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 September 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 October 27, 2000
----- ---------------------
Common Stock, $0.15 par value 3,079,934
Class B Common Stock, $0.15 par value 2,500,000
<PAGE>
FIRST BANKS AMERICA, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS - (UNAUDITED):
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.......................... 22
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................... 23
SIGNATURES.......................................................................................... 24
</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>
September 30, December 31,
2000 1999
---- ----
ASSETS
------
Cash and cash equivalents:
<S> <C> <C>
Cash and due from banks........................................................... $ 40,429 35,644
Interest-bearing deposits with other financial institutions
with maturities of three months or less........................................ 1,262 122
Federal funds sold................................................................ 57,200 8,800
----------- ---------
Total cash and cash equivalents.............................................. 98,891 44,566
----------- ---------
Investment securities:
Available for sale, at fair value................................................. 92,323 90,658
Held to maturity, at amortized cost (fair value of $1,757
at September 30, 2000 and December 31, 1999)................................... 1,856 1,880
----------- ---------
Total investment securities.................................................. 94,179 92,538
----------- ---------
Loans:
Commercial and financial.......................................................... 253,578 216,780
Real estate construction and development.......................................... 219,455 204,832
Real estate mortgage.............................................................. 319,174 272,700
Consumer and installment.......................................................... 28,774 40,514
----------- ---------
Total loans.................................................................. 820,981 734,826
Unearned discount................................................................. (2,760) (2,563)
Allowance for loan losses......................................................... (17,179) (14,611)
----------- ---------
Net loans.................................................................... 801,042 717,652
----------- ---------
Bank premises and equipment, net of accumulated depreciation.......................... 13,597 13,261
Intangibles associated with the purchase of subsidiaries.............................. 21,082 16,579
Accrued interest receivable........................................................... 7,607 6,244
Deferred tax assets................................................................... 15,022 11,125
Other assets.......................................................................... 19,167 18,742
----------- ---------
Total assets................................................................. $ 1,070,587 920,707
=========== =========
</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>
September 30, December 31,
2000 1999
---- ----
LIABILITIES
-----------
Deposits:
Demand:
<S> <C> <C>
Non-interest-bearing............................................................ $ 152,840 128,137
Interest-bearing................................................................ 85,038 74,858
Savings........................................................................... 274,348 242,543
Time deposits:
Time deposits of $100 or more................................................... 120,568 94,967
Other time deposits............................................................. 287,647 239,518
----------- ---------
Total deposits............................................................... 920,441 780,023
Short-term borrowings................................................................. 10,797 14,940
Accrued interest payable.............................................................. 3,991 1,989
Deferred tax liabilities.............................................................. 2,268 2,043
Accrued expenses and other liabilities................................................ 6,892 4,995
----------- ---------
Total liabilities............................................................ 944,389 803,990
----------- ---------
Guaranteed preferred beneficial interest in First Banks
America, Inc. subordinated debentures............................................. 44,264 44,218
----------- ---------
STOCKHOLDERS' EQUITY
--------------------
Common stock:
Common stock, $0.15 par value; 6,666,666 shares authorized;
3,883,363 shares and 3,874,697 shares issued
at September 30, 2000 and December 31, 1999, respectively....................... 583 581
Class B common stock, $0.15 par value; 4,000,000 shares
authorized; 2,500,000 shares issued and outstanding............................. 375 375
Capital surplus....................................................................... 69,820 69,760
Retained earnings since elimination of accumulated deficit
effective December 31, 1994....................................................... 24,537 15,163
Common treasury stock, at cost; 795,429 shares and 724,396 shares
at September 30, 2000 and December 31, 1999, respectively......................... (12,633) (11,369)
Accumulated other comprehensive loss.................................................. (748) (2,011)
---------- ---------
Total stockholders' equity................................................... 81,934 72,499
----------- ---------
Total liabilities and stockholders' equity................................... $ 1,070,587 920,707
=========== =========
</TABLE>
<PAGE>
FIRST BANKS AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Interest and fees on loans.............................................. $ 20,156 16,268 57,715 44,852
Investment securities................................................... 1,716 1,434 5,137 4,862
Federal funds sold and other............................................ 1,226 326 2,581 550
--------- ------- ------- -------
Total interest income.............................................. 23,098 18,028 65,433 50,264
--------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing demand............................................... 335 304 995 857
Savings............................................................... 2,795 2,137 7,699 6,086
Time deposits of $100 or more......................................... 2,289 969 4,359 2,609
Other time deposits................................................... 3,670 3,093 11,982 8,493
Promissory note payable and short-term borrowings....................... 179 137 600 603
--------- ------- ------- -------
Total interest expense............................................. 9,268 6,640 25,635 18,648
--------- ------- ------- -------
Net interest income................................................ 13,830 11,388 39,798 31,616
Provision for loan losses................................................... 320 90 1,032 303
--------- ------- ------- -------
Net interest income after provision for loan losses................ 13,510 11,298 38,766 31,313
--------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts and customer service fees........... 986 752 2,824 2,382
(Loss) gain on sales of securities, net................................. (179) -- (356) 174
Other income............................................................ 1,070 417 2,037 1,272
--------- ------- ------- -------
Total noninterest income........................................... 1,877 1,169 4,505 3,828
--------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits.......................................... 3,129 2,846 9,790 8,048
Occupancy, net of rental income......................................... 888 777 2,507 2,138
Furniture and equipment................................................. 419 446 1,404 1,294
Advertising and business development.................................... 119 233 355 396
Postage, printing and supplies.......................................... 188 213 581 600
Data processing fees.................................................... 1,075 842 3,026 2,398
Legal, examination and professional fees................................ 1,384 1,204 3,860 3,451
Communications.......................................................... 110 183 370 483
Gain on sales of other real estate, net of expenses..................... -- (333) (33) (326)
Amortization of intangibles associated with the purchase
of subsidiaries....................................................... 402 322 1,047 830
Guaranteed preferred debentures......................................... 974 993 2,945 2,979
Other................................................................... 808 653 2,219 2,277
--------- ------- ------- -------
Total noninterest expense.......................................... 9,496 8,379 28,071 24,568
--------- ------- ------- -------
Income before provision for income tax expense..................... 5,891 4,088 15,200 10,573
Provision for income tax expense............................................ 2,414 1,699 5,826 4,494
--------- ------- ------- -------
Net income......................................................... $ 3,477 2,389 9,374 6,079
========= ======= ======= =======
Earnings per common share:
Basic................................................................... $ 0.62 0.42 1.67 1.06
Diluted................................................................. 0.62 0.42 1.67 1.06
========= ======= ======= =======
Weighted average common stock outstanding (in thousands).................... 5,588 5,707 5,604 5,713
========= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST BANKS AMERICA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME - (UNAUDITED)
Nine months ended September 30, 2000 and 1999 and three months ended December 31, 1999
(dollars expressed in thousands, except per share data)
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
Nine months ended September 30, 1999:
Comprehensive income:
Net income.......................... -- -- -- 6,079 6,079 -- -- 6,079
Other comprehensive income, net of tax -
unrealized losses on securities, net
of reclassification adjustment (1) -- -- -- (1,836) -- -- (1,836) (1,836)
------
Comprehensive income................ 4,243
======
Reduction of deferred tax asset
valuation allowance............... -- -- 654 -- -- -- 654
Compensation paid in stock........... -- -- 36 -- -- -- 36
Repurchases of common stock.......... -- -- -- -- (443) -- (443)
----- --- ------ ------ ------- ------ ------
Consolidated balances,
September 30, 1999................... 581 375 69,433 11,772 (10,531) (1,295) 70,335
Three months ended December 31, 1999:
Comprehensive income:
Net income.......................... -- -- -- 3,391 3,391 -- -- 3,391
Other comprehensive income, net of tax -
unrealized losses on securities, net
of reclassification adjustment (1) -- -- -- (716) -- -- (716) (716)
-----
Comprehensive income................ 2,675
=====
Reduction of deferred tax asset
valuation allowance............... -- -- 327 -- -- -- 327
Repurchases of common stock.......... -- -- -- -- (838) -- (838)
----- --- ------ ------ ------- ------ ------
Consolidated balances,
December 31, 1999.................... 581 375 69,760 15,163 (11,369) (2,011) 72,499
Nine months ended September 30, 2000:
Comprehensive income:
Net income.......................... -- -- -- 9,374 9,374 -- -- 9,374
Other comprehensive income, net of tax -
unrealized gains on securities, net
of reclassification adjustment (1) -- -- -- 1,263 -- -- 1,263 1,263
------
Comprehensive income................ 10,637
======
Compensation paid in stock........... 1 -- 36 -- -- -- 37
Exercise of stock options............ 1 -- 24 -- -- -- 25
Repurchases of common stock.......... -- -- -- -- (1,264) -- (1,264)
----- --- ------ ------ ------- ------ ------
Consolidated balances,
September 30, 2000................... $ 583 375 69,820 24,537 (12,633) (748) 81,934
===== === ====== ====== ======= ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(1) Disclosure of reclassification adjustment:
Three months ended Nine months ended Three months ended
September 30, September 30, December 31,
--------------- ----------------
2000 1999 2000 1999 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unrealized gains (losses) arising during the period.............. $ 820 (153) 1,032 (1,723) (716)
Less reclassification adjustment for (losses)
gains included in net income................................. (116) -- (231) 113 --
------ ----- ------ ------ -----
Unrealized gains (losses) on investment securities............... $ 936 (153) 1,263 (1,836) (716)
====== ===== ====== ====== =====
</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>
Nine months ended
September 30,
-------------
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................................ $ 9,374 6,079
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization and accretion, net..................................... 1,904 1,498,
Provision for loan losses......................................................... 1,032 303
Provision for income tax expense.................................................. 5,826 4,494
Payments of income taxes.......................................................... (3,692) (834)
Loss (gain) on sales of securities, net........................................... 356 (174)
Increase in accrued interest receivable........................................... (697) (147)
Interest accrued on liabilities................................................... 25,635 18,648
Payments of interest on liabilities............................................... (24,147) (18,441)
Other operating activities, net................................................... 175 (7,280)
---------- ---------
Net cash provided by operating activities................................... 15,766 4,146
---------- ---------
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 available for sale....................... 6,512 30,260
Maturities of investment securities available for sale................................ 72,203 74,298
Maturities of investment securities held to maturity.................................. 22 126
Purchases of investment securities available for sale................................. (46,175) (52,304)
Net increase in loans................................................................. (49,518) (58,749)
Recoveries of loans previously charged-off............................................ 1,558 1,830
Purchases of bank premises and equipment.............................................. (1,570) (481)
Proceeds from sales of other real estate.............................................. 168 618
Other investing activities, net....................................................... (521) (464)
---------- ---------
Net cash used in investing activities....................................... (20,030) (22,110)
---------- ---------
Cash flows from financing activities:
Other increases (decreases) in deposits:
Demand and savings deposits......................................................... 22,057 (940)
Time deposits....................................................................... 41,914 13,592
(Decrease) increase in federal funds purchased........................................ (11,000) 4,000
Increase (decrease) in securities sold under agreements to repurchase................. 6,857 (897)
Exercise of stock options............................................................. 25 --
Repurchases of common stock for treasury.............................................. (1,264) (443)
---------- ---------
Net cash provided by financing activities................................... 58,589 15,312
---------- ---------
Net increase (decrease) in cash and cash equivalents........................ 54,325 (2,652)
Cash and cash equivalents, beginning of period............................................ 44,566 46,313
---------- ---------
Cash and cash equivalents, end of period.................................................. $ 98,891 43,661
========== =========
Noncash investing and financing activities:
Loans exchanged for and transferred to available-for-sale investment securities...... 3,594 --
Loans transferred to other real estate............................................... 75 1,014
Reduction of deferred tax asset valuation allowance.................................. -- 654
Compensation paid in stock........................................................... 37 36
========== ========
</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 nine months ended September 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 September 30, 2000 and
December 31, 1999, First Banks' ownership interest in FBA was 84.30% 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 $25.8 million. Commercial Bank operates one
branch office in the San Francisco financial district. At September 30, 2000,
Commercial Bank had $155.5 million in total assets, $98.6 million in loans, net
of unearned discount, $46.0 million in investment securities and $111.7 million
in deposits. FBA completed this transaction on October 31, 2000.
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 6.5 million shares of common stock of FBA, which
will increase First Banks' ownership percentage of FBA to approximately 92.76%.
This transaction and related internal reorganizations will allow FBA and First
Banks to merge their Texas and California interests. FB&T operates 27 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 September 30, 2000, FB&T had $1.1 billion in total assets, $856.5
million in loans, net of unearned discount, $104.4 million in investment
securities and $972.3 million in deposits. FBA completed this transaction on
October 31, 2000.
<PAGE>
On August 23, 2000, FBA and Millennium Bank executed a definitive
agreement providing for the acquisition of Millennium Bank, San Francisco,
California, by FBA. Under the terms of the agreement, the shareholders of
Millennium Bank will receive $8.10 per share in cash, or a total of
approximately $20.7 million. Millennium Bank has one office in the San Francisco
financial district and one office in Oakland, California. At September 30, 2000,
Millennium Bank had $110.4 million in total assets, $76.6 million in loans, net
of unearned discount, $28.4 million in investment securities and $97.6 million
in deposits. FBA expects this transaction, which is subject to regulatory
approvals, will be completed during or before the first quarter of 2001.
On September 22, 2000, FBA executed a definitive agreement to acquire
The San Francisco Company and its wholly-owned banking subsidiary, Bank of San
Francisco. Under the terms of this agreement, the shareholders of The San
Francisco Company will receive $1.95 per share in cash, or a total of
approximately $63.0 million. Bank of San Francisco has one office in the San
Francisco financial district. At September 30, 2000, Bank of San Francisco had
$191.8 million in total assets, $105.1 million in loans, net of unearned
discount, $38.9 million in investment securities and $142.3 million in deposits.
FBA expects this transaction, which is subject to regulatory approvals and other
conditions, will be completed during or before the first quarter of 2001.
The following unaudited pro forma combined condensed results of
operations for the nine months ended September 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 acquisition of FB&T as described above. The
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>
Nine months ended Year ended
September 30, December 31,
--------------------- ------------------
2000 1999 1999
---- ---- ----
(dollars expressed in thousands,
except per share data)
<S> <C> <C> <C>
Net interest income.................................................. $76,038 57,517 81,481
======= ======= ========
Net income........................................................... $19,896 10,612 17,599
======= ======= ========
Earnings per share:
Basic.............................................................. $ 1.64 0.87 1.44
Diluted............................................................ 1.64 0.87 1.44
======= ======= ========
</TABLE>
<PAGE>
(3) EARNINGS PER COMMON SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share (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 September 30, 2000:
<S> <C> <C> <C>
Basic EPS-- income available to common stockholders.......... $3,477 5,588 $ 0.62
======
Effect of dilutive securities-- stock options................ -- --
------ ------
Diluted EPS-- income available to common stockholders........ $3,477 5,588 $ 0.62
====== ====== ======
Three months ended September 30, 1999:
Basic EPS-- income available to common stockholders.......... $2,389 5,707 $ 0.42
======
Effect of dilutive securities-- stock options................ -- 5
------ ------
Diluted EPS-- income available to common stockholders........ $2,389 5,712 $ 0.42
====== ====== ======
Nine months ended September 30, 2000:
Basic EPS-- income available to common stockholders.......... $9,374 5,604 $ 1.67
======
Effect of dilutive securities-- stock options................ -- 2
------ ------
Diluted EPS-- income available to common stockholders........ $9,374 5,606 $ 1.67
====== ====== ======
Nine months ended September 30, 1999:
Basic EPS-- income available to common stockholders.......... $6,079 5,713 $ 1.06
======
Effect of dilutive securities-- stock options................ -- 6
------ ------
Diluted EPS-- income available to common stockholders........ $6,079 5,719 $ 1.06
====== ====== ======
</TABLE>
(4) TRANSACTIONS WITH RELATED PARTIES
FBA purchases certain services and supplies from or through First
Banks, its affiliates and First Services, L.P. 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.
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 $900,000 and $2.6 million for the three and nine months
ended September 30, 2000, and $737,000 and $2.1 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 $199,000 and $600,000 for the three
and nine months ended September 30, 2000, and $208,000 and $640,000 for the
comparable periods in 1999, respectively.
<PAGE>
First Services L.P., a limited partnership indirectly owned by First
Banks' Chairman and his adult children, provides data processing services and
technological, telecommunication and operational support to FB Texas and FB
California under the terms of data processing agreements. Fees paid under these
agreements were $1.0 million and $2.7 million for the three and nine months
ended September 30, 2000, and $770,000 and $2.2 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 $85.3 million and $88.2 million in whole
loans and loan participations outstanding at September 30, 2000 and December 31,
1999, respectively, that were purchased from banks affiliated with First Banks.
In addition, FBA's Subsidiary Banks had sold $302.8 million and $302.9 million
in whole loans and loan participations to affiliates of First Banks at September
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. There were no amounts outstanding under the
Note Payable at September 30, 2000 or December 31, 1999. The interest expense
incurred by FBA on the Note Payable was $31,000 and $245,000 for the three and
nine months ended September 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.
<PAGE>
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 September 30, 2000, FBA and the Subsidiary Banks were each well
capitalized under the applicable regulations.
As of September 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.
