<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-6198
FIRST AMERICAN CORPORATION
(Exact name of Registrant as specified in its charter)
TENNESSEE 62-0799975
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
FIRST AMERICAN CENTER, NASHVILLE, TENNESSEE 37237
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 615/748-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common shares outstanding: 106,827,566 as of July 31, 1998.
<PAGE> 2
FIRST AMERICAN CORPORATION
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
- -------------------------------- ----
<S> <C> <C>
Item 1 Financial Statements (unaudited)
Consolidated Income Statements for the Three and Six
Months Ended June 30, 1998 and June 30, 1997 3
Consolidated Balance Sheets as of June 30, 1998 and
1997 and December 31, 1997 4
Consolidated Statements of Changes in Shareholders'
Equity for the Six Months Ended June 30, 1998
and June 30, 1997 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and June 30, 1997 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information
- ----------------------------
Item 1 Legal Proceedings 25
Item 4 Submission of Matters to a Vote of Security Holders 25
Item 5 Other Information 26
Item 6 Exhibits and Reports on Form 8-K 26
</TABLE>
2
<PAGE> 3
FIRST AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Three months Ended Six Months Ended
June 30 June 30
---------------------- -----------------------
(in thousands, except per share amounts) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $236,718 $232,508 $479,844 $460,485
Interest and dividends on securities 81,277 66,757 151,601 136,565
Interest on federal funds sold and securities purchased under
agreements to resell 1,208 1,183 2,594 2,985
Interest on time deposits with other banks and other interest 1,229 1,296 2,435 2,468
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income 320,432 301,744 636,474 602,503
- ---------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits:
NOW accounts 10,391 10,203 19,653 20,437
Money market accounts 28,995 30,315 59,572 59,456
Regular savings 4,713 5,510 9,617 10,993
Certificates of deposit under $100,000 36,701 39,387 74,284 79,593
Certificates of deposit $100,000 and over 19,360 15,416 37,033 30,133
Other time and foreign 11,385 11,580 22,764 22,992
- ---------------------------------------------------------------------------------------------------------------------------
Total interest on deposits 111,545 112,411 222,923 223,604
- ---------------------------------------------------------------------------------------------------------------------------
Interest on short-term borrowings 27,760 20,447 52,534 40,563
Interest on long-term debt 9,312 6,598 18,530 13,054
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 148,617 139,456 293,987 277,221
- ---------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 171,815 162,288 342,487 325,282
PROVISION FOR LOAN LOSSES 5,000 1,875 11,000 3,750
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 166,815 160,413 331,487 321,532
- ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Investment services income 42,849 30,000 78,035 61,711
Service charges on deposit accounts 31,285 27,899 59,629 53,776
Mortgage banking 14,537 8,764 24,849 17,682
Commissions and fees on fiduciary activities 10,113 9,423 20,484 18,813
Merchant discount fees 964 900 1,764 1,790
Net realized gain on sales of securities 1,462 1,160 3,143 1,392
Trading account revenue 2,102 914 4,059 2,520
Other income 18,458 16,566 36,248 30,822
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest income 121,770 95,626 228,211 188,506
- ---------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 84,218 82,095 169,855 164,366
Subscribers' commissions 26,787 17,159 46,977 34,961
Net occupancy expense 12,461 11,736 24,622 23,299
Equipment expense 11,426 10,515 22,567 20,639
Systems and processing expense 3,632 4,070 7,296 8,124
Communication expense 6,967 6,405 13,811 12,580
Marketing expense 5,182 5,550 10,223 10,083
Supplies expense 2,838 3,600 5,971 7,481
Goodwill amortization 4,224 4,040 8,448 7,809
Restructuring and merger-related costs 72,043 - 72,043 -
Other expenses 23,762 20,208 45,373 40,981
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 253,540 165,378 427,186 330,323
- ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 35,045 90,661 132,512 179,715
Income tax expense 15,927 33,391 51,408 65,802
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 19,118 $ 57,270 $ 81,104 $113,913
===========================================================================================================================
PER COMMON SHARE:
Net income:
Basic $ .18 $ .54 $ .77 $1.06
Diluted .18 .53 .75 1.04
Dividends declared .25 .20 .45 .355
===========================================================================================================================
Average common shares outstanding:
Basic 105,634 106,234 105,275 107,330
Diluted 107,896 108,790 107,645 109,642
===========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
FIRST AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
--------------------------- -------------
(dollars in thousands, except share amounts) 1998 1997 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,004,527 $ 971,418 $ 987,520
Time deposits with other banks 4,910 10,216 13,463
Securities:
Held to maturity (fair value $993,118, $901,600, and $723,228,
respectively) 985,792 896,609 715,027
Available for sale (amortized cost $4,891,346, $2,974,319, and
$3,392,894, respectively) 4,906,133 2,959,051 3,395,494
- ---------------------------------------------------------------------------------------------------------------------------
Total securities 5,891,925 3,855,660 4,110,521
- ---------------------------------------------------------------------------------------------------------------------------
Federal funds sold and securities purchased under agreements to resell 104,250 98,066 189,542
Trading account securities 109,577 58,902 64,469
Loans:
Commercial 4,545,640 4,337,973 4,570,941
Consumer--amortizing mortgages 2,185,333 2,767,501 2,783,097
Consumer--other 2,589,318 2,538,446 2,524,577
Real estate--construction 444,363 373,754 400,557
Real estate--commercial mortgages and other 1,346,455 1,314,167 1,374,661
- ---------------------------------------------------------------------------------------------------------------------------
Total loans 11,111,109 11,331,841 11,653,833
Unearned discount (12,079) (13,730) (12,101)
- ---------------------------------------------------------------------------------------------------------------------------
Loans, net of unearned discount 11,099,030 11,318,111 11,641,732
Allowance for loan losses (180,138) (188,179) (180,043)
- ---------------------------------------------------------------------------------------------------------------------------
Total net loans 10,918,892 11,129,932 11,461,689
- ---------------------------------------------------------------------------------------------------------------------------
Premises and equipment, net 340,994 340,176 362,047
Other assets 684,526 624,541 645,185
- ---------------------------------------------------------------------------------------------------------------------------
Total assets $19,059,601 $17,088,911 $17,834,436
===========================================================================================================================
LIABILITIES
Deposits:
Demand (noninterest-bearing) $ 2,796,231 $ 2,625,471 $ 2,647,765
NOW accounts 2,152,207 1,820,200 1,879,520
Money market accounts 2,713,875 2,794,487 2,875,958
Regular savings 824,742 896,528 859,690
Certificates of deposit under $100,000 2,767,410 2,961,095 2,929,845
Certificates of deposit $100,000 and over 1,530,941 1,162,407 1,390,148
Other time 700,319 712,330 718,349
Foreign 155,810 131,938 104,182
- ---------------------------------------------------------------------------------------------------------------------------
Total deposits 13,641,535 13,104,456 13,405,457
- ---------------------------------------------------------------------------------------------------------------------------
Short-term borrowings 2,786,341 1,820,780 1,969,639
Long-term debt 600,125 417,053 596,218
Other liabilities 474,557 272,851 319,145
- ---------------------------------------------------------------------------------------------------------------------------
Total liabilities 17,502,558 15,615,140 16,290,459
- ---------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common stock, $2.50 par value; authorized 200,000,000 shares; issued:
106,731,706 shares at June 30, 1998; 106,434,503 shares at
June 30, 1997; and 106,032,013 shares at December 31, 1997 266,829 266,086 265,080
Additional paid-in capital 142,586 187,952 163,902
Retained earnings 1,171,319 1,044,176 1,126,803
Deferred compensation on restricted stock (33,543) (15,091) (13,341)
Employee stock ownership plan obligation - (291) (163)
- ---------------------------------------------------------------------------------------------------------------------------
Realized shareholders' equity 1,547,191 1,482,832 1,542,281
Accumulated other comprehensive income (loss), net of tax 9,852 (9,061) 1,696
- ---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 1,557,043 1,473,771 1,543,977
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,059,601 $17,088,911 $17,834,436
===========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
FIRST AMERICAN CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, COMMON DEFERRED EMPLOYEE ACCUMULATED
1997 AND JUNE 30, 1998 SHARES COMPENSATION STOCK OTHER
ISSUED ADDITIONAL ON OWNERSHIP COMPREHENSIVE
(dollars in thousands except per AND COMMON PAID-IN RETAINED RESTRICTED PLAN INCOME (LOSS),
share amounts) OUTSTANDING STOCK CAPITAL EARNINGS STOCK OBLIGATION NET OF TAX TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 105,109,909 $262,775 $239,661 $ 953,062 $ (2,066) $ (443) $(3,016) $1,449,973
Comprehensive income:
Net income - - - 113,913 - - -
Other comprehensive loss, net
of tax - - - - - - (6,045)
Comprehensive income 107,868
Issuance of common shares in
connection with Employee Benefit
Plans, net of discount on
Dividend Reinvestment Plan 859,989 2,149 12,587 - - - - 14,736
Issuance of shares of restricted
common stock 448,914 1,122 13,600 - (14,722) - - -
Repurchase of shares of common
stock (5,000,996) (12,502) (135,328) - - - - (147,830)
Issuance of common shares for
purchase of Hartsville
Bancshares, Inc. 350,522 876 9,223 - - - - 10,099
Issuance of common shares for
acquisitions of pooled company 4,666,077 11,665 45,855 13,938 71,458
Amortization of deferred
compensation on restricted stock - - - - 1,697 - - 1,697
Reduction in employee stock
ownership plan obligation - - - - - 152 - 152
Cash dividends declared ($.355 per
common share) - - - (21,016) - - - (21,016)
Cash dividends declared by
pooled company - - - (15,721) - - - (15,721)
Tax benefit from stock option and
award plans - - 2,351 - - - - 2,351
Other 88 1 3 - - - - 4
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1997 106,434,503 $266,086 $187,952 $1,044,176 $(15,091) $ (291) $ (9,061) $1,473,771
===================================================================================================================================
Balance, January 1, 1998 106,032,013 $265,080 $163,902 $1,126,803 $(13,341) $ (163) $ 1,696 $1,543,977
Comprehensive income:
Net income - - - 81,104 - - -
Other comprehensive income,
net of tax - - - - - - 8,138
Comprehensive income 89,242
Issuance of common shares in
connection with Employee Benefit
Plans, net of discount on
Dividend Reinvestment Plan 510,298 1,276 7,828 - - - - 9,104
Issuance of shares of restricted
common stock 500,148 1,250 22,239 - (23,489) - - -
Repurchase of shares of common
stock (1,181,909) (2,955) (59,923) - - - - (62,878)
Issuance of common shares for
acquisition of pooled company 871,156 2,178 5,524 (1,206) - - 18 6,514
Amortization of deferred
compensation on restricted stock - - - - 3,287 - - 3,287
Reduction in employee stock
ownership plan obligation - - - - - 163 - 163
Cash dividends declared ($.45 per
common share) - - - (26,006) - - - (26,006)
Cash dividends declared by
pooled company - - - (9,384) - - - (9,384)
Tax benefit from stock option and
award plans - - 3,018 - - - - 3,018
Other - - (2) 8 - - - 6
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1998 106,731,706 $266,829 $142,586 $1,171,319 $(33,543) $ - $ 9,852 $1,557,043
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
FIRST AMERICAN CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30
-------------------------
(in thousands) 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 81,104 $113,913
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 11,000 3,750
Depreciation and amortization of premises and equipment 18,930 18,481
Amortization of intangible assets 17,136 14,284
Other amortization, net 3,038 910
Deferred income tax (benefit) expense (816) 8,111
Net loss (gain) on sales and writedowns of other real estate owned 469 (1,893)
Net realized gains on sales of securities (3,143) (1,392)
Net loss (gain) on sales and writedowns of premises and equipment 589 (114)
Net gain on sales of branches and other assets (1,222) -
Change in assets and liabilities, net of effects from acquisitions:
(Increase) decrease in mortgage loans held for sale (102,288) 15,097
Increase in accrued interest receivable (5,927) (6,274)
Increase (decrease) in accrued interest payable 5,410 (1,093)
(Increase) decrease in trading account securities (45,108) 3,698
(Increase) decrease in other assets (62,089) 17,964
Increase (decrease) in other liabilities 147,044 (87,914)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 64,127 97,528
- ------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 723,864 983,537
Proceeds from maturities of securities available for sale 846,959 283,769
Purchases of securities available for sale (3,025,212) (977,622)
Proceeds from maturities of securities held to maturity 288,087 157,981
Purchases of securities held to maturity (868) (85,058)
Proceeds from sales of other real estate owned 3,540 8,032
Acquisitions, net of cash and cash equivalents acquired 11,262 85,063
Sales of branches and other assets (18,003) -
Net decrease (increase) in loans, net of repayments and sales 138,793 (369,843)
Proceeds from sales of premises and equipment 5,003 228
Purchases of premises and equipment (1,964) (33,399)
- ------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (1,028,539) 52,688
- ------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 158,293 (267,179)
Net increase (decrease) in other short-term borrowings 817,118 (58,423)
(Repayment to) advances from Federal Home Loan Bank (1,624) 159,776
Net repayment of other long-term debt (67) (77)
Issuance of common shares under Employee Benefit and Dividend
Reinvestment Plans 9,104 14,736
Repurchase of common stock (62,878) (147,830)
Tax benefit related to stock options 3,018 2,351
Cash dividends paid (35,390) (37,022)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 887,574 (333,668)
- ------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (76,838) (183,452)
Cash and cash equivalents, January 1 1,190,525 1,263,152
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, June 30 $1,113,687 $1,079,700
==================================================================================================================
Cash paid during the year for:
Interest expense $299,397 $278,314
Income taxes 44,625 47,347
Non-cash transactions:
Foreclosures 1,836 1,780
Stock issued for acquisitions 6,514 81,557
Mortgage loans securitized and retained 583,629 -
==================================================================================================================
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
FIRST AMERICAN CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles and general practices within the
banking industry.
