SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant To Section 14(c) of the
Securities Exchange Act of 1934, As Amended
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Definitive Information Statement
THE SAN FRANCISCO COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14c-5(g)and 0-11.
(1) Title of each class of securities to which transaction applies:
Class A Common Stock
(2) Aggregate number of securities to which transaction applies:
29,320,725 shares
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was determined):
Purchase price of $1.95 per share of Class A Common Stock Outstanding
(4) Proposed maximum aggregate value of transaction:
$57,175,414
(5) total fee paid: $11,435.08
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
none
(2) Form, schedule or registration statement no.:
(3) Filing Party:
(4) Date Filed:
page
The San Francisco Company
550 Montgomery Street
San Francisco, California 94111
November , 2000
Dear Stockholder:
The Board of the San Francisco Company has approved a merger of
The San Francisco Company with a subsidiary of First Banks
America, Inc (the "Merger"). We believe this Merger is in your
best interest as a stockholder of The San Francisco Company.
On September 22, 2000, The San Francisco Company and its wholly
owned subsidiary, Bank of San Francisco, entered into an
Agreement and Plan of Merger with First Banks, Inc., its wholly
owned subsidiary, First Banks America, Inc., and its wholly owned
subsidiary, Redwood Bank. The proposed transaction would result
in the Merger of The San Francisco Company with a subsidiary of
First Banks America, Inc. and Bank of San Francisco with and into
Redwood Bank. The Merger is subject to various terms and
conditions as more fully described in the attached Information
Statement dated November , 2000.
At the time of the Merger, for each share of The San Francisco
Company Class A Common (the "Common Stock") stock that you hold
you, will receive approximately $1.95 per share of Common Stock,
and for each share of The San Francisco Company 8% Series B
Preferred Stock that you hold, you will receive approximately
$7.00 per share.
The Boards of Directors of The San Francisco Company and the Bank
of San Francisco unanimously support the Merger. In addition,
the principal voting stockholder of The San Francisco Company,
holding 96.3% of the outstanding Common Stock, has consented to
the principal terms of the Agreement and Plan of Merger and has
executed and delivered an irrevocable proxy, in favor of First
Banks America, Inc. voting for the Merger. Therefore, we will
not hold a meeting of stockholders to vote on the Merger.
The attached documents provide you with detailed information
about the Merger. Please read these documents carefully in their
entirety. You may also obtain information about The San
Francisco Company from publicly available documents that have
been filed with the Securities and Exchange Commission.
Sincerely,
James E. Gilleran
Chairman of the Board and Chief Executive Officer
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
page
INFORMATION STATEMENT DATED NOVEMBER , 2000
AND FIRST MAILED TO STOCKHOLDERS ON OR ABOUT NOVEMBER , 2000
TABLE OF CONTENTS
Item 1. Information Required by Items of Schedule 14A.
Page
Summary Terms 1
Date, time and place information 1
Voting Securities and Principal Holders Thereof 1
Appraisal Rights 4
The Merger 4
Information About the Transaction 5
Background and overview 5
Name, address and telephone number of
principal executive offices 5
Summary of the Material Features of the Merger 5
Accounting Treatment 5
Federal Income Tax Consequences 6
Reason for the Transaction 6
Closing, Conversion of Shares, and Costs 6
Representations and Warranties 7
Agreements of the Company - Conduct to Closing 7
Agreements of FBA 8
Conditions Precedent to the Merger 9
Termination 10
Regulatory Approval and Status 10
Federal Reserve Board 10
California Department of Financial Institutions 10
Report, Opinion or Appraisal 11
Description of Negotiations Concerning the Merger 13
Range of Bid and Asked Prices the
date preceding the announcement 15
Item 2. Proxies Are Not Solicited. 15
Item 3. Interest of Certain Persons in or
Opposition to Matters to be Acted Upon 16
page
THE SAN FRANCISCO COMPANY
SCHEDULE 14C INFORMATION
FORWARD- LOOKING STATEMENTS
This document and the documents referenced herein may contain
forward-looking statements (and documents referred to) that are
subject to numerous risks and uncertainties. Many possible events
or factors could affect the future financial results and
performance of each of the companies and their ability to
consummate the Merger as described.
Item 1. Information Required by Items of Schedule 14A
SUMMARY TERMS
On September 22, 2000, the San Francisco Company (the "Company")
and its wholly owned subsidiary, Bank of San Francisco ("BSF"),
entered into an Agreement and Plan of Merger (the "Agreement")
with First Banks, Inc., (the "First Banks") its wholly owned
subsidiary, First Banks America, Inc., ("FBA, Inc") and its
wholly owned subsidiary, Redwood Bank ("Redwood") (collectively,
"FBA"). The proposed transaction would result in the Merger of
the Company with a subsidiary of FBA, Inc. and BSF with and into
Redwood (the "Merger").
The Board of Directors of both the Company and the Bank (the
"Board") approved the Merger, which will result in the sale of
all of the Class A Common Stock (the "Common Stock") and the 8%
Series B Preferred Stock (the "Preferred Stock") to FBA, after
reviewing other alternatives and determining that the Merger is
fair to all Stockholders. The following are the most material
terms of the Merger.
. FBA has agreed to pay $1.95 for each share of Common Stock
and $7.00 for each share of Preferred Stock. See Closing,
Conversion of Shares, and Costs for additional discussion.
. The Merger cannot be consummated without regulatory approval
as discussed under Regulatory Approval and Status.
. The consummation of the Merger is subject to various
conditions that must be satisfied or waived by FBA and the
Company as more fully discussed under Conditions Precedent to
the Merger.
. Subject to the conditions described under Conditions
Precedent to the Merger being satisfied or waived and regulatory
approval, management expects the Merger to be consummated during
the first quarter of 2001.
. The Principal Beneficial Stockholders, as defined below,
have consented to the Merger, and the Principal Voting
Stockholder, as defined below, has consented to the Merger and
executed an irrevocable proxy, representing 96.3% of the
outstanding Common Stock, in favor of the Merger. The Company
has delivered the irrevocable proxy to FBA. See VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF.
DATE, TIME AND PLACE INFORMATION
The date of this Information Statement is November , 2000.
It was mailed to the stockholders on or about November , 2000.
No meeting of stockholders has been called.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of October 31, 2000, the authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value
$0.01 per share and 5,000,000 shares of preferred stock, par
value of $0.01, of which 437,500 are designated Preferred Stock.
page 1
As of October 31, 2000, there were 29,320,725 shares of Common
Stock outstanding and 15,869 shares of Preferred Stock
outstanding. In addition, options to acquire 3,890,291 shares of
Common Stock were outstanding under the 1993 Amended and Restated
Stock Option Plan (the "Stock Option Plan").
Mr. Robb Evans, as Trustee under a Voting Trust Agreement dated
November 30, 1998 (the "VTA"), (the "Principal Voting
Stockholder") is the record owner of 28,224,533 shares of Common
Stock, or 96.3% of the outstanding shares of Common Stock. Mr.
Putra Masagung and PT Gunung Agung (the "Principal Beneficial
Stockholders") are the beneficial owners of all of the Common
Stock held of record by the Principal Voting Stockholder under
the VTA. As of October 31, 2000, Mr. Putra Masagung has
represented to the Company that he is the beneficial owner of
14,426,457 shares of Common Stock and PT Gunung Agung has
represented to the Company that it beneficially owns 13,798,076
shares of Common Stock.
The Principal Beneficial Stockholders have consented to the
Merger, and the Principal Voting Stockholder has consented to the
Merger and executed an irrevocable proxy, representing 96.3% of
the outstanding Common Stock, in favor of the Merger. The
Company has delivered the irrevocable proxy to FBA.
Security Ownership of Certain Beneficial Owners and Management
Common Stock
The following sets forth information regarding the beneficial
ownership of the holders of five percent (5%) or more of the
Common Stock as of October 31, 2000. The address of PT Gunung
Agung is 55 MH Thamrin, Jakarta, Indonesia, and Mr. Masagung's
address for the purpose of his beneficial ownership is the
principal executive office of the Company. The address for Mr.
Gilleran for the purpose of his beneficial ownership is the
principal executive office of the Company.
Other than as set forth below based upon filings made with the
SEC, the Company is not aware of any person who is the beneficial
owner of five percent (5%) or more of the Common Stock as of
October 31, 2000.
Number of
Shares of Number of
Common Stock Shares of
Beneficially Percent Common Stock Percent of
Name of Beneficial Owner Owned of Class Outstanding Outstanding
Pt Gunung Agung 13,798,076 42.0% 13,798,076 47.1%
Mr. Putra Masagung 14,426,457 43.9 14,426,457 49.2
Mr. James E. Gilleran 1,690,452 5.1 -- --
page 2
The following table shows the beneficial ownership of directors,
Named Executive Officers, and directors and Named Executive
Officers as a group as of October 31, 2000:
Right to Acquire
Number of shares
Number of Shares of Common Stock
Name of of Common Stock Percent Within Sixty Percent
Beneficial Owner Beneficially Owned Of Class Days of Class
James E. Gilleran -
Director of the Company
and the Bank (1) 1,690,452 5.1% 1,690,452 5.1%
John McGrath -
Director of the Company
and the Bank (1)(2) 361,116 1.1% 111,116 0.3%
Kent D. Price -
Director of the Company (1) 360,422 1.1% 360,422 1.1%
Peter Foo -
Director of the Company
and Bank (3)(4) 46,438 0.1% 46,438 0.1%
Nicholas Unkovic -
Director of the Company
and Bank (3)(4) 47,315 0.1% 47,315 0.1%
Willard D. Sharpe -
Director of the Company
and Bank (3)(4) 50,438 0.2% 50,188 0.2%
Gordon B. Swanson -
Director of the
Company (3)(4) 52,625 0.2% 50,188 0.2%
Paul Erickson -
Director of the Company
and Bank (4)(5) 39,829 0.1% 39,829 0.1%
Gary G. Williams -
Director of the Company
and Bank (3)(4) 46,438 0.1% 46,438 0.1%
Keary Colwell -
Chief Financial Officer
of the Company and
the Bank (6) 116,000 0.4% 26,000 0.1%
Joanne Haakinson -
Chief Administrative
Officer of the
Bank and Secretary of
the Company (7) 116,000 0.4% 116,000 0.4%
Directors and Named
Executive Officers as a
Group (eleven persons) 2,927,073 8.9% 2,584,386 7.9%
_____________________
(1) The stock options have anti-dilution provisions.
(2) Mr. McGrath was granted options to acquire 59,653 shares of
the Common Stock at a price of $0.45 effective November 18, 1998.
These options vest ratably over three years, with one-third
vesting on each anniversary of the grant. 19,884 of these were
vested as of October 31, 2000. In 1999, Mr. McGrath exercised
options to acquire 250,000 shares of Common Stock with an
exercise price of $0.34.
(3) Each outside director not covered by an existing contract
was granted options to acquire 26,438 shares of the Common Stock
at a price of $0.34 effective October 1, 1996. These options are
fully vested.
(4) Each outside director not covered by an existing contract
was granted options to acquire 30,000 shares of the Common Stock
at a price of $0.45 effective November 18, 1998. These options
vest ratably over three years, with one-third vesting on each
anniversary of the grant. One-third, or 10,000, of these were
vested as of October 31, 2000 and another one-third, or 10,000,
will vest on November 18, 2000.
(5) Mr. Erickson has been granted options to acquire 26,438 of
the Common Stock at a price of $0.45 effective November 21, 1997.
The options vest ratably over three years with 25% vested
immediately. As of October 31, 2000, 75% were vested.
(6) Ms. Colwell exercised options to acquire 90,000 of the
Common Stock at a price of $0.34. Ms. Colwell holds options to
acquire 39,000 of the Common Stock with a price of $0.45
effective November 18, 1998 with one-third vesting on each
anniversary of the grant. One-third, or 13,000 were vested at
October 31, 2000 and another one-third, or 10,000, will vest on
November 18, 2000.
(7) Ms. Haakinson has been granted options to acquire 90,000 of
the Common Stock at a price of $0.34 effective October 1, 1996
all of which are vested, and options to acquire 39,000 of the
Common Stock with an exercise price of $0.45 effective November
18, 1998 with one-third vesting on the anniversary of the grant.
One-third, or 13,000, were vested at October 31, 2000 and another
one-third, or 10,000, will vest on November 18, 2000.
(8) In accordance with the Stock Option Plan, the unvested
options to acquire Common Stock will vest immediately upon the
Merger.
page 3
Preferred Stock
The following sets forth information regarding the beneficial
ownership of the Preferred Stock held by directors, Named
Executive Officers, and directors and Named Executive Officers as
a group as of October 31, 2000.
Number of
Shares
Beneficially Percent
Name of Beneficial Owner Owned of Class
Gordon Swanson 7,200 45.4%
All directors and Named Executive
Officers as a group (eleven persons) 7,200 45.4
The address of Mr. Swanson for the purpose of his ownership of
the Preferred Stock is the principal executive office of the
Company. No other directors or officers have beneficial interest
in the Preferred Stock.
A Preferred Stock dividend of $0.28 is declared and paid
semi-annually. As of October 31, 2000, no unpaid dividends were
declared and there are no dividends in arrears.
APPRAISAL RIGHTS
Any stockholder who gives written notice to the Company, within
20 days after the date this Information Statement was first
mailed to stockholders may demand the appraisal of such
stockholder's shares of Common Stock or Preferred Stock, provided
that such stockholder has not consented to the merger and
complies with certain other requirements. The Principal Voting
Stockholder holding 96.3% of the outstanding voting shares has
consented to the Merger. As provided in Section 262 of the
Delaware General Corporation Law (the "DGCL"), the jurisdiction
in which the Company is incorporated, a stockholder entitled to
an appraisal shall be entitled to receive the fair value of his
or her shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair
rate of interest, if any, to be paid upon the amount determined
to be the fair value. Such payment may be higher or lower than
the value of the consideration to be received by non-dissenting
stockholders in the merger. If a stockholder delivers the
required notice on a timely basis and satisfies other conditions
under the DGCL, such stockholder may file a petition in the
Delaware Court of Chancery demanding a determination of the fair
value of the shares for which appraisal rights have been
exercised, which petition must be made within 120 days after
consummation of the Merger.
A copy of Section 262 of the DGCL is attached to this Information
Statement as Exhibit B. Any stockholder who fails to satisfy
any of the procedural requirements provided by the DGCL may lose
his or her appraisal rights.
Any appraisal demands delivered to the Company prior to the
Merger described below may be sent to Keary Colwell, Executive
Vice President and Chief Financial Officer, 550 Montgomery
Street, San Francisco, California 94111.
First Security Van Kasper is the only market maker in the Common
Stock. An active market does not exist for either the Common
Stock or the Preferred Stock. The estimated market price of the
Common Stock on September 21, 2000, the day before the Merger was
announced, was $0.92 per share based on the bid price quoted by
First Security Van Kasper. There is no market price for the
Preferred Stock. However, the Common Stock equivalent price of
Preferred Stock assuming the Preferred Stock was converted into
Common Stock would be $0.05 per share of Preferred Stock.
THE MERGER
This section of the Information Statement describes the material
terms of the Merger as defined below. You are urged to read
carefully this entire document and the other documents to which
this document refers to fully
page 5
understand the proposed Merger as defined below.
Attached as Exhibit A is the Agreement. Please
read the Agreement. It is the legal document that governs the
Merger.
Information About the Transaction
Background and Overview
On September 22, 2000, the Company and its wholly owned
subsidiary, BSF, entered into the Agreement with First Banks, its
wholly owned subsidiary, FBA, Inc and its wholly owned
subsidiary, Redwood. The proposed transaction would result in
the Merger of the Company with and into FBA, Inc. and BSF with
and into Redwood. The Merger is subject to various terms and
conditions as more fully described below.
The Board approved the Agreement after reviewing its terms, as
well as other alternative transactions, and determining that the
Merger was fair to all stockholders. Consummation of the Merger
will result in the sale of all of the Common Stock and Preferred
Stock to FBA for cash. The consummation of the Merger is subject
to regulatory approval, certain financing provisions, and other
terms and conditions, which are described below. The Principal
Beneficial Stockholders who control 96.3% of the outstanding
Common Stock are required by regulatory orders from the Board of
Governors of the Federal Reserve System (the "FRB") and the
California Department of Financial Institutions (the "DFI") to
divest their beneficial ownership interest by July 4, 2001. The
Principal Beneficial Stockholders have consented to the Merger,
and the Principal Voting Stockholder has approved the Agreement
and the Merger, and executed an irrevocable proxy in favor or
FBA, Inc., representing 96.3% of the outstanding Common Stock,
voting in favor of the Merger. The Company has delivered the
irrevocable proxy to FBA.
As set forth in the Agreement, FBA has agreed to pay $1.95 for
each share of Common Stock and $7.00 for each share of Preferred
Stock. In addition, any exercisable options to purchase Common
Stock outstanding immediately prior to closing with an exercise
price of less than $1.95 per share may be surrendered and the
holder of options may receive a total net option value as defined
below. As of October 31, 2000, there were 29,320,725 shares of
Common Stock outstanding and 15,869 shares of Preferred Stock
outstanding. In addition, options to acquire 3,890,291 shares of
Common Stock were outstanding under the Stock Option Plan. It is
estimated that options to acquire 3,372,559 shares of Common
Stock will be surrendered in accordance with the terms of the
Merger. All other options will be cancelled.
The Merger provides that at closing, the Company and FBA will
deliver certain documents including legal opinions from their
respective legal counsel regarding various aspects of the Merger,
evidence of various consents, and certifications regarding
conduct and other commitments. The consummation of the Merger is
subject to regulatory approval, certain financing provisions, and
other terms and conditions that are described below, and is
expected by management to occur in the first quarter of 2001.
Name, address and telephone number of principal executive offices
The San Francisco Company First Banks America, Inc.
550 Montgomery Street 135 North Meramec
San Francisco, California 94111 Clayton,Missouri 63105
(415)781-7810 (314)854-4600
Summary of the Material Features of the Merger
Accounting Treatment
FBA will account for the Merger under the purchase method of
accounting in accordance with Accounting Principles Board Opinion
No. 16, "Business Combinations," as amended. Under this method
of accounting, the purchase price will be allocated to assets
acquired and liabilities assumed based on their fair market value
at the date of the acquisition. Income of the Company prior to
the consummation of the Merger will not be included in FBA's
income.
page 5
Federal Income Tax Treatment
Generally, cash received by a stockholder will result in a
capital gain or loss for Federal income tax purposes measured by
the difference between the amount of cash received and the tax
basis of the shares sold. Such capital gain or loss would be
long-term capital gain or loss if the holding period for the
shares were longer than one year at closing. Generally, cash
received by option holders concurrent with the closing will
result in ordinary income for Federal income tax purposes.
