<PAGE> 1
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-9477
FIRST COMMERCIAL BANCORP, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 94-2683725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
865 Howe Avenue, Suite 310, Sacramento, California, 95825
(Address of principal executive offices, including zip code)
(916) 641-3288
( Registrant's telephone number, including area code)
2450 Venture Oaks Way, Sacramento, California, 95833
(Former name, former address, and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Number of Shares Outstanding
Title of Class at October 31, 1995
- -------------- ----------------------------
<S> <C>
Common Stock $.01 par value 4,675,110
</TABLE>
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994
Consolidated Statements of Operations for the three and nine
months ended September 30, 1995 and 1994
Consolidated Statements of Changes in Stockholders'
Equity for the nine months ended September 30, 1995
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
</TABLE>
1
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST COMMERCIAL BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
(Dollar amounts in thousands) 1995 1994
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 14,305 $ 19,059
Federal funds sold 5,500 27,200
Securities purchased under resale agreements 37,000 40,000
---------- ----------
Total cash and cash equivalents 56,805 86,259
Interest-bearing deposits with other financial institutions - 299
Investment securities (Note 3):
Held-to-maturity (market value of $11,061 in 1995 and $3,815 in 1994) 10,968 3,963
Available-for-sale 19,705 13,727
---------- ----------
Total investment securities: 30,673 17,690
Loans, net of unearned income of $170 in 1995 and $243 in 1994 81,919 130,172
Allowance for loan losses (Note 4) 4,838 7,437
---------- ----------
Net loans 77,081 122,735
Lease financing, net 991 1,038
Premises and equipment, net 2,147 2,637
Other real estate 2,054 5,222
Interest receivable and other assets 3,172 3,426
---------- ----------
TOTAL ASSETS $ 172,923 $ 239,306
========== ==========
LIABILITIES
DEPOSITS:
Demand accounts $ 33,162 $ 56,483
Interest-bearing transaction accounts 43,376 68,840
Savings accounts 17,915 21,695
Time accounts 72,786 86,518
---------- ----------
Total deposits 167,239 233,536
Accrued expenses and other liabilities 2,473 1,415
Minority interest 4,646 -
---------- ----------
TOTAL LIABILITIES 174,358 234,951
STOCKHOLDERS' EQUITY (NOTE 2)
Preferred stock: $.01 par value; authorized: 5,000,000
shares; issued and outstanding: none --- ---
Common stock: 1995 and 1994, $.01 par value, authorized: 1995 and
1994, 15,000,000 shares, issued and outstanding: 1995 and 1994,
4,675,110 shares 47 48
Additional paid-in capital 27,787 28,495
Retained deficit (29,181) (22,880)
Common stock in treasury, at cost: 1995, none; 1994, 100,000 shares - (709)
Unrealized losses on securities available-for-sale (88) (599)
---------- ----------
Total stockholders' equity (1,435) 4,355
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 172,923 $ 239,306
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE> 4
FIRST COMMERCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30,
(Dollar amounts in thousands) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans and leases $ 2,228 $ 3,863 $ 7,792 $ 11,726
Interest on Federal funds sold and securities purchased under
resale agreements 556 532 1,679 1,227
Interest on time deposits with other financial institutions -- 21 -- 87
Interest on investment securities 464 254 1,180 848
-------- -------- -------- --------
Total interest income 3,248 4,670 10,651 13,888
-------- -------- -------- --------
INTEREST EXPENSE:
Interest on interest-bearing transaction accounts 240 498 850 1,543
Interest on savings accounts 111 149 339 448
Interest on time accounts and other borrowed funds 1,176 916 3,450 2,242
-------- -------- -------- --------
Total interest expense 1,527 1,563 4,639 4,233
-------- -------- -------- --------
NET INTEREST INCOME 1,721 3,107 6,012 9,655
Provision for loan losses 100 1,022 3,345 9,057
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,621 2,085 2,667 598
-------- -------- -------- --------
Non-interest income 277 617 1,131 1,711
Non-interest expense 2,919 5,406 10,097 14,561
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (1,021) (2,704) (6,299) (12,252)
Provision for income taxes -- -- 2 1,926
-------- -------- -------- --------
NET LOSS $ (1,021) $ (2,704) $ (6,301) $(14,178)
======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Net loss per share $ (0.22) $ (0.58) $ (1.35) $ (3.03)
Weighted average shares of common stock outstanding 4,675 4,675 4,675 4,675
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE> 5
FIRST COMMERCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
UNREALIZED TOTAL
ADDITIONAL COMMON GAINS (LOSSES) STOCKHOLDERS'
COMMON PAID-IN RETAINED STOCK IN ON SECURITIES EQUITY
(DOLLAR AMOUNTS IN THOUSANDS) STOCK CAPITAL DEFICIT TREASURY AVAILABLE-FOR-SALE (DEFICIT)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1994 $ 48 $ 28,495 $(22,880) $ (709) $ (599) $ 4,355
Three months ended March 31, 1995:
Net loss -- -- (1,039) -- -- (1,039)
Adjustment to unrealized gains
(losses) on available-for-
sale securities (Note 3) -- -- -- -- 298 298
-------- -------- -------- -------- -------- --------
BALANCES, MARCH 31, 1995 48 28,495 (23,919) (709) (301) 3,614
Three months ended June 30, 1995:
Net loss -- -- (4,241) -- -- (4,241)
Adjustment to unrealized gains
(losses) on available-for-sale
securities (Note 3) -- -- -- -- 229 229
Treasury stock retirement (1) (708) -- 709 -- --
-------- -------- -------- -------- -------- --------
BALANCES, JUNE 30, 1995 47 27,787 (28,160) -- (72) (398)
Three months ended September 30, 1995:
Net loss -- -- (1,021) -- (1,021)
Adjustment to unrealized gains (losses)
on available-for-sale securities (Note 3) -- -- -- -- (16) (16)
-------- -------- -------- -------- -------- --------
BALANCES, SEPTEMBER 30, 1995 $ 47 $ 27,787 $(29,181) $ -- $ (88) $ (1,435)
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 6
FIRST COMMERCIAL BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
(Dollar amounts in thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss
Adjustments to reconcile loss to net cash $ (6,301) $ (14,178)
provided by operating activities:
Depreciation and amortization 576 1,734
Provision for loan losses 3,345 9,057
Write-down of other real estate 1,026 1,031
Fixed asset retirements 224 --
Decrease in interest receivable and other assets 254 5,743
Decrease in interest payable (17) (52)
Increase (decrease) in accrued expenses and other liabilities 1,075 (505)
-------- --------
Net cash provided by (used in) operating activities 182 2,830
-------- --------
Cash flows from investing activities:
Net decrease in interest-bearing deposits with other
financial institutions 299 2,480
Proceeds from the sale and maturity of investment securities 2,300 30,989
Purchase of investment securities (15,000) (4,974)
Net decrease in loans made to customers 41,605 27,009
Net decrease in deferred loan fees (73) (177)
Purchases of premises and equipment (82) (246)
Net decrease in lease financing 47 47
Proceeds from sale of other real estate 3,009 3,893
Payments to complete other real estate (90) (617)
-------- --------
Net cash provided by investing activities 32,015 58,404
-------- --------
Cash flows from financing activities:
Increase in minority interest in subsidiary (Note 2) 4,646 --
Net decrease in demand accounts, interest-bearing transaction
accounts and savings accounts (52,565) (67,054)
Net increase (decrease) in time accounts (13,732) 12,699
-------- --------
Net cash used in financing activities (61,651) (54,355)
-------- --------
Net decrease in cash and cash equivalents (29,454) 6,879
Cash and cash equivalents at beginning of period 86,259 86,874
-------- --------
Cash and cash equivalents at end of period $ 56,805 $ 93,753
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,622 $ 4,285
Income taxes $ -0- $ -0-
Supplemental Schedule of noncash investing and financing activities:
Net decrease in other real estate as a result of foreclosure or
financing, and other related transactions $ 777 $ 3,227
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 7
FIRST COMMERCIAL BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying consolidated financial statements of First Commercial Bancorp,
Inc. (the "Company") are unaudited and should be read in conjunction with the
consolidated financial statements contained in the Company's 1994 Annual Report
to Stockholders. In the opinion of management, all adjustments are of a normal
recurring nature. Operating results for the three and nine month periods ended
September 30, 1995 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1995.
The consolidated financial statements include the accounts of the parent company
and its sole subsidiary, First Commercial Bank (the "Bank"). As described in
Note 2, at September 30, 1995, the Company owned 1.05% of the outstanding common
stock of the Bank, although it continued to own 100% of the voting securities
of the Bank.
The net loss per share has been computed by dividing the reported net loss for
the period by the weighted average shares of common stock outstanding.
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS 114,
"Accounting by Creditors for Impairment of a Loan" (SFAS 114). During October
1994, the FASB issued SFAS 118, "Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosures" (SFAS 118), which amends SFAS 114.
SFAS 114 (as amended by SFAS 118) defines the recognition criterion for loan
impairment and the measurement methods for certain impaired loans and loans
whose terms have been modified in troubled debt restructurings (a restructured
loan). Specifically, a loan is considered impaired when it is probable a
creditor will be unable to collect all principal and interest according to the
contractual terms of the loan agreement. When measuring impairment, the expected
future cash flows of an impaired loan are required to be discounted at the
loan's effective rate. Alternatively, impairment can be measured by reference to
an observable market price, if one exists, or the fair market value of the
collateral for a collateral-dependent loan. Regardless of the measurement method
used historically, SFAS 114 requires a creditor to measure impairment based on
the fair value of the collateral when the creditor determines foreclosure is
probable. Additionally, impairment of a restructured loan is measured by
discounting the total expected future cash flows at the loan's effective rate of
interest as stated in the original loan agreement. Because the Company is
principally a collateral-based lender and, consequently, has used collateral
value to determine such reductions independent of the requirement of SFAS 114.
All loans in the Bank's portfolio are reviewed individually and are not
included in any homogeneous categories.
SFAS 118 amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan. Prior to the issuance of SFAS
118, SFAS 114 provided for two alternative income recognition methods to be used
to account for changes in the net carrying amount of an impaired loan subsequent
to the initial measurement of impairment. Under the first income recognition
method, a creditor would accrue interest on the net carrying amount of the
impaired loan and report other changes in the net carrying amount of the loan as
an adjustment to the provision for possible loan losses. Under the second income
recognition method, a creditor would recognize all changes in the net carrying
amount of the loan as an adjustment to the provision for possible loan losses.
While those income recognition methods are no longer required, SFAS 118 does not
preclude a creditor from using either of those methods.
6
<PAGE> 8
SFAS 114, as amended by SFAS 118, applies to financial statements for fiscal
years beginning after December 15, 1994. Accordingly, the Company adopted SFAS
114 on January 1, 1995. The adoption of SFAS 114 and SFAS 118 did not have a
material effect on its consolidated financial position or results of operations.
NOTE 2
- --------------------------------------------------------------------------------
RECAPITALIZATION
On August 7, 1995, the Company and the Bank entered into the Stock Purchase
Agreement with James F. Dierberg, an individual, and First Banks, a Missouri
bank holding company, which provides for the recapitalization of the Company and
the Bank. Under the terms of the Stock Purchase Agreement, as of June 30, 1995,
Mr. Dierberg, who is Chairman, Chief Executive Officer and President of First
Banks, acquired 750,000 shares of nonvoting, noncumulative preferred stock of
the Bank for $1.5 million. After receiving the necessary regulatory approvals,
on August 22, 1995 First Banks acquired the preferred stock from Mr. Dierberg
for $1.5 million, and on August 23, 1995, First Banks acquired 116,666,666
shares of common stock of the Bank for $3.5 million. As a result of these
transactions, First Banks owned 98.95% of the outstanding common stock and 100%
of the outstanding preferred stock of the Bank as of September 30, 1995.
The Bank common stock held by First Banks is subject to the terms of a proxy
agreement (the "Proxy") transferring to the Company the right to vote all of
the Bank common stock until the earlier of the conclusion of the Shareholders'
Meeting or December 31, 1995. Accordingly, the Company continues to own 100% of
the voting securities of the Bank. If the Company fails to hold the
Shareholders' Meeting on or before December 31, 1995, or if the shareholders
fail to approve the Stock Purchase Agreement, (1) the Proxy restricting First
Banks' voting of the Bank common stock will terminate and First Banks will
assume voting control of the Bank, (2) the $5 million currently held in escrow
will be invested in additional common stock of the Bank, and (3) the principal
and accrued but unpaid interest of the Investment Debenture would become
immediately convertible into shares of Bank common stock at the then current
book value per share. In that event, the Company would own less than one
percent (1%) of the outstanding shares of common stock of the Bank.
The Stock Purchase Agreement will be submitted for the approval of the
shareholders at a special meeting of the Company's shareholders (the
"Shareholders' Meeting") to be held in early December 1995. Upon the approval of
the Company's shareholders, the Bank preferred stock and the Bank common stock
will be exchanged for a total of 50,000,000 shares of Company common stock,
resulting in First Banks' ownership of 91.45% of the then outstanding shares of
Company common stock. In addition, First Banks has placed $5 million in an
escrow account for the purchase of a convertible debenture of the Company (the
"Debenture") upon receipt of the approval of the Stock Purchase Agreement by the
shareholders. At that time, $4.75 million of the proceeds of the Debenture will
be contributed to the capital of the Bank with the remaining $250,000 being
retained by the Company for general corporate purposes. The Debenture will bear
interest at 12% per year and will be secured by all of the Bank common stock
held by the Company. The Debenture matures five years after the Shareholders'
Meeting. Interest on the Debenture is payable in the sole discretion of the
Company's Board of Directors, upon receipt of any necessary regulatory
authorization. The principal and any accrued but unpaid interest thereon are
convertible into Company common stock at the option of First Banks at any time
prior to maturity at $.10 per share. At maturity, any remaining principal and
unpaid interest thereon must be converted into shares of the Company's common
stock at $.10 per share.
In order to enable the Bank to meet certain capital requirements of its
regulatory orders, on October 31, 1995, First Banks purchased, pursuant to the
terms of an Additional Investment Agreement, a convertible debenture of the
Company (the "Investment Debenture") for $1.5 million, the proceeds of which
were contributed to the Bank. The terms of the Investment Debenture are
identical to those of the Debenture described above, and the Investment
Debenture is convertible into 15,000,000 shares of Company common stock. In
addition, the terms of the Stock Purchase Agreement provide that if the Rights
Offering described below has not been concluded prior to December 31, 1995 and
the Bank's tangible capital ratio at that date does not equal 7.0%, First Banks
has the option to make an additional capital contribution to the Company through
the purchase of shares of Company common stock, at a purchase price of the then
current book value per share or $.10 per share, whichever is greater. In the
event First Banks elects not to make an additional capital infusion into the
Company or Bank, as applicable, the Bank will consider other methods of raising
capital, including the sale of additional Bank branch offices.
The Stock Purchase Agreement also provides for the Company to distribute shares
of Company common stock or cash to stockholders of record as of the record date
for the Shareholders' Meeting based on certain future events primarily related
to the earnings performance and the adequacy of the allowance for loan losses of
the Company during the period from July 1, 1995 to June 30, 1996 and recoveries
of certain previously charged-off assets, net of collection expenses and any
litigation costs thereafter through October 31, 1998.
7
<PAGE> 9
Finally, the Agreement provides that the Company shall amend the Company's
Stockholders' Rights Plan, adopted by the stockholders of the Company at the
1990 Special Meeting of the Stockholders (the "Rights Plan"), to exempt the
transactions contemplated by the Agreement from triggering the operation of the
Rights Plan. Further, if the Board of Directors of the Company determines that
the Company shall exercise its right of redemption under the Rights Plan then,
under certain conditions, First Banks may elect to arrange for the payment of
the redemption and the Company shall issue to First Banks shares of Company
common stock, on the basis of $.10 per share, in exchange for the aggregate
amount of such redemption.
Pursuant to the terms of the Stock Purchase Agreement, the Company has the
discretion and presently intends to make to its existing stockholders an
offering of rights to purchase additional shares of Company common stock and a
dividend exchange offer to certain stockholders. The Company is amending its
Registration Statement on Form S-1, which was filed on May 31, 1995 with the
Securities and Exchange Commission, to reflect the terms of the Stock Purchase
Agreement and Additional Investment Agreement, as well as to include current
financial and other information. The Registration Statement provides, inter
alia, for a rights offering of Company common stock to existing shareholders and
an offering in exchange for dividends owed to Company stockholders of record on
June 15 or September 14, 1992 (the "Offering"). If it is conducted, the Offering
would be intended to raise a maximum of $5 million of additional capital. The
Offering price would be the same as the price at which the Company's common
stock is purchased by First Banks. The Company cautions that the securities
covered by the Registration Statement may not be offered by the Company, nor may
offers to buy be accepted by the Company, prior to the time the Registration
Statement is declared effective by the Securities and Exchange Commission, and
then only by means of a prospectus. The Registration Statement has not been
declared effective by the Commission and the contents thereof are subject to
amendment.
8
<PAGE> 10
NOTE 3
- --------------------------------------------------------------------------------
INVESTMENT SECURITIES - HELD-TO-MATURITY AND AVAILABLE-FOR-SALE
The Company classifies its investments in debt and equity securities as
"held-to-maturity," "trading securities" or "available-for-sale." Investments
classified as "held-to-maturity" are reported at amortized cost, investments
classified as "trading" securities are reported at fair value with unrealized
gains and losses included in earnings, and investments classified as
"available-for-sale" are reported at fair value with unrealized gains and losses
reported as a separate component of stockholders' equity. As of September 30,
1995, the Company's assets and equity capital were reduced by $88,000 to reflect
unrealized losses on available-for-sale securities.
The estimated market value of investment securities is determined based on
current quotations, where available. The amortized cost (book value) and
estimated market value of investment securities at September 30, 1995 are as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
(Dollar amounts in thousands) COST GAINS LOSSES VALUE YIELD
- ------------------------------------------- ---------- ---------- ------- -----
<S> <C> <C> <C> <C> <C>
HELD-TO-MATURITY:
U.S. TREASURY SECURITIES $ 7,022 $ 49 $ -- $7,071 6.51%
U.S. GOVERNMENT AGENCIES 3,946 51 7 3,990 5.32
AVAILABLE-FOR-SALE:
U.S. TREASURY SECURITIES 11,063 25 20 11,068 5.92
U.S. GOVERNMENT AGENCIES 8,661 34 58 8,637 6.11
------- ---- --- -------
TOTAL INVESTMENT SECURITIES $30,692 $159 $ 85 $30,766 6.02%
======= ==== ==== =======
</TABLE>
On June 20, 1995, a Federal Home Loan Mortgage Corporation security with a book
value of $1,059,000, classified as "available-for-sale" was sold for a gain of
approximately $3,000. The Bank did not sell any other securities during the
nine-month period ended September 30, 1995, or the year ended December 31, 1994.
The following table shows the amortized cost and estimated market value of
investment securities at September 30,1995, by contractual maturity. Maturities
of mortgage-backed securities are classified in accordance with contractual
repayment schedules. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or
9
<PAGE> 11
prepay obligations with or without call or prepayment penalties. The amortized
cost and estimated market values, by contractual maturity were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------------------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
(Dollar amounts in thousands) COST VALUE YIELD COST VALUE YIELD
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MATURING WITHIN ONE YEAR:
U.S. TREASURY SECURITIES $ 3,996 $ 4,020 6.48% $10,025 $10,046 6.10%
U.S. GOVERNMENT AGENCIES 2,015 2,008 4.70 4,034 4,061 7.01
------- ------- ------- -------
TOTAL MATURING WITHIN ONE YEAR 6,011 6,028 5.88 14,059 14,107 6.36
------- ------- ------- -------
MATURING FROM ONE TO FIVE YEARS:
U.S. TREASURY SECURITIES 3,026 3,051 6.55 1,038 1,022 4.17
U.S. GOVERNMENT AGENCIES 1,931 1,982 5.78 4,628 4,576 5.33
------- ------- ------- -------
TOTAL MATURING FROM ONE TO FIVE YEARS 4,957 5,033 6.25 5,666 5,598 5.11
------- ------- ------- -------
TOTAL INVESTMENT SECURITIES $10,968 $11,061 6.05% $19,725 $19,705 6.00%
======= ======= ======= =======
</TABLE>
NOTE 4
- --------------------------------------------------------------------------------
LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of the loan portfolio is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
(Dollar amounts in thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL $ 37,075 $ 69,597
REAL ESTATE CONSTRUCTION 7,398 16,386
REAL ESTATE SECURED 33,982 38,439
INSTALLMENT 3,634 5,993
--------- ---------
TOTAL GROSS LOANS 82,089 130,415
UNEARNED INCOME (170) (243)
ALLOWANCE FOR LOAN LOSSES (4,838) (7,437)
--------- ---------
NET LOANS $ 77,081 $ 122,735
========= =========
</TABLE>
CONCENTRATION OF LARGE BORROWERS
The Company's loan portfolio is presently concentrated in twenty-two loans,
eleven of which exceed 25% of the Bank's September 30, 1995 capital. Commitments
to these borrowers represent $33.5 million or 41% of the Bank's total loan
portfolio at September 30, 1995. Outstanding balances to these borrowers at
September 30, 1995 were $22.7 million or 28% of the Bank's loan portfolio. Seven
of these loans, representing $14.9 million or 18% of the Bank's total loan
portfolio, have been classified by the Bank as substandard. One loan in the
amount of $638,000 is on nonaccrual status.
At September 30, 1995 the Bank's unsecured lending limit was $1.3 million and
its combined secured and unsecured lending limit was $2.2 million. The Bank
currently has five loans, representing $10.3 million, which exceed its unsecured
lending limit and two loans, representing $9.3 million that exceed the secured
and unsecured lending limit. The Company intends to be able to continue to
satisfy its larger customer's borrowing needs by participating loan amounts
above its lending limit with other banks until such time as the Bank becomes
recapitalized. Upon consummation of the transaction described in Note 2,
approximately $5.75 million will be added to the Bank's stockholders' equity as
of September 30,
10
<PAGE> 12
1995, after deducting the related expenses. As a result, the Bank's capital is
expected to be approximately $9.9 million. Based on this capital level, the
Bank's unsecured lending limit would be $2.2 million and the Bank's secured and
unsecured lending limit would be $3.7 million. Thereafter, the Bank would have
only one loan representing $3.3 million which would exceed its unsecured lending
limit, and two loans representing $9.3 million would exceed its secured and
unsecured lending limit.
CONCENTRATION OF CLASSIFIED ASSETS
Federal regulations require banks to review their assets on a regular basis and
to classify them if any weaknesses are noted. Banks must maintain adequate
allowances for assets classified as "Substandard" or "Doubtful" and must
immediately write off those assets classified as "Loss." The Bank has a
comprehensive process for classifying assets and asset reviews are performed on
a periodic basis. In addition to identifying adversely classified assets, the
Bank identifies certain assets as "Special Mention," which do not currently
expose the Bank to a sufficient degree of risk to warrant a more adverse
classification but do possess credit deficiencies or potential weaknesses
deserving management's close attention. Assets that do not possess credit
deficiencies are not classified and are considered "Pass" loans. The Bank
stratifies its loan portfolio based on collateral type concentrations and
delinquency trends. The objective of the review process is to identify any
trends and determine the levels of loss exposure to the Bank that would require
an adjustment to the valuation allowance.
Classified assets include nonperforming loans, other real estate and performing
loans that exhibit credit quality weaknesses. The table below outlines the
Bank's classified assets as of September 30, 1995:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(Dollar amounts in thousands)
- ----------------------------------------------------------
<S> <C>
Performing loans $21,029
Nonperforming loans 5,347
Other real estate 2,054
-------
Total classified assets $28,430
=======
</TABLE>
The Bank has been required by the Orders (as defined in Note 6) to reduce its
classified assets based upon the amount of classified loans as of the dates of
the 1993 and 1994 examinations. The Bank is in full compliance with the
classified loan reductions scheduled in connection with each of these
examinations. The classified assets described above are consistent with the
classification findings of the FDIC and SBD examiners in connection with the
1995 joint examination and represent 33.8% of the Bank's total loans and ORE.
Although the Bank has not as yet been required by the FDIC and SBD to agree
upon a classified asset reduction schedule, the Bank, based upon its past
experience, believes that it will be able to satisfy such a classified asset
reduction schedule once it is agreed upon with its regulatory authorities.