At September 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
----------------------------
September 30, December 31, adequacy prompt corrective
2000 1999 purposes action provisions
---- ---- -------- -----------------
Total capital (to risk-weighted assets):
<S> <C> <C> <C> <C>
FBA................................ 12.61% 13.08% 8.0% 10.0%
FB Texas........................... 12.12 12.42 8.0 10.0
FB California...................... 11.42 10.81 8.0 10.0
Redwood Bank....................... 11.44 11.17 8.0 10.0
Tier 1 capital (to risk-weighted assets):
FBA................................ 9.41% 9.34% 4.0% 6.0%
FB Texas........................... 10.86 11.17 4.0 6.0
FB California...................... 10.16 9.56 4.0 6.0
Redwood Bank....................... 10.19 10.15 4.0 6.0
Tier 1 capital (to average assets):
FBA................................ 8.48% 8.94% 3.0% 5.0%
FB Texas........................... 10.20 10.39 3.0 5.0
FB California...................... 9.31 9.95 3.0 5.0
Redwood Bank....................... 8.31 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, trade finance 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)
---------------------------- --------------------------
September 30, December 31, September 30, December 31,
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Balance sheet information:
<S> <C> <C> <C> <C>
Investment securities................................ $ 46,443 20,743 17,707 37,539
Loans, net of unearned discount...................... 448,197 379,632 140,858 138,902
Total assets......................................... 575,488 431,838 193,393 199,988
Deposits............................................. 499,179 367,563 166,992 173,703
Stockholders' equity................................. 64,578 47,990 24,115 24,275
======== ========= ========= =========
FB California (1) Redwood Bank (2)
---------------------------- -------------------------
Three months ended Three months ended
September 30, September 30,
---------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income...................................... $ 12,704 8,582 4,252 3,866
Interest expense..................................... 4,936 3,050 1,724 1,447
-------- --------- --------- ---------
Net interest income........................... 7,768 5,532 2,528 2,419
Provision for loan losses............................ 15 15 150 60
-------- --------- --------- ---------
Net interest income after
provision for loan losses................... 7,753 5,517 2,378 2,359
-------- --------- --------- ---------
Noninterest income................................... 1,499 934 (71) 122
Noninterest expense.................................. 4,381 3,785 1,379 1,496
-------- --------- --------- ---------
Income (loss) before provision (benefit)
for income tax expense...................... 4,871 2,666 928 985
Provision (benefit) for income tax expense........... 1,897 1,089 491 443
-------- --------- --------- ----------
Net income (loss)............................. $ 2,974 1,577 437 542
======== ========= ========= ==========
FB California (1) Redwood Bank (2)
-------------------------- -------------------------
Nine months ended Nine months ended
September 30, September 30,
-------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
Income statement information:
Interest income...................................... $ 35,325 24,714 12,136 8,796
Interest expense..................................... 13,285 9,125 4,832 3,282
-------- --------- --------- ---------
Net interest income........................... 22,040 15,589 7,304 5,514
Provision for loan losses............................ 150 95 432 133
-------- --------- --------- ---------
Net interest income after
provision for loan losses................... 21,890 15,494 6,872 5,381
-------- --------- --------- ---------
Noninterest income................................... 3,222 2,358 (120) 325
Noninterest expense.................................. 13,663 11,410 4,312 3,403
-------- --------- --------- ---------
Income (loss) before provision (benefit)
for income tax expense...................... 11,449 6,442 2,440 2,303
Provision (benefit) for income tax expense........... 4,474 2,742 1,292 1,087
-------- --------- --------- ----------
Net income (loss)............................. $ 6,975 3,700 1,148 1,216
======== ========= ========= ==========
-----------------
(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 $633,000 and $1.9 million of guaranteed preferred debentures expense, after applicable
income tax benefit of $341,000 and $1.0 million, for the three and nine months ended September 30, 2000, and $645,000 and $1.9
million of guaranteed preferred debentures expense, after applicable income tax benefit of $348,000 and $1.0 million, for
the comparable periods in 1999, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FB Texas Corporate and other (3) Consolidated total
----------------------------- ------------------------------- -------------------------------
September 30, December 31, September 30, December 31, September 30, December 31,
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C> <C>
25,703 30,439 4,326 3,817 94,179 92,538
229,150 213,731 16 (2) 818,221 732,263
292,890 278,988 8,816 9,893 1,070,587 920,707
254,271 244,248 (1) (5,491) 920,441 780,023
30,097 30,338 (36,856) (30,104) 81,934 72,499
========== ========= ========= ======== ========== =========
FB Texas Corporate and other (3) Consolidated total
------------------------------ ------------------------------- ----------------------------
Three months ended Three months ended Three months ended
September 30, September 30, September 30,
------------------------------ ------------------------------- ----------------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
6,044 5,500 98 80 23,098 18,028
2,575 2,185 33 (42) 9,268 6,640
---------- --------- --------- -------- ---------- --------
3,469 3,315 65 122 13,830 11,388
155 15 -- -- 320 90
---------- --------- --------- -------- ---------- --------
3,314 3,300 65 122 13,510 11,298
---------- --------- --------- -------- ---------- --------
459 504 (10) (391) 1,877 1,169
2,155 2,367 1,581 731 9,496 8,379
---------- --------- --------- -------- ---------- --------
1,618 1,437 (1,526) (1,000) 5,891 4,088
546 492 (520) (325) 2,414 1,699
---------- --------- --------- -------- ---------- --------
1,072 945 (1,006) (675) 3,477 2,389
========== ========= ========= ======== ========== ========
FB Texas Corporate and other (3) Consolidated total
--------------------------- ------------------------------- ----------------------------
Nine months ended Nine months ended Nine months ended
September 30, September 30, September 30,
--------------------------- ------------------------------- ----------------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
(dollars expressed in thousands)
17,702 16,523 270 231 65,433 50,264
7,295 6,510 223 (269) 25,635 18,648
---------- --------- --------- -------- ---------- --------
10,407 10,013 47 500 39,798 31,616
450 75 -- -- 1,032 303
---------- --------- --------- -------- ---------- --------
9,957 9,938 47 500 38,766 31,313
---------- --------- --------- -------- ---------- --------
1,445 1,560 (42) (415) 4,505 3,828
6,460 6,877 3,636 2,878 28,071 24,568
---------- --------- --------- -------- ---------- --------
4,942 4,621 (3,631) (2,793) 15,200 10,573
1,703 1,588 (1,643) (923) 5,826 4,494
---------- --------- --------- -------- ---------- --------
3,239 3,033 (1,988) (1,870) 9,374 6,079
========== ========= ========= ======== ========== ========
</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 our financial condition, results of operations and
business. 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 us, including but not limited to fluctuations in interest
rates and in the economy; the impact of laws and regulations applicable to us
and changes therein; competitive conditions in the markets in which we conduct
our operations, including competition from banking and non-banking companies
with substantially greater resources than us, some of which may offer and
develop products and services not offered by us; our ability to control the
composition of our loan portfolio without adversely affecting interest income;
and our ability to respond to changes in technology. With regard to our 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 our offices, as compared with competitors operating solely in
contiguous markets; the competition of larger acquirers with greater resources
than us; fluctuations in the prices at which acquisition targets may be
available for sale and in the market for our 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
We are a bank holding company incorporated in Delaware and
headquartered in St. Louis County, Missouri. Through the operation of our
subsidiaries, we offer a broad array of financial services to consumer and
commercial customers. We currently operate banking subsidiaries in California
and Texas. At September 30, 2000, we had $1.07 billion in total assets, $818.2
million in total loans, net of unearned discount, $920.4 million in total
deposits and $81.9 million in total stockholders' equity. We operate through
three wholly owned bank subsidiaries as follows:
<TABLE>
<CAPTION>
Loans, net of
Number of Total unearned Total
Name Headquarters locations assets discount deposits
---- ------------ --------- ------ -------- --------
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C>
First Bank of California Sacramento, California 13 $ 575,488 448,197 499,179
First Bank Texas N.A. Houston, Texas 6 292,890 229,150 254,271
Redwood Bank San Francisco, California 4 193,393 140,858 166,992
=== ========= ======= =======
</TABLE>
We offer 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, trade finance 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.
We centralize overall corporate policies, procedural and administrative
functions, and operational support functions for our subsidiary banks. Primary
responsibility for managing our subsidiary banks remains with the officers and
directors.
<PAGE>
Financial Condition
Our total assets were $1.07 billion and $920.7 million at September 30,
2000 and December 31, 1999, respectively. The increase in total assets is
primarily attributable to our acquisition of Lippo Bank, which provided assets
of $85.3 million. Loans, net of unearned discount, excluding the loans acquired
from Lippo Bank, increased by $45.0 million, which is further discussed under
"--Loans and Allowance for Loan Losses." Offsetting this increase and providing
an additional source of funds for continued internal loan growth was a reduction
in investment securities of $35.8 million, after consideration of the $37.4
million of investment securities provided by Lippo Bank, to $94.2 million at
September 30, 2000. Total deposits, excluding the $76.4 million of deposits
provided by the acquisition of Lippo Bank, increased by $64.0 million to $920.4
million at September 30, 2000. The funds generated from the deposit growth were
utilized to fund a portion of the loan growth, and the remaining funds were
temporarily invested in cash and cash equivalents, resulting in an increase of
$48.4 million in federal funds sold to $57.2 million at September 30, 2000. In
addition, short-term borrowings decreased by $4.1 million to $10.8 million at
September 30, 2000, reflecting an increase of $6.9 million in repurchase
agreements offset by a decrease of $11.0 million in federal funds purchased.
During the nine months ended September 30, 2000, we purchased $1.3
million of our common stock for treasury at an average cost of $17.28 per share.
We utilized available cash to fund our repurchases of common stock. In 1998, our
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 September 30, 2000, we have
purchased an aggregate total of 795,429 common shares for treasury and could
purchase approximately 21,449 additional shares under the existing 1998
authorization. In addition, on April 28, 2000, our 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 $3.5 million, or $0.62 per share on a diluted basis, for
the three months ended September 30, 2000, in comparison to $2.4 million, or
$0.42 per share on a diluted basis, for the comparable period in 1999. For the
nine months ended September 30, 2000 and 1999, net income was $9.4 million, or
$1.67 per share on a diluted basis, and $6.1 million, or $1.06 per share on a
diluted basis, respectively. The earnings progress was primarily driven by
increased net interest income generated from our acquisitions of Redwood Bank
and Lippo Bank, increased yields on earning assets, internal loan growth and
increased noninterest income as further discussed under "--Noninterest Income."
In addition, First Bank of California's net income increased to $3.0 million and
$7.0 million for the three and nine months ended September 30, 2000, in
comparison to $1.6 million and $3.7 million for the comparable periods in 1999,
respectively. This increase is reflective of the progress we have made in the
last year in assimilating the cultures of several acquired banks into First Bank
of California to create a single effective banking franchise.
The increase in net interest income for the three and nine months ended
September 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 $13.8 million, or 5.63% of average
interest-earning assets, for the three months ended September 30, 2000, in
comparison to $11.4 million, or 5.48% of average interest-earning assets, for
the comparable period in 1999. For the nine months ended September 30, 2000 and
1999, net interest income was $39.8 million, or 5.64% of average
interest-earning assets, and $31.6 million, or 5.47% of average interest-earning
assets, respectively. We credit the improved net interest income primarily to
the net interest-earning assets provided by our acquisitions of Lippo Bank and
Redwood Bank, internal loan growth and increases in the prime lending rate which
has resulted in increased yields on interest-earning assets. For the three and
nine months ended September 30, 2000, average loans increased by $102.1 million
and $130.9 million, respectively. During the period from October 1, 1999 through
September 30, 2000, the Board of Governors of the Federal Reserve System
increased the discount rate several times, resulting in four increases in the
prime rate of interest from 8.25% to 9.50%. This is reflected not only in the
<PAGE>
rate of interest earned on loans that are indexed to the prime rate, but also in
other assets and liabilities which either have variable or adjustable rates, or
which matured or repriced during this period. Although the cost of
interest-bearing liabilities has also increased, it has been less dramatic than
the earnings on interest-earning assets, contributing to an improvement in net
interest margins. This is further discussed under "--Interest Rate Risk
Management."
The improved yield earned on our interest-earning assets was partially
offset by an increased rate paid on our interest-bearing liabilities. For the
three and nine months ended September 30, 2000, the aggregate weighted average
rate paid on our deposit portfolio increased to 4.71% and 4.52%, respectively,
from 4.03% and 4.04% for the comparable periods in 1999, reflecting increased
rates paid by us to provide a funding source for continued loan growth.
The following table sets forth certain information relating to our
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 September 30, Nine months ended September 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> <C> <C> <C>
Loans (1)(2)(3)(4)........... $ 805,331 20,156 9.96% $703,274 16,268 9.18%$ 784,114 57,715 9.83% $653,228 44,852 9.18%
Investment securities (3).... 96,018 1,716 7.11 94,016 1,434 6.05 102,144 5,137 6.72 104,798 4,862 6.20
Federal funds sold .......... 74,754 1,213 6.46 25,378 311 4.86 54,812 2,535 6.18 14,490 525 4.84
Other........................ 570 13 9.07 1,274 15 4.67 774 46 7.94 691 25 4.84
---------- ------ -------- ------ ---------- ------ -------- ------
Total interest-
earning assets.......... 976,673 23,098 9.41 823,942 18,028 8.68 941,844 65,433 9.28 773,207 50,264 8.69
------ ------ ------ ------
Nonearning assets............... 94,941 79,574 94,095 79,805
---------- -------- ---------- --------
Total assets............... 1,071,614 $903,516 $1,035,939 $853,012
========== ======== ========== ========
Liabilities and Stockholders' Equity
------------------------------------
Interest-bearing liabilities:
Interest-bearing
demand deposits............ $ 95,639 335 1.39% $ 85,584 304 1.41%$ 94,439 995 1.41% $ 81,852 857 1.40%
Savings deposits............. 265,314 2,795 4.19 233,504 2,137 3.63 254,204 7,699 4.05 223,619 6,086 3.64
Time deposits................ 406,676 5,959 5.83 320,966 4,062 5.02 391,256 16,341 5.58 291,718 11,102 5.09
---------- ------ ------- ------ ---------- ------ -------- ------
Total interest-
bearing deposits 767,629 9,089 4.71 640,054 6,503 4.03 739,899 25,035 4.52 597,189 18,045 4.04
Promissory notes payable and
short-term borrowings....... 11,732 179 6.07 8,350 137 6.51 12,891 600 6.22 14,633 603 5.51
---------- ------ ------- ------ ---------- ------ -------- ------
Total interest-bearing
liabilities............. 779,361 9,268 4.73 648,404 6,640 4.06 752,790 25,635 4.55 611,822 18,648 4.08
------ ------ ------ ------
Noninterest-bearing liabilities:
Demand deposits.............. 152,333 128,781 145,223 117,449
Other liabilities............ 59,644 55,987 60,420 55,416
---------- -------- ---------- --------
Total liabilities.......... 991,338 833,172 958,433 784,687
Stockholders' equity............ 80,276 70,344 77,506 68,325
---------- -------- ---------- --------
Total liabilities and
stockholders' equity.... $1,071,614 $903,516 $1,035,939 $853,012
========== ======== ========== ========
Net interest income............. 13,830 11,388 39,798 31,616
======= ====== ====== ======
Interest rate spread............ 4.68 4.62 4.73 4.61
Net interest margin............. 5.63% 5.48% 5.64% 5.47%
==== ==== ==== ====
</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 $320,000 and $1.0 million for the
three and nine months ended September 30, 2000, in comparison to $90,000 and
$303,000 for the comparable periods in 1999, respectively. We attribute the
increase in the provision for loan losses primarily to continued growth in the
loan portfolio, both internal and through acquisitions; increased risk
associated with the continued changing composition of our loan portfolio; and an
increase in nonperforming assets. Loan charge-offs were $96,000 and $821,000 for
the three and nine months ended September 30, 2000, in comparison to $211,000
and $1.0 million for the comparable periods in 1999. For the nine months ended
September 30, 2000, loan charge-offs included a charge-off of $457,000 on a
single loan purchased from an affiliated bank. Loan recoveries were $388,000 and
$1.6 million for the three and nine months ended September 30, 2000, in
comparison to $455,000 and $1.8 million for the comparable periods in 1999,
reflecting lower charge-off experience in recent years, which reduced the amount
of recovery opportunities. Our 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 $1.9 million and $4.5 million for the three and
nine months ended September 30, 2000, in comparison to $1.2 million and $3.8
million for the comparable periods in 1999, respectively. Noninterest income
consists primarily of service charges on deposit accounts and customer service
fees and other income.
Service charges on deposit accounts and customer service fees increased
to $986,000 and $2.8 million for the three and nine months ended September 30,
2000, in comparison to $752,000 and $2.4 million for the comparable periods in
1999, respectively. We attribute the increase in service charges to the increase
in deposit balances provided by internal growth; our acquisitions of Lippo Bank
and Redwood Bank; additional services available and utilized by our expanding
base of retail and corporate customers; increased fee income resulting from
revisions of customer service charge rates, effective April 1, 1999 and June 1,
2000, and enhanced control of fee waivers; and increased income associated with
automatic teller machine services and debit and credit cards.