Stockholders are urged to consult with their tax advisors
regarding the particular tax consequences of the Merger to them,
including the effects of Federal, state, local, foreign and other
tax laws.
Reason for the Transaction
The Principal Beneficial Stockholders who together hold
beneficial ownership in 96.3% of the outstanding Common Stock,
are required by regulatory orders with the FRB and DFI to divest
their beneficial ownership interest by July 4, 2001. The
Principal Beneficial Stockholders have consented to, and the
Principal Voting Stockholder has approve the Agreement and
executed an irrevocable proxy in favor of FBA, Inc. voting for
the Merger.
The Board has unanimously approved the Agreement and the Merger,
which will result in the sale of all of the Common Stock and
Preferred Stock to FBA, after reviewing other alternatives, and
determining that the Merger is fair to all Stockholders. See
additional discussion under Description of Negotiations
Concerning the Merger.
Closing, Conversion of Shares and Costs
Closing
The Agreement provides that at closing, the Company and FBA will
deliver certain documents including legal opinions from their
respective legal counsel regarding various aspects of the Merger,
evidence of various consents, and certifications regarding
representations, warranties, and satisfaction or waiver of all
closing conditions. The consummation of the Merger is subject to
regulatory approval, certain financing provisions, and other
terms and conditions that are described below, and is expected by
management to occur in the first quarter of 2001.
Conversion of Shares
The Agreement provides that at closing, the Company will cease to
exist and be merged with and into FBA, Inc. All Common Stock,
Preferred Stock and options to acquire Common Stock will be
canceled in exchange for payment of the merger consideration.
Following consummation of the Merger, FBA or its exchange agent
will provide a letter of transmittal to all Stockholders
regarding the surrender of stock certificates in exchange for a
check representing the amount of cash that such holder has the
right to receive in respect of the certificate(s) so surrendered.
The Company will provide instructions to be delivered to all
option holders regarding the exercise or surrender of options to
acquire Common stock in exchange for a check representing the net
option value described below.
FBA will pay $1.95 for each share of Common Stock and each
exercised option to acquire Common Stock, and $7.00 for each
share of Preferred Stock, subject to adjustment as described
below. As of October 31, 2000, there were 29,320,725 shares of
outstanding Common Stock and 15,869 shares of outstanding
Preferred Stock. In addition, options to acquire 3,890,291
shares of Common Stock were outstanding. It is estimated that
options to acquire 3,372,559 shares of Common Stock will be
surrendered in accordance with the terms of the Agreement and
options to acquire 517,732 will be cancelled as a result of the
Merger.
The Company has granted options to purchase unissued shares of
Common Stock for a purchase price per share between $0.34 per
share and $5.68 per share. In the Merger, each option to
purchase a share of Common Stock granted under the Stock Option
Plan will be converted into the right to receive cash equal to
the "net option value". The net option value is equal to the
difference, if positive, between $1.95 and the exercise price of
the stock option. Options with exercise prices equal to or above
$1.95 will be canceled without payment. As a result of the
Merger, presently unvested options to acquire shares of Common
Stock granted under the Stock Option Plan will vest and
page 6
become immediately exercisable. These options otherwise would have
vested periodically until November 18, 2001 at exercise price of
$0.45 per share. All options not exercised in accordance with
the instructions provided prior to the Merger will be cancelled.
Upon surrender to FBA, or its exchange agent, of each stock
certificate for exchange and cancellation, together with a duly
executed letter of transmittal, the holder of such certificate
shall be entitled to receive a check, without interest,
representing the amount of cash which such stockholder is
entitled. FBA has agreed to cooperate in making arrangement for
payment to the Principal Voting Stockholder by wire transfer
immediately upon consummation of the Merger. In the event of a
lost or stole certificate, the stockholder may be required to
post a bond to indemnify FBA against any claim made against such
a certificate.
Costs
In April 2000, the Principal Voting Stockholder entered into an
agreement with a financial advisor, to render financial advisory
and investment banking services in connection with identification
and evaluation of opportunities for the sale of the Principal
Beneficial Stockholders' interest in the Company. Under the
agreement with the financial advisor, the financial advisory fee
of $2.4 million and out-of-pocket expenses not to exceed $10,000
must be paid to the financial advisor upon consummation of the
Merger. A portion of the fee will be borne by the Principal
Beneficial Stockholders with respect to their shares, totaling
$2.1 million, for the sale of their shares and for a fairness
opinion provided to the Principal Voting Stockholder in
connection with the sale of their shares. The Company agreed to
pay the remaining portion of financial advisor's fee of
approximately $345,000. In addition, each party in the Merger
will pay its own costs for legal and other advisory services.
The Company anticipates its total expenses for advisors and other
costs related to the Merger will total $300,000.
Representations and Warranties
In the Agreement, the Company has made numerous representations
and warranties to FBA regarding the Company's and BSF's capital
structure, standing, authority and subsidiaries. The Company
also made representations and warranties regarding financial
information, regulatory and tax matters, pending litigation and
undisclosed liabilities, investment and loan portfolios, employee
and employment matters, compliance with laws and regulations,
title to properties and environmental matters, commitments and
contracts, conduct, material interest of certain persons, and
delivery by the Principal Voting Stockholder of an irrevocable
proxy.
FBA has made various representations and warranties to the
Company regarding its organization and authority, financial
information, litigation, and ability to consummate the Merger.
Both parties made representations and warranties that none of the
filings to be made or information for the inclusion in any
document to be filed with any regulatory authority in connection
with the Merger will be false or misleading in any material
respect or omit to state any material fact, and all filings will
comply in all material respects with applicable laws, rules and
regulations.
Agreements of the Company - Conduct to Closing
The Company has agreed to certain operating restrictions between
September 22, 2000 and consummation of the Merger. The Company
has agreed to continue to conduct its business in the usual,
regular and ordinary course subject to the requirement of FBA's
prior approval of certain actions. The restrictions and
limitations include requiring FBA's prior approval for
transactions above certain amounts related to new and renewing
commitments, loans, and contracts. New commitments, loans, and
contracts in excess of $1.0 million and renewing commitments,
loans, and contracts in excess of $1.5 million are subject to
FBA's prior approval.
In addition, the Company is prohibited from engaging in certain
activities other than in the ordinary course of business, or
ordinary and normal course of business consistent with past
practices including granting increases in compensation payable or
making any changes in any employment arrangements, borrowing any
amount of funds, purchasing investment securities with an average
remaining life to maturity of greater than five years or any
asset-backed securities other than those issued or guaranteed by
a government or quasi-government organization, entering into any
agreement or contract, with certain exceptions, with a term of
more than six months, canceling
page 7
or waiving any material rights of substantial value, foreclosing, taking
title, or control of any real estate property without first obtaining
a Phase I environmental report which indicates the property is free of
pollutants, committing any act or failing to perform any act
which will cause a breach of any agreement or contract which will
have a material adverse effect, violating any law, statute, rule,
governmental regulation or order that would have a material
adverse effect, purchasing any real or personal property or
capital expenditure in excess of $75,000, or increasing or
decreasing the rate of interest paid on time deposits.
The Agreement also prohibits the Company from engaging in certain
activities including the redemption of capital stock, the
declaration and payment of dividends other than regular dividends
on the Preferred Stock, and the issuance of warrants, options or
rights to acquire capital stock. The Company cannot engage in
any activity that would materially and adversely affect its
ability to consummate the Merger. The Company cannot change its
Certificate or Articles of Incorporation or Bylaws. The Company
cannot solicit or encourage, or, except to the extent required by
applicable corporate law or fiduciary principles, hold
discussions or negotiations with or provide information to any
person in connection with any proposal to purchase all or a
substantial portion of the business, assets or capital stock of
the Company or any subsidiary.
The Company has agreed to notify FBA of any matter or event known
to and directly involving the Company or the Bank that would
reasonably expect to have a material adverse effect on the
business of the Company or the Bank or affect the ability to the
Company or the Bank to consummate the Merger.
As required by the Agreement, the Company delivered to FBA a
written consent executed by the Principal Voting Stockholder
approving the Agreement and the Merger. The Company agreed to
prepare and file with the SEC this Information Statement.
The Company has agreed to provide and has provided a Phase I
environmental report on its headquarters building at 550
Montgomery Street, San Francisco, California. If a Phase I
environmental report requires further investigation, in FBA's
reasonable opinion and subject to the lessor's consent, FBA may
obtain a Phase II environmental report. See additional
discussion under Conditions Precedent to the Merger. The Company
agreed to use its best efforts to obtain all consents of third
parties necessary to consummation of the Merger including consent
of the lessor (to the extent required) under the current lease of
the office premises located at 550 Montgomery Street, San
Francisco, California, to the extent required,
The Company agreed to provide reasonable access to books,
records, papers and documents relating to assets, stockownership,
properties, operations, obligations, and liabilities. In
addition, the Company agreed to provide subsequent financial
statements and regulatory reports to FBA. The financial
statements must be prepared on a basis consistent with past
practices. The financial statements may not be misleading in any
material respect.
The Company has specifically agreed to use its best efforts to
consummate the Merger within 180 days after the date of signing
the Agreement, or by March 21, 2001, and to cooperate with FBA in
preparing and executing such documents as may be necessary to
consummate the Merger.
Agreements of FBA
FBA has agreed to use its best efforts, as more fully described
under Conditions Precedent to the Merger, to obtain regulatory
approval, to complete the financing, described below, by December
31, 2000, and to consummate the Merger within 180 days of
signing, or March 21, 2001. FBA shall give prompt notice to the
Company with regard to any event or condition which would cause
or constitute a breach of its representations and warranties
described above, and FBA has agreed to no engage in any
transaction or take any action that would render untrue in any
material respect any of its representations and warranties.
FBA has agreed to provide certain employee benefits with respect
to each employee who remains an employee following the closing
subject to FBA's ongoing right to adopt subsequent amendments or
modifications to any benefit plans or to terminate such plans.
FBA has agreed to credit each continuing employee with his or her
term of service with the Company for the purpose of vesting and
any age or period of service requirements.
page 8
FBA has agreed to indemnify present officers and directors of the
Company against losses and claims arising out of their positions
with the Company for a period of four years from the date of
Merger. In addition, the existing indemnification agreements
between the Company, Bank, and officers and directors shall
remain in effect subject to the amendments described under
Conditions Precedent to the Merger. If after the Merger is
consummated, the Company is liquidated or otherwise not to be
continued, then FBA shall indemnify each party to the same extent
so obligated. FBA has the option to purchase director and
officer liability insurance insuring the indemnified parties on
terms acceptable to FBA.
Conditions Precedent to the Merger
There are certain conditions precedent to the Merger that are
obligations of the Company or FBA. The Agreement may be
terminated if the following conditions are not met, unless one or
both of the parties waive failure.
. All representations and warranties made by the Company,
Bank, and FBA shall be true in all material respects as of the
consummation date and each party shall have performed and
complied in all material respects with its obligations and
agreements required to be performed prior to the consummation of
the Merger. If any of the parties are unable to represent that
the representations and warranties, and their conduct are in all
material respects in accordance with the Agreement, then the
parties must waive the condition or requirement or the Agreement
may be terminated.
. Regulatory approval is required and cannot be waived by the
Company or FBA. A denial of a required regulatory approval would
automatically cause the Agreement to terminate. See additional
discussion on regulatory consent under Regulatory Approval and
Status. All waiting period required by law shall have expired.
. First Banks, Inc. has agreed to use its best efforts to
complete an offering of trust preferred securities or obtain
alternative financing totaling $30.0 million under customary
terms. As of October 31, 2000, this condition has been
satisfied.
. The Company has agreed to provide and has provided a Phase I
environmental report to FBA for the Company's headquarters
building located at 550 Montgomery Street, San Francisco,
California. FBA has the option of obtaining a Phase II
environmental report, with appropriate consents, if the Phase I
environmental report is not reasonably acceptable. In the event
that an environmental report indicates estimated environmental
remediation costs of more than $600,000, the Merger price shall
be reduced by the amount in excess of $600,000 to a maximum price
adjustment of $5.0 million. The maximum price adjustment for
Common Stock would be a reduction of approximately $0.16 per
share, to $1.79 per share, and for Preferred Stock would be a
reduction of $1.40 per share to $5.60 per share. If the price
adjustment exceeds $5.0 million, both parties must agree to waive
this condition or the Agreement terminates.
. The Company has agreed to provide certain legal opinions
reasonably acceptable to FBA. In addition to the standard legal
opinion regarding the validity and good standing of the Company
and the Bank, two additional legal opinions are required. An
opinion regarding the necessity of any third party consent under
the lease of the Company's headquarter building at 550 Montgomery
Street, San Francisco, California, and an opinion regarding the
number of outstanding shares of stock in the Company and the Bank
are required. If the Company is unable to deliver the legal
opinions, in a form reasonably satisfactory to FBA and its
counsel, then FBA may waive the condition or terminate the
Agreement.
. The Company has agreed to deliver amendments to existing
indemnification agreements to FBA. If the Company is unable to
deliver the amendments, FBA may waive the condition or terminate
the Agreement.
. No legal action may be taken or pending, or any statute,
rule, regulation or order entered, enforced or deemed applicable
to the Merger which makes the consummation illegal. Stockholders
of the Company
page 9
owning no more than 15% of the Common Stock outstanding shall have
perfected the right to dissent. FBA may waive the condition or terminate
the Agreement.
. FBA has agreed to deposit the requisite amount of cash to be
paid in exchange for the Common Stock, Preferred Stock, and the
options exercised or surrendered with First Bank, a Missouri
banking corporation which is a wholly-owned subsidiary of First
Banks.
Termination
The Agreement may be terminated, subject to waiver in certain
circumstances, under the following conditions:
. By mutual written agreement between the Company and FBA
prior to closing.
. In the event of a material breach of any of the
representations and warranties or agreements that is not cured
within 30 days, the non-breaching party may terminate and cancel
the Agreement.
. In the event of denial of, or failure to obtain regulatory
approval. Regulatory approval is required and cannot be waived
by the Company or FBA. A denial of a required regulatory
approval would automatically cause the Agreement to terminate.
See additional discussion on regulatory consent under Regulatory
Approval and Status.
. In the event any price adjustment for estimated
environmental costs exceeds $5.0 million.
. In the event the Company or BSF become subject to regulatory
sanctions.
. In the event of failure to meet or waive the conditions
described under Conditions Precedent to the Merger within 210
days, or by April 18, 2001.
Regulatory Approval and Status
The Merger cannot be completed unless it is approved or exempted
by the DFI and FRB. It is expected that, once the FRB and DFI
approve the Merger or grant a waiver or exemption, as applicable,
and the other conditions of the Agreement are met or waived, the
Merger will be consummated on the last business day of said month
or the first business day of the following month.
The Agreement provides that FBA must file all of the required
applications or notices with the FRB, DFI, and any other
regulatory authorities as soon as practicable, but in no event
later than six calendar weeks after September 22, 2000, or by
November 3, 2000. The required regulatory applications were
filed on October 25, 2000. As of the date of this document, the
required approvals or waivers have not been obtained. While we
do not know of any reason that FBA would not be able to obtain
the necessary approvals, exemptions or waivers in a timely
manner, we cannot be certain when or if they will be obtained.
Federal Reserve Board
The Merger is subject to prior approval by the FRB under Section
3 of the Bank Holding Company Act, as amended (the "BHCA"). The
FRB may waive the requirement of an application and prior
approval under the BHCA in connection with certain bank holding
company mergers if the transaction is part of the merger of the
bank or banks to be acquired with a subsidiary bank of the
acquiring bank holding company. FBA and the Company have agreed
to merge their subsidiary banks, BSF, with and into FBA's lead
subsidiary bank, Redwood (the "Bank Merger"). The Bank Merger is
subject to the prior approval of the DFI.
California Department of Financial Institutions
Because BSF is a state-chartered bank, the Merger is subject to
prior approval of the California Commissioner of Financial
Institutions under Section 701 of the California Financial Code.
page 10
Report, Opinion or Appraisal
The Company has not received a written report, opinion or
appraisal regarding the Merger consideration or its terms and
conditions. The Company's management and Board, did, however,
obtain publicly available information to assess the fairness of
the consideration offered by FBA, and engage separate legal
counsel experienced in bank sales and purchase transactions to
assist in the negotiation of the terms of the Agreement. Based on
the information shown in the following tables giving
consideration to the type of transaction (either cash or the
issuance of stock of the acquiring company, or a combination of
cash and stock), and giving consideration to the background
described under Description of Negotiations Concerning the
Merger, management and the Board concluded that the consideration
offered by FBA is fair to all Stockholders. Using publicly
available information, the Company's management and Board
compared selected financial and operating data for the Company to
corresponding data of companies located in California, that they
selected as comparable to the Company, that had announced
definitive agreements in 2000. The comparable cash transactions,
shown below, are acquisitions of companies of similar size
banking operations in California.
Multiple(1)(2) Capital Return on
Seller Buyer Capital Earnings /Assets Equity
Los Robles Pacific Capital 2.7 x 15.6 x 7.6% 20.2%
Sierra National Bank of the Sierra 1.8 28.0 6.0 15.6
Valley Merchants Business Bancorp 2.0 14.9 10.4 13.4
Bank of Ventura FBA 2.6 20.7 9.1 15.7
Commercial Bank of
San Francisco FBA 1.8 27.7 9.1 11.3
Millennium Bank FBA 1.9 15.2 10.5 12.7
Average -- 2.1 20.4 8.8 14.8
The San Francisco
Company FBA 2.3(4) 12.0(3) 13.6 21.2
--------------------
(1) Multiple of capital is the cash purchase price divided by
the company's equity capital.
(2) Multiple of earnings is the cash purchase price divided by
the trailing quarter annualized earnings.
(3) The Company's multiple of earnings is below average due to
higher net income as a result of the income tax benefit of net
operating loss carryforwards. If the Company's earnings were
taxed in a similar manner as those of other institutions, the
multiple of earnings would be comparable to the average.
