Bank, 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 Commercial Bank 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 shareholders of Commercial
Bank 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 5.01 hereof should be finally denied or
disapproved by a regulatory authority, then this Agreement thereupon shall be
deemed terminated and canceled; provided, however, that a request for additional
information or undertaking by FBA, as a condition for approval, shall not be
deemed to be a denial or disapproval so long as FBA diligently provides the
requested information or undertaking. In the event an application is denied
pending an appeal, petition for review or similar such act on the part of FBA
(hereinafter referred to as the "Appeal") then the application will be deemed
denied unless FBA prepares and timely files an Appeal and continues the
appellate process for purposes of obtaining the necessary approval.
<PAGE>
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 Commercial Bank.
Section 7.06. Regulatory Enforcement Matters. In the event that
Commercial Bank 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
Commercial Bank.
Section 7.07. Unilateral Termination. If the Closing Date shall not
have occurred on or prior to the day which is 240 days after the date of this
Agreement, then this Agreement may be terminated by any party by giving written
notice to the other parties.
Section 7.08. Acquisition Proposal. Commercial Bank may terminate this
Agreement if its Board of Directors shall have approved an Acquisition Proposal
after determining, upon the basis of the written legal advice of outside counsel
(who may be Commercial Bank's regular outside counsel), that such approval is
required in the exercise of its fiduciary obligations under applicable law.
Section 7.09. Liquidated Damages. In the event that either FBA or
Commercial Bank shall have breached any provision of this Agreement and the
other party shall have properly terminated this Agreement pursuant to Section
7.02, then the party breaching this Agreement shall be liable to the
non-breaching party for liquidated damages in the amount of $500,000.00. The
amount of liquidated damages has been agreed to by the parties based upon their
good faith analysis of the range of actual damages likely to be sustained by a
non-breaching party, recognizing that the actual damages, including but not
limited to fees of attorneys and other advisers, other out-of-pocket costs,
opportunity costs and other potential direct and consequential damages would be
difficult to ascertain with certainty; that the amount of liquidated damages is
a reasonable amount as of the time this Agreement has been negotiated; and that
no portion of such damages is intended to operate as a penalty to any party.
<PAGE>
Section 7.10. Break-up Fee. (a) Commercial Bank hereby agrees to pay to
FBA, and FBA shall be entitled to payment of, a fee in the amount of
$1,000,000.00 (the "Fee") in immediately available funds within five business
days after a proper written demand therefor by FBA following the occurrence of a
Purchase Event (as defined herein), provided, that the right to receive the Fee
shall terminate if any of the following (a "Fee Termination Event") occurs prior
to the occurrence of a Purchase Event: (i) the Effective Time of the Merger;
(ii) termination of this Agreement in accordance with the provisions hereof if
such termination occurs prior to the occurrence of a Preliminary Purchase Event
(as defined herein), except a termination by FBA pursuant to Section 7.02
hereof; or (iii) the expiration of eighteen months after termination of this
Agreement if such termination follows the occurrence of a Preliminary Purchase
Event or a termination by FBA pursuant to Section 7.02 hereof (provided that if
a Preliminary Purchase Event continues or occurs beyond such termination, the
Fee Termination Event shall be eighteen months after the expiration of the Last
Preliminary Purchase Event but in no event more than 24 months after such
termination). The "Last Preliminary Purchase Event" shall mean the last
Preliminary Purchase Event to expire.
(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Commercial Bank, without having received FBA's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as defined herein) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange Act of 1934
and the rules and regulations thereunder) other than FBA or a
subsidiary of FBA (an "FBA Subsidiary"), or the Board of Directors of
Commercial Bank shall have approved or recommended that the
shareholders of Commercial Bank approve or accept any Acquisition
Transaction with any person other than FBA or an FBA Subsidiary. For
purposes of this Agreement, "Acquisition Transaction" shall mean (A) a
merger, consolidation or any similar transaction involving Commercial
Bank, (B) a purchase, lease or other acquisition of all or
substantially all of the assets of Commercial Bank, (C) a purchase or
other acquisition in compliance with applicable laws and regulations
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of Commercial Bank, or (D) any transaction substantially similar in
effect to any of the foregoing;
(ii)(A) any person (other than FBA or an FBA Subsidiary) shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of any class of voting securities of
Commercial Bank (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto under Section 13(d) of
the Exchange Act and the rules and regulations thereunder), or (B) any
group (as such term is defined in Section 13(d) of the Exchange Act)
other than a group of which FBA or an FBA Subsidiary is a member, shall
have been formed that beneficially owns 10% or more of any class of
voting securities of Commercial Bank;
(iii) any person other than FBA or an FBA Subsidiary shall have made a
bona fide proposal to Commercial Bank or its shareholders, by public
announcement or written communication, to engage in an Acquisition
Transaction (including, without limitation, any transaction which any
person other than FBA or an FBA Subsidiary shall have commenced, or
shall have filed a registration statement under the Securities Act of
1933, as amended, with respect to, a tender offer or exchange offer to
purchase any shares of Commercial Bank Common such that, upon
consummation of the offer, such person would own or control 25% or more
of the then outstanding shares of Commercial Bank Common (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively);
<PAGE>
(iv) after a proposal is made by a third party to Commercial Bank or
its shareholders to engage in an Acquisition Transaction, Commercial
Bank shall have breached any covenant or obligation contained in this
Agreement, such breach would entitle FBA to terminate this Agreement
under Section 7.02 of this Agreement and such breach shall not have
been cured within 30 days after written notice thereof from FBA;
(v) any person other than FBA or an FBA Subsidiary, other than in
connection with a transaction to which FBA has given its prior written
consent, shall have filed an application or notice with a governmental
authority or regulatory or administrative agency or commission,
domestic or foreign, for approval to engage in an Acquisition
Transaction; or
(vi) the holders of Commercial Bank Common shall not have approved this
Agreement at the meeting of shareholders held for the purpose of voting
on this Agreement, such meeting shall not have been held or shall have
been canceled prior to termination of this Agreement, or Commercial
Bank's Board of Directors shall have withdrawn or modified in a manner
adverse to FBA the recommendation of Commercial Bank's Board of
Directors with respect to this Agreement, in each case after any person
(other than FBA or an FBA Subsidiary) shall have (A) made or disclosed
an intention to make a proposal to engage in an Acquisition Transaction
or (B) commenced a Tender Offer or an Exchange Offer.
(c) the Term "Purchase Event" shall mean either of the following events
or transactions occurring after the date hereof:
(i) the acquisition in compliance with applicable laws and regulations
by any person, other than FBA or an FBA Subsidiary, alone or together
with such person's affiliates and associates, or any group (as defined
in Section 13(d) of the Exchange Act), of beneficial ownership of 25%
or more of the then outstanding voting securities of Commercial Bank;
or
(ii) the occurrence of a Preliminary Purchase Event described in
Section 7.10(b)(i), except that the percentage referred to in clause
(C) shall be 25%.
(d) Commercial Bank shall notify FBA promptly in writing of its
knowledge of the occurrence of any Preliminary Purchase Event or Purchase Event,
and FBA shall be required to make a written demand for payment of the fee not
later than 90 days following its receipt of notice from Commercial Bank;
provided, however, that the giving of notice by Commercial Bank shall not be a
condition precedent to the right of FBA to receive payment of the Fee.