Noninterest income for the nine months ended September 30, 2000 also
included a net loss on the sale of available-for-sale investment securities of
$356,000, of which $179,000 was recognized during the third quarter, in
comparison to a net gain on the sale of available-for-sale investment securities
of $174,000 for the nine months ended September 30, 1999. The net loss in 2000
resulted from sales of certain investment securities held by acquired
institutions that did not meet our overall investment objectives, whereas the
net gain in 1999 resulted from sales of certain investment securities to
facilitate the funding of our loan growth.
Other income was $1.1 million and $2.0 million for the three and nine
months ended September 30, 2000, in comparison to $417,000 and $1.3 million for
the comparable periods in 1999, respectively. The primary components of the
increase are increased income earned on our investment in bank-owned life
insurance; earnings associated with our International Banking Division, which
was initially acquired in conjunction with our Lippo Bank acquisition and has
subsequently been expanded to offer these services to our entire customer base;
and, approximately $620,000 relating to the settlement of a loan of an acquired
bank that had been fully charged-off prior to the date of acquisition.
Noninterest Expense
Noninterest expense was $9.5 million and $28.1 million for the three
and nine months ended September 30, 2000, in comparison to $8.4 million and
$24.6 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
benefit expenses; (c) increased data processing fees; (d) increased legal,
examination and professional fees; and (e) increased amortization of intangibles
associated with the purchase of subsidiaries.
<PAGE>
Salaries and employee benefits were $3.1 million and $9.8 million for
the three and nine months ended September 30, 2000, in comparison to $2.8
million and $8.0 million for the comparable periods in 1999, respectively. We
attribute the increase to our acquisitions of Lippo Bank and Redwood Bank and to
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 necessary to employ and retain qualified personnel.
Data processing fees were $1.1 million and $3.0 million for the three
and nine months ended September 30, 2000, in comparison to $842,000 and $2.4
million for the comparable periods in 1999, respectively. We attribute the
increased data processing fees to growth and technological advancements
consistent with our product and services offerings, and upgrades to
technological equipment, networks and communication channels.
Legal, examination and professional fees were $1.4 million and $3.9
million for the three and nine months ended September 30, 2000, in comparison to
$1.2 million and $3.5 million for the comparable periods in 1999, respectively.
The increase in these fees is primarily attributable to our expanded utilization
of legal and professional services in conjunction with general corporate
activities.
Amortization of intangibles associated with the purchase of
subsidiaries was $402,000 and $1.0 million for the three and nine months ended
September 30, 2000, in comparison to $322,000 and $830,000 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 we acquired in February 2000 and March 1999,
respectively.
Provision for Income Tax Expense
Provision for income tax expense was $2.4 million and $5.8 million for
the three and nine months ended September 30, 2000, representing an effective
income tax rate of 41.0% and 38.3%, respectively, in comparison to $1.7 million
and $4.5 million, representing an effective income tax rate of 41.6% and 42.5%
for the comparable periods in 1999, respectively. The decrease in the effective
income tax rate for the nine months ended September 30, 2000 is primarily
attributable to a reduction in our deferred tax asset valuation reserve of
$404,000 related to the utilization of net operating losses.
Interest Rate Risk Management
We utilize off-balance-sheet derivative financial instruments to assist
in our management of interest rate sensitivity and to modify the repricing,
maturity and option characteristics of on-balance-sheet assets and liabilities.
We limit the use of such derivative financial instruments to reduce our interest
rate exposure. The derivative financial instruments we hold, for purposes of
managing interest rate risk, are summarized as follows:
<TABLE>
<CAPTION>
September 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.................... $120,000 200 120,000 614
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
our credit exposure through our use of derivative financial instruments. The
credit exposure represents the accounting loss we 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, we 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 their funding
source with the objective of stabilizing cash flow, and accordingly, net
interest income, over time. The swap agreements initially provided for us to
receive a fixed rate of interest and pay an adjustable rate of interest
equivalent to the 90-day London Interbank Offering Rate. In March 2000, the
<PAGE>
terms of the swap agreements were modified such that we currently pay an
adjustable rate of interest equivalent to the daily weighted average prime
lending rate minus 2.705%. The terms of the swap agreements provide for us to
pay quarterly and receive payment semiannually. The amount receivable by us
under the swap agreements was $375,000 and $805,000 at September 30, 2000 and
December 31, 1999, respectively, and the amount payable by us under the swap
agreements was $171,000 and $185,000 at September 30, 2000 and December 31,
1999, respectively.
During May 1999, we 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. The
swap agreements provided for us to receive an adjustable rate of interest
equivalent to the daily weighted average 30-day London Interbank Offering Rate
and pay an adjustable rate of interest equivalent to the daily weighted average
prime lending rate minus 2.665%. The terms of the swap agreements, which had an
effective date of October 1, 1999 and a maturity date of March 31, 2000,
provided for us to pay and receive interest on a monthly basis. In January 2000,
we 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, we 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 their funding source with the objective of stabilizing cash flow, and
accordingly, net interest income, over time. The swap agreements provide for us
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
the swap agreements provide for us to pay and receive interest on a quarterly
basis. The amount receivable by us under the swap agreements was $38,000 at
September 30, 2000 and December 31, 1999, and the amount payable by us under the
swap agreements was $42,000 and $44,000 at September 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 September 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)
September 30, 2000:
<S> <C> <C> <C> <C> <C>
September 27, 2001....................... $ 40,000 6.80% 6.14% $ (210)
September 27, 2001....................... 15,000 6.80 6.14 (79)
June 11, 2002............................ 15,000 6.80 6.00 (173)
September 16, 2002....................... 20,000 6.80 5.36 (486)
September 18, 2002....................... 30,000 6.80 5.33 (750)
--------- --------
$ 120,000 6.80 5.79 $ (1,698)
========= ====== ====== ========
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.
<PAGE>
We 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 us under this agreement was $7,000 at
December 31, 1999.
Loans and Allowance for Loan Losses
Interest earned on our loan portfolio represents the principal source
of income for First Banks America and our subsidiary banks. Interest and fees on
loans were 87.3% and 90.2% of total interest income for the three months ended
September 30, 2000 and 1999, respectively, and 88.2% and 89.2% for the nine
months ended September 30, 2000 and 1999, respectively. Total loans, net of
unearned discount, were $818.2 million, or 76.4% of total assets, at September
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 our acquisition of Lippo Bank, which provided
loans, net of unearned discount, of $40.9 million, and the continued growth of
our commercial and financial and commercial real estate mortgage loan
portfolios. This increase was partially offset by a decrease in our consumer and
installment loan portfolio, which is primarily comprised of indirect automobile
loans, to $28.8 million at September 30, 2000 from $40.5 million at December 31,
1999. Such decrease is consistent with our efforts to reduce the indirect loan
portfolio. Commensurate with the growth in corporate lending and our prescribed
credit exposure guidelines for extending credit to an individual borrower, loan
participations sold to and purchased from banks affiliated with First Banks were
$302.8 million and $85.3 million at September 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.
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>
September 30, December 31,
2000 1999
---- ----
(dollars expressed in thousands)
<S> <C> <C>
Nonperforming loans........................................................ $ 5,517 3,337
Other real estate.......................................................... -- 60
---------- --------
Total nonperforming assets........................................ $ 5,517 3,397
========== ========
Loans, net of unearned discount............................................ $ 818,221 732,263
========== ========
Loans past due:
Over 30 days to 90 days................................................ $ 7,949 2,696
Over 90 days and still accruing........................................ 1,688 2,944
---------- --------
Total past-due loans.............................................. $ 9,637 5,640
========== ========
Allowance for loan losses to loans......................................... 2.10% 2.00%
Nonperforming loans to loans............................................... 0.67 0.46
Allowance for loan losses to nonperforming loans........................... 311.38 437.85
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 $5.5 million at September 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
First Bank Texas N.A. that was placed on nonaccrual in May 2000. We recently
initiated foreclosure proceedings with respect to this relationship and
anticipate liquidating the underlying collateral in settlement of this loan. The
decline in the ratio of the allowance for loan losses to nonperforming loans is
primarily attributable to the increase in nonperforming loans, specifically the
$2.4 million loan at First Bank Texas N.A. described above, which was partially
offset by an increase in the allowance for loan losses.
<PAGE>
Impaired loans, consisting of loans on nonaccrual status and indirect
consumer and installment loans 60 days or more past due, were $5.6 million and
$3.6 million at September 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 Nine months ended
September 30, September 30,
---------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars expressed in thousands)
<S> <C> <C> <C> <C>
Allowance for loan losses, beginning of period............ $ 16,567 14,383 14,611 12,127
Acquired allowances for loan losses................... -- -- 799 1,466
--------- -------- --------- --------
16,567 14,383 15,410 13,593
--------- -------- --------- --------
Loans charged-off..................................... (96) (211) (821) (1,009)
Recoveries of loans previously charged-off............ 388 455 1,558 1,830
--------- -------- --------- --------
Net loan recoveries................................... 292 244 737 821
--------- -------- --------- --------
Provision for loan losses............................. 320 90 1,032 303
--------- -------- --------- --------
Allowance for loan losses, end of period.................. $ 17,179 14,717 17,179 14,717
========= ======== ========= ========
</TABLE>
The allowance for loan losses is monitored on a monthly basis. Each
month, the credit administration department provides our 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 coupled 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, we continually monitor the overall increases or decreases
in the levels of risk in the portfolios. Factors are applied to the loan
portfolios for each category of loan risk to determine acceptable levels of
allowance for loan losses. We derive these factors primarily from the actual
loss experience of our 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 we
operate. Based on this quantitative and qualitative analysis, provisions are
made to our allowance for loan losses. Such provisions are reflected in our
consolidated statements of income.
Liquidity
The liquidity of First Banks America and our 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. Our subsidiary
banks receive funds for liquidity from customer deposits, loan payments,
maturities of loans and investments, sales of investments and earnings. In
addition, we may avail ourselves 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
borrowings under our revolving note payable. The aggregate funds acquired from
these more volatile sources were $131.4 million and $109.9 million at September
30, 2000 and December 31, 1999, respectively.
<PAGE>
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 September 30, 2000:
(dollars expressed in thousands)
3 months or less.......................... $ 45,940
Over 3 through 6 months................... 21,996
Over 6 through 12 months.................. 43,427
Over 12 months............................ 20,002
----------
Total................................... $ 131,365
==========
We have periodically borrowed from First Banks under our revolving note
payable. Borrowings under the revolving note payable have been utilized to
facilitate the funding of our acquisitions, support repurchases of common stock
from time to time and for other corporate purposes. The increase to $90.0
million of the maximum amount available under the revolving note payable, as
further discussed in Note 4 to the accompanying consolidated financial
statements, is intended to provide us with sufficient additional liquidity to
pursue acquisition opportunities. The borrowings under the revolving 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 revolving note payable is due and payable on June 30, 2005.
At September 30, 2000 and December 31, 1999, there were no amounts outstanding
under the revolving note payable.
In 1999, First Bank Texas N.A. and First Bank of 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 September 30, 2000 and December 31, 1999, the borrowing capacity
under these agreements was approximately $293.2 million and $255.4 million,
respectively. In addition, our subsidiary banks' borrowing capacity through
their relationships with the Federal Home Loan Banks was approximately $14.7
million and $35.3 million at September 30, 2000 and December 31, 1999,
respectively.
Management believes the available liquidity and operating results of
our subsidiary banks will be sufficient to provide funds for growth and to
permit the distribution of dividends to us sufficient to meet our operating and
debt service requirements, both on a short-term and long-term basis, and to pay
the dividends on the trust preferred securities issued by our financing
subsidiary, First America Capital Trust.
<PAGE>
Year 2000 Compatibility
First Banks America and our 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.
We successfully completed all phases of our Year 2000 program within
the appropriate timeframes established by the regulatory agencies. In addition,
we did not encounter any significant business disruptions or processing problems
as a result of the Year 2000 century date change. Furthermore, we are unaware of
any Year 2000 issues encountered by our more significant borrowers and vendors
that would inhibit their ability to repay obligations or provide goods or
services. The total cost of our Year 2000 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. We are charging the capital improvements to expense
in the form of depreciation expense or lease expense, generally over a period of
60 months. We incurred direct expenses related to our Year 2000 program of
approximately $54,000 for the nine months ended September 30, 2000, $135,000 and
$270,000 for the three and nine months ended September 30, 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 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.
<PAGE>
In June 1999, the Financial Accounting Standards Board 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 Financial Accounting Standards Board 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. The DIG presently has additional issues and questions pending and
continues to release guidance and interpretations as such issues are resolved.
We continue to consider the actions and conclusions of the DIG as they are
released in order to determine their potential impact on our consolidated
financial statements.
We currently believe the implementation of SFAS 133 will not have a
material impact on our consolidated financial statements as it relates to our
existing derivative financial instruments. However, the effect of future
derivative transactions as well as further guidance from the DIG may result in
modifications of our current assessment of SFAS 133 and its overall impact on
our consolidated financial statements.
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, our 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 our earnings, a decline in interest
rates of 100 basis points indicated a pre-tax projected loss of approximately
8.0% of net interest income based on assets and liabilities at December 31,
1999. At September 30, 2000, we remain in an "asset-sensitive" position and
thus, remain subject to a higher level of risk in a declining interest-rate
environment. Our asset-sensitive position, coupled with increases in the prime
lending rate throughout the last nine months, is reflected in the increased net
interest income for the three and nine months ended September 30, 2000 as
further discussed under "--Results of Operations." During the three and nine
months ended September 30, 2000, our 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
<TABLE>
<CAPTION>
(a) The exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.
Exhibit Number Description
-------------- -----------
<S> <C> <C>
10(ff) Agreement and Plan of Reorganization by and between First Banks
America, Inc. and Millennium Bank, dated August 23, 2000 - filed
herewith.
10(gg) Agreement and Plan of Merger by and among First Banks, Inc., First
Banks America, Inc., Redwood Bank, The San Francisco Company and
Bank of San Francisco, dated September 22, 2000 - filed herewith.
27 Article 9 - Financial Data Schedule (EDGAR only)
(b) We filed no reports on Form 8-K during the three months ended September 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
November 10, 2000 (Principal Executive Officer)
By: /s/ Frank H. Sanfilippo
-----------------------------------------------
Frank H. Sanfilippo
Executive Vice President and
Chief Financial Officer
November 10, 2000 (Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT 10(ff)
AGREEMENT AND PLAN OF REORGANIZATION
by and between
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
and
MILLENNIUM BANK,
a California banking corporation
August 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I - TERMS OF THE MERGER & CLOSING; CONVERSION OF SHARES
<S> <C> <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 MILLENNIUM BANK
Section 2.01. Organization and Capital Stock........................................................ 4
Section 2.02. Authorization; No Defaults............................................................ 5
Section 2.03. Millennium Bank Subsidiaries.......................................................... 5
Section 2.04. Financial Information................................................................. 5
Section 2.05. Absence of Changes.................................................................... 5
Section 2.06. Regulatory Enforcement Matters........................................................ 6
Section 2.07. Tax Matters.......................................................................... 6
Section 2.08. Litigation............................................................................ 7
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other Agreements.................... 7
Section 2.10. Reports............................................................................... 8
Section 2.11. Investment Portfolio.................................................................. 8
Section 2.12. Loan Portfolio........................................................................ 8
Section 2.13. Employee Matters and ERISA............................................................ 9
Section 2.14. Title to Properties; Licenses; Insurance............................................. 10
Section 2.15. Environmental Matters................................................................ 11
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.......................................................... 12
Section 2.20. Commitments and Contracts............................................................ 12
Section 2.21. Material Interest of Certain Persons................................................. 13
Section 2.22. Conduct to Date...................................................................... 13
</TABLE>
<PAGE>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FBA
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section 3.01. Organization......................................................................... 14
Section 3.02. Authorization........................................................................ 14
Section 3.03. Litigation........................................................................... 15
Section 3.04. Statements True and Correct.......................................................... 15
ARTICLE IV - AGREEMENTS OF MILLENNIUM BANK
Section 4.01. Business in Ordinary Course.......................................................... 15
Section 4.02. Breaches............................................................................. 18
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................................................................. 20
Section 5.02. Breaches............................................................................. 20
Section 5.03. Consummation of Agreement............................................................ 20
Section 5.04. Employee Benefits.................................................................... 20
Section 5.05. Merger Agreement..................................................................... 21
Section 5.06. Indemnification...................................................................... 21
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01. Conditions to the Obligations of FBA................................................. 22
Section 6.02. Conditions to the Obligations of Millennium Bank..................................... 22
</TABLE>
<PAGE>
ARTICLE VII - TERMINATION
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section 7.01. Mutual Agreement..................................................................... 23
Section 7.02. Breach of Agreements................................................................. 23
Section 7.03. Failure of Conditions................................................................ 24
Section 7.04. Denial of Regulatory Approval........................................................ 24
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......................................................................... 25
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01. Confidential Information............................................................. 27
Section 8.02. Publicity............................................................................ 27
Section 8.03. Return of Documents.................................................................. 28
Section 8.04. Notices.............................................................................. 28
Section 8.05. Nonsurvival of Representations, Warranties and Agreements............................ 28
Section 8.06. Costs and Expenses................................................................... 28
Section 8.07. Entire Agreement..................................................................... 29
Section 8.08. Headings and Captions................................................................ 29
Section 8.09. Waiver, Amendment or Modification.................................................... 29
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 August 23, 2000
is by and between First Banks America, Inc., a bank holding company organized as
a Delaware corporation ("FBA"), and Millennium Bank, a California banking
corporation ("Millennium 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 Millennium 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 Millennium 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 Millennium 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 Millennium 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 Millennium Bank ("Millennium 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 eight dollars and
ten cents ($8.10).