(4) The Company's multiple of capital is higher than the average.
If the Company's capital level were at the average, the capital
multiple would have been higher than the average.
page 11
In addition, using publicly available information, the Company's
management and Board considered the average price of all types of
bank transactions in California from 1998, 1999, 2000, and the
average for the past ten years as follows:
Multiple of (1)(2) Capital Return on
Year Capital Earnings /Assets Equity
10 year Average - Median 1.9 x 20.7 x 8.4% 11.1%
2000 High 3.5 32.7 7.2 18.3
Median 2.6 20.8 7.6 13.1
Low 1.3 10.8 10.6 4.7
1999 High 4.6 116.7 8.5 24.9
Median 2.5 22.0 8.6 12.9
Low 1.4 13.6 25.2 (8.3)
1998 High 8.0 43.6 5.8 33.2
Median 2.9 21.2 9.2 12.4
Low 1.0 8.8 11.5 0.9
The San Francisco Company 2.3(4) 12.0(3) 13.6 21.2
--------------------
(1) Multiple of capital is the cash purchase price divided by
the company's equity capital.
(2) Multiple of earnings is the cash purchase price divided by
the trailing quarter annualized earnings.
(3) The Company's multiple of earnings is below average due to
higher net income as a result of the income tax benefit of net
operating loss carryforwards. If the Company's earnings were
taxed in a similar manner as those of the other institutions, the
multiple of earnings would be comparable to the average.
(4) The Company's multiple of capital is higher than average. If
the Company's capital level were at the average, the capital
multiple would have been higher than the average.
In addition, using publicly available information, the Company's
management and Board considered the average price of all types of
transactions nationwide which were announced in 2000 of financial
institutions that, like BSF, have assets totaling between $100
million and $500 million and have return on average assets in
excess of 1% and return on average equity in excess of 10%. The
transactions include both cash and stock acquisitions. The
following summarizes the information considered:
Multiple of (1)(2) Capital Return on
Measurement Range Capital Earnings /Assets Equity
High 3.8 x 26.1 x 10.0% 23.6%
Median 2.6 20.0 7.4 14.2
Low 1.7 9.2 7.0 10.3
Average 2.4 18.8 8.8 14.8
The San Francisco Company 2.3(4) 12.0(3) 13.6 21.2
--------------------
(1) Multiple of capital is the cash purchase price divided by
the company's equity capital.
(2) Multiple of earnings is the cash purchase price divided by
the trailing quarter annualized earnings.
(3) The Company's multiple of earnings is below average due to
higher net income as a result of the income tax benefit of net
operating loss carryforwards. If the Company's earnings were
taxed in a similar manner as those of the other institutions, the
multiple of earnings would be higher than the average.
(4) The Company's multiple of capital is higher than average. If
the Company's capital level were at the average, the capital
multiple would have been below the average.
The Principal Voting Stockholder engaged the services of a
financial advisor to evaluate opportunities for a sale of its
interest in the Company and to identify possible buyers. Prior
to the Principal Voting Stockholder approving
page 12
the Merger, the financial advisor issued, for the benefit of the
Principal Voting Stockholder, a verbal fairness opinion, as requested,
and management believes the financial advisor will issue a written
fairness opinion.
Description of Negotiations Concerning the Merger
In November 1998, the Company's Principal Beneficial Stockholders
entered into the VTA with the Trustee, Mr. Robb Evans, the
Principal Voting Stockholder, the FRB and the DFI. The VTA
requires the Principal Beneficial Stockholders to divest of their
beneficial interest in the Company by July 4, 2001. The VTA also
requires that the Principal Voting Stockholder use his best
efforts to sell the entire Company, not just the Principal
Beneficial Stockholders' shares.
The Company's management has from time to time reviewed with the
Board possible strategic business combinations with other
financial institutions, including larger bank holding companies,
and acquisitions by of the Principal Beneficial Stockholders'
interest in the Company as part of its ongoing evaluation of
available strategies to divest the Principal Beneficial
Stockholders' interest. Although the Company's management and
Board believed the Company had established itself as a valuable
independent franchise in the greater San Francisco Bay Area of
California, they also observed that the combination of the
Company with a strong and successful bank holding company in need
of an established California operation might provide an
opportunity to realize additional value for all of the
Stockholders of the Company.
In April 2000, the Principal Voting Stockholder entered into an
agreement with a financial advisor to render financial advisory
and investment banking services in connection with identification
and evaluation of opportunities for the sale of the Principal
Beneficial Stockholders' interest in the Company. The Company
understands that in April 2000, the financial advisor contacted
approximately 25 potential parties to solicit their interest in
acquiring the Company. In May 2000, the financial advisor
distributed a confidential offering memorandum describing the
Company to approximately 12 interested financial institutions and
others who had indicated interest in the purchase of the Company
and BSF. In June 2000, the financial advisor obtained
preliminary expressions of interest from approximately seven
interested parties. In June and July 2000, four interested
parties, selected by the financial advisor, performed due
diligence at the Company's headquarters.
In July 2000, management unsuccessfully attempted to attract
investors who would be willing to finance management's purchase
of the Company and BSF.
The financial advisor requested that final proposals from all
interested parties be presented by July 31, 2000. The financial
advisor immediately presented the proposals to the Principal
Voting Stockholder. On August 2, 2000, the proposals were
presented to the Principal Beneficial Stockholders for their
consideration. All of the proposals, from other financial
institutions, contemplated a business combination transaction
involving Company and its wholly owned subsidiary, BSF. Based on
the analysis of the four proposals, the Principal Beneficial
Stockholders selected the FBA proposal. Management believes the
Principal Beneficial Stockholders' selected FBA's proposal
because, overall, it was more favorable than the other proposals.
On August 11, 2000, the Principal Voting Stockholder accepted the
preliminary terms as outlined in FBA's expression of interest
dated August 2, 2000, subject to the approval of the Board.
On August 16, 2000, the Company's Board met to consider the
Principal Voting Stockholder's action and discuss the proposals.
The Company's Board concluded that, while the Company did not
consider itself to be up for sale and remaining independent
continued to be the prevailing business strategy, the Board
recognized that the sale of the Principal Beneficial
Stockholders' interest was imminent. After discussion,
management and the Board concluded that negotiation of a
definitive agreement with FBA was in the best interest of all of
the Stockholders of the Company.
During August and September 2000, extensive discussions were held
between the management of, and counsel for, the Company and FBA,
as well as counsel for the Principal Voting Stockholder,
concerning the final terms of the Agreement. The Agreement was
revised several times as the parties negotiated over various
issues, including
page 13
the terms of the Agreement, the financing requirements, the treatment
of outstanding options, and other conditions and issues.
The Board held special meetings on August 31, 2000, September 19,
2000, and September 22, 2000 to discuss the terms of the proposal
and directed management and its advisors to proceed with
discussions and negotiations concerning the Agreement. On
September 21, 2000, the Company understands that the financial
advisor orally confirmed its opinion to the Principal Voting
Stockholder its opinion that the consideration to be received by
the Principal Beneficial Stockholders was fair from a financial
point of view.
On September 22, 2000, the Board held a special meeting to
consider the final points material to the negotiations. All
members of the Board were present at the meeting. At the
meeting, the members of the Board unanimously approved the
Agreement and authorized Company's management to take all action
reasonably necessary to effect the Merger. On September 22,
2000, the Company and FBA concluded the negotiation of the
definitive agreement and executed the Agreement. The Agreement
was publicly announced on Friday, September 22, 2000.
In reaching its decision to approve the Agreement, the Board
analyzed alternatives for enhancement of stockholder value
including the prospects of finding a buyer for the Principal
Beneficial Stockholders' interest to enable the Company to remain
independent. The Board also analyzed the consideration to be
paid by FBA compared to the consideration offered by the other
bidders and the consideration paid in other merger transactions
announced over a period of years, nationally and in California.
The factors that were examined as part of this analysis include,
but were not limited to, the following:
. The regulatory order requiring the Principal Beneficial
Stockholders to divest their interest by July 2001;
. The Principal Beneficial Stockholders' agreement with the
FRB and DFI to certain restrictions regarding ownership of bank
or bank holding company stock. These restrictions limit the
ability of the Company to consider any Merger transactions that
would result in a stock exchange;
. The ability to attract a buyer for the Principal Beneficial
Stockholders' interest at an acceptable price;
. A review of the Company's business, operations, financial
condition and earnings on an historical and a prospective basis;
. The belief of the Company's Board and management that a
business combination with FBA would offer liquidity to present
stockholders;
. The terms of the Agreement and transactions contemplated by
the Agreement, including the cash price per share noting that it
reflected a multiple of book value of 2.3 representing a
reasonable premium for Company's stockholders;
. A comparison of the FBA offer with reported transactions,
nationally and in California;
. An analysis of the other expressions of interest presented
to the financial advisor; and
. The fairness opinion of the financial advisor issued to the
Principal Beneficial Stockholders.
The above discussion of the material factors considered by the
Board is not exhaustive but does set forth the principal factors
considered. The Board collectively reached the conclusion to
approve the Merger and the Agreement in light of the factors
described above and other factors that each member of the Board
felt was appropriate. The Merger and terms of the Agreement were
unanimously approved by the Board with the exception
page 14
of Mr. Unkovic who abstained due to his relationship as the attorney
representing Mr. Masagung, a Principal Beneficial Stockholder.
The Board did not assign relative or specific weights to any of
the factors described above and individual directors may have
weighed the factors differently.
Range of Bid and Asked Prices the date preceding the announcement
The Common Stock is not listed on any exchange. First Security
Van Kasper, San Francisco, California, is the sole market maker
of the Company's stock. The following table sets forth the high
and low closing sales prices for
Common Stock for the periods indicated. No cash dividends were
declared for the periods indicated.
Price range of
Common Stock
-------------------- Dividends
High Low Declared
--------- --------- -----------
1998
First Quarter ................ $ 0.60 $ 0.45 $ --
Second Quarter................ 0.60 0.45 --
Third Quarter................. 0.60 0.45 --
Fourth Quarter................ 0.45 0.35 --
1999
First Quarter................. $ 0.45 $ 0.45 $ --
Second Quarter................ 0.70 0.45 --
Third Quarter................. 0.70 0.45 --
Fourth Quarter................ 0.71 0.45 --
2000
First Quarter................. $ 0.90 $ 0.71 $ --
Second Quarter................ 0.92 0.71 --
Third Quarter (through
September 22, 2000).......... 0.92 0.71 --
-----------
(1) Common Stock is traded solely "over the counter" by First
Security Van Kasper, and trading was not extensive. Consequently,
sales price information data consists largely of quotations by
dealers making a market in the Common Stock and reflect
inter-dealer prices, without adjustments for mark-ups, mark-downs
or commissions, and may not represent actual transactions.
Item 2. Proxies Are Not Solicited.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
page 15
Item 3. Interest of Certain Persons in or Opposition to Matters
to be Acted Upon
The following table indicates the direct or indirect security
interest of each of the directors and executive officers of the
Company and the Bank as of October 31, 2000 with regard to the
Merger. Each has been a director or officer since the beginning
of the year.
Options Common Total net
Name of Director or Estimated to Stock Amount to be
Officer Total Options(a) be Exercised(b) Owned (c) Received (d)
Paul Erickson (5) 56,438 56,438 -- $84,657
Peter Foo (2)(5) 56,438 56,438 -- 87,565
James E. Gilleran (1) 1,802,112 1,486,510 -- 2,389,856
John McGrath (1) 170,075 164,614 250,000 745,282
Kent D. Price(5) 360,422 297,657 -- 478,509
Willard D. Sharpe (5) 60,188 56,438 250 88,053
Gordon B. Swanson (3)(5) 60,188 56,438 2,437 92,317
Nicholas Unkovic (4)(5) 57,315 56,438 -- 87,565
Gary G. Williams (5) 56,438 56,438 -- 87,565
Keary Colwell (1) 39,000 39,000 90,000 234,000
Joanne Haakinson (1) 129,000 129,000 -- 203,400
_____________________
(a) Total options granted to present directors and executive
officers to acquire common stock under the Stock Option Plan.
(b) Maximum number of options to be exercised or surrendered in
accordance with the terms of the Agreement. Any options not
exercised or surrendered will be canceled.
(c) Total number of shares of Common Stock owned.
(d) Total amount of to be paid upon closing of the Merger. The
amount shown for the exercise or surrender of options is net of
the exercise price.
(1) The employment contract description below provides
additional information regarding retention and severance payments
related to the Merger.
(2) Mr. Foo has a business relationship with Mr. Masagung, a
Principal Beneficial Stockholder. Mr. Masagung owns a controlling
interest in Peninsula Holdings and Mr. Peter Foo is the President
of Peninsula Holdings. In addition, Peninsula Holdings leases
office space from the Bank at 550 Montgomery Street at market
rates.
(3) In addition to Mr. Swanson's options and Common Stock, he
also holds 7,200 shares of Preferred Stock for which he will
receive $50,400.
(4) Mr. Unkovic is serving as legal counsel to Mr. Masagung, a
Principal Beneficial Stockholder. Mr. Unkovic, as a partner in
the law firm of Squire, Sanders & Dempsey LLP, represents Mr.
Masagung in various legal matters including his ownership
interest in the Company and acts as the Company's and Bank's
General Counsel. The Company and the Bank have agreed to
indemnify Squire Sanders & Dempsey LLP in certain circumstances,
as more fully described below.
(5) Each outside director will be paid a bonus totaling $25,000
in connection with their efforts to consummate the Merger.
Other Interests of Certain Persons and Employment Agreements
Other Interests of Mr. Foo. Mr. Foo has a business relationship
with Mr. Masagung, a Principal Beneficial Stockholder. Mr.
Masagung owns a controlling interest in Peninsula Holdings and
Mr. Peter Foo is the President of Peninsula Holdings. In
addition, Peninsula Holdings leases office space from the Bank at
550 Montgomery Street at market rates.
Other Interests of Mr. Unkovic. Mr. Unkovic is serving as legal
counsel to Mr. Masagung, a Principal Beneficial Stockholder. Mr.
Unkovic, as a partner in the law firm of Squire, Sanders &
Dempsey LLP, represents Mr. Masagung in various legal matters
including his ownership interest in the Company and acts as the
Company's and Bank's General Counsel. The Company and the Bank
have agreed to indemnify Squire Sanders & Dempsey LLP in certain
circumstances, as more fully described below.
page 16
Employment Agreement of Mr. Gilleran. The Company and the Bank
entered into an employment agreement with Mr. Gilleran dated
April 22, 1998. The employment agreement provides, among other
things, for Mr. Gilleran to receive an annual salary of at least
$300,000 per year, payable in accordance with the Bank's usual
payment practices.
The contract has a severance provision that provides for a
payment equal to one year's annual base salary upon termination
and a retention provision that provides for a payment equal to
one year's annual base salary upon a change-in-control. Mr.
Gilleran will earn the retention contract amount of $300,000 as a
result of the Merger. In addition, he will receive a severance
payment totaling $300,000 if he is terminated as a result of the
Merger.
The agreement provides that the Board shall grant Mr. Gilleran
options under the Stock Option Plan to acquire shares of the
Company's Common Stock equal to 5% of the fully-diluted shares of
the Common Stock, with additional anti-dilution options to be
granted in the future as necessary to maintain the 5% interest
until after the next public offering of the Company's Common
Stock. As a result of the Merger, Mr. Gilleran will surrender
his in-the-money, exercisable options, and receive net cash
totaling $1,073,115. All remaining options will be cancelled.
Employment Agreement of Mr. McGrath. The Bank entered into an
employment agreement with Mr. McGrath dated April 22, 1998
replacing the previous employment agreement. The 1998 employment
agreement provides, among other things, for Mr. McGrath to
receive an annual salary of at least $170,000 per year, payable
in accordance with the Bank's usual payment practices.
The contract has a severance provision that provides for a
payment equal to one year's annual base salary upon termination
and a retention provision that provides for a payment equal to
one year's annual base salary upon a change-in-control. Mr.
McGrath will earn the retention contract amount of $170,000 as a
result of the Merger. In addition, he will receive a severance
payment totaling $170,000 if he is terminated as a result of the
Merger.
The agreement provides that the Board shall grant Mr. McGrath
options under the Stock Option Plan to acquire shares of the
Company's Common Stock equal to 1% of the fully-diluted shares of
the Common Stock, with additional anti-dilution options to be
granted in the future as necessary to maintain the 1% interest
until after the next public offering of the Company's Common
Stock. As a result of the Merger, Mr. McGrath will surrender his
in-the-money, exercisable options to acquire 164,614 shares of
Common Stock and the 250,000 shares of Common Stock (acquired as
a result of the previous exercise of options) he presently holds
and receive net cash totaling $717,960. All remaining options
will be cancelled.
Employment Agreements of Ms. Colwell and Ms. Haakinson. The Bank
entered into employment agreements with Ms. Colwell and Ms.
Haakinson dated April 22, 1998 which provide, among other things,
for Ms. Colwell and Ms. Haakinson to receive an annual salary of
at least $120,000 per year, payable in accordance with the Bank's
usual payment practices. During 1999, Ms. Colwell's and Ms.
Haakinson's annual salaries were increased to $132,000 per year.
The contracts have severance provisions that provide for a
payment equal to one year's annual base salary upon termination
and a retention provision that provides for payments equal to one
year's annual base salary upon a change-in-control.
Ms. Colwell will earn the retention contract amount of $132,000
as a result of the Merger. In addition, she will receive a
severance payment totaling $132,000 if terminated as a result of
the Merger. Ms. Colwell will surrender her in-the-money,
exercisable options to acquire 39,000 shares of Common Stock and
the 90,000 shares of Common Stock (acquired as a result of the
previous exercise of options) she presently holds and receive net
cash totaling $226,200.
Ms. Haakinson will earn the retention contract amount of $132,000
as a result of the Merger. In addition, she will receive a
severance payment totaling $132,000 if terminated as a result of
the Merger. Ms. Haakinson will surrender her in-the-money,
exercisable options to acquire 129,000 shares of Common Stock and
receive net cash totaling $180,600.