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.01 Confidential Information. The parties acknowledge the
confidential and proprietary nature of the "Information" (as herein defined)
which has heretofore been exchanged and which will be received from each other
hereunder and agree to hold and keep the same confidential. Such Information
will include any and all financial, technical, commercial, marketing, customer
or other information concerning the business, operations and affairs of a party
that may be provided to the others, irrespective of the form of the
communications, by such party's employees or agents. Such Information shall not
include information which is or becomes generally available to the public other
than as a result of a disclosure by a party or its representatives in violation
of this Agreement. The parties agree that the Information will be used solely
for the purposes contemplated by this Agreement and that such Information will
not be disclosed to any person other than employees and agents of a party who
are directly involved in implementing the Merger, who shall be informed of the
confidential nature of the Information and directed individually to abide by the
restrictions set forth in this Section 8.01. The Information shall not be used
in any way detrimental to a party, including use directly or indirectly in the
conduct of the other party's business or any business or enterprise in which
such party may have an interest, now or in the future, and whether or not now in
competition with such other party.
Section 8.02. Publicity. FBA and Commercial Bank shall cooperate with
each other in the development and distribution of all news releases and other
public disclosures concerning this Agreement and the Merger. Neither party shall
issue any news release or make any other public disclosure without the prior
consent of the other party, unless such is required by law upon the written
advice of counsel or is in response to published newspaper or other mass media
reports regarding the transaction contemplated hereby, in which latter event the
parties shall consult with each other to the extent practicable regarding such
responsive public disclosure.
Section 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: First Banks America, Inc.
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
<PAGE>
with a copy to: John S. Daniels
Attorney at Law
7502 Greenville Avenue, Suite 500
Dallas, Texas 75231
Facsimile: (214) 890-4003
(b) if to Commercial Bank: Commercial Bank of San Francisco
333 Pine Street
San Francisco, California 94104
Attention: Robert A. Fuller,
President
Facsimile: (415) 627-0325
with a copy to: McCutchen Doyle Brown & Enersen LLP
Three Embarcadero Center
San Francisco, CA 94111
Attention: Thomas G. Reddy
Facsimile: (415) 393-2286
or to such other address as any party may from time to time designate by notice
to the others.
Section 8.05. Except for the agreements set forth in Sections 5.04,
5.06, 8.01, 8.03 and 8.06, 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 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, together with the
Merger 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 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.
<PAGE>
Section 8.10. Rules of Construction. Unless the context otherwise
requires: (a) a term has the meaning assigned to it; (b) an accounting term not
otherwise defined has the meaning assigned to it in accordance with generally
accepted accounting principles; (c) "or" is not exclusive; and (d) words in the
singular may include the plural and in the plural include the singular.
Section 8.11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
Section 8.12. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. There shall be no third party beneficiaries hereof.
Section 8.13. Governing Law. This Agreement shall be governed by the
laws of the State of California and any applicable
federal laws and regulations.
IN WITNESS WHEREOF, FBA and Commercial Bank 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: Executive Vice President
COMMERCIAL BANK OF SAN FRANCISCO
By: /s/Robert A. Fuller
-----------------------
Its: President
<PAGE>
EXHIBIT 1.06(a)
Legal Opinion Matters
Commercial Bank of San Francisco ("Commercial Bank")
1. The due incorporation, valid existence and good standing of
Commercial Bank under the laws of the State of California, its power and
authority to own and operate its properties and to carry on its business as now
conducted, and its power and authority to enter into the Agreement and the
Merger Agreement and to consummate the transactions contemplated by the
Agreement and the Merger Agreement.
2. With respect to Commercial Bank: (i) the number of authorized,
issued and outstanding shares of capital stock of Commercial Bank immediately
prior to the Closing, (ii) the nonexistence of any violation of the preemptive
or subscription rights of any person, (iii) the nonexistence of any outstanding
options, warrants, or other rights to acquire, or securities convertible into,
any equity security of Commercial Bank, except as set forth in Section 2.01 of
the Agreement and (iv) the nonexistence of any obligation, contingent or
otherwise, to reacquire any shares of capital stock of Commercial Bank.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by Commercial Bank to authorize
the execution, delivery and performance of the Agreement and the Merger
Agreement, the due execution and delivery of the Agreement and the Merger
Agreement by Commercial Bank, and the Agreement and the Merger Agreement as
valid and binding obligations of Commercial Bank, enforceable against Commercial
Bank in accordance with their respective terms (subject to the provisions of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforceability of creditors' rights generally from
time to time in effect, and equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of judicial
discretion).
4. The execution of the Agreement and the Merger Agreement by
Commercial Bank and the consummation of the Merger do not violate or cause a
default under its Articles of Incorporation or Bylaws, any statute, regulation
or rule applicable to Commercial Bank or any judgment, order or decree known to
counsel against, or any material agreement known to counsel and binding upon,
Commercial Bank.
5. The receipt of all required consents, approvals, orders and
authorizations of, and registrations, declaration and filings with and notices
to, any court, administrative agency and commission and other governmental
authority and instrumentality, domestic and foreign, and every other person and
entity required to be obtained or made by Commercial Bank in connection with the
execution and delivery of the Agreement and the Merger Agreement by Commercial
Bank, the performance of its obligations thereunder and the consummation of the
transactions contemplated therein.
6. The nonexistence of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or affecting
Commercial Bank which, if adversely determined, would have a material adverse
effect upon their respective properties or assets or the consummation of the
Merger.
<PAGE>
EXHIBIT 1.06(b)
Legal Opinion Matters
First Banks America, Inc. ("FBA")
1. The due incorporation, valid existence and good standing of FBA
under the laws of the State of Delaware, its power and authority to own and
operate its properties and to carry on its business as now conducted, and its
power and authority to enter into the Agreement and the Merger Agreement and to
consummate the transactions contemplated by the Agreement and the Merger
Agreement.
2. The due incorporation or organization, valid existence and good
standing of Newco and its power and authority to enter into and consummate the
Merger Agreement.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by FBA to authorize the execution,
delivery and performance of the Agreement and the Merger Agreement, its due
execution and delivery of the Agreement and the Merger Agreement, and the
Agreement and the Merger Agreement as the valid and binding obligation of FBA,
enforceable against it in accordance with their respective terms (subject to the
provisions of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforceability of creditors' rights
generally from time to time in effect, and equitable principles relating to the
granting of specific performance and other equitable remedies as a matter of
judicial discretion).
4. The execution of the Agreement by FBA and the Merger Agreement by
Newco, and the consummation of the Merger and the other transactions
contemplated therein do not violate or cause a default under their respective
Articles of incorporation or Bylaws, any statute, regulation or rule applicable
to FBA or Newco or any judgment, order or decree known to counsel against, or
any material agreement known to counsel and binding upon, FBA or Newco.
5. The receipt of all required consents, approvals, orders and
authorizations of, and registrations, declaration and filings with and notices
to, any court, administrative agency and commission and other governmental
authority and instrumentality, domestic and foreign, and every other person and
entity required to be obtained or made by FBA or Newco in connection with the
execution and delivery of the Agreement and the Merger Agreement, the
performance of their respective obligations thereunder or the consummation of
the transactions contemplated therein.