The interim consolidated financial statements should be read in
conjunction with First American Corporation's (the "Corporation" or "First
American") supplemental consolidated financial statements and include the
accounts of Deposit Guaranty Corp. ("Deposit Guaranty") for all periods
presented in accordance with the pooling-of-interests method of accounting for
business combinations. The quarterly consolidated financial statements reflect
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for interim periods. All adjustments are of a normal
recurring nature. Certain prior year amounts have been reclassified to conform
with the current year presentation. The results for interim periods are not
necessarily indicative of results to be expected for the complete fiscal year.
(2) ACQUISITIONS
Effective May 1, 1998, the Corporation completed the merger of Deposit
Guaranty with and into the Corporation by exchanging approximately 48.7 million
shares of First American common stock for all of the outstanding shares of
Deposit Guaranty (based on an exchange ratio of 1.17 shares of First American
common stock for each share of Deposit Guaranty common stock). Deposit Guaranty
was a $7.2 billion asset financial services holding company headquartered in
Jackson, Mississippi, with banking offices in Mississippi, Louisiana, Arkansas,
and Tennessee, and mortgage offices in Oklahoma, Nebraska, Texas, Indiana, and
Iowa. The transaction was accounted for as a pooling of interests, and
accordingly, the consolidated financial statements have been restated to include
the results of Deposit Guaranty for all periods presented. Restructuring and
merger-related costs, comprised primarily of investment banking, severance, and
systems conversions costs, are expected to total approximately $72 million, net
of tax, and will be recognized throughout 1998.
In April 1998 and in conjunction with the Deposit Guaranty business
combination, the number of authorized shares was increased from 100 million to
200 million.
Net interest income, noninterest income and net income as originally
reported by First American and Deposit Guaranty for the three months and the
six months ended June 30, 1997 are presented in the table below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- ------------------------------
First Deposit First Deposit
(in thousands) American Guaranty Combined American Guaranty Combined
- ------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net interest income $93,549 $68,739 $162,288 $186,483 $138,799 $325,282
Noninterest income 62,839 32,787 95,626 124,590 63,916 188,506
Net income 35,341 21,929 57,270 69,371 44,542 113,913
</TABLE>
Bank mergers and acquisitions completed by First American since January
1, 1997, are presented in the following table (in millions):
<TABLE>
<CAPTION>
Common
Shares Cash Accounting
Financial Institution State Date Assets Issued Paid Treatment
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jefferson Guaranty Bancorp, Inc. LA Jan. 1997 $299 2.1 $10 Purchase
- -------------------------------------------------------------------------------------------------------------------
Hartsville Bancshares, Inc. TN Jan. 1997 90 0.4 - Purchase
- -------------------------------------------------------------------------------------------------------------------
First Capital Bancorp, Inc. LA Mar. 1997 186 1.8 - Pooling
- -------------------------------------------------------------------------------------------------------------------
NBC Financial Corporation LA July 1997 69 0.5 - Purchase
- -------------------------------------------------------------------------------------------------------------------
CitiSave Financial Corporation LA Aug. 1997 75 - 19 Purchase
- -------------------------------------------------------------------------------------------------------------------
Victory Bancshares, Inc. TN Mar. 1998 131 0.9 - Pooling
===================================================================================================================
</TABLE>
For the acquisitions accounted for as pooling-of-interests combinations,
the results of operations have been included in the consolidated financial
statements from the beginning of the year acquired or from the date of the
acquisition when preacquisition amounts were not material. Prior year financial
statements have not been restated since the changes would have been immaterial.
For acquisitions accounted for as purchase business combinations, the results of
operations have been included in the
7
<PAGE> 8
consolidated financial statements from the respective dates of acquisition. The
purchase price in excess of the net assets acquired has been recorded as
goodwill and is being amortized on a straight-line basis over 15 years. The
proforma effect on prior earnings of such acquisitions is not significant.
On June 1, 1997, the Corporation issued .8 million shares of its common
stock in exchange for the 2 percent interest in Deposit Guaranty National Bank
("DGNB") owned by minority shareholders. With this acquisition the Corporation
became the sole shareholder of DGNB.
Pending business combinations announced during the first six months of
1998 are presented in the following table (dollars in millions):
<TABLE>
<CAPTION>
Anticipated
Assets Exchange Effective
Financial Institution State at 6/30/98 Ratio (1) Date
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peoples Bank of Dickson TN $136 3.7:1 October 1, 1998
- ----------------------------------------------------------------------------------------------
Middle Tennessee Bank TN 225 7.768:1 October 1, 1998
- ----------------------------------------------------------------------------------------------
CSB Financial Corporation TN 145 9.7071:1 October 1, 1998
- ----------------------------------------------------------------------------------------------
Pioneer Bancshares TN 1,006 1.65:1 November 1, 1998
==============================================================================================
</TABLE>
(1) Ratio of the number of shares of First American common stock to be
exchanged for each share of common stock of the financial institution to be
merged. These ratios are subject to adjustment in certain circumstances as
provided in the respective merger agreements.
The business combinations noted in the table above will be accounted for
as pooling of interests and are subject to shareholder and regulatory approval.
(3) NONPERFORMING ASSETS
Nonperforming assets were as follows:
<TABLE>
<CAPTION>
June 30 December 31
---------------------------------------------
(dollars in thousands) 1998 1997 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans $ 31,853 $ 37,597 $ 36,294
Foreclosed properties 7,021 8,074 7,023
- -----------------------------------------------------------------------------------------------------
Total nonperforming assets $ 38,874 $ 45,671 $ 43,317
=====================================================================================================
Loans on accrual past due 90 days or more $ 26,445 $ 29,625 $ 26,875
=====================================================================================================
Nonperforming assets as a percent of loans
and foreclosed properties (excluding loans
on accrual past due 90 days or more) .35% .40% .37%
=====================================================================================================
</TABLE>
(4) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30
-----------------------------------
(in thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $180,043 $185,470
Provision charged to operating expenses 11,000 3,750
Allowance of business combinations, except Deposit Guaranty 1,317 7,581
- -------------------------------------------------------------------------------------------------------
192,360 196,801
- -------------------------------------------------------------------------------------------------------
Loans charged off 27,296 22,368
Recoveries of loans previously charged off 15,074 13,746
- -------------------------------------------------------------------------------------------------------
Net charge-offs 12,222 8,622
- -------------------------------------------------------------------------------------------------------
Balance, June 30 $180,138 $188,179
=======================================================================================================
</TABLE>
8
<PAGE> 9
Allowance ratios were as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Allowance end of period to net loans outstanding 1.62% 1.66%
Net charge-offs to average loans (annualized) .22 .16
========================================================================================================
</TABLE>
(5) ACCOUNTING MATTERS
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," was adopted by the Corporation on January 1, 1998. SFAS
No. 130 establishes standards for reporting comprehensive income. Comprehensive
income includes net income and other comprehensive income which is defined as
non-owner related transactions in equity. Prior periods have been reclassified
to reflect the application of the provisions of SFAS No. 130.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning after
December 15, 1997. SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports to
shareholders. Operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. Adoption of SFAS No. 131 will expand disclosures related
to the consolidated financial statements. The Corporation adopted SFAS No. 131
on January 1, 1998 and is currently evaluating its operations to determine the
appropriate disclosures with respect to SFAS No. 131.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," revises and standardizes the disclosure requirements
for employers' pensions and other postretirement benefits plans. This standard
does not change the measurement or recognition of such plans. SFAS No. 132 is
effective for fiscal years beginning after December 15, 1997. Restatement of
disclosures for earlier periods presented is required unless the information is
not readily available, in which case, all available information and a
description of the information not available shall be included in the notes to
the financial statements. The disclosure requirements of SFAS No. 132 have been
designed to provide information that is more comparable, understandable, and
concise for the users of this information. The Corporation adopted SFAS 132 on
January 1, 1998.
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities," establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Gains or losses
resulting from changes in the values of derivatives will be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting with the key criterion for hedge accounting being that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. SFAS No. 133 is effective for fiscal years beginning after
June 15, 1999, and shall not be applied retroactively to financial statements of
prior periods. At this time, the Corporation is evaluating when and how it will
adopt SFAS No. 133 as well as the possible impact of the statement on the
Corporation's consolidated financial statements.
(6) EARNINGS PER COMMON SHARE
Basic earnings per share ("EPS") is computed by dividing income available
to common shareholders (numerator) by the weighted average number of common
shares outstanding (denominator). Diluted EPS is computed by dividing income
available to common shareholders by the weighted average number of shares
outstanding adjusted to reflect the potential dilution that could
9
<PAGE> 10
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
(7) LEGAL AND REGULATORY MATTERS
Following the adoption of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, Charter Federal Savings Bank ("Charter" or now
"FAFSB"), brought an action against the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation seeking injunctive and other relief,
contending that Congress' elimination of supervisory goodwill required
rescission of certain supervisory transactions. The Federal District Court found
in Charter's favor, but in 1992 the Fourth Circuit Court of Appeals reversed,
and the U.S. Supreme Court denied Charter's petition for certiorari. In 1995,
the Federal Circuit Court found in favor of another thrift institution in a
similar case (Winstar Corp. v. United States) in which the association sought
damages for breach of contract. Charter also filed suit against the United
States Government ("Government") in the Court of Federal Claims based on breach
of contract. Pending the Supreme Court's review of the Winstar decision, FAFSB's
action was stayed. In July 1996, the Supreme Court affirmed the lower court's
decision in Winstar. The stay was automatically lifted and FAFSB's suit is now
proceeding. The Government filed a motion to dismiss the suit based on the prior
Fourth Circuit decision, and FAFSB has filed a Motion for Partial Summary
Judgment. These motions have not yet been decided by the Federal Claims Court.
The value of FAFSB's claims against the Government, as well as their
ultimate outcome, are contingent upon a number of factors, some of which are
outside of FAFSB's control, and are highly uncertain as to substance, timing and
the dollar amount of any damages which might be awarded should FAFSB finally
prevail. Under the Agreement and Plan of Reorganization as amended by and
between FAFSB and the Corporation, in the event that FAFSB is successful in this
litigation, the FAFSB shareholders as of December 1, 1995, will be entitled to
receive additional consideration equal in value to 50% of any recovery, net of
all taxes and certain other expenses, including the costs and expenses of such
litigation, received on or before December 1, 2000, subject to certain
limitations in the case of certain business combinations. Such additional
consideration, if any, is payable in the common stock of the Corporation, based
on the average per share closing price on the date of receipt by FAFSB of the
last payment constituting a recovery from the Government.
DGNB is a defendant in a case in which the plaintiffs are beneficiaries
of a trust for which DGNB is the trustee. In an amended complaint, the
plaintiffs claim that DGNB was negligent in its dealings with the trust
property, breached its trust duties by allegedly abusing its discretion and
negligently handling trust assets, engaged in self dealing, and was grossly
negligent in its handling of the trusts. The case seeks actual damages for waste
of trust assets and loss of income and punitive damages, both in an unspecified
amount to be proven at trial, and attorney fees and court costs. While the
ultimate outcome of the lawsuit cannot be predicted with certainty, management
denies all liability and believes that the ultimate resolution of this matter
will not have a material effect on the Corporation's consolidated financial
statements.
DGNB is also a defendant in an action brought in Pike County, Mississippi
by a land owner and a gaming corporation, alleging that DGNB and the two
defendant casinos entered into an agreement, expressed or implied, to oppose an
application to operate a casino on the Big Black River in Mississippi. The
plaintiffs contend that DGNB used its influence to cause the Mississippi Gaming
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Commission to deny the casino's application. The plaintiffs seek actual damages
for injury to property and business in the total amount of $38 million and
punitive damages in the amount of $200 million. DGNB denies all liability. It is
the opinion of management and counsel that ultimate disposition of the case
should not have a material effect on the Corporation's consolidated financial
statements.
Also, there are from time to time other legal proceedings pending against
the Corporation and its subsidiaries. In the opinion of management and counsel,
liabilities, if any, arising from such proceedings presently pending would not
have a material adverse effect on the consolidated financial statements of the
Corporation.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
consolidated financial statements and accompanying notes of First American
appearing within this report and by reference to the Corporation's supplemental
consolidated financial statements and management's discussion and analysis
contained in the Form 8-K filed on July 14, 1998.
To the extent that statements in this discussion relate to the plans,
objectives, or future performance of First American, these statements may be
deemed to be forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are based on
management's current expectations and the current economic environment. Actual
strategies and results in future periods may differ materially from those
currently expected due to various risks and uncertainties.
OVERVIEW
Effective May 1, 1998, the Corporation completed the merger of Deposit
Guaranty with and into the Corporation by exchanging approximately 48.7 million
shares of First American common stock for all of the outstanding shares of
Deposit Guaranty. Deposit Guaranty was a $7.2 billion asset financial services
holding company headquartered in Jackson, Mississippi, with banking offices in
Mississippi, Louisiana, Arkansas, and Tennessee, and mortgage offices in
Oklahoma, Nebraska, Texas, Indiana, and Iowa. The transaction was accounted for
under the pooling-of-interests method of accounting for business combinations
and, accordingly, the consolidated financial statements have been restated to
include the results of Deposit Guaranty for all periods presented. In connection
with the merger, restructuring and merger-related costs, which are comprised of
investment banking, severance, and systems conversions costs, are expected to
total approximately $72 million, net of tax, and will be recognized throughout
1998.
Net income for the second quarter of 1998 was $19.1 million with both
basic and diluted earnings per share at $.18. Excluding restructuring and
merger-related costs of $49.8 million, net of tax, recognized in the second
quarter of 1998, net income for the second quarter of 1998 was $68.9 million, up
20 percent from $57.3 million earned in the second quarter of 1997. Basic
earnings per share, exclusive of the restructuring and merger-related costs,
increased 20 percent, to $.65 from $.54 in the second quarter of 1997. Diluted
earnings per share, exclusive of the restructuring and merger-related costs,
increased 21 percent to $.64 from $.53 in the second quarter of 1997. Excluding
the restructuring and merger-related costs, return on average assets ("ROA")
improved to 1.54 percent in the second quarter of 1998 compared to 1.37 percent
in the second quarter of 1997 and return on average equity ("ROE") improved to
17.80 percent in the second quarter of 1998 compared to 15.82 percent in the
second quarter of 1997.