Indemnification Agreements
The Company and the Bank entered into indemnification agreements
with each of the Named Executive Officers and each Director dated
March 18, 1998. The indemnification agreements provide for
indemnification from and against any and all liabilities or
expenses arising with respect to any action or inaction taken in
the course of their duties as a Named Executive Officer or as a
director of the Company and/or the Bank.
page 17
The Company and the Bank have engaged the law firm of Squire
Sanders & Dempsey LLP, the predecessor to Graham & James LLP, to
perform the function of General Counsel. Mr. Unkovic, a director
of the Company and the Bank, is a partner with Squire Sanders &
Dempsey LLP. The Company entered into an indemnification
agreement with Graham & James LLP, as predecessor in interest to
Squire Sanders & Dempsey LLP, dated December 16, 1994. The
indemnification agreement provides that Squire Sanders & Dempsey
LLP is indemnified against any and all liabilities and expenses
against Squire Sanders & Dempsey LLP arising by reason of Mr.
Unkovic serving as a director of the Company. The
indemnification does not include legal services Mr. Unkovic or
Squire Sanders & Dempsey LLP may render to the Company or its
subsidiaries, affiliates, directors, officers or stockholders.
page 18
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
by and among
FIRST BANKS, INC.,
a Missouri corporation,
FIRST BANKS AMERICA, INC.,
a Delaware corporation,
REDWOOD BANK,
a California banking corporation,
THE SAN FRANCISCO COMPANY,
a Delaware corporation
and
BANK OF SAN FRANCISCO,
a California banking corporation
September 22, 2000
page
TABLE OF CONTENTS
ARTICLE I - TERMS OF THE MERGER & CLOSING; CONVERSION OF SHARES
Section 1.01. The Merger ............................................. 1
Section 1.02. Effects of the Merger .................................. 1
Section 1.03. Conversion of Shares ................................... 1
Section 1.04. The Closing ............................................ 2
Section 1.05. The Closing Date ....................................... 2
Section 1.06. Actions At Closing ..................................... 2
Section 1.07. Deposit of Merger Consideration ........................ 3
Section 1.08. Exchange of Certificates ............................... 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF BANCORP AND BANK
OF SAN FRANCISCO
Section 2.01. Organization and Capital Stock; Standing and Authority . 5
Section 2.02. Authorization; No Defaults ............................. 5
Section 2.03. Subsidiaries ........................................... 6
Section 2.04. Financial Information .................................. 6
Section 2.05. Absence of Changes ..................................... 7
Section 2.06. Regulatory Enforcement Matters ......................... 7
Section 2.07. Tax Matters ............................................ 7
Section 2.08. Litigation ............................................. 7
Section 2.09. Properties, Contracts, Employee Benefit Plans and
Other Agreements ....................................... 8
Section 2.10. Reports ................................................ 9
Section 2.11. Investment Portfolio ................................... 9
Section 2.12. Loan Portfolio ......................................... 9
Section 2.13. Employee Matters and ERISA ............................. 10
Section 2.14. Title to Properties; Licenses; Insurance ............... 11
Section 2.15. Environmental Matters .................................. 11
Section 2.16. Compliance with Laws and Regulations ................... 12
Section 2.17. Brokerage .............................................. 12
Section 2.18. No Undisclosed Liabilities ............................. 12
Section 2.19. Statements True and Correct ............................ 12
Section 2.20. Commitments and Contracts .............................. 12
Section 2.21. Material Interest of Certain Persons ................... 13
Section 2.22. Conduct to Date ........................................ 13
Section 2.23. Irrevocable Proxy ...................................... 14
page i
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF FIRST BANKS, FBA
AND REDWOOD
Section 3.01. Organization ........................................... 14
Section 3.02. Authorization .......................................... 14
Section 3.03. Litigation ............................................. 15
Section 3.04. Statements True and Correct ............................ 15
Section 3.05. Financial Information .................................. 15
Section 3.06. Absence of Changes ..................................... 15
Section 3.07. Ability to Consummate the Merger ....................... 15
ARTICLE IV - AGREEMENTS OF BANCORP AND BANK OF SAN FRANCISCO
Section 4.01. Business in Ordinary Course ............................ 16
Section 4.02. Breaches ............................................... 18
Section 4.03. Submission to Shareholders ............................. 18
Section 4.04. Consummation of Agreement .............................. 18
Section 4.05. Environmental Reports .................................. 19
Section 4.06. Access to Information .................................. 19
Section 4.07. Consents of Third Parties .............................. 19
Section 4.08. Subsequent Financial Statements ........................ 19
Section 4.09. Merger of Banks ........................................ 20
ARTICLE V - AGREEMENTS OF FIRST BANKS, FBA AND REDWOOD
Section 5.01. Regulatory Approvals ................................... 20
Section 5.02. Breaches ............................................... 20
Section 5.03. Consummation of Agreement .............................. 20
Section 5.04. Employee Benefits ...................................... 21
Section 5.05. Indemnification ........................................ 21
Section 5.06. Completion of Financing ................................ 22
ARTICLE VI - CONDITIONS PRECEDENT TO THE MERGER
Section 6.01. Conditions to the Obligations of First Banks, FBA and
Redwood ................................................ 22
Section 6.02. Conditions to the Obligations of Bancorp and Bank
of San Francisco ....................................... 23
page ii
ARTICLE VII - TERMINATION
Section 7.01. Mutual Agreement ....................................... 24
Section 7.02. Breach of Agreements ................................... 24
Section 7.03. Failure of Conditions .................................. 24
Section 7.04. Denial of Regulatory Approval .......................... 24
Section 7.05. Environmental Reports .................................. 24
Section 7.06. Regulatory Enforcement Matters ......................... 24
Section 7.07. Unilateral Termination ................................. 25
ARTICLE VIII - GENERAL PROVISIONS
Section 8.01. Confidential Information ............................... 25
Section 8.02. Publicity .............................................. 25
Section 8.03. Return of Documents .................................... 25
Section 8.04. Notices ................................................ 25
Section 8.05. Nonsurvival of Representations, Warranties and
Agreements ............................................. 27
Section 8.06. Costs and Expenses ..................................... 27
Section 8.07. Entire Agreement ....................................... 27
Section 8.08. Headings and Captions .................................. 27
Section 8.09. Waiver, Amendment or Modification ...................... 27
Section 8.10. Rules of Construction .................................. 27
Section 8.11. Counterparts ........................................... 27
Section 8.12. Successors and Assigns ................................. 27
Section 8.13. Governing Law .......................................... 28
Signatures ............................................................ 29
page iii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of September 22,
2000, is by and among First Banks, Inc., a bank holding company
organized as a Missouri corporation ("First Banks"), First Banks
America, Inc., a bank holding company organized as a Delaware
corporation which is a majority-owned subsidiary of First Banks
("FBA"), Redwood Bank, a California banking corporation which is
a wholly-owned subsidiary of FBA ("Redwood"), The San Francisco
Company, a bank holding company organized as a Delaware
corporation ("Bancorp"), and Bank of San Francisco, a California
banking corporation which is a wholly-owned subsidiary of Bancorp
("Bank of San Francisco"). This Agreement and Plan of Merger is
hereinafter referred to as the "Agreement."
In consideration of the mutual representations, warranties,
agreements and covenants contained herein, First Banks, FBA,
Redwood, Bancorp and Bank of San Francisco hereby agree as
follows:
ARTICLE I
TERMS OF THE MERGER & CLOSING; CONVERSION
OF SHARES
Section 1.01. The Merger. FBA will organize an interim
subsidiary ("Newco") and, subject to the receipt of required
regulatory approvals and the satisfaction or waiver of the
conditions set forth in Article VI of this Agreement, FBA will
cause Newco to merge with and into Bancorp (the "Merger")
pursuant to the Delaware General Corporation Law ("Corporate
Law"). This Agreement also contemplates that, immediately
following the Effective Time (as defined in Section 1.05 hereof),
the Bank Merger (as such term is defined in Section 4.09) will
occur.
Section 1.02. Effects of the Merger. (a) The Merger shall have
all of the effects provided by Corporate Law and this Agreement,
and the separate corporate existence of Newco shall cease on
consummation of the Merger and be combined in Bancorp.
(b) The Certificate of Incorporation of Bancorp from and after
the Effective Time shall be amended as set forth on Exhibit A
attached hereto.
(c) The Bylaws of Bancorp from and after the Effective Time shall
be the same as the Bylaws of Newco immediately prior to the
Effective Time, except for the corporate name which shall
continue to be "The San Francisco Company."
(d) The directors and officers of Bancorp from and after the
Effective Time shall be the persons serving as the directors and
officers of Newco immediately prior to the Effective Time.
Section 1.03. Conversion of Shares. (a) At the Effective Time,
each share of Class A Common Stock, $.01 par value, of Bancorp
("Bancorp Common") issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive
$1.95 (the "Common Share Merger Price"), and each share of 8%
Series B Convertible Preferred Stock, $.01 par value, of Bancorp
("Bancorp Preferred") issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive
$7.00 plus, in the case of Bancorp Preferred, any then
outstanding accumulated and unpaid dividends (the "Preferred
Share Merger Price" and, together with the Common Share Merger
Price, the "Merger Consideration"); provided, however, that
shares of Bancorp Common and Bancorp Preferred held in the
treasury of Bancorp or by any direct or indirect subsidiary of
Bancorp immediately prior to the Effective
page 1
Time shall be canceled. The Common Share Merger Price may be adjusted
by virtue of the provisions of Section 7.05 of this Agreement, in which
case all references herein to the amount of consideration to be
paid by FBA pursuant to the Merger shall be deemed to reflect the
amount of any adjustment duly made in accordance with such
Section.
(b) The stock transfer books of Bancorp shall be closed, and no
share transfers will be permitted after the Effective Time. At
the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, all of the shares of
Bancorp Common and Bancorp Preferred (collectively, the "Bancorp
Stock") shall cease to be outstanding and be canceled. Each
certificate previously representing shares of Bancorp Stock (a
"Certificate") shall thereafter only represent the right to
receive the cash into which the shares of Bancorp Stock
represented by such Certificate have been converted pursuant to
this Section 1.03.
(c) If holders of Bancorp Stock are entitled to require
appraisal of their shares under applicable Corporate Law, shares
held by a dissenting holder who has perfected the right to obtain
an appraisal of his shares shall not be converted as described in
this Section 1.03, but from and after the Effective Time shall
represent only the right to receive such consideration as may be
determined pursuant to applicable Corporate Law; provided,
however, that each share of Bancorp Stock outstanding immediately
prior to the Effective Time and held by a dissenting holder who
after the Effective Time shall withdraw his demand for appraisal
or lose his right of appraisal shall thereafter have only such
rights as are provided under applicable Corporate Law.
(d) Any options to purchase shares of Bancorp Common ("Bancorp
Options") which are outstanding immediately prior to the
Effective Time and then exercisable at a price less than the
Common Share Merger Price may be surrendered to Bancorp as of the
Effective Time. FBA shall pay for each share of Bancorp Common
covered by a Bancorp Option exercised or surrendered pursuant to
this Section 1.03(d) an amount equal to the difference between
the Common Share Merger Price and the exercise price per share of
the options surrendered. All Bancorp Options that are not
exercised or surrendered in accordance with the preceding
sentence shall be canceled as of the Effective Time.
(e) At the Effective Time, the outstanding shares of common
stock of Newco shall be converted into an equal number of shares
of Bancorp Common, so that immediately following the Effective
Time, the number of outstanding shares of common stock of Bancorp
shall be equal to the number of outstanding shares of common
stock of Newco immediately prior to the Merger.
Section 1.04. The Closing. The closing of the Merger (the
"Closing") shall take place at the location mutually agreeable to
the parties hereto at 10:00 a.m. local time on the Closing Date
described in Section 1.05 of this Agreement.
Section 1.05. The Closing Date. At FBA's option, the Closing
shall take place on either the last business day of the month
during which each of the conditions in Sections 6.01 and 6.02 is
satisfied or waived by the appropriate party or the first
business day of the succeeding month, or on such other date as
Bancorp and FBA may agree (the "Closing Date"). The Merger shall
be effective upon the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware or at a later time
specified in the Certificate of Merger (the "Effective Time").
Section 1.06. Actions At Closing. (a) At the Closing, Bancorp
shall deliver to FBA:
(i) certified copies of the Certificate of Incorporation and
Bylaws of Bancorp and the Articles or Certificate of
Incorporation and Bylaws of each of its subsidiaries;
page 2
(ii) certificates signed by the Chief Executive Officers of
Bancorp and Bank of San Francisco on behalf of such entities
stating that (A) each of the representations and warranties
contained in Article II is true and correct in all material
respects at the time of the Closing with the same force and
effect as if such representations and warranties had been made at
the Closing (except to the extent any representation or warranty
expressly speaks as of an earlier date), and (B) all of the
conditions set forth in Section 6.01 have been satisfied or
waived as provided therein;
(iii) certified copies of resolutions of the Boards of
Directors of Bancorp and Bank of San Francisco and of the
shareholders of Bancorp, establishing the requisite approvals
under applicable Corporate Law of this Agreement, the Merger and
the other transactions contemplated hereby;
(iv) tax clearance certificates issued by the Franchise Tax Board
of the State of California with respect to Bancorp and each of
its subsidiaries, dated a recent date, stating that all taxes
imposed under the Bank and Corporation Tax Law on such
corporations have been paid or adequately secured;
(v) a legal opinion from counsel for Bancorp and Bank of San
Francisco (which counsel shall be reasonably acceptable to FBA)
with respect to the matters listed in Exhibit 1.06(a) hereto, in
form reasonably satisfactory to FBA and its counsel; and
(vi) evidence of the receipt of all required consents and
approvals from federal and state regulatory agencies and other
governmental bodies, if any, with respect to the consummation of
the Merger, the Bank Merger and each of the transactions
contemplated herein.
(b) At the Closing, FBA shall deliver to Bancorp:
(i) certificates signed by the Presidents of First Banks, FBA
and Redwood on behalf of such entities stating that (A) each of
the representations and warranties contained in Article III is
true and correct in all material respects at the time of the
Closing with the same force and effect as if such representations
and warranties had been made at the Closing (except to the extent
any representation or warranty expressly speaks as of an earlier
date), and (B) all of the conditions set forth in Section 6.02
have been satisfied or waived as provided therein;
(ii) certified copies of resolutions of the Boards of Directors
of First Banks, FBA and Redwood, establishing the requisite
approvals under applicable Corporate Law of this Agreement, the
Merger and the other transactions contemplated hereby;
(iii) a legal opinion from John S. Daniels, counsel for FBA
and Redwood, with respect to the matters listed in Exhibit
1.06(b) hereto, in form reasonably satisfactory to Bancorp and
the Trustee and their respective counsel; and
(iv) evidence of the receipt of all required consents and
approvals from federal and state regulatory agencies and other
governmental bodies, if any, with respect to the consummation of
the Merger, the Bank Merger and each of the transactions
contemplated herein.
Section 1.07. Deposit of Merger Consideration. At or prior to
the Effective Time, FBA shall deposit or cause to be deposited
with First Bank, a Missouri banking corporation which is a
wholly-owned subsidiary of First Banks, or another bank or trust
company (which may be
page 3
an affiliate of FBA) selected by FBA and reasonably satisfactory to
Bancorp (the "Exchange Agent"), for exchange in accordance with Section
1.08, the requisite amount of cash to be paid pursuant to Section 1.03
in exchange for the outstanding shares of Bancorp Stock and the Bancorp
Options exercised or surrendered pursuant to this Agreement (such amount
being referred to as the "Exchange Fund").
Section 1.08. Exchange of Certificates. (a) As soon as
reasonably practicable after the Effective Time, FBA shall cause
the Exchange Agent to mail to each record holder of shares of
Bancorp Stock a form letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
certificates shall pass, only upon proper delivery of the
certificates to the Exchange Agent) and instructions for
surrendering certificates evidencing shares of Bancorp stock in
exchange for the amount of cash into which such shares shall have
been converted pursuant to Section 1.03. The letter of
transmittal shall be in such form and have such other provisions
as FBA may reasonably specify (subject to the right of Bancorp to
review both the letter of transmittal and the instructions prior
to the Effective Time and provide reasonable comments thereon).
Upon surrender to the Exchange Agent of such a certificate for
exchange and cancellation, together with a duly executed letter
of transmittal (both in proper form), the holder of such
certificate shall be entitled to receive in exchange therefor a
check representing the amount of cash which such holder has the
right to receive in respect of the certificate or certificates so
surrendered, without interest, and the certificate or certificate
so surrendered shall be canceled.
(b) Notwithstanding subsection (a), FBA shall cooperate in
making arrangement for payment to the Trustee (as defined in
Section 2.23) at the Closing by wire transfer of immediately
available funds to an account in the United States designated by
the Trustee, against delivery of certificates representing
Bancorp Stock registered in the Trustee's name.
(c) If any payment for shares of Bancorp Stock is to be made in a
name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of such
payment that the certificate so surrendered shall be properly
endorsed or accompanied by an appropriate instrument of transfer
and otherwise in proper form for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the
certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that
such taxes have been paid or are not payable.
(d) After the Effective Time, there shall be no transfers on the
stock transfer books of Bancorp of any shares of Bancorp Stock.
(e) At any time following six months after the Effective Time,
FBA shall be entitled to terminate the Exchange Agent
relationship and assume the duties of the Exchange Agent provided
in Section 1.07, and thereafter holders of certificates
evidencing shares of Bancorp Stock shall be entitled to look only
to FBA (subject to abandoned property, escheat or other similar
laws) with respect to the surrender and exchange of certificates.
(f) In the event any certificate shall have been lost, stolen or
destroyed, upon the presentation to the Exchange Agent of an
affidavit of that fact by the person claiming the same and, if
required by FBA, the posting by such person of a bond in such
amount as FBA may direct as indemnity against any claim that may
be made against it with respect to such certificate, the Exchange
Agent will issue in exchange for such certificate a check for the
amount of cash payable in respect of the shares represented by
such certificate.
page 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF BANCORP AND BANK OF SAN FRANCISCO
Except as otherwise disclosed in that section of the disclosure
schedule executed by the parties to this Agreement concurrently
with the execution hereof (the "Disclosure Schedule")
corresponding to a particular representation or warranty, Bancorp
and Bank of San Francisco each represent and warrant to First
Banks, FBA and Redwood as follows:
Section 2.01. Organization and Capital Stock; Standing and Authority.
(a) Bancorp is a corporation, and Bank of San Francisco is a
banking corporation, and both of such corporations are duly
organized, validly existing and in good standing under the laws
of Delaware and California, respectively. Each of such
corporations has the power to own all of its property and assets,
to incur all of its liabilities and to carry on its business as
now conducted.