6. The nonexistence of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or affecting FBA
or Newco which, if adversely determined, would have a material adverse effect
upon the consummation of the Merger.
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
This Agreement of Merger is entered into between Newco, a California
corporation ("Merging Corporation"), and Commercial Bank of San Francisco, a
California banking corporation ("Surviving Corporation").
1.Merging Corporation shall be merged into Surviving Corporation.
2.The outstanding shares of Surviving Corporation shall be converted
into the right to receive cash consideration of $________ per share.
3.The outstanding shares of Merging Corporation shall be converted into
an equal number of shares of Surviving Corporation, so that immediately
following the effective time of the merger, the number of outstanding shares of
common stock of the Surviving Corporation shall be equal to the number of
outstanding shares of common stock of the Merging Corporation immediately prior
to the Merger.
4.Until amended in accordance with applicable law, the Articles of
Incorporation and Bylaws of Surviving Corporation remain the same as those of
the Surviving Corporation immediately prior to the merger.
5.The effect and the effective date of the merger shall be as
prescribed by applicable law.
In Witness Whereof, the parties have executed this Agreement as of
___________ ___, 2000.
NEWCO COMMERCIAL BANK OF SAN FRANCISCO
----------------------------- -------------------------------
President President
----------------------------- -------------------------------
Secretary Secretary
<PAGE>
EXHIBIT 10(ee)
AGREEMENT AND PLAN OF REORGANIZATION
by and among
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
REDWOOD BANK,
a California banking corporation,
FIRST BANKS, INC.,
a Missouri corporation
and
FIRST BANK & TRUST,
a California banking corporation
June 29, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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. The Closing Date..................................................................... 2
Section 1.06. Actions At Closing................................................................... 2
Section 1.07. Exchange Procedures................................................................... 3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF FIRST BANKS AND FIRST BANK & TRUST
Section 2.01. Organization and Capital Stock; Standing and Authority................................ 3
Section 2.02. Authorization; No Defaults............................................................ 4
Section 2.03. First Bank & Trust Subsidiaries....................................................... 4
Section 2.04. Financial Information................................................................. 4
Section 2.05. Absence of Changes.................................................................... 5
Section 2.06. Regulatory Enforcement Matters........................................................ 5
Section 2.07. Tax Matters........................................................................... 5
Section 2.08. Litigation............................................................................ 5
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other Agreements.................... 5
Section 2.10. Reports............................................................................... 6
Section 2.11. Investment Portfolio.................................................................. 6
Section 2.12. Loan Portfolio........................................................................ 7
Section 2.13. Employee Matters and ERISA............................................................ 7
Section 2.14. Title to Properties; Insurance........................................................ 7
Section 2.15. Compliance with Laws.................................................................. 8
Section 2.16. Brokerage............................................................................. 8
Section 2.17. No Undisclosed Liabilities............................................................ 8
Section 2.18. Statements True and Correct........................................................... 8
Section 2.19. Commitments and Contracts............................................................. 9
Section 2.20. Material Interest of Certain Persons.................................................. 9
Section 2.21. Conduct to Date....................................................................... 9
Section 2.22. Environmental Matters.................................................................10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FBA AND REDWOOD
<S> <C> <C>
Section 3.01. Organization and Capital Stock....................................................... 11
Section 3.02. Authorization; No Defaults........................................................... 12
Section 3.03. FBA Subsidiaries..................................................................... 12
Section 3.04. Financial Information................................................................ 13
Section 3.05. Absence of Changes................................................................... 13
Section 3.06. Regulatory Enforcement Matters....................................................... 13
Section 3.07. Tax Matters.......................................................................... 13
Section 3.08. Litigation........................................................................... 14
Section 3.09. Properties, Contracts, Employee Benefit Plans and Other Agreements................... 14
Section 3.10. Reports.............................................................................. 15
Section 3.11. Investment Portfolio................................................................. 15
Section 3.12. Loan Portfolio....................................................................... 15
Section 3.13. Employee Matters and ERISA........................................................... 16
Section 3.14. Title to Properties; Insurance....................................................... 16
Section 3.15. Compliance with Laws................................................................. 16
Section 3.16. Brokerage............................................................................ 17
Section 3.17. No Undisclosed Liabilities........................................................... 17
Section 3.18. Statements True and Correct.......................................................... 17
Section 3.19. Commitments and Contracts............................................................ 17
Section 3.20. Material Interest of Certain Persons................................................. 18
Section 3.21. Conduct to Date...................................................................... 18
Section 3.22. Environmental Matters.................................................................19
ARTICLE IV - AGREEMENTS OF FIRST BANKS AND FIRST BANK & TRUST
Section 4.01. Business in Ordinary Course.......................................................... 20
Section 4.02. Breaches............................................................................. 21
Section 4.03. Submission to FBA's Stockholders..................................................... 21
Section 4.04. Consummation of Agreement............................................................ 22
Section 4.05. Access to Information................................................................ 22
Section 4.06. Consents to Contracts and Leases..................................................... 22
Section 4.07. Subsequent Financial Statements...................................................... 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V - AGREEMENTS OF FBA AND REDWOOD
<S> <C> <C>
Section 5.01. Business in Ordinary Course.......................................................... 23
Section 5.02. Regulatory Approvals................................................................. 24
Section 5.03. Breaches............................................................................. 24
Section 5.04. Consummation of Agreement............................................................ 24
Section 5.05. Access to Information................................................................ 24
Section 5.06. Proxy Statement and Stockholders' Meeting............................................ 25
Section 5.07. Subsequent Financial Statements.......................................................25
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01. Conditions to the Obligations of FBA and Redwood..................................... 26
Section 6.02. Conditions to the Obligations of First Banks and First Bank & Trust................. 26
ARTICLE VII - TERMINATION
Section 7.01. Mutual Agreement..................................................................... 27
Section 7.02. Breach of Agreements................................................................. 27
Section 7.03. Failure of Conditions................................................................ 27
Section 7.04. Denial of Regulatory Approval........................................................ 28
Section 7.05. Regulatory Enforcement Matters....................................................... 28
Section 7.06. Unilateral Termination............................................................... 28
Section 7.07. Damages and Limitation on Damages.................................................... 28
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01. Confidential Information............................................................. 29
Section 8.02. Publicity............................................................................ 29
Section 8.03. Return of Documents.................................................................. 29
Section 8.04. Notices.............................................................................. 29
Section 8.05. Nonsurvival of Representations, Warranties and Agreements............................ 31
Section 8.06. Costs and Expenses................................................................... 31
Section 8.07. Entire Agreement..................................................................... 31
Section 8.08. Headings and Captions................................................................ 31
Section 8.09. Waiver, Amendment or Modification.................................................... 31
Section 8.10. Rules of Construction................................................................ 31
Section 8.11. Counterparts......................................................................... 31
Section 8.12. Successors and Assigns............................................................... 31
Section 8.13. Governing Law........................................................................ 31
Signatures............................................................................................. 32
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Merger, dated as of June 29, 2000, is by and
among First Banks America, Inc., a bank holding company organized as a Delaware
corporation ("FBA"), Redwood Bank, a California banking corporation ("Redwood"),
First Banks, Inc., a bank holding company organized as a Missouri corporation
("First Banks") and First Bank & Trust, a California banking corporation ("First
Bank &Trust"). FBA is a majority owned subsidiary of First Banks, Redwood is a
wholly-owned indirect subsidiary of FBA, and First Bank & Trust is a wholly
owned subsidiary of First Banks. 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, Redwood, First Banks and First Bank & Trust
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 an Agreement of Merger in the form of Exhibit A attached hereto
(the "Merger Agreement") to be executed by the parties thereto promptly
following the receipt of all regulatory approvals referred to in Sections 6.01
and 6.02 hereof, First Bank & Trust shall merge with and into Redwood, and
Redwood will be the surviving corporation but will change its corporate name
from and after the merger (the "Merger") to "First Bank & Trust." In this
Agreement, the term "First Bank & Trust" refers to the existing bank which is a
party to this Agreement and not to the surviving corporation of the Merger.