11
<PAGE> 13
The changes to the allowance for loan losses consisted of the following for the
nine-month period ended September 30, 1995 and for the year ended December 31,
1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
(Dollar amounts in thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 7,437 $ 7,337
CHARGE-OFFS:
COMMERCIAL 4,880 3,712
REAL ESTATE CONSTRUCTION 430 5,591
REAL ESTATE SECURED 644 661
INSTALLMENT 281 59
-------- --------
6,235 10,023
-------- --------
RECOVERIES:
COMMERCIAL 306 176
REAL ESTATE CONSTRUCTION -- 125
REAL ESTATE SECURED -- --
INSTALLMENT 12 13
-------- --------
318 314
-------- --------
NET CHARGE-OFFS ON LOANS 5,917 9,709
ADDITIONS TO ALLOWANCE CHARGED
TO OPERATING EXPENSE 3,345 9,809
REDUCTION IN ALLOWANCE FOR LOAN LOSSES
TRANSFERRED WITH BRANCH SALE (27) --
-------- --------
BALANCE AT END OF PERIOD $ 4,838 $ 7,437
======== ========
- --------------------------------------------------------------------------------
NET CHARGE-OFFS ON LOANS 7.26% 5.62%
TO AVERAGE LOANS
ALLOWANCE FOR LOAN LOSSES TO 5.89% 5.70%
TOTAL LOANS OUTSTANDING
</TABLE>
12
<PAGE> 14
The following table provides information with respect to all nonperforming
assets:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
(Dollar amounts in thousands) 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C>
TOTAL LOANS OUTSTANDING $ 82,089 $130,415
======== ========
ACCRUAL LOANS PAST DUE NINETY DAYS OR MORE $ -- $ 22
NONACCRUAL LOANS 4,738 11,433
RESTRUCTURED LOANS 609 710
-------- --------
NONPERFORMING LOANS 5,347 12,165
OTHER REAL ESTATE 2,054 5,222
-------- --------
NONPERFORMING ASSETS $ 7,401 $ 17,387
======== ========
LOANS PAST DUE 30 TO 89 DAYS $ 1,133 $ 4,514
======== ========
RATIOS:
NONPERFORMING LOANS TO TOTAL LOANS OUTSTANDING 6.51% 9.33%
ALLOWANCE FOR LOAN LOSSES TO NONPERFORMING LOANS 90.48% 61.13%
NONPERFORMING ASSETS TO LOANS AND OTHER REAL ESTATE 8.80% 12.82%
</TABLE>
During the nine months ended September 30, 1995, the Bank's nonperforming loans
decreased from $12,165,000 at December 31, 1994 to $5,347,000 at September 30,
1995, or 56.0%. At September 30, 1995, 65% of nonperforming loans were
collateralized by real estate. Loans past due 30 days or more and less than 90
days decreased 74.9% from $4,514,000 at December 31, 1994 to $1,133,000 at
September 30, 1995.
A loan is classified as nonaccrual and the accrual of interest on such loan is
discontinued when the contractual payment of principal or interest has become 90
days past due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing. When a loan
is placed on nonaccrual status, the Bank reverses any accrual and unpaid
interest and all payments thereafter are applied to principal until such time as
management believes the full repayment of principal and interest is assured. At
such time, the loan may be returned to accrual status and payment then applied
to principal and/or interest according to the terms of the loan. Interest on
impaired loans which are performing is recognized in accordance with the loan
documents.
At September 30, 1995, the recorded investment in loans that are considered to
be impaired under Statement 114 was $7,349,000. Thirty-five percent (35.32%), or
$1,709,000 of the allowance for loan losses at September 30, 1995, has been
provided for impaired loans. Impaired loans are reviewed monthly and are
assigned asset quality ratings as part of the Company's on-going Asset Quality
Plan review. At September 30, 1995, 36%, or $4,738,000 of the impaired loans
were on a nonaccrual basis. The average recorded investment in impaired loans
for the quarter and nine months ended September 30, 1995, was $6,573,000 and
$9,795,000, respectively. The Company uses the cash basis method of income
recognition for recording interest income on impaired loans, which are
nonperforming.
Other real estate acquired through foreclosure decreased 60.7% from $5,222,000
at December 31, 1994 to $2,054,000 at September 30, 1995. During the first nine
months, the Bank sold $5,308,000 which was offset by foreclosures on $3,215,000
of other real estate.
The Bank has three loans totaling $609,000 which are accounted for as "troubled
debt restructurings" as defined in Statement of Financial Accounting Standards
Number 15. The amount of interest income which has not been recognized with
respect to these loans is not material to the consolidated financial statements.
13
<PAGE> 15
There are no loans made by the Bank to directors, executive officers or any
associate of such persons exceeding $60,000 for the nine-month period ended
September 30, 1995.
NOTE 5
- --------------------------------------------------------------------------------
INCOME TAXES
The Company and the Bank file consolidated federal income tax returns. Because
of the structure of the transaction described in Note 2 to the consolidated
financial statements, current regulations of the Internal Revenue Service would
prohibit the Company from continuing to file a consolidated income tax return
with the Bank for the period after August 22, 1995. However, the regulations
allow the Commissioner of the Internal Revenue Service to grant waivers of this,
if the circumstances warrant.
The Company and the Bank are considering applying to the Commissioner for such a
waiver, which, if granted, would allow their continued consolidation for federal
income tax purposes until the Stock Purchase Agreement is approved by the
shareholders. Thereafter, if First Banks continues to hold at least 80% of the
voting stock of the Company, both the Company and the Bank could be included in
the consolidated federal income tax return of First Banks.
NOTE 6
- --------------------------------------------------------------------------------
REGULATORY AGREEMENTS
For each of the three years ended December 31, 1994 as well as the nine months
ended September 30, 1995, the Company and the Bank have incurred substantial
losses from operations. These losses were associated primarily with the emphasis
which the Bank had placed on real estate based lending and the deterioration of
the California economy during that period, particularly as it related to the
real estate sector. Because of the magnitude of problem assets which arose and
the reduction of the Bank's capital due to the losses, the Company has been
operating under the terms of a Memorandum of Understanding with the Federal
Reserve Bank of San Francisco (the "MOU"), and the Bank has been operating under
the terms of a Cease and Desist Order issued by the Federal Deposit Insurance
Corporation, a Final Order issued by the State Banking Department and several
Capital Impairment Orders (collectively the "Orders"). The MOU and the Orders
have placed significant restrictions on the Company and the Bank including
restrictions on the payment of dividends, requirements of specified capital
levels and reduction of classified assets.
The Company and the Bank have entered into a Stock Purchase Agreement with First
Banks and James F. Dierberg as outlined in Note 2, which provides for a
substantial recapitalization of the Company and the Bank upon the approval of
the stockholders and, if the stockholders fail to approve the Stock Purchase
Agreement, a recapitalization of only the Bank. See REGULATORY AGREEMENTS. In
addition, the Company is considering an offering of the Company's common stock
to existing stockholders and an exchange offer for dividends owed to certain
stockholders. However, the Company has continued to incur losses from operations
through September 30, 1995. Consequently, there can be no assurance that (1) the
Stock Purchase Agreement will be approved by the Company's stockholders, (2) the
Offering will be conducted, or if conducted that it will be successful, (3) the
Company will not incur substantial additional losses in the liquidation of its
portfolio of problem assets, (4) continued losses will not adversely effect the
Company's ability to comply with the requirement of the MOU and the Orders, or
(5) because of any of the preceding, the Company and the Bank may not be
required to raise additional capital or have additional regulatory agreements
imposed upon them in the future.
NOTE 7
- --------------------------------------------------------------------------------
TRANSACTIONS WITH FIRST BANKS
In October, 1995, the Board of Directors of the Bank approved a management
services agreement with First Banks and a cost sharing agreement with First Bank
& Trust, Santa Ana, California, a wholly owned subsidiary of First Banks. The
management fee agreement provides that the Bank will compensate First Banks on
an hourly basis for its use of personnel for various functions including
internal auditing, loan review, income tax preparation and assistance,
accounting and other
14
<PAGE> 16
management and administrative services. Hourly rates for such services compare
favorably with those of similar services from unrelated sources, as well as the
internal costs of the Bank personnel which were used previously. It is estimated
that the aggregate cost for such services will be more economical than those
previously incurred separately by the Bank.
The cost sharing agreement provides a structure for the Bank and First Bank &
Trust to share the cost of certain personnel and services which will be used by
both banks. This will include the salaries and benefits of certain loan and
administrative personnel. Expenses associated with loan origination personnel
will be allocated based on the relative loan volume between the banks. Costs of
most other personnel will be allocated on an hourly basis. Because this involves
distributing essentially fixed costs over a larger asset base, it allows each
bank to receive the benefit of personnel and services at a reduced cost.
It is anticipated that the Bank will also enter into a data processing agreement
with FirstServ, Inc., a wholly owned data processing subsidiary of First Banks.
Under this agreement, FirstServ, Inc. will provide data processing and item
processing to the Bank beginning in December, 1995. The fees for such services
will be substantially less than the Bank is incurring in connection with its
current data processing or than it would incur with non-affiliated vendors.
The management services agreement, cost sharing agreement and data processing
agreement are subject to the review and approval of the Bank's regulatory
authorities. As of November 15, 1995, no fees had been charged to the Bank under
any of these agreements. See REGULATORY AGREEMENTS.
In addition, the Bank may purchase certain services and supplies from or through
First Banks or one of its subsidiaries. This would include insurance policies,
office supplies and other commonly used banking products which can be acquired
more economically than had previously been possible for the Bank separately.
These items are purchased on a cost pass-through basis and the amount of such
purchases is not expected to be material to the Company's consolidated financial
position or results of operations.
15
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion relates to the consolidated results of operations of
the Company and the Bank for the three and nine month periods ended September
30, 1995 and should be read in conjunction with the Consolidated Financial
Statements, and accompanying notes included in Part I, Item 1.
GENERAL
The Company is a registered bank holding company incorporated in Delaware and
headquartered in Sacramento, California. Through the Bank, the Company operates
seven banking offices in Northern California.
As a result of substantial losses which the Company has incurred for each of the
three years ended December 31, 1994 and the nine months ended September 30,
1995, the Company and the Bank have been operating under the terms of an MOU and
certain regulatory Orders which have placed significant restrictions on their
operations, including restrictions on the payment of dividends, requirements for
specified capital levels and reductions of classified assets. The Company and
the Bank have not yet been able to achieve full compliance with the requirements
of the MOU and the Orders, particularly relative to earnings and the level of
capital. See REGULATORY AGREEMENTS.
In response to the MOU and the Orders, and recognizing its continuing losses and
declining capital during the nine months ended September 30, 1995, the Company
and the Bank have pursued a strategy to: (1) reduce total assets; (2) reduce
operating expenses and staffing levels; (3) reduce nonperforming assets while
increasing the reserve coverage of nonperforming assets; (4) reduce the
portfolio of real estate construction lending; (5) eliminate volatile deposits
and close non strategic branch offices; and (6) maintain high levels of
liquidity to facilitate asset and deposit dispositions. The effects of the
various components of this strategy are apparent throughout the Consolidated
Financial Statements.
During the first nine months of 1995, the Company reduced its assets 28% to
$172,923,000 and its deposits 28% to $167,239,000 at September 30, 1995. These
reductions were accomplished in part by the sale of the Bank's San Diego Branch
office in January, 1995 and the closure of the Santa Rosa branch in April of
1995. The liquidity necessary to dispose of these two branches was partially
provided by the Company's reduction in its commercial and real estate loan
portfolio. For the nine months ended September 30, 1995, the Company's
commercial loan portfolio decreased by 47% to $37,075,000 and the real estate
loan portfolio decreased by 25% to $41,380,000. For the three months ended
September 30, 1995, the Company continued to sustain losses from operations of
$(1,021,000), further reducing its capital to $(1,435,000), also resulting in
the Company's Tier 1 capital leverage ratio decreasing to (0.83)%. On August
23, 1995, the Bank was infused with an additional $3,500,000 in capital by
First Banks, Inc., thereby increasing the Bank's Tier 1 capital leverage ratio
to 2.41%. The Company and the Bank continue to be considered "troubled" for all
regulatory purposes as of October 31, 1995 and are deemed "critically
undercapitalized" and "undercapitalized," respectively, under the prompt
corrective action provisions of FDICIA. See CAPITAL ADEQUACY REQUIREMENTS. As of
October 31, 1995, the Bank's Tier 1 capital ratio reached 3.19%, as a result of
the purchase of a $1.5 million Investment Debenture by First Banks and by the
Company's contribution of the $1.5 million to the Bank.
LENDING AND CREDIT MANAGEMENT
Interest and fees earned on the loan portfolio is the primary source of income
of the Company. This income was 68.6% and 73.2% of total interest income for the
three and nine-month periods ended September 30, 1995, respectively, compared to
82.7% and 84.4% for the same periods in 1994. The reduction in income from loans
reflects the overall
16
<PAGE> 18
decrease in the amount of loans outstanding, particularly in the commercial and
real estate construction portfolios. Total loans outstanding were $156,468,000
at September 30, 1994, compared with $82,089,000 at September 30, 1995.
This reduction in loan income is critical to the profitability of the Bank.
While loans carry with them inherent credit risks, this can be controlled by
effective loan underwriting and loan approval procedures, a strong credit
administration and risk management system and periodic independent loan reviews.
At the same time, loans typically have interest rates and fees which are
substantially higher than alternative earning assets, such as investment
securities and Federal funds sold. For the three and nine-month periods ended
September 30, 1995, the yield on the Bank's loan portfolio was 9.94% and 9.57%,
respectively, compared to 5.91% and 5.84%, respectively, on its investment
portfolio. Consequently, the shifting of funds out of the loan portfolio and
into lower-earning assets has been a significant factor in the reduction of its
net interest margin.
As previously discussed, the Company's strategy to address the problems created
by its asset quality included the reduction of real estate construction loans
outstanding as well as the overall reduction of loans which were classified.
Because of this, the focus of the lending staff has been on the collection,
strengthening and restructuring of loans considered problems, rather than on the
origination of new loans to replace them. This was further compounded in recent
months by the resignation of a majority of the Bank's loan officers.
With a substantial recapitalization plan in place, and the continuing reduction
in the level of problem assets, management of the Bank has initiated a plan for
the renewal of business development efforts in its markets. Critical to those
efforts is the restaffing of the lending organization, which the Bank is in the
process of accomplishing.
Management of the Bank believes that the return of the Bank to satisfactory
condition requires: (1) the replenishment of the depleted capital base; (2) the
rapid reduction in the portfolio of problem assets to a more acceptable level;
(3) relief from all or most of the existing regulatory Orders; and (4) the
rebuilding of the Bank's loan portfolio by developing new, high quality
business. Consequently, these steps to regenerate a quality loan portfolio are
an integral part of this process.
SUMMARY OF OPERATIONS
The net loss for the quarter ended September 30, 1995, was $(1,021,000) compared
to net loss of $(2,704,000) for the quarter ended September 30, 1994. Net loss
per share was $(0.22) for the third quarter in 1995, compared to net loss per
share of $(0.58) for the third quarter in 1994. The Company's net loss for the
nine months ended September 30, 1995, was $(6,301,000), compared to a net loss
of $(14,178,000) for the same period last year. Net loss per share was $(1.35)
for the nine months ended September 30, 1995 compared to $(3.03) for the same
period in 1994.
The net loss for the quarter ended September 30, 1995 was primarily due to the
reduction in interest on loans resulting from the decrease in the amount of
loans outstanding, the writedown and other expenses associated with Other Real
Estate ("ORE") properties of $400,000 and the write-off of deferred costs of
$288,000 associated with portions of the Company's recapitalization plan, which
subsequently were revised.
NET INTEREST INCOME
Net interest income is the difference between interest and loan fees earned by
the Company on its earning assets and the interest expense paid on its
interest-bearing deposits and other borrowed funds. Net interest income,
expressed as a percentage of average total earning assets, is referred to as net
interest margin.
The Bank's prime rate averaged 8.75% for the quarter, compared to 7.5% for the
same quarter last year. Yield on earning assets increased to 8.28% compared to
7.91% for the same period past year. However, rates paid on interest-bearing
liabilities increased to 4.45% for the third quarter, compared to 3.30% for the
third quarter in 1994. As a result, the Bank's net interest margin was 4.51%
compared to 5.27% for the same period last year. In addition to this compression
17
<PAGE> 19
between the interest rates earned on assets and paid on liabilities, the
reduction which was occurring in the loan portfolio led to a shifting of funds
from loans, which typically carry higher interest rates to investments and
Federal Funds sold, which have lower interest rates. Total loans were 49.09% of
total deposits as of September 30, 1995, compared with 58.07% as of September
30, 1994.
Net interest income for the quarter ended September 30, 1995, was $1,721,000
compared to $3,107,000, for the same quarter last year, representing a decrease
of $1,386,000 or 44.61%. The majority of this decline was due to the reduction
in the level of real estate construction, real estate amortizing and commercial
loans. For the quarter ended September 30, 1995, average real estate
construction loans were $8,636,000, compared to $28,100,000 for the same period
last year, a decrease of $19,464,000 or 69.27%. Average real estate amortizing
loans were $19,216,000, compared to $22,924,000 for the same period last year, a
decrease of $3,708,000 or 16.18%. Average commercial loans were $41,553,000,
compared to $96,579,000 for the same period last year, a decrease of $55,026,000
or 56.98%.
Included in real estate construction loans are loans for the construction of
nonowner-occupied real estate. These loans averaged $4,858,000 for the quarter
ended September 30, 1995, compared to $20,879,000 for the same period last year,
a decrease of $16,021,000 or 76.73%. At September 30, 1995, nonowner-occupied
real estate construction loans were $4,383,000 compared to $18,278,000 at
September 30, 1994, a reduction of $13,895,000 or 76.02%.
Offsetting the decrease in interest income created by the reduction in the
volume of loans was the decrease in nonaccrual loans. At September 30, 1995,
nonaccrual loans totaled $4,738,000, a decrease of $7,742,000 or 62.04% from the
same period last year and a decrease of $6,695,000 or 58.56% from December 31,
1994. Included in nonaccrual loans at September 30, 1995 are 11 real estate
secured loans totaling $3,101,000, of which $1,060,000 are single-family
residences, $989,000 are single-family lots, $277,000 are land and $775,000 are
commercial buildings.
At September 30, 1995, the Bank had ORE totaling $2,054,000 compared to
$11,073,000 for the same period last year and $5,222,000 at December 31, 1994.
Included in ORE are 17 properties, 3 of which consist of single-family
residences with a book value of $395,000 and 14 in the single-family lot
category with a book value of $1,659,000. The activity in ORE for the nine
months ended September 30, 1995 includes sales of 15 separate properties
totaling approximately $5,308,000, which resulted in a net gain of $202,000.
During the third quarter of this year, the Bank foreclosed on four properties
totaling $1,158,000 which were included in ORE as of September 30, 1995.
Net interest income for the nine months ended September 30, 1995 was $6,012,000
compared to $9,655,000 for the same period last year, a decrease of $3,643,000
or 37.73%, again primarily due to a reduction in the level of real estate and
commercial loans. For the nine months ended September 30, 1995, average real
estate construction loans were $12,219,000 compared to $33,149,000 for the same
period last year, a decrease of $20,930,000 or 63.14%. Average commercial loans
were $55,593,000 for the nine months ended September 30, 1995, compared to
$100,209,000 for the same period last year, a decrease of $44,616,000 or 44.52%.
The Bank's interest expense increased $406,000 or 9.59% for the nine months
ended September 30, 1995 in comparison to the same period last year. This
increase is primarily due to a change in the mix of deposits, as well as a
general increase in the rates paid on deposits. See "Liquidity" herein.
The Bank's prime rate averaged 8.86% for the nine months ended September 30,
1995, compared to 6.99% for the same period last year. Yield on earning assets
increased to 8.17%, compared to 7.46% for the same period last year. However,
rates paid on interest-bearing liabilities increased to 4.09% for the nine
months ended September 30, 1995, compared to 3.05% for the same period last
year. As a result, the Bank's net interest margin was 4.77% compared to 5.31%
for the same period last year.
18
<PAGE> 20
PROVISION FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that management of the
Bank considers to be adequate to provide for future losses that reasonably can
be anticipated. The allowance for loan losses is increased by charges to the
provision for loan losses and reduced by charge-offs net of recoveries on loans
previously charged off. Future losses include those that are known, those
reasonably anticipated and inherent losses which are probable but not
identifiable on a specific loan by loan basis. Although management utilizes its
best judgment in providing for possible loan losses and establishing the
allowance for loan losses, the allowance is an estimate which is inherently
uncertain and depends on the outcome of future events.
It is the policy of the Bank to establish the allowance for loan losses based
upon a systematic and documented approach which is consistently applied and
regularly monitored. The methodology employed is dynamic and addresses both
general and specific allowances for loan losses, encompassing internal factors
based upon the individual credit components of the Bank's loan portfolio and
external factors based upon economic, political and regulatory factors. Coupled
with the internal and external analysis of the Bank's risk assets, the Bank's
historical experience, current conditions, and anticipated future developments
are integrated into the process of evaluating and calculating the reserve. In
addition, the reserve is determined based upon the following factors: the
delinquency status of the loan portfolio, inherent risk by type of loan,
historical loss trends derived from experience, industry statistical data,
recommendations made by the Bank's regulatory authorities and the current
economic environment.
Incumbent in establishing the appropriate level of the allowance for loan losses
are two components which are vital to the overall credit administration process
of the Bank. They are the asset quality rating process and the internal loan
review process, which serve to establish an assessment of the general quality of
the Bank's loan portfolio. The asset quality rating process occurs on a
continuous basis. Credit review procedures are performed on a quarterly basis,
with annual and periodic reviews performed by the external auditors and the
regulatory authorities, respectively.
During the quarter ended September 30, 1995, the Bank provided $100,000 to its
allowance for loan losses as compared to $1,022,000 for the same period in 1994.
The provision for loan losses for the nine months ended September 30, 1995 was
$3,345,000 as compared to $9,057,000 for the same period in 1994. Of the
provisions for 1995, $3,245,000 or ninety-seven percent was made during the
quarter ended June 30, 1995. The 1995 second quarter provision was significantly
influenced by two events: (1) a provision of $2,166,000 to fully charge-off six
loans in the aggregate amount of $4,238,000, net of $2,072,000 previously
provided to the allowance for loan losses with respect to those loans and (2) an
increase in the allowance for loan losses required for certain substandard loans
of $891,000 resulting from an increase in the percentage applied to these loans
in calculating the allowance from 7.5% to 15%. Substantially all of the 1995
second quarter provisions to its allowance for loan losses resulted from
recommendations made by the Bank's regulatory examiners during the joint
FDIC/State Banking Department examination which commenced on May 22, 1995. Of
the six loans charged-off during the quarter, one loan charge-off, in the
principal amount of $3,010,000, net of $1,500,000 previously provided to the
allowance for loan losses for this loan, resulted from a bankruptcy proceeding
threatened by the borrower during the second quarter of 1995 and commenced
during the third quarter.
Net loan charge-offs for the quarter ended September 30, 1995 were $80,000,
compared to $940,000 for the same quarter last year. Net loan charge-offs for
the nine months ended September 30, 1995 were $5,917,000, compared to $8,079,000
for the same period last year. The ratio of net charge-offs to average total
loans was 0.36% for the third quarter of 1995 and 2.16% for the same period in
1994. The charge-off ratio for the nine months ended September 30, 1995 and 1994
was 7.26% and 5.92%, respectively. At September 30, 1995, the loan loss reserve
was $4,838,000, or 5.89% of total loans compared to $8,314,000 or 5.31% of total
loans at September 30, 1994. The loan loss reserve as a percentage of
nonperforming loans was 90.48%, at September 30, 1995, compared to 61.18% for
the same period last year. Additionally, the loan loss reserve as a percentage
of nonperforming assets, which includes ORE, was 65.37% at September 30, 1995,
compared to 42.77% for the same period last year.
19
<PAGE> 21
NON-INTEREST INCOME
Non-interest income consists primarily of service charges on deposit accounts
and other related fees, merchant discount income, other non-yield related fees
and charges, and other income. Total non-interest income decreased $340,000 or
55.11% for the quarter ended September 30, 1995, compared to the same period
last year. Service charges on deposit accounts and other related fees decreased
$134,000 primarily due to a decrease in deposit accounts. Merchant discount
income decreased $5,000 over the same quarter last year due to a decrease in
volume of merchant customer activity. VISA card and personal lines of credit
annual fee income decreased $11,000 in comparison to same quarter last year
because of a decrease in personal lines of credit loans outstanding and due to
the termination of the Bank's in-house VISA credit card program during the
second quarter of 1995. Mortgage fee income decreased $3,000 in comparison to
the same period last year due to the closing of the mortgage loan division
effective April, 1994.
Included in other non-interest income for the quarter ended September 30, 1995
are net gains on sales of ORE totaling $33,000. Included in this category for
the quarter ended September 30, 1994, are net gains on sales of ORE totaling
$24,000 and a partial settlement of a lawsuit in favor of the Company of
$198,000.
Non-interest income was $1,131,000 for the nine-months ended September 30, 1995,
compared to $1,711,000 for the same period last year, a decrease of $580,000 or
33.90%. Service charges on deposit accounts decreased $356,000 due to a decrease
in the number of deposit accounts. Merchant discount income decreased $8,000 due
to an decrease in volume of merchant customer activity. VISA card and personal
lines of credit annual fee income decreased $27,000, and mortgage fee income
decreased $65,000.
Included in other non-interest income for the nine-months ended September 30,
1995 are net gains on sales of ORE totaling $202,000 and recovery of collection
expenses on a charged-off loan of $40,000. Included in other non-interest income
for the nine-months ended September 30, 1994 are net gains on sales of ORE
totaling $171,000 and a partial settlement of a lawsuit for $230,000.
