As filed with the Securities and Exchange Commission on February
3, 1995
====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 20, 1995
WEST COAST BANCORP
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3586860
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Commission file number 0-10897
535 EAST FIRST STREET
TUSTIN, CALIFORNIA 92680
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 724-8733
NOT APPLICABLE
(Former name or former address, if changed since last report)
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THIS REPORT INCLUDES A TOTAL OF 16 PAGES
THE EXHIBIT INDEX IS ON PAGE 6
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 20, 1995, West Coast Bancorp ("WCB"), formerly
the holder of approximately 93.3% of the total outstanding shares
of common stock of Sacramento First National Bank, a California
corporation ("SFNB"), and Business & Professional Bank ("B&PB")
consummated the transactions contemplated by that certain Plan and
Agreement of Consolidation and Merger, dated as of June 22, 1994,
as amended by that First Amendment, dated as of November 16, 1994,
(the "Agreement"), relating to the acquisition of SFNB by B&PB.
B&PB acquired SFNB through a consolidation (the "Consolidation") of
SFNB with a wholly owned subsidiary of B&PB, followed by a merger
of the consolidated entity with and into B&PB (the "Merger").
Under the terms of the Agreement, SFNB was consolidated
on January 20, 1995 with a wholly-owned subsidiary of B&PB ("B&PB
Sub") under the national banking association charter of SFNB, and
the separate corporate existence of both B&PB Sub and SFNB ceased.
The directors and officers of B&PB Sub served as the directors and
officers of the entity emerging from the consolidation (the
"Consolidation Association"). Upon consummation of the
Consolidation and without any action on the part of the holders
thereof, (i) each issued and outstanding share of B&PB Sub Common
Stock was converted into one share of issued and outstanding share
of SFNB Common Stock, excluding any shares as to which dissenters'
rights under Section 215 of Title 12 of the United States Code were
perfected ("Dissenting Shares"), and were converted into the right
to receive the Consolidation Consideration (as hereinafter
defined). The time of effectiveness of the Consolidation, on
January 20, 1995, is referred to in this description as the
"Effective Time" and January 20, 1995, the date on which the
Effective Time occurred, is referred to as the "Closing Date."
Immediately following the Effective Time, the Consolidated
Association merged with and into B&PB, with B&PB as the surviving
corporation (the "Surviving Corporation"). The directors and
officers of B&PB are the directors and officers of the Surviving
Corporation except for Joanne Greenwood, former Chief Financial
Officer of SFNB, who is now the Chief Financial Officer of the
Surviving Corporation. Upon consummation of the Merger and without
any action on the part of the holder thereof, (i) each issued and
outstanding share of B&PB Common Stock continued to be outstanding
as one share of common stock of the Surviving Corporation, and
(ii) each issued and outstanding share of Common Stock of the
Consolidated Association was cancelled. The Merger became
effective on January 20, 1995 at the time the agreement of merger
with respect to the Merger bearing the certification of the
California Secretary of State was filed with the California
Superintendent of Banks.
<PAGE>
Upon consummation of the Consolidation, each share of SFNB
Common Stock, other than Dissenting Shares, were converted into the
right to receive the following consideration (the "Consolidation
Consideration"): (i) cash in the amount of the quotient of
(A) $3,930,000 less the amount by which the filing fees and
professional fees and expenses payable by SFNB in connection with
the Consolidation and Merger exceed $300,000, divided by (B) the
number of shares of SFNB Common Stock issued and outstanding at the
Effective Time (the "Outstanding Shares"); (ii) cash in the amount
of the quotient of (A) the net unrealized gains, if any, in SFNB's
portfolio of investment securities as of the last day of the month
immediately preceding the Closing Date (the "Measurement Date"),
calculated in accordance with the procedures set forth in the
Agreement, divided by (B) the Outstanding Shares; (iii) that
fraction of a share of B&PB Common Stock that equals the quotient
of (A) $2,500,000, divided by (B) the product of (x) the total
shareholders' equity of B&PB as of the Measurement Date divided by
the number of shares of B&PB Common Stock issued and outstanding as
of that date, multiplied by (y) the Outstanding Shares; and (iv) a
proportionate share of the Contingent Payment Amount, which equals
fifty percent (50%) of the unutilized portion of a reserve
established for the loans and other real estate owned contained in
SFNB's loan portfolio at December 31, 1993 up to a maximum amount
of $1,000,000.