(b) As of the date hereof, the authorized capital stock of
Bancorp consists of 100,000,000 shares of Bancorp Common, of
which 29,320,725 are outstanding, and 5,000,000 shares of Bancorp
Preferred, of which 15,869 are outstanding. All of the
outstanding shares of Bancorp Stock are duly and validly issued,
fully paid and non-assessable.
(c) As of the date hereof, the authorized capital stock of Bank
of San Francisco consists of 4,200,000 shares of common stock,
$3.50 par value ("Bank Common"), of which 285,814 are
outstanding, duly and validly issued, fully paid and
non-assessable. None of the outstanding shares of Bancorp Common,
Bancorp Preferred or Bank Common has been issued in violation of
any preemptive rights.
(d) Except as described above or disclosed in Section 2.01(d) of
the Disclosure Schedule, there are no shares of capital stock or
other equity securities of Bancorp or Bank of San Francisco
issued or outstanding and no outstanding options, warrants,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of capital stock of Bancorp or Bank
of San Francisco or contracts, commitments, understandings or
arrangements by which either of them is or may be obligated to
issue additional shares of capital stock.
(e) Bank of San Francisco holds a current valid license to
engage in the commercial banking business at its banking offices
in California, and Bancorp and Bank of San Francisco are in
material compliance with all agreements, understandings and
orders of the Federal Reserve Board, the Federal Deposit
Insurance Corporation ("FDIC") and other regulatory authorities
having jurisdiction over their business, assets and properties.
Neither the scope of the business of Bank of San Francisco nor
the location of its properties requires it to be licensed to do
business in any jurisdiction other than the State of California.
The deposits of Bank of San Francisco are insured by the FDIC to
the maximum extent permitted by applicable laws and regulations.
Bancorp is a bank holding company registered pursuant to the Bank
Holding Company Act, as amended.
Section 2.02. Authorization; No Defaults. The Boards of
Directors of Bancorp and Bank of San Francisco have by all
requisite action approved this Agreement, the Merger and the Bank
Merger and, in the case of Bancorp, the Proxy, and they have
authorized the execution and delivery hereof on behalf of such
corporations by duly authorized officers and the performance of
their respective obligations thereunder. Bancorp, in its capacity
as the sole holder of outstanding capital stock of Bank of San
Francisco, has approved this Agreement, the Merger and the Bank
page 5
Merger. Nothing in the Certificate of Incorporation or Bylaws of
Bancorp, the Articles of Incorporation or Bylaws of Bank of San
Francisco or any other agreement, instrument, decree, proceeding,
law or regulation (except as specifically referred to in or
contemplated by this Agreement) by or to which either entity is
bound or subject would prohibit either of such corporations from
consummating this Agreement, the Merger and the Bank Merger on
the terms and conditions herein contained. This Agreement has
been duly and validly executed and delivered by Bancorp and Bank
of San Francisco and constitutes a legal, valid and binding
obligation of each of them, enforceable against them in
accordance with its terms. Neither Bancorp nor Bank of San
Francisco is in default under nor in violation of any provision
of its Certificate or Articles of Incorporation, as the case may
be, Bylaws or, in any material respect, any promissory note,
indenture or any evidence of indebtedness or security therefor,
lease, contract, purchase or other material commitment or
agreement.
Section 2.03. Subsidiaries. Each of Bancorp's direct and
indirect subsidiaries (hereinafter referred to singly as a
"Bancorp Subsidiary" and collectively as the "Bancorp
Subsidiaries"), the names and jurisdictions of incorporation of
which are disclosed in Section 2.03 of the Disclosure Schedule,
is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and each of
the Bancorp Subsidiaries has the corporate power to
own its properties and assets, to incur its liabilities and to
carry on its business as now being conducted. The number of
issued and outstanding shares of capital stock of each Bancorp
Subsidiary and the ownership of such shares is set forth in
Section 2.03 of the Disclosure Schedule, and all of such shares
are owned by Bancorp or a Bancorp Subsidiary, free and clear of
all liens, encumbrances, rights of first refusal, options or
other restrictions of any nature whatsoever, except as disclosed
in Section 2.03 of the Disclosure Schedule. Except as disclosed
in Section 2.03 of the Disclosure Schedule, there are no options,
warrants or rights outstanding to acquire any capital stock of
any Bancorp Subsidiary, and no person or entity has any other
right to purchase or acquire any unissued shares of stock of any
Bancorp Subsidiary, nor does any Bancorp Subsidiary have any
obligation of any nature with respect to its unissued shares of
stock. Except as disclosed in Section 2.03 of the Disclosure
Schedule, neither Bancorp nor any Bancorp Subsidiary is a party
to any partnership or joint venture or owns an equity interest in
any other business or enterprise.
Section 2.04. Financial Information. The audited consolidated
balance sheets of Bancorp and its subsidiaries as of December 31,
1999 and related consolidated income statements and statements of
changes in shareholders' equity and of cash flows for the three
years ended December 31, 1999, together with the notes thereto,
included in Bancorp's Annual Report on Form 10-K for the year
ended December 31, 1999 as currently on file with the Securities
and Exchange Commission (the "SEC"); the unaudited consolidated
balance sheets of Bancorp and its subsidiaries as of June 30,
2000 and related consolidated income statements and statements of
changes in shareholders' equity and of cash flows for the three
and six months ended June 30, 2000, together with the notes
thereto, included in Bancorp's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000 as currently on file with the
SEC; and the year-end and quarter-end Reports of Condition and
Reports of Income of Bank of San Francisco for 1999 and for the
three month periods ended March 31, 2000 and June 30, 2000,
respectively, as filed with the Federal Deposit Insurance
Corporation (the "FDIC") (such financial statements and notes
collectively referred to herein as the "Bancorp Financial
Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be disclosed
therein and except for regulatory reporting differences required
in Bank of San Francisco's reports) and fairly present the
consolidated financial position and the consolidated results of
operations, changes in shareholders' equity and cash flows of the
respective entity and its respective consolidated subsidiaries as
of the dates and for the periods indicated subject, in the case
of any such statements which are unaudited, to
page 6
normal year-end adjustments of accruals and the absence of footnotes
and other normal presentational items.
Section 2.05. Absence of Changes. Since December 31, 1999 there
has not been any material adverse change in the financial
condition, the results of operations or the business or prospects
of Bancorp and its subsidiaries taken as a whole, nor have there
been any events or transactions having such a material adverse
effect which should be disclosed in order to make the Bancorp
Financial Statements not misleading. Since June 30, 1999, the
date of the most recent examination of Bank of San Francisco by
the Department of Financial Institutions of the State of
California (the "Financial Institutions Department"), there has
been no material adverse change in the financial condition, the
results of operations or the business of Bank of San Francisco
except for any such changes as may be disclosed in Bank of San
Francisco's Reports of Condition and Income filed since such
date.
Section 2.06. Regulatory Enforcement Matters. Except as
disclosed in Section 2.06 of the Disclosure Schedule, neither
Bancorp nor any Bancorp Subsidiary is subject to, or has been
informed by any federal or state agency charged with the
supervision or regulation of banks or bank holding companies or
engaged in the insurance of bank deposits that it may become
subject to, any order, agreement, memorandum of understanding or
other regulatory enforcement action or proceeding of such agency.
Section 2.07. Tax Matters. (a) Bancorp and the Bancorp
Subsidiaries have filed all federal, state, local and foreign
income, franchise, excise, sales, use, real and personal property
and other tax returns required to be filed. All such returns
fairly reflect the information required to be presented therein.
All provisions for accrued but unpaid taxes contained in the
Bancorp Financial Statements were made in accordance with
generally accepted accounting principles and in the aggregate do
not materially fail to provide for potential tax liabilities.
(b) Except as disclosed in Section 2.07 of the Disclosure
Schedule, Bancorp has not (i) executed an extension or waiver
that is currently in effect with respect to any statute of
limitations on the assessment or collection of any tax; (ii)
entered into any tax sharing or tax allocation agreement or been
a part of a consolidated group filing a consolidated tax return
(other than a group of which Bancorp was the parent); (iii)
become liable for a tax of any other person or entity pursuant to
Treasury Regulation 1.1502-6 (or any similar provision of state,
local or foreign laws) as a transferee or successor or by
contract or otherwise; or (iv) made any payment, become obligated
to make any payment or been party to a contract or agreement that
would obligate it to make any payment that would be disallowed as
a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(c) Except as disclosed in Section 2.07 of the Disclosure
Schedule, there has not occurred during or after any taxable
period in which Bancorp incurred a net operating loss that
carries over to any taxable period ending after 1999 either (i) a
direct ownership change of Bancorp as defined in Section 382(g)
of the Internal Revenue Code or (ii) to the knowledge of Bancorp,
an ownership change in any entity owning Bancorp Stock that would
cause there to have been an ownership change of Bancorp as
defined in such section.
(d) All material elections with respect to taxes affecting
Bancorp have been and will be timely made.
Section 2.08. Litigation. Except as disclosed in Section 2.08
of the Disclosure Schedule, there is no litigation, claim or
other proceeding pending or, to the knowledge of Bancorp,
threatened against Bancorp or any of the Bancorp Subsidiaries, or
of which the property of Bancorp or any of the Bancorp
Subsidiaries is or would be subject.
page 7
Section 2.09. Properties, Contracts, Employee Benefit Plans and
Other Agreements. Section 2.09 of the Disclosure Schedule
specifically identifies the following:
(a) each lease of real property to which Bancorp or any Bancorp
Subsidiary is a party, identifying the parties thereto, the
annual rental payable, the expiration date thereof and a brief
description of the property covered;
(b) all loan and credit agreements, conditional sales contracts
or other title retention agreements or security agreements
relating to money borrowed by Bancorp or a Bancorp Subsidiary and
involving more than $10,000 individually or $25,000 in the
aggregate, exclusive of deposit agreements with customers of Bank
of San Francisco entered into in the ordinary course of business,
agreements for the purchase of federal funds and repurchase
agreements;
(c) all agreements, loans, contracts, leases, guaranties,
letters of credit, lines of credit or commitments of Bancorp or
any Bancorp Subsidiary not referred to elsewhere in this Section
2.09 which:
(i) involve payment by Bancorp or any Bancorp Subsidiary of more
than $150,000 (other than loans, loan commitments or letters of
credit);
(ii) involve payments based on profits of Bancorp or any Bancorp
Subsidiary;
(iii) relate to the future purchase of goods or services in
excess of the requirements of its respective business at current
levels or for normal operating purposes;
(iv) were not made in the ordinary course of business;
(v) materially affect the business or financial condition of
Bancorp or any Bancorp Subsidiary; or
(vi) require the consent or approval of any third party for the
Merger and the Bank Merger to be consummated.
(d) all contracts, agreements, plans and arrangements by which
any profit sharing, group insurance, hospitalization, stock
option, pension, retirement, bonus, deferred compensation, stock
bonus, stock purchase, collective bargaining agreements,
contracts or arrangements under which pensions, deferred
compensation or other retirement benefits is being paid, or plans
or arrangements established or maintained, sponsored or
undertaken by Bancorp or any Bancorp Subsidiary for the benefit
of officers, directors or employees, including each trust or
other agreement with any custodian or any trustee for funds held
under any such agreement, plan or arrangement, and in respect to
any of them, the latest reports or forms, if any, filed with the
Department of Labor and Pension Benefit Guaranty Corporation
under ERISA (as defined below), any current financial or
actuarial reports and any currently effective IRS private ruling
or determination letters obtained by or for the benefit of
Bancorp or any Bancorp Subsidiary;
(e) all leases, subleases or licenses with respect to real or
personal property, whether as lessor, lessee, licensor or
licensee, with annual rental or other payments due thereunder in
excess of $100,000;
(f) all agreements for the employment, retention, engagement or
indemnification, or with respect to the severance, of any
officer, employee, agent, consultant or other person or entity
which by its terms is not terminable by Bancorp or a Bancorp
Subsidiary on thirty (30) days written notice or less without any
payment by reason of such termination; and
page 8
(g) the name and annual salary as of January 1, 2000 of each
director or employee of Bancorp or any Bancorp Subsidiary with a
salary in excess of $100,000.
Copies of each document, plan or contract identified in Section
2.09 of the Disclosure Schedule are appended to such Schedule and
are hereby incorporated in and constitute a part of the
Disclosure Schedule.
Section 2.10. Reports. Bancorp and the Bancorp Subsidiaries
have filed all reports and statements, together with any
amendments required to be made with respect thereto, required to
be filed with the SEC, the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the Financial
Institutions Department, the FDIC or any other governmental
authority with jurisdiction over Bancorp or any Bancorp
Subsidiary. As of the dates indicated thereon, each of such
reports and documents, including any financial statements,
exhibits and schedules thereto, complied in all material respects
with the relevant statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were
filed, and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein.
Section 2.11. Investment Portfolio. All United States Treasury
securities, obligations of other United States Government
agencies and corporations, obligations of States and political
subdivisions of the United States and other investment securities
held by Bancorp or any Bancorp Subsidiary, as reflected in the
latest consolidated balance sheet of Bancorp included in the
Bancorp Financial Statements, are carried in accordance with
generally accepted accounting principles.
Section 2.12. Loan Portfolio. Except as disclosed in Section
2.12 of the Disclosure Schedule, (a) all loans and discounts
reflected in the Bancorp Financial Statements as of March 31,
2000 or which were or will be entered into after March 31, 2000
but before the Closing Date were and will be made in all material
respects for good, valuable and adequate consideration in the
ordinary course of the business of Bancorp and the Bancorp
Subsidiaries, in accordance with sound lending practices (as
would be followed by a reasonably prudent commercial bank), and
they are not subject to any known defenses, setoffs or
counterclaims, including without limitation any such as are
afforded by usury or truth in lending laws, except as may be
provided by bankruptcy, insolvency or similar laws or by general
principles of equity;
(b) the notes and other evidences of indebtedness evidencing
such loans and all forms of pledges, mortgages and other
collateral documents and security agreements are and will be in
all material respects enforceable, valid, true and genuine and
what they purport to be;
(c) Bancorp and the Bancorp Subsidiaries have complied and will
through the Closing Date comply with all laws and regulations
relating to such loans, or to the extent there has not been such
compliance, such failure to comply will not materially interfere
with the collection of loans in an amount material to the loan
portfolio of Bank of San Francisco. All loans and loan
commitments extended by Bank of San Francisco and any extensions,
renewals or continuations of such loans and loan commitments were
made in accordance with its customary lending standards in the
ordinary course of business. Such loans are evidenced by
appropriate and sufficient documentation based upon customary and
ordinary past practices of Bank of San Francisco; and
(d) the reserve for loan losses reflected in the Bancorp
Financial Statements as of June 30, 2000 was determined as of
such date by Bancorp and Bank of San Francisco in accordance with
the requirements of generally accepted accounting principles to
be adequate to provide for losses on loans outstanding as of June
30, 2000.
page 9
Section 2.13. Employee Matters and ERISA. (a) Except as
disclosed in Section 2.13 (a) of the Disclosure Schedule, neither
Bancorp nor any Bancorp Subsidiary has entered into any
collective bargaining agreement with any labor organization with
respect to any group of employees of Bancorp or any Bancorp
Subsidiary, and there is no present effort nor existing proposal
to attempt to unionize any group of employees of Bancorp or any
Bancorp Subsidiary.
(b)(i) Bancorp and the Bancorp Subsidiaries have been and are in
compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without
limitation, any laws respecting employment discrimination and
occupational safety and health requirements, and neither Bancorp
nor any Bancorp Subsidiary is engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint
against Bancorp or any Bancorp Subsidiary pending or, to the
knowledge of Bancorp or Bank of San Francisco, threatened before
the National Labor Relations Board; (iii) there is no labor
dispute, strike, slowdown or stoppage actually pending or, to the
knowledge of Bancorp or Bank of San Francisco, threatened against
or directly affecting Bancorp or any Bancorp Subsidiary; and (iv)
neither Bancorp nor any Bancorp Subsidiary has experienced any
work stoppage or other material labor difficulty during the past
five years.
(c) Except as disclosed in Section 2.13(c) of the Disclosure
Schedule, neither Bancorp nor any Bancorp Subsidiary maintains,
contributes to or participates in or has any liability under any
employee benefit plans, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any nonqualified employee benefit plans or deferred
compensation, bonus, stock or incentive plans, or other employee
benefit or fringe benefit programs for the benefit of former or
current employees of Bancorp or any Bancorp Subsidiary
(collectively, the "Employee Plans"). No present or former
employee of Bancorp or any Bancorp Subsidiary has been charged
with breaching nor has breached a fiduciary duty under any
Employee Plan. Neither Bancorp nor any Bancorp Subsidiary
participates in, nor has it in the past five years participated
in, nor has it any present or future obligation or liability
under, any multiemployer plan (as defined at Section 3(37) of
ERISA). Except as separately disclosed in Section 2.13(c) of the
Disclosure Schedule, neither Bancorp nor any Bancorp Subsidiary
maintains, contributes to, or participates in any plan that
provides health, major medical, disability, life insurance,
severance, salary continuation or other benefits to one or more
former employees or consultants.
(d) All liabilities of the Employee Plans have been funded on
the basis of consistent methods in accordance with sound
actuarial assumptions and practices, and no Employee Plan, at the
end of any plan year, or at March 31, 2000 had an accumulated
funding deficiency. No actuarial assumptions have been changed
since the last written report of actuaries on the Employee Plans.
All insurance premiums (including premiums to the Pension Benefit
Guaranty Corporation) have been paid in full, subject only to
normal retrospective adjustments in the ordinary course. Except
as reflected in the Bancorp Financial Statements, Bancorp and the
Bancorp Subsidiaries have no contingent or actual liabilities
under Title IV of ERISA. No accumulated funding deficiency
(within the meaning of Section 302 of ERISA or Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code")) has been
incurred with respect to any Employee Plan, whether or not
waived. No reportable event (as defined in Section 4043 of ERISA)
has occurred with respect to any Employee Plan as to which a
notice would be required to be filed with the Pension Benefit
Guaranty Corporation. No claim is pending or, to the knowledge of
Bancorp or Bank of San Francisco, threatened or imminent with
respect to any Employee Plan (other than a routine claim for
benefits for which plan administrative review procedures have not
been exhausted) for which Bancorp or any Bancorp Subsidiary would
be liable, except as is reflected in the Bancorp Financial
Statements. Bancorp and the Bancorp Subsidiaries have no
liability for excise taxes under Sections 4971, 4975, 4976, 4977,
4979 or 4980B of the Code or for a fine under Section 502 of
ERISA with respect to any Employee Plan. All Employee Plans have
in all
page 10
material respects been operated, administered and maintained in
accordance with the terms thereof and in compliance with the requirements
of all applicable laws, including, without limitation, ERISA.