(b) Each share of Millennium Bank Common held in the treasury of
Millennium Bank or by any direct or indirect subsidiary of Millennium 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.
<PAGE>
(c) The stock transfer books of Millennium 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 Millennium Bank Common shall cease to be
outstanding and be canceled.
(d) If holders of Millennium Bank Common are entitled to require
appraisal of their shares under applicable Corporate Law, issued and outstanding
shares of Millennium 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
Millennium 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 Millennium Bank Common
("Millennium 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 Millennium Bank as of the Closing Date. FBA shall pay for
each share of Millennium 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 Millennium 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 Millennium Bank
Common, so that immediately following the effective time of the Merger, the
number of outstanding shares of common stock of Millennium 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")
-----------
hall 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 Millennium 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").
<PAGE>
Section 1.06. Actions At Closing.
-------------------
(a) At the Closing, Millennium Bank shall deliver to FBA:
(i) certified copies of the Articles of Incorporation and
Bylaws of Millennium Bank;
(ii) a certificate signed by an appropriate officer of
Millennium 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 Millennium 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 Millennium
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 Millennium 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 Millennium 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 Millennium Bank and its counsel.
<PAGE>
Section 1.07. Exchange Procedures; Surrender of Certificates. As soon as
--------------------------------------------------
reasonably practicable after the Effective Time, FBA shall mail to each record
holder of shares of Millennium Bank Common a letter of transmittal in form
reasonably satisfactory to Millennium 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 Millennium 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 MILLENNIUM BANK
Millennium Bank represents and warrants to FBA as follows:
Section 2.01. Organization and Capital Stock.
------------------------------
(a) Millennium Bank is a California banking corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has the corporate power to own all of its property and assets, to incur all
of its liabilities and to carry on its business as now being conducted.
Millennium Bank's deposits are insured by the Federal Deposit Insurance
Corporation ("FDIC").
(b) As of the date hereof, the authorized capital stock of Millennium
Bank consists of (i) 5,000,000 shares of Millennium Bank Common, of which
2,311,130 shares are outstanding, duly and validly issued, fully paid and
non-assessable, and 2,000,000 shares of preferred stock, none of which is
outstanding. None of the outstanding shares of Millennium Bank Common has been
issued in violation of any preemptive rights. Each certificate representing
shares of Millennium 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 Millennium Bank only upon receipt
of an affidavit of lost stock certificate and a bond sufficient to indemnify
Millennium 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 Millennium Bank to FBA entitled "Disclosure Schedule" and executed
by both Millennium 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 Millennium 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 Millennium Bank or
contracts, commitments, understandings or arrangements by which Millennium Bank
is or may be obligated to issue additional shares of its capital stock.
<PAGE>
Section 2.02. Authorization; No Defaults. Millennium Bank's Board of
---------------------------
Directors has by all requisite action approved this Agreement and the Merger and
authorized the execution of this Agreement on its behalf by its duly authorized
officers and the performance by Millennium Bank of its obligations hereunder.
Nothing in the Articles of Incorporation or Bylaws of Millennium Bank or any
other agreement, instrument, decree, proceeding, law or regulation (except as
specifically referred to in this Agreement) by or to which Millennium Bank or
any of its assets is bound or subject prohibits or inhibits Millennium 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
Millennium Bank and constitutes the legal, valid and binding obligation of
Millennium Bank, enforceable against Millennium Bank in accordance with its
terms. Millennium 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 Millennium Bank.
Section 2.03. Millennium Bank Subsidiaries. Millennium Bank has no
------------------------------
direct and indirect subsidiaries. Except as disclosed in Section 2.03 of the
Disclosure Schedule, Millennium 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
----------------------
Millennium Bank as of December 31, 1999 and the 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 as the same appear in Millennium Bank's Annual
Report on Form 10-K for the year ended December 31, 1999; the unaudited balance
sheets of Millennium Bank as of March 31, 2000 and June 30, 2000 and the related
income statements and statements of changes in shareholders' equity and of cash
flows for the three and six months periods ended March 31, 2000 and June 30,
2000, respectively, together with the notes thereto, included in Millennium
Bank's Quarterly Reports on Form 10-Q for the periods ended March 31, 2000 and
June 30, 2000; and Millennium Bank's year-end and quarter-end Reports of
Condition and Reports of Income for 1999 and for the three month periods ended
March 31, 2000 and June 30, 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 "Millennium Bank Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be disclosed therein and except for regulatory reporting
differences required for Millennium Bank's reports) and fairly present the
financial position and the results of operations, changes in shareholders'
equity and cash flows of Millennium Bank as of the dates and for the periods
indicated.
<PAGE>
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 Millennium Bank, nor have there been
any events or transactions having such a material adverse effect which should be
disclosed in order to make the Millennium Bank Financial Statements not
misleading. Since November 15, 1999 (the date of the most recent examination of
Millennium Bank by the Financial Institutions Department and/or the FDIC), there
has been no material adverse change in Millennium Bank's financial condition,
results of operations or business except for any such changes as are disclosed
in Millennium Bank's Reports of Condition and Income filed with the FDIC since
such date.
Section 2.06. Regulatory Enforcement Matters. Except as disclosed in
-------------------------------
Section 2.06 of the Disclosure Schedule, Millennium 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 Millennium Bank.
Section 2.07. Tax Matters.
-----------
(a) Millennium 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 Millennium 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) Millennium 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 Millennium 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) Except as disclosed in Section 2.07(c) of the Disclosure Schedule,
there has not been an ownership change of Millennium Bank, as defined in Section
382(g) of the Internal Revenue Code, that occurred during or after any taxable
period in which Millennium Bank incurred a net operating loss that carries over
to any taxable period ending after 1999.
(d) All material elections with respect to taxes affecting Millennium
Bank have been and will be timely made.
<PAGE>
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 Millennium Bank's
knowledge, threatened against Millennium Bank, or to which the property of
Millennium 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 Millennium 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 Millennium 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 Millennium Bank, exclusive of deposit agreements with customers of
Millennium 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 Millennium Bank not referred to
elsewhere in this Section 2.09 which:
(i) involve payment by Millennium Bank of more than
$100,000 (other than loans, loan commitments or letters of credit);
(ii) involve payments based on profits of Millennium 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 Millennium Bank; or
(vi) require the consent or approval of any third party
for the Merger to be consummated.
<PAGE>
(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
Millennium 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 Millennium 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 Millennium 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 Millennium 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. Millennium 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 Millennium 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 Millennium Bank, as reflected in
the latest balance sheet of Millennium Bank included in the Millennium Bank
Financial Statements, are carried in accordance with generally accepted
accounting principles.
<PAGE>
Section 2.12. Loan Portfolio.
--------------
(a) All loans and discounts shown on the Millennium 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) Millennium 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
Millennium 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 Millennium Bank's customary and ordinary
past practices; and
(d) the reserve for loan losses reflected in the Millennium 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) Millennium 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 Millennium Bank's knowledge there is no present effort nor
existing proposal to attempt to unionize any group of employees of Millennium
Bank.
(b) (i) Millennium 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 Millennium Bank is not engaged in any unfair labor practice;
(ii) there is no unfair labor practice complaint against Millennium Bank pending
or, to the best of Millennium 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 Millennium Bank's knowledge,
threatened against or directly affecting Millennium Bank; and (iv) Millennium
Bank has not experienced any work stoppage or other material labor difficulty
during the past five years.
<PAGE>
(c) Except as disclosed in Section 2.13(c) of the Disclosure Schedule,
Millennium 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 Millennium Bank (collectively, the "Employee Plans"). No present or
former employee of Millennium Bank has been charged with breaching nor has
breached a fiduciary duty under any Employee Plan. Millennium 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, Millennium Bank does 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 Millennium Bank.
(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 Millennium Bank
Financial Statements, Millennium 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 Millennium Bank would be liable, except as is
reflected in the Millennium Bank Financial Statements. Millennium 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) Millennium 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 Millennium 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
Millennium 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 Millennium Bank in its business are held pursuant to lease
agreements which are valid and enforceable in accordance with their terms;
<PAGE>
(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 Millennium Bank's knowledge, threatened with respect
to any of such properties;
(d) Millennium 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 Millennium 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 Millennium 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.
During the period of Millennium Bank's ownership, lease or operation
(on its own behalf or in a fiduciary capacity) of all properties (and, to the
best of Millennium Bank's knowledge, during periods prior to such ownership,
lease or operation), neither the conduct nor operation of Millennium Bank nor
any condition of any property violates or violated any Environmental Law in any
respect material to the business of Millennium 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 Millennium Bank, of any Environmental Law or obligate (or
potentially obligate) Millennium 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 Millennium Bank. Millennium Bank has
not received notice from any person or entity that Millennium Bank or the
operation or condition of any property ever owned, leased or operated by
Millennium Bank on its own behalf or in a fiduciary capacity, are or were in
violation of any Environmental Law, or that Millennium 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. Millennium 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.
<PAGE>
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 Millennium Bank.
Section 2.18. No Undisclosed Liabilities. Millennium 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 Millennium Bank
giving rise to any such liability), except (i) liabilities reflected in the
Millennium 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 Millennium 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 Millennium 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), Millennium Bank 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 Millennium Bank Financial Statements relating to the
borrowing of money by Millennium Bank or the guarantee by Millennium
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 $50,000; or
(iii) any contract containing covenants which limit the
ability of Millennium 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, Millennium Bank may carry on its business.
<PAGE>
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 Millennium 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 Millennium Bank; and
(b) all outstanding loans from Millennium 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, Millennium 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 Millennium 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;
(v) incurred any material obligation or liability (absolute
or contingent), except normal trade or business obligations or liabili-
ties 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;
<PAGE>
(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.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF FBA
FBA represents and warrants to Millennium 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").
<PAGE>
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.
ARTICLE IV AGREEMENTS OF MILLENNIUM BANK
Section 4.01. Business in Ordinary Course.
---------------------------
(a) Millennium 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, Millennium Bank will not:
(i) declare or pay any dividend or make any other distribu-
tion 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 Millennium Bank Common or any other stock of Millennium
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;
<PAGE>
(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;
(vi) engage in any transaction with (A) a person or entity
directly or indirectly controlling, controlled by or under common
control with Millennium Bank or (B) an officer, director or direct or
indirect beneficial owner of 10% or more of a class of Millennium Bank
Common; or
(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) Millennium Bank will not, without the prior written consent of
FBA:
(i) except as disclosed in Section 4.01(b) of the Disclosure
Schedule, 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 $750,000 or that would
increase the aggregate credit outstanding to any one borrower (or group
of affiliated borrowers) to more than $1,000,000 (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;
<PAGE>
(vii) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to Millennium Bank or any
claims which Millennium 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;
(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 Millennium 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 Millennium 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 Millennium 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 $40,000; or
(xiii) increase or decrease the rate of interest paid on
deposits, except in a manner consistent with past practices.
(c) Millennium 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 Millennium
Bank contained in Article II hereof, if such representations and warranties were
given immediately following such transaction or action.
(d) Millennium Bank shall promptly notify FBA of the occurrence of any
matter or event known to and directly involving Millennium Bank that is
materially adverse to the business, operations, properties, assets, or condition
(financial or otherwise) of Millennium Bank.
<PAGE>
(e) Millennium 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 Millennium Bank Common or other securities or assets
of Millennium Bank, except for the transaction contemplated in subsection (a)(v)
above ("Acquisition Proposal"). Millennium Bank shall promptly advise FBA of its
receipt of any Acquisition Proposal or inquiry regarding a potential acquisition
transaction and the substance thereof.
Section 4.02. Breaches. Millennium 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. Millennium 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. Millennium 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 Millennium 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. Millennium 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. Millennium 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 Millennium Bank to do so.
<PAGE>
Section 4.05. Environmental Reports. Millennium 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 Millennium Bank as of the date
hereof (other than space in retail and similar establishments leased by
Millennium Bank for automatic teller machines), and within ten (10) days after
the acquisition or lease of any real property acquired or leased by Millennium
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, Millennium 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 Millennium 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 $200,000 as
reasonably estimated by an environmental expert retained for such purpose by FBA
and reasonably acceptable to Millennium 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 $200,000 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.
Section 4.06. Access to Information. Millennium Bank shall permit FBA
--------------------
reasonable access, in a manner which will avoid undue disruption or interference
with Millennium Bank's normal operations, to its properties, and Millennium 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 Millennium 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. Millennium 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, Millennium Bank shall deliver to FBA all monthly
unaudited balance sheets and profit and loss statements of Millennium 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 Millennium Bank Financial
Statements"). The Subsequent Millennium 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, Millennium 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 Millennium
Bank will perform all of its obligations thereunder.
<PAGE>
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 Millennium Bank reasonably informed as to the status of such
applications and make available to Millennium Bank, upon reasonable request,
copies of such applications and any supplementally filed materials.
Section 5.02. Breaches. FBA shall, in the event it has knowledge of
--------
the occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to Millennium 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.
<PAGE>
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 Millennium 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 Millennium Bank
after the Effective Time. Millennium 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 Millennium 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, Millennium 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.
Section 5.06. Indemnification.
---------------
(a) For four years after the Closing Date, FBA will cause Millennium
Bank to indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of Millennium Bank (each, an "Indemnified
Party") against all losses, expenses, claims, damages or liabilities arising out
of actions or omissions related to their positions at Millennium 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 Millennium 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 Millennium Bank's successors and assigns to assume any
remaining obligations set forth in this Section 5.06. If Millennium 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 Millennium Bank was so obligated pursuant to this Section 5.06.
(c) FBA shall have the option of purchasing insurance in the form of an
extension of coverage under Millennium Bank's existing insurance policy Number
276-16-50 issued by Bancinsure, Inc., insuring the Indemnified Parties against
such losses, expenses, claims, damages or liabilities, on terms acceptable to
FBA.
<PAGE>
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER
Section 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 Millennium 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) Millennium 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;
(d) all necessary approvals, consents and authorizations required by
law for consummation of the Merger, including the requisite approval of the
shareholders of Millennium 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
Millennium 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 Millennium Bank Common shall have perfected the right to dissent
from the Merger; and
(h) the Millennium Bank Financial Statements shall not be inaccurate
in any material respect.
Section 6.02. Conditions to the Obligations of Millennium Bank. The
---------------------------------------------------
obligations of Millennium Bank to effect the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver
by Millennium Bank) prior to or on the Closing Date of the following conditions:
<PAGE>
(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 Millennium Bank and all legally required regulatory approvals,
shall have been obtained, and all required waiting periods shall have expired;
and
(e) Millennium 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 Millennium 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 Millennium 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 Millennium 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 Millennium Bank shall have been
previously obtained, may terminate and cancel this Agreement by providing
written notice of such action to the other parties hereto.
<PAGE>
Section 7.03. Failure of Conditions. In the event that any of the
-----------------------
conditions to the obligations of a party are not satisfied or waived on or prior
to the Closing Date, and if any applicable cure period provided in Section 7.02
hereof has lapsed, then such party may, regardless of whether approval of the
transactions contemplated by this Agreement by the shareholders of Millennium
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.
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 Millennium Bank.
Section 7.06. Regulatory Enforcement Matters. In the event that
--------------------------------
Millennium 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
Millennium 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. Millennium 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 Millennium 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
-------------------
Millennium 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. 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) Millennium Bank hereby agrees to pay to FBA, and FBA shall be
entitled to payment of, a fee in the amount of $750,000 (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 18 months after the expiration of the Last
Preliminary Purchase Event (or 12 months thereafter if the only continuing
Preliminary Purchase Event or Events are those described in subsections (b)(ii),
(b)(iii) or (b)(v) hereof), but in no event more than 24 months after such
termination (or 18 months if the only continuing Preliminary Purchase Event or
Events are those described in subsections (b)(ii), (b)(iii) or (b)(v)). 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) Millennium 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
Millennium Bank shall have approved or recommended that the
shareholders of Millennium 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 Millennium
Bank, (B) a purchase, lease or other acquisition of all or
substantially all of the assets of Millennium 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 Millennium Bank, or (D) any transaction substantially similar in
effect to any of the foregoing;
<PAGE>
(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 Millennium 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 Millennium Bank;
(iii) any person other than FBA or an FBA Subsidiary shall
have made a bona fide proposal to Millennium 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 Millennium Bank Common) such
that, upon consummation of the offer, such person would own or control
25% or more of the then outstanding shares of Millennium Bank Common
(such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively);
(iv) after a proposalis made by a third party to Millennium
Bank or its shareholders to engage in an Acquisition Transaction,
Millennium 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 Millennium 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 Millennium Bank's Board of Directors shall have withdrawn
or modified in a manner adverse to FBA the recommendation of Millennium
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.
<PAGE>
(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
Millennium 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) Millennium 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 Millennium Bank;
provided, however, that the giving of notice by Millennium Bank shall not be a
condition precedent to the right of FBA to receive payment of the Fee.
ARTICLE VIII GENERAL PROVISIONS
Section 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 Millennium 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.