NON-INTEREST EXPENSE
The following table summarizes the significant components of non-interest
expense for the quarters ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DOLLAR PERCENTAGE
(Dollar amounts in thousands) 1995 1994 CHANGE CHANGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALARIES AND RELATED BENEFITS $ 984 $ 1,545 $ (561) (36.31)%
OCCUPANCY 305 389 (84) (21.59)%
EQUIPMENT 160 193 (33) (17.10)%
OTHER 1,470 3,279 (1,809) (55.17)%
------- ------- -------
TOTAL $ 2,919 $ 5,406 $(2,487) (46.00)%
======= ======= =======
</TABLE>
Other non-interest expense was $1,470,000 for the quarter ended September 30,
1995, compared to $3,279,000 for the quarter ended September 30, 1994, a
decrease of $1,809,000 or 55.17%. This decrease is primarily attributable to a
decrease in ORE write downs and other ORE expenses, reflecting a decrease in ORE
from $11,073,000 at September 30, 1994 to $2,054,000 at September 30, 1995, a
reduction of $9,019,000 or 81.45%. ORE related expenses for the quarter ended
September 30, 1995 consisted of write downs of four properties totaling $145,000
and expenses of $255,000 to acquire, maintain, and complete residential home and
lot properties for the quarter ended September 30, 1995, compared to a write
down of two properties totaling $788,000 and expenses of $358,000 for the
quarter ended September 30, 1994.
20
<PAGE> 22
In July of 1994, the Company charged-off $992,000 of unamortized deferred costs
associated with the 1988 acquisition of the Citizens Banks of Roseville. As a
result of this write-off, no acquisition amortization expense was required for
the quarter ended September 30, 1995, whereas $1,001,000 was recorded for the
same period last year.
Effective September 30, 1994, the Bank discontinued third party vendor payments
for all title and escrow deposit accounts. As a result, there were no services
provided to title company customers and no title company expense for the third
quarter ended September 30, 1995, compared to $164,000 for the same period last
year. In addition, there were decreases in insurance expense, FDIC insurance,
stationery and supplies, courier expense, telephone expense and operating losses
for the quarter ended September 30, 1995 when compared to the same quarter of
the prior year.
A substantial portion of the decrease in these expenses resulted from the sale
of the Bank's San Diego office and closure of its Santa Rosa branch as well as
the Company's continuing efforts to reduce its operating expenses.
Offsetting these decreases in other non-interest expense for the third quarter
ended September 30, 1995, were legal expenses of $86,000, management consulting
expenses of $123,000, certified public accounting expenses of $63,000, and
miscellaneous expenses of $16,000 which related to the write-off of deferred
costs in connection with certain portions of the recapitalization of the Company
and the Bank, which were subsequently revised. An additional increase of $61,000
in legal expenses resulted from general corporate legal matters and legal costs
associated with the reduction and resolution of problem assets.
Salaries and related benefits decreased $561,000 or 36.31%. This decrease is
primarily due to a reduction in staff. At September 30, 1995, the Bank has
reduced the level of its full-time equivalent employees to 97 from 155 at
September 30, 1994. Additional staff reductions were implemented effective
October 13, 1995. Anticipated salary savings from this reduction are
approximately $47,000 per month. The Bank anticipates further staff reductions
upon completion of a scheduled computer conversion in early December which will
result in salary savings of approximately $34,000 per month.
Occupancy and equipment expense was $465,000 for the quarter ended September 30,
1995, compared to $582,000 for the same period last year, a decrease of $117,000
or 20.1%. This decrease is primarily due to the selling of the San Diego branch
office on January 21, 1995 and the closure of the Santa Rosa branch on April 14,
1995. Additionally, at the end of the third quarter of 1995, the Bank relocated
its head office which will result in a monthly reduction in rent expense of
approximately $24,000.
The following table summarizes the significant components of non-interest
expense for the nine months ended September 30, 1995, and 1994:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DOLLAR PERCENTAGE
(Dollar amounts in thousands) 1995 1994 CHANGE CHANGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALARIES AND RELATED BENEFITS $ 3,196 $ 5,145 $(1,949) (37.88)%
OCCUPANCY 1,318 1,089 229 21.03 %
EQUIPMENT 483 764 (281) (36.78)%
OTHER 5,100 7,563 (2,463) (32.57)%
------- ------- -------
TOTAL $10,097 $14,561 $(4,464) (30.66)%
======= ======= =======
</TABLE>
Other non-interest expense was $5,100,000 for the nine months ended September
30, 1995, compared to $7,563,000 for the same period last year, a decrease of
$2,463,000 or 32.57%. This decrease is primarily attributable to ORE write downs
and other expenses of $2,410,000 for the nine months ended September 30, 1995
compared to $3,146,000 for the same period last year, a decrease of $736,000.
ORE related expenses for the first nine months of 1995 consisted of write
21
<PAGE> 23
downs on 17 properties totaling $1,273,000 and expenses of $1,137,000 to
acquire, maintain, complete and to increase the contingency reserve on
residential home and lot properties. For the nine months ended September 30,
1994, the Bank incurred write downs on ten properties totaling $2,434,000 and
expenses of $712,000.
There was no acquisition amortization expense related to the acquisition of the
Citizens Bank of Roseville required for the nine months ended September 30,
1995, whereas $1,047,000 was recorded for the same period last year.
Other decreases in expenses include a reduction in the cost of services provided
to title company customers of $672,000, FDIC insurance of $131,000, telephone
expense of $58,000, stationary and supplies of $82,000, travel and business
development $65,000, directors fees of $57,000, courier expense of $59,000
and operating losses of $70,000. The operating loss for the nine months ended
September 30, 1994 included a portion of the loss deductible under the Bank's
Financial Institution Bond for a defalcation perpetrated by a former employee of
the Bank.
Offsetting these decreases in other non-interest expense for the nine months
ended September 30, 1995, were increases in legal expense of $341,000 primarily
relating to the reduction and resolution of problem assets and the write-off of
deferred costs in connection with the recapitalization of the Company and the
Bank. There were also increases in management consulting expense of $103,000 and
certified public accounting expense of $42,000.
Salaries and related benefits decreased $1,949,000 or 37.88%. This decrease is
primarily due to a reduction in staff and the sale and closure of branch
offices, as noted on the previous page.
Occupancy and equipment expense was $1,801,000 for the nine months ended
September 30, 1995, compared to $1,853,000 for the same period last year, a
decrease $52,000 or 2.81%. During the second quarter of 1995, the Bank expensed
the unamortized balance of leasehold improvements and furniture and equipment
relating to one of the Bank's discontinued branch offices of $158,000. The Bank
also recorded the remaining rent expense of $182,000 in connection with this
discontinued branch, and a nonrecurring rent expense of $40,000 relating to
common area maintenance expense on the San Diego branch office. Offsetting these
increases to occupancy and equipment were decreases of $182,000 in depreciation
expense relating to data processing equipment which became fully depreciated in
1994 and the ongoing costs that were associated with the San Diego and Santa
Rosa branch offices.
PROVISION FOR INCOME TAXES
Due to the loss reported for the nine-month period ended September 30, 1995, and
the substantial losses reported for the year ended December 31, 1994, the
Company concluded that it no longer met the realization standards for its income
tax assets as embodied in Statement of Financial Accounting Standards No. 109,
and recorded the losses for the quarter and nine-month period ended September
30, 1995 on a pre-tax benefit basis. California State Franchise tax expense of
$2,000 was recorded for the nine-month period ended September 30, 1995. This
compares to a provision for income taxes of $0 and $1,926,000 for the quarter
and nine-month period ended September 30, 1994, respectively.
LIQUIDITY
Liquidity refers to the Company's ability to maintain a cash flow adequate to
fund both on and off-balance sheet sources (assets) and meet obligations
(liabilities) on a timely and cost-effective basis. Potential significant
liquidity requirements include funding of commitments to loan customers and
withdrawals from non-interest-bearing demand deposits, as well as meeting the
funding requirements created by the Company's decisions to reduce title and
escrow company deposits, reduce brokered and other non-core deposits and sell or
close two branch offices.
The Company's liquidity ratio is defined as: (1) cash and due from banks net of
reserve requirements, Federal funds sold, securities purchased under resale
agreements, interest-bearing deposits with other financial institutions and
marketable securities, less amounts pledged to secure deposits and for other
purposes, divided by (2) total deposits, less deposits secured by marketable
securities, and short-term borrowings. Using this definition at September 30,
1995, the Company's
22
<PAGE> 24
liquidity ratio was 51.54%, compared to 40.36% at September 30, 1994. At
September 30, 1995, the loan-to-deposit ratio was 49.09%, which compares to
58.07% at September 30, 1994.
The following table highlights the average deposit structure as of September 30,
1995, and September 30, 1994:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DOLLAR PERCENTAGE
(Dollar amounts in thousands) 1995 1994 CHANGE CHANGE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEMAND (EXCLUDING TITLE AND ESCROW ACCOUNTS) $ 30,968 $ 54,455 $(23,487) (43.13)%
CORE TITLE AND ESCROW DEMAND ACCOUNTS (1) 1,062 17,000 (15,938) (93.75)
INTEREST BEARING TRANSACTION ACCOUNTS 43,787 77,302 (33,515) (43.36)
SAVINGS ACCOUNTS 17,973 24,091 (6,118) (25.40)
TIME ACCOUNTS, LESS THAN $100,000 57,052 44,124 12,928 29.30
-------- -------- --------
TOTAL CORE DEPOSIT ACCOUNTS 150,842 216,972 (66,130) (30.48)
EXCESS TITLE AND ESCROW DEMAND ACCOUNTS (1) -- 3,905 (3,905) (100.00)
PUBLIC TIME ACCOUNTS -- 339 (339) (100.00)
TIME ACCOUNTS, MORE THAN $100,000 17,953 37,401 (19,448) (52.00)
-------- -------- --------
TOTAL DEPOSIT ACCOUNTS $168,795 $258,617 $(89,822) (34.73)%
======== ======== ========
</TABLE>
(1) In accordance with a recommendation of the FDIC, title and escrow company
deposits in excess of the Bank's historical minimum level of $17,000,000
were considered volatile and were excluded from core deposits. These
excess title and escrow company deposits were invested in liquid assets
with one-day maturities in order to assist in managing the Bank's
liquidity.
During the second quarter of 1994, the Bank began a program to reduce title and
escrow company deposit balances in order to reduce its dependency on volatile
liabilities and the related non-interest expenses. Effective September 30, 1994,
the Bank discontinued third party vendor payments for all title and escrow
deposit accounts. Title and escrow company deposits at September 30, 1995 were
$1,148,000 compared to $21,542,000 at September 30, 1994.
The decrease in total deposit accounts was primarily due to the reduction in the
asset size of the Bank to compensate for the decline in the Company's capital.
As part of this reduction, the Company sold the San Diego branch on January 20,
1995, and closed the Santa Rosa branch on April 14, 1995. Included in the third
quarterly averages for 1994 for these two branches were $6,771,000 in demand
accounts; $13,567,000 in core title and escrow company accounts; $12,901,000 in
interest-bearing transaction accounts; $2,493,000 in savings; $5,486,000 in time
accounts less than $100,000; and $2,702,000 in time accounts more than $100,000.
The additional decreases in all deposit categories excluding time accounts less
than $100,000, was due to a decision to allow deposits to decrease in order to
control the interest rates paid on deposits.
The increase in time accounts less than $100,000 is due to a bank-wide calling
program which was implemented in mid-February 1995 and which resulted in the
origination of approximately $12,000,000 in such new time accounts at a rate of
7% with a term of one year. See "Net Interest Income."
The volatile liability dependency ratio is defined as time accounts greater than
$100,000, Federal funds purchased, other short-term borrowings and excess title
and escrow company deposits less short-term investments, divided by total
earning assets less short-term investments. A positive ratio indicates the
extent to which the Bank is funding long-term assets with short-term volatile
deposits. At September 30, 1995, the Bank had a negative volatile liability
dependency ratio of (48.42%) compared to (12.58)% at September 30, 1994.
23
<PAGE> 25
To augment possible short-term liquidity needs, the Bank has a secured
borrowing arrangement with the Federal Reserve Bank of San Francisco. At
September 30, 1995, the Bank had investment securities in the aggregate
principal amount of $17,252,000 and loans totaling $20,140,000 eligible for
pledging as collateral. At September 30, 1995, the Bank could borrow up to
approximately 75.77% of the value of the pledged assets. This borrowing
arrangement was not utilized during the nine-month period ended September
30, 1995, nor during the year ended December 31, 1994.
Undisbursed loan commitments, which are a factor in managing liquidity,
totaled $23,164,000, compared to $41,504,000 at December 31, 1994, and
$50,240,000 at September 30, 1994. Listed below are these commitments by
loan category as of September 30, 1995:
- Commitments of $12,634,000 are associated with commercial loans,
substantially all of which are contingent upon customers maintaining
specific credit standards. This represents a 58.08% reduction from the
$30,138,000 at September 30, 1994.
- There were no commitments associated with speculative real
construction loans with short-term maturities at September 30, 1995,
compared to commitments of $2,644,000 at September 30, 1994.
- Commitments of $776,000 are associated with owner/builder construction
loans. This represents a 71.63% reduction from the $2,735,000 at
September 30, 1994.
- Commitments of $9,754,000 are associated with consumer loan products
consisting of equity lines and personal lines of credit. This
represents a 33.75% reduction from the $14,723,000 at September 30,
1994.
These present commitments are expected to be funded through existing
liquidity and the repayment of existing loans. Management believes the Bank
presently has sufficient funding sources from which to meet its funding
requirements for outstanding loan commitments.
CAPITAL ADEQUACY REQUIREMENTS
The Company is subject to the Federal Reserve Board's capital guidelines for
bank holding companies and the Bank is subject to the FDIC's regulations
governing capital adequacy for nonmember banks. The Federal banking agencies
have proposed regulations which would impose additional capital requirements
on banks based on the interest rate risk inherent in a bank's portfolio.
The Federal Reserve Board has established risk-based and leverage capital
guidelines for bank holding companies which are similar to the FDIC's
capital adequacy regulations for nonmember banks. The Federal Reserve Board
guidelines apply on a consolidated basis to bank holding companies with
consolidated assets of $150 million or more. In addition, the Bank is
subject to specific capital requirements imposed by the FDIC and State
Banking Department. See REGULATORY AGREEMENTS.
The Federal Reserve Board capital guidelines for bank holding companies and
the FDIC's regulations for nonmember banks set total capital requirements
and define capital in terms of "core capital elements," or Tier 1 capital(1)
and
----------------------------
(1) Tier 1 capital is generally defined as the sum of the core capital
elements less goodwill and certain intangibles. The following items are defined
as core capital elements: (i) common stockholders equity; (ii) qualifying
noncumulative perpetual preferred stock and related surplus; and (iii) minority
interests in the equity accounts of consolidated subsidiaries.
24
<PAGE> 26
"supplemental capital elements," or Tier 2 capital(2). The maximum amount of
supplemental capital elements which qualify as Tier 2 capital is limited to
one-hundred percent (100%) of Tier 1 capital, net of goodwill.
Both bank holding companies and nonmember banks are required to maintain a
minimum ratio of qualifying total capital to risk-weighted assets of eight
percent (8%), at least one-half of which must be in the form of Tier 1
capital. Risk-based capital ratios are calculated with reference to
risk-weighted assets, including both on and off-balance sheet exposures,
which are multiplied by certain risk weights assigned by the Federal Reserve
Board to those assets.
PROMPT CORRECTIVE ACTION
In addition to the minimum regulatory capital requirements set forth above,
the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
created capital categories for the purpose of determining when supervisory
or other corrective action is appropriate. The five capital categories are
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized.
In order to be well capitalized, an institution must have a total risk-based
capital ratio of 10% or more, a Tier 1 risk-based capital ratio of 6% or
more, a leverage capital ratio of 5% or more, and not be subject to any
written agreement or order issued by the FDIC. An adequately capitalized
institution must have a total risk-based capital ratio of 8% or more, a Tier
1 risk-based capital ratio of 4% or more and a leverage ratio of 4% or more.
An undercapitalized institution has a total risk-based capital ratio of less
than 8%, or a Tier 1 risk-based capital ratio of less than 4% or a leverage
ratio of less than 4%. Significantly undercapitalized means a financial
institution with a total risk-based ratio of less than 6%, or a Tier 1
risk-based ratio of less than 3% or a leverage ratio of less than 3%. A
critically undercapitalized institution has a ratio of tangible equity to
total assets that is equal to or less than 2%. At September 30, 1995, the
Bank was classified as a significantly undercapitalized institution.
Set forth in the table below are the Company's and the Bank's risk-based
and leverage capital ratios as of September 30, 1995. Information provided
for the Company gives effect the approval of the Stock Purchase Agreement
by the Company's Stockholders as if such approval had occurred on September
30, 1995. Accordingly the following transactions are reflected therein: (1)
the exchange of 750,000 shares of nonvoting, noncumulation Bank preferred
stock held by First Banks for 15,000,000 shares of Company common stock,
and (2) the exchange of 116,666,666 shares of Bank common stock held by
First Banks for 35,000,000 shares of Company common stock.
-------------------------
(2) Supplementary capital elements include: (i) allowance for loan and lease
losses (which cannot exceed 1.25% of an institution's risk weighted assets);
(ii) perpetual preferred stock and related surplus not qualifying as core
capital; (iii) hybrid capital instruments, perpetual debt and mandatory
convertible debt instruments; and (iv) term subordinated debt and
intermediate-term preferred stock and related surplus.
25
<PAGE> 27
Risk-Based and Leverage Capital Ratios
as of September 30, 1995 (1)
<TABLE>
<CAPTION>
COMPANY BANK
- ---------------------------------------------------------------------------------------
(DOLLAR AMOUNTS IN THOUSANDS) AMOUNT RATIO AMOUNT RATIO
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TIER 1 RISK-BASED CAPITAL (2) $ (1,431) (1.40)% $ 4,163 4.09 %
TIER 1 CAPITAL MINIMUM REQUIREMENT 4,075 4.00 % 4,075 4.00 %
--------- ---- ---------- ----
EXCESS/(DEFICIENCY) $ (5,506) (5.40)% $ 88 0.09 %
========= ==== ========== ====
TOTAL RISK-BASED CAPITAL (3) $ (112) (0.11)% $ 5,481 5.38 %
TOTAL CAPITAL MINIMUM REQUIREMENT 8,150 8.00 % 8,150 8.00 %
--------- ---- ---------- ----
EXCESS/(DEFICIENCY) $ (8,262) (8.11)% $ (2,669) (2.62)%
========= ==== ========== ====
RISK-ADJUSTED ASSETS $ 101,879 $ 101,879
========= ==========
LEVERAGE CAPITAL RATIO (4) (0.83)% 2.41 %
==== ====
TOTAL AVERAGE ASSETS $ 173,001 $ 173,001
========= ==========
</TABLE>
(1) As a result of the purchase of a $1.5 Investment Debenture by First Banks
and the contribution of the funds to the Bank, the Bank's Tier 1 capital
ratio reached 3.19% at October 31, 1995.
(2) Includes common stockholders' equity.
(3) Includes common stockholders' equity and allowance for loan losses,
subject to certain limitations.
(4) Tier 1 capital divided by average assets for the period. Under the current
rules, a minimum leverage ratio of 3% is required for institutions which
have been determined to be in the highest of five categories used by
regulators to rate financial institutions. All other institutions,
including the Company and the Bank, are required to maintain leverage
ratios of at least 100 to 200 basis points above the 3% minimum.
Commencing December 9, 1992, insured institutions such as the Bank must,
among other things, maintain a leverage ratio of at least 4% or 5% to be
considered "adequately capitalized" or "well capitalized," respectively,
under the prompt corrective action provisions of the FDICIA.
Because of its capital position, as determined by the FDIC, the Bank is subject
to significant restrictions under Section 38 of the Federal Deposit Insurance
Act ("FDIA").
An institution which is undercapitalized, significantly undercapitalized or
critically undercapitalized becomes subject to the following mandatory
supervisory actions immediately upon notification of its capital category: (1)
restrictions on payment of capital distributions, such as dividends; (2)
restrictions on payment of management fees to any person having control of the
institution; (3) close monitoring by the FDIC of the condition of the
institution, compliance with capital restoration plans, restrictions, and
requirements imposed under Section 38, and periodic review of the institution's
efforts to restore its capital and comply with restrictions; (4) requirement
that the institution submit within the time allowed by the FDIC a capital
restoration plan, which must include (a) the steps the institution will take to
become adequately capitalized, (b) the levels of capital to be attained during
each year in which the plan will be in effect, (c) how the institution will
comply with restrictions or requirements imposed on its activities, (d) the
types and levels of activities in which the institution will engage, and (e)
such other information as the FDIC may require; (5) requirement that any company
which controls an undercapitalized institution must guarantee, in an amount
equal to 5% of the institution's total assets or the amount needed to bring the
institution into full capital compliance, that the institution will comply with
the capital restoration plan until the institution has been adequately
capitalized, on the average, for four consecutive quarters;
26
<PAGE> 28
(6) restrictions on growth of the institution's total assets so that its average
total assets during any calendar quarter do not exceed its average total assets
during the preceding calendar quarter unless (a) the FDIC has accepted the
institution's capital restoration plan, (b) any increase in total assets is
consistent with the capital restoration plan, and (c) the institution's ratio of
tangible equity to assets increases during the calendar quarter at a rate
sufficient to enable the institution to become adequately capitalized within a
reasonable time; and (7) limitations on the institution's ability to make any
acquisition, open any new branch offices or engage in any new line of business
unless the FDIC has accepted the institution's capital plan and has granted
prior approval.
In addition to the above, the FDIC may take any of the actions described below
for institutions which fail to submit and implement a capital restoration plan.
Significantly undercapitalized and undercapitalized institutions that fail to
submit and implement adequate capital restoration plans are subject to the
mandatory provisions set forth above and, in addition, will be required to do or
comply with one or more of the following: (1) sell enough additional capital,
including voting shares, to bring the institution to an adequately capitalized
level or, if one or more grounds exist for appointing a conservator or receiver
for the institution, be acquired by or combined with another insured depository
institution; (2) restrict transactions with affiliates; (3) restrict interest
rates paid on deposits to the prevailing rates in the region where the
institution is located as determined by the FDIC; (4) restrict asset growth or
reduce total assets more stringently than described above; (5) terminate, reduce
or alter any activity (including any activity conducted by a subsidiary of the
institution) determined by the FDIC to pose an excessive risk to the
institution; (6) hold a new election for the institution's board of directors;
(7) dismiss directors or senior officers and/or employ new officers, subject to
agency approval; (8) cease accepting deposits from correspondent depository
institutions, including renewals and rollovers of prior deposits; (9) divest or
liquidate any subsidiary that is in danger of becoming insolvent and poses a
significant risk to the institution or that is likely to cause significant
dissipation of the institution's assets or earnings; or (10) take any other
action that the FDIC determines to be appropriate.
Significantly undercapitalized institutions are also prohibited from paying any
bonus or raise to a senior executive officer without prior FDIC approval. No
such approval will be granted to an institution which is required but has failed
to submit an acceptable capital restoration plan. Further, the FDIC may impose
one or more of the restrictions applicable to critically undercapitalized
institutions set forth below.
In addition to all of the restrictions set forth above, a critically
undercapitalized institution must be placed in conservatorship or receivership
within 90 days of becoming critically undercapitalized, unless the FDIC
determines that other action would better achieve the purposes of the FDIA.
A determination of alternate action by the FDIC is effective for only 90 days,
after which period the FDIC must reexamine whether to appoint a conservator or
receiver for the Bank. Such determination must thereafter be renewed by the FDIC
at the end of each 90-day period. Notwithstanding the FDIC's periodic
redetermination of the effectiveness of the alternative actions it has ordered,
if the Bank is critically undercapitalized on average during the calendar
quarter beginning 270 days after the Bank became critically undercapitalized,
the FDIC is required by FDICIA to appoint a receiver for the Bank unless the
FDIC finds that: (a) the Bank has positive net worth; (b) the Bank has been in
substantial compliance with its Capital Plan, as approved by the FDIC; (c) the
Bank is profitable or has an upward trend in earnings which the FDIC projects is
sustainable; and (d) the Bank is reducing the ratio of non-performing loans to
total loans. In addition, both the FDIC and the Chairman of the Board of the
Bank must certify that the Bank is viable and not expected to fail.
A critically undercapitalized institution also is prohibited from taking a
number of actions without FDIC prior written approval, including entering into
any material transaction other than in the usual course of business, making
payments on subordinated debt, financing a highly leveraged transaction,
adopting charter or by-law amendments, materially changing accounting methods,
engaging in any covered transaction as defined in the Federal Reserve Act,
paying excessive compensation or bonuses, and paying interest on new or renewed
liabilities at a rate that would increase the institution's
27
<PAGE> 29
weighted average cost of funds to a level significantly exceeding the prevailing
rates of interest on insured deposits in the institution's normal market areas.
The FDIC, in its discretion, may restrict even further the activities of a
critically undercapitalized institution.