Net income for the six months ended June 30, 1998, was $81.1 million with
basic earnings per share of $.77 and diluted earnings per share of $.75.
Excluding after-tax restructuring and merger-related costs of $49.8 million,
net income for the six months ended June 30, 1998, was $130.9 million, up 15
percent from $113.9 million earned during the first six months of 1997. Basic
earnings per share, exclusive of the restructuring and merger-related costs,
increased 17 percent to $1.24 during the first six months of 1998 compared to
$1.06 during the first six months of 1997. Diluted earnings per share, exclusive
of the restructuring and merger-related costs, rose 17 percent during the first
six months of 1998 to $1.22 from $1.04 during the same time period last year.
Excluding the restructuring and merger-related costs, ROA improved to 1.49
percent during the first six months of 1998 versus 1.37 percent during the first
six months of 1997 and ROE increased to 17.16 percent compared to 15.54 percent.
Effective March 23, 1998, First American acquired Victory Bancshares,
Inc. ("Victory"), a bank holding company in West Tennessee with $131 million in
assets by exchanging approximately 871
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thousand shares of the Corporation's common stock for all of the outstanding
shares of Victory. The acquisition was accounted for as a pooling of interests.
Results of operations of Victory were included in the Corporation's financial
statements from the date of acquisition, as prior amounts were not material.
NOTE 2 to the supplemental consolidated financial statements presents details of
acquisition activity during 1997.
On April 3, 1998, First American completed the sale of three branches in
Virginia with total deposits of approximately $37 million for a pretax gain of
$2.7 million. The sale of the three branches was a part of the implementation of
First American's Distribution Management System ("DMS"), which is designed to
reconfigure First American's distribution system to determine the best mix of
distribution alternatives for clients and to maximize return on capital
investment.
On April 22, 1998, First American entered into a definitive agreement to
merge Peoples Bank of Dickson ("Peoples Bank"), a $136 million asset bank
headquartered in Dickson, Tennessee, with six banking offices in Middle
Tennessee, into First American. Terms of the agreement provide for Peoples Bank
shareholders to receive 3.7 shares of First American's common stock for each
outstanding share of Peoples Bank common stock in a transaction to be accounted
for as a pooling of interests. The transaction is subject to shareholder and
regulatory approval and is expected to close in the fourth quarter of 1998.
On May 26, 1998, First American entered into a definitive agreement to
merge The Middle Tennessee Bank ("Middle Tennessee"), a $225 million asset bank
headquartered in Columbia, Tennessee, with seven banking offices, into First
American. Terms of the agreement provide for Middle Tennessee's shareholders to
receive 7.768 shares of First American's common stock for each outstanding share
of Middle Tennessee common stock in a transaction to be accounted for as a
pooling of interests. The transaction is subject to shareholder and regulatory
approval and is expected to close in the fourth quarter of 1998.
On May 28, 1998, First American entered into a definitive agreement to
merge Pioneer Bancshares Inc. ("Pioneer"), a $1 billion bank holding company
headquartered in Chattanooga, Tennessee, into First American. Pioneer is the
parent company of Pioneer Bank, Valley Bank, and Pioneer Bank f. s. b., a
federal savings bank, with 34 banking offices in southeast Tennessee and
northwest Georgia. Terms of the agreement provide for Pioneer's shareholders to
receive 1.65 shares of First American's common stock for each outstanding share
of Pioneer common stock in a transaction to be accounted for as a pooling of
interests. The transaction is subject to shareholder and regulatory approval and
is expected to close in the fourth quarter of 1998.
On June 9, 1998, First American entered into a definitive agreement to
merge CSB Financial Corporation ("CSB Financial"), a $145 million asset bank
holding company headquartered in Kingston Springs, Tennessee, with four banking
offices in Cheatham County, into First American. In addition to a community
bank, CSB Financial subsidiaries include a lease financing subsidiary; a
financial planning and insurance, annuity, mutual fund, and securities sales
subsidiary; and a mobile home financing subsidiary. Terms of the agreement
provide for CSB Financial's shareholders to receive approximately 927 thousand
shares of First American's common stock in a transaction to be accounted for as
a pooling of interests. The transaction is subject to shareholder and regulatory
approval and is expected to close in the fourth quarter of 1998.
Effective July 11, 1998, First American sold First Mortgage Corp.,
a mortgage subsidiary operating in Nebraska, Iowa, and Oklahoma, and recognized
a pretax loss of approximately $2.4 million.
On July 28, 1998, First American announced the signing of a definitive
agreement to sell the corporate trust business of DGNB to The Bank of New York.
The transaction is expected to close during the third quarter of 1998 and result
in an estimated gain of $7 million. The sale will involve the transfer of
approximately 900 bond trustee and agency relationships representing $8 billion
in outstanding securities for municipalities and corporations located primarily
in Mississippi and Louisiana.
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INCOME STATEMENT ANALYSIS
NET INTEREST INCOME
SECOND QUARTER 1998 VERSUS SECOND QUARTER 1997
Net interest income on a taxable equivalent basis represented 58 percent
of total revenues in the second quarter of 1998 versus 63 percent in the second
quarter of 1997. For purposes of this discussion, total revenues consist of the
sum of net interest income on a taxable equivalent basis and noninterest income.
Net interest income is the difference between total interest income earned on
earning assets such as loans and securities and total interest expense paid on
interest-bearing liabilities such as deposits. Net interest income on a taxable
equivalent basis was $174.5 million in the second quarter of 1998, up $9.7
million, or 6 percent, from $164.8 million in the second quarter of 1997. The
$9.7 million increase in net interest income resulted primarily from an increase
in the volume of earning assets ($11.6 million net interest income impact)
offset by a slight decrease in the net interest spread ($1.9 million net
interest income impact).
During the second quarter of 1998, average earning assets increased $1.07
billion, or 7 percent, to $16.24 billion from $15.17 billion in the second
quarter of 1997. The increase in average earning assets was essentially due to
increases in investment securities ($937.5 million, or 23 percent) and loans
($147.6 million, or 1 percent). Approximately half of the increase in investment
securities was due to the effect of the securitization and retention of a total
of $584 million of mortgage loans during the first six months of 1998. Excluding
the effect of these mortgage loan securitizations and transfers to investment
securities, average investment securities increased $456.1 million, or 11
percent. The change in average loans was impacted by mortgage loan
securitizations, loan purchases, loan sales, and business combinations except
Deposit Guaranty; excluding the effect of the above items, average loans
increased $319.9 million, or 3 percent, during the second quarter of 1998 over
the second quarter of 1997. Interest-bearing liabilities averaged $13.51 billion
during the second quarter of 1998, an increase of $879.1 million, or 7 percent,
from $12.63 billion in the second quarter of 1997. Contributing to the growth in
interest-bearing liabilities during the second quarter of 1998 compared to the
same period in 1997 were increases in federal funds purchased and securities
sold under agreements to repurchase ($468.7 million, or 34 percent);
interest-bearing deposits ($258.4 million, or 2.5 percent); and long-term debt
($107.3 million, or 25 percent).
The net interest spread decreased to 3.57 percent in the second quarter
of 1998 from 3.61 percent in the second quarter of 1997 as the average yield on
earning assets decreased 6 basis points while the average rate paid on
interest-bearing liabilities decreased 2 basis points. The 6 basis point
decrease in the yield on earning assets to 7.98 percent from 8.04 percent was
essentially due to a decrease in the yield on investment securities from 6.84
percent to 6.75 percent offset by an increase in the yield on loans from 8.51
percent to 8.55 percent. The external interest rate environment significantly
impacts the rates that First American earns on investment securities, charges
for loans, and pays on interest-bearing liabilities. For example, yields on
purchases of investment securities are impacted by yields on U.S. treasuries. A
major factor contributing to the decreased yield on investment securities was
the purchase of investment securities during the second quarter of 1998 in a
lower long-term interest rate environment compared to the second quarter of
1997. Factors contributing to the 2 basis point decrease in the average rate
paid on interest-bearing liabilities to 4.41 percent from 4.43 percent were
deposit pricing actions offset by deposit mix changes and increases in the rates
paid on certificates of deposit $100,000 and over and other interest-bearing
nondeposit funds.
As the net interest spread declined, the net interest margin decreased 5
basis points to 4.31 percent in the second quarter of 1998 from 4.36 percent in
the second quarter of 1997. The decline in the net interest margin was
attributable to a change in the mix of earning assets and competitive pressures
resulting in more reliance on noncore interest-bearing liabilities to fund
earning assets.
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FIRST SIX MONTHS OF 1998 VERSUS FIRST SIX MONTHS OF 1997
Net interest income on a taxable equivalent basis represented 60 percent
of total revenues in the first six months of 1998 versus 64 percent in the first
six months of 1997. Net interest income on a taxable equivalent basis was $347.9
million in the first six months of 1998, up $17.3 million, or 5 percent, from
$330.6 million in the first six months of 1997. The $17.3 million increase in
net interest income resulted primarily from an increase in the volume of earning
assets ($17.9 million net interest income impact) offset by a slight decrease in
the net interest spread ($.6 million net interest income impact).
During the first six months of 1998, average earning assets increased
$850.5 million, or 6 percent, to $16.08 billion from $15.23 billion in the first
six months of 1997. The increase in average earning assets was essentially due
to increases in investment securities ($485.8 million, or 12 percent) and loans
($395.3 million, or 4 percent). Approximately half of the increase in investment
securities was due to the effect of the securitization of a total of $584
million of mortgage loans during the first six months of 1998. Excluding the
effect of these mortgage loan securitizations, average investment securities
increased $238.5 million, or 6 percent. The change in average loans was impacted
by mortgage loan securitizations, loan purchases, loan sales, and business
combinations except Deposit Guaranty; excluding the effect of the above items,
average loans increased $398 million, or 4 percent, during the first six months
of 1998 over the first six months of 1997. Interest-bearing liabilities averaged
$13.39 billion during the first six months of 1998, an increase of $734.5
million, or 6 percent, from $12.66 billion in the first six months of 1997.
During the first six months of 1998 compared to the same period in 1997, federal
funds purchased and securities sold under agreements to repurchase increased
$349.3 million, or 25 percent, to $1.75 billion; interest-bearing deposits grew
$176.8 million, or 2 percent, to $10.76 billion; and long-term debt increased
$140.4 million, or 33 percent, to $561.9 million.
The net interest spread declined 1 basis point in the first six months of
1998 to 3.62 percent from 3.63 percent in the first six months of 1997 as the
average yield on earning assets remained at 8.05 percent for both the first six
months of 1998 and 1997 while the average rate paid on interest-bearing
liabilities increased 1 basis point.
As the net interest spread declined, the net interest margin decreased 2
basis points to 4.36 percent in the first six months of 1998 from 4.38 percent
in the first six months of 1997. The slight decline in the net interest margin
was attributable, in part, to a change in the mix of earning assets and
competitive pressures which resulted in an increase in the percentage of
certificates of deposit $100,000 and over, federal funds purchased and
repurchase agreements, and long-term debt funding average earning assets during
the first six months of 1998 than in the first six months of 1997.
PROVISION FOR LOAN LOSSES
This topic is addressed under the caption, "Allowance and Provision for
Loan Losses."
NONINTEREST INCOME
SECOND QUARTER 1998 VERSUS SECOND QUARTER 1997
Total noninterest income represented 42 percent of total revenues in the
second quarter of 1998 compared with 37 percent in the second quarter of 1997.
Total noninterest income increased $26.2 million, or 27 percent, to $121.8
million in the second quarter of 1998 from $95.6 million in the second quarter
of 1997. Noninterest income, excluding net realized gains on sales of
securities, totaled $120.3 million, an increase of $25.8 million, or 27 percent,
from $94.5 million in the second quarter of 1997. Approximately half of the
increase in noninterest income was attributable to investment services income,
which increased $12.8 million, or 43 percent. IFC Holdings, Inc. ("IFC")
contributed to substantially all of the increase in investment services income
as the result of growth in retail brokerage commissions related to mutual funds,
equities, and annuities sales.
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Other categories of noninterest income with significant increases in the
second quarter of 1998 over the second quarter of 1997 included mortgage banking
income, service charges on deposit accounts, trading account revenue, and other
income. Explanations for the changes in the second quarter of 1998 versus the
second quarter of 1997 are outlined as follows:
- - Mortgage banking income was up $5.8 million, or 66 percent, which was
attributable to an increased volume of mortgage loans processed and $2.9
million of additional net gains on the sale of mortgage warehouse loans.
- - The $3.4 million, or 12 percent, increase in service charges on deposit
accounts reflected fee increases and product changes in conjunction with
the utilization of a customer information system called VISION.
- - Trading account revenue increased $1.2 million, or 130 percent, due to
increased call writing activity.
- - The increase of $1.9 million, or 11 percent, in other income from the
previous year's second quarter was primarily attributable to a $2.7 million
gain on the sale of three branches in Virginia and a $1 million increase in
open-end nonloan fees (essentially due to interchange fees generated by the
"Check Card" product) offset by a $2.4 million loss on the sale of First
Mortgage's operations.
FIRST SIX MONTHS OF 1998 VERSUS FIRST SIX MONTHS OF 1997
Total noninterest income increased $39.7 million, or 21 percent, to
$228.2 million during the first six months of 1998 compared to $188.5 million
during the first six months of 1997 and represented 40 percent of total revenues
during the first half of 1998 compared to 37 percent during the first half of
1997. Noninterest income, excluding net realized gains on sales of securities,
totaled $225.1 million during the first six months of 1998, an increase of $38
million, or 20 percent, from $187.1 million during the first half of 1997.
Approximately half of the increase in noninterest income was attributed to
investment services income, which increased $16.3 million, or 26 percent. IFC
contributed 83 percent of the increase in investment services income as the
result of growth in retail brokerage commissions related to mutual funds,
equities, and annuities sales.
Other categories of noninterest income with significant increases in the
first six months of 1998 compared to the first six months of 1997 included
mortgage banking income, service charges on deposit accounts, commissions and
fees on fiduciary activities, trading account revenue, and other income.