<PAGE>
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
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 Millennium Bank: Millennium Bank
180 Sansome Street
San Francisco, California 94104
Attention: Bruce MacQueen, President
Facsimile: (415) 434-0358
with a copy to: McCutchen Doyle Brown & Enersen LLP
Three Embarcadero Center
San Francisco, CA 94111
Attention: James M. Rockett
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. Nonsurvival of Representations, Warranties and
-------------------------------------------------------
Agreements. 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.
<PAGE>
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.
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, FBA and Millennium 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
----------------------------
MILLENNIUM BANK
By: /s/Bruce K. MacQueen
----------------------------
Its:President and CEO
----------------------------
<PAGE>
EXHIBIT 1.06(a)
Legal Opinion Matters Millennium Bank ("Millennium Bank")
1. The due incorporation, valid existence and good standing of
Millennium 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 Millennium Bank: (i) the number of authorized,
issued and outstanding shares of capital stock of Millennium 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 Millennium 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 Millennium Bank.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by Millennium 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 Millennium Bank, and the Agreement and the Merger Agreement as
valid and binding obligations of Millennium Bank, enforceable against Millennium
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
Millennium 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 Millennium Bank or any judgment, order or decree known to
counsel against, or any material agreement known to counsel and binding upon,
Millennium 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 Millennium Bank in connection with the
execution and delivery of the Agreement and the Merger Agreement by Millennium
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
Millennium 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 Millennium Bank, 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 MILLENNIUM BANK
------------------------- ---------------------------
President President
------------------------- ---------------------------
Secretary Secretary
<PAGE>
EXHIBIT 10(gg)
AGREEMENT AND PLAN OF MERGER
by and among
FIRST BANKS, INC.,
a Missouri corporation,
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
REDWOOD BANK,
a California banking corporation,
THE SAN FRANCISCO COMPANY,
a Delaware corporation
and
BANK OF SAN FRANCISCO,
a California banking corporation
September 22, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I - TERMS OF THE MERGER & CLOSING; CONVERSION OF SHARES
<S> <C> <C> <C>
Section 1.01. The Merger........................................................................... 1
Section 1.02. Effects 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. Deposit of Merger Consideration....................................................... 3
Section 1.08. Exchange of Certificates.............................................................. 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF BANCORP AND BANK OF SAN FRANCISCO
Section 2.01. Organization and Capital Stock; Standing and Authority................................ 5
Section 2.02. Authorization; No Defaults............................................................ 5
Section 2.03. Subsidiaries.......................................................................... 6
Section 2.04. Financial Information................................................................. 6
Section 2.05. Absence of Changes.................................................................... 7
Section 2.06. Regulatory Enforcement Matters........................................................ 7
Section 2.07. Tax Matters........................................................................... 7
Section 2.08. Litigation............................................................................ 7
Section 2.09. Properties, Contracts, Employee Benefit Plans and Other Agreements.................... 8
Section 2.10. Reports............................................................................... 9
Section 2.11. Investment Portfolio.................................................................. 9
Section 2.12. Loan Portfolio........................................................................ 9
Section 2.13. Employee Matters and ERISA........................................................... 10
Section 2.14. Title to Properties; Licenses; Insurance............................................. 11
Section 2.15. Environmental Matters................................................................ 11
Section 2.16. Compliance with Laws and Regulations................................................. 12
Section 2.17. Brokerage............................................................................ 12
Section 2.18. No Undisclosed Liabilities........................................................... 12
Section 2.19. Statements True and Correct.......................................................... 12
Section 2.20. Commitments and Contracts............................................................ 12
Section 2.21. Material Interest of Certain Persons................................................. 13
Section 2.22. Conduct to Date...................................................................... 13
Section 2.23. Irrevocable Proxy.................................................................... 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FIRST BANKS, FBA AND REDWOOD
<S> <C> <C> <C>
Section 3.01. Organization......................................................................... 14
Section 3.02. Authorization........................................................................ 14
Section 3.03. Litigation........................................................................... 15
Section 3.04. Statements True and Correct.......................................................... 15
Section 3.05. Financial Information................................................................ 15
Section 3.06. Absence of Changes................................................................... 15
Section 3.07. Ability to Consummate the Merger..................................................... 15
ARTICLE IV - AGREEMENTS OF BANCORP AND BANK OF SAN FRANCISCO
Section 4.01. Business in Ordinary Course.......................................................... 16
Section 4.02. Breaches............................................................................. 18
Section 4.03. Submission to Shareholders........................................................... 18
Section 4.04. Consummation of Agreement............................................................ 18
Section 4.05. Environmental Reports................................................................ 19
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 of Banks.......................................................................20
ARTICLE V - AGREEMENTS OF FIRST BANKS, FBA AND REDWOOD
Section 5.01. Regulatory Approvals................................................................. 20
Section 5.02. Breaches............................................................................. 20
Section 5.03. Consummation of Agreement............................................................ 20
Section 5.04. Employee Benefits.................................................................... 21
Section 5.05. Indemnification...................................................................... 21
Section 5.06. Completion of Financing.............................................................. 22
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01. Conditions to the Obligations of First Banks, FBA and Redwood........................ 22
Section 6.02. Conditions to the Obligations of Bancorp and Bank of San Francisco................... 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII - TERMINATION
<S> <C> <C> <C>
Section 7.01. Mutual Agreement..................................................................... 24
Section 7.02. Breach of Agreements................................................................. 24
Section 7.03. Failure of Conditions................................................................ 24
Section 7.04. Denial of Regulatory Approval........................................................ 24
Section 7.05. Environmental Reports................................................................ 24
Section 7.06. Regulatory Enforcement Matters....................................................... 24
Section 7.07. Unilateral Termination............................................................... 25
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01. Confidential Information............................................................. 25
Section 8.02. Publicity............................................................................ 25
Section 8.03. Return of Documents.................................................................. 25
Section 8.04. Notices.............................................................................. 25
Section 8.05. Nonsurvival of Representations, Warranties and Agreements............................ 27
Section 8.06. Costs and Expenses................................................................... 27
Section 8.07. Entire Agreement..................................................................... 27
Section 8.08. Headings and Captions................................................................ 27
Section 8.09. Waiver, Amendment or Modification.................................................... 27
Section 8.10. Rules of Construction................................................................ 27
Section 8.11. Counterparts......................................................................... 27
Section 8.12. Successors and Assigns............................................................... 27
Section 8.13. Governing Law........................................................................ 28
Signatures............................................................................................. 29
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of September 22, 2000, is
by and among First Banks, Inc., a bank holding company organized as a Missouri
corporation ("First Banks"), First Banks America, Inc., a bank holding company
organized as a Delaware corporation which is a majority-owned subsidiary of
First Banks ("FBA"), Redwood Bank, a California banking corporation which is a
wholly-owned subsidiary of FBA ("Redwood"), The San Francisco Company, a bank
holding company organized as a Delaware corporation ("Bancorp"), and Bank of San
Francisco, a California banking corporation which is a wholly-owned subsidiary
of Bancorp ("Bank of San Francisco"). 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, First Banks, FBA, Redwood, Bancorp and Bank of
San Francisco hereby agree as follows:
ARTICLE I
TERMS OF THE MERGER & CLOSING; CONVERSION
OF SHARES
Section 1.01. The Merger. FBA will organize an interim subsidiary
("Newco") and, subject to the receipt of required regulatory approvals and the
satisfaction or waiver of the conditions set forth in Article VI of this
Agreement, FBA will cause Newco to merge with and into Bancorp (the "Merger")
pursuant to the Delaware General Corporation Law ("Corporate Law"). This
Agreement also contemplates that, immediately following the Effective Time (as
defined in Section 1.05 hereof), the Bank Merger (as such term is defined in
Section 4.09) will occur.
Section 1.02. Effects of the Merger. (a) The Merger shall have all of
the effects provided by Corporate Law and this Agreement, and the separate
corporate existence of Newco shall cease on consummation of the Merger and be
combined in Bancorp.
(b) The Certificate of Incorporation of Bancorp from and after the
Effective Time shall be amended as set forth on Exhibit A attached hereto.
(c) The Bylaws of Bancorp from and after the Effective Time shall be
the same as the Bylaws of Newco immediately prior to the Effective Time, except
for the corporate name which shall continue to be "The San Francisco Company."
(d) The directors and officers of Bancorp from and after the Effective
Time shall be the persons serving as the directors and officers of Newco
immediately prior to the Effective Time.
<PAGE>
Section 1.03. Conversion Of Shares. (a) At the Effective Time, each
share of Class A Common Stock, $.01 par value, of Bancorp ("Bancorp Common")
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive $1.95 (the "Common Share Merger Price"), and
each share of 8% Series B Convertible Preferred Stock, $.01 par value, of
Bancorp ("Bancorp Preferred") issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive $7.00 plus, in the
case of Bancorp Preferred, any then outstanding accumulated and unpaid dividends
(the "Preferred Share Merger Price" and, together with the Common Share Merger
Price, the "Merger Consideration"); provided, however, that shares of Bancorp
Common and Bancorp Preferred held in the treasury of Bancorp or by any direct or
indirect subsidiary of Bancorp immediately prior to the Effective Time shall be
canceled. The Common Share Merger Price may be adjusted by virtue of the
provisions of Section 7.05 of this Agreement, in which case all references
herein to the amount of consideration to be paid by FBA pursuant to the Merger
shall be deemed to reflect the amount of any adjustment duly made in accordance
with such Section.
(b) The stock transfer books of Bancorp 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 Bancorp Common and Bancorp Preferred (collectively, the
"Bancorp Stock") shall cease to be outstanding and be canceled. Each certificate
previously representing shares of Bancorp Stock (a "Certificate") shall
thereafter only represent the right to receive the cash into which the shares of
Bancorp Stock represented by such Certificate have been converted pursuant to
this Section 1.03.
(c) If holders of Bancorp Stock are entitled to require appraisal of
their shares under applicable Corporate Law, shares 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 Bancorp Stock outstanding immediately prior to the Effective Time and
held by a dissenting holder who after the Effective Time shall withdraw his
demand for appraisal or lose his right of appraisal shall thereafter have only
such rights as are provided under applicable Corporate Law.
(d) Any options to purchase shares of Bancorp Common ("Bancorp
Options") which are outstanding immediately prior to the Effective Time and then
exercisable at a price less than the Common Share Merger Price may be
surrendered to Bancorp as of the Effective Time. FBA shall pay for each share of
Bancorp Common covered by a Bancorp Option exercised or surrendered pursuant to
this Section 1.03(d) an amount equal to the difference between the Common Share
Merger Price and the exercise price per share of the options surrendered. All
Bancorp Options that are not exercised or surrendered in accordance with the
preceding sentence shall be canceled as of the Effective Time.
<PAGE>
(e) At the Effective Time, the outstanding shares of common stock of
Newco shall be converted into an equal number of shares of Bancorp Common, so
that immediately following the Effective Time, the number of outstanding shares
of common stock of Bancorp 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 described in Section 1.05 of this
Agreement.
Section 1.05. The Closing Date. At FBA's option, the Closing shall take
place on either the last business day of the month during which each of the
conditions in Sections 6.01 and 6.02 is satisfied or waived by the appropriate
party or the first business day of the succeeding month, or on such other date
as Bancorp and FBA may agree (the "Closing Date"). The Merger shall be effective
upon the filing of a Certificate of Merger with the Secretary of State of the
State of Delaware or at a later time specified in the Certificate of Merger (the
"Effective Time").
Section 1.06. Actions At Closing. (a) At the Closing, Bancorp shall
deliver to FBA:
(i) certified copies of the Certificate of Incorporation and Bylaws
of Bancorp and the Articles or Certificate of Incorporation and Bylaws
of each of its subsidiaries;
(ii) certificates signed by the Chief Executive Officers of Bancorp
and Bank of San Francisco on behalf of such entities 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 (except to the extent any
representation or warranty expressly speaks as of an earlier date),
and (B) all of the conditions set forth in Section 6.01 have been
satisfied or waived as provided therein;
(iii) certified copies of resolutions of the Boards of Directors of
Bancorp and Bank of San Francisco and of the shareholders of Bancorp,
establishing the requisite approvals under applicable Corporate Law of
this Agreement, the Merger and the other transactions contemplated
hereby;
(iv) tax clearance certificates issued by the Franchise Tax Board
of the State of California with respect to Bancorp and each of its
subsidiaries, dated a recent date, stating that all taxes imposed under
the Bank and Corporation Tax Law on such corporations have been paid or
adequately secured;
<PAGE>
(v) a legal opinion from counsel for Bancorp and Bank of San
Francisco (which counsel shall be reasonably acceptable to FBA) with
respect to the matters listed in Exhibit 1.06(a) hereto, in form
reasonably satisfactory to FBA and its counsel; and
(vi) evidence of the receipt of all required consents and approvals
from federal and state regulatory agencies and other governmental
bodies, if any, with respect to the consummation of the Merger, the
Bank Merger and each of the transactions contemplated herein.
(b) At the Closing, FBA shall deliver to Bancorp:
(i) certificates signed by the Presidents of First Banks, FBA and
Redwood on behalf of such entities 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 (except to the extent any representation or
warranty expressly speaks as of an earlier date), and (B) all of the
conditions set forth in Section 6.02 have been satisfied or waived as
provided therein;
(ii) certified copies of resolutions of the Boards of Directors of
First Banks, FBA and Redwood, establishing the requisite approvals
under applicable Corporate Law of this Agreement, the Merger and the
other transactions contemplated hereby;
(iii) a legal opinion from John S. Daniels, counsel for FBA and
Redwood, with respect to the matters listed in Exhibit 1.06(b) hereto,
in form reasonably satisfactory to Bancorp and the Trustee and their
respective counsel; and
(iv) evidence of the receipt of all required consents and approvals
from federal and state regulatory agencies and other governmental
bodies, if any, with respect to the consummation of the Merger, the
Bank Merger and each of the transactions contemplated herein.
<PAGE>
Section 1.07. Deposit of Merger Consideration. At or prior to the
Effective Time, FBA shall deposit or cause to be deposited with First Bank, a
Missouri banking corporation which is a wholly-owned subsidiary of First Banks,
or another bank or trust company (which may be an affiliate of FBA) selected by
FBA and reasonably satisfactory to Bancorp (the "Exchange Agent"), for exchange
in accordance with Section 1.08, the requisite amount of cash to be paid
pursuant to Section 1.03 in exchange for the outstanding shares of Bancorp Stock
and the Bancorp Options exercised or surrendered pursuant to this Agreement
(such amount being referred to as the "Exchange Fund").
Section 1.08. Exchange of Certificates. (a) As soon as reasonably
practicable after the Effective Time, FBA shall cause the Exchange Agent to mail
to each record holder of shares of Bancorp Stock a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to certificates shall pass, only upon proper delivery of the certificates to the
Exchange Agent) and instructions for surrendering certificates evidencing shares
of Bancorp stock in exchange for the amount of cash into which such shares shall
have been converted pursuant to Section 1.03. The letter of transmittal shall be
in such form and have such other provisions as FBA may reasonably specify
(subject to the right of Bancorp to review both the letter of transmittal and
the instructions prior to the Effective Time and provide reasonable comments
thereon). Upon surrender to the Exchange Agent of such a certificate for
exchange and cancellation, together with a duly executed letter of transmittal
(both in proper form), the holder of such certificate shall be entitled to
receive in exchange therefor a check representing the amount of cash which such
holder has the right to receive in respect of the certificate or certificates so
surrendered, without interest, and the certificate or certificate so surrendered
shall be canceled.
(b) Notwithstanding subsection (a), FBA shall cooperate in making
arrangement for payment to the Trustee (as defined in Section 2.23) at the
Closing by wire transfer of immediately available funds to an account in the
United States designated by the Trustee, against delivery of certificates
representing Bancorp Stock registered in the Trustee's name.
(c) If any payment for shares of Bancorp Stock is to be made in a name
other than that in which the certificate surrendered in exchange therefor is
registered, it shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed or accompanied by an appropriate
instrument of transfer and otherwise in proper form for transfer, and that the
person requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Bancorp of any shares of Bancorp Stock.
(e) At any time following six months after the Effective Time, FBA
shall be entitled to terminate the Exchange Agent relationship and assume the
duties of the Exchange Agent provided in Section 1.07, and thereafter holders of
certificates evidencing shares of Bancorp Stock shall be entitled to look only
to FBA (subject to abandoned property, escheat or other similar laws) with
respect to the surrender and exchange of certificates.
(f) In the event any certificate shall have been lost, stolen or
destroyed, upon the presentation to the Exchange Agent of an affidavit of that
fact by the person claiming the same and, if required by FBA, the posting by
such person of a bond in such amount as FBA may direct as indemnity against any
claim that may be made against it with respect to such certificate, the Exchange
Agent will issue in exchange for such certificate a check for the amount of cash
payable in respect of the shares represented by such certificate.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF BANCORP AND BANK OF SAN FRANCISCO
Except as otherwise disclosed in that section of the disclosure
schedule executed by the parties to this Agreement concurrently with the
execution hereof (the "Disclosure Schedule") corresponding to a particular
representation or warranty, Bancorp and Bank of San Francisco each represent and
warrant to First Banks, FBA and Redwood as follows:
Section 2.01. Organization and Capital Stock; Standing and Authority.
(a) Bancorp is a corporation, and Bank of San Francisco is a banking
corporation, and both of such corporations are duly organized, validly existing
and in good standing under the laws of Delaware 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 Bancorp
consists of 100,000,000 shares of Bancorp Common, of which 29,320,725 are
outstanding, and 5,000,000 shares of Bancorp Preferred, of which 15,869 are
outstanding. All of the outstanding shares of Bancorp Stock are duly and validly
issued, fully paid and non-assessable.