WCB received, upon consummation of the transactions
contemplated by the Agreement, 243,546 shares of B&PB Common Stock
and cash in the amount of $3,614,343.79.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Pro Forma Financial Information
(i) Income Statement as of September 30, 1994 and
pro forma adjustments
(ii) Income Statement as of December 31, 1993 and
pro forma adjustments.
(b) Exhibits
2.1 Plan and Agreement of Consolidation and Merger (the
"Agreement"), by and between WCB, SFNB and B&PB,
with exhibits.*
2.2 Shareholder Agreement between WCB and B&PB.*
2.3 First Amendment to the Agreement.
* Incorporated by reference to WCB's Report on Form
8-K, as filed with the Securities and Exchange Commission by EDGAR
on June 28, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
WEST COAST BANCORP
(Registrant)
Date: February 3, 1995 By /s/ John B. Joseph
John B. Joseph, Chairman
of the Board, President
and Chief Executive Officer
<PAGE>
Pro Forma Balance Sheet
West Coast Bancorp netted all assets and liabilities of Sacramento
First National Bank ("Sacramento First") into "Net assets held for
sale" on its September 30, 1994 Form 10-Q. Net assets held for
sale represented the value of consideration expected to be received
upon consummation of the sale. The actual Form 10-Q balance sheet
for September 30, 1994 is the same as the required pro forma
balance sheet. Therefore, the pro forma balance sheet is deemed
unnecessary.
<PAGE>
Pro Forma Income Statements
A summary of the actual results for the nine months ended September
30, 1994 and the pro forma income statement adjustments follows:
<TABLE>
<CAPTION>
(in thousands, 9/30/94 PROFORMA 9/30/94
except for share data) 10-Q ADJUSTMENTS PROFORMA
------------------------------------
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 12,181 $ (3,839) $ 8,342
Investment securities 516 (395) 121
Deposits with banks 110 (27) 83
Federal Funds sold 631 (175) 456
------------------------------------
Total interest income 13,438 (4,436) 9,002
Interest expense:
Interest on deposits 3,463 (1,189) 2,274
Other borrowed funds 382 (35) 347
------------------------------------
Total interest expense 3,845 (1,224) 2,621
------------------------------------
Net interest income 9,593 (3,212) 6,381
Provision for possible
credit losses 3,039 (551) 2,488
------------------------------------
Net interest income after
provision for possible
credit losses 6,554 (2,661) 3,893
Other operating income 2,279 (609) 1,670
Other operating expenses 10,972 (3,058) 7,914
Loss on liquidation of
WCV, Inc. 100 - 100
Loss on proposed sale
of Sacramento First 1,800 (1,800) -
------------------------------------
Loss before income tax (4,039) 1,588 (2,451)
Income tax expense 13 (1) 12
------------------------------------
Net loss (4,052) 1,589 (2,463)
====================================
Net loss per common share $ (.44) $ .17 $ (.27)
====================================
Weighted average number of
common shares outstanding 9,193 - 9,193
====================================
</TABLE>
<PAGE>
West Coast Bancorp's income statement presented in the third
quarter 1994 Form 10-Q included Sacramento First's operating
results through June 30, 1994 and an expected loss from the sale of
Sacramento First of $1.8 million. The pro forma adjustments shown
above represent: income and expense for Sacramento First through
June 30, 1994, an elimination for the 6.7% minority interest in
Sacramento First's earnings, an elimination of the proposed loss on
sale of Sacramento First and an adjustment to exclude Sacramento
First from the consolidated income tax expense.