Explanations for the changes in the first six months of 1998 versus the first
six months of 1997 are outlined as follows:
- - The $7.2 million, or 41 percent, increase in mortgage banking income was
attributable to an increased volume of mortgage loans processed and an
additional net gain of $3.1 million on the sale of mortgage warehouse
loans.
- - Service charges on deposit accounts were up $5.9 million, or 11 percent,
which reflected fee increases and product changes in conjunction with the
utilization of a customer information system called VISION.
- - Commission and fees on fiduciary activities increased $1.7 million, or 9
percent, principally as a result of an increase in the value of assets
managed due to favorable market conditions.
- - Trading account revenue was up $1.5 million, or 61 percent, due to
increased call writing activity.
- - The increase of $5.4 million, or 18 percent, in other income from the first
half of 1997 was primarily attributable to a $2.7 million gain on the sale
of three branches in Virginia, a $1.6 million gain in open-end nonloan fees
(essentially due to interchange fees generated by the "Check Card"
product), a $1 million increase in other corporate service fees
(essentially due to automated teller ("ATM") surcharge fees resulting from
non-First American customer's use of ATMs), an
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additional $.9 million gain recognized on the sale of First American's
corporate trust assets to The Bank of New York in the fourth quarter of
1997 offset by a $2.4 million loss on the sale of First Mortgage's
operations.
NONINTEREST EXPENSE
SECOND QUARTER 1998 VERSUS SECOND QUARTER 1997
Total noninterest expense increased $88.1 million, or 53 percent, to
$253.5 million for the second quarter of 1998 compared with $165.4 million for
the same period in 1997. Noninterest expense in the second quarter of 1998
included $72 million of restructuring and merger-related costs comprised of
$19.5 million of severance and retention costs, $19 million of investment
banking fees, $15 million to establish a charitable foundation for the Deposit
Guaranty markets, and $18.5 million of other expenses. Excluding the
restructuring and merger-related costs, noninterest expense increased $16.1
million, or 10 percent.
Significant changes in the second quarter of 1998 compared to the second
quarter of 1997 in noninterest expense included increases in subscribers'
commissions, salaries and benefits, equipment expense, and other expenses.
Explanations for the changes between the second quarter of 1998 versus the
second quarter of 1997 are outlined as follows:
- - Subscribers' commissions increased $9.6 million, or 56 percent, due to
increases in IFC's brokerage activities.
- - Salaries and benefits increased only $2.1 million, or 3 percent. The change
was attributable to increases in merit pay and incentive program expenses
offset by decreases due to a reduction in the number of employees, which
reflected synergies in connection with the merger with Deposit Guaranty.
- - Equipment expense increased $.9 million, or 9 percent, due to an increase in
equipment rental expense. The second quarter of 1998 reflected an increase
in the rental of personal computers compared to the same time period last
year.
- - Other expenses were up $3.6 million, or 18 percent. Contributing to the
$3.6 million increase were increases in intangibles amortization,
consultant fees, and software expense. The increase in intangibles
amortization of $2 million, or 28 percent, from $7.1 million to $9.1 million
was primarily attributable to an increased portfolio of mortgage servicing
rights and an increase in impairment reserves related to accelerated
payments on the underlying loan portfolio. Consultant fees were up $.8
million, or 37 percent, from $2.1 million to $2.9 million due to various
special projects designed to enhance efficiency, reduce costs, and provide
better services. Software expense was up $.7 million, or 32 percent, from
$2.2 million to $2.9 million reflecting an increase in software maintenance
expense and amortization.
First American's productivity ratio in the traditional banking business
improved to 56.45 percent for the second quarter of 1998 compared to 59.69
percent for the second quarter of 1997. The improvement in the productivity
ratio means that the Corporation spent $3.24 less to generate $100 of bank
revenue during the second quarter of 1998 compared to the same time period last
year.
FIRST SIX MONTHS OF 1998 VERSUS FIRST SIX MONTHS OF 1997
Total noninterest expense increased $96.9 million, or 29 percent, to
$427.2 million for the first six months of 1998 compared with $330.3 million for
the same period in 1997. Noninterest expense in the first six months of 1998
included $72 million of restructuring and merger-related costs. Excluding the
restructuring and merger-related costs, noninterest expense increased $24.8
million, or 8 percent.
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Significant changes in the first six months of 1998 compared to the first
six months of 1997 in noninterest expense included increases in subscribers'
commissions, salaries and employee benefits, equipment expense, net occupancy
expense, communication expense, and other expenses. Explanations for the changes
in the first six months of 1998 versus the first six months of 1997 are outlined
as follows:
- - Subscribers' commissions increased $12 million, or 34 percent, due to
increases in IFC's brokerage activities.
- - Salaries and benefits increased only $5.5 million, or 3 percent. The change
was attributable to increases in merit pay and incentive program expenses
offset by decreases due to a reduction in the number of employees, which
reflected synergies in connection with the merger with Deposit Guaranty.
- - Equipment expense increased $1.9 million, or 9 percent, due to an increase
in equipment rental expense. The first six months of 1998 reflected an
increase in the rental of personal computers compared to the same time
period last year.
- - The increase in net occupancy expense of $1.3 million, or 6 percent, was
attributable to increased rent and depreciation expenses. Rent expense was
up due to increased leased space and rental rates. The increase in
depreciation expense was attributable to branch improvements. In connection
with First American's DMS, the branch system is being reconfigured to
optimize distribution investment.
- - Communication expense increased $1.2 million, or 10 percent, due to higher
expenditures for telecommunications.
- - Other expenses were up $4.4 million, or 11 percent. Contributing to the
$4.4 million increase were increases in intangibles amortization,
consultant fees, software expense, net foreclosed properties expense, and
miscellaneous taxes. The increase in intangibles amortization of $2.9
million, or 20 percent, from $14.3 million to $17.2 million was primarily
attributable to an increased portfolio of mortgage servicing rights and an
increase in impairment reserves related to accelerated payments on the
underlying loan portfolio. Consultant fees were up $1.5 million, or 46
percent, from $3.2 million to $4.7 million due to various special projects
designed to enhance efficiency, reduce costs, and provide better services.
Software expense was up $1.3 million, or 25 percent, from $5.1 million to
$6.4 million, which reflected an increase in amortization expense. Net
foreclosed properties expense increased $1.3 million from $1.7 million of
foreclosed properties income to $.4 million of foreclosed properties income.
Miscellaneous tax expense increased $1.2 million, or 32 percent, from $3.7
million to $4.9 million due to increased franchise taxes paid to states with
nonbank operations.
First American's productivity ratio in the traditional banking business
improved to 57.15 percent during the first six months of 1998 compared to 59.77
percent during the first six months of 1997. The improvement in the productivity
ratio means that the Corporation spent $2.62 less to generate $100 of bank
revenue during the first six months of 1998 compared to the same time period
last year.
The term "Year 2000 issue" refers to the necessity of converting computer
information systems so that such systems recognize more than two digits to
identify a year in any given date field, and are thereby able to differentiate
between years in the twentieth and twenty-first centuries ending with the same
two digits (e.g. 1900 and 2000). To address the Year 2000 issue, First American
has adopted a broad-based approach designed to encompass First American's total
environment.
First American has appointed a project manager from its information
technology ("IT") group and a project team comprised of managers from various
areas of the organization to address the Year 2000 issue. Overseeing the project
is a steering committee made up of senior management. The project team is
responsible for evaluating Year 2000 impact to each area's products and systems,
developing a plan for bringing those products and systems to compliant levels,
and testing or verifying that compliance. Areas being addressed by the project
team include:
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- Business Systems Applications--This involves Year 2000 remediation of
application software that is used to perform specific business functions
such as deposits or mortgage systems.
- Technical Infrastructure--This involves Year 2000 remediation of the
hardware and software environment used to run application software, and
includes PC networks, telecommunications, mainframe computers, operating
systems, and productivity software.
- Credit Administration--In this area, the project team is reviewing the
risk associated with Year 2000 status of the Corporation's clients and
depositors.
- Facilities Systems--This involves Year 2000 remediation of nonIT systems
such as elevators, HVAC systems, security systems, lighting systems, and
utilities.
- Vendor and Third Party Assessment--In this area, the project team has
conducted an inventory of the systems and products provided by third
parties and has contacted the providers regarding the status of their
Year 2000 compliance. This has been a broad-based effort including IT
vendors, nonIT vendors, and public utilities.
First American's project team is using a 5-phase approach in its Year
2000 project made up of awareness, assessment, remediation, validation, and
implementation phases. For IT systems, all in-house programs were remediated as
of December, 1997 and are now being tested for Year 2000 compliance. For vendor
supplied systems, First American has contacted the suppliers and determined the
compliance of these systems. Necessary upgrades to these systems are in process,
but are not yet complete. The project team is in the process of testing the
Corporation's vendor supplied systems, and anticipates having substantially
completed the testing of all mission critical applications by the end of 1998.
For nonIT systems, the project team has contacted vendors to establish the Year
2000 compliance of these products, and anticipates having substantially
completed testing of these products by the end of 1998.
First American estimates that the cost of its Year 2000 project will not
exceed $5 million dollars in the aggregate and that the cost will not be
material to earnings. Actual expenditures to date and anticipated future
expenditures are within this estimate. First American management believes its
approach to the Year 2000 issue to be comprehensive, and does not expect the
Year 2000 issue to have a material impact on its results of operations,
liquidity or financial condition. However, given the widespread nature of the
problem, and the number of factors outside of the Corporation's direct control,
management is continuously evaluating the risks associated with Year 2000. In
order to help mitigate these risks, a Year 2000 element is being developed for
the existing corporate contingency plan which will focus on mission critical
systems (both IT and nonIT) that are believed to be at high risk for
noncompliance.
INCOME TAXES
During the second quarters of 1998 and 1997, income tax expense was $15.9
million (effective tax rate of 45.4%) and $33.4 million (effective tax rate of
36.8%), respectively. During the six months ended June 30, 1998, and June 30,
1997, income tax expense was $51.4 million (effective tax rate of 38.8%) and
$65.8 million (effective tax rate of 36.6%), respectively. The major factor for
the increase in the effective tax rates was from nondeductible restructuring and
merger-related costs in connection with the business combination with Deposit
Guaranty.
BALANCE SHEET REVIEW
ASSETS
Total assets of First American rose $1.97 billion, or 12 percent, to
$19.06 billion at June 30, 1998, compared to $17.09 billion at June 30, 1997.
The growth in total assets was primarily due to a $2.04 billion, or 53 percent,
increase in investment securities. Excluding the effect of the securitizations
and retention of mortgage loans, investment securities increased $1.45 billion,
or 38 percent, between June 30, 1998, and June 30, 1997. Loans net of unearned
discount decreased $219.1 million, or 2 percent, between June 30, 1998, and June
30, 1997; excluding the effect of
19
<PAGE> 20
securitizations, sales, and business combinations except Deposit Guaranty, loans
net of unearned discount increased $255.5 million, or 2 percent. Excluding the
effect of securitizations, sales, and business combinations except Deposit
Guaranty, average loans increased $398 million, or 4 percent, during the first
six months of 1998 compared to the first six months of 1997. Also contributing
to asset growth were increases in trading account securities ($50.6 million, or
86 percent) which reflected an increase in call writing activity, other assets
($60 million, or 10 percent), and cash and due from banks ($33.1 million, or 3
percent).
Total assets of First American increased $1.23 billion, or 7 percent,
from $17.83 billion at December 31, 1997, to $19.06 billion at June 30, 1998.
The increase in total assets from December 31, 1997, to June 30, 1998, was
primarily due to a $1.78 billion, or 43 percent, increase in investment
securities offset by a $542.7 million, or 5 percent, decrease in loans net of
unearned discount. Excluding the effect of securitizations and retention of
mortgage loans during the first six months of 1998, investment securities
increased $1.20 billion, or 29 percent, from December 31, 1997, to June 30,
1998. Loans net of unearned discount decreased $542.7 million, or 5 percent,
during the first six months of 1998; excluding the effect of securitizations,
sales, and business combinations except Deposit Guaranty, loans net of unearned
discount decreased $48.5 million, or .4 percent. Trading account securities
increased $45.1 million, or 70 percent, from December 31, 1997, to December 31,
1998, due to increased call writing activity.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Management's policy is to maintain the allowance for loan losses at a
level which is adequate to absorb estimated loan losses inherent in the loan
portfolio. The provision for loan losses is a charge to earnings necessary,
after loan charge-offs and recoveries, to maintain the allowance at an
appropriate level. Determining the appropriate level of the allowance and the
amount of the provision for loan losses involves uncertainties and matters of
judgment and therefore cannot be determined with precision.
The allowance for loan losses was $180.1 million at June 30, 1998, $188.2
million at June 30, 1997, and $180 million at December 31, 1997. The allowance
for loan losses was 1.62 percent and 1.66 percent of net loans at June 30, 1998,
and 1997, respectively, and 1.55 percent of net loans at December 31, 1997.
In the second quarter of 1998, the allowance was increased by a provision
of $5 million and decreased by net charge-offs of $5.3 million compared to a
provision of $1.9 million and net charge-offs of $5.7 million in the second
quarter of 1997. Net charge-offs as a percentage of average loans on an
annualized basis amounted to .19 percent and .21 percent, respectively, in the
second quarters of 1998 and 1997.
During the first six months of 1998, the allowance was increased by a
provision of $11 million and reduced by net charge-offs of $12.2 million
compared to a provision of $3.8 million and net charge-offs of $8.6 million in
the first six months of 1997. For the six months ended June 30, 1998, and 1997,
activity in the allowance for loan losses also included increases of $1.3
million and $7.6 million, respectively, which consisted of the allowance of
business combinations except Deposit Guaranty. Net charge-offs as a percentage
of average loans on an annualized basis amounted to .22 percent and .16 percent,
respectively, for the six months ended June 30, 1998, and 1997.