(c) As of the date hereof, the authorized capital stock of Bank of San
Francisco consists of 4,200,000 shares of common stock, $3.50 par value ("Bank
Common"), of which 285,814 are outstanding, duly and validly issued, fully paid
and non-assessable. None of the outstanding shares of Bancorp Common, Bancorp
Preferred or Bank Common has been issued in violation of any preemptive rights.
(d) Except as described above or disclosed in Section 2.01(d) of the
Disclosure Schedule, there are no shares of capital stock or other equity
securities of Bancorp or Bank of San Francisco 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 capital stock of Bancorp or Bank of San Francisco
or contracts, commitments, understandings or arrangements by which either of
them is or may be obligated to issue additional shares of capital stock.
(e) Bank of San Francisco holds a current valid license to engage in
the commercial banking business at its banking offices in California, and
Bancorp and Bank of San Francisco are in material compliance with all
agreements, understandings and orders of the Federal Reserve Board, the Federal
Deposit Insurance Corporation ("FDIC") and other regulatory authorities having
jurisdiction over their business, assets and properties. Neither the scope of
the business of Bank of San Francisco 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 Bank of San Francisco are insured by the
FDIC to the maximum extent permitted by applicable laws and regulations. Bancorp
is a bank holding company registered pursuant to the Bank Holding Company Act,
as amended.
<PAGE>
Section 2.02. Authorization; No Defaults. The Boards of Directors of
Bancorp and Bank of San Francisco have by all requisite action approved this
Agreement, the Merger and the Bank Merger and, in the case of Bancorp, the
Proxy, and they have authorized the execution and delivery hereof on behalf of
such corporations by duly authorized officers and the performance of their
respective obligations thereunder. Bancorp, in its capacity as the sole holder
of outstanding capital stock of Bank of San Francisco, has approved this
Agreement, the Merger and the Bank Merger. Nothing in the Certificate of
Incorporation or Bylaws of Bancorp, the Articles of Incorporation or Bylaws of
Bank of San Francisco 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
either of such corporations from consummating this Agreement, the Merger and the
Bank Merger on the terms and conditions herein contained. This Agreement has
been duly and validly executed and delivered by Bancorp and Bank of San
Francisco and constitutes a legal, valid and binding obligation of each of them,
enforceable against them in accordance with its terms. Neither Bancorp nor Bank
of San Francisco is in default under nor in violation of any provision of its
Certificate or Articles of Incorporation, as the case may be, Bylaws or, in any
material respect, any promissory note, indenture or any evidence of indebtedness
or security therefor, lease, contract, purchase or other material commitment or
agreement.
Section 2.03. Subsidiaries. Each of Bancorp's direct and indirect
subsidiaries (hereinafter referred to singly as a "Bancorp Subsidiary" and
collectively as the "Bancorp Subsidiaries"), the names and jurisdictions of
incorporation of which are disclosed in Section 2.03 of the Disclosure Schedule,
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and each of the Bancorp 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 Bancorp Subsidiary and the ownership
of such shares is set forth in Section 2.03 of the Disclosure Schedule, and all
of such shares are owned by Bancorp or a Bancorp Subsidiary, free and clear of
all liens, encumbrances, rights of first refusal, options or other restrictions
of any nature whatsoever, except as disclosed in Section 2.03 of the Disclosure
Schedule. Except as disclosed in Section 2.03 of the Disclosure Schedule, there
are no options, warrants or rights outstanding to acquire any capital stock of
any Bancorp Subsidiary, and no person or entity has any other right to purchase
or acquire any unissued shares of stock of any Bancorp Subsidiary, nor does any
Bancorp Subsidiary have any obligation of any nature with respect to its
unissued shares of stock. Except as disclosed in Section 2.03 of the Disclosure
Schedule, neither Bancorp nor any Bancorp Subsidiary is a party to any
partnership or joint venture or owns an equity interest in any other business or
enterprise.
<PAGE>
Section 2.04. Financial Information. The audited consolidated balance
sheets of Bancorp and its 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 Bancorp's Annual Report on Form 10-K for the year
ended December 31, 1999 as currently on file with the Securities and Exchange
Commission (the "SEC"); the unaudited consolidated balance sheets of Bancorp and
its subsidiaries as of June 30, 2000 and related consolidated income statements
and statements of changes in shareholders' equity and of cash flows for the
three and six months ended June 30, 2000, together with the notes thereto,
included in Bancorp's Quarterly Report on Form 10-Q for the quarter ended June
30, 2000 as currently on file with the SEC; and the year-end and quarter-end
Reports of Condition and Reports of Income of Bank of San Francisco for 1999 and
for the three month periods ended March 31, 2000 and June 30, 2000,
respectively, as filed with the Federal Deposit Insurance Corporation (the
"FDIC") (such financial statements and notes collectively referred to herein as
the "Bancorp Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be disclosed therein and except
for regulatory reporting differences required in Bank of San Francisco's
reports) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of the respective entity and its respective consolidated subsidiaries as
of the dates and for the periods indicated subject, in the case of any such
statements which are unaudited, to normal year-end adjustments of accruals and
the absence of footnotes and other normal presentational items.
Section 2.05. Absence of Changes. Since December 31, 1999 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of Bancorp 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 Bancorp Financial
Statements not misleading. Since June 30, 1999, the date of the most recent
examination of Bank of San Francisco by the Department of Financial Institutions
of the State of California (the "Financial Institutions Department"), there has
been no material adverse change in the financial condition, the results of
operations or the business of Bank of San Francisco except for any such changes
as may be disclosed in Bank of San Francisco's Reports of Condition and Income
filed since such date.
Section 2.06. Regulatory Enforcement Matters. Except as disclosed in
Section 2.06 of the Disclosure Schedule, neither Bancorp nor any Bancorp
Subsidiary is subject to, or has been informed 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 that it may become subject to, any
order, agreement, memorandum of understanding or other regulatory enforcement
action or proceeding of such agency.
Section 2.07. Tax Matters. (a) Bancorp and the Bancorp Subsidiaries
have 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 Bancorp
Financial Statements were made in accordance with generally accepted accounting
principles and in the aggregate do not materially fail to provide for potential
tax liabilities.
<PAGE>
(b) Except as disclosed in Section 2.07 of the Disclosure Schedule,
Bancorp 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 Bancorp 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) Except as disclosed in Section 2.07 of the Disclosure Schedule,
there has not occurred during or after any taxable period in which Bancorp
incurred a net operating loss that carries over to any taxable period ending
after 1999 either (i) a direct ownership change of Bancorp as defined in Section
382(g) of the Internal Revenue Code or (ii) to the knowledge of Bancorp, an
ownership change in any entity owning Bancorp Stock that would cause there to
have been an ownership change of Bancorp as defined in such section.
(d) All material elections with respect to taxes affecting Bancorp 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 or other proceeding pending
or, to the knowledge of Bancorp, threatened against Bancorp or any of the
Bancorp Subsidiaries, or of which the property of Bancorp or any of the Bancorp
Subsidiaries is or would be subject.
<PAGE>
Section 2.09. Properties, Contracts, Employee Benefit Plans and
Other Agreements Section 2.09 of the Disclosure Schedule specifically identifies
the following:
(a) each lease of real property to which Bancorp or any Bancorp
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 Bancorp or a Bancorp Subsidiary and involving more than $10,000
individually or $25,000 in the aggregate, exclusive of deposit agreements with
customers of Bank of San Francisco 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 Bancorp or any Bancorp Subsidiary not
referred to elsewhere in this Section 2.09 which:
(i) involve payment by Bancorp or any Bancorp Subsidiary of more
than $150,000 (other than loans, loan commitments or letters of
credit);
(ii) involve payments based on profits of Bancorp or any Bancorp
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;
(v) materially affect the business or financial condition of
Bancorp or any Bancorp Subsidiary; or
(vi) require the consent or approval of any third party for the
Merger and the Bank 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
Bancorp or any Bancorp Subsidiary for the benefit of officers, directors or
employees, including each trust or other agreement with any custodian or any
trustee for funds held under any such agreement, plan or arrangement, and in
respect to any of them, the latest reports or forms, if any, filed with the
Department of Labor and Pension Benefit Guaranty Corporation under ERISA (as
defined below), any current financial or actuarial reports and any currently
effective IRS private ruling or determination letters obtained by or for the
benefit of Bancorp or any Bancorp Subsidiary;
(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 $100,000;
(f) all agreements for the employment, retention, engagement or
indemnification, or with respect to the severance, of any officer, employee,
agent, consultant or other person or entity which by its terms is not terminable
by Bancorp or a Bancorp Subsidiary on thirty (30) days written notice or less
without any payment by reason of such termination; and
<PAGE>
(g) the name and annual salary as of January 1, 2000 of each director
or employee of Bancorp or any Bancorp Subsidiary with a salary in excess of
$100,000.
Copies of each document, plan or contract identified in Section 2.09 of
the Disclosure Schedule are appended to such Schedule and are hereby
incorporated in and constitute a part of the Disclosure Schedule.
Section 2.10. Reports. Bancorp and the Bancorp Subsidiaries have filed
all reports and statements, together with any amendments required to be made
with respect thereto, required to be filed with the SEC, the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), the Financial
Institutions Department, the FDIC or any other governmental authority with
jurisdiction over Bancorp or any Bancorp 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.
Section 2.11. Investment Portfolio. All United States Treasury
securities, obligations of other United States Government agencies and
corporations, obligations of States and political subdivisions of the United
States and other investment securities held by Bancorp or any Bancorp
Subsidiary, as reflected in the latest consolidated balance sheet of Bancorp
included in the Bancorp Financial Statements, are carried in accordance with
generally accepted accounting principles.
Section 2.12. Loan Portfolio. Except as disclosed in Section 2.12 of
the Disclosure Schedule, (a) all loans and discounts reflected in the Bancorp
Financial Statements as of 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 of Bancorp and the Bancorp Subsidiaries, in accordance
with sound lending practices (as would be followed by a reasonably prudent
commercial bank), 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, except as may be provided by bankruptcy, insolvency or
similar laws or by general principles of equity;
(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 in all material respects enforceable, valid, true and
genuine and what they purport to be;
(c) Bancorp and the Bancorp 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 loans in an amount material to
the loan portfolio of Bank of San Francisco. All loans and loan commitments
extended by Bank of San Francisco and any extensions, renewals or continuations
of such loans and loan commitments were made in accordance with its customary
lending standards in the ordinary course of business. Such loans are evidenced
by appropriate and sufficient documentation based upon customary and ordinary
past practices of Bank of San Francisco; and
(d) the reserve for loan losses reflected in the Bancorp Financial
Statements as of June 30, 2000 was determined as of such date by Bancorp and
Bank of San Francisco in accordance with the requirements of generally accepted
accounting principles to be adequate to provide for losses on loans outstanding
as of June 30, 2000.
<PAGE>
Section 2.13. Employee Matters and ERISA. (a) Except as disclosed in
Section 2.13 (a) of the Disclosure Schedule, neither Bancorp nor any Bancorp
Subsidiary has entered into any collective bargaining agreement with any labor
organization with respect to any group of employees of Bancorp or any Bancorp
Subsidiary, and there is no present effort nor existing proposal to attempt to
unionize any group of employees of Bancorp or any Bancorp Subsidiary.
(b)(i) Bancorp and the Bancorp Subsidiaries have been and are in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including, without limitation, any laws respecting employment
discrimination and occupational safety and health requirements, and neither
Bancorp nor any Bancorp Subsidiary is engaged in any unfair labor practice; (ii)
there is no unfair labor practice complaint against Bancorp or any Bancorp
Subsidiary pending or, to the knowledge of Bancorp or Bank of San Francisco,
threatened before the National Labor Relations Board; (iii) there is no labor
dispute, strike, slowdown or stoppage actually pending or, to the knowledge of
Bancorp or Bank of San Francisco, threatened against or directly affecting
Bancorp or any Bancorp Subsidiary; and (iv) neither Bancorp nor any Bancorp
Subsidiary has 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,
neither Bancorp nor any Bancorp Subsidiary maintains, contributes to or
participates in or has any liability under any employee benefit plans, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any nonqualified employee benefit plans or deferred
compensation, bonus, stock or incentive plans, or other employee benefit or
fringe benefit programs for the benefit of former or current employees of
Bancorp or any Bancorp Subsidiary (collectively, the "Employee Plans"). No
present or former employee of Bancorp or any Bancorp Subsidiary has been charged
with breaching nor has breached a fiduciary duty under any Employee Plan.
Neither Bancorp nor any Bancorp Subsidiary participates in, nor has it in the
past five years participated in, nor has it any present or future obligation or
liability under, any multiemployer plan (as defined at Section 3(37) of ERISA).
Except as separately disclosed in Section 2.13(c) of the Disclosure Schedule,
neither Bancorp nor any Bancorp Subsidiary maintains, contributes to, or
participates in any plan that provides health, major medical, disability, life
insurance, severance, salary continuation or other benefits to one or more
former employees or consultants.
<PAGE>
(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 Bancorp Financial
Statements, Bancorp and the Bancorp Subsidiaries have no contingent or actual
liabilities under Title IV of ERISA. No accumulated funding deficiency (within
the meaning of Section 302 of ERISA or Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code")) has been incurred with respect to any Employee
Plan, whether or not waived. No reportable event (as defined in Section 4043 of
ERISA) has occurred with respect to any Employee Plan as to which a notice would
be required to be filed with the Pension Benefit Guaranty Corporation. No claim
is pending or, to the knowledge of Bancorp or Bank of San Francisco, threatened
or imminent with respect to any Employee Plan (other than a routine claim for
benefits for which plan administrative review procedures have not been
exhausted) for which Bancorp or any Bancorp Subsidiary would be liable, except
as is reflected in the Bancorp Financial Statements. Bancorp and the Bancorp
Subsidiaries have no liability for excise taxes under Sections 4971, 4975, 4976,
4977, 4979 or 4980B of the Code or for a fine under Section 502 of ERISA with
respect to any Employee Plan. All Employee Plans have in all material respects
been operated, administered and maintained in accordance with the terms thereof
and in compliance with the requirements of all applicable laws, including,
without limitation, ERISA.
Section 2.14. Title to Properties; Licenses; Insurance. (a) Neither
Bancorp nor any Bancorp Subsidiary owns any real property;
(b) all leasehold interests for real property and any material personal
property used by Bancorp or a Bancorp Subsidiary in its business are held
pursuant to lease agreements which are valid and enforceable in accordance with
their 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;
(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 knowledge of Bancorp or Bank of San Francisco, threatened
with respect to any of such properties;
(d) Bancorp and the Bancorp Subsidiaries have valid title or other
ownership rights under licenses to all material intangible personal or
intellectual property used by Bancorp or any Bancorp 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
current use of such property; and
(e) all material insurable properties owned or held by Bancorp or a
Bancorp Subsidiary are insured under effective insurance policies in such
amounts and against fire, earthquake and other risks insured against by extended
coverage and public liability insurance, in amounts and on terms customary with
bank holding companies of similar size.
Section 2.15. Environmental Matters. As used in this Agreement,
"Environmental Laws" means all local, state and federal environmental, health
and safety laws and regulations in all jurisdictions in which Bancorp or any
Bancorp 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.
<PAGE>
Neither the conduct nor operation of Bancorp or any Bancorp Subsidiary
nor any condition of any property presently or previously owned, leased or
operated by any of them on their own behalf or in a fiduciary capacity violates
or violated any Environmental Law in any respect material to the business of
Bancorp and the Bancorp Subsidiaries, taken as a whole, and no condition or
event has occurred with respect to any of them or any property that, with notice
or the passage of time, or both, would constitute a violation material to the
business of Bancorp and the Bancorp Subsidiaries, taken as a whole, of any
Environmental Law or obligate (or potentially obligate) Bancorp or any Bancorp
Subsidiary to remedy, stabilize, neutralize or otherwise alter the environmental
condition of any property, where the aggregate cost of such actions would be
material to Bancorp and the Bancorp Subsidiaries, taken as a whole. Neither
Bancorp nor any Bancorp Subsidiary has received notice from any person or entity
that Bancorp or any Bancorp Subsidiary, or the operation or condition of any
property ever owned, leased or operated by any of them on their own behalf or in
a fiduciary capacity, are or were in violation of any Environmental Law, or that
Bancorp or any Bancorp Subsidiary is responsible (or potentially responsible)
for remedying, or the cleanup of, any pollutants, contaminants, or hazardous or
toxic wastes, substances or materials at, on or beneath any such property.
Section 2.16. Compliance with Laws and Regulations. Bancorp and the
Bancorp Subsidiaries have all licenses, franchises, permits and other
governmental authorizations that are necessary 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, ordinances and regulations.
Section 2.17. Brokerage. Except for fees payable by Bancorp to Dain
Rauscher Wessels, which are described in Section 2.17 of the Disclosure
Schedule, there are no existing claims or agreements for brokerage commissions,
investment banking fees, financial advisory fees, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
payable by Bancorp or any Bancorp Subsidiary.