<PAGE>
A summary of the actual results for the twelve months ended
December 31, 1993 and the pro forma income statement adjustments
follows:
<TABLE>
<CAPTION>
(in thousands, 12/31/93 PROFORMA 12/31/93
except for share data) 10-K ADJUSTMENTS PROFORMA
------------------------------------
<S> <C> <C> <C>
Interest income:
Loans, including fees $ 23,490 $ (8,509) $ 14,981
Investment securities 814 (726) 88
Deposits with banks 56 (56) -
Federal funds sold 718 (340) 378
------------------------------------
Total interest income $ 25,078 $ (9,631) $ 15,447
Interest expense:
Interest on deposits 6,861 (3,114) 3,747
Other borrowed funds 546 (73) 473
------------------------------------
Total interest expense 7,407 (3,187) 4,220
------------------------------------
Net interest income 17,671 (6,444) 11,227
Provision for possible
credit losses 8,470 (1,925) 6,545
------------------------------------
Net interest income after
provision for possible
credit losses 9,201 (4,519) 4,682
Other operating income 3,110 (1,481) 1,629
Other operating expenses 23,883 (6,566) 17,317
Loss on liquidation of
WCV, Inc. 550 - 550
------------------------------------
Loss before income tax (12,122) 566 (11,556)
Income tax expense (15) - (15)
------------------------------------
Net loss (12,107) 566 (11,541)
====================================
Net loss per common share $ (1.32) $ .06 $ (1.26)
====================================
Weighted average number
of common shares
outstanding 9,185 - 9,185
====================================
</TABLE>
<PAGE>
West Coast Bancorp's December 31, 1993 Form 10-K did not include
any adjustment for the sale of Sacramento First. Therefore, pro
forma adjustments include removing Sacramento First's income and
expense, removing the 6.7% minority interest in Sacramento First's
1993 loss and excluding Sacramento First from the consolidated
income tax expense.
<PAGE>
Exhibit Index
Page
2.1 Plan and Agreement of Consolidation and Merger,
by and between West Coast Bancorp, Sacramento
First National Bank and Business & Professional
Bank, with exhibits (the "Agreement").*
2.2 Shareholder Agreement between West Coast Bancorp
and Business & Professional Bank.*
2.3 First Amendment to the Agreement 10
* Incorporated by reference to WCB's Report on Form
8-K, as filed with the Securities and Exchange Commission by EDGAR
on June 28, 1994.
<PAGE>
EXHIBIT 2.3
FIRST AMENDMENT TO THE AGREEMENT
<PAGE>
FIRST AMENDMENT
TO
PLAN AND AGREEMENT OF
CONSOLIDATION AND MERGER
AMONG
BUSINESS & PROFESSIONAL BANK
AND
WEST COAST BANCORP
AND
SACRAMENTO FIRST NATIONAL BANK
Dated as of November 16, 1994
<PAGE>
This First Amendment to Plan and Agreement of
Consolidation and Merger ("First Amendment") is entered as of
this 16th day of November, 1994 among Business & Professional
Bank, a California state-chartered bank ("Buyer"), West Coast
Bancorp, a California corporation ("Seller"), and Sacramento
First National Bank, a national banking association ("Bank"), and
amends that certain Plan and Agreement of Consolidation and
Merger (the "Agreement") dated as of June 22, 1994 by and among
Buyer, Seller and Bank.
RECITALS
A. Buyer, Seller and Bank entered into the Agreement
which provides that (i) Buyer will form a California state-
chartered bank as a wholly-owned subsidiary of Buyer
("MergerSub"), (ii) MergerSub will be consolidated with Bank
under Bank's national banking association charter (the
"Consolidation"), and the stockholders of record of Bank at the
effective time of such consolidation will receive, in exchange
for their shares of Bank common stock, the consideration
specified in the Agreement and (iii) immediately after
consummation of the Consolidation, the resulting consolidated
association will be merged with and into Buyer and Buyer shall be
the surviving corporation.
B. In connection with Bank's settlement with the U.S.
Department of the Treasury (the "Treasury") relating to the Bank
not filing certain transaction reports as required by the Bank
Secrecy Act (the "BSA"), the Treasury has requested that the
parties execute this First Amendment.
C. In connection with the foregoing, the parties
desire to make certain other amendments to the Agreement and the
exhibits thereto.