Section 2.14. Title to Properties; Licenses; Insurance. (a)
Neither Bancorp nor any Bancorp Subsidiary owns any real
property;
(b) all leasehold interests for real property and any material
personal property used by Bancorp or a Bancorp Subsidiary in its
business are held pursuant to lease agreements which are valid
and enforceable in accordance with their terms, subject to the
provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time
in effect, and equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of
judicial discretion;
(c) all such properties comply in all material respects with all
applicable private agreements, zoning requirements and other
governmental laws and regulations relating thereto, and there are
no condemnation proceedings pending or, to the knowledge of
Bancorp or Bank of San Francisco, threatened with respect to any
of such properties;
(d) Bancorp and the Bancorp Subsidiaries have valid title or
other ownership rights under licenses to all material intangible
personal or intellectual property used by Bancorp or any Bancorp
Subsidiary in its business, free and clear of any material claim,
defense or right of any other person or entity, subject only to
rights of the licensors pursuant to applicable license
agreements, which rights do not materially and adversely
interfere with the current use of such property; and
(e) all material insurable properties owned or held by Bancorp
or a Bancorp Subsidiary are insured under effective insurance
policies in such amounts and against fire, earthquake and other
risks insured against by extended coverage and public liability
insurance, in amounts and on terms customary with bank holding
companies of similar size.
Section 2.15. Environmental Matters. As used in this Agreement,
"Environmental Laws" means all local, state and federal
environmental, health and safety laws and regulations in all
jurisdictions in which Bancorp or any Bancorp Subsidiary has done
business or owned, leased or operated property, including,
without limitation, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response,
Compensation and Liability Act, the Federal Clean Water Act, the
Federal Clean Air Act, and the Federal Occupational Safety and
Health Act.
Neither the conduct nor operation of Bancorp or any Bancorp
Subsidiary nor any condition of any property presently or
previously owned, leased or operated by any of them on their own
behalf or in a fiduciary capacity violates or violated any
Environmental Law in any respect material to the business of
Bancorp and the Bancorp Subsidiaries, taken as a whole, and no
condition or event has occurred with respect to any of them or
any property that, with notice or the passage of time, or both,
would constitute a violation material to the business of Bancorp
and the Bancorp Subsidiaries, taken as a whole, of any
Environmental Law or obligate (or potentially obligate) Bancorp
or any Bancorp Subsidiary to remedy, stabilize, neutralize or
otherwise alter the environmental condition of any property,
where the aggregate cost of such actions would be material to
Bancorp and the Bancorp Subsidiaries, taken as a whole. Neither
Bancorp nor any Bancorp Subsidiary has received notice from any
person or entity that Bancorp or any Bancorp Subsidiary, or the
operation or condition of any property ever owned, leased or
operated by any of them on their own behalf or in a fiduciary
capacity, are or were in violation of any Environmental Law, or
that Bancorp or any Bancorp Subsidiary is responsible (or
potentially
page 11
responsible) for remedying, or the cleanup of, any
pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on or beneath any such property.
Section 2.16. Compliance with Laws and Regulations. Bancorp and
the Bancorp Subsidiaries have all licenses, franchises, permits
and other governmental authorizations that are necessary to
enable them to conduct their respective businesses, are qualified
to conduct business in every jurisdiction in which such
qualification is legally required and are in compliance in all
material respects with all applicable laws, ordinances and
regulations.
Section 2.17. Brokerage. Except for fees payable by Bancorp to
Dain Rauscher Wessels, which are described in Section 2.17 of the
Disclosure Schedule, there are no existing claims or agreements
for brokerage commissions, investment banking fees, financial
advisory fees, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement
payable by Bancorp or any Bancorp Subsidiary.
Section 2.18. No Undisclosed Liabilities. Neither Bancorp nor
any Bancorp Subsidiary has any material liability, whether known
or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and whether due
or to become due (and, to the knowledge of Bancorp and Bank of
San Francisco, there is no past or present fact, situation,
circumstance, condition or other basis for any present or future
action, suit or proceeding, hearing, charge, complaint, claim or
demand against Bancorp or any Bancorp Subsidiary giving rise to
any such liability), except (i) liabilities reflected in the
Bancorp Financial Statements and (ii) liabilities incurred in the
ordinary course of business since June 30, 2000.
Section 2.19. Statements True and Correct. None of the
information supplied or to be supplied by Bancorp for inclusion
in any document to be filed with the SEC or any banking or other
regulatory authority in connection with the transactions
contemplated hereby, at the respective times such documents are
filed, and, in the case of the Information Statement (as defined
in Section 4.03), when such documents are first mailed to the
stockholders of Bancorp, will be false or misleading with respect
to any material fact, omit to state any material fact necessary
in order to make the statements therein not misleading or omit to
state any material fact required to be stated in order to correct
any statement in any earlier communication with respect to the
Information Statement. All documents that Bancorp is responsible
for filing with the SEC or any banking or other regulatory
authority in connection with the transactions contemplated hereby
will comply in all material respects with the provisions of
applicable law and the applicable rules and regulations
thereunder.
Section 2.20. Commitments and Contracts. Neither Bancorp nor
any Bancorp Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):
(i) any agreement, arrangement or commitment not made in the
ordinary course of business;
(ii) any agreement, indenture or other instrument not reflected
in the Bancorp Financial Statements relating to the borrowing of
money by Bancorp or a Bancorp Subsidiary or the guarantee by
Bancorp or a Bancorp Subsidiary of any obligation (except trade
payables or instruments related to transactions entered into in
the ordinary course of business by Bancorp or a Bancorp
Subsidiary, such as deposits, federal funds borrowings and
repurchase agreements), other than agreements, indentures or
instruments providing for annual payments of less than $100,000;
or
(iii) any contract containing covenants which limit the
ability of Bancorp or any Bancorp Subsidiary to compete in any
line of business or with any person or containing
page 12
any restriction of the geographical area in which, or method by which,
Bancorp or any Bancorp Subsidiary may carry on its business.
Section 2.21. Material Interest of Certain Persons. (a) No
officer or director of Bancorp or Bank of San Francisco or any
"associate" (as such term is defined in Rule 14a-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of any such officer or director has any material interest in any
material contract or property (real or personal, tangible or
intangible), used in or pertaining to the business of Bancorp or
any Bancorp Subsidiary.
(b) All outstanding loans from Bancorp or any Bancorp Subsidiary
to any present officer, director, employee or any associate or
related interest of any person referred to in subsection (a) were
approved by or reported to the Board of Directors of the
applicable entity in accordance with all applicable laws and
regulations.
Section 2.22. Conduct to Date. From and after December 31, 1999
through the date of this Agreement, except as disclosed in
Section 2.22 of the Disclosure Schedule, neither Bancorp nor any
Bancorp Subsidiary has done the following:
(i) failed to conduct its business in the ordinary and usual
course consistent with past practices;
(ii) issued, sold, granted, conferred or awarded any common or
other stock, or any corporate debt securities properly classified
under generally accepted accounting principles applied on a
consistent basis as long-term debt on the balance sheets of
Bancorp or Bank of San Francisco;
(iii) effected any stock split or adjusted, combined,
reclassified or otherwise changed its capitalization;
(iv) except for semi-annual dividends on shares of Bancorp
Preferred which Bancorp is required to declare and pay pursuant
to its Certificate of Incorporation, declared, set aside or paid
any cash or stock dividend or other distribution in respect of
its capital stock, or purchased, redeemed, retired, repurchased,
or exchanged, or otherwise directly or indirectly acquired or
disposed of any of its capital stock;
(v) incurred any material obligation or liability (absolute or
contingent), except normal trade or business obligations or
liabilities incurred in the ordinary course of business, or
subjected to lien any of its assets or properties other than in
the ordinary course of business consistent with past practice;
(vi) discharged or satisfied any material lien or paid any
material obligation or liability (absolute or contingent), other
than in accordance with its terms in the ordinary course of
business;
(vii) sold, assigned, transferred, leased, exchanged, or
otherwise disposed of any of its properties or assets other than
for a fair consideration in the ordinary course of business;
(viii) except as required by contract, (A) increased the rate
of compensation of, or paid any bonus to, any of its directors,
officers, or other employees, except for merit or promotion
increases consistent with past practice and in accordance with
existing policy or established incentive programs; (B) entered
into any new, or amended or supplemented any existing,
employment, management, consulting, deferred compensation,
retention,
page 13
severance, indemnification or other similar contract,
(C) entered into, terminated or substantially modified any of the
Employee Plans or (D) agreed to do any of the foregoing;
(ix) suffered any material damage, destruction or loss, whether
as the result of fire, explosion, earthquake, accident, casualty,
labor trouble, taking of property by any governmental authority,
flood, windstorm, embargo, riot, act of God, act of war or other
casualty or event, whether or not covered by insurance;
(x) canceled or compromised any debt, except for debts charged
off or compromised in accordance with past practice;
(xi) entered into any material transaction, contract or
commitment outside the ordinary course of its business; or
(xii) made or guaranteed any loan to any of the Employee
Plans.
Section 2.23. Irrevocable Proxy. Bancorp has delivered to FBA
concurrently with the execution of this Agreement the irrevocable
proxy of the Trustee named in a Voting Trust (the "Trustee")
dated November 30, 1998 (the "Voting Trust"). To the best of
Bancorp's knowledge, the Trustee has the exclusive right to vote
the shares of Bancorp Stock which are the subject of the written
consent referred to in Section 4.03 and the Proxy, and such
written consent and the Proxy are legal, valid and binding
obligations of the Trustee, enforceable in accordance with their
respective terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF FIRST BANKS, FBA AND REDWOOD
First Banks, FBA and Redwood each represents and warrants to
Bancorp and Bank of San Francisco as follows:
Section 3.01. Organization. First Banks, FBA and Redwood are
corporations duly organized, validly existing and in good
standing under the laws of the States of Missouri, Delaware and
California, respectively. Each of such corporations has the power
to own all of its property and assets, to incur all of its
liabilities and to carry on its business as now conducted.
Immediately prior to the Effective Time, Newco will be duly
organized, validly existing and in good standing under the laws
of Delaware and will have all requisite power and authority to
own al of its properties and assets, to incur all of its
liabilities, to carry on its business and to consummate the
Merger and the other transactions contemplated by this Agreement.
Section 3.02. Authorization. The Boards of Directors of First
Banks, FBA and Redwood have, and as of the Closing the Board of
Directors of Newco will have, by all requisite action approved
this Agreement, the Merger and the Bank Merger and authorized the
execution hereof on behalf of each corporation by duly authorized
officers and the performance of their respective obligations
hereunder. FBA, in its capacity as the sole holder of outstanding
capital stock of Redwood, has approved this Agreement, the Merger
and the Bank Merger. Nothing in the Certificates of Incorporation
of FBA or Newco, the Articles of Incorporation of First Banks or
Redwood, or the Bylaws of any of such entities or any other
agreement, instrument, decree, proceeding, law or regulation
(except as specifically referred to in this Agreement) by or to
which First Banks, FBA, Redwood or Newco is or will be bound or
subject prohibits (or in the case of Newco, will prohibit) any of
them from consummating this Agreement, the Merger and the Bank
page 14
Merger on the terms and conditions herein contained. This
Agreement has been duly and validly executed and delivered by
First Banks, FBA and Redwood and constitutes a legal, valid and
binding obligation of each of them, enforceable against them in
accordance with its terms.
Section 3.03. Litigation. There is no litigation, claim or
other proceeding pending or, to the best of the knowledge of
First Banks, FBA or Redwood, threatened that would prohibit any
of them or Newco from consummating the transactions contemplated
by this Agreement.
Section 3.04. Statements True and Correct. None of the filings
made or the information supplied or to be supplied by First
Banks, FBA, Redwood or Newco for inclusion in any document to be
filed with any regulatory authority in connection with the
transactions contemplated hereby will, at the respective times
such documents are filed and, in the case of the Information
Statement, when it is first mailed to the stockholders of
Bancorp, be false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to
make the statements therein not misleading. All documents filed
by First Banks or any of its subsidiaries with any other
regulatory authority in connection with the transactions
contemplated hereby will comply with applicable laws, rules and
regulations.
Section 3.05. Financial Information. The audited consolidated
balance sheets of First Banks and its subsidiaries as of December
31, 1999 and related consolidated income statements and
statements of changes in shareholders' equity and of cash flows
for the three years ended December 31, 1999, together with the
notes thereto, included in First Banks' Annual Report on Form
10-K for the year ended December 31, 1999 as currently on file
with the SEC; the unaudited consolidated balance sheets of First
Banks and its subsidiaries as of June 30, 2000 and related
consolidated income statements and statements of changes in
shareholders' equity and of cash flows for the three and six
months ended June 30, 2000, together with the notes thereto,
included in First Banks' Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000 as currently on file with the SEC;
and the year-end and quarter-end Reports of Condition and Reports
of Income of Redwood for 1999 and for the three month periods
ended March 31, 2000 and June 30, 2000, respectively, as filed
with the FDIC (such financial statements and notes collectively
referred to herein as the "First Banks Financial Statements"),
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as
may be disclosed therein and except for regulatory reporting
differences required in Redwood?s reports) and fairly present the
consolidated financial position and the consolidated results of
operations, changes in shareholders' equity and cash flows of the
respective entity and its respective consolidated subsidiaries as
of the dates and for the periods indicated subject, in the case
of any such statements which are unaudited, to normal year-end
adjustments of accruals and the absence of footnotes and other
normal presentational items.
Section 3.06. Absence of Changes. Since December 31, 1999 there
has not been any material adverse change in the financial
condition, the results of operations or the business or prospects
of First Banks and its subsidiaries taken as a whole, nor have
there been any events or transactions having such a material
adverse effect which should be disclosed in order to make the
First Banks Financial Statements not misleading.
Section 3.07. Ability to Consummate the Merger. Each of First
Banks, FBA and Redwood believes, on a reasonable basis and in
good faith, that (i) each of First Banks, FBA, Newco and Redwood
will be able to obtain the approvals, consents and authorizations
required by law for the consummation of the Merger, including all
legally required regulatory approvals, (ii) First Banks will be
able to consummate a public offering of Trust Preferred
securities so as to satisfy the condition set forth in Section
6.01(h), and (iii) each of First Banks, FBA, Newco and Redwood
will be able otherwise to satisfy all conditions necessary for it
to consummate the transactions contemplated by this Agreement in
accordance with its terms, in each case not later than the date
page 15
which is 180 days after the date of this Agreement. Neither First
Banks, FBA nor Redwood has any reason to believe that it will be
unable to consummate the transactions contemplated by this
Agreement on or before such date.
ARTICLE IV
AGREEMENTS OF BANCORP AND BANK OF SAN FRANCISCO
Section 4.01. Business in Ordinary Course. Bancorp and Bank of
San Francisco agree that, from the date of this Agreement until
the earlier of the Closing Date or the termination of this
Agreement in accordance with its terms:
(a) Bancorp and the Bancorp Subsidiaries shall continue to carry
on their business and the discharge or incurrence of obligations
and liabilities only in the usual, regular and ordinary course of
business, as heretofore conducted, and by way of amplification
and not limitation, Bancorp and each Bancorp Subsidiary will not:
(i) except for semi-annual dividends payable on shares of
Bancorp Preferred which Bancorp is required to declare and pay
pursuant to its Certificate of Incorporation, declare or pay any
dividend or make any other distribution to shareholders, whether
in cash, stock or other property; or
(ii) issue any capital stock or any options, warrants, or other
rights to subscribe for or purchase capital stock or any
securities convertible into or exchangeable for any capital stock
(except for the issuance of Bancorp Common pursuant to the
convertible securities, exchangeable securities or Bancorp Stock
Options described in Section 2.01(d) of the Disclosure Schedule);
or
(iii) directly or indirectly redeem, purchase or otherwise
acquire any capital stock of Bancorp or any Bancorp Subsidiary;
or
(iv) effect a reclassification, recapitalization, splitup,
exchange of shares, readjustment or other similar change in or to
any capital stock, or otherwise reorganize or recapitalize; or
(v) except as contemplated in Section 1.02, change its
Certificate or Articles of Incorporation or association, as the
case may be, or Bylaws, nor enter into any agreement to merge or
consolidate with, or sell a significant portion of its assets to,
any person or entity.