Section 1.02. Effect of the Merger. The Merger shall have all of the
effects provided by applicable corporate law, this Agreement and the Merger
Agreement. The separate corporate existence of First Bank & Trust shall cease on
consummation of the Merger and be combined in Redwood.
Section 1.03. Conversion of Shares.
(a) At the Effective Time, each share of common stock, stated value
$5.00 per share, of First Bank & Trust ("FB&T Common") issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive 1.4703 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 FB&T Common
held in the treasury of First Bank & Trust or by any direct or indirect
subsidiary of First Bank & Trust immediately prior to the Effective Time shall
be canceled.
<PAGE>
30
(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 FB&T Common
shall cease to be outstanding and be canceled. Upon the surrender of any
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of FB&T Common, 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 FB&T Common represented by the certificate have been
converted.
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. The 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 Bank & Trust and FBA may agree (the "Closing Date"). The Merger shall be
effective at the time determined by the Department of Financial Institutions
(the "DFI") of the State of California (the "Effective Time").
Section 1.06. Actions At Closing. (a) At the Closing, First Banks and
First Bank & Trust shall deliver to FBA:
(i) certificates signed by appropriate officers of each entity stating
that (A) each of the representations and warranties contained in
Article II is true and correct in all material respects (except for
those made as of a specified date) 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;
(ii) certified copies of the resolutions of their respective Boards of
Directors, establishing the requisite approvals under applicable
corporate law of this Agreement and the Merger;
(iii) evidence satisfactory to FBA that First Banks and First Bank &
Trust are in good standing; and
(iv) a legal opinion from counsel for First Bank & Trust regarding this
Agreement and the transactions contemplated hereby, in form reasonably
satisfactory to FBA and its counsel.
<PAGE>
At the Closing, FBA and Redwood shall deliver to First Banks:
(i) certificates signed by appropriate officers of each entity 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 the Boards of Directors of
each entity, establishing the requisite approvals under applicable
corporate law of this Agreement, the Merger and the other transactions
contemplated hereby;
(iv) evidence satisfactory to First Banks that FBA and Redwood are in
good standing; and
(v) a legal opinion from counsel for FBA regarding this Agreement and
the transactions contemplated hereby, in form reasonably satisfactory
to First Banks and its counsel.
Section 1.07. Exchange Procedures. At the Closing, First Banks shall
surrender to FBA a certificate or certificates evidencing First Banks' ownership
of the outstanding FB&T Common, duly endorsed or accompanied by executed stock
powers, and FBA shall issue to First Banks one or more certificates evidencing
the appropriate number of shares of FBA Common, together with cash in lieu of
any fractional shares. Such certificates shall bear any appropriate legends
restricting the transfer of the shares evidenced thereby in accordance with
applicable securities laws.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF FIRST BANKS
AND FIRST BANK & TRUST
First Banks and First Bank & Trust represent and warrant to FBA as
follows:
Section 2.01 Organization and Capital Stock; Standing and Authority.
(a) First Banks and First Bank & Trust are corporations duly organized,
validly existing and in good standing under the laws of the States of Missouri
and California, respectively. Each of such corporations has the power to own all
of its property and assets, to incur all of its liabilities and to carry on its
business as now conducted.
(b) As of the date hereof, the authorized capital stock of First Bank &
Trust consists of 20,000,000 shares of FB&T Common, of which 4,725,396 are
outstanding, duly and validly issued, fully paid and non-assessable. None of the
outstanding shares of FB&T Common has been issued in violation of any preemptive
rights.
<PAGE>
(c) There are no shares of capital stock or other equity securities of
First Bank & Trust 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 Bank & Trust or contracts, commitments,
understandings or arrangements by which First Bank & Trust is or may be
obligated to issue additional shares of its capital stock.
(d) First Bank & Trust holds a current valid license to engage in the
commercial banking business at its banking offices in California, and First
Banks and First Bank & Trust are in material compliance with all agreements,
understandings and orders of the Federal Reserve Board, the Federal Deposit
Insurance Corporation ("FDIC"), the DFI and other regulatory authorities having
jurisdiction over their business, assets and properties. Neither the scope of
the business of First Bank & Trust nor the location of its properties requires
it to be licensed to do business in any jurisdiction other than the State of
California. The deposits of First Bank & Trust are insured by the FDIC to the
maximum extent permitted by applicable law and regulation. First Banks is a bank
holding company registered pursuant to the Bank Holding Company Act, as amended.
Section 2.02. Authorization; No Defaults. The Boards of Directors of
First Banks and First Bank & Trust have by all requisite action approved this
Agreement and the Merger and authorized the execution and delivery hereof on
behalf of such corporations and the performance of their respective obligations
hereunder. First Banks, in its capacity as the sole holder of outstanding
capital stock of First Bank & Trust, has approved this Agreement and the Merger.
Nothing in the Articles of Incorporation or Bylaws of First Banks or First Bank
& Trust 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 either entity is bound or subject would prohibit or
inhibit either of such corporations 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 Banks and First Bank & Trust
and constitutes a legal, valid and binding obligation of each of them,
enforceable against them in accordance with its terms. Neither First Banks nor
First Bank & Trust is in default under nor in violation of any provision of its
articles of incorporation, bylaws, or any promissory note, indenture or any
evidence of indebtedness or security therefor, lease, contract, purchase or
other material commitment or agreement.
Section 2.03. First Bank & Trust Subsidiaries. First Bank & Trust has
no direct or indirect subsidiaries, it is not a party to any partnership or
joint venture and it does not own any equity interest in any other entity.
<PAGE>
Section 2.04. Financial Information. The year-end and quarter-end
Reports of Condition and Reports of Income of First Bank & Trust for 1999 and
for the three month period ended March 31, 2000, respectively, as filed with the
FDIC (such financial statements and notes collectively referred to herein as the
"FB&T Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as
disclosed therein and except for regulatory reporting differences required for
First Bank & Trust's reports) and fairly present the consolidated financial
position and the consolidated results of operations, changes in shareholders'
equity and cash flows of First Bank & Trust as of the dates and for the periods
indicated.