As of July 30, 1995, the Bank was notified that it was critically
undercapitalized and that the Bank would have been placed in receivership on
October 30, 1995, unless the Bank's Tier 1 capital ratio increased above 2% or a
determination was made that a different action was more appropriate. As
previously noted, as of October 31, 1995, the Bank's Tier 1 capital ratio was
approximately 3.19%. Thus, its classification has been upgraded to
"undercapitalized." If the Company's stockholders approve the Stock Purchase
Agreement, First Banks will purchase an additional $5 million convertible
Debenture, $4.75 million of which will be provided to the Bank as additional
capital. Giving effect to this as if the Stock Purchase Agreement were approved
and the transactions contemplated thereby consummated, as of October 31, 1995,
the Bank's Tier 1 capital ratio would be increased to approximately 5.98%
REGULATORY AGREEMENTS
FDIC AND STATE BANKING DEPARTMENT REGULATORY ORDERS
As a result of an examination of the Bank by the FDIC and the State Banking
Department ("SBD") which was concluded during the second quarter of 1993, the
Bank consented to enter into an amended Cease and Desist Order with the FDIC on
July 27, 1993 (the "FDIC Cease and Desist Order"). Similarly, the Bank consented
on July 6, 1993, to the entrance of a Final Order under Financial Code Section
1913 with the SBD, which was amended on March 30, 1995, (the 'SBD Final Order")
(collectively, the "Orders"). The Orders remain in effect.
During the second quarter of 1995, the FDIC and SBD conducted a joint
examination of the Bank which was commenced on May 22, 1995. All recommendations
from the examiners with respect to loan and other asset write-offs, including
recommended provisions to the Bank's loan loss reserves, were complied with as
of June 30, 1995.
Pursuant to the Orders, the Bank is required to: (a) maintain management
acceptable to the SBD and FDIC; (b) notify the SBD in writing prior to adding
any individual to its Board of Directors; (c) charge off assets classified loss
noted in the ROE of the Bank as of March 25, 1994; (d) reduce assets classified
substandard in accordance with a prescribed schedule; (e) reduce the amount of
assets listed for attention in the ROE within a certain time frame; (f) within
30 days, develop and adopt and thereafter implement a profit plan and
month-by-month budget; (g) within 30 days, adopt and thereafter implement a
strategic plan to return the bank to a profitable condition, in a form
acceptable to the SBD and FDIC; (h) not later than September 30, 1995, increase
tangible shareholders' equity to not less than 6.5% of tangible assets and
increase such ratio to 7.0% by December 31, 1995 and maintain such 7% ratio
during the life of the Orders; (i) make no distributions to any shareholder
without the prior written consent of the SBD; (j) immediately comply with all
laws and regulations and correct or eliminate within 30 days any apparent
violations noted in the ROE; and (k) establish a committee to assure compliance
with the SBD Amended Final Order. All of the items in the Orders have been
complied with timely, except as discussed herein.
With respect to acceptable management, as of June 1, 1994, James E. Culleton,
the Executive Vice President of the Company and Executive Vice President and
Chief Operating Officer of the Bank, was named as Interim President of the
Company and the Bank until a permanent President and Chief Executive Officer
could be employed. Applications have been approved by the SBD and FDIC for
Mr. Culleton to serve as the permanent President and Chief Operating Officer of
the Bank, and Donald W. Williams has been appointed Chief Executive Officer of
the Bank. An application also will be filed with the Reserve Bank for approval
of Mr. Williams to serve as President and Chief Executive Officer of the
Company. The requisite applications have been filed with the FDIC and the SBD
to obtain the necessary approvals for Terrance McCarthy to be appointed as
Senior Vice President and Chief Credit Officer of the Bank.
28
<PAGE> 30
Pursuant to the Orders, the Bank agreed to maintain adjusted Tier 1 capital
equal to or exceeding 6.5% of the Bank's total assets. Furthermore, the Bank is
required to maintain tangible shareholders' equity plus mandatorily convertible
subordinated debt equal to not less than 6.5% of total tangible assets, and a
minimum tangible shareholders' equity plus mandatorily convertible subordinated
debt of $12,300,000. The SBD Final Order requires the ratio of shareholders'
equity to tangible assets to increase to 7% at December 31, 1995.
In response to its capital deficiency, the Bank submitted to the FDIC on August
23, 1994 its Capital Restoration Plan (the "Capital Plan") which was amended on
November 22, 1994, and approved by the FDIC on January 30, 1995. One of the
components of the Capital Plan consists of a decrease in the Bank's asset size.
On January 21, 1995, the Bank consummated the sale of its San Diego branch
office to the Bank of Commerce, and on April 14, 1995, the Bank's Santa Rosa
branch office was closed. On August 31, 1995, the Company moved its corporate
headquarters to the branch office of the Bank located at 865 Howe Avenue,
Sacramento, California, thus decreasing overhead by $24,000 per month.
As a result of the losses occurring during the year ended December 31, 1994 and
for the nine-month period ended September 30, 1995, the Bank is not in
compliance with its mandatory capital ratios. As of September 30, 1995, the
Bank's adjusted Tier 1 capital ratio was 2.41%, and the Bank's tangible
shareholders' equity plus mandatorily convertible subordinated debt was 2.36% of
total tangible assets. At that date, the Bank's tangible shareholders' equity
was $4,162,717, which includes the conversion of a $2,400,000 mandatorily
convertible subordinated note and the contribution of $1,402,000 of capital from
the Company. As of October 31, 1995, the Bank's tangible shareholders' equity
was $5,436,000 and its Tier 1 capital ratio was approximately 3.19%.
The Bank received a letter dated July 25, 1995, as amended on August 9, 1995,
from the Superintendent of the SBD setting forth revised time frames for the
Bank to increase its capital levels. Under the terms of such letter, the Bank
must, (i) before August 25, 1995, increase its tangible shareholders' equity to
at least $5,160,000 and approximately 3% of the Bank's total tangible assets
and, (ii) on or before October 31, 1995, increase its tangible shareholders'
equity to at least $11,180,000 or approximately 6.5% of the Bank's total
tangible assets, including the increase called for by the First Installment. The
SBD decreased the October 31, 1995 6.5% requirement to 3.0% as a result of First
Banks' agreement to purchase a $1,500,000 Investment Debenture from the Company,
and the contribution of those funds to the Bank.
Another component of the Capital Plan is the raising of capital. In addition to
the $11.5 million recapitalization of the Company and the Bank by First Banks
(described above), the Company presently intends to conduct the Offering to
raise additional capital, which Offering shall not exceed $5.0 million pursuant
to the terms of the Stock Purchase Agreement. The Company also is considering
conducting a Dividend Exchange Offer for approximately an additional $1.0
million. In the event the Bank's Tier 1 capital ratio does not reach 7.0% at
December 31, 1995, the Stock Purchase Agreement provides that First Banks may
purchase shares of Company and/or Bank Common Stock sufficient to meet this
requirement. If First Banks chooses not to purchase such Company or Bank shares,
the Bank will consider other methods of raising capital, including the sale of
Bank assets, in order to reach the required capital requirements.
The Bank continues to be designated as a problem bank and is considered
"troubled" for all regulatory purposes. Accordingly, the Bank is required to
provide prior notice to the FDIC of the employment of any senior officer or
appointment of a director. Due to the Bank's current regulatory capital ratios,
the Bank is prohibited from accepting funds obtained directly or indirectly
through a deposit broker. In addition, the Bank cannot provide pass-through
deposit insurance to employee benefit plan deposits so long as it is ineligible
to accept brokered deposits.
Failure to comply with the terms of the Orders could result in various
regulatory actions against the Bank, including recapitalization, merger, and/or
acquisition of the Bank.
29
<PAGE> 31
STATE CAPITAL IMPAIRMENT ORDERS
The California Financial Code (the "Financial Code") requires the Superintendent
to order any bank whose contributed capital is impaired to correct such
impairment within 60 days of the date of the Order. Under Section 134(b) of the
Financial Code, the "contributed capital" of a bank, defined as all
shareholders' equity other than retained earnings, is deemed to be impaired
whenever such bank has deficit retained earnings in an amount exceeding 40% of
such contributed capital. The Bank received notices from the SBD dated August 3,
1994, November 3, 1994, February 17, March 13, May 15, 1995, and August 7, 1995
that its contributed capital is impaired (the "Capital Impairment Orders"). As
of September 30, 1995, the Bank had contributed capital of $24.23 million and
deficit-retained earnings of approximately $20.07 million, or approximately 83%
of contributed capital, within the meaning of Section 134(b) of the Financial
Code. Thus, under Section 134(b) of the Financial Code, the Bank's contributed
capital was impaired as of that date in the approximate amount of $10.38
million. The Bank has not complied with the Capital Impairment Orders.
Under Section 662 of the Financial Code, the Superintendent has the authority,
in his or her discretion, to take certain appropriate regulatory action with
respect to a bank having impaired contributed capital, including possible
seizure of such bank's assets. A bank that has deficit retained earnings may,
subject to the approval of its shareholders and of the Superintendent, readjust
its accounts in a quasi-reorganization, which may include eliminating its
deficit retained earnings, under Section 663 of the Financial Code. However, a
bank that is not able to effect such a quasi-reorganization or otherwise to
correct an impairment of its contributed capital within 60 days of an order to
do so from the Superintendent must levy and collect an assessment on its common
shares pursuant to Section 423 of the California Corporations Code.
The shareholders of the Bank (not the Company's stockholders) will receive any
notices of assessment issued by the Bank. THE BANK IS IN VIOLATION OF THIS
CALIFORNIA LAW REQUIRING IT TO ASSESS THE SHARES OF THE BANK IN ORDER TO CORRECT
THE IMPAIRMENT OF THE BANK'S CAPITAL. AS LONG AS THE BANK'S CONTRIBUTED CAPITAL
IS IMPAIRED AS DEFINED UNDER CALIFORNIA LAW, THE SUPERINTENDENT IS AUTHORIZED TO
TAKE POSSESSION OF THE PROPERTY AND BUSINESS OF THE BANK, TO CLOSE THE BANK OR
TO ORDER THE BANK TO COMPLY WITH THE LEGAL REQUIREMENT TO LEVY AN ASSESSMENT ON
THE OUTSTANDING SHARES OF BANK COMMON STOCK SUFFICIENT TO CORRECT THE
IMPAIRMENT. THE COMPANY, A STOCKHOLDER OF THE BANK, DOES NOT HAVE THE FUNDS TO
SATISFY SUCH AN ASSESSMENT.
The Bank's capital impairment may be corrected through earnings, by raising
additional capital or by a quasi-reorganization, subject to the approval of the
SBD. In a quasi-reorganization, the Bank's deficit retained earnings would be
reduced or eliminated by a corresponding reduction in the Bank's contributed
capital. As of September 30, 1995, the Bank would have been required to raise
$25,943,000 in new capital (inclusive of any proceeds from the offering) in
order to correct its impaired contributed capital (because the ratio of deficit
retained earnings to contributed capital may not exceed 40%, $2.50 of new
capital must be raised for every dollar of impairment).
It is the policy of the Superintendent not to grant a quasi-reorganization
unless a bank can establish that (a) it has adequate capital, (b) the problems
that created past losses and the impairment of capital have been corrected, and
(c) it is currently operating on a profitable basis and will continue to do so
in the future.
Management also believes that, because it is anticipated that the Bank would
have high leverage and risk-based capital ratios after First Banks' investment
in the Company and/or the Bank, it is unlikely that the Superintendent would
seek to take action solely on the basis of impaired capital under the Section
134 definition. There can be no assurance, however, that other circumstances,
such as insufficient liquidity, operating losses, or other issues, could not
arise that would provide incentives to the Superintendent to utilize the powers
granted by Section 134.
No assurance can be given that the Bank's capital condition will not deteriorate
further as a result of future operating losses prior to curing its capital
impairment. In addition, because a quasi-reorganization requires that the Bank
reduce
30
<PAGE> 32
its assets and liabilities to market value at the time of the reorganization,
the Bank's capital could be further reduced from its present level as a result
of such a reduction in the market value of the Bank's assets over its
liabilities. Finally, there can be no assurance that, following a correction of
the Bank's capital impairment (whether through earnings, an infusion of
sufficient capital or a quasi-reorganization), the Bank's capital position will
not continue to erode through future operating losses.
FEDERAL RESERVE BANK MEMORANDUM OF UNDERSTANDING
On October 17, 1994, the Company entered into a Memorandum of Understanding
("Memorandum") with the Federal Reserve Bank of San Francisco (the "Reserve
Bank"). Under the terms of the Memorandum, the Company may not declare or pay
any dividends without the prior written approval of the Reserve Bank and may not
take dividends from the Bank without providing prior written notice to the
Reserve Bank; the Company must submit to the Reserve Bank a written plan to
improve and maintain an adequate capital position at the Company and the Bank;
and the Company must take reasonable actions to employ a full-time president for
the Company and the Bank. Further, the Memorandum sets forth restrictions on
certain transactions between the Bank and the Company, directs the Company to
prepare and submit to the Reserve Bank certain policies and procedures and
financial information, and requires the Company to provide prior notice to the
Reserve Bank of any new, or the renewal or modification of any existing,
employment, service or severance contracts with any executive officer. Within 45
days of the end of each calendar quarter, the Company must submit to the Reserve
Bank a written progress report regarding the Company's compliance with the terms
of the Memorandum.
On August 23, 1994, the Company submitted to the Reserve Bank its Capital
Restoration Plan setting forth the Company's plans for improving and maintaining
an adequate capital position at the Company and the Bank. The Capital
Restoration Plan was updated on November 23, 1994.
1995 REGULATORY EXAMINATION
In connection with the joint examination of the Bank by the FDIC and the SBD
which commenced on May 22, 1995, the Bank was generally criticized by the
regulatory authorities for lack of a permanent Chief Executive Officer,
excessive loan losses, poor quality assets, large provisions for loan losses,
write-downs of other real estate, apparent violations of law, and inadequate
capital. Although the FDIC and the SBD believed the loan loss reserve was
underfunded as of May 22, 1995, the Bank, through its provision to loan loss
reserves for the second quarter of 1995 was in full compliance with all
recommended write-offs and write-downs, including an adequate loan loss
reserve as of June 30, 1995.
In addition, the FDIC has criticized the Bank for, in the FDIC's opinion, not
filing accurate Call Reports for December 1994 and March 1995. The SBD examiners
did not concur with the FDIC's opinion that these Call Reports required
restatement. The FDIC's criticism relates to two loans which were written-off by
the Bank during the second quarter of 1995, which the FDIC claims should have
been written off as of December 31, 1994. Following a review of these loans and
after consultation with the Company's independent public accountants, the Board
of Directors and management of the Bank do not agree that these loans should
have been written off at December 31, 1994, based upon all relevant information
available to them at December 31, 1994. Accordingly, the Company has determined
that it is not required to restate GAAP financial statements as filed in its
Annual Report on Form 10-K for the fiscal year 1994 nor its Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1995, even if the Company
restates its December 1994 and March 1995 FDIC Call Reports to prevent further
criticism by the FDIC.
COMPLIANCE WITH ORDERS AND MEMORANDUM
As of September 30, 1995, the Company and the Bank believe they are in
substantial compliance with the FDIC Cease and Desist Order and the SBD Final
Order except for reaching the 6.5% Tier 1 capital requirements of the Orders,
and, with respect to the FDIC's criticism concerning restating the Bank's
December 1994 and March 1995 Call Reports. In
31
<PAGE> 33
addition, based upon the contemplated approval by the Reserve Bank of Mr.
Williams as the Company's President and Chief Executive Officer, the Company
believes it will be in substantial compliance with the Memorandum.
Full compliance with the capital requirements of the Company's MOU, the 6.5%
Tier 1 capital requirements of the Orders, as well as compliance with the 7%
Tier 1 capital requirement of the SBD Final Order is anticipated following the
approval of the Company's Stock Purchase Agreement by the Company's stockholders
and the completion of First Bank's capital investments, as provided for therein,
and through a combination of the Company's proposed stockholder rights offering,
and the reduction of assets through the sale of additional Bank branch offices,
if necessary. The Bank, as yet, has not made a final decision whether to restate
its FDIC call reports for December 1994 and March 1995.
Methods for the Bank's compliance with the Capital Impairment Orders are
described above in "State Capital Impairment Orders".
32
<PAGE> 34
PART II: OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10(a) Additional Investment Agreement
dated October 31, 1995
----
10(b) Investment Debenture Agreement
dated October 31, 1995
----
10(c) Stock Pledge Agreement
dated October 31, 1995
----
10(d) Lease between Northrup-Howe Tower Group
and First Commercial Bank dated June 14, 1995
----
10(e) Severance Agreement and General Release
between Dennis F. Ceklovsky, First Commercial
Bancorp, Inc. and First Commercial Bank
----
10(f) Amendment No. 1 to Employment Agreement
by and between Anne H. Long, First Commercial
Bancorp, Inc. and First Commercial Bank
----
10(g) Management Services Agreement by and between
First Commercial Bank and First Banks, Inc.
----
10(h) Cost Sharing Agreement by and between First
Bank & Trust, First Commercial Bank and
First Commercial Bancorp, Inc.
27 Financial Data Schedule ----
Possible Other Items:
Item 5. Other Information
</TABLE>
CHANGES IN DIRECTORS AND MANAGEMENT
On October 24, 1995, the Board of Directors of First Commercial Bank elected
Donald W. Williams as Chief Executive Officer of First Commercial Bank.
On August 24, 1995, the Bank submitted an application to the FDIC and the State
Banking Department for approval of James E. Culleton, Interim President of the
Bank, as President and Director of First Commercial Bank. Both agencies have
responded with a notice of nondisapproval.
Mr. Dennis F. Ceklovsky, Executive Vice President and Chief Credit Officer has
resigned effective October 31, 1995. To replace Mr. Ceklovsky, the Board has
retained the services of Mr. Terrance McCarthy to become the Senior Vice
33
<PAGE> 35
President and Chief Credit Officer upon the receipt of the necessary regulatory
approvals. Mr. McCarthy is Senior Vice President and Chief Credit Officer of
First Bank & Trust, Santa Ana, California, a wholly-owned subsidiary of First
Banks. The requisite applications with respect to Mr. McCarthy have been
submitted to the FDIC and State Banking Department. Assisting Mr. McCarthy will
be Mr. Norman Boyer, who will be responsible for administration and disposition
of problem assets. Mr. McCarthy and Mr. Boyer have been working together in
similar positions at Queen City Bank, N.A., Long Beach, California for the last
twelve months.
Effective August 29, 1995, Manuel Barandas, Harry Curry and Earl Nichols
resigned as directors of First Commercial Bank and First Commercial Bancorp.
On August 29, 1995, the Board of Directors of First Commercial Bancorp, Inc. and
First Commercial Bank elected Michael P. Morris to serve as a member of the
Board of Directors of First Commercial Bancorp, Inc. and First Commercial Bank.
On September 26, 1995, the Board of Directors of the Bank elected Allen H.
Blake, James F. Dierberg and Donald W. Williams as Directors of the Bank.
On September 22, 1995, First Banks submitted an application to the Federal
Reserve Bank of St. Louis for approval of Allen H. Blake, James F. Dierberg and
Donald W. Williams as directors of First Commercial Bancorp, Inc. On October 23,
1995, the Federal Reserve Bank responded with a no objection letter.
No reports on Form 8-K were filed with the SEC during the quarter ended
September 30, 1995.
34
<PAGE> 36
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST COMMERCIAL BANCORP, INC.
Registrant
DATE: November 16, 1995 /s/ James E. Culleton
-----------------------------
JAMES E. CULLETON
Interim President
DATE: November 16, 1995 /s/ Anne Heck Long
-----------------------------
ANNE HECK LONG
(Principal Financial and Accounting Officer)
Executive Vice President and Chief Financial Officer
35
<PAGE> 37
<TABLE>
<CAPTION>
Exhibit Exhibit Description
No.
<S> <C>
Ex - 10(a) Additional Investment Agreement
dated October 31, 1995
Ex - 10(b) Investment Debenture Agreement
dated October 31, 1995
Ex - 10(c) Stock Pledge Agreement
dated October 31, 1995
Ex - 10(d) Lease between Northrup-Howe Tower Group
and First Commercial Bank dated June 14, 1995
Ex - 10(e) Severance Agreement and General Release
between Dennis F. Ceklovsky, First Commercial
Bancorp, Inc. and First Commercial Bank
Ex - 10(f) Amendment No. 1 to Employment Agreement
by and between Anne H. Long, First Commercial
Bancorp, Inc. and First Commercial Bank
Ex - 10(g) Management Services Agreement by and between
First Commercial Bank and First Banks, Inc.
Ex - 10(h) Cost Sharing Agreement by and between First
Bank & Trust, First Commercial Bank and
First Commercial Bancorp, Inc.
Ex - 27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 10(a)
ADDITIONAL INVESTMENT AGREEMENT
THIS ADDITIONAL INVESTMENT AGREEMENT (the "Agreement") is made and
entered into as of October __, 1995, by and between FIRST COMMERCIAL BANCORP,
INC., a Delaware corporation (the "Company"), FIRST COMMERCIAL BANK, a
California chartered banking corporation, and FIRST BANKS, INC., a Missouri
corporation ("First Banks").
W I T N E S S E T H
WHEREAS, the parties to this Agreement entered into an Amended and
Restated Stock Purchase Agreement dated August 7, 1995 (the "Stock Purchase
Agreement"), pursuant to which First Banks was given the option under certain
circumstances to make additional investments in the Company or the Bank for the
purpose of increasing the capital levels of the Bank;
WHEREAS, the Bank anticipates that it will not meet, on or before
October 31, 1995, the 6.5% tangible capital requirement of the Second Amended
Final Order of the California State Banking Department under California
Financial Code Section 1913 (the "State Order");
WHEREAS, the Bank has obtained the agreement of the California State
Banking Department ("SBD") to revise the required tangible capital level to 3.0%
as of October 31, 1995, based upon First Banks' intended infusion of capital;
WHEREAS, First Banks desires to make a capital infusion to the Bank
sufficient to increase the Bank's tangible capital requirement to 3.0% as of
October 31, 1995;
WHEREAS, the Stock Purchase Agreement provides that unless the Company
is conducting the Offering at the time of the additional capital contribution of
First Banks, such additional capital contribution shall be made by the purchase
of shares of Company Common Stock, the proceeds of which will be contributed by
the Company to the Bank;
WHEREAS, the parties hereto, with the concurrence of Mr. James F.
Dierberg, a signatory to the Stock Purchase Agreement, wish to amend and
supersede by this Agreement any contradictory provisions of the Stock Purchase
Agreement with respect to the additional capital contribution of First Banks to
the Company or the Bank contemplated hereby; and
WHEREAS, unless otherwise defined herein, the capitalized terms used in
this Agreement shall have those meanings assigned to them in the Stock Purchase
Agreement:
NOW, THEREFORE, for and in consideration of the promises contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of all of which is hereby acknowledged, the parties hereto agree as
follows:
1. On or before October 31, 1995, First Banks shall lend to the
Company an additional $1.5 million which is required to increase the Bank's
tangible capital ratio to 3.0% as of October 31, 1995 (the "Investment Amount").
- 1 -
<PAGE> 2
2. The Company hereby agrees to borrow from First Banks, pursuant
to the terms and conditions set forth in the debenture attached hereto as
Exhibit 2 (the "Investment Debenture"), the Investment Amount, and the Company
hereby agrees to execute such Investment Debenture. The Company hereby further
agrees to contribute to the Bank all of the proceeds of the Investment
Debenture.
3. Delivery of the Investment Amount and execution of the
Investment Debenture shall occur at the executive offices of the Bank no later
than 12:00 p.m. California time on October 31, 1995, but may occur on such
earlier date as may be agreed upon by the parties upon receipt of the Approvals
referred to below (the "Investment Closing Date").
4. Notwithstanding anything set forth in this Agreement, First
Banks' loan of the Investment Amount, the Company's issuance of the Investment
Debenture, the payment of any interest amount of the Investment Debenture in
cash and the conversion of the principal and any interest amounts of the
Investment Debenture into shares of Company Common Stock shall be subject,
respectively, to receipt of all necessary regulatory Approvals. Each party
hereto agrees to expeditiously file for and use its best efforts to obtain any
required Approval.
5. The terms of this Agreement are intended to supersede the
provisions of Section 1(b)(iii) of the Stock Purchase Agreement to the extent
Section 1(b)(iii) concerns a contribution of capital by First Banks to the
Company or the Bank to enable the Bank to meet the requirements of the State
Order by October 31, 1995. The provisions of Section 1(b)(iii) with respect to
a further capital contribution by First Banks to the Bank as of December 31,
1995 shall not be altered by this Agreement.
6. This Agreement shall terminate: (a) upon the termination of
the Stock Purchase Agreement or (b) in the event that the required Approvals are
not obtained on or prior to October 31, 1995, unless such date shall have been
extended by the mutual consent of the parties hereto.
7. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware in effect at the time of the
execution hereof.
8. This Agreement may be executed in any number of counterparts,
each of which counterparts when so executed and delivered shall be deemed to be
an original, but all such respective counterparts shall together constitute but
one and the same instrument.
9. Any notices required to be given pursuant to this Agreement
shall be given in accordance with Section 13 of the Stock Purchase Agreement.
10. Except as set forth herein, all other provisions and terms of
the Stock Purchase Agreement remain unchanged and in full force and effect. This
Agreement shall not operate as an amendment or waiver of, or estoppel with
respect to, any other obligation, covenant, agreement or condition contained in
the Stock Purchase Agreement.