Section 2.18. No Undisclosed Liabilities. Neither Bancorp nor any
Bancorp 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, to the knowledge of
Bancorp and Bank of San Francisco, there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against Bancorp or any
Bancorp Subsidiary giving rise to any such liability), except (i) liabilities
reflected in the Bancorp Financial Statements and (ii) liabilities incurred in
the ordinary course of business since June 30, 2000.
<PAGE>
Section 2.19. Statements True and Correct. None of the information
supplied or to be supplied by Bancorp for inclusion in any document to be filed
with the SEC or any banking or other regulatory authority in connection with the
transactions contemplated hereby, at the respective times such documents are
filed, and, in the case of the Information Statement (as defined in Section
4.03), when such documents are first mailed to the stockholders of Bancorp, will
be false or misleading with respect to any material fact, omit to state any
material fact necessary in order to make the statements therein not misleading
or omit to state any material fact required to be stated in order to correct any
statement in any earlier communication with respect to the Information
Statement. All documents that Bancorp is responsible for filing with the SEC or
any banking or other regulatory authority in connection with the transactions
contemplated hereby will comply in all material respects with the provisions of
applicable law and the applicable rules and regulations thereunder.
Section 2.20. Commitments and Contracts. Neither Bancorp nor any
Bancorp 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
Bancorp Financial Statements relating to the borrowing of money by
Bancorp or a Bancorp Subsidiary or the guarantee by Bancorp or a
Bancorp Subsidiary of any obligation (except trade payables or
instruments related to transactions entered into in the ordinary course
of business by Bancorp or a Bancorp Subsidiary, such as deposits,
federal funds borrowings and repurchase agreements), other than
agreements, indentures or instruments providing for annual payments of
less than $100,000; or
(iii) any contract containing covenants which limit the ability of
Bancorp or any Bancorp Subsidiary to compete in any line of business or
with any person or containing any restriction of the geographical area
in which, or method by which, Bancorp or any Bancorp Subsidiary may
carry on its business.
Section 2.21. Material Interest of Certain Persons. (a) No officer or
director of Bancorp or Bank of San Francisco 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 Bancorp or any Bancorp Subsidiary.
<PAGE>
(b) All outstanding loans from Bancorp or any Bancorp Subsidiary to any
present officer, director, employee or any associate or related interest of any
person referred to in subsection (a) were approved by or reported to the Board
of Directors of the applicable entity 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, neither Bancorp nor any Bancorp Subsidiary has 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 Bancorp or Bank of San
Francisco;
(iii) effected any stock split or adjusted, combined, reclassified
or otherwise changed its capitalization;
(iv) except for semi-annual dividends on shares of Bancorp Preferred
which Bancorp is required to declare and pay pursuant to its
Certificate of Incorporation, 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;
(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;
<PAGE>
(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 for merit or promotion increases consistent
with past practice and in accordance with existing policy or
established incentive programs; (B) entered into any new, or amended or
supplemented any existing, employment, management, consulting, deferred
compensation, retention, severance, indemnification 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.
Section 2.23. Irrevocable Proxy. Bancorp has delivered to FBA
concurrently with the execution of this Agreement the irrevocable proxy of the
Trustee named in a Voting Trust (the "Trustee") dated November 30, 1998 (the
"Voting Trust"). To the best of Bancorp's knowledge, the Trustee has the
exclusive right to vote the shares of Bancorp Stock which are the subject of the
written consent referred to in Section 4.03 and the Proxy, and such written
consent and the Proxy are legal, valid and binding obligations of the Trustee,
enforceable in accordance with their respective terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF FIRST BANKS, FBA AND REDWOOD
First Banks, FBA and Redwood each represents and warrants to Bancorp
and Bank of San Francisco as follows:
Section 3.01. Organization. First Banks, FBA and Redwood are
corporations duly organized, validly existing and in good standing under the
laws of the States of Missouri, Delaware 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.
Immediately prior to the Effective Time, Newco will be duly organized, validly
existing and in good standing under the laws of Delaware and will have all
requisite power and authority to own al of its properties and assets, to incur
all of its liabilities, to carry on its business and to consummate the Merger
and the other transactions contemplated by this Agreement.
<PAGE>
Section 3.02. Authorization. The Boards of Directors of First Banks,
FBA and Redwood have, and as of the Closing the Board of Directors of Newco will
have, by all requisite action approved this Agreement, the Merger and the Bank
Merger and authorized the execution hereof on behalf of each corporation by duly
authorized officers and the performance of their respective obligations
hereunder. FBA, in its capacity as the sole holder of outstanding capital stock
of Redwood, has approved this Agreement, the Merger and the Bank Merger. Nothing
in the Certificates of Incorporation of FBA or Newco, the Articles of
Incorporation of First Banks or Redwood, or the Bylaws of any of such entities
or any other agreement, instrument, decree, proceeding, law or regulation
(except as specifically referred to in this Agreement) by or to which First
Banks, FBA, Redwood or Newco is or will be bound or subject prohibits (or in the
case of Newco, will prohibit) any of them from consummating this Agreement, the
Merger and the Bank Merger on the terms and conditions herein contained. This
Agreement has been duly and validly executed and delivered by First Banks, FBA
and Redwood and constitutes a legal, valid and binding obligation of each of
them, enforceable against them in accordance with its terms.
Section 3.03. Litigation. There is no litigation, claim or other
proceeding pending or, to the best of the knowledge of First Banks, FBA or
Redwood, threatened that would prohibit any of them or Newco from consummating
the transactions contemplated by this Agreement.
Section 3.04. Statements True and Correct. None of the filings made or
the information supplied or to be supplied by First Banks, FBA, Redwood or Newco
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 and, in the case of the Information Statement,
when it is first mailed to the stockholders of Bancorp, 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 filed by
First Banks or any of its subsidiaries with any other regulatory authority in
connection with the transactions contemplated hereby will comply with applicable
laws, rules and regulations.
Section 3.05. Financial Information. The audited consolidated balance
sheets of First Banks and its 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 First Banks' Annual Report on Form 10-K for the year
ended December 31, 1999 as currently on file with the SEC; the unaudited
consolidated balance sheets of First Banks and its subsidiaries as of June 30,
2000 and related consolidated income statements and statements of changes in
shareholders' equity and of cash flows for the three and six months ended June
30, 2000, together with the notes thereto, included in First Banks' Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000 as currently on file
with the SEC; and the year-end and quarter-end Reports of Condition and Reports
of Income of Redwood for 1999 and for the three month periods ended March 31,
2000 and June 30, 2000, respectively, as filed with the FDIC (such financial
statements and notes collectively referred to herein as the "First Banks
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be disclosed
therein and except for regulatory reporting differences required in Redwood's
reports) and fairly present the consolidated financial position and the
consolidated results of operations, changes in shareholders' equity and cash
flows of the respective entity and its respective consolidated subsidiaries as
of the dates and for the periods indicated subject, in the case of any such
statements which are unaudited, to normal year-end adjustments of accruals and
the absence of footnotes and other normal presentational items.
Section 3.06. Absence of Changes. Since December 31, 1999 there has not
been any material adverse change in the financial condition, the results of
operations or the business or prospects of First Banks and its subsidiaries
taken as a whole, nor have there been any events or transactions having such a
material adverse effect which should be disclosed in order to make the First
Banks Financial Statements not misleading.
<PAGE>
Section 3.07. Ability to Consummate the Merger. Each of First Banks,
FBA and Redwood believes, on a reasonable basis and in good faith, that (i) each
of First Banks, FBA, Newco and Redwood will be able to obtain the approvals,
consents and authorizations required by law for the consummation of the Merger,
including all legally required regulatory approvals, (ii) First Banks will be
able to consummate a public offering of Trust Preferred securities so as to
satisfy the condition set forth in Section 6.01(h), and (iii) each of First
Banks, FBA, Newco and Redwood will be able otherwise to satisfy all conditions
necessary for it to consummate the transactions contemplated by this Agreement
in accordance with its terms, in each case not later than the date which is 180
days after the date of this Agreement. Neither First Banks, FBA nor Redwood has
any reason to believe that it will be unable to consummate the transactions
contemplated by this Agreement on or before such date.
ARTICLE IV
AGREEMENTS OF BANCORP AND BANK OF SAN FRANCISCO
Section 4.01. Business in Ordinary Course. Bancorp and Bank of San
Francisco agree that, from the date of this Agreement until the earlier of the
Closing Date or the termination of this Agreement in accordance with its terms:
(a) Bancorp and the Bancorp Subsidiaries shall continue to carry on
their business and the discharge or incurrence of obligations and liabilities
only in the usual, regular and ordinary course of business, as heretofore
conducted, and by way of amplification and not limitation, Bancorp and each
Bancorp Subsidiary will not:
(i) except for semi-annual dividends payable on shares o
Bancorp Preferred which Bancorp is required to declare and pay pursuant
to its Certificate of Incorporation, declare or pay any dividend or
make any other distribution to shareholders, whether in cash, stock
or other property; or
(ii) issue any capital 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 (except for the
issuance of Bancorp Common pursuant to the convertible securities,
exchangeable securities or Bancorp Stock Options described in Section
2.01(d) of the Disclosure Schedule); or
(iii) directly or indirectly redeem, purchase or otherwise acquire
any capital stock of Bancorp or any Bancorp Subsidiary; or
(iv) effect a reclassification, recapitalization, splitup, exchange
of shares, readjustment or other similar change in or to any capital
stock, or otherwise reorganize or recapitalize; or
(v) except as contemplated in Section 1.02, change its Certificate
or Articles of Incorporation or association, as the case may be, or
Bylaws, nor enter into any agreement to merge or consolidate with, or
sell a significant portion of its assets to, any person or entity.
(b) Bancorp and each Bancorp Subsidiary will not, without the prior
written consent of FBA (which consent shall not be unreasonably withheld or
delayed):
(i) Except as disclosed in Section 4.01(b) of the Disclosure Schedule,
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 employment, bonus,
insurance, pension, salary continuation, retention, indemnification or
other Employee Plan, agreement, payment or arrangement made to, for or
with any of such officers or employees;
<PAGE>
(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 to maturity greater than five
years or any asset-backed securities other than those issued or
guaranteed by the Federal Home Loan Bank Board, the Government National
Mortgage Association, 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 six (6) months other than, in the ordinary course of
business: letters of credit, loan agreements, credit and deposit
agreements and documents, renewals with current market rates and terms
of expiring subleases of office space located at 550 Montgomery Street,
San Francisco, California (all current subleases scheduled to expire
prior to March 31, 2001 being identified in Section 4.01(b) of the
Disclosure Schedule) and renewals or replacements of insurance policies
(in either case for terms not exceeding one year) on terms
substantially similar to existing Bancorp and Bank of San Francisco
policies;
(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 Bancorp or a Bancorp Subsidiary or
any claim which Bancorp or any Bancorp Subsidiary 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;
(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 a report shall not be required 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
Bancorp or a Bancorp Subsidiary;
(xi) violate any law, statute, rule, governmental regulation or
order, which violation would have a material adverse effect on the
business, financial condition, or earnings of Bancorp or a Bancorp
Subsidiary;
(xii) purchase any real or personal property or make any other capital
expenditure where the amount paid or committed therefor is in excess of
$75,000; or
<PAGE>
(xiii) increase or decrease the rate of interest paid on time deposits,
except in the ordinary course of business in a manner consistent with
past practices.
(c) Bancorp and the Bancorp Subsidiaries shall not, without the prior
written consent of FBA, engage in any transaction or take any action that would
render untrue in any material respect any of the representations and warranties
of Bancorp or Bank of San Francisco contained in Article II hereof, if such
representations and warranties were given immediately following such transaction
or action.
(d) Bancorp shall promptly notify FBA of the occurrence of any matter
or event known to and directly involving Bancorp or Bank of San Francisco that
has or would be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, or condition (financial or otherwise)
of Bancorp and the Bancorp Subsidiaries, taken as a whole, or that would
otherwise materially and adversely affect the ability of Bancorp or Bank of San
Francisco to consummate the transactions contemplated by this Agreement.
(e) Bancorp shall not solicit or encourage, or, except to the extent
otherwise required by applicable Corporate Law or applicable directors'
fiduciary principles, 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
Bancorp Common or other securities or assets of Bancorp or any Bancorp
Subsidiary. Bancorp shall promptly advise FBA of its receipt of any such
proposal or inquiry and the substance thereof.
Section 4.02. Breaches. Bancorp and Bank of San Francisco 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. Written Consent. Concurrently with the execution of this
Agreement, Bancorp has delivered to FBA a true copy of a written consent
executed by the Trustee and delivered to Bancorp approving the Merger and the
other transactions contemplated by this Agreement. As soon as reasonably
practicable and within applicable time limitations, Bancorp shall (i) prepare
and file with the SEC an Information Statement (the "Information Statement")
with respect to the Merger and the other transactions contemplated by this
Agreement, (ii) cause such Information Statement to be mailed to all Bancorp
stockholders and (iii) perform all other actions required by Section 14 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
Section 4.04. Consummation of Agreement. Bancorp and Bank of San
Francisco shall use their best efforts to perform and fulfill all conditions and
obligations on their respective parts to be performed or fulfilled pursuant to
this Agreement and to effect the Merger within 180 days after the date hereof
and cooperate in causing the Bank Merger in accordance with the terms and
provisions hereof. Bancorp and Bank of San Francisco shall furnish to FBA in a
timely manner all information, data and documents reasonably requested by FBA
and shall cooperate fully with First Banks, FBA and Redwood in seeking such
approvals, consents and authorizations as are required for the Merger and in
consummating the transactions contemplated by this Agreement. Neither Bancorp
nor Bank of San Francisco shall take, or permit any of its affiliates to take,
any action that is intended, or would reasonably be expected, to result in (i)
any of its representations or warranties in this Agreement to become untrue in
any material respect at any time prior to the Effective Time, (ii) any of the
conditions to the Merger set forth in Article VI not to be satisfied, or (iii)
any provision of this Agreement to be violated in any material respect.
<PAGE>
Section 4.05. Environmental Reports. Bancorp shall provide to FBA, as
soon as reasonably practicable and not later than 45 days after the date hereof,
a report of a phase one environmental investigation on the real property leased
and operated by Bancorp and Bank of San Francisco located at 550 Montgomery
Street, San Francisco, California. In addition, within ten (10) days after the
acquisition or lease of any real property acquired or leased by Bancorp or any
Bancorp Subsidiary 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), Bancorp and Bank of San Francisco
shall provide to FBA a report of a phase one environmental investigation on such
real property. If required by the phase one investigation, in FBA's reasonable
opinion, and subject to the consent of the lessor of any such property if
legally required (which consent Bancorp and Bank of San Francisco shall use
their best efforts to obtain), FBA may obtain a report of a phase two
investigation or other appropriate environmental investigation on properties
requiring such additional investigation, and Bancorp and Bank of San Francisco
will cooperate with FBA in obtaining the same. FBA shall have fifteen (15) days
from the receipt of any such report or investigation to notify Bancorp in
writing of the estimated costs, in excess of $600,000 (for all affected
properties), of taking such remedial and corrective actions and measures as are
required by applicable law or recommended by such report or investigation in
light of serious life, health or safety concerns (the "Estimated Environmental
Costs").
Section 4.06. Access to Information. Bancorp and Bank of San Francisco
shall permit FBA reasonable access, in a manner which will avoid undue
disruption or interference with their normal operations, to their properties and
shall cause the Bancorp Subsidiaries to provide to FBA comparable access to
their properties. Bancorp and Bank of San Francisco 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
Bancorp and the Bancorp Subsidiaries including, but not limited to, all books of
account (including the general ledger), tax records, minute books of directors'
and shareholders' meetings, organizational documents, material contracts and
agreements, loan files, filings with any regulatory authority, accountants'
workpapers (if available and subject to the respective independent accountants'
consent), litigation files, plans affecting employees, and any other business
activities or prospects in which FBA may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by this Agreement. FBA
will hold any such information which is nonpublic in confidence in accordance
with the provisions of Section 8.01 hereof.
Section 4.07. Consents of Third Parties. Bancorp and Bank of San
Francisco shall use their best efforts to obtain all consents of third parties
necessary for the consummation of the transactions contemplated by this
Agreement, including without limitation the consent of the lessor (to the extent
required) under the current lease of the office premises located at 550
Montgomery Street, San Francisco, California.
Section 4.08. Subsequent Financial Statements. As soon as available
after the date hereof, Bancorp shall deliver to FBA the monthly unaudited
consolidated balance sheets and profit and loss statements of Bancorp prepared
for its internal use, the Report of Condition and Income of Bank of San
Francisco 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
Bancorp Financial Statements"). The Subsequent Bancorp 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>
Section 4.09. Merger of Banks. Bancorp and Bank of San Francisco shall
cooperate with FBA and shall execute such documents as may be required in order
to enable Bank of San Francisco to enter into and consummate a merger with
Redwood Bank (or a successor thereto) (the "Bank Merger"), to be effective
immediately following the Effective Time or as soon thereafter as practicable.
ARTICLE V
AGREEMENTS OF FIRST BANKS, FBA AND REDWOOD
Section 5.01. Regulatory Approvals. First Banks shall use its best
efforts to obtain the necessary approvals, consents and authorizations required
by law for the consummation of the Merger, including all legally required
regulatory approvals. First Banks, FBA and Redwood shall file all regulatory
applications required in order to consummate the Merger and the Bank Merger,
including but not limited to the necessary applications for the prior approval
of the Federal Reserve Board. Any required application shall be filed by First
Banks or FBA with the appropriate regulatory or governing authority as soon as
reasonably practicable, but in no event later than six calendar weeks after the
date hereof. FBA shall keep Bancorp reasonably informed as to the status of such
applications and provide to Bancorp and the Trustee, promptly after filing,
copies of such applications and any supplementally filed materials.