Section 2.05. Absence of Changes. Since March 31, 2000 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of First Bank & Trust, nor have there
been any events or transactions having such a material adverse effect which
should be disclosed in order to make the FB&T Financial Statements not
misleading. Since March 31, 2000 there has been no material adverse change in
the financial condition, the results of operations or the business of First Bank
& Trust, except for changes disclosed in its Reports of Condition and Income
filed with the FDIC since such date.
. Section 2.06. Regulatory Enforcement Matters. Neither First Banks nor First
Bank & Trust is subject to, nor has either of them 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 engaged in
the insurance of bank deposits or any other governmental agency having
supervisory or regulatory authority over either of them.
Section 2.07. Tax Matters. First Bank & Trust has 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 FB&T 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 that
certain document delivered by First Banks and First Bank & Trust to FBA entitled
"FB&T Disclosure Schedule" and executed by both First Bank & Trust and FBA
concurrently with the execution and delivery of this Agreement (the "FB&T
Disclosure Schedule"), there is no litigation, claim or other proceeding
involving an amount in controversy in excess of $100,000 pending or, to the
knowledge of First Bank & Trust, threatened against it, or to which the property
of First Bank & Trust is or would be subject.
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other
Agreements. Section 2.09 of the FB&T Disclosure Schedule specifically identifies
the following:
(a) all real property owned by First Bank & Trust and the principal
buildings and structures located thereon and each lease of real property to
which First Bank & Trust 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 Bank & Trust, exclusive of deposit agreements with customers
entered into in the ordinary course of business, agreements for the purchase of
federal funds and repurchase agreements;
<PAGE>
(c) all agreements, loans, contracts, guaranties, letters of credit,
lines of credit or commitments of First Bank & Trust not referred to elsewhere
in this Section 2.09 which:
(i) (except for loans, loan commitments or lines of credit)
involve payment by First Bank & Trust of more than $200,000;
(ii) involve payments based on profits of First Bank & Trust;
(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 Bank & Trust;
(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 $100,000; and
(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 Bank & Trust on
thirty (30) days written notice or less without any payment by reason of such
termination.
Copies of each document, plan or contract identified in Section 2.09 of
the FB&T 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 Bank & Trust has filed all reports and
statements, together with any amendments required to be made with respect
thereto, required to be filed with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), the DFI, the FDIC and all other
governmental authorities with jurisdiction over First Bank & Trust. 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 Bank & Trust, as reflected
in the latest consolidated balance sheet of First Bank & Trust included in the
FB&T Financial Statements, are carried in accordance with generally accepted
accounting principles.
<PAGE>
Section 2.12. Loan Portfolio. (a)(i) All loans and discounts reflected
in the FB&T Financial Statements at March 31, 2000 or which were or will be
entered into after March 31, 2000 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 business, 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 Bank & Trust has 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.
(b) All loans and loan commitments extended by First Bank & Trust 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. The reserve for
loan losses reflected in the FB&T Financial Statements as of March 31, 2000 is
adequate in all material respects under the requirements of generally accepted
accounting principles to provide for losses on loans outstanding as of March 31,
2000.
Section 2.13. Employee Matters and ERISA.
(a) First Bank & Trust has not entered into any collective bargaining
agreement with any labor organization with respect to any group of employees,
and to the knowledge of First Bank & Trust there is no present effort nor
existing proposal to attempt to unionize any group of its employees.
(b) All arrangements of First Bank & Trust relating to employees,
including all benefit plans and deferred compensation, bonus, stock or incentive
plans for the benefit of current or former employees (the "FB&T Employee Plans")
are administered by First Banks. All costs, liabilities and obligations arising
from the FB&T Employee Plans are properly reflected in accordance with generally
accepted accounting principles in the FB&T Financial Statements.
<PAGE>
Section 2.14. Title to Properties; Insurance. (i) First Bank & Trust
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 FB&T 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 Bank & Trust, 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 Bank & Trust 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 Bank & Trust, threatened with respect to any of such
properties; (iv) First Bank & Trust has valid title or other ownership rights
under licenses to all material intangible personal or intellectual property used
by First Bank & Trust 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 Bank & Trust 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 Laws. First Bank & Trust has all
licenses, franchises, permits and other governmental authorizations that are
legally required to enable it to conduct its business in all material respects,
is qualified to conduct business in every jurisdiction in which such
qualification is legally required, and it is in compliance in all material
respects with all applicable laws and regulations.
Section 2.16. Brokerage. Neither First Bank nor First Bank & Trust has
incurred any claims or obligations for brokerage commissions, finders' fees,
financial advisory fees, investment banking fees or similar compensation in
connection with the transactions contemplated by this Agreement.
Section 2.17. No Undisclosed Liabilities. First Bank & Trust 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 First Bank &
Trust giving rise to any such liability), except (i) liabilities reflected in
the FB&T Financial Statements and (ii) liabilities of the same type incurred in
the ordinary course of business of First Bank & Trust since March 31, 2000.
Section 2.18. Statements True and Correct. None of the information
supplied or to be supplied by First Banks or First Bank & Trust for inclusion in
any document to be filed with the Securities and Exchange Commission ("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 Proxy Statement (as defined in Section 5.07), when mailed to
the stockholders of FBA and at the time of the 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 required to be stated in order to correct any
statement in an earlier communication. All documents that First Banks or First
Bank & Trust is responsible for filing with the SEC or any 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.
<PAGE>
Section 2.19. Commitments and Contracts. Except as disclosed in Section
2.19 of the FB&T 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), First Bank & Trust 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
FB&T Financial Statements relating to the borrowing of money or the
guarantee by First Bank & Trust of any obligation, other than (A) trade
payables or instruments related to transactions entered into in the
ordinary course of business, such as deposits, federal funds borrowings
and repurchase agreements, or (B) agreements, indentures or instruments
providing for annual payments of less than $75,000; or
(iii) any contract containing covenants limiting the ability of First
Bank & Trust 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 Bank & Trust may carry on its business.
Section 2.20. Material Interest of Certain Persons. (a) Except as
disclosed in Section 2.20 of the FB&T Disclosure Schedule, no officer or
director of First Bank & Trust 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
contract or property (real or personal, tangible or intangible), used in or
pertaining to the business of First Bank & Trust.
(b) All outstanding loans from First Bank & Trust to any of their
officers, directors, employees or any associate or related interest of any such
persons 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 FB&T Disclosure Schedule, from and after March 31, 2000 through the date of
this Agreement, First Bank & Trust has not:
(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 Bank & Trust;
(iii) effected any stock split or adjusted, combined, reclassified or
otherwise changed its capitalization;
<PAGE>
(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 and consistent with past practices, (B) entered
into any new, or amended or supplemented any existing, employment,
management, consulting, deferred compensation, severance or other
similar contract, (C) entered into, terminated or substantially
modified any of the Employee Plans or (D) agreed to do any of the
foregoing;
(ix) suffered any material damage, destruction, or loss, whether as the
result of fire, explosion, earthquake, accident, casualty, labor
trouble, requisition, or taking of property by any regulatory
authority, flood, windstorm, embargo, riot, act of God or the enemy, or
other casualty or event, and whether or not covered by insurance;
(x) canceled or compromised any debt, except for debts charged off or
compromised in accordance with past practice;
(xi) entered into any material transaction, contract or commitment
outside the ordinary course of its business; or
(xii) made or guaranteed any loan to any of the FB&T 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 Bank & Trust
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>
Neither the conduct nor operation of First Bank & Trust nor any
condition of any property presently or previously owned, leased or operated by
First Bank & Trust violates or violated any Environmental Law in any respect
material to the business of First Bank & Trust, 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 Bank & Trust of any Environmental Law or obligate (or potentially
obligate) First Bank & Trust 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 Bank & Trust. Except as may be disclosed in
Section 2.22 of the FB&T Disclosure Schedule, First Bank & Trust has not
received notice from any person or entity that First Bank & Trust, or the
operation or condition of any property ever owned, leased or operated by it, are
or were in violation of any Environmental Law, or that First Bank & Trust 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
AND REDWOOD
FBA and Redwood represent and warrant to First Banks as follows:
Section 3.01. Organization and Capital Stock.