ASSET QUALITY
First American's nonperforming assets (excluding loans 90 days or more
past due on accrual status) were $38.9 million at June 30, 1998, $45.7 million
at June 30, 1997, and $43.3 million at December 31, 1997. Nonperforming assets
(excluding loans 90 days or more past due on accrual status) at June 30, 1998,
represented .35 percent of total loans and foreclosed properties, compared to
.40 percent at June 30, 1997, and .37 percent at December 31, 1997. At June 30,
1998, nonperforming assets consisted of $31.9 million of nonaccrual loans and $7
million of foreclosed properties.
20
<PAGE> 21
Other potential problem loans consist of loans that are currently not
considered nonperforming but on which information about possible credit problems
has caused management to doubt the ability of the borrowers to comply fully with
present repayment terms. At June 30, 1998, such loans totaled approximately
$98.4 million. Depending on the economy and other factors, these loans and
others, which may not be presently identified, could become nonperforming assets
in the future.
LIABILITIES
Total deposits increased $537.1 million, or 4 percent, to $13.64 billion
at June 30, 1998, from $13.10 billion at June 30, 1997. Excluding the effect of
business combinations except Deposit Guaranty and dispositions, total deposits
increased $337.8 million, or 3 percent, between June 30, 1998, and June 30,
1997. Average deposits for the first six months of 1998 compared to the first
six months of 1997 increased 3 percent; excluding the effect of business
combinations and dispositions, average deposits increased 1 percent. Short-term
borrowings increased $965.6 million, or 53 percent, to $2.79 billion at June 30,
1998, from $1.82 billion at June 30, 1997, which was primarily due to an
increase in federal funds purchased and securities sold under agreements to
repurchase. The level of federal funds purchased and repurchase agreements can
fluctuate significantly on a daily basis depending on funding need and
availability of sources of funds to meet those needs. Long-term debt increased
$183 million, or 44 percent, to $600.1 million at June 30, 1998, from $417.1
million at June 30, 1997, with most of the increase due to the addition of $285
million variable rate and $5.5 million fixed rate borrowings from the Federal
Home Loan Bank ("FHLB") offset by $114 million of FHLB borrowings ($108.5
million of variable rate and $5.5 million of fixed rate) that were reclassified
from long-term debt to short-term borrowings. Competitive pressures resulted in
an increased reliance on noncore sources of funds during the first half of 1998
compared to the first half of 1997.
Total deposits increased $236.1 million, or 2 percent, from $13.41
billion at December 31, 1997, to $13.64 billion at June 30, 1998. Short-term
borrowings increased $816.7 million, or 41 percent, from $1.97 billion at
December 31, 1997, which was primarily attributable to increases in federal
funds purchased.
DERIVATIVE INSTRUMENTS
First American has utilized off balance sheet derivative products for a
number of years in managing its interest rate sensitivity. Generally, a
derivative transaction is a payments exchange agreement whose value derives from
an underlying asset or underlying reference rate or index. The use of
noncomplex, nonleveraged derivative products has reduced the Company's exposure
to changes in the interest rate environment. By using derivative products such
as interest rate swaps and futures contracts to alter the nature of (hedge)
specific assets or liabilities on the balance sheet (for example to change a
variable to a fixed rate obligation), the derivative product offsets
fluctuations in net interest income from the otherwise unhedged position. In
other words, if net interest income from the otherwise unhedged position changes
(increases or decreases) by a given amount, the derivative product should
produce close to the opposite result, making the combined amount (otherwise
unhedged position impact plus the derivative product position impact)
essentially unchanged. Derivative products have enabled First American to
improve its balance between interest-sensitive assets and interest-sensitive
liabilities by managing interest rate sensitivity, while continuing to meet the
lending and deposit needs of its customers.
In conjunction with managing interest rate sensitivity, at June 30, 1998,
First American had derivatives with notional values totaling $3.28 billion.
These derivatives had a net positive fair value (unrealized net pretax gain) of
$12.3 million. Notional amounts are key elements of derivative financial
instrument agreements. However, notional amounts do not represent the amounts
exchanged by the parties to derivatives and do not measure First American's
exposure to credit or market risks. The amounts exchanged are based on the
notional amounts and the other terms of the underlying derivative agreements. At
June 30, 1997, First American had derivatives with notional values totaling
21
<PAGE> 22
$2.26 billion. These derivatives had a net positive fair value (unrealized net
pretax gain) of $8.2 million at June 30, 1997. The instruments utilized are
noted in the following table along with their notional amounts and fair values
at June 30, 1998 and 1997.
<TABLE>
<CAPTION>
Weighted
Average
Weighted Average Rate Maturity
Related Variable Rate Notional ---------------------------- -------- Fair
(in thousands) Asset/Liability Amount Paid Received Years Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JUNE 30, 1998
Interest rate swaps Money market deposits $ 150,000 5.97%(1) 5.69%(2) 1.6 $ (234)
Interest rate swaps Available for sale securities 100,000 5.54 (1) 5.67 (2) 4.6 234
Interest rate swaps Available for sale securities 50,000 5.78 (2) 5.46 (8) 3.3 (613)
Interest rate swaps Loans 825,000 5.69 (2) 6.61 (2) 3.9 20,577
Interest rate swaps FHLB borrowings 85,000 6.33 (1) 5.70 (2) 6.2 (2,282)
Interest rate swaps Mortgages 20,482 6.65 (1) 5.70 (9) 9.1 (683)
Forward interest rate Money market deposits
swaps 500,000 6.11 (3) 5.69 (3) 2.1 (938)
Forward interest rate Available for sale
swaps securities 1,300,000 6.10 (4) N/A (4) 2.5 (4,888)
Floors Loans 250,000 5.45 (1) 6.00 (2) 2.9 1,119
---------- --------
$3,280,482 $ 12,292
===============================================================================================================================
June 30, 1997
Interest rate swaps Money market deposits $ 250,000 5.80%(1) 5.79%(5) 1.7 $ 2,337
Interest rate swaps Loans 550,000 5.84 (5) 6.76 (1) 4.5 6,140
Interest rate swaps Long-term debt 100,000 6.94 (1) 6.06 (10) .3 494
Interest rate swaps Mortgages 21,938 6.65 (1) 5.69 (9) 10.1 10
Forward interest rate Money market deposits 750,000 6.37 (6) 5.81 (6) .7 772
swaps
Forward interest rate
swaps Available for sale 200,000 7.10 (7) 5.84 (7) 3.4 (2,487)
Floors Loans 285,000 5.34 (1) 5.81 (2) 3.3 969
Caps Certificates of deposit 100,000 6.88 (1) 5.87 (2) .5 -
---------- --------
$2,256,938 $ 8,235
===============================================================================================================================
</TABLE>
(1) Fixed rate.
(2) Variable rate which reprices quarterly based on 3-month LIBOR.
(3) Forward swap periods have become effective for $100 million and will begin
at various dates during 1998 and 1999 for $400 million. The rates to be
paid are fixed and were set at the inception of the contracts. Variable
rates to be received are based on 3-month LIBOR, repricing quarterly, but
were unknown for $400 million of forward swaps at June 30, 1998, since the
related forward swap periods had not yet begun.
(4) Forward swap periods begin at various dates during 1998 and 1999. The rates
paid are fixed and were set at the inception of the contracts. Variable
rates are based on 3-month LIBOR and reprice quarterly.
(5) Variable rate which reprices quarterly based on 3-month LIBOR, except for
$25 million which reprices every 6 months based on 6-month LIBOR.
(6) Forward swap periods have become effective for $100 million and will begin
in September 1997 for $100 million, November 1997 for $200 million and June
1998 for $350 million. The rates to be paid are fixed and were set at the
inception of the contracts. Variable rates to be received are based on
3-month LIBOR and reprice quarterly, but were unknown for $650 million of
forward swaps at June 30, 1997 since the related forward swap period had
not yet begun.
(7) Forward swap periods have become effective for $100 million and will begin
in April 1998 for $100 million. The rates to be paid are fixed and were set
at the inception of the contracts. Variable rates to be received are based
on 3-month LIBOR, repricing quarterly, but were unknown for $100 million of
forward swaps at June 30, 1997, since the related forward swap periods had
not yet begun.
(8) Variable rate which reprices quarterly based on constant maturity treasury
index less 16 basis points on $25 million, and less 12 basis points on $25
million.
(9) Variable rate which reprices quarterly based on 1-month LIBOR.
(10) Variable rate which reprices quarterly based on 6-month LIBOR.
As First American's individual derivative contracts approach maturity, they
may be terminated and replaced with derivatives with longer maturities which
offer more interest rate risk protection. At June 30, 1998, there were $1.7
million of deferred net gains related to terminated derivatives contracts, and
there were $5.1 million of deferred net losses at March 31, 1997. Deferred gains
and losses on off balance sheet derivative activities are recognized as interest
income or interest expense over the original covered periods.
22
<PAGE> 23
Net interest income for the quarter ended June 30, 1998, was increased by
derivative products income of $1.2 million. Net interest income for the quarter
ended June 30, 1997, was increased by $.8 million derivative products income.
The increase in derivative products net income in second quarter 1998 from
second quarter 1997 was primarily due to actions taken later in 1997 to create a
derivatives position more balanced between pay-fixed and receive-fixed interest
rate swaps.
Credit risk exposure due to off-balance-sheet hedging is closely monitored,
and counterparts to these contracts are selected on the basis of their credit
worthiness, as well as their market-making ability. As of June 30, 1998, all
outstanding derivative transactions were with counterparts with credit ratings
of A-2 or better. Enforceable bilateral netting contracts between First American
and its counterparts allow for the netting of gains and losses in determining
net credit exposure. First American's net credit exposure on outstanding
derivatives was $16.4 million on June 30, 1998. Given the credit standing of the
counterparts to the derivative contracts, Management believes that this credit
exposure is reasonable in light of its objectives.
CAPITAL POSITION
Total shareholders' equity was $1.56 billion, or 8.17 percent of total
assets, at June 30, 1998, $1.47 billion, or 8.62 percent of total assets, at
June 30, 1997, and $1.54 billion, or 8.66 percent of total assets, at December
31, 1997. Total shareholders' equity increased $83.3 million, or 6 percent, from
June 30, 1997, to June 30, 1998, resulting principally from comprehensive income
(unrealized gains on securities available for sale) and issuance of shares for
acquisitions and employee benefit plans offset by common stock repurchases and
dividends to shareholders. Total shareholders' equity increased $13.1 million,
or .8 percent, from December 31, 1997, to June 30, 1998, which was primarily due
to comprehensive income and issuance of shares in connection with employee
benefit plans offset by common stock repurchases and dividends to shareholders.
During the second quarter of 1998, First American declared cash dividends on
its common stock of $.25 per common share compared to $.20 per common share in
the second quarter of 1997, an increase of 25 percent. Cash dividends for the
first six months of 1998 were $.45 per share, an increase of 27 percent over the
same time period last year. The dividend payout ratio was 138.89 percent (38.46
percent, exclusive of restructuring and merger-related costs) in the second
quarter of 1998 compared to 37.04 percent in the second quarter of 1997. The
dividend payout ratio for the six months ended June 30, 1998, and 1997, was
58.44 percent (36.29 percent, exclusive of restructuring and merger-related
costs) and 33.49 percent, respectively.
The Federal Reserve Board and the Office of the Comptroller of the Currency
("OCC") promulgate risk-based capital guidelines and regulations which require
bank holding companies and national banks to maintain minimum capital ratios. As
of June 30, 1998, the Corporation, First American National Bank ("FANB"), and
DGNB had ratios which exceeded the regulatory requirements to be classified as
"well capitalized," the highest regulatory rating. At June 30, 1998, the
Corporation, FANB, and DGNB had total risk-based capital ratios of 11.49
percent, 11.01 percent, and 12.54 percent, respectively; Tier I risk-based
capital ratios of 9.52 percent, 9.76 percent, and 11.30 percent, respectively;
and Tier I leverage capital ratios of 7.49 percent, 8.30 percent, and 8.62
percent, respectively. In order to be considered well capitalized, the total
risk-based capital ratio must be a minimum of 10 percent, the Tier I risk-based
capital ratio must equal or exceed 6 percent, and the Tier I leverage capital
ratio must equal or exceed 5 percent.
First American Federal Savings Bank ("FAFSB") is subject to capital
requirements adopted by the Office of Thrift Supervision, which are similar but
not identical to those issued by the Federal Reserve Board and the OCC. At
June 30, 1998, FAFSB had ratios which exceeded the regulatory requirements to
be classified as "well capitalized."
23
<PAGE> 24
LIQUIDITY
Liquidity management consists of maintaining sufficient cash levels to fund
operations and to meet the requirements of borrowers, depositors, and creditors.
Liquid assets include cash and cash equivalents (which consist of cash and due
from banks, interest-bearing deposits in banks, and federal funds sold and
securities purchased under agreements to resell) less Federal Reserve Bank
reserve requirements in addition to trading account securities and securities
that are estimated to mature within one year. Liquid assets totaled $1.46
billion and $1.28 billion at June 30, 1998, and 1997, respectively, which was
approximately 8.5 percent and 8.4 percent of earning assets, respectively.
Available for sale securities maturing after one year, which can be sold to meet
liquidity needs, had a balance of $4.57 billion at June 30, 1998, compared to
$2.94 billion at June 30, 1997. The overall liquidity position of First American
is further enhanced by a high proportion of core deposits, which provide a
stable funding base. Core deposits comprised 88 percent of total deposits at
June 30, 1998, versus 90 percent at June 30, 1997.
An additional source of liquidity is First American's three-year $100 million
revolving credit agreement which became effective in July 1998 and replaced the
1994 $70 million revolving credit agreement. First American had no borrowings
under either agreement during 1998 or 1997.
24
<PAGE> 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The information called for by this item is incorporated by reference
to Item 3 of the Registrant's annual report on Form 10-K for the
year ended December 31, 1997, and Note 7 to the Corporation's
Consolidated Financial Statements for the quarter ended June 30,
1998 included herein.
Item 4. Submission of Matters to a Vote of Security Holders
(a) An annual meeting of shareholders was held on April 16, 1998.