Section 5.02. Breaches. First Banks, FBA and Redwood shall, in the
event any of them has knowledge of the occurrence, or impending or threatened
occurrence, of any event or condition which would cause or constitute a breach
(or would have caused or constituted a breach had such event occurred or been
known prior to the date hereof) of any of its representations or agreements
contained or referred to herein, give prompt written notice thereof to Bancorp
and use their best efforts to prevent or promptly remedy the same.
Section 5.03. Consummation of Agreement. (a) First Banks, FBA and
Redwood shall use their best efforts to perform and fulfill all conditions and
obligations on their parts and on the part of Newco to be performed or fulfilled
under this Agreement, to effect the Merger within 180 days after the date hereof
(subject to FBA's right as set forth in Section 1.05 to schedule the Closing at
the end of a month or the first day of the following month, even if the effect
of doing so is to cause the Merger to be effective more than 180 days from the
date hereof) and to effect the Bank Merger in accordance with the terms and
conditions of this Agreement. First Banks, FBA and Redwood shall furnish to
Bancorp in a timely manner all information, data and documents reasonably
requested by Bancorp and shall cooperate fully with Bancorp and Bank of San
Francisco in seeking such approvals, consents and authorizations as are required
for the Merger and the other transactions contemplated by this Agreement.
Neither First Banks, FBA nor Redwood shall take, or permit any of its affiliates
to take, any action that is intended, or would reasonably be expected, to result
in (i) any of its representations or warranties in this Agreement to become
untrue in any material respect at any time prior to the Effective Time, (ii) any
of the conditions to the Merger set forth in Article VI not to be satisfied, or
(iii) any provision of this Agreement to be violated in any material respect.
(b) First Banks, FBA and Redwood shall not, without the prior written
consent of Bancorp, engage in any transaction or take any action that would
render untrue in any material respect any of the representations and warranties
of First Banks, FBA or Redwood contained in Article III hereof, if such
representations and warranties were given immediately following such transaction
or action.
<PAGE>
(c) FBA shall promptly notify Bancorp of the occurrence of any matter
or event known to or directly involving First Banks or FBA that has or would be
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, or condition (financial or otherwise) of First
Banks or FBA and their respective subsidiaries, taken as a whole or that would
otherwise materially and adversely affect the ability of First Banks, FBA,
Redwood or Newco to consummate the transactions contemplated by this Agreement.
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 Bancorp or a Bancorp Subsidiary 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 an 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 banking 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
Bancorp after the Effective Time. Bancorp employees shall participate therein on
the same basis as similarly situated employees of other subsidiaries of FBA. All
such participation shall be subject to the terms of such plans as may be in
effect from time to time, and this Section 5.04 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 Bancorp, 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, Bancorp or any other entity to employ any person or to continue to
employ any person for any period of time.
Section 5.05. Indemnification. (a) For four years after the Closing
Date, FBA shall cause Bancorp to indemnify, defend and hold harmless the present
and former officers, directors, employees and agents of Bancorp and the Bancorp
Subsidiaries (each, an "Indemnified Party") against all losses, expenses,
claims, damages or liabilities arising out of actions or omissions related to
their positions at Bancorp or a Bancorp Subsidiary 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 Bancorp's Certificate of Incorporation as in effect on March 31,
2000. The Indemnification Agreements specifically identified in Section 2.09 of
the Disclosure Schedule, as amended as contemplated in Section 6.01(i), shall
remain in effect.
(b) If after the Closing Date Bancorp 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 (including as a result of the Bank
Merger), then and in each such case, FBA shall cause Bancorp's successors and
assigns to assume any remaining obligations set forth in this Section 5.05. If
Bancorp 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 Bancorp was so obligated pursuant to this
Section 5.05.
<PAGE>
(c) FBA shall have the option of purchasing insurance in the form of an
extension of coverage under Bancorp's existing insurance policy Number
F0019780Y002 issued by Lloyds of London (First City), insuring the Indemnified
Parties against such losses, expenses, claims, damages or liabilities, on terms
acceptable to FBA.
Section 5.06. Completion of Financing. Each of First Banks and its
subsidiaries will use its best efforts to complete a Financing (as defined in
Section 6.01) necessary to satisfy the conditions set forth in Section 6.01 as
soon as practicable and shall periodically keep Bancorp and the Trustee
reasonably informed of the status of the Financing, including providing copies
of non-confidential documents related to the Financing.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.01 Conditions to the Obligations of First Banks, FBA and Redwood. The
obligations of First Banks, FBA and Redwood to effect the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
(or waiver by such parties) prior to or on the Closing Date of the following
conditions:
(a) the representations and warranties made by Bancorp and Bank of San
Francisco 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 (except to the
extent any representation or warranty expressly speaks as of an earlier date);
(b) Bancorp and Bank of San Francisco shall each 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 preventing the
consummation of the Merger or the Bank Merger, 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 or the Bank Merger which makes the consummation thereof illegal;
(d) all necessary approvals, consents and authorizations required by
law for consummation of the Merger, including the requisite approvals of the
shareholders of Bancorp and all legally required regulatory approvals, shall
have been obtained, and all waiting periods required by law shall have expired;
(e) FBA shall have received the environmental reports required by
Section 4.05 hereof and shall not have elected pursuant to Section 7.05 hereof
to terminate this Agreement;
(f) FBA shall have received all documents required to be received from
Bancorp, including without limitation the consents referred to in Section 4.07,
on or prior to the Closing Date, all in form and substance reasonably
satisfactory to FBA;
(g) stockholders of Bancorp Common owning no more than fifteen percent
(15%) of the outstanding Bancorp Common shall have perfected the right to
dissent from the Merger;
<PAGE>
(h) First Banks or one of its subsidiaries shall have completed an
offering of Trust Preferred securities in the aggregate principal amount of at
least $30,000,000 with customary terms and at a dividend rate no higher than
twelve and one-half percent (12 1/2%) or an alternative financing arrangement on
substantially similar terms (the "Financing"); provided, that if First Banks and
its subsidiaries have complied in all material respects with their obligations
under Section 5.07 but have been unable to complete a Financing by December 31,
2000, unless completion of such a transaction is then imminent, then FBA shall
either (i) terminate this Agreement effective January 1, 2001 by written notice
to Bancorp on or before such date, or (ii) as of January 1, 2001, this paragraph
(h) shall be void and of no further force and effect. Notwithstanding the
foregoing, if, as of December 31, 2000, First Banks, FBA or Redwood is in
material breach of any of their representations, warranties or agreements set
forth herein, and such breach has not been cured within the applicable cure
period after delivery of written notice with respect to the breach, then FBA
shall not have the option of terminating this Agreement pursuant to the above
clause (i) of this subsection (h) and, in such event this subsection (h) shall
automatically terminate and be of no further force and effect on and as of
January 1, 2001; and
(i) each of the Indemnification Agreements identified in Section 2.09
of the Disclosure Schedule shall have been amended by removing Sections 5(d) and
8 therefrom, in a manner reasonably acceptable to FBA.
Section 6.02. Conditions to the Obligations of Bancorp and Bank of San
Francisco. The obligations of Bancorp and Bank of San Francisco to effect the
Merger and the other transactions contemplated by this Agreement shall be
subject to the satisfaction (or waiver by Bancorp and Bank of San Francisco)
prior to or on the Closing Date of the following conditions:
(a) the representations and warranties made by First Banks, FBA and
Redwood 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 (except to the extent any
representation or warranty expressly speaks as of an earlier date);
(b) First Banks, FBA and Redwood shall each 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 or the Bank
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 or the Bank Merger which
makes the consummation thereof illegal;
(d) all necessary approvals, consents and authorizations required by
law for consummation of the Merger, including the requisite approvals of the
shareholders of Bancorp and all legally required regulatory approvals, shall
have been obtained, and all waiting periods required by law shall have expired;
and
(e) Bancorp shall have received all documents required to be received
from FBA on or prior to the Closing Date, all in form and substance reasonably
satisfactory to Bancorp.
<PAGE>
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 Bancorp 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, FBA or Redwood, on one hand, or Bancorp or Bank of San Francisco,
on the other hand, which breach is not cured within thirty days after delivery
of written notice to cure such breach is given to the breaching party by the
non-breaching party, then the non-breaching parties, regardless of whether
approval of this Agreement and the Merger by the shareholders of Bancorp 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 Bancorp 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 the approval of which is required in order for the transactions
contemplated by this Agreement be consummated 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 First Banks, FBA, Redwood or Newco as a condition
for approval, shall not be deemed to be a denial or disapproval so long as such
parties diligently provide 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 First Banks, FBA, Redwood or Newco (hereinafter referred
to as the "Appeal"), then the application will be deemed denied unless such
party or parties prepares and timely files and continues to pursue an Appeal
seeking the necessary approval.
Section 7.05. Environmental Reports. (a) In the event that the
Estimated Environmental Costs as set forth in the notification provided by FBA
to Bancorp pursuant to Section 4.05 are less than or equal to $5,000,000, then
the Common Share Merger Price shall be reduced by an amount per share equal to
the result obtained by dividing the Estimated Environmental Costs by the
aggregate of the number of shares of Bancorp Common outstanding as of the
Closing Date plus the number of shares of Bancorp Common that would be issued
upon the exercise of the Bancorp Options outstanding on the Closing Date.
(b) In the event that the Estimated Environmental Costs are greater
than $5,000,000, FBA shall have the right for a period of fifteen (15) days
following delivery of notice, as provided in Section 4.05, to terminate this
Agreement by giving written notice thereof to Bancorp.
<PAGE>
Section 7.06. Regulatory Enforcement Matters. In the event that Bancorp
or any Bancorp Subsidiary shall become a party or subject to any written
agreement, memorandum of understanding, cease and desist order, imposition of
civil money penalties or other regulatory enforcement action or proceeding of
any bank or bank holding company regulatory authority after the date of this
Agreement and based upon safety and soundness considerations, then FBA may
terminate this Agreement by giving written notice of such termination to
Bancorp.
Section 7.07. Unilateral Termination. If the Closing Date shall not
have occurred on or prior to the day which is 210 days after the date of this
Agreement, then this Agreement may be terminated by any party by giving written
notice to the other parties; provided, however, that a party shall not be
entitled to terminate this Agreement pursuant to this Section 7.07 if such party
is in breach of this Agreement and such breach has contributed materially to the
failure of the Closing to have occurred on or prior to the date on which such
party proposed to terminate this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section 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 Bancorp will purchase or sell
any security issued by the other party for so long as this Agreement remains in
effect.
<PAGE>
Section 8.02. Publicity. First Banks, FBA and Bancorp shall cooperate
with each other and with the Trustee in the development and distribution of all
news releases and other public disclosures concerning this Agreement and the
Merger. No party shall issue any news release or make any other public
disclosure without the prior consent of the other parties, 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 transactions
contemplated hereby, in which latter events 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 upon return of a signed receipt in regular form
if sent by the United States Registered or Certified Mail, postage prepaid, or
upon receipt if transmitted by facsimile telecopy or any other means, addressed
(in any case) as follows:
(a) if to First Banks: First Banks, Inc.
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
(b) if to FBA: First Banks America, Inc.
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
(c) if to Redwood: Redwood Bank
735 Montgomery Street
San Francisco, California 94111
Attention: Mr. Terrance McCarthy
Facsimile: (415) 391-9090
with a copy to: John S. Daniels
Attorney at Law
6440 North Central Expressway
Suite 503
Dallas, Texas 75206
Facsimile: (214) 368-9094
(d) if to Bancorp or
Bank of San Francisco:
The San Francisco Company
550 Montgomery Street
San Francisco, California 94111
Attention: Chief Financial Officer
Facsimile: (415) 781-0536
Bank of San Francisco
550 Montgomery Street
San Francisco, California 94111
Attention: Chief Financial Officer
Facsimile: (415) 781-0536
with a copy to: Pillsbury Madison & Sutro LLP
50 Fremont Street
San Francisco, California 94105
Attention: Michael J. Halloran
Facsimile: (415) 983-1200
with additional copies to: Squire, Sanders & Dempsey, L.L.P.
600 Hansen Way
Palo Alto, California 94304
Attention: Nicholas Unkovic
Facsimile: (650) 856-3619
<PAGE>
Robb Evans, Trustee
11450 Sheldon Street
Sun Valley, California 91352
Facsimile: (818) 768-8802
Brobeck, Phleger & Harrison, LLP
One Market Street
San Francisco, California 94105
Attention: J. Michael Shepherd
Facsimile: (415) 442-1010
or to such other address as any party may from time to time designate by notice
to the others.
Section 8.05. Nonsurvival of Representations, Warranties and Agreements.
Except for the agreements set forth in Sections 5.04, 5.05, 8.01, 8.03 and 8.06
hereof, no representation, warranty or agreement contained in this Agreement
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
Proxy, 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. Except as contemplated in Section 1.03 and except for
the persons defined as Indemnified Parties in Section 5.05, 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, the corporation law of the State of
Delaware 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, INC.
By:/s/Allen H. Blake
-------------------------
Its:President
------------------------
FIRST BANKS AMERICA, INC.
By:/s/ Allen H Blake
-------------------------
Its:Executive Vice President
------------------------
REDWOOD BANK
By:/s/Terrance M. McCarthy
-------------------------
Its:President and CEO
------------------------
THE SAN FRANCISCO COMPANY
By:/s/James E. Gilleran
------------------------
Its:Chairman
-----------------------
BANK OF SAN FRANCISCO
By:/s/James E. Gilleran
------------------------
Its:Chairman
------------------------
<PAGE>
EXHIBIT 1.06(a)
Legal Opinion Matters
The San Francisco Company and Bank of San Francisco (the "SF Parties")
1. The due incorporation, valid existence and good standing of each of
the SF Parties under the laws of their respective states of incorporation, their
power and authority to own and operate their respective properties and to carry
on their respective businesses as now conducted, and their power and authority
to enter into the Agreement and to consummate the transactions contemplated by
the Agreement.
2. With respect to each of the SF Parties: (i) the number of
authorized, issued and outstanding shares of capital stock of such entity
immediately prior to the Closing, (ii) the nonexistence of any violation of the
preemptive or subscription rights of any person known to such counsel, (iii) the
nonexistence of any outstanding options, warrants, or other rights to acquire,
or securities convertible into, any equity security of such entity known to such
counsel, except as set forth in Section 2.01 of the Agreement and (iv) the
nonexistence of any obligation, contingent or otherwise, known to such counsel,
to reacquire any shares of capital stock of such entity.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by the SF Parties to authorize the
execution, delivery and performance of the Agreement, the due execution and
delivery of the Agreement by the SF Parties, and the Agreement as the valid and
binding obligations of each of the SF Parties, enforceable against them in
accordance with its 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, and other customary
assumptions and exceptions).
4. The execution of the Agreement by each of the SF Parties and the
consummation of the transactions contemplated thereby do not violate or cause a
default under their respective Certificate of Incorporation and Articles of
Incorporation or Bylaws, any statute, regulation or rule applicable to either of
the SF Parties or any judgment, order or decree known to counsel against, or any
material agreement known to counsel and binding upon, either of the SF Parties.
5. The receipt of all material 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 third
parties required to be obtained or made by either of the SF Parties in
connection with the execution and delivery of the Agreement by such party, 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
either of the SF Parties and known to such counsel which, if adversely
determined, would have a material adverse effect upon their respective
properties or assets or the consummation of the Merger.
7. The right of a successor corporation to Bank of San Francisco to
succeed to the rights and benefits of Bank of San Francisco under the lease
pursuant to which Bank of San Francisco currently occupies the premises located
at 550 Montgomery Street, San Francisco, California.
<PAGE>
EXHIBIT 1.06(b)
Legal Opinion Matters
FBA and Redwood (the "FBA Parties")
1. The due incorporation, valid existence and good standing of each of
the FBA Parties under the laws of their respective jurisdictions of
incorporation, their power and authority to own and operate their respective
properties and to carry on their respective businesses as now conducted, and
their power and authority to enter into the Agreement and to consummate the
transactions contemplated by the Agreement.
2. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by the FBA Parties to authorize
the execution, delivery and performance of the Agreement, the due execution and
delivery of the Agreement by the FBA Parties, and the Agreement as the valid and
binding obligation of each of the FBA Parties, enforceable against them in
accordance with its 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 and
other customary assumptions and exceptions).
3. The execution of the Agreement by each of the FBA Parties, and the
consummation of the transactions contemplated thereby do not violate or cause a
default under their respective Certificate of Incorporation, Articles of
Incorporation or Bylaws, any statute, regulation or rule applicable to either of
the FBA Parties or any judgment, order or decree known to counsel against, or
any material agreement known to counsel and binding upon, either of the FBA
Parties.
4. The receipt of all material 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 third parties required
to be obtained or made by either of the FBA Parties in connection with the
execution and delivery of the Agreement by such party, the performance of its
obligations thereunder or the consummation of the transactions contemplated
therein.
5. The nonexistence of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or affecting
either of the FBA Parties and known to such counsel which, if adversely
determined, would have a material adverse effect upon the consummation of the
Merger.