- 2 -
<PAGE> 3
11. This Agreement, together with the Stock Purchase Agreement, and
together with the Letters of Representation and Approvals to be received
pursuant hereto, constitute the entire agreement of the parties with respect to
the subject matter hereof.
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
First Banks, Inc., First Commercial Bank and First Commercial Bancorp, Inc. has
signed or caused to be signed its name, all as of the day and year first above
written, and James F. Dierberg has consented to the terms of this Agreement by
execution hereof.
FIRST COMMERCIAL BANCORP, INC.
By:______________________________________
Name: Manuel Perry, Jr.
Title: Chairman of the Board of Directors
FIRST COMMERCIAL BANK
By:______________________________________
Name: James E. Culleton
Title: Interim President
DIERBERG
_________________________________________
James F. Dierberg, an individual
FIRST BANKS, INC.
By:______________________________________
Name:
Title:
- 3 -
<PAGE> 1
Exhibit 10(b)
FIRST COMMERCIAL BANCORP, INC.
A DELAWARE CORPORATION
INVESTMENT DEBENTURE
THIS IS THE SOLE DEBENTURE OF
AN ISSUANCE OF DEBENTURES TOTALING
$1,500,000.00
BY FIRST COMMERCIAL BANCORP, INC. ON THIS DATE
Amount of Debenture: $1,500,000.00 October 31, 1995
Due: October 31, 2000
1. PROMISE TO PAY. FIRST COMMERCIAL BANCORP, INC., a Delaware
corporation (the "Company"), for value received, promises to pay to FIRST
BANKS, INC., a Missouri corporation, or its successors and assigns (the
"Holder"), the sum of One Million Five Hundred Thousand Dollars
($1,500,000.00), together with interest on the principal amount hereof (not
compounded) as hereinafter provided. Unless otherwise provided herein,
payments on this Debenture shall be in dollars of the United States of America
and payments shall be made to the address of the Holder as specified in Section
13 below.
2. INTEREST. Interest on this Debenture shall accrue at the rate
of interest of twelve percent (12%) annually.
3. PAYMENTS. The Company shall make payments on this Debenture
when, in the sole and absolute discretion of the Board of Directors of the
Company, the Company has sufficient funds to make such a payment of interest or
principal on this Debenture and can make such a payment in accordance with law
and all applicable regulatory requirements; provided, however, if and to the
extent the Company has not previously paid interest or principal on this
Debenture, then (i) prior to October 31, 2000 ("Maturity"), the Holder of this
Debenture shall have the right to convert unpaid interest or principal at the
times and in the manner described in Section 5, and upon such conversion, that
portion of interest or principal so converted shall be deemed paid in full and
(ii) upon Maturity, the Debenture shall be payable and convert to Stock
(defined below) pursuant to the provisions of Section 5(b). Notwithstanding
anything to the contrary herein, Company shall give Holder ten (10) days prior
written notice of Company's intention to make any payment to Holder on the
Debenture.
4. SECURITY. As security for the obligations of Company
hereunder, Company shall execute a Stock Pledge Agreement in form and substance
acceptable to Holder, granting holder a security interest in all shares of
common and preferred stock, if any, held by Company in Company's subsidiary,
First Commercial Bank.
5. CONVERSION RIGHTS.
(a) RIGHT TO CONVERT. At the sole option and discretion
of the Holder of this Debenture, following the earlier of (i) the vote of the
Company stockholders at the Special Meeting (as hereinafter defined) with
respect to that certain Amended and Restated Stock Purchase Agreement, dated
August 7, 1995, by and among Company, Holder, First Commercial Bank and James
F. Dierberg (the "Stock Purchase Agreement"), or (ii) December 31, 1995,
<PAGE> 2
unpaid principal and accrued but unpaid interest may be converted into Stock at
the Conversion Price set forth in Subsection (c) below. A Holder desiring to
convert shall follow the conversion procedure set forth in Subsection (d). On
the date that the conversion is effective as provided in Subsection (d) below,
all or any portion of the unpaid principal and interest which has then accrued
but remains unpaid, and which Holder elects to convert, shall be converted into
shares of Stock. In the event that the stockholders of the Company approve the
Stock Purchase Agreement, then "Stock" shall mean the common stock, par value
$0.01 per share, of Company. In the event that the stockholders of the Company
fail to approve the Stock Purchase Agreement, then "Stock" shall mean the common
stock, no par value, of First Commercial Bank.
(b) AUTOMATIC CONVERSION. Notwithstanding the provisions
of Section 5(a) above and absent an Event of Default, at Maturity, all unpaid
principal and accrued but unpaid interest shall be automatically converted into
Stock at the Conversion Price set forth in Subsection (c) below. Once the
automatic conversion has occurred, no further interest shall accrue, and the
Holder shall be deemed to be paid in full.
(c) CONVERSION PRICE. The price per share of Company
common stock at which the convertible portion of the interest or principal of
this Debenture may be converted (the "Company Conversion Price") shall be equal
to $0.10 per share. The price per share of First Commercial Bank common stock
at which the convertible portion of the interest or principal of this Debenture
may be converted ("Bank Conversion Price") shall be equal to the book value of
the First Commercial Bank common stock, as determined in accordance with GAAP,
on the last day of the month immediately preceding the date of conversion. The
Company Conversion Price and the Bank Conversion Price shall be referred to
hereinafter, as appropriate (based upon the outcome of the vote of Company
shareholders on the Stock Purchase Agreement), as the "Conversion Price".
(d) CONVERSION PROCEDURE. If Holder desires to convert
all or any portion of the unpaid principal or accrued but unpaid interest of
this Debenture, then Holder shall deliver a written notice to the Company
stating that the Holder desires to convert and specifying the amount of unpaid
principal and accrued but unpaid interest that Holder wishes to convert.
Promptly after receipt of such written notice, the Company shall deliver to the
Holder of this Debenture any and all documents which the Company shall require
in order to permit the conversion, including, without limitation, any and all
documents necessary to comply with applicable securities law exemptions or to
satisfy any and all requirements of applicable law and regulations, including
any requirements of any regulatory bodies having jurisdiction over the Company
or Bank. Promptly after receipt from Holder by the Company of such documents as
the Company may require to permit conversion, the Company shall send written
notice to the Holder and the Holder shall execute the written notice that the
portion of this Debenture that the Holder requested be converted has in fact
been converted into Stock at the Conversion Price and specifying the number of
shares of Stock to which the Holder will be entitled as a result of such
conversion. The conversion shall be deemed to have taken effect as of the date
of such written notice from the Holder to the Company, and, promptly thereafter,
the Company shall cause to be delivered to the Holder from the Company, First
Commercial Bank or its respective transfer agent, a certificate representing
such shares of Stock, which shares shall bear a legend substantially in the form
of that set forth in Section 7 of this Debenture (with
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<PAGE> 3
such changes as are necessary to reflect that the legend condition affects the
shares represented by that certificate in lieu of the language pertaining to
this Debenture). With respect to an automatic conversion of the Debenture on
and as of October 31, 2000, such conversion shall occur automatically as set
forth herein, except that no notice shall be required.
6. RESERVATION. The Company shall, at all times, reserve and keep
available, out of its authorized but unissued shares of Company common stock,
solely for the purpose of effecting the conversion of this Debenture, the full
number of shares of Company common stock deliverable upon the conversion of all
Debentures from time to time outstanding. The Company shall from time to time
in accordance with Delaware law, increase the authorized number of shares of
Company common stock if at any time the authorized number of such shares
remaining unissued shall not be sufficient to permit the conversion of all of
the Debentures at the time outstanding. Similarly, Company shall cause First
Commercial Bank to reserve and keep available, out of its authorized, but
unissued shares of First Commercial Bank common stock, solely for the purpose of
effecting the conversion of this Debenture, the full number of shares of First
Commercial Bank common stock deliverable upon the conversion of all Debentures
from time to time outstanding. The Company shall cause First Commercial Bank
from time to time in accordance with California law, to increase the authorized
number of shares of First Commercial Bank common stock if at any time the
authorized number of such shares remaining unissued shall not be sufficient to
permit the conversion of all of the Debentures at the time outstanding.
7. COVENANTS. So long as all or any portion of the Debenture
shall remain outstanding, the Company shall not, without first obtaining the
approval of the Holder of the Debenture (or if all or a portion of the Debenture
has been assigned or transferred to a permissible assignee or transferee under
the terms of this Debenture, then the approval of the Holders of a majority of
the principal amount of this Debenture), repurchase any of its common stock or
pay a dividend on its common stock, or make any other distribution to its
shareholders or other debenture holders, except as provided for in that certain
Additional Investment Agreement, dated October 31, 1995 ("Investment
Agreement"), the Stock Purchase Agreement, the proposed Offering by the Company
(as defined in the Stock Purchase Agreement), and except as proposed to be
presented to the stockholders of the Company at the Special Meeting (as defined
in the Stock Purchase Agreement).
8. RESTRICTED NATURE OF DEBENTURES. This Debenture has been
issued pursuant to the Investment Agreement and the Stock Purchase Agreement.
This Debenture is subject to the restrictions contained in the Investment
Agreement and the Stock Purchase Agreement and no interest in this Debenture may
be sold or transferred by the holder hereof without compliance with the
provisions of the Investment Agreement and the Stock Purchase Agreement. The
Holder of this Debenture understands that the Company may require, upon the
conversion of this Debenture into Stock, that the Holder make certain
representations to the Company to comply with applicable securities law
exemptions. The Holder understands that this Debenture and Stock into which
this Debenture is convertible are "restricted securities" under the Securities
Act of 1933 and this Debenture and the Stock into which this Debenture is
convertible is and will be subject to the following legend condition:
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<PAGE> 4
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). THE DEBENTURE HAS BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF: (1) AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THAT ACT;
(2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED; OR (3) A "NO ACTION" LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT THE STAFF OF THE
COMMISSION WILL NOT RECOMMEND THAT ANY ACTION BE TAKEN UNDER THE ACT
AGAINST THE COMPANY IF SUCH PROPOSED SALE IS CONSUMMATED WITHOUT
REGISTRATION UNDER THE ACT.
In the event First Commercial Bank common stock is issued upon conversion of
this Debenture, the certificate representing the shares of First Commercial Bank
common stock shall contain such restrictive legends as the California State
Banking Department may require in its permit authorizing the sale thereof.
The issuance of the Stock may be delayed in order for the Company or First
Commercial Bank as the case may be, to obtain any and all necessary regulatory
approvals and to comply with state, federal and securities laws.
9. DEFAULT. Each of the following shall constitute an event of
default ("Events of Default") under this Debenture:
(a) Default or breach by the Company in the due observance or
performance of any of the terms, covenants or agreements set forth in
this Debenture if such default is not remedied by the Company or waived
by Holder within 30 days following the Company's receipt of notice
thereof.
(b) The Company (i) fails to pay, or admits in writing such
Borrower's inability to pay, such Borrower's debts as they become due,
or otherwise becomes insolvent (however evidenced); (ii) makes an
assignment for the benefit of creditors; (iii) files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies
to any tribunal for any receiver or any trustee of the Company or any
substantial part of the Company's property; (iv) commences any
proceeding relating to the Company under any reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; (v) if
there is commenced against the Company any such proceeding which
remains undismissed for a period of thirty (30) days, or the Company by
any act indicates its consent to, approval of, or acquiescence in any
such proceeding or the appointment of any receiver of or any trustee
for such Borrower or of any substantial part of the Company's property,
or suffers any such receivership or trusteeship to continue
undischarged for a period of 30 days or the Company takes any
partnership or corporate action to authorize any of the foregoing; or
(vi) is placed in receivership by any federal or state agency with
regulatory authority over the Company.
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<PAGE> 5
(c) The Company files a certificate of dissolution under
applicable state law or is liquidated or dissolved or suspends or
terminates the operation of its business, or has commenced against it
any action or proceeding for its liquidation or dissolution or the
winding up of its business, or takes any corporate action in
furtherance thereof.
10. RIGHTS AND REMEDIES IN THE EVENT OF DEFAULT. Upon any Event of
Default, and at any time thereafter, Holder may, at its option, do any one or
more of the following: (a) Declare this Debenture to be immediately due and
payable in cash; (b) exercise any or all of the rights accruing to a secured
party, upon default by a debtor, under the Uniform Commercial Code as in effect
from time to time in the State of Missouri and any other applicable law; or (c)
exercise any other rights or remedies available to holder under this Debenture,
the Investment Agreement, the Stock Purchase Agreement, the Stock Pledge
Agreement or any other agreement entered into pursuant to the terms of the Stock
Purchase Agreement or otherwise available to Holder at law or in equity.
11. MODIFICATION. The terms of this Debenture may be amended or
modified by the Company with the written consent of the Holder. If the Holder
transfers or assigns all or a portion of this Debenture to a permitted assignee
or transferee, then the Holders, by vote of Holders holding a majority of the
principal amount of this Debenture, may authorize any amendment, modification,
or waiver of compliance by the Company of the provisions or defaults under this
Debenture. Any such consent or waiver by the Holder (or majority in interest of
subsequent Holders) of the Debenture shall be conclusive and binding upon the
Holder (and all other Holders) and upon all future holders of this Debenture.
12. GOVERNING LAW AND ATTORNEYS' FEES. This Debenture and the
rights and obligations of the parties hereunder are to be governed by and
construed and interpreted in accordance with the laws of the State of Missouri
applicable to contracts made and to be performed wholly within Missouri, without
regard to choice or conflict of laws rules. If either party incurs legal
expenses in any action arising out of this Debenture, then the prevailing party
in such action shall be entitled to recover from the nonprevailing party all
reasonable attorneys' fees, expert witness fees, and other costs, in addition to
any other relief to which such party may be entitled. This Debenture and the
agreements referred to herein, including but not limited to the Investment
Agreement and the Stock Purchase Agreement, constitute the entire agreement
among the parties pertaining to the subject matter hereof and fully supersede
any and all prior agreements between the parties hereto respecting the subject
matter hereof.
13. NOTICES. Any notice required to be given to the Holder of this
Debenture shall be deemed given if it is set forth in writing addressed to the
Holder at the Holder's address appearing on the books of the Company. Notices to
the Company shall be in writing and sent to the President, or any Executive Vice
President of the Company in care of the then present principal place of business
of the Company. Such notices shall be deemed effectively delivered: (a) three
business days after deposit in the United States mail, postage prepaid; (b) when
actually received if delivered by personal delivery; or (c) as of two business
days after delivery to Federal Express or some other third-party who will
guarantee delivery by overnight courier addressed to the address of such party
as provided in this section.
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<PAGE> 6
14. USURY LAW PROVISION. All payments due hereunder are hereby
expressly limited so that in no contingency or event whatsoever shall the amount
paid or agreed to be paid to the Holder of this Debenture for the use,
forbearance, or detention of the money exceed the highest lawful rate
permissible. If, from any circumstance, whatsoever, fulfillment of any of the
provisions of this Debenture, or any other agreement referred to herein, as of
the time performance of such provision shall be due, shall involve a payment
that exceeds the lawful amount permissible under law which a court of competent
jurisdiction may deem applicable, then the obligations to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance the Holder
of this Debenture shall ever receive as interest an amount which would exceed
the highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of unpaid principal balance due hereunder, and not to
the payment of interest, or, if such excessive interest exceeds the unpaid
principal balance due hereunder, the excess shall be refunded to the
undersigned.
15. NON-TRANSFERABLE. Except with the consent of the Company
(which consent shall not be unreasonably withheld) or to an entity controlled by
or under common control with Holder, this Debenture is not transferable by the
Holder hereof.
FIRST COMMERCIAL BANCORP, INC.
By:____________________________________
Manuel Perry, Jr.
Chairman of the Board
By:____________________________________
Dagmar Hotel
Secretary
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<PAGE> 1
Exhibit 10(c)
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement is made and entered into as of the 31st day
of October, 1995, by and between FIRST COMMERCIAL BANCORP, INC., a Delaware
corporation ("Pledgor"), and FIRST BANKS, INC., a Missouri corporation (the
"Lender" or "Pledgee").
RECITALS
A. Pledgor owns 1,242,000 shares of the issued and outstanding
common stock of First Commercial Bank, a California- chartered bank (the
"Bank"), more particularly described in Exhibit A attached hereto and made a
part hereof (the "Shares").
B. Pledgor, Pledgee, the Bank and Mr. James F. Dierberg, an
individual, have executed that certain Amended and Restated Stock Purchase
Agreement, dated as of August 7, 1995 (the "Amended Agreement") and that certain
Additional Investment Agreement, of even date herewith, (the "Investment
Agreement"), and, pursuant to the Amended Agreement and the Investment Agreement
(as the Amended Agreement and Investment Agreement may be amended, renewed,
extended or modified from time to time, collectively the "Agreements"), Pledgor
has executed an Investment Debenture, of even date herewith (the "Investment
Debenture"), and Pledgee is holder of such Investment Debenture. Pledgor and
Pledgee contemplate that Pledgor may issue, from time to time, one or more
additional debentures to Pledgee (together with the Investment Debenture, such
other debentures shall collectively be referred to herein as the "Debentures").
C. Pledgor and Pledgee desire to secure the payment and
performance of all of Pledgor's Obligations (as defined herein), by a collateral
pledge to Pledgee of the Shares. Capitalized terms used but not defined herein
have the meanings given them in the Agreements or the Debentures.
In consideration of the foregoing, the agreements below and other
sufficient consideration, the receipt of which is hereby acknowledged, Pledgor
and Pledgee agree as follows:
1. PLEDGE AND GRANT OF SECURITY INTEREST.
1.1. To secure the due and punctual payment and performance of all
of the Obligations of Pledgor, Pledgor hereby grants to Pledgee a security
interest under Articles 8 and 9 of the Uniform Commercial Code, as currently
effective in the State of Missouri, and any other applicable law pertaining to
security interests in personal property, in all of the Shares. The Shares are
represented by certificates which are herewith delivered, together with a stock
power attached to each such stock certificate executed in blank by Pledgor, to
Pledgee.
1.2. In addition, Pledgor hereby grants to Pledgee a security
interest in the following (which shall be deemed included in the term
"Shares"): (i) all dividends, cash, securities, instruments and other property
from time to time paid, payable or otherwise distributed in respect of or in
exchange for any or all of such Shares, (ii) any and all distributions made in
respect to the Shares, whether in cash or in kind, by way of dividends or stock
splits, or pursuant to a merger or consolidation or otherwise, or any
substitute security issued upon conversion, reorganization or otherwise, (iii)
any and all other property hereafter delivered to Pledgor or Pledgee in
substitution for or in addition to any of the foregoing (including without
limitation all securities issued pursuant to any shareholder agreement, stock
purchase agreement, stock purchase rights or other agreement with respect to
stock of companies
<PAGE> 2
represented by the Shares to which Pledgor may now or hereafter be a party),
all certificates and instruments representing or evidencing such property and
all cash, securities, interest, dividends, rights, and other property at any
time and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof, and (iv) any and all proceeds
of any of the foregoing. If any of the foregoing shall be received by Pledgor,
Pledgor shall immediately deliver the same to Pledgee or its designated
nominee, accompanied, if appropriate, by proper instruments of assignment
and/or stock powers executed by Pledgor in accordance with Pledgee's
instructions, to be held subject to the terms of this Agreement.
Notwithstanding the foregoing and provided that no default has occurred or is
continuing, Pledgor shall be entitled to collect and use for its proper
corporate purposes all cash dividends (except cash dividends paid or payable in
respect of the total or partial liquidation of the Bank) paid on the Shares so
long as the declaration and payment of such dividends does not violate the
provisions of the Agreements; provided, however, that until actually paid, all
rights to such dividends shall remain subject to the security interest created
by this Agreement. All dividends (other than cash dividends governed by the
immediately preceding sentence) and all other distributions in respect of any
of the Shares or any of the other collateral, whenever paid or made, shall be
delivered to Lender and held by it subject to the security interest created by
this Agreement.
2. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants that:
2.1. Pledgor owns the Shares, free of all liens or other encumbrances
other than any assessment due with respect to the Shares pursuant to section
662 of the California Financial Code.
2.2. There are no outstanding warrants, options, subscriptions or
other contractual arrangements for the purchase of any other shares of stock or
any securities convertible into shares of stock of the Bank, other than equity
securities of the Bank held by Pledgee or Mr. Dierberg and the Investment
Debenture.
2.3. The delivery of the Shares to Pledgee pursuant to this Agreement
and the filing of the financing statements (if any), which have been, or
contemporaneously with the execution of this Agreement shall be, delivered to
Pledgee, in the offices shown thereon, create a valid and fully perfected first
priority security interest in the Shares, securing the satisfaction of the
Company's obligations under the Debentures and the Agreements.
2.4. Pledgor has all requisite corporate power and authority to (i)
pledge, assign, grant a security interest in, transfer and deliver the Shares
to Pledgee in the manner hereby done or contemplated and (ii) execute, deliver
and perform all of its obligations under this Agreement;
2.5. This Agreement has been duly authorized, executed and,
delivered by Pledgor and constitutes the legal, valid and binding obligation of
Pledgor, enforceable in accordance with its terms;
3. DILUTION OF STOCK. Except as may be required or permitted pursuant to
the terms and conditions of the Agreements, Pledgor agrees that it will cause
the Bank not to issue any stock or other securities (including any warrants,
options, subscriptions or other contractual arrangements for the purchase of
stock or securities convertible into stock) in addition to or in substitution
for the Shares.
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<PAGE> 3
4. ADDITIONAL LIENS. Pledgor agrees that it will not (i) sell or
otherwise dispose of, or grant any option with respect to, any of the Shares or
(ii) create any lien or other encumbrance or permit any lien or other
encumbrance to exist upon or with respect to any of the Shares, except for the
lien under this Stock Pledge Agreement, any lien resulting from future
debentures entered into with Pledgee and any assessment due with respect to the
Shares pursuant to section 662 of the California Financial Code.
5. RELEASE OF SHARES. Pledgee shall return the certificates representing
the Shares to Pledgor, with the stock powers executed by Pledgor attached, and
such Shares shall be deemed released from any lien or other encumbrance
hereunder if: (i) the full amount of the Obligations of Pledgor pursuant to the
terms of the Debentures have been paid to Pledgee in compliance with the terms
of the Debentures and the Agreements or (ii) Pledgee has converted into
Pledgor's common stock, par value $0.01 per share, or Bank common stock, no par
value (as the case may be), the full amount of the principal of and accrued but
unpaid interest on the Debentures, as permitted under the terms and conditions
of the Debentures and the Agreements.
6. DEFAULT. As used herein, the term "default" means and includes any
violation by Pledgor of any of the terms or conditions of this Stock Pledge
Agreement or an event or condition that constitutes an Event of Default under
the Debentures.
7. REMEDIES. Subject to any prior regulatory approvals required under
federal or state law, upon the occurrence and during the continuance of any
default, Pledgee may at any time exercise the rights and pursue the remedies
provided under Articles 8 and 9 of the Uniform Commercial Code as currently
effective in, or as hereafter amended by, the State of Missouri, and any other
applicable law pertaining to security interests in personal property, including
but not limited to selling the Shares, in whole or partial lots, at any public
sale or, at private sale without advertisement if in Pledgee's reasonable
judgement such partial or total lot sale, or private sale, would result in a
greater sale price than a public sale. The parties agree that in the event
Pledgee elects to proceed with respect to the Shares, whenever applicable
provisions of the Uniform Commercial Code or other applicable law require that
notice be reasonable, ten (10) days' notice shall be deemed reasonable.
Pledgee shall not be obligated to make any sale of the Shares regardless of
notice of sale having been given. Pledgee may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned. Pledgee may bid and become a purchaser at any such
sale, if public, and upon any such sale Pledgee may collect, receive, and hold
and apply, as provided herein, the proceeds thereof to the payment of the
Obligations, and assign and deliver the Shares and the certificate therefor to
the purchaser at any such sale. The proceeds from any such sale shall be
applied first to the payment of costs, expenses and reasonable attorney's fees
incurred by Pledgee in connection with the sale, secondly, to the Obligations,
and any remainder shall be delivered to Pledgor.
8. RIGHT TO VOTE SHARES. Until the Debentures are fully paid, Pledgee
shall have the sole right to vote the Shares with regard to any proposed
amendment to the Articles of Incorporation of the Bank which would result in a
change in the preferences, qualifications, limitations, restrictions, or the
special or relative rights in respect of the Shares. Otherwise, Pledgor shall
have, subject to the covenants contained in the Debentures and the Agreements,
the sole right to vote the Shares unless there is a default hereunder.
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<PAGE> 4
9. PRESERVATION AND PERFECTION OF LIENS. Pledgor shall promptly, upon
the reasonable request of Pledgee and at Pledgor's expense, execute,
acknowledge and deliver, or cause the execution, acknowledgment and delivery
of, and thereafter, if applicable, register, file or record in an appropriate
governmental office, any document or instrument supplemental to or confirmatory
of this Stock Pledge Agreement, and give such further assurances as may
otherwise be necessary or desirable for the creation, preservation and/or
perfection of the liens created by this Stock Pledge Agreement.
10. CERTAIN COVENANTS. All covenants contained in the Agreements and the
Debentures and referred to herein are incorporated by reference as if fully set
forth herein and shall be deemed to be set forth, in their entirety, herein.