(b) Bancorp and each Bancorp Subsidiary will not, without the
prior written consent of FBA (which consent shall not be
unreasonably withheld or delayed):
(i) Except as disclosed in Section 4.01(b) of the Disclosure
Schedule, grant any increase (other than ordinary and normal
increases consistent with past practices) in the compensation
payable or to become payable to officers or salaried employees,
grant any stock options or, except as required by law, adopt or
make any change in any employment, bonus, insurance, pension,
salary continuation, retention, indemnification or other Employee
Plan, agreement, payment or arrangement made to, for or with any
of such officers or employees;
page 16
(ii) borrow or agree to borrow any amount of funds except in the
ordinary course of business, or directly or indirectly guarantee
or agree to guarantee any obligations of others;
(iii) make or commit to make any new loan or letter of credit
or any new or additional discretionary advance under any existing
line of credit, in principal amounts in excess of $1,000,000 or
that would increase the aggregate credit outstanding to any one
borrower (or group of affiliated borrowers) to more than
$1,500,000 (excluding for this purpose any accrued interest or
overdrafts);
(iv) purchase or otherwise acquire any investment security for
its own account having an average remaining life to maturity
greater than five years or any asset-backed securities other than
those issued or guaranteed by the Federal Home Loan Bank Board,
the Government National Mortgage Association, the Federal
National Mortgage Association or the Federal Home Loan Mortgage
Corporation;
(v) enter into any agreement, contract or commitment having a
term in excess of six (6) months other than, in the ordinary
course of business: letters of credit, loan agreements, credit
and deposit agreements and documents, renewals with current
market rates and terms of expiring subleases of office space
located at 550 Montgomery Street, San Francisco, California (all
current subleases scheduled to expire prior to March 31, 2001
being identified in Section 4.01(b) of the Disclosure Schedule)
and renewals or replacements of insurance policies (in either
case for terms not exceeding one year) on terms substantially
similar to existing Bancorp and Bank of San Francisco policies;
(vi) except in the ordinary course of business, place on any of
its assets or properties any mortgage, pledge, lien, charge, or
other encumbrance;
(vii) except in the ordinary course of business, cancel or
accelerate any material indebtedness owing to Bancorp or a
Bancorp Subsidiary or any claim which Bancorp or any Bancorp
Subsidiary may possess, or waive any material rights of
substantial value;
(viii) sell or otherwise dispose of any real property or any
material amount of any tangible or intangible personal property,
other than properties acquired in foreclosure or otherwise in the
ordinary collection of indebtedness;
(ix) foreclose upon or otherwise take title to or possession or
control of any real property without first obtaining a phase one
environmental report thereon which indicates that the property is
free of pollutants, contaminants or hazardous or toxic waste
materials; provided, however, that a report shall not be required
with respect to single family, non-agricultural residential
property of one acre or less to be foreclosed upon unless the
entity proposing to acquire the property has reason to believe
that such property might contain any such waste materials or
otherwise might be contaminated;
(x) commit any act or fail to do any act which will cause a
breach of any agreement, contract or commitment and which will
have a material adverse effect on the business, financial
condition or earnings of Bancorp or a Bancorp Subsidiary;
(xi) violate any law, statute, rule, governmental regulation or
order, which violation would have a material adverse effect on
the business, financial condition, or earnings of Bancorp or a
Bancorp Subsidiary;
(xii) purchase any real or personal property or make any
other capital expenditure where the amount paid or committed
therefor is in excess of $75,000; or
page 17
(xiii) increase or decrease the rate of interest paid on time
deposits, except in the ordinary course of business in a manner
consistent with past practices.
(c) Bancorp and the Bancorp Subsidiaries shall not, without the
prior written consent of FBA, engage in any transaction or take
any action that would render untrue in any material respect any
of the representations and warranties of Bancorp or Bank of San
Francisco contained in Article II hereof, if such representations
and warranties were given immediately following such transaction
or action.
(d) Bancorp shall promptly notify FBA of the occurrence of any
matter or event known to and directly involving Bancorp or Bank
of San Francisco that has or would be reasonably expected to have
a material adverse effect on the business, operations,
properties, assets, or condition (financial or otherwise) of
Bancorp and the Bancorp Subsidiaries, taken as a whole, or that
would otherwise materially and adversely affect the ability of
Bancorp or Bank of San Francisco to consummate the transactions
contemplated by this Agreement.
(e) Bancorp shall not solicit or encourage, or, except to the
extent otherwise required by applicable Corporate Law or
applicable directors' fiduciary principles, hold discussions or
negotiations with or provide information to any person or entity
in connection with any proposal for the acquisition of all or a
substantial portion of the business, assets, shares of Bancorp
Common or other securities or assets of Bancorp or any Bancorp
Subsidiary. Bancorp shall promptly advise FBA of its receipt of
any such proposal or inquiry and the substance thereof.
Section 4.02. Breaches. Bancorp and Bank of San Francisco
shall, in the event either has knowledge of the occurrence, or
impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior
to the date hereof) of any of its representations or agreements
contained or referred to herein, give prompt written notice
thereof to FBA and use their best efforts to prevent or promptly
remedy the same.
Section 4.03. Written Consent. Concurrently with the execution
of this Agreement, Bancorp has delivered to FBA a true copy of a
written consent executed by the Trustee and delivered to Bancorp
approving the Merger and the other transactions contemplated by
this Agreement. As soon as reasonably practicable and within
applicable time limitations, Bancorp shall (i) prepare and file
with the SEC an Information Statement (the "Information
Statement") with respect to the Merger and the other transactions
contemplated by this Agreement, (ii) cause such Information
Statement to be mailed to all Bancorp stockholders and (iii)
perform all other actions required by Section 14 of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
Section 4.04. Consummation of Agreement. Bancorp and Bank of
San Francisco shall use their best efforts to perform and fulfill
all conditions and obligations on their respective parts to be
performed or fulfilled pursuant to this Agreement and to effect
the Merger within 180 days after the date hereof and cooperate in
causing the Bank Merger in accordance with the terms and
provisions hereof. Bancorp and Bank of San Francisco shall
furnish to FBA in a timely manner all information, data and
documents reasonably requested by FBA and shall cooperate fully
with First Banks, FBA and Redwood in seeking such approvals,
consents and authorizations as are required for the Merger and in
consummating the transactions contemplated by this Agreement.
Neither Bancorp nor Bank of San Francisco shall take, or permit
any of its affiliates to take, any action that is intended, or
would reasonably be expected, to result in (i) any of its
representations or warranties in this Agreement to become untrue
in any material respect at any time prior to the Effective Time,
(ii) any of the conditions to the Merger set forth in Article VI
not to be satisfied, or (iii) any provision of this Agreement to
be violated in any material respect.
page 18
Section 4.05. Environmental Reports. Bancorp shall provide to
FBA, as soon as reasonably practicable and not later than 45 days
after the date hereof, a report of a phase one environmental
investigation on the real property leased and operated by Bancorp
and Bank of San Francisco located at 550 Montgomery Street, San
Francisco, California. In addition, within ten (10) days after
the acquisition or lease of any real property acquired or leased
by Bancorp or any Bancorp Subsidiary after the date hereof (other
than space in retail and similar establishments leased or
operated for automatic teller machines), except as otherwise
provided in Section 4.01(b)(ix), Bancorp and Bank of San
Francisco shall provide to FBA a report of a phase one
environmental investigation on such real property. If required by
the phase one investigation, in FBA's reasonable opinion, and
subject to the consent of the lessor of any such property if
legally required (which consent Bancorp and Bank of San Francisco
shall use their best efforts to obtain), FBA may obtain a report
of a phase two investigation or other appropriate environmental
investigation on properties requiring such additional
investigation, and Bancorp and Bank of San Francisco will
cooperate with FBA in obtaining the same. FBA shall have fifteen
(15) days from the receipt of any such report or investigation to
notify Bancorp in writing of the estimated costs, in excess of
$600,000 (for all affected properties), of taking such remedial
and corrective actions and measures as are required by applicable
law or recommended by such report or investigation in light of
serious life, health or safety concerns (the "Estimated
Environmental Costs").
Section 4.06. Access to Information. Bancorp and Bank of San
Francisco shall permit FBA reasonable access, in a manner which
will avoid undue disruption or interference with their normal
operations, to their properties and shall cause the Bancorp
Subsidiaries to provide to FBA comparable access to their
properties. Bancorp and Bank of San Francisco shall disclose and
make available to FBA all books, documents, papers and records
relating to the assets, stock ownership, properties, operations,
obligations and liabilities of Bancorp and the Bancorp
Subsidiaries including, but not limited to, all books of account
(including the general ledger), tax records, minute books of
directors' and shareholders' meetings, organizational documents,
material contracts and agreements, loan files, filings with any
regulatory authority, accountants' workpapers (if available and
subject to the respective independent accountants' consent),
litigation files, plans affecting employees, and any other
business activities or prospects in which FBA may have a
reasonable and legitimate interest in furtherance of the
transactions contemplated by this Agreement. FBA will hold any
such information which is nonpublic in confidence in accordance
with the provisions of Section 8.01 hereof.
Section 4.07. Consents of Third Parties. Bancorp and Bank of
San Francisco shall use their best efforts to obtain all consents
of third parties necessary for the consummation of the
transactions contemplated by this Agreement, including without
limitation the consent of the lessor (to the extent required)
under the current lease of the office premises located at 550
Montgomery Street, San Francisco, California.
Section 4.08. Subsequent Financial Statements. As soon as
available after the date hereof, Bancorp shall deliver to FBA the
monthly unaudited consolidated balance sheets and profit and loss
statements of Bancorp prepared for its internal use, the Report
of Condition and Income of Bank of San Francisco for each
quarterly period completed prior to the Closing, and all other
financial reports or statements submitted to regulatory
authorities after the date hereof, to the extent permitted by law
(collectively, the "Subsequent Bancorp Financial Statements").
The Subsequent Bancorp Financial Statements shall be prepared on
a basis consistent with past accounting practices, shall fairly
present the financial condition and results of operations for the
dates and periods presented and shall not include any material
assets or omit to state any material liabilities, absolute or
contingent, or other facts, which inclusion or omission would
render such financial statements misleading in any material
respect.
PAGE 19
Section 4.09. Merger of Banks. Bancorp and Bank of San
Francisco shall cooperate with FBA and shall execute such
documents as may be required in order to enable Bank of San
Francisco to enter into and consummate a merger with Redwood Bank
(or a successor thereto) (the "Bank Merger"), to be effective
immediately following the Effective Time or as soon thereafter as
practicable.
ARTICLE V
AGREEMENTS OF FIRST BANKS, FBA AND REDWOOD
Section 5.01. Regulatory Approvals. First Banks shall use its
best efforts to obtain the necessary approvals, consents and
authorizations required by law for the consummation of the
Merger, including all legally required regulatory approvals.
First Banks, FBA and Redwood shall file all regulatory
applications required in order to consummate the Merger and the
Bank Merger, including but not limited to the necessary
applications for the prior approval of the Federal Reserve Board.
Any required application shall be filed by First Banks or FBA
with the appropriate regulatory or governing authority as soon as
reasonably practicable, but in no event later than six calendar
weeks after the date hereof. FBA shall keep Bancorp reasonably
informed as to the status of such applications and provide to
Bancorp and the Trustee, promptly after filing, copies of such
applications and any supplementally filed materials.
Section 5.02. Breaches. First Banks, FBA and Redwood shall, in
the event any of them has knowledge of the occurrence, or
impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or
constituted a breach had such event occurred or been known prior
to the date hereof) of any of its representations or agreements
contained or referred to herein, give prompt written notice
thereof to Bancorp and use their best efforts to prevent or
promptly remedy the same.
Section 5.03. Consummation of Agreement. (a) First Banks, FBA
and Redwood shall use their best efforts to perform and fulfill
all conditions and obligations on their parts and on the part of
Newco to be performed or fulfilled under this Agreement, to
effect the Merger within 180 days after the date hereof (subject
to FBA?s right as set forth in Section 1.05 to schedule the
Closing at the end of a month or the first day of the following
month, even if the effect of doing so is to cause the Merger to
be effective more than 180 days from the date hereof) and to
effect the Bank Merger in accordance with the terms and
conditions of this Agreement. First Banks, FBA and Redwood shall
furnish to Bancorp in a timely manner all information, data and
documents reasonably requested by Bancorp and shall cooperate
fully with Bancorp and Bank of San Francisco in seeking such
approvals, consents and authorizations as are required for the
Merger and the other transactions contemplated by this Agreement.
Neither First Banks, FBA nor Redwood shall take, or permit any of
its affiliates to take, any action that is intended, or would
reasonably be expected, to result in (i) any of its
representations or warranties in this Agreement to become untrue
in any material respect at any time prior to the Effective Time,
(ii) any of the conditions to the Merger set forth in Article VI
not to be satisfied, or (iii) any provision of this Agreement to
be violated in any material respect.
(b) First Banks, FBA and Redwood shall not, without the prior
written consent of Bancorp, engage in any transaction or take any
action that would render untrue in any material respect any of
the representations and warranties of First Banks, FBA or Redwood
contained in Article III hereof, if such representations and
warranties were given immediately following such transaction or
action.
PAGE 20
(c) FBA shall promptly notify Bancorp of the occurrence of any
matter or event known to or directly involving First Banks or FBA
that has or would be reasonably expected to have a material
adverse effect on the business, operations, properties, assets,
or condition (financial or otherwise) of First Banks or FBA and
their respective subsidiaries, taken as a whole or that would
otherwise materially and adversely affect the ability of First
Banks, FBA, Redwood or Newco to consummate the transactions
contemplated by this Agreement.
Section 5.04. Employee Benefits. FBA shall provide the benefits
described in this Section 5.04 with respect to each person who
remains an employee of Bancorp or a Bancorp Subsidiary following
the Closing Date (each a "Continued Employee"). Subject to FBA's
ongoing right to adopt subsequent amendments or modifications of
any plan referred to in this Section 5.04 or to terminate any
such plan, in FBA's sole discretion, each Continued Employee
shall be entitled, as an employee of a subsidiary of FBA, to
participate in such employee benefit plans, as defined in Section
3(3) of ERISA, or any non-qualified employee benefit plans or
deferred compensation, stock option, bonus or incentive plans, or
other employee benefit or fringe benefit programs as may be in
effect generally for employees of all of FBA's banking
subsidiaries (the "FBA Plans"), if and as a Continued Employee
shall be eligible and, if required, selected for participation
therein under the terms thereof and otherwise shall not be
participating in a similar plan which is maintained by Bancorp
after the Effective Time. Bancorp employees shall participate
therein on the same basis as similarly situated employees of
other subsidiaries of FBA. All such participation shall be
subject to the terms of such plans as may be in effect from time
to time, and this Section 5.04 is not intended to give Continued
Employees any rights or privileges superior to those of other
employees of subsidiaries of FBA. FBA may terminate or modify all
Employee Plans, and FBA's obligation under this Section 5.04
shall not be deemed or construed so as to provide duplication of
similar benefits but, subject to that qualification, FBA shall
credit each Continued Employee with his or her term of service
with Bancorp, for purposes of vesting and any age or period of
service requirements for commencement of participation with
respect to any FBA Plan in which Continued Employees may
participate. Nothing in this Agreement shall obligate FBA,
Bancorp or any other entity to employ any person or to continue
to employ any person for any period of time.
Section 5.05. Indemnification. (a) For four years after the
Closing Date, FBA shall cause Bancorp to indemnify, defend and
hold harmless the present and former officers, directors,
employees and agents of Bancorp and the Bancorp Subsidiaries
(each, an "Indemnified Party") against all losses, expenses,
claims, damages or liabilities arising out of actions or
omissions related to their positions at Bancorp or a Bancorp
Subsidiary occurring on or prior to the Closing Date (including,
without limitation, the transactions contemplated by this
Agreement) to the extent permitted by applicable corporate laws
and required by Bancorp's Certificate of Incorporation as in
effect on March 31, 2000. The Indemnification Agreements
specifically identified in Section 2.09 of the Disclosure
Schedule, as amended as contemplated in Section 6.01(i), shall
remain in effect.
(b) If after the Closing Date Bancorp or its successors or
assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or
surviving entity of such consolidation or merger, or (ii) shall
transfer all or substantially all of its properties and assets to
any individual, corporation or other entity (including as a
result of the Bank Merger), then and in each such case, FBA shall
cause Bancorp's successors and assigns to assume any remaining
obligations set forth in this Section 5.05. If Bancorp shall
liquidate, dissolve or otherwise wind up its business, then FBA
shall indemnify, defend and hold harmless each Indemnified Party
to the same extent and on the same terms that Bancorp was so
obligated pursuant to this Section 5.05.
PAGE 21
(c) FBA shall have the option of purchasing insurance in the
form of an extension of coverage under Bancorp's existing
insurance policy Number F0019780Y002 issued by Lloyds of London
(First City), insuring the Indemnified Parties against such
losses, expenses, claims, damages or liabilities, on terms
acceptable to FBA.
Section 5.06. Completion of Financing. Each of First Banks and
its subsidiaries will use its best efforts to complete a
Financing (as defined in Section 6.01) necessary to satisfy the
conditions set forth in Section 6.01 as soon as practicable and
shall periodically keep Bancorp and the Trustee reasonably
informed of the status of the Financing, including providing
copies of non-confidential documents related to the Financing.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.01 Conditions to the Obligations of First Banks, FBA and
Redwood. The obligations of First Banks, FBA and Redwood to
effect the Merger and the other transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver by such
parties) prior to or on the Closing Date of the following
conditions:
(a) the representations and warranties made by Bancorp and Bank
of San Francisco in this Agreement shall be true in all material
respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given
on and as of the Closing Date (except to the extent any
representation or warranty expressly speaks as of an earlier
date);
(b) Bancorp and Bank of San Francisco shall each have performed
and complied in all material respects with all of its obligations
and agreements required to be performed prior to the Closing
Date;
(c) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction preventing the consummation of the Merger or the
Bank Merger, or other legal restraint or prohibition preventing
the consummation of the Merger, shall be in effect, nor shall any
proceeding by any regulatory authority or other person seeking
any of the foregoing be pending. There shall not be any action
taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger or the Bank
Merger which makes the consummation thereof illegal;
(d) all necessary approvals, consents and authorizations
required by law for consummation of the Merger, including the
requisite approvals of the shareholders of Bancorp and all
legally required regulatory approvals, shall have been obtained,
and all waiting periods required by law shall have expired;
(e) FBA shall have received the environmental reports required
by Section 4.05 hereof and shall not have elected pursuant to
Section 7.05 hereof to terminate this Agreement;
(f) FBA shall have received all documents required to be
received from Bancorp, including without limitation the consents
referred to in Section 4.07, on or prior to the Closing Date, all
in form and substance reasonably satisfactory to FBA;
(g) stockholders of Bancorp Common owning no more than fifteen
percent (15%) of the outstanding Bancorp Common shall have
perfected the right to dissent from the Merger;
PAGE 22
(h) First Banks or one of its subsidiaries shall have completed
an offering of Trust Preferred securities in the aggregate
principal amount of at least $30,000,000 with customary terms and
at a dividend rate no higher than twelve and one-half percent (12
1/2%) or an alternative financing arrangement on substantially
similar terms (the "Financing"); provided, that if First Banks
and its subsidiaries have complied in all material respects with
their obligations under Section 5.07 but have been unable to
complete a Financing by December 31, 2000, unless completion of
such a transaction is then imminent, then FBA shall either (i)
terminate this Agreement effective January 1, 2001 by written
notice to Bancorp on or before such date, or (ii) as of January
1, 2001, this paragraph (h) shall be void and of no further force
and effect. Notwithstanding the foregoing, if, as of December 31,
2000, First Banks, FBA or Redwood is in material breach of any of
their representations, warranties or agreements set forth herein,
and such breach has not been cured within the applicable cure
period after delivery of written notice with respect to the
breach, then FBA shall not have the option of terminating this
Agreement pursuant to the above clause (i) of this subsection (h)
and, in such event this subsection (h) shall automatically
terminate and be of no further force and effect on and as of
January 1, 2001; and
(i) each of the Indemnification Agreements identified in Section
2.09 of the Disclosure Schedule shall have been amended by
removing Sections 5(d) and 8 therefrom, in a manner reasonably
acceptable to FBA.