(b)(c) At the annual meeting, the shareholders voted on the election of
directors and two proposals. The description of each matter voted
upon and a tabulation of votes is as follows:
(1) Election of directors.
<TABLE>
<CAPTION>
Name For Against Abstain
---- --- ------- -------
<S> <C> <C> <C>
Reginald D. Dickson 50,357,736 154,061 217,936
Gene C. Koonce 50,386,758 124,729 217,936
Dale W. Polley 50,384,709 122,281 217,936
James F. Smith, Jr. 50,416,385 90,516 218,152
Cal Turner, Jr. 50,371,086 138,494 217,936
Ted H. Welch 50,361,519 145,422 217,936
David K. Wilson 50,427,554 88,482 217,046
</TABLE>
The name of each other director whose term of office as a
director continued after the annual meeting is as follows:
(until 1999 meeting) Ernest W. Deavenport, Jr., Martha R.
Ingram, James R. Martin, Roscoe R. Robinson, and William S.
Wire, II; (until 2000 meeting) Dennis C. Bottorff, James A.
Haslam, II, Walter G. Knestrick, Robert A. McCabe, Jr.,
Celia A. Wallace, and Toby S. Wilt.
(2) Approval of the Agreement and Plan of Merger by and between
First American and Deposit Guaranty Corp.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
41,960,567 1,386,463 172,724
</TABLE>
(3) Approval of an amendment to the Restated Charter to increase
the number of authorized shares of common stock of First
American from 100 million to 200 million.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
41,845,808 1,452,142 219,189
</TABLE>
25
<PAGE> 26
Item 5. Other Information
If First American does not receive notice at its principal offices
on or before January 17, 1999 of a shareholder proposal for
consideration at the 1999 annual meeting of shareholders, the
proxies named by First American's Board of Directors with respect to
that meeting shall have discretionary voting authority with respect
to such proposal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -------------------------------------------------------------
<S> <C>
3.1 Restated Charter of the Registrant currently in effect as
amended and corrected is incorporated herein by
reference to Exhibit 3.1 of the Registrant's Form
10-Q for the period ended March 31, 1998.
3.2 By-laws of the Registrant currently in effect as amended July
16, 1998, are included herein.
10 $100 million Credit Agreement dated July 17, 1998.
11 Statement regarding computation of per share earnings is
included in Note 6 to the Consolidated Financial Statements
for the quarter ended June 30, 1998. See Part 1, Item 1.
15 Letter regarding unaudited interim financial information from
KPMG Peat Marwick LLP dated July 16, 1998 included
herein.
27.1 Financial Data Schedule for interim year-to-date
period ended June 30, 1998 included herein.
27.2 Restated Financial Data Schedule for interim
year-to-date period ended June 30, 1997.
</TABLE>
(b) Reports on Form 8-K
(1) A report on Form 8-K dated May 11, 1998 was filed under Item 2
("Acquisition or Disposition of Assets") and Item 7 (Financial
Statements, Pro Forma Financial Statements and Exhibits) that
includes as Exhibit 99 thereto the press release dated May 1,
1998 which announced the consummation of the merger of Deposit
Guaranty Corp. into First American Corporation and the
historical financial data for Deposit Guaranty Corp. as
follows:
Independent Auditors' Report
Consolidated Statements of Condition at December 31, 1997,
and 1996
Consolidated Statements of Earnings for the Years ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996, and 1995.
(2) A report on Form 8-K dated July 14, 1998 was filed under Item
5 ("Other Events") that includes as Exhibit 99 thereto the
following giving retroactive effect to the merger of Deposit
Guaranty Corp. into First American Corporation on May 1, 1998
in a transaction accounted for as a pooling of interest:
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Quantitative and
Qualitative Disclosures about Market Risk
26
<PAGE> 27
Supplementary Financial Data
Independent Auditors' Report
Supplemental Consolidated Balance Sheets as of December
31, 1997 and 1996
Supplemental Consolidated Statements of Income for the
years ended December 31, 1997, 1996, and 1995
Supplemental Consolidated Statements of Changes in
Shareholders' Equity for the Years ended December 31,
1997, 1996 and 1995
Supplemental Consolidated Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995
Notes to the Supplemental Consolidated Financial
Statements
27
<PAGE> 28
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 thereunto duly authorized.
FIRST AMERICAN CORPORATION
--------------------------
(Registrant)
/s/ Dale W. Polley
-----------------------------------------
Dale W. Polley
President and Principal Financial Officer
Date: August 11, 1998
----------------------------------
28
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
FIRST AMERICAN CORPORATION
(HEREIN SOMETIMES THE "CORPORATION")
AS AMENDED JULY 16, 1998
ARTICLE I
GENERAL
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be in First American Center, Nashville, Tennessee, and the Corporation
shall have such other offices at such other places as the Board of Directors
(herein sometimes the "Board") may from time to time appoint, or the business of
the Corporation may require.
SECTION 1.2. GENDER. When used herein, the masculine gender shall
include the feminine.
ARTICLE II
SHAREHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting each year shall be held on such day and at such
time as the Board of Directors shall determine.
SECTION 2.2. SPECIAL MEETINGS. Special meetings of shareholders, unless
otherwise provided by law, may be called at any time by the Board, the Chairman
of the Board, the Vice Chairman of the Board, or the President. The Chairman of
the Board, the Vice Chairman or the President shall also call a special meeting
of shareholders, to be held no sooner than seventy-five (75) and no later than
ninety (90) days (as shall be determined in the sole discretion of the officer
calling the same) after the receipt of a written demand for such a meeting from
shareholders owning of record ten percent (10%) or more of the entire capital
stock of the Corporation issued and outstanding and entitled to vote at such
meeting, together with a certified check for fifty thousand dollars ($50,000)
payable to the Corporation to cover the Corporation's expenses in connection
with such meeting, including the preparation of proxy materials and the mailing
of notices and proxy materials to shareholders. Such written demand must state
the purpose or purposes for which the meeting is called, the names of the
shareholder or shareholders calling the meeting, the number of shares owned of
record by each such shareholder, and any other information specified in Schedule
14A, Rule 14a-3
1
<PAGE> 2
or Rule 14a-11 of the Rules and Regulations of the Securities and Exchange
Commission.
SECTION 2.3. PLACE OF MEETING. The Board may designate any place,
either within or without the State of Tennessee, as the place of meeting for any
annual meeting or for any special meeting which is called by the Board. If no
place is designated by the Board, or if a special meeting is held pursuant to
shareholder demand, the place of meeting shall be the principal office of the
Corporation as provided in these By-Laws.
SECTION 2.4. NOTICE OF SHAREHOLDER MEETINGS; WAIVER.
(A) ANNUAL MEETINGS. Written notice stating the place, date and hour of
the annual meeting of shareholders shall be given in person or by mail to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be mailed not less than ten (10) days nor more than sixty (60) days before
the meeting. Mailed notice shall be deemed to be given when deposited, with
postage prepaid, in the United States mail addressed to the shareholder at his
address as it appears on the records of the Corporation at the close of business
on the record date established for such meeting, or to such other address as the
shareholder shall have designated in writing to the Secretary. If delivered
personally, such notice shall be delivered not less than ten (10) days nor more
than sixty (60) days before the date of the meeting and shall be deemed
delivered when actually received by the shareholder.
(B) SPECIAL MEETINGS. Written notice of every special meeting of
shareholders shall be given by the Corporation in person or by mail to each
shareholder of record entitled to vote at such meeting. Such notice shall state
the place, date, hour, purpose or purposes for which the meeting is called, and
the person or persons calling the meeting. In the case of a meeting called
pursuant to the request of shareholders owning ten percent (10%) or more of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote at such meeting, such notice shall be given, in person or by mail, not less
than forty-five (45) days nor more than sixty (60) days before the meeting.
Otherwise, if mailed, such notice shall be given not less than ten (10) days nor
more than sixty (60) days before the meeting, and if delivered personally, such
notice shall be delivered not less than ten (10) days nor more than sixty (60)
days before the date of the meeting. Mailed notice shall be deemed to be given
when deposited, with postage prepaid, in the United States mail addressed to the
shareholder at his address as it appears on the records of the Corporation at
the close of business on the record date established for such meeting, or to
such other address as the shareholder shall have designated in writing to the
Secretary, and shall be deemed delivered personally when actually received by
the shareholder.
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(C) WAIVER. Notice of any meeting need not be given to any shareholder
who signs a waiver of notice, either before or after such meeting, or who
attends the meeting in person or by proxy, and does not object at the beginning
of the meeting to the lack of notice or to the fact that the meeting was not
otherwise lawfully called or convened. Attendance at a meeting for the express
purpose of objecting to the lack of notice or to the fact that the meeting was
otherwise not lawfully called or convened shall not, however, constitute a
waiver of notice.
SECTION 2.5. NOTICE OF NOMINATIONS. Nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors authorized to make such nominations.
SECTION 2.6 SHAREHOLDER NOMINATIONS AND PROPOSALS. (a) No proposal for
a shareholder vote (other than votes that are solely on procedural issues) shall
be submitted by a shareholder (a "Shareholder Proposal") to the Corporation's
shareholders unless the shareholder submitting such proposal (the "Proponent")
shall have filed a written notice setting forth with particularity (i) the names
and business addresses of the Proponent and all persons acting in concert with
the Proponent; (ii) the name and address of the Proponent and the persons
identified in clause (i), as they appear on the Corporation's books (if they so
appear); (iii) the class and number of shares of the Corporation beneficially
owned by the Proponent and the Persons identified in clause (i); (iv) a
description of the Shareholder Proposal containing all material information
relating thereto; and (v) such other information as the Board of Directors
reasonably determines is necessary or appropriate to enable the Board of
Directors and shareholders of the Corporation to consider the Shareholder
Proposal. If the presiding officer at any shareholders meeting determines that
any Shareholder Proposal was not made in accordance with the procedures
prescribed in these Bylaws or is otherwise not in accordance with law, he shall
so declare at the meeting and the Shareholder Proposal shall be disregarded.
(b) Only persons who are selected and recommended by the Board of
Directors or the committee of the Board of Directors designated to make
nominations pursuant to Section 2.5, or who are nominated by shareholders in
accordance with the procedures set forth in this Section 2.6, shall be eligible
for election, or qualified to serve, as directors. Nominations of individuals
for election to the Board of Directors of the Corporation at any annual meeting
or any special meeting of shareholders at which directors are to be elected may
be made by any shareholder of the Corporation entitled to vote for the election
of directors at that meeting by compliance with the procedures set forth in this
Section 2.6. Nominations by shareholders shall be made by written notice (a
"Nomination Notice"), which shall set forth (i) as to each individual nominated,
(A) the name, date of birth, business address and residence address of such
individual; (B) the business experience during the past five years of such
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nominee, including his or her principal occupations and employment during such
period, the name and principal business of any corporation or other organization
in which such occupations and employment were carried on, and such other
information as to the nature of his or her responsibilities and level of
professional competence as may be sufficient to permit assessment of his or her
prior business experience; (C) whether the nominee is or has ever been at any
time a director, officer or owner of 5% or more of any class of capital stock,
partnership interests or other equity interest of any corporation, partnership
or other entity; (D) any directorships held by such nominee in any company with
a class of securities registered pursuant to section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended; and (E) whether, in the last five
years, such nominee has been convicted in a criminal proceeding or has been
subject to a judgment, order, finding or decree of any federal, state or other
governmental entity, domestic or foreign, concerning any violation of federal,
state or other law, or any proceeding in bankruptcy, which conviction, order,
finding, decree, or proceeding may be material to an evaluation of the ability
or integrity of the nominee, and (ii) as to the person submitting the Nomination
Notice and any person acting in concert with such person, (x) the name and
business address of such person, (y) the name and address of such person as they
appear on the Corporation's books (if they so appear), and (z) the class and
number of shares of the Corporation which are beneficially owned by such person.
A written consent to being named in a proxy statement as a nominee, and to serve
as a director if elected, signed by the nominee, shall be filed with any
Nomination Notice. If the presiding officer at any shareholders meeting
determines that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(c) Nomination Notices and Shareholder Proposals shall be delivered to
the Secretary at the principal executive office of the Corporation 90 days or
more before the month and the day of the prior years' shareholders meeting if
such Nomination Notice or Shareholder Proposal is to be submitted at an annual
shareholders meeting, or such other date as the Board of Directors may
determine, provided that the deadline imposed by the Board is more than 60 days
following public announcement of such deadline. Nomination Notices and
Shareholder Proposals shall be delivered to the Secretary at the principal
executive office of the Corporation no later than the close of business on the
15th day following the day on which notice of the date of a special meeting of
shareholders was given if the Nomination Notice or Shareholder Proposal is to be
submitted at a special shareholders meeting.
SECTION 2.7. RECORD DATE. The Board shall fix as the record date for
any determination of shareholders entitled to vote at any meeting of
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shareholders or any adjournment thereof, to demand a special meeting, to receive
notice of a shareholders meeting, to receive payment of any dividend, or for any
other proper purpose, a date not more than seventy (70) days prior to the date
on which the particular action requiring such determination of shareholders is
to be taken. If no record date is fixed by the Board, as provided above, and if
the Charter does not otherwise provide for a record date, then the date on which
the resolution of the Board declaring such dividend is adopted, or the day
before the date on which notice of the meeting is mailed, shall be the record
date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided herein, such determination shall apply
to any adjournment of such meeting unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
four (4) months after the date fixed for the original meeting.
SECTION 2.8. LIST OF SHAREHOLDERS. After the record date for a meeting
has been fixed, the Corporation shall prepare an alphabetical list of names of
all shareholders who are entitled to notice of a shareholders' meeting. Such
list will be arranged by voting group (and within each voting group by class or
series of shares) and will show the address of and number of shares held by each
shareholder. The shareholders' list will be available for inspection in
accordance with the Tennessee Business Corporation Act (the "Act"), beginning
two (2) business days after notice of the meeting is given for which the list
was prepared and continuing through the meeting, at the Corporation's principal
office or at a place identified in the meeting notice in the city where the
meeting will be held. A shareholder or his agent or attorney is entitled on
written demand to inspect and, subject to the requirements of the Act, to copy
the list, during regular business hours and at his expense, during the period it
is available for inspection.