11. CUSTODY AND PRESERVATION OF PLEDGED SECURITIES. Neither the failure
of Pledgee to preserve or protect the value of the Shares nor any rights with
respect to any of the Shares against other parties shall be deemed a failure to
exercise reasonable care in the custody or preservation of such Shares.
Pledgee shall act reasonably with respect to the Shares, however, Pledgee shall
not be deemed to have failed to exercise reasonable care in the custody and
preservation of any Shares if it fails to sell or convert such Shares in a
falling market. Failure to sell or convert such Shares while Pledgee is
diligently considering a request by Pledgor that Pledgee waive a default or
forbear from collection after a default or restructure any of the Obligations,
or while negotiating any such restructuring in good faith, shall not be deemed
negligence or gross negligence under any circumstances. Pledgee shall have the
absolute right, exercisable in its sole and absolute discretion, to sell the
Shares, in whole or partial lots, and convert them to cash at any time
following default.
12. WAIVERS AND MODIFICATIONS. No waiver by the Pledgee hereunder shall
be effective unless it is in a writing signed by an authorized officer of the
Pledgee. No such waiver shall operate as a waiver of any other matter or of a
similar matter at a future time. This Stock Pledge Agreement may not be
changed except by a writing executed by Pledgor and an authorized officer of
the Pledgee.
13. WAIVERS BY THE PLEDGOR.
13.1 The Pledgor further waives presentment and demand for payment
of any of the Obligations secured hereby, protest and notice of dishonor or
default with respect to any of such Obligations, and all other notices to which
the Pledgor might otherwise be entitled, except as otherwise expressly provided
in this Stock Pledge Agreement.
13.2 The Pledgor (to the extent that it may lawfully do so)
covenants that it shall not at any time insist upon or plead, or in any manner
claim or take the benefit or advance of, any stay (except in connection with a
pending appeal), valuation, appraisal, redemption or extension law now or at
any time hereafter in force that, but for this waiver, might be applicable to
any sale made under any judgment, order or decree based on this Stock Pledge
Agreement or any other document executed in connection therewith; and the
Pledgor (to the extent that it may lawfully do so) hereby expressly waives and
relinquishes all benefit and advance of any and all such laws and hereby
covenants that it will not hinder, delay or impede the execution of any power
in this Stock Pledge Agreement or therein granted and delegated to the Pledgee,
but that it will suffer and permit the execution of every such power as though
no such law or laws had been made or enacted.
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<PAGE> 5
14. COUNTERPARTS. This Stock Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall be deemed to be one and the same instrument.
15. SEVERABILITY. Any provision of this Stock Pledge Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction unless the ineffectiveness of such
provision would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.
16. NOTICES. All notices, consents, requests and demands to or upon the
respective parties hereto shall be given in the manner required for notices
under the Agreements or the Debentures.
17. FAILURE OR DELAY. No failure on the part of Pledgee to exercise, and
no delay in exercising, any right, power or privilege hereunder operates as a
waiver thereof; nor does any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. No notice to or demand on
Pledgor in any case entitles Pledgor to any other or further notice or demand
in similar or other circumstances.
18. GOVERNING LAW. This Stock Pledge Agreement shall be governed and
construed under the laws of the State of Missouri without regard to conflict or
choice of laws rules.
19. DEFINITION OF OBLIGATION. As used herein, the term "Obligation" shall
mean all indebtedness (whether principal, interest, fees or otherwise),
obligations and liabilities of Pledgor to Pledgee under the Debentures,
including but not limited to all debt obligations under one or more of a series
of debentures or promissory notes, which may be executed by Pledgor and made
payable to Pledgee from time to time pursuant to the Agreements (including
without limitation all extensions, renewals, modifications, amendments,
rearrangements, restructures, replacements and refinancings thereof, whether or
not the same involve modifications to interest rates or other payment terms of
such indebtedness, obligations and liabilities), whether now existing or
hereafter created, including but not limited to the obligation of Pledgor to
repay future advances by Pledgee, whether or not made pursuant to commitment
and whether or not presently contemplated by Pledgor and Pledgee and (to the
extent permitted by law) all costs of collection thereof, including but not
limited to reasonable attorney's fees and actual attorney's expenses (whether
or not there is litigation), court costs and all costs in connection with any
proceedings under the United States Bankruptcy Code pertaining thereto.
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<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FIRST COMMERCIAL BANCORP, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
FIRST BANKS, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
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<PAGE> 7
EXHIBIT A
SHARES PLEDGED
1. __________________________________________________________________________
2. __________________________________________________________________________
7
<PAGE> 1
Exhibit 10(d)
NORTHRUP-HOME TOWER GROUP
865 HOWE AVENUE, SUITE 310
(916) 927-2721
OFFICE BUILDING LEASE
1. PARTIES. This Lease, dated, for reference purposes only, JUNE 14, 1995, is
made by and between NORTHRUP-HOWE TOWER GROUP (herein called "Landlord") and
FIRST COMMERCIAL BANK (herein called "Tenant").
2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases
from Landlord that certain office space (herein called "Premises") indicated on
Exhibit "A" attached hereto and hereby reference thereto made a part hereof,
said Premises being agreed, for the purpose of this Lease, to have an area of
approximately 3,499 square feet (SUITE 310 AT 2,777 SQ. FT., SUITE 320 AT 722
SQ. FT.) and being situated on the THIRD floor of that certain Building known
as HOWE AVENUE TOWER, 865 HOWE AVENUE, SACRAMENTO, CA 95825.
Said Lease is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition
of said performance.
3. TERM. The term of this Lease shall be for 5.75 years, commencing on the
1ST day of SEPTEMBER, 1995 and ending on the 31ST day of MAY, 2001.
4. POSSESSION.
4a. If the Landlord, for any reason whatsoever, cannot deliver possession
of the said Premises to the Tenant at the commencement of the term hereof, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom, nor shall the expiration date of the
above term be in any way extended, but in that event, all rent shall be abated
during the period between the commencement of said term and the time when
Landlord delivers possession.
4b. In the event that Landlord shall permit Tenant to occupy the Premises
prior to the commencement date of the term, such occupancy shall be subject to
all the provisions of this Lease. Said early possession shall not advance the
termination date hereinabove provided.
5. RENT. Tenant agrees to pay to Landlord as rental, without prior notice or
demand, for the Premises the sum of: FOUR THOUSAND SIX HUNDRED FIFTY-TWO
DOLLARS ($4,652.00) dollars, on or before the first day of the first full
calendar month of the term hereof and a like sum on or before the first day of
each and every successive calendar month thereafter during the term hereof,
except that the first month's rent shall be paid upon the execution hereof.
Rent for any period during the term hereof which is for less than one (1) month
shall be a prorated portion of the monthly installment herein, based upon a
thirty (30) day month. Said rental shall be paid to Landlord, without deduction
or offset in lawful money of the United States of America, which shall be legal
tender at the time of payment at the Office of the Building, or to such other
person or at such other place as Landlord may from time to time designate in
writing.
6. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of - WAIVED -
($ ) Dollars. Said sum shall be held by Landlord as security for the
faithful performance by Tenant of all the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. If Tenant
defaults with respect to any provision of this Lease, including, but not
limited to the provisions relating to the payment of rent, Landlord may (but
shall not be required to) use, supply or retain all or any part of this
security deposit for the payment of any rent or any other sum in default, or
for the payment of any amount which Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant's default. If any
portion of said deposit is so used or applied, Tenant shall within five (5)
days after written demand therefor, deposit cash with Landlord in an amount
sufficient to restore the security deposit to its original amount and Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not
be required to keep this security deposit separate from its general funds, and
Tenant shall not be entitled to interest on such deposit. If Tenant shall fully
and faithfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest hereunder) at the
expiration of the Lease term. In the event of termination of Landlord's
interest in this Lease, Landlord shall transfer said deposit to Landlord's
successor in interest.
7. OPERATING EXPENSE ADJUSTMENTS. For the purposes of this Article, the
following terms are defined as follows:
Base Year: The calendar year in which this lease term commences (provided,
however, that the Base Year shall in no event be earlier than
the first full calendar year following the date of initial
occupancy by the first occupant of said Building).
Comparison Each calendar year of the term after the Base Year.
Year:
Direct All direct costs of operation and maintenance, as determined by
Expenses: standard accounting practices, and shall include the following
costs by way of illustration, but not be limited to: real
property taxes and assessments; rent taxes, gross receipt taxes
(whether assessed against the Landlord or assessed against the
Tenant and collected by the Landlord, or both); water and sewer
charges; insurance premiums; utilities; janitorial services;
labor; costs incurred in the management of the Building, if any;
air-conditioning & heating; elevator maintenance; supplies;
materials; equipment; and tools, including maintenance, costs,
and upkeep of all parking and common areas ("Direct Expenses"
shall not include depreciation on the Building of which the
Premises are a part or equipment therein, loan payments,
executive salaries or real estate brokers' commissions).
If the Direct Expenses paid or incurred by the Landlord for the Comparison
Year on account of the operation or maintenance of the Building of which the
Premises are a part are in excess of the Direct Expenses paid or incurred for
the Base Year, then the Tenant shall pay 25.5% of the Increase. This percentage
is that portion of the total rentable area of the Building occupied by the
Tenant hereunder. Landlord shall endeavor to give to Tenant on or before the
first day or March of each year following the respective Comparison Year a
statement of the increase in rent payable by Tenant hereunder, but failure by
Landlord to give such statement by said date shall not constitute a waiver by
Landlord of its right to require an increase in rent. Upon receipt of the
statement for the first Comparison Year, Tenant shall pay in full the total
amount of increase due for the first Comparison Year, and in addition for the
then current year, the amount of any such increase shall be used as an estimate
for said current year and this amount shall be divided into twelve (12) equal
monthly installments and Tenant shall pay to Landlord, concurrently with the
regular monthly rent payment next due following the receipt of such statement,
an amount equal to one (1) monthly installment multiplied by the number of
months from January in the calendar year in which said statement is submitted
to the month of such payment, both months inclusive. Subsequent installments
shall be payable concurrently with the regular monthly rent payments for the
balance of that calendar year and shall continue until the next Comparison
Year's statement is rendered. If the next or any succeeding Comparison Year
results in a greater increase in Direct Expenses, then upon receipt of a
statement from Landlord, Tenant shall pay a lump sum equal to such total
increases in Direct Expenses over the Base Year, less the total of the monthly
installments of estimated increases paid in the previous calendar year for
which comparison is then being made to the Base Year; and the estimated monthly
installments to be paid for the next year, following said Comparison Year,
shall be adjusted to reflect such increase. If in any Comparison Year the
Tenant's share of Direct Expenses be less than the preceding year, then upon
receipt of Landlord's statement, any overpayment made by Tenant on the monthly
installment basis provided above shall be credited towards the next monthly
rent falling due and the estimated monthly installments of Direct Expenses to
be paid shall be adjusted to reflect such lower Direct Expenses for the most
recent Comparison Year.
Even though the term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's share of Direct Expenses for the
year in which this Lease terminates, Tenant shall immediately pay any increase
due over the estimated expenses paid and conversely any overpayment made in the
event said expenses decrease shall be immediately rebated by Landlord to Tenant.
Notwithstanding anything contained in this Article, the rental payable by
Tenant shall in no event by less than the rent specified in Article 5
hereinabove.
(PAGE 1 - OFF. BLDG.) INITIAL _____ _____
<PAGE> 2
8. USE. Tenant shall use the Premises for general office purposes and shall
not use or permit the Premises to be used for any other purposes without the
prior written consent of Landlord.
Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
rate of or affect any fire or other insurance upon the Building or any of its
contents, or cause cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or
injure or annoy them or use or allow the Premises to be usued for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain
or permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.
9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict
with any law, statute, ordinance or governmental rule or regulation now in
force or which may hereafter be enacted or promulgated. Tenant shall, at its
sole cost and expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, and with the requirements of any board of fire insurance
underwriters or other similar bodies now or hereafter constituted, relating to,
or affecting the condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by Tenant's improvements or acts.
The judgment or any court of competent jurisdiction or the admission of Tenant
in any action against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any law, statute, ordinance or governmental rule,
regulation or requirement, shall be conclusive of that fact as between the
Landlord and Tenant.
10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of said Premises, or any part
thereof without the written consent of Landlord first had and obtained and any
alterations, additions or improvements to or at said Premises, including but
not limited to, wall covering, paneling and built-in cabinet work, but
excepting movable furniture and trade fixtures, shall on the expiration of the
term become a part of the realty and belong to the Landlord and shall be
surrendered with the Premises. In the event Landlord consents to the making of
any alterations, additions or improvements to the Premises by Tenant, the same
shall be made by Tenant at Tenant's sole cost and expense, and any contractor
or person selected by Tenant to make the same must first be approved of in
writing by the Landlord. Upon the expiration or sooner termination of the term
hereof, Tenant shall, upon written demand by Landlord, given at least thirty
(30) days prior to the end of the term, at Tenant's sole cost and expense,
forthwith and with all due diligence remove any alterations, additions, or
improvements made by Tenant, designated by Landlord to be removed, and Tenant
shall, forthwith and with all due diligence at its sole cost and expense,
repair any damage to the Premises caused by such removal.
11. REPAIRS.
11a. By taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in good, sanitary order, condition and repair.
Tenant shall, at Tenant's sole cost and expense, keep the Premises and every
part thereof in good condition and repair, damage thereto from causes beyond
the reasonable control of Tenant and ordinary wear and tear excepted. Tenant
shall upon the expiration or sooner termination of this Lease hereof surrender
the Premises to the Landlord in good condition, ordinary wear and tear and
damage from causes beyond the reasonable control of Tenant excepted. Except as
specifically provided in an addendum, if any, to this Lease, Landlord shall
have no obligation whatsoever to alter, remodel, improve, repair, decorate or
paint the Premises or any part thereof and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.
11b. Notwithstanding the provisions of Article 11.a. hereinabove,
Landlord shall repair and maintain the structural portions of the Building,
including the basic plumbing, air conditioning, heating, and electrical
systems, installed or furnished by Landlord, unless such maintenance and
repairs are caused in part or in whole by the act, neglect, fault or omission
of any duty by the Tenant, its agents, servants, employees or invitees, in
which case Tenant shall pay to Landlord the reasonable cost of such maintenance
and repairs. Landlord shall not be liable for any failure to make any such
repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Article 22
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
Building or the Premises or in or to fixtures, appurtenances and equipment
therein. Tenant waives the right to make repairs at Landlord's expense under
any law, statute or ordinance now or hereafter in effect.
12. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide to Landlord, at Tenant's
sole cost and expense, a lien and completion bond in an amount equal to one
and one-half (1-1/2) times any and all estimated cost of any improvements,
additions, or alterations in the Premises, to insure Landlord against any
liability for mechanics' and materialman's liens and to insure completion of
the work.
13. ASSIGNMENT AND SUBLETTING. Tenant shall not either voluntarily or by
operation of law, assign, transfer, mortgage, pledge, hypothecate or encumber
this Lease or any interest therein, and shall not sublet the said Premises or
any part thereof, or any right or privilege appurtenant thereto, or suffer any
other person (the employees, agents, servants and invitees of Tenant excepted)
to occupy or use the said Premises, or any portion thereof, without the written
consent of Landlord first had and obtained, which consent shall not be
unreasonably withheld, and a consent to one assignment, subletting, occupation
or use by any other person shall not be deemed to be a consent to any
subsequent assignment, subletting, occupation or use by another person. Any
such assignment or subletting without such consent shall be void, and shall, at
the option of the Landlord, constitute a default under this Lease.
14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against
and from any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from
any act of negligence of the Tenant, or any officer, agent, employee, guest, or
invitee of Tenant, and from all and against all cost, attorney's fees,
expenses and liabilities incurred in or about any such claim or any action or
proceeding brought thereon, and, in any case, action or proceeding be brought
against Landlord by reason of any such claim. Tenant upon notice from Landlord
shall defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. Tenant as a material part of the consideration to Landlord hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises, from any cause other than Landlord's negligence, and Tenant
hereby waives all claims in respect thereof against Landlord.
Landlord or its agents shall not be liable for any damage to property
entrusted to employees of the Building, nor for loss or damage to any property
by theft or otherwise, nor for any injury to or damage to persons or property
resulting from fire, explosion, falling plaster, steam, gas, electricity, water
or rain which may leak from any part of the Building or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever,
unless caused by or due to the negligence of Landlord, its agents, servants or
employees. Landlord or its agents shall not be liable for interference with the
light or other incorporeal hereditaments, loss of business by Tenant, nor shall
Landlord be liable for any latent defect in the Premises or in the Building.
Tenant shall give prompt notice to Landlord in case of fire or accidents in the
Premises or in the Building or of defects therein or in the fixtures or
equipment.
15. SUBROGATION. As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer to
evidence compliance with the aforementioned waiver.
16. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep
in force during the term of this Lease a policy of comprehensive public
liability insurance insuring Landlord and Tenant against any liability arising
out of the ownership, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. The limit of said insurance shall not, however,
limit the liability of the Tenant hereunder. Tenant may carry said insurance
under a blanket policy, providing, however, said insurance by Tenant shall have
a Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant. Insurance
required hereunder, shall be in companies rated A+ AAA or better in "Best's
Insurance Guide". Tenant shall deliver to Landlord prior to occupancy of the
Premises copies of policies of liability insurance required herein or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Landlord. No policy shall be cancellable or
subject to reduction of coverage except after ten (10) days' prior written
notice to Landlord.
17. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder,
Landlord agrees to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at his sole discretion,
and subject to the rules and regulations of the Building of which the Premises
are a part, electricity for normal lighting and fractional horsepower office
machines, heat and air conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises, and janitorial service.
Landlord shall also maintain and keep lighted the common stairs, common
entries and toilet rooms in the Building of which the Premises are a part.
Landlord shall not be liable for, and Tenant shall not be entitled to, any
reduction of rental by reason of Landlord's failure to furnish any of the
foregoing when such failure is caused by accident, breakage, repairs, strikes,
lockouts or other labor disturbances or labor disputes or any character, or by
any other cause, similar or dissimilar, beyond the reasonable control of
(PAGE 2 - OFF. BLDG.) INITIAL: ________
<PAGE> 3
Landlord. Landlord shall not be liable under any circumstances for a loss of
or injury to property, however occurring, through or in connection with or
incidental to failure to furnish any of the foregoing. Wherever heat generating
machines or equipment are used in the Premises which affect the temperature
otherwise maintained by the air conditioning system, Landlord reserves the
right to install supplementary air conditioning units in this Premises and the
cost thereof, including the cost of installation, and the cost of operation and
maintenance thereof shall be paid by Tenant to Landlord upon demand by Landlord.
Tenant will not, without written consent of Landlord, use any apparatus
or device in the Premises, including, but without limitation thereto,
electronic data processing machines, punch card machines, and machines using in
excess of 120 volts, which will in any way increase the amount of electricity
usually furnished or supplied for the use of the Premises as general office
space; nor connect with electric current except through existing electrical
outlets in the Premises, any apparatus or device, for the purpose of using
electric current. If Tenant shall require water or electric current in excess
of that usually furnished or supplied for the use of the Premises of general
office space, Tenant shall first procure the written consent of Landlord, which
Landlord may refuse, to the use thereof and Landlord may cause a water meter or
electrical current meter to be installed in the Premises, so as to measure the
amount of water and electric current consumed for any such use. The cost of any
such meters and of installation, maintenance and repair thereof shall be paid
for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand
therefor by Landlord for all such water and electric current consumed as
shown by said meters, at the rates charged for such services by the local
public utility furnishing the same, plus any additional expenses incurred in
keeping account of the water and electric current to consumed, If a separate
meter is not installed, such excess cost for such water and electric current
will be established by an estimate made by a utility company or electrical
engineer.
18. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property located in the Premises; except that
which has been paid for by Landlord, and is the standard of the Building. In
the event any or all of the Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property shall be assessed and taxed with the
Building, Tenant shall pay to Landlord its share of such taxes within ten (10)
days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of such taxes applicable to Tenant's property.
19. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with
the rules and regulations that Landlord shall from time to time promulgate.
Landlord reserves the right from time to time to make all reasonable
modifications to said rules. The additions and modifications to those rules
shall be binding upon Tenant upon delivery of a copy of them to Tenant.
Landlord shall not be responsible to Tenant for the nonperformance of any said
rules by any other tenants or occupants.
20. HOLDING OVER. If Tenant remains in possession of the Premises or any
part thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy shall be a tenancy from month to month as a
rental in the amount of _______________ plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month to month tenancy.
(REFER TO PAGE 5 UNDER OPTIONS/RENT) INITIAL:__________ ________
21. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times
have the right to enter the Premises, inspect the same, supply janitorial
service and any other service to be provided by Landlord to Tenant hereunder,
to submit said Premises to prospective purchasers or tenants, to post notices
of non-responsibility, and to alter, improve or repair the Premises and any
portion of the Building of which the Premises are a part that Landlord may deem
necessary or desirable, without abatement of rent and may for that purpose
erect scaffolding and other necessary structures where reasonably required by
the character of the work to be performed, always providing that the entrance
to the Premises shall not be blocked thereby, and further providing that the
business of the Tenant shall not be interfered with unreasonably. Tenant hereby
waives any claim for damages or for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned thereby. For each of the
aforesaid purposes, Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant's vaults, safes and files, and Landlord shall have the right to use any
and all means which Landlord may deem proper to open said doors in an
emergency. In order to obtain entry to the Premises without liability to Tenant
except for any failure to exercise due care for Tenant's property. Any entry to
the Premises obtained by Landlord by any of said means, or otherwise shall not
under any circumstances be construed or deemed to be a forceable or unlawful
entry into, or a detainer of, the Premises, or an eviction of Tenant from the
Premises or any portion thereof.
22. RECONSTRUCTION. In the event the Premises or the Building of which the
Premises are a part are damaged by fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same; and this
Lease shall remain in full force and effect, except that Tenant shall be
entitled to a proportionate reduction of the rent while such repairs are being
made, such proportionate reduction to be based upon the extent to which the
making of such repairs shall materially interfere with the business carried on
by the Tenant in the Premises. If the damage is due to the fault or neglect of
Tenant to its employees, there shall be no abatement of rent.
In the event the Premises or the Building of which the Premises are a
part are damaged as a result of any cause other than the perils covered by fire
and extended coverage insurance, then Landlord shall forthwith repair the same,
provided the extent of the destruction be less than ten (10%) per cent of the
then full replacement cost of the Premises or the Building of which the
Premises are a part. In the event the destruction of the Premises or the
Building is to an extent greater than ten (10%) per cent of the full
replacement cost, then Landlord shall have the option; (1) to repair or
restore such damage, this Lease continuing in full force and effect, but the
rent to be proportionately reduced as hereinabove in this Article provided; or
(2) give notice to Tenant at any time within sixty (60) days after such damage
terminating this Lease as of the date specified in such notice, which date
shall be no less than thirty (30) and no more than sixty (60) days after such
damage terminating this Lease as of the date specified in such notice, which
date shall be no less than thirty (30) and no more than sixty (60) days after
the giving of such notice. In the event of giving such notice, this Lease
shall expire and all interest of the Tenant in the Premises shall terminate on
the date so specified in such notice and the Rent, reduced by a proportionate
amount, based upon the extent, if any, to which such damage materially
interfered with the business carried on by the Tenant in the Premises, shall
be paid up to date of such said termination.
Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this
Lease or any extension thereof.
Landlord shall not be required to repair any injury or damage by fire
or other cause, or to make any repairs or replacements of any panels,
decoration, office fixtures, railings, floor covering, partitions, or any other
property installed in the Premises by Tenant.
The Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the premises, Tenant's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration.
23. DEFAULT. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Tenant.
23.a. The vacating or abandonment of the Premises by Tenant.
23.b. The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof by Landlord to Tenant.
23.c. The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by the Tenant, other than described in Article 23.b. above, where such failure
shall continue for a period of thirty (30) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default
is such that more than thirty (30) days are reasonably required for its cure,
then Tenant shall not be deemed to be in default if Tenant commences such cure
within said thirty (30) day period and thereafter diligently prosecutes such
cure to completion.
23.d. The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt, or a petition of reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days);
or the appointment of a trustee or a receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within
thirty (30) days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged in thirty (30)
days.
24. REMEDIES IN DEFAULT. In the event of any such material default or
breach by Tenant, Landlord may at any time thereafter, with or without notice
or demand and without limiting Landlord in the exercise of a right or remedy
which Landlord may have by reason of such default or breach:
24.a. Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's
fees, any real estate commission actually paid; the worth at the time of award
by the court having jurisdiction thereof of the amount by which the unpaid rent
for the balance of the term after the time of such award exceeds the amount of
such rental loss for the same period that Tenant proves could be reasonably
avoided; that portion of the leasing commission paid by Landlord and applicable
to the unexpired term of this Lease. Unpaid installments of rent or other sums
shall bear interest from the date due at the rate of ten (10%) per cent per
annum. In the event Tenant shall have abandoned the Premises, Landlord shall
have the option of (a) taking possession of the Premises and recovering from
Tenant the amount specified in this paragraph, or (b) proceeding under the
provisions of the following Article 24.b.
24.b. Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent
INITIAL:___________
___________
(PAGE 3 - OFF. BLDG.)
<PAGE> 4
as it becomes due hereunder.
24.c. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decision of the State in which the Premises are
located.