Section 6.02. Conditions to the Obligations of Bancorp and Bank
of San Francisco. The obligations of Bancorp and Bank of San
Francisco to effect the Merger and the other transactions
contemplated by this Agreement shall be subject to the
satisfaction (or waiver by Bancorp and Bank of San Francisco)
prior to or on the Closing Date of the following conditions:
(a) the representations and warranties made by First Banks, FBA
and Redwood in this Agreement shall be true in all material
respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made or given
on the Closing Date (except to the extent any representation or
warranty expressly speaks as of an earlier date);
(b) First Banks, FBA and Redwood shall each have performed and
complied in all material respects with all of its obligations and
agreements required to be performed prior to the Closing Date;
(c) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or the Bank Merger shall be in
effect, nor shall any proceeding by any bank regulatory authority
or other person seeking any of the foregoing be pending. There
shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the
Merger or the Bank Merger which makes the consummation thereof
illegal;
(d) all necessary approvals, consents and authorizations
required by law for consummation of the Merger, including the
requisite approvals of the shareholders of Bancorp and all
legally required regulatory approvals, shall have been obtained,
and all waiting periods required by law
shall have expired; and
(e) Bancorp shall have received all documents required to be
received from FBA on or prior to the Closing Date, all in form
and substance reasonably satisfactory to Bancorp.
PAGE 23
ARTICLE VII
TERMINATION
Section 7.01. Mutual Agreement. This Agreement may be
terminated by the mutual written agreement of the parties at any
time prior to the Closing Date, regardless of whether approval of
this Agreement and the Merger by the shareholders of Bancorp
shall have been previously obtained.
Section 7.02. Breach of Agreements. In the event that there is
a material breach of any of the representations and warranties or
agreements of First Banks, FBA or Redwood, on one hand, or
Bancorp or Bank of San Francisco, on the other hand, which breach
is not cured within thirty days after delivery of written notice
to cure such breach is given to the breaching party by the
non-breaching party, then the non-breaching parties, regardless
of whether approval of this Agreement and the Merger by the
shareholders of Bancorp shall have been previously obtained, may
terminate and cancel this Agreement by providing written notice
of such action to the other parties hereto.
Section 7.03. Failure of Conditions. In the event that any of
the conditions to the obligations of a party are not satisfied or
waived on or prior to the Closing Date, and if any applicable
cure period provided in Section 7.02 hereof has lapsed, then such
party may, regardless of whether approval of the transactions
contemplated by this Agreement by the shareholders of Bancorp
shall have been previously obtained, terminate and cancel this
Agreement by delivery of written notice of such action to the
other parties.
Section 7.04. Denial of Regulatory Approval. If any regulatory
application the approval of which is required in order for the
transactions contemplated by this Agreement be consummated should
be finally denied or disapproved by a regulatory authority, then
this Agreement thereupon shall be deemed terminated and canceled;
provided, however, that a request for additional information or
undertaking by First Banks, FBA, Redwood or Newco as a condition
for approval, shall not be deemed to be a denial or disapproval
so long as such parties diligently provide the requested
information or undertaking. In the event an application is denied
pending an appeal, petition for review or similar such act on the
part of First Banks, FBA, Redwood or Newco (hereinafter referred
to as the "Appeal"), then the application will be deemed denied
unless such party or parties prepares and timely files and
continues to pursue an Appeal seeking the necessary approval.
Section 7.05. Environmental Reports. (a) In the event that the
Estimated Environmental Costs as set forth in the notification
provided by FBA to Bancorp pursuant to Section 4.05 are less than
or equal to $5,000,000, then the Common Share Merger Price shall
be reduced by an amount per share equal to the result obtained by
dividing the Estimated Environmental Costs by the aggregate of
the number of shares of Bancorp Common outstanding as of the
Closing Date plus the number of shares of Bancorp Common that
would be issued upon the exercise of the Bancorp Options
outstanding on the Closing Date.
(b) In the event that the Estimated Environmental Costs are
greater than $5,000,000, FBA shall have the right for a period of
fifteen (15) days following delivery of notice, as provided in
Section 4.05, to terminate this Agreement by giving written
notice thereof to Bancorp.
Section 7.06. Regulatory Enforcement Matters. In the event that
Bancorp or any Bancorp Subsidiary shall become a party or subject
to any written agreement, memorandum of understanding, cease and
desist order, imposition of civil money penalties or other
regulatory enforcement action or proceeding of any bank or bank
holding company regulatory authority after
PAGE 24
the date of this Agreement and based upon safety and soundness
considerations, then FBA may terminate this Agreement by giving written
notice of such termination to Bancorp.
Section 7.07. Unilateral Termination. If the Closing Date shall
not have occurred on or prior to the day which is 210 days after
the date of this Agreement, then this Agreement may be terminated
by any party by giving written notice to the other parties;
provided, however, that a party shall not be entitled to
terminate this Agreement pursuant to this Section 7.07 if such
party is in breach of this Agreement and such breach has
contributed materially to the failure of the Closing to have
occurred on or prior to the date on which such party proposed to
terminate this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01 Confidential Information. The parties acknowledge
the confidential and proprietary nature of the "Information" (as
herein defined) which has heretofore been exchanged and which
will be received from each other hereunder and agree to hold and
keep the same confidential. Such Information will include any
and all financial, technical, commercial, marketing, customer or
other information concerning the business, operations and affairs
of a party that may be provided to the others, irrespective of
the form of the communications, by such party's employees or
agents. Such Information shall not include information which is
or becomes generally available to the public other than as a
result of a disclosure by a party or its representatives in
violation of this Agreement. The parties agree that the
Information will be used solely for the purposes contemplated by
this Agreement and that such Information will not be disclosed to
any person other than employees and agents of a party who are
directly involved in implementing the Merger, who shall be
informed of the confidential nature of the Information and
directed individually to abide by the restrictions set forth in
this Section 8.01. The Information shall not be used in any way
detrimental to a party, including use directly or indirectly in
the conduct of the other party's business or any business or
enterprise in which such party may have an interest, now or in
the future, and whether or not now in competition with such other
party. Neither FBA nor Bancorp will purchase or sell any security
issued by the other party for so long as this Agreement remains
in effect.
Section 8.02. Publicity. First Banks, FBA and Bancorp shall
cooperate with each other and with the Trustee in the development
and distribution of all news releases and other public
disclosures concerning this Agreement and the Merger. No party
shall issue any news release or make any other public disclosure
without the prior consent of the other parties, unless such is
required by law upon the written advice of counsel or is in
response to published newspaper or other mass media reports
regarding the transactions contemplated hereby, in which latter
events the parties shall consult with each other to the extent
practicable regarding such responsive disclosure.
Section 8.03. Return of Documents. Upon termination of this
Agreement without the Merger becoming effective, each party shall
deliver to the others originals and all copies of all Information
made available to such party and will not retain any copies,
extracts or other reproductions, in whole or in part, of such
Information.
Section 8.04. Notices. Any notice or other communication shall
be in writing and shall be deemed to have been given or made on
the date of delivery, in the case of hand delivery, or upon
return of a signed receipt in regular form if sent by the United
States Registered or Certified
PAGE 25
Mail, postage prepaid, or upon receipt if transmitted by facsimile
telecopy or any other means, addressed (in any case) as follows:
(a) if to First Banks: First Banks, Inc.
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
(b) if to FBA: First Banks America, Inc.
11901 Olive Boulevard
Creve Coeur, Missouri 63141
Attention: Mr. Allen H. Blake
Facsimile: (314) 567-3490
(c) if to Redwood: Redwood Bank
735 Montgomery Street
San Francisco, California 94111
Attention: Mr. Terrance McCarthy
Facsimile: (415) 391-9090
with a copy to: John S. Daniels
Attorney at Law
6440 North Central Expressway
Suite 503
Dallas, Texas 75206
Facsimile: (214) 368-9094
(d) if to Bancorp or
Bank of San Francisco:
The San Francisco Company
550 Montgomery Street
San Francisco, California 94111
Attention: Chief Financial Officer
Facsimile: (415) 781-0536
Bank of San Francisco
550 Montgomery Street
San Francisco, California 94111
Attention: Chief Financial Officer
Facsimile: (415) 781-0536
with a copy to: Pillsbury Madison & Sutro LLP
50 Fremont Street
San Francisco, California 94105
Attention: Michael J. Halloran
Facsimile: (415) 983-1200
with additional copies to: Squire, Sanders & Dempsey, L.L.P.
600 Hansen Way
Palo Alto, California 94304
Attention: Nicholas Unkovic
Facsimile: (650) 856-3619
PAGE 26
Robb Evans, Trustee
11450 Sheldon Street
Sun Valley, California 91352
Facsimile: (818) 768-8802
Brobeck, Phleger & Harrison, LLP
One Market Street
San Francisco, California 94105
Attention: J. Michael Shepherd
Facsimile: (415) 442-1010
or to such other address as any party may from time to time
designate by notice to the others.
Section 8.05. Nonsurvival of Representations, Warranties and
Agreements. Except for the agreements set forth in Sections
5.04, 5.05, 8.01, 8.03 and 8.06 hereof, no representation,
warranty or agreement contained in this Agreement shall survive
the Closing. In the event that this Agreement is terminated prior
to Closing, the representations, warranties and agreements set
forth herein shall survive such termination.
Section 8.06. Costs and Expenses. Except as may be otherwise
provided herein, each party shall pay its own costs and expenses
incurred in connection with this Agreement and the matters
contemplated hereby, including without limitation all fees and
expenses of attorneys, accountants, brokers, financial advisors
and other professionals.
Section 8.07. Entire Agreement. This Agreement, together with
the Proxy, constitutes the entire agreement among the parties and
supersedes and cancels any and all prior discussions,
negotiations, undertakings, agreements in principle and other
agreements among the parties relating to the subject matter
hereof.
Section 8.08. Headings and Captions. The captions of Articles
and Sections hereof are for convenience only and shall not
control or affect the meaning or construction of any of the
provisions of this Agreement.
Section 8.09. Waiver, Amendment or Modification. The conditions
of this Agreement which may be waived may only be waived by a
written instrument delivered to the other party. The failure of
any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later
time to enforce the same. This Agreement may not be amended or
modified except by a written document duly executed by the
parties hereto.
Section 8.10. Rules of Construction. Unless the context
otherwise requires: (a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles; (c) "or" is not exclusive; and (d) words in the
singular may include the plural and in the plural include the
singular.
Section 8.11. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which shall be deemed one and the same instrument.
Section 8.12. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. Except as contemplated
in Section 1.03 and except for the persons defined as Indemnified
Parties in Section 5.05, there shall be no third party
beneficiaries hereof.
PAGE 27
Section 8.13. Governing Law. This Agreement shall be governed
by the laws of the State of California, the corporation law of
the State of Delaware and any applicable federal laws and
regulations.
PAGE 28
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereunto duly authorized,
all as of the date first written above.
FIRST BANKS, INC.
By:
Its:
FIRST BANKS AMERICA, INC.
By:
Its:
REDWOOD BANK
By:
Its:
THE SAN FRANCISCO COMPANY
By:
Its:
BANK OF SAN FRANCISCO
By:
Its:
PAGE 29
EXHIBIT 1.06(a)
Legal Opinion Matters
The San Francisco Company and Bank of San Francisco (the "SF Parties")
1. The due incorporation, valid existence and good standing of
each of the SF Parties under the laws of their respective states
of incorporation, their power and authority to own and operate
their respective properties and to carry on their respective
businesses as now conducted, and their power and authority to
enter into the Agreement and to consummate the transactions
contemplated by the Agreement.
2. With respect to each of the SF Parties: (i) the number of
authorized, issued and outstanding shares of capital stock of
such entity immediately prior to the Closing, (ii) the
nonexistence of any violation of the preemptive or subscription
rights of any person known to such counsel, (iii) the
nonexistence of any outstanding options, warrants, or other
rights to acquire, or securities convertible into, any equity
security of such entity known to such counsel, except as set
forth in Section 2.01 of the Agreement and (iv) the nonexistence
of any obligation, contingent or otherwise, known to such
counsel, to reacquire any shares of capital stock of such entity.
3. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by the SF Parties
to authorize the execution, delivery and performance of the
Agreement, the due execution and delivery of the Agreement by the
SF Parties, and the Agreement as the valid and binding
obligations of each of the SF Parties, enforceable against them
in accordance with its terms (subject to the provisions of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforceability of
creditors' rights generally from time to time in effect, and
equitable principles relating to the granting of specific
performance and other equitable remedies as a matter of judicial
discretion, and other customary assumptions and exceptions).
4. The execution of the Agreement by each of the SF Parties and
the consummation of the transactions contemplated thereby do not
violate or cause a default under their respective Certificate of
Incorporation and Articles of Incorporation or Bylaws, any
statute, regulation or rule applicable to either of the SF
Parties or any judgment, order or decree known to counsel
against, or any material agreement known to counsel and binding
upon, either of the SF Parties.
5. The receipt of all material required consents, approvals,
orders and authorizations of, and registrations, declaration and
filings with and notices to, any court, administrative agency and
commission and other governmental authority and instrumentality,
domestic and foreign, and third parties required to be obtained
or made by either of the SF Parties in connection with the
execution and delivery of the Agreement by such party, the
performance of its obligations thereunder and the consummation of
the transactions contemplated therein.
6. The nonexistence of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or
affecting either of the SF Parties and known to such counsel
which, if adversely determined, would have a material adverse
effect upon their respective properties or assets or the
consummation of the Merger.
7. The right of a successor corporation to Bank of San Francisco
to succeed to the rights and benefits of Bank of San Francisco
under the lease pursuant to which Bank of San Francisco currently
occupies the premises located at 550 Montgomery Street, San
Francisco, California.
page
EXHIBIT 1.06(b)
Legal Opinion Matters
FBA and Redwood (the "FBA Parties")
1. The due incorporation, valid existence and good standing of
each of the FBA Parties under the laws of their respective
jurisdictions of incorporation, their power and authority to own
and operate their respective properties and to carry on their
respective businesses as now conducted, and their power and
authority to enter into the Agreement and to consummate the
transactions contemplated by the Agreement.
2. The due and proper performance of all corporate acts and other
proceedings necessary or required to be taken by the FBA Parties
to authorize the execution, delivery and performance of the
Agreement, the due execution and delivery of the Agreement by the
FBA Parties, and the Agreement as the valid and binding
obligation of each of the FBA Parties, enforceable against them
in accordance with its respective terms (subject to the
provisions of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally from time to time
in effect, and equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of
judicial discretion and other customary assumptions and
exceptions).
3. The execution of the Agreement by each of the FBA Parties, and
the consummation of the transactions contemplated thereby do not
violate or cause a default under their respective Certificate of
Incorporation, Articles of Incorporation or Bylaws, any statute,
regulation or rule applicable to either of the FBA Parties or any
judgment, order or decree known to counsel against, or any
material agreement known to counsel and binding upon, either of
the FBA Parties.
4. The receipt of all material required consents, approvals,
orders and authorizations of, and registrations, declaration and
filings with and notices to, any court, administrative agency and
commission and other governmental authority and instrumentality,
domestic and foreign, and third parties required to be obtained
or made by either of the FBA Parties in connection with the
execution and delivery of the Agreement by such party, the
performance of its obligations thereunder or the consummation of
the transactions contemplated therein.
5. The nonexistence of any material actions, suits, proceedings,
orders, investigations or claims pending or threatened against or
affecting either of the FBA Parties and known to such counsel
which, if adversely determined, would have a material adverse
effect upon the consummation of the Merger.
page
Exhibit B
Section 262 of the DGCL
Section 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such
shares, who continuously holds such shares through the effective
date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in
writing pursuant to section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the
stockholder's share of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this
section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member or record of a nonstock
corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger
or consolidation to be effected pursuant to section 251 (other than a
merger effected pursuant to section 251(g) of this title), section 252,
section 254, section 257, section 258, section 263 or section 264
of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect thereof,
at the record date fixed to determine the stockholders entitled
to receive notice of and to vote at the meeting of stockholders
to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in
subsection (f) of section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of
any class or series of stock of a constituent corporation if the
holders thereof are required by the terms of an agreement of
merger or consolidation pursuant to sections 251, 252, 254, 257, 258,
263 and 264 of this title to accept for such stock anything
except:
page
a. Shares of stock of the corporation surviving or resulting
from such a merger or consolidation, or depository receipts in
respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interedealer quotation
system by the National Association of Securities Dealers, Inc. or
held of record by more than 2000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of
this paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c.
of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under section 253 of this title
is not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not less
than 20 days prior to the meeting, shall notify each of its
stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such
demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by separate written
demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
page
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to section
228 or section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or
within ten days thereafter, shall notify each of the holder of
any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall
be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger
or consolidation, shall, also notify such stockholder of the
effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder'' shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identify of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of
the effective date of the merger or consolidation, either (i)
each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of
such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice,
such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of
such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given
on or after the effective date of the merger or consolidation,
the record date shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice it given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of
the value of the stock of all such stockholders. Notwithstanding
the foregoing, at any time with 60 days after the effective date
of the merger or consolidation, any stockholder shall have the
right to withdraw such stockholder's demand for appraisal and to
accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
page
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written
request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number
of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after such stockholder's
written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of
the period for delivery of demand for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after such
service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names
and address of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so order by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine
the stockholders who have complied with this section and who have
become entitled to appraisal rights. The Court may require the
stockholders who have demanded an appraisal for their shares and
who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment
or expectation of the merger or consolidation, together with a
fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to
borrow money during pendency of the proceedings. Upon
application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding,
the Court may, in its discretion, permit discover or other
pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings
until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
page
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificated upon the surrender
to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court
Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceedings may be determined by the Court
and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may
order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceedings,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be entitled
to vote such stock for any purpose or to receive payment of
dividends or other distributions on the stock (except dividends
or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection
(e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such
stockholder's demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems
just.
l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