(a) FBA and Redwood are corporations duly organized, validly existing
and in good standing under the laws of the States of Delaware and California,
respectively. Each of such corporations 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 3,085,934 are outstanding,
duly and validly issued, fully paid and non-assessable; and 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. None of the outstanding shares of FBA Common Stock or FBA Class
B Stock has been issued in violation of any preemptive rights.
(c) Except as disclosed in Section 3.01 of that certain document
delivered by FBA to First Banks entitled the "FBA Disclosure Schedule" and
executed by both FBA and First Banks 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>
(d) As of the date hereof, the authorized capital stock of Redwood
consists of 1,000,000 shares of common stock, $3.33 par value ("Redwood
Common"), of which 465,000 are outstanding, duly and validly issued, fully paid
and non-assessable. All of such outstanding shares are owned by Redwood Bancorp,
a California corporation which is a subsidiary of FBA. None of the outstanding
shares of Redwood Common has been issued in violation of any preemptive rights.
Redwood has no outstanding stock 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
Redwood or contracts, commitments, understandings or arrangements by which
Redwood is or may be obligated to issue additional shares of its capital stock.
Section 3.02. Authorization; No Defaults. The Boards of Directors of
FBA and Redwood have by all requisite action approved this Agreement and the
Merger and authorized the execution and delivery hereof on behalf of such
corporations and the performance of their respective obligations hereunder.
Nothing in the Certificate of Incorporation of FBA, the Articles of
Incorporation of Redwood, the Bylaws of either corporation, 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 Redwood is bound or subject would prohibit or inhibit FBA or Redwood 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 Redwood and constitutes a legal, valid and binding obligation of each of
them, enforceable against them 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. 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. 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.
<PAGE>
Section 3.04. Financial Information. All of (i) the audited
consolidated balance sheets of FBA and the FBA Subsidiaries as of December 31,
1999 and related consolidated income statements and statements of changes in
shareholders' equity and of cash flows for the three years ended December 31,
1999, together with the notes thereto, included in FBA's Annual Report on Form
10-K for the year ended December 31, 1999, as currently on file with the SEC;
(ii) the unaudited consolidated balance sheets of FBA and the FBA Subsidiaries
as of March 31, 2000 and related consolidated income statements and statements
of changes in shareholders' equity and of cash flows for the three months ended
March 31, 2000, together with the notes thereto, included in FBA's Quarterly
Report on Form 10-Q for the three months ended March 31, 2000 as currently filed
with the SEC; and (iii) the year-end and quarter-end Reports of Condition and
Reports of Income of Redwood, First Bank of California and First Bank Texas
N.A., respectively, for 1999 and for the three month period ended March 31,
2000, as filed with the appropriate federal regulatory agencies (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 disclosed therein
and except for regulatory reporting differences required for reports of the
banks) 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 March 31, 2000 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of FBA and its subsidiaries taken as a
whole, nor have there been any events or transactions having such a material
adverse effect which should be disclosed in order to make the FBA Financial
Statements not misleading. Since March 31, 2000 there has been no material
adverse change in the financial condition, the results of operations or the
business of Redwood, except for changes as are disclosed in its Reports of
Condition and Income filed with the FDIC since such date.
Section 3.06. Regulatory Enforcement Matters. Neither FBA nor any FBA
Subsidiary is 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 FBA or any of
the FBA 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.
<PAGE>
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 $100,000 pending or, to the
knowledge of FBA or Redwood, 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 FBA Subsidiary and the
principal buildings and structures located thereon and each lease of real
property to which FBA or any FBA 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 FBA or an FBA Subsidiary, exclusive of deposit agreements with
customers 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 $200,000;
(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;
(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 $100,000; and
(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.
<PAGE>
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
Banks 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 DFI, the FDIC and all other governmental authorities 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 sheets of FBA included in the FBA
Financial Statements, are carried in accordance with generally accepted
accounting principles.
Section 3.12. Loan Portfolio. (a)(i) All loans and discounts reflected
in the FBA Financial Statements at March 31, 2000 or which were or will be
entered into after March 31, 2000 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 business, 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 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 the FBA Subsidiaries 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. The reserve for
loan losses reflected in the FBA Financial Statements as of March 31, 2000 is
adequate in all material respects under the requirements of generally accepted
accounting principles to provide for losses on loans outstanding as of March 31,
2000.
<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. 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. (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 and the FBA
Subsidiaries, 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 Laws. 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.
<PAGE>
Section 3.16. Brokerage. Except for fees payable by FBA to Baxter
Fentriss and Company, neither FBA nor any FBA Subsidiary has incurred any claims
or obligations for brokerage commissions, finders' fees, financial advisory
fees, investment banking fees or similar compensation in connection with the
transactions contemplated by this Agreement.
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 March 31, 2000.
Section 3.18. Statements True and Correct. None of the information
supplied or to be supplied by FBA or Redwood 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 Proxy Statement, when mailed to the
stockholders of FBA and at the time of the 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 required to
be stated in order to correct any statement in an earlier communication. All
documents that FBA or Redwood 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 Bank &
Trust 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 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, such as deposits, federal funds
borrowings and repurchase agreements or (B) agreements, indentures or
instruments providing for annual payments of less than $75,000; or
<PAGE>
(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.
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
Exchange Act) of any such officer or director, has any material interest in any
contract or property (real or personal, tangible or intangible), used in or
pertaining to the business of FBA or an FBA Subsidiary.
(b) All outstanding loans from FBA or any FBA Subsidiary to any of
their officers, directors, employees or any associate or related interest of any
such persons 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 March 31, 2000 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 an FBA Subsidiary;
(iii) effected any stock split or adjusted, combined, reclassified or
otherwise changed its capitalization;
(iv) declared, set aside or paid any dividend or other distribution in
respect of its capital stock, or purchased, redeemed, retired,
repurchased, or exchanged, or otherwise directly or indirectly acquired
or disposed of any of its capital stock;
(v) incurred any material obligation or liability (absolute or
contingent), except normal trade or business obligations or liabilities
incurred in the ordinary course of business, or subjected to lien any
of its assets or properties other than in the ordinary course of
business consistent with past practice;
(vi) discharged or satisfied any material lien or paid any material
obligation or liability (absolute or contingent), other than in the
ordinary course of business;
(vii) sold, 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;
<PAGE>
(viii) except as required by contract or law, (A) increased the rate of
compensation of, or paid any bonus to, any of its directors, officers,
or other employees, except merit or promotion increases in accordance
with existing policy, (B) entered into any new, or amended or
supplemented any existing, employment, management, consulting, deferred
compensation, severance or other similar contract, (C) entered into,
terminated or substantially modified any of the Employee Plans or (D)
agreed to do any of the foregoing;
(ix) suffered any material damage, destruction, or loss, whether as the
result of fire, explosion, earthquake, accident, casualty, labor
trouble, requisition, or taking of property by any regulatory
authority, flood, windstorm, embargo, riot, act of God or the enemy, or
other casualty or event, and whether or not covered by insurance;
(x) canceled or compromised any debt, except for debts charged off or
compromised in accordance with past practice;
(xi) entered into any material transaction, contract or commitment
outside the ordinary course of its business; or
(xii) made or guaranteed any loan to any of the Employee Plans.