D. Capitalized terms used but not defined herein have
the meanings ascribed to them in the Agreement.
Accordingly, the parties hereto agree as follows:
1. Article V of the Agreement is hereby amended by
inserting the following as Section 5.27 thereof:
"5.27 "Compliance Examinations." Buyer hereby
agrees (1) on or about three months after consummation of the
Consolidation to cause a comprehensive external audit to be
conducted of the Surviving Corporation's Bank Secrecy Act ("BSA")
compliance, as prescribed by the FDIC; (2) to make all necessary
arrangements to subject the Surviving Corporation to a full scope
examination of BSA compliance, by the FDIC, six months after
consummation of the Consolidation; and (3) to provide to the
Treasury the results of the external audit and FDIC examination
of the Surviving Corporation's BSA Compliance and a list of
<PAGE>
corrective actions taken or planned to rectify any deficiencies
noted in either the audit or examination."
2. Section 5.26 of the Agreement is hereby amended
and restated in its entirety to read as follows:
"5.26 "Disposition of Bank's Employee Benefit
Plans." Bank or Seller shall take any actions necessary or
reasonably requested by Buyer to cause, on or before the Closing
Date, the termination of all of the employee benefit plans
maintained by Bank and the termination of Bank's participation in
employee benefit plans maintained by Seller, including Seller's
401(k) Plan, which cover Bank's employees; provided, however,
that all Transferred Employees who are participants of Seller's
401(k) Plan immediately prior to the Closing Date shall cease
participation in such Plan as of the Closing Date. Any
distribution made by Seller to the Transferred Employees on
account of the Transactions contemplated hereby shall be made in
accordance with Treasury Regulation Section 1.401(k)-1(d)(4).
Seller shall maintain responsibility for the administration of
the Transferred Employees' accounts under Seller's 401(k) Plan
until Seller has distributed all benefits under such Plan to the
Transferred Employees, and Buyer shall have no responsibility or
liability therefor."
3. "Exhibit B" to the Agreement is hereby amended and
restated in its entirety so as to read as set forth in
Attachment 1 hereto.
4. Except as otherwise amended hereby, the provisions
of the Agreement shall remain in full force and effect.
5. This Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement.
/ / /
/ / /
/ / /
<PAGE>
6. This Amendment shall be governed by the laws of
the State of California without taking into account provisions
regarding choice of law.
IN WITNESS WHEREOF, the parties hereto have set their
hands as of the date first above written.
BUSINESS & PROFESSIONAL BANK,
a California state-chartered
bank
By: /s/ Michael F. Burkhart
Michael F. Burkhart,
President
SACRAMENTO FIRST
NATIONAL BANK,
a national banking association
By: /s/ John F. McGrath
John F. McGrath,
President
WEST COAST BANCORP,
a California corporation
By: /s/ John Joseph
John Joseph, President
<PAGE>
ATTACHMENT 1
Number of San Francisco, California
Contingent Payments _____________, 1994
Evidenced Hereby: _____________.
CONTINGENT PAYMENT RIGHT
Business & Professional Bank, a California state-
chartered bank ("Bank"), hereby promises to pay to
_________________________ ("Holder"), or Holder's assigns, a cash
payment in an amount equal to the Contingent Payment(s) evidenced
hereby, all in accordance with the terms of Section 1.2(d) of
that certain Plan and Agreement of Consolidation and Merger dated
as of June 22, 1994 by and among Bank, Westcoast Bancorp and
Sacramento First National Bank (the "Agreement") and "Schedule
1.2(d)" thereto, the terms and conditions of which Schedule are
set forth in full on the reverse side hereof. Capitalized terms
used but not defined herein shall have the meanings ascribed to
them in the Agreement.
This Contingent Payment Right evidences the right to
receive _____________ Contingent Payments.
[THE CONTINGENT PAYMENTS TO BE MADE HEREUNDER ARE
SUBJECT TO A RIGHT OF SET-OFF IN FAVOR OF BANK PURSUANT TO
SECTION 8.6 OF THE AGREEMENT.] [For inclusion in Seller's
certificate only]
THE RIGHT TO RECEIVE PAYMENT OF ANY FUNDS HEREUNDER IS
SUBJECT TO THE SATISFACTION OF CERTAIN CONTINGENCIES.