25. EMINENT DOMAIN. If more than twenty-five (25%) per cent of the
Premises shall be taken or appropriated by any public or quasi-public authority
under the power of eminent domain, either party hereto shall have the right, at
its option, to terminate this Lease, and Landlord shall be entitled to any and
all income, rent, award, or any interest therein whatsoever which may be paid
or made in connection with such public or quasi-public use or purpose, and
Tenant shall have no claim against Landlord for the value of any unexpired term
of this Lease. If either less than or more than twenty-five (25%) per cent of
the Premises is taken, and neither party elects to terminate as herein
provided, the rental thereafter to be paid shall be equitably reduced. If any
part of the Building other than the Premises may be so taken or appropriated,
Landlord shall have the right as its option to terminate this Lease and shall
be entitled to the entire award as above provided.
26. OFFSET STATEMENT. Tenant shall at any time and from time to time upon
not less than ten (10) days' prior written notice from Landlord execute,
acknowledge and deliver to Landlord a statement in writing, (a) certifying that
this Lease is unmodified and in full force and effect (or, if modified, noting
the nature of such modification and certifying that this Lease as so modified,
is in full force and effect), and the date to which the rental and other
charges are paid in advance, if any, and (b) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of the Landlord
hereunder, or specifying such defaults if any are claimed. Any such statement
may be relied upon by any prospective purchaser or encumbrancer of all or any
portion of the real property of which the Premises are a part.
27. PARKING. Tenant shall have the right to use in common with other
tenants or occupants of the Building the parking facilities of the Building, if
any, subject to the monthly rates, rules and regulations, and any other charges
of Landlord for such parking facilities which may be established or altered by
Landlord at any time or from time to time during the term hereof.
28. AUTHORITY OF PARTIES.
28.a. Corporate Authority. If Tenant is a corporation, each
individual executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of said corporation, in accordance with a duly adopted resolution of the board
of directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
28.b. Limited Partnerships. If the Landlord herein is a limited
partnership, it is understood and agreed that any claims by Tenant on Landlord
shall be limited to the assets of the limited partnership, and furthermore,
Tenant expressly waives any and all rights to proceed against the individual
partners or the officers, directors or shareholders of any corporate partner,
except to the extent of their interest in said limited partnership.
29. GENERAL PROVISIONS.
(i) Plats and Riders. Clauses, plats and riders, if any, signed by
the Landlord and the Tenant and endorsed on or affixed to this Lease are a part
hereof.
(ii) Waiver. The waiver by Landlord of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition on any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, other than
the failure of the Tenant to pay the particular rental so accepted, regardless
of Landlord's knowledge of such preceding breach at the time of the acceptance
of such rent.
(iii) Notice. All notices and demands which may or are to be required
or permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail, postage prepaid, addressed to the Tenant at the Premises,
or to such other place as Tenant may from time to time designate in a notice
to the Landlord. All notices and demands by the Tenant to the Landlord shall be
sent by United States Mail, postage prepaid, addressed to the Landlord at the
Office of the Building, or to such other person or place as the Landlord may
from time to time designate in a notice to the Tenant.
(iv) Joint Obligation. If there be more than one Tenant the
obligations hereunder imposed upon Tenants shall be joint and several.
(v) Marginal Headings. The marginal headings and Article titles to
the Articles of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof.
(vi) Time. Time is of the essence of this Lease and each and all of
its provisions in which performance is a factor.
(vii) Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
(viii) Recordation. Neither Landlord nor Tenant shall record this
Lease or a short form memorandum hereof without the prior written consent of
the other party.
(ix) Quiet Possession. Upon Tenant paying the rent reserved
hereunder and observing and performing all of the covenants, conditions and
provisions on Tenant's part to be observed and performed hereunder, Tenant
shall have quiet possession of the Premises for the entire term hereof, subject
to all the provisions of this Lease.
(x) Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of a sum due from Tenant shall not be
received by Landlord or Landlord's designee within ten (10) days after written
notice that said amount is past due, then Tenant shall pay to Landlord a late
charge equal to ten (10%) per cent of such overdue amount. The parties hereby
agree that such late charges represent a fair and reasonable estimate of the
cost that Landlord will incur by reason of the late payment by Tenant.
Acceptance of such late charges by the Landlord shall in no event constitute a
waiver of Tenant's default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
(xi) Prior Agreements. This Lease contains all of the agreements of
the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreements or understanding pertaining to any such matters
shall be effective for any purpose. No provision of this Lease may be amended
or added to except by an agreement in writing signed by the parties hereto or
their respective successors in interest. This Lease shall not be effective or
binding on any party until fully executed by both parties hereto.
(xii) Inability to Perform. This Lease and the obligations of the
Tenant hereunder shall not be affected or impaired because the Landlord is
unable to fulfill any of its obligations hereunder or is delayed in doing so,
if such inability or delay is caused by reason of strike, labor troubles, acts
of God, or any other cause beyond the reasonable control of the Landlord.
(xiii) Attorney's Fees. In the event of any action or proceeding
brought by either party against the other under this Lease the prevailing party
shall be entitled to recover all costs and expenses including the fees of its
attorneys in such action or proceeding in such amount as the court may adjudge
reasonable as attorney's fees.
(xiv) Sale of Premises by Landlord. In the event of any sale of the
Building, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission
occurring after the consummation of such sale; and the purchaser, at such sale
or any subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any and
all of the covenants and obligations of the Landlord under this Lease.
(xv) Subordination, Attornment. Upon request of the Landlord, Tenant
will in writing subordinate its rights hereunder to the lien of any first
mortgage, or first deed of trust to any bank, insurance company or other
lending institution, now or hereafter in force against the land and building of
which the Premises are a part, and upon any buildings hereafter placed upon the
land of which the Premises are a part, and to all advances made or hereafter to
be made upon the security thereof.
In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the Premises, the Tenant shall attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Landlord under this Lease.
The provisions of this Article to the contrary notwithstanding, and so
long as Tenant is not in default hereunder, this Lease shall remain in full
force and effect for the full term hereof.
(xvi) Name. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.
(xvii) Separability. Any provision of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provision hereof and such other provision shall remain in full force and
affect.
(xviii) Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
(xix) Choice of Law. This Lease shall be governed by the laws of the
State in which the Premises are located.
(xx) Signs and Auctions. Tenant shall not place any sign upon the
Premises or Building or conduct any auction thereon without Landlord's prior
written consent.
(PAGE 4 - OFF. BLDG.) INITIAL:____________
<PAGE> 5
30. BROKERS. Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease excepting
only -NO EXCEPTIONS- and it knows of no other real estate broker of agent who
is entitled to a commission in connection with this Lease.
31. OPTION
TENANT SHALL HAVE THE OPTION TO EXTEND THE TERM OF THIS LEASE FOR 4 FIVE
YEAR TERMS UPON THE SAME TERMS AND CONDITIONS HEREIN CONTAINED EXCEPT THAT
THE RENT SHALL BE ADJUSTED AS HEREIN SET FORTH. WRITTEN NOTICE OF TENANT'S
INTENTION TO RENEW THIS LEASE SHALL BE GIVEN TO THE LANDLORD AT LEAST NINETY
(90) DAYS PRIOR TO THE EXPIRATION OF THIS LEASE AND ANY EXTENSION HEREUNDER.
32. ADJUSTMENT TO BASE RENT
ADJUSTMENT TO MINIMUM RENT PAYABLE HEREUNDER SHALL BE ADJUSTED THROUGHOUT
THE TERM, INCLUDING ANY EXTENSION, EVERY SIXTY (60) MONTHS. ADJUSTMENT SHALL
BE BASED ON CONSUMER PRICE INDEX: SAN FRANCISCO-OAKLAND, SAN JOSE CMSA (BASE
YEAR 1995 VS 1982-84 = 100), WITH A MAXIMUM SIXTY (60) MONTH INCREASE OF
TWENTY (20) PERCENT. NOTWITHSTANDING THE ABOVE PROVISION, THE RENT INCREASE
WILL NOT BE GREATER THAN THE PREVAILING MARKET RATE OF RENT AT THE TIME OF
RENEWAL OR TWENTY (20) PERCENT, WHICHEVER IS LESS.
33. TENANT IMPROVEMENTS
TENANT IMPROVEMENTS TO INCLUDE BUILDING AND CARPETS, AS APPROVED BY
LANDLORD, WILL BE PAID BY TENANT FOR SUITES 320 & 330. TENANT WILL REIMBURSE
THE COST OF RENOVATION OF SUITES 320 & 330 IN APRIL OF 1994 IN THE AMOUNT OF
$3,801.00.
34. COVERED PARKING
TWO COVERED SPACES ARE INCLUDED. AS IT BECOMES AVAILABLE ONE ADDITIONAL
SPACE AT A RATE OF $50.00 PER MONTH.
The parties hereto have executed this Lease at the place and on the dates
specified immediately adjacent to their respective signatures.
If this Lease has been filled in, it has been prepared for submission to
your attorney for his approval. No representation or recommendation is made by
the real estate broker or his agents or employees as to the legal sufficiency,
legal effect, or the consequences of this Lease or the transactions relating
thereto.
NORTHRUP-HOWE TOWER GROUP
By ERNEST L. BUSCH
ERNEST L. BUSCH
Address 865 HOWE AVENUE, SUITE 310 By
SACRAMENTO, CA 95825 ----------------------------------
"LANDLORD"
FIRST COMMERCIAL BANK
By JAMES E. COLTON INTERIM PRESIDENT
Address 2450 VENTURE OAKS WAY By
SACRAMENTO, CA 95833 -----------------------------------
"TENANT"
(PAGE 5-OFF BLDG.)
<PAGE> 6
NORTHRUP-HOWE TOWER GROUP
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, or printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Landlord first had and
obtained and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant.
All approved signs or lettering on doors shall be printed, painted, affixed
or inscribed at the expense of Tenant by a person approved by the Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises; provided, however, that Landlord may furnish and install
a Building standard window covering at all exterior windows. Tenant shall not
without prior written consent of Landlord cause or otherwise sunscreen any
window.
2. The sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by any of the tenants or used by them for any purpose
other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional locks or
any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than that for which they were constructed and no foreign
substances of any kind whatsoever shall be thrown therein and the expense of
any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Tenant who, or whose employees or invitees shall have
caused it.
5. Tenant shall not overload the floor of the Premises or in any way deface
the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought into the
Building without the prior notice to Landlord and all moving of the same into
or out of the Building shall be done at such time and in such manner as
Landlord shall designate. Landlord shall have the right to prescribe the
weight, size and position of all safes and other heavy equipment brought into
the Building and also the times and manner of moving the same in and out of the
Building. safes or other heavy objects shall, if considered necessary by
Landlord, stand on supports of such thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage
to any such safe or property from any cause and all damage done to the
Building by moving or maintaining any such safe or other property shall be
repaired at the expense of Tenant.
7. Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or
other occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with either tenants or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises of
the Building.
8. No cooking shall be done or permitted by any Tenant on the Premises, nor
shall the Premises be used for the storage of merchandise, for washing clothes,
for lodging, or for any improper, objectionable or immoral purposes.
9. Tenant shall not use or keep in the Premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material, or use any method of
heating or air conditioning other than that supplied by Landlord.
10. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Landlord. The location of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to
the approval of Landlord.
11. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building or
to the halls, corridors, elevators or stairways in the Building, or to the
Premises may be refused unless the person seeking access is known to the
person or employee of the Building in charge and has a pass or is properly
identified. The Landlord shall in no case be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person.
In case of invasion, mob, riot, public excitement, or other commotion, the
Landlord reserves the right to prevent access to the Building during the
continuance of the same by closing of the doors or otherwise, for the safety of
the tenants and protection of property in the Building and the Building.
12. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of the Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.
13. No vending machines or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.
14. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building
of which the Premises are a part.
15. Tenant shall not disturb, solicit, or canvass any occupant at the Building
and shall cooperate to prevent same.
16. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
17. Landlord shall have the right to control and operate the public portions of
the Building, and the public facilities, and heating and air conditioning, at
will as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.
18. All entrance doors in the Premises shall be left locked when the Premises
are not in use, and all doors opening to public corridors shall be kept closed
except for normal ingress and egress from the Premises.
INITIAL:
------
------
(PAGE 6-OFF. BLDG.)
<PAGE> 1
Exhibit 10(e)
SEVERANCE AGREEMENT AND GENERAL RELEASE
1. SEVERANCE PAY AND BENEFITS:
Pursuant to the mutual agreement of Dennis F. Ceklovsky
("Employee") and First Commercial Bank and First Commercial Bancorp, Inc.
("Employer"), Employee, for himself, Employee's heirs, executors,
administrators, successors and assigns (hereinafter referred to as the
"Releasors"), hereby accepts the following offer of Employer to provide the
mutually agreed upon severance pay and benefits set forth herein in connection
with cessation of Employee's employment with Employer and termination of
Employee's employment agreement dated November 22, 1994 (the "1994 Employment
Agreement"), effective October 31, 1995:
(a) Employer and Employee hereby agree that Employee shall
cease his employment with Employer effective October
31, 1995 (the "Cessation Date"), at which time
Employee's 1994 Employment Agreement shall terminate
and all salary and benefits payable to Employee shall
cease except as otherwise provided herein.
(b) On the Cessation Date, Employee shall be paid for his
accrued and unused vacation time.
(c) Employer shall provide Employee with continuation of
his current monthly salary, which shall be paid less
applicable payroll withholding amounts in twice
monthly installments, for the period beginning on
Employee's Cessation Date and ending on December 31,
1995.
(d) During the period beginning on Employee's Cessation
Date and ending on June 30, 1996 or until Employee is
employed elsewhere, whichever occurs first, Employer
shall pay Employee's monthly premiums for continuation
coverage under Employer's medical plan pursuant to
COBRA, less an amount equal to the amount currently
paid by Employee monthly for coverage under Employer's
medical plan, so that Employee will pay the same for
coverage under Employer's medical plan during said
period as he currently pays.
(e) Employer shall assign and shall tender to Employee
upon the expiration of seven (7) days from the
Cessation Date all of Employer's right, title and
interest in the term life insurance policy provided to
Employee by Employer. Employer shall pay the premiums
on such policy through December 31, 1996. Employee
shall thereafter assume payment of the premiums on
such policy, and Employer shall not be responsible for
any premiums on said policy after payment of the 1996
premium.
<PAGE> 2
(f) Employer shall pay to employee on January 1, 1996 a
lump sum payment of $80,000, less applicable payroll
withholding amounts. This payment shall be allocated
as follows: $48,000 of the payment is intended by the
parties as compensation for Employee's potential
claims for personal injury, and $32,000 is severance
pay. Employer will not issue a 1099 or W-2 as to the
$48,000. Employee recognizes that he may be liable to
one or more governmental taxing authorities for tax
payments on the $48,000 paid pursuant to this
Severance Agreement and General Release ("Agreement").
Employee agrees that he will pay any and all taxes
which may be imposed upon Employee by any and all
governmental taxing authorities or other entities on
account of the $48,000 paid pursuant to this
Agreement, and that Employer is not liable for such
taxes. Employee shall indemnify and hold Employer
harmless from and for any and all liability for taxes
and other payments which may be imposed upon Employee
by governmental taxing authorities, including
interest, penalties, costs, and attorneys' fees, on
account of the $48,000 paid pursuant to this
Agreement.
2. FULL RELEASE:
In return for such severance payment and benefits, Releasors
hereby fully release and discharge Employer and their respective officers,
directors, employees, agents, insurers, underwriters, subsidiaries, parents,
affiliates, successors or assigns (all such persons, firms, corporations and
entities being deemed beneficiaries hereof and are referred to herein as the
"Releasees") from any and all actions, causes of action, claims, obligations,
costs, losses, liabilities, damages and demands of whatsoever character, whether
or not known, suspected or claimed ("Claims"), which the Releasors have, or
hereafter may have, against the Releasees, including but not limited to, Claims
arising out of or in any way related to Employee's employment, the terms of any
employment agreement or the cessation of Employee's employment.
This Agreement of Employee shall be binding on the executors,
heirs, administrators, successors and assigns of Employee, and shall inure to
the benefit of the respective executors, heirs, administrators, successors and
assigns of the Releasees.
(b) Releasees agree to release Employee from all Claims
which Releasees have, or hereafter may have, against the Releasors arising out
of or in any way related to Employee's employment, the terms of any employment
agreement or the cessation of Employee's employment; provided however, that
Releasees do not agree to release Releasors from any Claims or proceedings
whatsoever which may be brought or claimed by any regulatory authority or for
any actions discovered after the Cessation Date which are related
- 2 -
SEVERANCE AGREEMENT AND GENERAL RELEASE
<PAGE> 3
to Employee's malfeasance, misfeasance, fraud, dishonest or illegal conduct or
gross negligence.
3. EXPRESS WAIVER OF ALL CLAIMS UNDER CALIFORNIA CIVIL CODE
SECTION 1542:
It is understood and agreed that this Agreement extends to all
of the above-described Claims and potential Claims, and that all rights under
California Civil Code Section 1542 are hereby expressly waived by the Releasors
with respect to all such Claims. Said Section 1542 provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor.
4. WAIVER OF RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT
ACT:
Employee understands that this Agreement includes claims and
rights Employee might have under the Age Discrimination in Employment Act
("ADEA"). The waiver of Employee's rights under the ADEA does not extend to
claims or rights that might arise after the date this Agreement is executed. The
monies to be paid to Employee in this Agreement are in addition to any sums to
which he would be entitled without signing this Agreement. For a period of seven
(7) days following execution of this Agreement, Employee may revoke the terms of
this Agreement by a written document received by the Employer on or before the
end of the seven (7) day period. The Agreement will not be final until said
revocation period has expired. Employer will make the payment to Employee as
described above if this Agreement is not revoked by Employee.
Employee acknowledges that he has been given the twenty-one
(21) day period to decide whether to sign this Agreement and has been advised to
consult with an attorney of his own choosing to discuss whether or not to sign
this Agreement.
5. RELEASEES' EXPRESS DENIAL OF LIABILITY:
The payment by the Releasees of the amount and benefits
specified hereinabove shall not be deemed an admission that any liability of the
Releasees exists, and in making said payment Releasees do not admit, but
expressly deny, any liability.
6. CONFIDENTIALITY:
Except pursuant to a valid and effective subpoena, civil
investigative or discovery demand, interrogatories, request for information or
production of documents, order
- 3 -
SEVERANCE AGREEMENT AND GENERAL RELEASE
<PAGE> 4
of a court of competent jurisdiction or governmental entity or similar process,
or as is necessary or appropriate to disclose to any regulatory authority having
jurisdiction over Employer, any current or prospective insurance carrier of
Employer or as otherwise required by law or regulation, Employee and Employer
agree that the terms and amount of this Agreement have been and shall be held
strictly confidential by him and it. Employee and Employer agree that in the
event he or it discloses any information contrary to the confidentiality
provisions of this Agreement, any such breach would be a material breach of this
Agreement for which Employer or Employee, as the case may be, shall be entitled
to pursue any and all legal and equitable remedies available to it or him.
7. COOPERATION:
Employee agrees to reasonably cooperate with Employer, for a
period of six months following Employee's Cessation Date, with regard to the
business of Employer that Employee participated in during the course of
Employee's employment with Employer, including, but not limited to, providing
Employer with information requested by Employer with regard to such business.
8. EMPLOYMENT AGREEMENT:
Employee agrees that all his rights under the 1994 Employment
Agreement with Employer are terminated as of the Cessation Date and acknowledges
that his obligations under paragraphs 8 and 10 remain in full force and effect
in accordance with the terms thereof.
9. SEVERABILITY:
In the event that any term in this Agreement shall for any
reason be held by a court of competent jurisdiction to be invalid, illegal,
void, or unenforceable, the same shall not affect any other term of this
Agreement, but this Agreement shall be construed as if such invalid, illegal,
void, or unenforceable term had never been contained herein.
10. INFORMED AND VOLUNTARY SIGNATURE:
No promise or inducement has been made other than those set out
in this Agreement, and this Agreement is executed by Employee without reliance
on any representation by Employer. Employee hereby acknowledges that Employee
has read and understands this Agreement and that Employee affixes Employee's
signature hereto voluntarily and without coercion.
- 4 -
SEVERANCE AGREEMENT AND GENERAL RELEASE
<PAGE> 5
11. ENTIRE AGREEMENT:
Employer and Employee acknowledge that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party or anyone acting on behalf of a party which are not embodied herein, and
that no other agreement, statement, representation, inducement or promise not
contained in this Agreement shall be valid or binding. Any modification, waiver
or amendment of this Agreement will be effective only if it is in writing and
signed by all parties to the Agreement.
12. ARBITRATION:
Any disagreement, dispute, controversy or claim arising out of
this Agreement shall be settled exclusively and finally by arbitration. Employer
and Employee hereby expressly waive their entitlement, if any, to have
controversies between them related to matters that are to be arbitrated
hereunder decided by a court or a jury.
(a) The arbitration shall be conducted in accordance with
the Commercial Rules of Arbitration of the American
Arbitration Association ("AAA"). The arbitral tribunal
shall consist of one (1) arbitrator that shall be
mutually agreed upon by the parties or, if the parties
are unable to agree, the arbitrator shall be chosen by
the regional administrator of the AAA.
(b) The arbitrator shall have full authority to decide any
matters in controversy or dispute between the parties
except that he or she shall not have authority to vary
the terms of this Agreement.
(c) The arbitration shall be conducted in Sacramento,
California, or in any other city in the United States
of America that the parties to the dispute designate
by mutual written consent, and Employee and Employer
hereby consent to jurisdiction of the Arbitration held
in said locale and any award herein made. The
arbitration award may be enforced by any court of
competent authority in the same manner as a judgment
ordered by a court of law and/or equity.
(d) Any decision or award of the arbitrator shall be final
and binding upon the parties to the arbitration
proceeding. The parties hereto agree that the arbitral
award may be enforced against the parties to the
arbitration proceeding or their assets wherever the
award may be entered in any court having jurisdiction
thereof.
(e) All arbitration proceedings herein shall be pursued
privately and neither Employer nor Employee shall
publicize the fact of, or the decision of
- 5 -
SEVERANCE AGREEMENT AND GENERAL RELEASE
<PAGE> 6
any such arbitration except pursuant to a valid and
effective subpoena, civil investigative or discovery
demand, interrogatories, request for information or
production of documents, order of a court of competent
jurisdiction or governmental entity or similar
process, or as is necessary or appropriate to disclose
to any regulatory authority having jurisdiction over
Employer, any current or prospective insurance carrier
of Employer or as otherwise required by law or
regulation, or for the purpose of pursuing any rights
of review as set forth in Section 11 through 13 of the
United States Arbitration Act.
13. ATTORNEYS' FEES:
In the event that any party shall bring an action or
arbitration in connection with the performance, breach or interpretation of this
Agreement, then the prevailing party in such action or arbitration as determined
by the court or other body having jurisdiction shall be entitled to recover from
the losing party in such action or arbitration, as determined by the court or
such other body having jurisdiction, all reasonable costs and expenses of
litigation or arbitration, including reasonable attorneys' fees, court costs,
costs of investigation and other costs reasonably related to such proceeding, in
such amounts as may be determined in the discretion of the court or such other
body having jurisdiction.
I, DENNIS F. CEKLOVSKY, UNDERSTAND THAT THIS IS A LEGAL
RELEASE; MY SIGNATURE IS VOLUNTARY.
IN WITNESS WHEREOF, the parties hereto have executed this
Severance Agreement and General Release on this 31st day of October, 1995.
By Employee _____________________________________
DENNIS F. CEKLOVSKY
By Employer _____________________________________
MANUEL PERRY, JR.
Chairman of the Board of Directors
- 6 -
SEVERANCE AGREEMENT AND GENERAL RELEASE
<PAGE> 1
Exhibit 10(f)
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
DATED NOVEMBER 22, 1994
THIS AMENDMENT NO. 1 ("Amendment No. 1") to that certain Employment
Agreement dated November 22, 1994 (the "Agreement") is made and entered into on
this _____ day of November, 1995, by and among FIRST COMMERCIAL BANK, a
California state-chartered banking corporation (the "Bank"), FIRST COMMERCIAL
BANCORP, INC., a Delaware corporation ("Bancorp") (Bank and Bancorp are jointly
and severally referred to herein as "Employers"), and ANNE H. LONG (hereinafter
referred to as "Employee"):
WHEREAS, Employee currently is employed by Employers as Executive Vice
President and Chief Financial Officer under the terms of the Agreement;
WHEREAS, Employers and Employee desire to amend certain provisions of
the Agreement, which amendments, unless otherwise specified herein, shall become
effective immediately upon execution of this Amendment No. 1; and
WHEREAS, except as otherwise set forth herein, capitalized terms used
throughout this Amendment No. 1 shall have the meanings assigned to them in the
Agreement.
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. Section 4(a) of the Agreement is amended to read in its
entirety as follows:
"(a) BASE COMPENSATION. Employers shall pay or cause to be paid to
Employee (i) through November 30, 1995, a base compensation of $125,000 per
year, and (ii) thereafter during the Employment Term, a base compensation of
$70,000 per year, payable in conformity with Employers' normal payroll
procedures (the "Base Salary") and prorated for any partial year in which this
Agreement is in effect. Employee's performance may be reviewed by the Boards
from time to time during the Employment Term, and Employee's Base Salary may be
increased as the Boards, in their sole discretion, may determine, but subject to
such regulatory review and/or approval as may be required by a presently or then
existing written agreement, as such term is defined in Section 325.2(x) of the
FDIC regulations, and such regulatory review and/or approval as may be required
by the Federal Reserve Bank of San Francisco. The Boards shall conduct the first
such salary review in April, 1997."