SECTION 2.9. VOTING GROUPS; QUORUM; ADJOURNMENT. All shares entitled to
vote and be counted together collectively on a matter at a meeting of
shareholders shall be a "voting group". Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. Except as otherwise required by the
Act or provided in the Charter, a majority of the votes entitled to be cast on a
matter by a voting group constitutes a quorum of that voting group for action on
that matter. Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting. If a quorum of a voting group shall
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not be present or represented at any meeting, the shares entitled to vote
thereat shall have power, by majority vote, to adjourn the meeting to a
different date, time or place without notice other than announcement at the
meeting of the new time, date or place to which the meeting is adjourned. At any
adjourned meeting at which a quorum of any voting group shall be present or
represented, any business may be transacted by such voting group which might
have been transacted at the meeting as originally called.
SECTION 2.10. PROXIES. At all meetings of shareholders, a shareholder
may vote in person or by proxy executed in writing by such shareholder or his
duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary
of the Corporation or other officer or agent authorized to tabulate votes before
or at the time of the meeting. No proxy shall be valid after eleven (11) months
from its date, unless otherwise provided in the proxy. A proxy is revocable by
the shareholder unless the form of proxy conspicuously states that it is
irrevocable and the proxy is coupled with an interest.
SECTION 2.11. ACCEPTANCE OF SHAREHOLDER DOCUMENTS. If the name signed
on a shareholder document (a vote, consent, waiver, or proxy appointment)
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, is entitled to accept such shareholder document and give it effect as the
act of the shareholder. If the name signed on such shareholder document does not
correspond to the name of a shareholder, the Corporation, if acting in good
faith, is nevertheless entitled to accept such shareholder document and to give
it effect as the act of the shareholder if:
(I) the shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(II) the name signed purports to be that of a fiduciary representing
the shareholder and, if the Corporation requests, evidence of fiduciary status
acceptable to the Corporation has been presented with respect to such
shareholder document;
(III) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the Corporation requests, evidence of this
status acceptable to the Corporation has been presented with respect to the
shareholder document;
(IV) the name signed purports to be that of a pledgee, beneficial owner
or attorney-in-fact of the shareholder and, if the Corporation requests,
evidence acceptable to the Corporation of the signatory's authority to sign for
the
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shareholder has been presented with respect to such shareholder document; or
(V) two or more persons are the shareholder as cotenants or fiduciaries
and the name signed purports to be the name of at least one (1) of the co-owners
and the person signing appears to be acting on behalf of all the co-owners.
The Corporation is entitled to reject a shareholder document if the
Secretary or other officer or agent authorized to tabulate votes, acting in good
faith, has a reasonable basis for doubt about the validity of the signature on
such shareholder document or about the signatory's authority to sign for the
shareholder.
SECTION 2.12. VOTING OF SHARES.
(A) SHAREHOLDERS ENTITLED TO VOTE. Unless otherwise provided by the Act
or the Charter, every shareholder of the Corporation shall be entitled, at each
meeting of the shareholders and upon each proposal presented at such meeting, to
one vote for each share registered in his name on the books of the Corporation
on the record date. Shares owned of record or beneficially as fiduciary by a
subsidiary bank of the Corporation shall be entitled to be voted at such
meeting, and shall be voted in accordance with the directions in the instrument
establishing such fiduciary relationship or other governing instrument, or in
the absence of such direction, in accordance with applicable fiduciary
principles, and the Corporation, as such, shall not control the voting of such
shares.
(B) VOTE REQUIRED. Unless the Act, the Corporation's Charter or these
By-Laws specifically require a greater number of affirmative votes, if a quorum
exists, approval of action on a matter (other than election of directors) by a
voting group entitled to vote thereon is received if the votes cast within the
voting group favoring the action exceeds the votes cast disapproving the action.
Except as otherwise provided in the Charter, directors shall be elected by the
affirmative vote of a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present. If a shareholder
shall abstain, such shareholder shall be deemed to have not voted. At each
election of directors, every shareholder shall have the right to vote the number
of shares which he is entitled to vote at such meeting for as many persons as
there are directors to be elected at said meeting, but cumulative voting for
nominees shall not be permitted. Except as specified in Article X of the
Corporation's Charter, any Business Combination (as therein defined) shall
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require in addition to any affirmative vote required by the Act an affirmative
vote of (i) seventy-five percent (75%) of the votes entitled to be cast by all
holders of Voting Stock (as defined in such Article X), voting together as a
voting group at a meeting of shareholders called for such purpose, and in
addition thereto, (ii) a majority of the votes entitled to be cast by all
holders of Voting Stock, other than shares of Voting Stock which are
Beneficially Owned (as defined in Article X) by an Interested Shareholder (as
defined in Article X), voting together as a voting group at a meeting of
shareholders called for such purpose.
SECTION 2.13. ORGANIZATION. At every meeting of shareholders, the Chief
Executive Officer shall preside as Chairman of the meeting and the Secretary or
other officer shall act as secretary. In the Chief Executive Officer's absence,
inability or unwillingness to serve, the Chairman of the Board or the President
(and in his absence, inability or unwillingness to serve, the Vice Chairman of
the Board) shall preside as Chairman of the meeting. A full record of each
meeting shall be made by its secretary and such minutes shall be retained in the
records of the Corporation. At every annual meeting, the Chief Executive
Officer, or other appropriate officer, shall report on the operations of the
Corporation during the preceding year.
SECTION 2.14. JUDGES OF THE ELECTION. The Board of Directors or the
officer presiding at the annual meeting shall appoint one or more judges of
election as such appointing authority shall deem necessary to assure the proper
holding of the election of directors; and the judge or judges so appointed
shall, after the election has been held, certify the results thereof, giving the
names of directors. In the event the judge or judges of election shall be
appointed by the Board in advance of the annual meeting and shall for any reason
fail or be unable to serve, a substitute judge may be appointed at any time
prior to the election by either the Board or the officer presiding at the annual
meeting.
SECTION 2.15. CONDUCT OF MEETINGS. Meetings of shareholders generally
shall follow accepted rules of parliamentary procedure subject to the following:
(A) The chairman of the meeting shall have absolute authority over the
matters of procedure, and there shall be no appeal from the ruling of the
chairman. If, in his absolute discretion, the chairman deems it advisable to
dispense with the rules of parliamentary procedure as to any meeting of
shareholders or part thereof, he shall so state and shall clearly state the
rules under which the meeting or appropriate part thereof shall be conducted.
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(B) If disorder should arise which prevents the continuation of the
legitimate business of the meeting, the chairman may quit the chair and announce
the adjournment of the meeting; and upon his so doing, the meeting is
immediately adjourned.
(C) The chairman may ask or require that anyone not a bona fide
shareholder or proxy leave the meeting.
(D) A resolution or motion shall be considered for vote only if
proposed by a shareholder or a duly authorized proxy and seconded by a
shareholder or duly authorized proxy other than the individual who proposed the
resolution or motion.
(E) Except as the chairman may permit, no matter shall be presented to
the meeting which has not been submitted for inclusion in the agenda at least
thirty (30) days prior to the meeting.
SECTION 2.16. ACTION ON WRITTEN CONSENT OF SHAREHOLDERS. Action
required or permitted by the Act to be taken at a shareholders' meeting may be
taken without a meeting. If all shareholders entitled to vote on the action
consent to taking such action without a meeting, the affirmative vote of the
number of shares that would be necessary to authorize or take such action at a
meeting is the act of the shareholders.
The action must be evidenced by one (1) or more written consents
describing the action taken, at least one of which is signed by each shareholder
entitled to vote on the action in one (1) or more counterparts, indicating such
signing shareholder's vote or abstention on the action and delivered to the
Corporation for inclusion in the minutes or for filing with the corporate
records.
If the Act or the Charter requires that notice of a proposed action be
given to nonvoting shareholders and the action is to be taken by consent of the
voting shareholders, then the Corporation shall give its nonvoting shareholders
written notice of the proposed action at least ten (10) days before such action
is taken. Such notice shall contain or be accompanied by the same material that
would have been required to be sent to nonvoting shareholders in a notice of a
meeting at which the proposed action would have been submitted to the
shareholders for action.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. All corporate powers shall be exercised by
or under the authority of and the business and affairs of the Corporation shall
be managed under the direction of the Board of Directors.
SECTION 3.2. NUMBER, ELECTION AND TENURE OF DIRECTORS. The Board shall
consist of not less than nine (9) nor more than twenty-seven (27), the exact
number within such minimum and maximum to be fixed and determined from time to
time by resolution of a majority of the Board or by resolution of the
shareholders at any meeting thereof. The directors shall be divided into three
classes as equal in number as practicable. At each annual meeting of
shareholders following the initial classification and election, directors
elected to succeed those directors whose terms expire shall be elected for a
three-year term of office. Each director shall hold office for the term for
which the person was elected and until his successor has been elected and
qualified. No decrease in the number of authorized directors constituting the
entire Board of Directors shall shorten the term of any incumbent director.
SECTION 3.3. VACANCIES. Unless the Charter otherwise provides, newly
created directorships resulting from any increase in the authorized number of
directors, or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification or removal (with or without cause)
shall be filled only by a majority vote of the directors then in office, though
less than a quorum, and each director so chosen shall hold office for the
unexpired term of his or her predecessor, or, if there is no such predecessor,
until the next annual meeting of shareholders. No decrease in the number of
authorized directors constituting the entire Board of Directors shall shorten
the term of any incumbent director. If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group shall be entitled to vote to fill the vacancy if it is filled by
the shareholders.
SECTION 3.4. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director may be removed, but only for cause as
defined by the laws of Tennessee, by the affirmative vote of the shareholders
holding seventy-five percent (75%) of the shares entitled to vote at such
meeting. If any voting group (other than shares of common stock) is entitled to
elect one or more directors, the provisions of the foregoing sentence shall not
apply in respect of the removal of the director or directors so elected, and the
vote of the holders of that voting group and the rights of the holders of such
shares shall be as set forth in the Charter.
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SECTION 3.5. REGULAR MEETINGS. A regular meeting of the Board shall be
held immediately after the annual meeting of shareholders. A majority of the
entire Board may provide, by resolution, the time and place for the holding of
additional regular meetings. Such regular meetings may be held without notice of
the time, place and purpose thereof.
SECTION 3.6. SPECIAL MEETINGS. Special meetings of the Board may be
called by the Chairman of the Board, the Vice Chairman of the Board, the
President or any three directors. Notice of the time and place of each special
meeting shall be given to each director at either his business or residence
address, as shown by the records of the Secretary, at least forty-eight (48)
hours previously thereto if mailed and twelve (12) hours previously thereto if
delivered or given by telegram or telephone. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage prepaid thereon. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram, so addressed, is delivered to the
telegraph company. Any directors may waive notice of any meeting before, at or
after such meeting, and except as provided in the next sentence, the waiver must
be in writing, signed by the director and filed with the minutes or corporate
records. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting except where a director attends for the express purpose
of objecting to the transaction of business thereat on the ground that the
meeting is not lawfully called or convened.
SECTION 3.7. QUORUM. A majority of the entire Board shall constitute a
quorum at any meeting; but a less number may adjourn any meeting from time to
time, and the meeting may be held, as adjourned, without further notice. Subject
to the rights of the holders of any series of Preferred Stock then outstanding,
newly created directorships resulting from any increase in the authorized number
of directors, or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
shall be filled only by a majority vote of the directors then in office, though
less than a quorum, and each director so chosen shall hold office for the
unexpired term of his or her predecessor, or if there is no predecessor, until
the next annual meeting of shareholders.
SECTION 3.8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall, unless the Charter or
these By-Laws require the vote of a greater (or different) number of directors,
be the act of the Board. Directors may participate in any meetings, or the
meeting may be conducted by means of communications equipment whereby all
persons participating can simultaneously hear each other. A director
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participating in a meeting by this means is deemed to be present in person at
the meeting. Any action required or permitted by the Act to be taken at a Board
of Directors' meeting may be taken without a meeting. If all directors consent
to taking such action without a meeting, the affirmative vote of the number of
directors that would be necessary to authorize or take such action at a meeting
is the act of the Board of Directors. Such action must be evidenced by one or
more written consents describing the action taken, at least one of which is
signed by each director, indicating the director's vote or abstention on the
action, which consents shall be included in the minutes or filed with the
corporate records reflecting the action taken. Action taken by consent is
effective when the last director signs the consent, unless the consent specifies
a different effective date.
SECTION 3.9. COMPENSATION. Directors and members of any committee
created by the Board of Directors shall be entitled to such reasonable
compensation for their services as directors and members of such committee as
shall be fixed from time to time by the Board, and shall also be entitled to
reimbursement for any reasonable expenses incurred in attending meetings of the
Board or of any such committee meetings. Any director receiving such
compensation shall not be barred from serving the Corporation in any other
capacity and receiving reasonable compensation for such other services;
provided, however, that no director who is also an officer (other than are
holding an honorary position) shall be compensated for service as a director.
SECTION 3.10. PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board at which action on any Corporation matter
is taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting, or unless:
(I) he objects at the beginning of the meeting (or promptly upon his
arrival) to holding the meeting or transacting business at the meeting;
(II) his dissent or abstention from the action taken is entered in the
minutes of the meeting; or
(III) he delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the Corporation
immediately after adjournment of the meeting. The right of dissent or abstention
is not available to a director who votes in favor of the action taken.
SECTION 3.11. DIRECTOR AGE QUALIFICATION. No person shall be elected or
re-elected a director of the Corporation after attaining age 70; provided,
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however, if deemed by the Board to be in the best interest of the Corporation, a
person may be elected or re-elected for a single term after attaining age 70;
and provided further, a person who owns, directly or indirectly, in excess of 1%
of the issued and outstanding shares of the Corporation may be re-elected
without regard to age.