THERE CAN BE NO ASSURANCE THAT SUCH CONTINGENCIES WILL
BE SATISFIED, AND AS A RESULT, THAT ANY AMOUNTS WILL
BECOME DUE AND PAYABLE TO THE HOLDER HEREOF PURSUANT TO
THE TERMS HEREOF.
This Contingent Payment Right is subject to all of the terms
and conditions contained in the Agreement, including those set
forth on the reverse side hereof. A copy of the Agreement may be
inspected at the offices of Bank at
______________________________.
A-84
<PAGE>
BUSINESS & PROFESSIONAL BANK
Attest: _______________________
By:____________________________
, Secretary Michael F. Burkhart,
President
[REVERSE SIDE OF CERTIFICATE]
This Contingent Payment Right evidences the right to receive
the Contingent Payment(s) evidenced hereby, all as defined and
determined in accordance with Section 1.2(d) of and "Schedule
1.2(d)" to the Agreement.
Section 1.2(d) of the Agreement defines a Contingent Payment
as "an additional payment in cash of an amount equal to the
quotient of (i) 50% of the Unutilized Closing Reserve determined
in accordance with "Schedule 1.2(d)" ... up to a maximum of
$1,000,000, divided by (ii) the Outstanding Shares, together with
interest thereon, compounded annually, at the annual rate of four
percent (4%) in excess of the average weekly interest rate from
time to time prevailing for one-year Treasury bills, such
interest to accrue from the Initial Computation Date to but
excluding the payment date."
"Schedule 1.2(d)" of the Agreement provides in pertinent
part as follows:
"1.1 "General". For purposes of computing the aggregate
amount of the payment payable by Buyer pursuant to the Contingent
Payment Right delivered to the Stockholders pursuant to Section
1.2(d) of the Agreement, the Unutilized Closing Reserve shall
mean $3,038,000 less the sum of (a) the amount of any Net Charge-
Offs plus (b) the amount of any Residual Reserve, in each case,
as of the applicable Computation Date, determined in accordance
with the provisions hereof.
"1.2 "Calculation and Procedure".
(a) Buyer shall calculate the Unutilized Closing
Reserve as of the Initial Computation Date (or
other Computation Date) and, within ten (10)
business days after the Initial Computation Date
(or other Computation Date), shall deliver to the
Representative a certificate setting forth in such
detail as may reasonably be requested by the
Representative such calculation, including, but
not limited to, (i) a list of all Bank Loans
reflected on the books and records of Buyer as of
the Computation Date, (ii) the Recorded Book Value
of all Bank Loans as of December 31, 1993 (which
shall be the amounts reflected in "Schedule 9.15"
to the Agreement),
A-85
<PAGE>
(iii) the Recorded Book Value of all Bank Loans
was renewed since the six-month anniversary of the
Closing Date and, if so, the classification
assigned by Buyer to such Bank Loan at the time of
such renewal (which classification shall be
assigned in accordance and consistent with Buyer's
policies for assigning classifications to the
remainder of its loan portfolio and real estate
owned), (v) the classification and reserve, if
any, assigned to each such Bank Loan as of the
Computation Date (which classification and reserve
shall be assigned in accordance and consistent
with Buyer's policies for assigning
classifications and reserves to the remainder of
its loan portfolio and real estate owned),
(vi) the classification and reserve, if any,
assigned to each such Bank Loan as of the
Computation Date (which classification and reserve
shall be assigned in accordance and consistent
with Buyer's policies for assigning
classifications and reserves to the remainder of
its loan portfolio and real estate owned),
(vi) the amount of the Net Charge-Offs, (including
Write-Downs, Net Proceeds and Recoveries) with
respect to each Bank Loan from December 31, 1993
to the Computation Date and the aggregate amount
of such Net Charge-Offs during such period, and
(vii) the Residual Reserve for the Bank Loans on
an individual and aggregate basis as of such
Computation Date.