2. Section 4(g) of the Agreement is amended to read in its
entirety as follows:
"(g) VACATION. Employee shall be entitled to four (4) weeks' paid
vacation leave per year, prorated for any partial calendar year in which this
Agreement is in effect. Such vacation leave shall be taken at such time or
times as mutually agreed upon by Employee and the Boards
- 1 -
<PAGE> 2
and in accordance with Employers' vacation leave policy, provided, that at least
two (2) weeks of such vacation shall be taken consecutively. Employee
acknowledges that the requirement of two (2) consecutive weeks of vacation is
required by sound banking practice. As of November 30, 1995, Employee will have
accrued and unused vacation time of twenty-nine (29) days, for which Employee
shall be paid $14,107.87 on November 30, 1995, less any amounts Employee shall
use prior to November 30, 1995. Commencing on December 1, 1995, unused vacation
time may be carried over by Employee from year to year, provided, however, that
Employee shall accrue no additional vacation time at any time that the Employee
has accrued and unused vacation time of four (4) weeks. Notwithstanding
anything to the contrary contained in this Agreement, upon termination of this
Agreement pursuant to Sections 5(a), 5(c), 5(d) or 5(e), Employee shall be
entitled to receive payment for any accrued and unused vacation days accumulated
in accordance with this Section 4(g) after December 1, 1995 through the date of
termination, based upon Employee's then current base salary."
3. The introductory paragraph to Section 5 of the Agreement is
amended to read in its entirety as follows:
"5. TERMINATION OF AGREEMENT.
This Agreement may be terminated with or without cause during the
Employment Term in accordance with this Section 5. In the event of such
termination, Employee and Employers shall be released from all obligations under
this Agreement, except that Employee shall remain subject to Sections 8, 10, 15,
17 and 21, and Employers shall be released from all obligations under this
Agreement, except as otherwise provided in this Section 5 and Sections 4, 15, 17
and 21."
4. Section 5(a) of the Agreement is amended to read in its
entirety as follows:
"(a) EARLY TERMINATION BY EMPLOYERS WITHOUT CAUSE. This Agreement
and Employee's employment may be terminated by Employers without cause, for any
reason whatsoever, in the sole, absolute and unreviewable discretion of
Employers, upon 30 days' written notice by the Boards to Employee. All other
benefits and compensation under this Agreement shall be discontinued as of the
date of termination, except that Employee shall be entitled to receive (1) any
previously awarded but unpaid bonus compensation, if any, provided pursuant to
Section 4(b) hereof, (2) any payments in respect of unused and accrued vacation
days, pursuant to Section 4(g) hereof, and (3) the insurance coverage provided
pursuant to Section 4(e) hereof for a period of up to six (6) months at
Employers' expense, subject to Employee's subsequent employment elsewhere and
receipt by Employee from such subsequent employer of comparable insurance
coverage (the benefits and payments due to Employee under this Section 5(a)
being hereinafter referred to as the "Section 5(a) Payments"). Such Section
5(a) Payments shall constitute liquidated damages in lieu of any and all claims
by Employee against Employers, and shall be in full and complete satisfaction of
any and all rights which Employee may enjoy hereunder and is expressly
conditioned upon receipt by Employers of a full and unconditional
- 2 -
<PAGE> 3
release from Employee of any and all liability of either of Employers or any of
their affiliates arising out of this Agreement or out of the employment
relationship between Employee and Employers."
5. The first sentence of Section 5(b) is amended to read as
follows:
"(b) This Agreement and Employee's employment may be terminated for
cause by Employers upon written notice to Employee, and Employee shall not be
entitled to receive compensation or other benefits for any period after
termination for cause."
6. Section 5(c) of the Agreement is amended to read in its
entirety as follows:
"(c) EARLY TERMINATION BY EMPLOYEE. Employee may terminate this
Agreement upon thirty (30) days' written notice to Employers. Employee shall be
entitled to receive the insurance coverage provided pursuant to Section 4(e)
hereof for a period of up to six (6) months at Employers' expense, subject to
Employee's subsequent employment elsewhere and receipt by Employee from such
subsequent employer of comparable insurance coverage. Employee shall not be
entitled to receive any other compensation or other benefits for any period
after early termination by Employee, except as otherwise provided by Section
4(g) hereof."
7. Section 5(d) of the Agreement is amended to read in its
entirety as follows:
"(d) EARLY TERMINATION UPON DISABILITY. If during any Employment
Term Employee becomes unable to perform her duties hereunder because of a
physical or mental condition and has exhausted the medical leave provided to her
under the Family Medical Leave and Family Rights Acts, the Bank may at its
option terminate this Agreement. Employee shall be entitled to the Base Salary
and insurance coverage as provided in Sections 4(a) and 4(e) of this Agreement
for the period of any medical leave prior to the termination of this Agreement,
but not beyond the date specified herein for any Employment Term, plus declared
but unpaid bonus, if any, as described in Section 4(b) hereof, and accrued but
unused vacation leave pursuant to Section 4(g) hereof; provided, however, that
Base Salary as provided in Section 4(a) shall not be paid for more than a total
of sixty-five (65) days due to medical leave during any Employment Term. All
compensation and benefits provided for under this Agreement shall cease as of
the date of termination, except that Employee shall be entitled to receive
payment for any accrued but unused vacation leave pursuant to Section 4(g)
hereof and the Bank shall use reasonable efforts to assure that Employee shall
have the option to assume such insurance coverage at her individual expense from
and after termination of insurance coverage under this Section 5(d)."
8. Section 5(e) of the Agreement is amended to read in its
entirety as follows:
"(e) MERGER OR CORPORATE DISSOLUTION. In the event of a merger in
which Employers are not the surviving or resulting corporations; in the event of
a transfer of all or substantially all of the assets of Employers; or in the
event of any other corporate reorganization in which there
- 3 -
<PAGE> 4
is a change in ownership of the outstanding shares of either of Employers where
more than fifty percent (50%) of the outstanding shares of either of Employers
are transferred to any other partnership, corporation, trust or business entity
("change in control") not resulting from conservatorship, receivership or
insolvency of the Employers; or in the event of the dissolution of Employers,
this Agreement shall not be terminated, but instead, Employers shall use
reasonable efforts to provide that the surviving or resulting corporation or the
transferee of Employers' assets, if other than one of the Employers, is bound
by, and shall have the benefit of, the provisions of this Agreement; except in
the event of dissolution of both Employers, which shall result in Section 5(a)
Payments, so long as Employers have funds to make such payments, the making of
such payments is not limited or prohibited by any law or regulation, and the
making of such payments is without liability on the part of the directors of
Employers. In the event, however, that such surviving or resulting corporation
or transferee, other than one of the Employers, elects to terminate this
Agreement, Employee shall be entitled to receive the Section 5(a) Payments from
such surviving or resulting corporation or transferee."
9. In consideration of Employee's agreement to amend the
provisions of Sections 4(a), 4(g) and 5 hereof, and to terminate any and all
oral agreements to grant to Employee additional stock options, Employer agrees
to pay to Employee the lump sum amount of $62,500, which sum shall be due and
payable to Employee upon the signing by Anne H. Long and Manuel Perry, Jr. of
this Amendment No. 1 to the Agreement. Employee has elected to receive said
payment on January 2, 1996. Payment of such sum shall be paid to Employee via
Employer's payroll procedures, or via cashier's check or wire transfer to an
account designated by Employee.
10. Except as set forth herein, all other provisions and terms of
the Agreement remain unchanged and in full force and effect. This Amendment No.
1 shall not operate as an amendment or waiver of, or estoppel with respect to,
any other obligation, covenant, agreement or condition contained in the
Agreement.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, Employee and Employers have executed this Amendment
No. 1 on the day and year first above-written.
EMPLOYERS: EMPLOYEE:
FIRST COMMERCIAL BANCORP, INC.
- ---------------------------------- ----------------------------------
Manuel Perry, Jr. Anne H. Long
Chairman of the Board of Directors
FIRST COMMERCIAL BANK
- ----------------------------------
Manuel Perry, Jr.
Chairman of the Board of Directors
- 5 -
<PAGE> 1
EXHIBIT 10(g)
FIRST BANKS, INC.
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the "Agreement") is made this ___
day of October, 1995, by and between First Commercial Bank, a California
banking corporation (the "Bank") and First Banks, Inc., a Missouri corporation
("First Banks").
WHEREAS First Banks is a multi-bank and thrift holding company which
provides certain services to its subsidiary financial institutions on a
centralized basis and is willing to provide such services to Bank, and
WHEREAS the Bank is currently operating as a commercial and retail
bank in the State of California, and desires to avail itself of such
centralized services in connection with its operations,
THEREFORE, in consideration of the premises and the mutual terms and
provisions set forth in this Agreement, First Banks and the Bank hereby agree
as follows;
Services to be performed:
First Banks shall undertake to perform certain services for the
benefit of the Bank including, but not limited to those services enumerated
below. These services may be provided by employees of First Banks, any
subsidiary of First Banks, or external sources retained by First Banks on
behalf of the Bank and/or its affiliates. First Banks will prepare a monthly
statement to the Bank indicating the nature of the services performed and the
fees charged for such services.
Services performed by employees of First Banks will be billed to the
Bank on the basis of actual hours required to perform the services using
standard hourly rates established for each type of service. The hourly rates in
effect as of the date of this Agreement are listed in Attachment A. These rates
will be reviewed periodically and adjusted as necessary to reflect First Banks'
current costs in delivering the services, but may only be adjusted once during
any calendar year. The Bank will be provided at least ninety (90) days' notice
prior to any change in the hourly rates to be used. The Bank may terminate
this Agreement at any time if any rate increase is deemed excessive by the
Bank's Board of Directors.
Services performed by employees of subsidiaries of First Banks
(excluding those services separately provided for under that certain Cost
Sharing Agreement by and among First Bank & Trust, First Commercial Bank and
First Commercial Bancorp dated __, 1995) may be rendered directly to the Bank
or to First Banks for the benefit of the Bank. Such services will be charged by
the subsidiary delivering the service based on actual hours required to perform
the services using the same standard hourly rates used for employees of First
Banks. A subsidiary providing services will receive credit on its monthly
management fees statement for the amount charged for the services.
Services provided by external sources will be charged to the Bank at
First Banks' cost. Services which benefit more than one subsidiary of First
Banks will be allocated between them using the basis deemed most appropriate
for the particular service and the charge for that service.
<PAGE> 2
Management Services Agreement, continued
Page 2
All services provided are subject to oversight and review by the
Bank's Board of Directors, and will be coordinated with appropriate Bank
management personnel. In addition, services provided by independent certified
public accountants and First Banks' internal audit staff will be reported to
the Banks' Board of Directors and be subject to the prior approval, supervision
and direction of the Board or the Audit Committee thereof.
Included in the services to be provided will be the following:
1. Lending:
a. Loan review
b. Loan administration and support
c. Loan and business development
d. Loan servicing
e. Loan collection and workout
f. Other lending activities
2. Human resources:
a. Human resources administration
b. Records and compliance
c. Employee recruiting and training
d. Payroll administration and benefits
e. Other human resources activities
3. Corporate audit:
a. Assisting external auditors
b. Internal auditing
c. Compliance and Community Reinvestment Act assistance
d. Assisting examinations and replies to reports
e. Other audit activities.
4. General accounting:
a. Regulatory examinations and compliance
b. Income tax returns and tax audits
c. Estimated tax payments and tax accruals
d. State and local taxes
e. Fixed asset records and accounting
f. General accounting assistance
g. Regulatory reporting
h. SEC reporting and compliance
i. Systems and procedures
j. Other accounting activities
5. Asset/liability management
6. Investments, in accordance with and subject to the Bank's Investment Policy
7. Planning and budgets
<PAGE> 3
Management Services Agreement, continued
Page 3
8. Branch administration:
a. Marketing and business development
b. Branch operations
c. Customer service and training
d. Other branch administration activities
9. Purchasing and accounts payable
10. Preparation for and participation in meetings
In addition, First Banks will contract for certain services to be
provided to the Bank and its affiliates, which may be charged through
management fees, or through separate direct charges to the Bank. These will
include advertising and promotional expenses, property and liability insurance,
Certain external legal, audit and tax assistance, and employee benefit
programs. Any and all services and charges therefor outside the terms of this
Agreement will be discussed with the management and/or Board of the Bank,
implemented and billed separately.
Notwithstanding anything else contained in this Agreement to the
contrary, any such insurance policy, employee benefit plan or other program or
service to be provided or rendered by First Banks or any subsidiaries or
affiliates of First Banks pursuant to this Agreement shall be provided on terms
and conditions, including audit standards, that are substantially the same, or
at least as favorable to the Bank as then prevailing at the time for comparable
transactions with or not involving other nonaffiliated companies, or in the
absence of comparable transactions, on terms and under circumstances, including
audit standards, that in good faith would be offered to, or would apply to,
nonaffiliated companies.
Travel expenses associated with performance of management services
will be charged to the Bank based on the expense reports received from the
employees. Travel time, or other non-productive time, will not be charged to
the Bank.
Billing of fees:
First Banks shall prepare and submit to the Bank a monthly bill for
services rendered indicating the nature of services provided and the charges
therefore in sufficient detail to provide the Bank a basis for evaluating the
cost/benefit of items charged. At a minimum, bills will indicate each of the
services listed above, the hours charged for each, the related rate per hour,
and the amount charged for each. It shall be the responsibility of First Banks
to maintain time reports, worksheets and summaries supporting the amounts
billed. These will be furnished to the Bank and/or its examiners or auditors
upon request.
Amounts billed will be payable to First Banks by either a direct
charge to the Bank's account at First Bank (Missouri), or, if appropriate, a
credit to that account on the last day of the month following the month in
which the services were performed. Management fee statements will be provided
to the Bank at least five working days prior to payment. If the Bank disputes
any amounts
<PAGE> 4
Management Services Agreement, continued
Page 4
billed, it will provide First Banks with an explanation of its disagreement and
a solution for resolving the dispute. If the Bank is unable to reach an
agreement with First Banks with respect to the disputed items, it will be
settled by a decision reached between the Presidents or Chief Financial
Officers of the Bank and First Banks.
The Bank shall make available to First Banks all records, facilities
and personnel necessary to enable First Banks to perform the services required,
which records and other materials shall be returned to the Bank when the
services are completed. First Banks shall furnish the necessary forms and
instructions to the Bank's personnel.
First Banks shall give the same care to Bank's work as it gives to its
own work. However, First Banks does not warrant the work free of error, and
shall be liable only for First Bank's own gross negligence or willful misconduct
or that of its subsidiaries and/or affiliates other than the Bank.
The services performed under this Agreement by First Banks will be
subject to the regulations and examination of the federal or state agencies
having supervisory jurisdiction over the Bank and its affiliates and First
Banks to the same extent as if such services were being performed solely by the
Bank on its own premises. The provisions of this Agreement are subject to the
approval, modification, regulation or ruling of any governmental agency having
jurisdiction over the Bank or First Banks or its affiliates. This Agreement
shall be binding upon the parties and their successors or assigns, and may only
be amended or modified by a writing executed by the parties hereto.
First Banks will hold in confidence all information relating, to the
Bank's assets, liabilities, business or affairs, or those of any of its
customers, which is received by First Banks in the course of rendering the
services hereunder. It will make the same effort to safeguard such information
as it does to protect its own proprietary data. First Banks and its
subsidiaries will not use any proprietary information regarding the Bank for
their own benefit or that of any affiliate, and all confidential information
obtained during the term of this Agreement will be returned to the Bank upon
its termination.
The term of the Agreement is for one year, but it shall be
automatically renewable for additional periods of one year each unless the Bank
shall give written notice of termination prior to the end of any term. The
Agreement is terminable by Bank at any time upon thirty (30) days' prior
written notice to First Banks.
This Agreement shall be binding upon the parties and their successors
or assigns, and may only be amended by a writing executed by both parties.
<PAGE> 5
Management Services Agreement, continued
Page 5
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers executed this Agreement this ____ day of October, 1995
FIRST COMMERCIAL BANK
By
Its
FIRST BANKS, INC
By
Its
<PAGE> 1
EXHIBIT 10(h)
COST SHARING AGREEMENT BY AND AMONG
FIRST BANK & TRUST,
FIRST COMMERCIAL BANK AND
FIRST COMMERCIAL BANCORP, INC.
This Cost Sharing Agreement (the "Agreement") is made this _____ day
of October, 1995, by and between First Bank & Trust, Santa Ana, California, a
California banking corporation ("First Bank") and First Commercial Bank,
Sacramento, California, a California banking corporation ("FC Bank"), (each a
"Bank" and collectively the "Banks") and First Commercial Bancorp, Inc., a
Delaware corporation ("First Commercial").
WHEREAS First Bank is currently operating as a commercial and retail
bank in the State of California, with offices in Walnut Creek and San Jose,
California, as well as Orange County and Los Angeles County, California, and
desires to share with First Commercial and FC Bank the costs, benefits and
services of certain personnel, and
WHEREAS FC Bank is currently operating as a commercial and retail bank
in the State of California, with offices in Sacramento, Roseville, Concord,
Campbell and San Francisco, California, and desires to share with First Bank
the costs, benefits and services of certain personnel and purchase certain
other services from First Bank,
WHEREAS First Commercial is a registered Bank Holding Company, whose
sole subsidiary is FC Bank, and desires to share with First Bank the costs,
benefits and services of certain personnel and purchase certain other services
from First Bank,
WHEREAS First Bank is a wholly-owned subsidiary of First Banks, Inc.,
a Missouri corporation and a multi-bank and thrift holding company ("FB,
Inc."), and
WHEREAS FB, Inc. has acquired majority control of FC Bank,
THEREFORE, in consideration of the premises and the mutual terms and
provisions set forth in this Agreement, First Bank, First Commercial and FC
Bank hereby agree as follows:
Services to be performed:
First Bank shall undertake to perform certain services for the benefit
of First Commercial and FC Bank, including, but not limited to those enumerated
below, as and when requested by First Commercial or FC Bank, as the case may be,
and approved by First Bank. These services will generally be provided by
employees of First Bank, but may include services provided by external sources
such as independent contractors or consultants retained by First Bank on behalf
of itself and First Commercial and FC Bank, as the case may be. First Bank will
prepare a monthly statement to First Commercial and FC Bank, respectively,
indicating the nature of the services performed, the entity performing such
services and the fees charged for such services.
FC Bank shall undertake to perform certain services for the benefit of
First Bank, including, but not limited to those enumerated below, as and when
requested by First Bank and approved by FC Bank. These services will generally
be provided by employees of FC Bank, but may include
<PAGE> 2
Cost Sharing Agreement, continued
Page 2
services provided by First Commercial as well as external sources such as
independent contractors or consultants retained by FC Bank on behalf of itself
and First Bank. FC Bank will prepare a monthly statement to First Bank
indicating the nature of the services performed, the entity performing such
services and the fees charged for such services.
Notwithstanding anything else contained in this Agreement to the
contrary, any such services provided by First Bank to either First Commercial
or FC Bank or by FC Bank or First Commercial to First Bank pursuant to this
Agreement shall be provided on terms and conditions, including audit standards,
that are substantially the same, or at least as favorable to First Bank, First
Commercial and FC Bank, as the case may be, as then prevailing at the time for
comparable transactions with or not involving other non-affiliated companies,
or in the absence of comparable transactions, on terms and under circumstances,
including audit standards, that in good faith would be offered to, or would
apply to, non-affiliated companies.
Services performed by employees of First Bank will be billed to First
Commercial or FC Bank, as the case may be, and services performed by employees
of FC Bank will be billed to First Bank, on the most appropriate basis for the
type of service provided. For loan officers engaged in the development of new
business and marketing, charges will be based on the aggregate loan volume
assigned to each officer for each Bank. Generally, services provided by other
employees will be charged on the basis of hours required to perform the
services using hourly rates established for each employee. Hours billed for
exempt employees will be charged based on a maximum of eight hours per day,
forty hours per week. Hours billed for non-exempt employees will be charged
based on actual hours worked, including any overtime hours for which such
employee may have been paid.
The base rates will be established by dividing each such employee's
annualized wages, excluding any overtime compensation by 1,864 hours per year.
This amount will be increased by 20% to compensate for the cost of fringe
benefits, payroll taxes and the cost of premises, equipment, supplies and other
expenses incurred by each Bank on behalf of the employee. Rates for overtime
hours of non-exempt employees will be calculated at 150% or 200% of the
employee's base rate as may be appropriate for the hours charged.
Services provided by external sources will be charged at cost. The
allocation of costs between the Banks will generally be on the basis of hours
expended for each Bank, unless another basis is determined mutually by the
Banks to be more appropriate for the particular service and charge.
Included in the services to be provided will be the following:
1. Lending:
a. Loan and business development
b. Loan administration and support
c. Loan collection and workout
d. Other lending activities
<PAGE> 3
Cost Sharing Agreement, continued
Page 3
2. Human resources:
a. Human resources administration
b. Records and compliance
c. Employee recruiting and training
d. Payroll administration and benefits
e. Other human resources activities
3. Branch administration:
a. Branch operations
b. Customer service and training
c. Data capture and item processing
d. Other branch administration activities
Travel expenses incurred in connection with the performance of
services will be charged to each Bank based on the expense reports received
from the employees. Travel time, or other non-productive time, will not be
charged to the Banks.
Billing of fees:
Each Bank shall prepare and submit to the other Bank a monthly bill
for services rendered in sufficient detail to provide that Bank a basis for
evaluating the cost/benefit of items charged. It shall be the responsibility
of the Bank preparing the statement to maintain time reports, worksheets and
summaries supporting the amounts billed. Such documentation will be furnished
to the other Bank, and/or its examiners or auditors upon request.
Amounts billed will be payable to the billing Bank by either a direct
payment or offsetting it against a reciprocal bill submitted to that Bank after
written approval of payment thereof by the Bank being billed. If either Bank
disputes the amounts billed, such Bank will provide to the billing Bank a
written explanation of its disagreement and a solution for resolving the
dispute. If the Banks are unable to reach an agreement with respect to the
disputed items, the disagreement will be resolved by a decision between the
Presidents of the Banks. Payments will be due by the last day of the month
following the month in which the services were performed. Cost sharing
statements will be provided to the other Bank at least five working days prior
to payment.
General:
Each Bank shall make available to the other Bank all records,
facilities and personnel reasonably necessary to enable it to perform the
services required, which records and other materials shall be returned to that
Bank when the services are completed. The Bank performing the services shall
furnish the necessary forms and instructions to the other Bank's personnel.
<PAGE> 4
Cost Sharing Agreement, continued
Page 4
Each Bank shall give the same care to the other Bank's work as it
gives to its own work. However, neither Bank shall warrant the work free of
error, and each Bank shall be liable only for its own gross negligence or
willful misconduct.
The services performed under this Agreement by each Bank will be
subject to the regulations and examination of the federal or state agencies
having supervisory jurisdiction over the Bank to the same extent as if such
services were being performed solely by the Bank on its own premises. The
provisions of this Agreement are subject to the approval, modification,
regulation or ruling of any governmental agency having jurisdiction over each
Bank, First Commercial, First Banks or its affiliates. This Agreement shall be
binding upon the parties and their successors or assigns, and may only be
amended or modified by a writing executed by the parties hereto.
Each Bank will hold in confidence, during the term and following the
termination of this Agreement, all information relating to the other Bank's
assets, liabilities, business or affairs, or those of any of its customers,
which such Bank may receive in the course of rendering the services hereunder
and shall return all confidential information obtained during the performance
of the Agreement to the other Bank upon termination of the Agreement. Each
Bank will make the same effort to safeguard such information as it does to
protect its own proprietary data.
The term of the Agreement is for one year, but it shall be
automatically renewable for additional periods of one year each unless any
party hereto shall give thirty (30) days' written notice of termination prior
to the end of any term to the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have, by their duly authorized
officers executed this Agreement this ___ day of October, 1995.
FIRST BANK AND TRUST
By
Its
FIRST COMMERCIAL BANK
By
Its
FIRST COMMERCIAL BANCORP, INC.
By
Its
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AND STATEMENT OF OPERATIONS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 56,805,000
<SECURITIES> 30,673,000
<RECEIVABLES> 81,919,000
<ALLOWANCES> 4,838,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,147,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 172,923,000
<CURRENT-LIABILITIES> 167,239,000
<BONDS> 0
<COMMON> 47,000
0
0
<OTHER-SE> (1,482,000)
<TOTAL-LIABILITY-AND-EQUITY> 172,923,000
<SALES> 0
<TOTAL-REVENUES> 11,782,000
<CGS> 0
<TOTAL-COSTS> 4,639,000
<OTHER-EXPENSES> 10,097,000
<LOSS-PROVISION> 3,345,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,299,000)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (6,301,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,301,000)
<EPS-PRIMARY> (1.35)
<EPS-DILUTED> 0
</TABLE>