Section 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.
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.
<PAGE>
ARTICLE IV
AGREEMENTS OF FIRST BANKS AND FIRST BANK & TRUST
Section 4.01. Business in Ordinary Course. First Banks and First Bank &
Trust agree that, from the date of this Agreement until the earlier of the
Closing Date or the earlier termination of this Agreement in accordance with its
terms:
(a) First Bank & Trust shall 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, First Bank & Trust will not:
(i) declare or pay any dividend or make any other distribution to
stockholders, whether in cash, stock or other property; or
(ii) issue any Common Stock or other capital stock or any options,
warrants, or other rights to subscribe for or purchase Common Stock or
any other capital stock or any securities convertible into or
exchangeable for any capital stock; or
(iii) directly or indirectly redeem, purchase or otherwise acquire any
capital stock of First Bank & Trust; 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 articles of incorporation or association 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 Bank & Trust 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 FB&T 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
<PAGE>
(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 Bank & Trust or any claims
which First Bank & Trust may possess, or waive any material rights of
substantial value; or
(vii) sell or otherwise dispose of any real property or any material
amount of any tangible or intangible personal property, other than
properties acquired in foreclosure or otherwise in the ordinary
collection of indebtedness; or
(viii) violate any law, statute, rule, governmental regulation or
order, which violation might have a material adverse effect on the
business, financial condition, or earnings of First Bank & Trust; 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 Bank & Trust 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 Bank &
Trust contained in Article II hereof, if such representations and warranties
were given immediately following such transaction or action.
Section 4.02. Breaches. First Banks and First Bank & Trust shall, in
the event either 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 their best efforts to prevent or promptly remedy the same.
Section 4.03. Submission to FBA's Stockholders. First Banks and First
Bank & Trust shall cooperate with FBA in the preparation and filing of the Proxy
Statement described in Section 5.07 and will provide to FBA accurate and
complete information, data and documents requested by FBA in connection with the
preparation and filing of the Proxy Statement.
<PAGE>
Section 4.04. Consummation of Agreement. First Banks and First Bank &
Trust shall use their best efforts to perform and fulfill all conditions and
obligations on their parts to be performed or fulfilled under this Agreement and
to effect the Merger in accordance with the terms and provisions hereof. First
Banks and First Bank & Trust shall furnish to FBA in a timely manner all
information, data and documents 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. Promptly following the receipt of all required
regulatory approvals, First Bank & Trust shall execute the Merger Agreement,
revised if necessary to comply with any requirements imposed in connection with
such regulatory approvals.
Section 4.05. Access to Information. First Bank & Trust shall permit
FBA reasonable access, in a manner which will avoid undue disruption or
interference with First Bank & Trust's normal operations, to its properties, and
First Bank & Trust 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 Bank & Trust
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 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 Bank & Trust
shall use its best efforts to obtain all consents with respect to interests of
First Bank & Trust in material leases, licenses, contracts, instruments and
rights, if any, which require the consent of another person for the consummation
of the Merger.
Section 4.07. Subsequent Financial Statements. As soon as available
after the date hereof, First Bank & Trust shall deliver to FBA the monthly
unaudited consolidated balance sheets and profit and loss statements of First
Bank & Trust prepared for its internal use, the Report of Condition and Income
of First Bank & Trust 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 FB&T Financial Statements"). The Subsequent FB&T 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.
<PAGE>
ARTICLE V
AGREEMENTS OF FBA AND REDWOOD
Section 5.01. Business in Ordinary Course. FBA and Redwood agree that
from the date of this Agreement until the Closing Date or the earlier
termination of this Agreement in accordance with its terms, except for the
actions described in Section 5.01 of the FBA Disclosure Schedule:
(a) FBA and the FBA Subsidiaries shall carry on their business and the
discharge or incurrence of their 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 the FBA Subsidiaries will not:
(i) declare or pay any dividend or make any other distribution to
stockholders, whether in cash, stock or other property; or
(ii) effect a reclassification, recapitalization, splitup, exchange of
shares, readjustment or other similar change in or to any capital
stock, or otherwise reorganize or recapitalize.
(b) FBA and the FBA Subsidiaries will not, without the prior written
consent of First Banks, 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 FBA 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
<PAGE>
(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 and the FBA Subsidiary
Subsidiaries, taken as a whole; 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 Bank & Trust, 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 III hereof, if such representations and
warranties were given immediately following such transaction or action.
Section 5.02. Regulatory Approvals. FBA and Redwood shall file or cause
to be filed 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. FBA shall keep First Banks reasonably
informed as to the status of such applications and make available to First
Banks, upon reasonable request, copies of such applications and any
supplementally filed materials.
Section 5.03. Breaches. FBA shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to First Banks and use its best efforts to prevent or
promptly remedy the same.
Section 5.04. Consummation of Agreement. FBA and Redwood shall use
their best efforts to perform and fulfill all conditions and obligations on
their parts to be performed or fulfilled under this Agreement and to effect the
Merger in accordance with the terms and conditions of this Agreement. Promptly
following the approval of the Merger by FBA's stockholders, FBA shall cause its
subsidiary, Redwood Bancorp, to approve the Merger in its capacity as the sole
shareholder of Redwood (or FBA will do so if FBA shall have become Redwood's
sole shareholder prior to such time). Promptly following the receipt of all
required regulatory approvals, Redwood shall execute the Merger Agreement,
revised if necessary to comply with any requirements imposed in connection with
such regulatory approvals.
<PAGE>
Section 5.05. Access to Information. FBA and Redwood shall permit First
Banks reasonable access, in a manner which will avoid undue disruption or
interference with their normal operations, to its properties, and FBA and
Redwood shall disclose and make available to First Banks 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 accountants' consent), litigation files, plans affecting employees, and
any other business activities or prospects in which First Banks may have a
reasonable and legitimate interest in furtherance of the transactions
contemplated by this Agreement. First Banks will hold any such information which
is nonpublic in confidence in accordance with the provisions of Section 8.01
hereof.
Section 5.06. Proxy Statement and Stockholders' Meeting. (a) FBA shall
promptly (i) prepare and file with the SEC, as soon as reasonably practicable, a
Proxy Statement (the "Proxy Statement") for a meeting of the stockholders of FBA
to be held as soon as reasonably practicable (the "Stockholders' Meeting"); (ii)
hold the Stockholders' Meeting; and (iii) use its best efforts to obtain the
approval of this Agreement and the Merger by the stockholders of FBA. The
Special Committee of the Board of Directors of FBA established to consider the
transactions contemplated by this Agreement shall recommend such approval to
FBA's stockholders, and the Board of Directors shall adopt the same
recommendation and cause the Proxy Statement to be mailed to FBA's stockholders
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 or 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 and Redwood shall cooperate and use their 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, and (ii) to cause the Merger to be consummated
as expeditiously as reasonably practicable.