(b) The representative shall have a period of 30
business days after receipt of Buyer's analysis to
review the analysis and Buyer's calculation of the
Unutilized Closing Reserve. During such period,
the Representative and its accountants and other
agents shall have full access to the loan files
and other papers of Buyer relating to the Bank
Loans and other loans and real estate owned of
Buyer or used in connection with Buyer's
preparation of the analysis and its calculation of
the Unutilized Closing Reserve. If the
Representative shall not have objected, in
writing, within such 30-business day period, to
the amount of Buyer's proposed Unutilized Closing
Reserve, which objection shall identify the basis
of the objection and any adjustments to the
Unutilized Closing Reserve initially proposed by
Buyer, then Buyer's calculation of the Unutilized
Closing Reserve shall be final and binding and
such Unutilized Closing Reserve shall be the
Unutilized Closing Reserve for purposes of
Section 12.(d) of the Agreement. If, however, the
Representative shall deliver such written
objection to Buyer within such 30-business day
period, Buyer shall notify the Representative of
its approval or disapproval of the
Representative's proposed adjustments to Buyer's
calculation of the Unutilized Closing Reserve, any
disapproval to be contained in a written objection
delivered to the Representative within 15 business
days of Buyer's receipt of the Representative's
written objection. If Buyer shall fail to notify
the Representative in writing within such 15-
business day period of its approval or disapproval
of such proposed adjustments, the
A-86
<PAGE>
Representative's proposed adjustments shall be
made and Buyer's proposed Unutilized Closing
Reserve as so adjusted shall be final and binding
upon all parties and shall be the Unutilized
Closing Reserve for purposes of the Agreement.
(c) If Buyer shall notify the Representative in
writing of its disapproval of such proposed
adjustments within the 15-business day period set
forth in paragraph (b) above, the parties shall
defer calculation of the Unutilized Closing
Reserve until the fourth anniversary of the
Closing Date, at which time the parties shall
employ the same procedure used on the Initial
Computation Date to calculate the Unutilized
Closing Reserve as of such later Computation Date.
If Buyer again notifies the Representative in
writing of its disapproval of the Representative's
proposed adjustments to Buyer's calculation of the
Unutilized Closing Reserve within the applicable
period, the parties shall defer calculation of the
Unutilized Closing Reserve until the fifth
anniversary of the Closing Date and shall employ
the same procedure used on the Initial Computation
Date to calculate the Unutilized Closing Reserve
as of such later Computation Date.
(d) If Buyer again notifies the Representative in
writing of its disapproval of the Representative's
proposed adjustments to Buyer's calculation of the
Unutilized Closing Reserve within the applicable
period, the dispute shall be settled by
arbitration in accordance with the then prevailing
Arbitration Rules of the American Arbitration
Association and judgment upon the award rendered
in the arbitration shall be final and binding upon
all parties and may be entered in any court having
jurisdiction. The fees and expenses of the
arbitrators shall be borne equally by Buyer and
the holders of the Contingent Payment Right and,
in the case of such holders, shall be offset
against the amount payable to such holders under
the Contingent Payment Right.
(e) Within ten business days after the date the
Utilized Closing Reserve is finally determined
pursuant to the provisions hereof, Buyer shall
deposit with the Exchange and Paying Agent funds
equal to the Contingent Payment for payment to the
holders of the Contingent Payment Right as of a
specified date (the "Record Holders"). In
addition, to the extent Buyer receives any
Additional Recoveries with respect to Bank Loans
within the one-year period following the last
Computation Date resorted to by the parties, Buyer
shall, within ten business days after the
expiration of such one-year period, deposit with
the Exchange and Paying Agent for payment to the
Record Holders an amount of funds equal to (i) the
amount of the Contingent Payment that would have
been payable as of the
A-87
<PAGE>
expiration of such one-year period, after taking
into account such Additional Recoveries, less
(ii) the Contingent Payment actually paid to the
Record Holders pursuant to the terms hereof
provided that no interest shall accrue on the
amount of the Additional Recoveries.
"1.3 "Definitions". For purposes of this Schedule, the
following terms shall have the meanings ascribed to
them:
(a) "ADDITIONAL RECOVERIES" shall mean the sum of (i)
for any Bank Loans (including real estate owned)
that are disposed of after the last Computation
Date and on or prior to the first anniversary of
the Last Computation Date (the "Additional
Recovery Period") the excess, if any, of the Net
Proceeds received by Buyer upon the disposition of
such Bank Loans over the Recorded Book Value of
such Bank Loans as of such date plus (ii) for any
Bank Loans for which there have been Gross Charge-
Offs (as defined in 1.3(c)) prior to the Last
Computation Date, the amount of such Gross Charge-
Offs that is recovered by Buyer (other than any
amount recovered pursuant to clause (i)), by
repayment or otherwise, prior to the expiration of
the Additional Recovery Period.
(b) "BANK LOANS" shall have the meaning ascribed to it
in the Agreement; provided that any Bank Loan that
is renewed by Buyer any time after the expiration
of the six-month period following the Closing
shall no longer be deemed a Bank Loan, in a manner
in accordance and consistent with Buyer's policies
for assigning classifications to the remainder of
its loan portfolio and real estate owned,
internally classify such Bank Loan as "Special
Mention," "Substandard," "Doubtful" or "Loss."
(c) "NET CHARGE-OFFS" as of any date shall mean
(i) the sum of (A) for any Bank Loan (including
any real estate owned) that is disposed of after
December 31, 1993 and on or prior to the
applicable Computation Date, the excess of the
Recorded Book Value of such Bank Loan as of such
date, if any, over the Net Proceeds received by
Buyer upon the disposition of such Bank Loan, plus
(B) for any Bank Loan written down or charged off
after December 31, 1993 and on or prior to the
applicable Computation Date, the amount of such
writedown or charge off ("Write Downs") (the sum
of (i)(A) and (i)(B) shall be referred to herein
as "Gross Charge-Offs"), less (ii) the sum of (A)
for any Bank Loan (including real estate owned)
that is disposed of after December 31, 1993 and on
or prior to the applicable Computation Date, the
excess, if any, of the Net Proceeds received by
Buyer upon the disposition of such Bank Loan over
the Recorded Book Value of such Bank Loan as of
such date plus (B) for any Bank Loan for which
there has been a Gross Charge-Off
A-88
<PAGE>
that is recovered by Buyer (other than any amount
recovered pursuant to clause (ii)(A)), by
repayment or otherwise, prior to such Computation
Date (the sum of (ii)(A) and (ii)(B) shall be
referred to herein as "Recoveries").
(d) "COMPUTATION DATE" shall mean, as applicable, the
third, fourth or fifth anniversary of the Closing
Date.
(e) "INITIAL COMPUTATION DATE" shall mean the third
anniversary of the Closing Date.
(f) "NET PROCEEDS" with respect to any sale or
disposition of a Bank Loan (including real estate
owned) shall mean the gross proceeds from such
sale or disposition, less all out-of-pocket
transaction costs reasonably incurred by Buyer in
connection with such sale or disposition,
including, without limitation, all sales and/or
brokerage commissions, legal fees, transfer and
other taxes, title insurance, escrow and recording
costs, and credits for security deposits and the
like reasonably incurred or given by Buyer in
connection therewith.
(g) "RECORDED BOOK VALUE" of any Bank Loan as of a
particular date shall mean the amount of such Bank
Loan (including, in the case of a loan commitment,
the amount of such commitment) as shown on the
books of the Bank at December 31, 1993 and
reflected in SCHEDULE 9.15 to the Agreement,
(i) plus, as appropriate, the amount of any
additional advances made by Buyer in an attempt to
work out such Bank Loan, and (ii) less the sum of
(A) the amount of any principal paid thereon and
(B) the amount of any Write Downs thereof, in each
case, during the period from December 31, 1993 to
the specified date.
(h) "RESIDUAL RESERVE" as of any date shall mean the
reserves assigned by Buyer to the Bank Loans, on
an individual and/or aggregate basis, in
accordance and consistent with Buyer's policies
for assigning reserves to the remainder of Buyer's
loan portfolio and real estate owned."
A-89
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