Section 5.07. Subsequent Financial Statements. As soon as available
after the date hereof, FBA shall deliver to First Banks the monthly unaudited
consolidated balance sheets and profit and loss statements of FBA and Redwood
prepared for their internal use, Quarterly Reports on Form 10-Q for FBA as filed
with the SEC, the Report of Condition and Income of Redwood 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.
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.01. Conditions to the Obligations of FBA and Redwood. The obligations
of FBA and Redwood 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 Banks and First
Bank & Trust 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 Banks and First Bank & Trust 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
stockholders of 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 Banks and First Bank & Trust on or prior to the Closing Date, all in form
and substance reasonably satisfactory to FBA; and
(f) the Special Committee of the Board of Directors of FBA shall have
received within thirty (30) days after the date of this Agreement a fairness
opinion of the financial advisor to the Special Committee 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.
Section 6.02. Conditions to the Obligations of First Banks and First
Bank & Trust. The obligations of First Banks and First Bank & Trust to effect
the Merger and the other transactions contemplated by this Agreement shall be
subject to the satisfaction (or waiver by First Banks) prior to or on the
Closing Date of the following conditions:
<PAGE>
(a) the representations and warranties made by FBA and Redwood in this
Agreement shall be true in all material respects on and as of the Closing Date
(except for those made as of a specified date) with the same effect as though
such representations and warranties had been made or given on the Closing Date;
(b) FBA shall have performed and complied in all material respects with
all of its obligations and agreements hereunder required to be performed prior
to the Closing Date;
(c) no temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect, nor shall any proceeding by any bank regulatory authority or other
person seeking any of the foregoing be pending. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger which makes the consummation of the Merger or
the other transactions contemplated hereby illegal;
(d) all necessary approvals, consents and authorizations required by
law for consummation of the Merger, including the requisite approval of the
stockholders of FBA and all legally required regulatory approvals, shall have
been obtained, and all waiting periods required by law shall have expired; and
(e) First Banks shall have received all documents required to be
received from FBA and Redwood on or prior to the Closing Date, all in form and
substance reasonably satisfactory to First Banks.
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 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
First Banks or First Bank & Trust, on the one hand, or FBA or Redwood, on the
other hand, 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 FBA 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 stockholders of FBA shall
have been previously obtained, terminate and cancel this Agreement by delivery
of written notice of such action to the other parties.
Section 7.04. Denial of Regulatory Approval. If any regulatory
application filed pursuant to Section 5.02 hereof should be finally denied or
disapproved by a regulatory authority, then this Agreement thereupon shall be
deemed terminated and cancelled; provided, however, that a request for
additional information or undertaking by FBA, as a condition for approval, shall
not be deemed to be a denial or disapproval so long as FBA diligently provides
the requested information or undertaking. In the event an application is denied
pending an appeal, petition for review or similar such act on the part of FBA
(hereinafter referred to as the "Appeal"), then the application will be deemed
denied unless FBA prepares and timely files and continues to pursue an Appeal
seeking the necessary approval. In the event that, as a condition of any
required regulatory approval, FBA would be required to change its business or
operations in a manner material and adverse to FBA, then this Agreement may be
terminated by either party by giving written notice to the other party.
Section 7.05. Regulatory Enforcement Matters. (a) In the event that
First Banks or First Bank & Trust 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 Banks.
(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 Banks 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 31, 2001, then this Agreement may be terminated by
any party by giving written notice to the other party.
<PAGE>
Section 7.07. Damages and Limitation on Damages. In the event that
either FBA or First Bank & Trust 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. 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 Bank & Trust 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 Bank & Trust 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:
<PAGE>
(a) if to FBA: Special Committee of the Board of Directors
First Banks America, Inc.
c/o Albert M. Lavezzo
Favaro, Lavezzo, Gill Caretti & Heppell
300 Tuolumne Street, Suite A
Vallejo, California 94590
Facsimile: (707) 552-8913
and
First Banks America, Inc.
Attention: Frank Sanfilippo
Chief Financial Officer
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Facsimile: (314) 567-8769
with a copy to: James S. Ryan
Jackson Walker LLP
901 Main Street, Suite 6000
Dallas, Texas 75202
Facsimile: (214) 953-5736
(b) if to Redwood: Redwood Bank
Attention: Terrance M. McCarthy, President
735 Montgomery Street
San Francisco, California 94111
(c) if to First Banks or First Bank & Trust:
First Banks, Inc.
Attention: Allen H. Blake, President
11701 Olive Boulevard
Creve Coeur, Missouri 63141
Facsimile: (314) 995-8769
with a copy to: John S. Daniels
Attorney at Law
7502 Greenville Avenue, Suite 500
Dallas, Texas 75231
Facsimile: (214) 890-4003
or to such other address as any party may from time to time designate by notice
to the others.
<PAGE>
Section 8.05. Nonsurvival of Representations, Warranties and
Agreements. No representation, warranty or agreement contained in this Agreement
shall survive the Closing Date, and, except for the provisions of Sections 7.07,
8.01, 8.03 and 8.06 hereof, no provisions hereof 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.
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 California and any applicable federal laws and regulations.
<PAGE>
IN WITNESS WHEREOF, the parties 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/Frank H. Sanfilippo
----------------------------
Its: Chief Financial Officer
REDWOOD BANK
By: /s/Terrance M. McCarthy
----------------------------
Its: President
FIRST BANKS, INC.
By: /s/Allen H. Blake
----------------------------
Its: President
FIRST BANK & TRUST
By: /s/Allen H. Blake
----------------------------
Its: Vice Pesident
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
This Agreement of Merger is entered into between First Bank & Trust, a
California corporation ("Merging Corporation"), and Redwood Bank, a California
corporation ("Surviving Corporation").
1. Merging Corporation shall be merged into Surviving Corporation.
2. The outstanding shares of Surviving Corporation shall remain
outstanding and shall not be affected by the merger.
3. Each outstanding share of Merging Corporation shall be converted
into the right to receive shares of common stock, par value $.15 per share, of
First Banks America, Inc., a Delaware corporation which is the parent of
Surviving Corporation; provided, however, that FBA shall pay cash in lieu of
fractional shares, if any, that would otherwise be issued.
4. Until amended in accordance with applicable law, the Articles
of Incorporation and Bylaws of Surviving Corporation remain the same as those of
the Surviving Corporation immediately prior to the merger.
5. The effect of the merger shall be as prescribed by law; the
effective date of the merger shall be at the time when a copy of this Agreement,
certified by the Secretary of State of the State of California, is filed with
the Commissioner of Financial Institutions of the State of California pursuant
to Section 4887(b) of the California Financial Code.
In Witness Whereof, the parties have executed this Agreement as of
________ __, 2000.
FIRST BANK & TRUST REDWOOD BANK
President President
Secretary Secretary