ARTICLE IV
COMMITTEES
SECTION 4.1. EXECUTIVE COMMITTEE. There may be an Executive Committee
of the Board consisting of the Chief Executive Officer (or in his absence the
President or Chairman of the Board) and not less than three other Directors who
shall be elected by the Board. Except as set forth below, the Executive
Committee shall have all the powers of the Board in the management and conduct
of the business and affairs of the Corporation in the intervals between meetings
of the Board, and shall report its actions to the Board at its regular meetings.
The Executive Committee may not:
a. Except according to a formula or method prescribed by the
Board, authorize dividends (in cash, debt or property other
than shares of the Corporation) purchases, redemptions or
other acquisitions of shares of the Corporation or the
incurrence of indebtedness (directly or indirectly, including
through a guaranty) by the Corporation to or for the benefit
of its shareholders in respect of any of its shares;
b. Approve or propose to shareholders action that the Act
requires be approved by shareholders;
c. Fill vacancies on the Board or any of its Committees;
d. Amend the Charter pursuant to T.C.A. ss. 48-20-102;
e. Adopt, amend or repeal these bylaws;
f. Approve a plan of merger not requiring shareholder approval;
g. Authorize or approve reacquisition of shares, except according
to a formula or method prescribed by the Board; or
h. Authorize or approve the issuance or sale or contract for sale
of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares,
except that the Board may authorize the Executive Committee
(or any senior executive officer of the Corporation) to do so
within limits specifically prescribed by the Board of
Directors.
Vacancies in the membership of the Executive Committee may be filled at
any meeting of the Board. Meetings of the Executive Committee shall be
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held subject to call by the Chairman of the Committee or the Chief Executive
Officer.
SECTION 4.2. AUDIT COMMITTEE. There shall be an Audit Committee
composed of at least three directors elected by the Board, none of whom shall be
officers employed on a regular full-time basis by the Corporation or any of its
affiliates. The Board shall appoint from among the members of the committee a
chairman thereof, who shall preside at meetings of the committee and shall
direct its work.
The Audit Committee shall determine that the affairs and operations of
the Corporation and its affiliates are subject to appropriate audits and control
procedures, shall report regularly to the Board, at least annually, in
connection with the activities, findings and reports of both internal and
independent audits of the Corporation and its affiliates, and shall provide
guidance and assistance to such auditors, as appropriate under the
circumstances, including providing that such auditors shall exercise their
function independently of management, wherever appropriate. If requested to do
so by the Board or the Executive Committee, the Audit Committee shall review any
transaction with the Corporation in which a director or officer of the
Corporation has a direct or indirect interest.
SECTION 4.3. HUMAN RESOURCES COMMITTEE. There may be a Human Resources
Committee composed of at least three directors elected by the Board, at least
two of whom shall not be employed on a regular full-time basis by the
Corporation or any of its affiliates. The Board shall appoint from among the
members of the committee a chairman thereof, who shall preside at meetings of
the committee and shall direct its work.
The Committee shall exercise general oversight over all personnel
practices and procedures for all officers and employees of the Corporation and
all its affiliates, including but not limited to all benefit programs, and to
act on behalf of the Board with regard to salary administration. The committee
shall review all actions of management as to the aggregate expenditures for
salaries and shall review specific salaries of all officers of the Corporation
and employees of the Corporation whose current salaries exceed such amount per
year as shall be determined from time to time by the committee or whose salary
would exceed such amount per year if the recommended increase were granted.
Salaries of officers of the Corporation who are also Directors of the
Corporation shall be recommended by the Human Resources Committee for approval
by the full Board of Directors. The committee shall serve as the administrative
committee for the Corporation's FIRST Plan, the Star Award Plan
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and the KEEP plan and shall perform such other functions as may be assigned to
it by the Board.
SECTION 4.4. COMMUNITY AFFAIRS COMMITTEE. There shall be a Community
Affairs Committee composed of at least three Directors elected by the Board, at
least two of whom shall not be employed on a regular full-time basis by the
Corporation or any of its affiliates. The Board shall appoint from among the
members of the Committee a chairman thereof, who shall preside at meetings of
the Committee and shall direct its work.
It shall be the duty of the Committee to advise and counsel management
in matters of community activities, contributions, image issues, government
affairs, and compliance with the Community Reinvestment Act and other laws or
regulations of a similar purpose; and to perform such other functions as may be
assigned to it by the Board.
SECTION 4.5. DEVELOPMENT COMMITTEE. There shall be a Development
Committee of the Board consisting of not less than three directors elected by
the Board. The Board shall appoint from among the members of the Committee a
Chairman thereof, who shall preside at meetings of the Committee and shall
direct its work.
It shall be the duty of the Committee to oversee and to advise and
counsel management as to the investigation, development and implementation of
non-traditional banking products or services offered through the Corporation or
its affiliates. The Committee shall also provide general oversight to First
American National Bank's corporate and personal trust services as well as
services offered incidentally thereto, such as investment management. The
Committee shall also review preliminary reports and recommendations concerning
strategic growth through mergers and acquisitions. The Committee shall ensure
that all such activities are undertaken and conducted in accordance with
applicable laws and regulations, corporate policy and sound financial planning.
The Committee shall also perform such other functions as may be assigned to it
by the Board.
SECTION 4.6. ASSET POLICY COMMITTEE. There shall be an Asset Policy
Committee composed of not less than five directors elected by the Board, at
least four of whom shall not be employed on a regular full-time basis by the
Corporation or any of its affiliates. The Board shall appoint from among the
members of the Committee a Chairman thereof, who shall preside at meetings of
the Committee and shall direct its work.
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The Committee shall have responsibility for all credit related matters,
including approval of credit policies and procedures, monitoring the loan
portfolio, review of significant transactions, review of credit examinations,
compliance with regulatory requirements and applicable laws and regulations,
review of internal and external audits, review of the allowance for loan losses,
and review of regulatory examinations. The Asset Policy Committee shall also
regularly review asset/liability policies and procedures, asset quality reports,
and the policies and procedures of the Capital Markets Group. The Asset Policy
Committee shall perform such other duties as may be assigned to it from time to
time by the Board.
SECTION 4.7. THE COMMITTEE ON DIRECTORS. There may be a Committee on
Directors composed of at least three directors elected by the Board, none of
whom shall be officers employed on a regular full-time basis by the Corporation
or any of its affiliates. The Board shall appoint from among the members of the
committee a Chairman thereof, who shall preside at meetings of the committee and
shall direct its work.
The Committee on Directors shall establish criteria for the evaluation
of members of the board, shall evaluate members of the Board and recommend to
the Board of Directors whether those members should be re-elected. The committee
shall evaluate the size and composition of the Board and shall establish
criteria for director nomination. They shall identify and recommend to the Board
of Directors nominees for membership on the Board. In keeping with all of the
foregoing, the Committee on Directors shall administer the Corporate Governance
Program of the Corporation, as may be approved from time to time by the
Directors.
The Committee may receive recommendations for membership on the Board
submitted by shareholders of the Corporation if written notice of the
recommendation is submitted to the Chief Executive Officer of the corporation
within 60 days prior to the meeting of the committee. Such written notice shall
contain the following information to the extent known by the nominating
shareholder: the name and address of each proposed nominee; the principal
occupation of each proposed nominee; the name and residential address of the
notifying shareholder; and the number of shares owned by the notifying
shareholder.
SECTION 4.8. OTHER COMMITTEES. The Board may create such other
committees as it may determine will be helpful in discharging its
responsibilities for the management and administration of the Corporation. Each
committee shall perform such functions as may be assigned to it by the Board.
All
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members of committees of the Board which exercise powers of the Board must be
members of, and serve at the pleasure of, the Board.
SECTION 4.9. COMPENSATION. The chairman and members of all committees
(except those who are also officers of the Corporation or any subsidiary of the
Corporation) shall receive such compensation for their services as may be fixed
by the Board.
SECTION 4.10. MEETINGS. Regular meetings of any standing or special
committee may be held without call or notice at such times and places as such
committee from time to time may fix. Other meetings of any such committee may be
called by the Chairman of the Board, the Vice Chairman of the Board, the
President, the chairman of such committee, or any two members of such committee,
upon giving notice of the time and place of each such meeting to each member at
either his business or residence address, as shown by the records of the
Secretary, at least forty-eight (48) hours previously thereto if mailed, and
twelve (12) hours previously thereto if delivered in person, or given orally, or
by telephone or by telegraph. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, so addressed, with postage
prepaid thereon. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram, so addressed, is delivered to the telegraph
company. Any member may waive notice of any meeting before, at or after such
meeting and except as provided in the next sentence, the waiver must be in
writing, signed by the director and filed with the minutes or corporate records.
The attendance of a member at a meeting shall constitute a waiver of notice of
such meeting except where a member attends for the express purpose of objecting
to the transaction of business thereat on the grounds that the meeting is not
lawfully called or convened.
SECTION 4.11. QUORUM. At any meeting of any standing or special
committee, a majority of the members shall constitute a quorum and any action of
such committee to be effective must be authorized by the affirmative vote of a
majority of the members thereof present at the meeting.
SECTION 4.12. MANNER OF ACTING. Committees are authorized to act in any
manner by which the Board is authorized to act as provided in Section 3.8 of
these By-Laws.
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ARTICLE V
OFFICERS AND EMPLOYEES
SECTION 5.1. NUMBER. The officers of the Corporation shall be a
Chairman of the Board, a Vice Chairman of the Board, a President, one or more
Vice Presidents, a Secretary, a Treasurer, and such other officers, with such
titles and descriptions, as the Board, the Human Resources Committee, or the
Chief Executive Officer, from time to time, may deem appropriate. The Chairman
of the Board, the Vice Chairman of the Board and the President shall be members
of the Board. Any two or more offices may be held by the same person except the
offices of the President and the Secretary may not be combined.
SECTION 5.2. APPOINTMENT AND TERM OF OFFICE. The officers of the
Corporation shall be appointed annually by the Board at its first meeting held
after the annual meeting of shareholders, or as soon thereafter as is
convenient. Each officer shall serve at the pleasure of the Board of Directors
until his successor shall have been duly appointed or until his death,
resignation or removal.
SECTION 5.3. REMOVAL. Any officer or agent elected or appointed by the
Board may be removed by the Board at any time, with or without cause, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Appointment of an officer or agent shall not of itself create
contract rights.
SECTION 5.4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
or the Human Resources Committee for the unexpired portion of the term.
SECTION 5.5. CHAIRMAN OF THE BOARD AND/OR EXECUTIVE COMMITTEE. The
Board may elect one of its members, who may be the same person, to be Chairman
of the Board and/or Chairman of the Executive Committee. He shall preside at all
meetings of the Board and/or the Executive Committee and shall perform such
duties and exercise such powers as reasonably may be assigned by the Board. In
the absence of the Chairman, the Chief Executive Officer shall preside at
meetings of the Board or the Executive Committee.
SECTION 5.6. VICE CHAIRMAN. The Board may elect one or more Vice
Chairmen, who need not be Board members, with such duties and powers as may be
assigned by the Board, the Chairman of the Board or the Chief Executive Officer.
SECTION 5.7. PRESIDENT. The Board shall elect one of its members to be
President. The President shall have such powers and duties as may be
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assigned to him by the Board or the Chief Executive Officer of the Corporation.
In the absence of the Chairman of the Board, the President shall preside at
meetings of the Board. In the absence of the Chairman of the Executive
Committee, the President shall preside at meetings of the Committee. In the
absence of the President, or upon his inability to act, or if said office shall
become vacant, his duties shall be performed by such person or persons as shall
be so designated by the Board. He shall perform such other duties as the Board
of Directors may prescribe.
SECTION 5.8 CHIEF EXECUTIVE OFFICER. The Board shall elect one of its
members to be Chief Executive Officer. He may exercise all of the powers
customarily exercised by the chief executive officer of a corporation and shall
have general supervision of all policies and operations of the Corporation. All
officers of the Corporation shall report to him to the extent he may at any time
require.
SECTION 5.9. EXECUTIVE AND SENIOR VICE PRESIDENTS. The Board or the
Human Resources Committee shall appoint one or more Executive or Senior Vice
Presidents, except that those designated as Regulation O executive officers
based upon their roles in First American Corporation or First American National
Bank shall be appointed solely by the Board. Each Executive or Senior Vice
President shall have such powers and duties as may be assigned to him by the
Board, the Human Resources Committee, or the Chief Executive Officer of the
Corporation.
SECTION 5.10. SECRETARY. The Secretary of the Corporation shall be
exofficio Secretary of the Board, the Executive Committee, and of all other
standing committees of the Board (unless another person is so designated by such
committee). He shall keep the minutes of all meetings of the shareholders, the
Board, the Executive Committee, and when required, of all other standing
committees and meetings of which he shall be assigned secretary; and attend to
serving and giving all notices of the Corporation. He shall have charge of the
corporate seal, the stock certificate records and such other books, records, and
papers as the Board and the Executive Committee may direct; keep a stock record
containing the names of all persons who are shareholders of the Corporation,
showing their place of residence, the number of shares of stock held by them
respectively; the dates they became owners thereof; and shall perform such other
duties as may be incident to his office or as prescribed by the Board or the
Chief Executive Officer. If the Board so prescribes, the stock records may be
kept by a stock transfer agent selected by the Board.
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SECTION 5.11. TREASURER. The Treasurer shall keep or cause to be kept
full and accurate accounts of all receipts and disbursements in books belonging
to the Corporation, and shall have the care and custody of all funds and
securities of the Corporation and he shall disburse the funds of the Corporation
as required in the ordinary course of business or as may be ordered by the
Board, the Executive Committee, or the Chief Executive Officer. He shall perform
such other duties as may be incident to his office or as prescribed by the Board
or the Chief Executive Officer.
SECTION 5.12. VICE PRESIDENTS AND OTHER OFFICERS. The Board, the Human
Resources Committee, the Chief Executive Officer or the President may elect or
appoint Vice Presidents and such other officers and attorneys-in-fact, not
specifically provided for by these By-Laws, with such titles and descriptions,
as from time to time may appear to the Board, the Human Resources Committee, the
Chief Executive Officer or the President to be required or desirable to transact
the business of the Corporation. Such officers shall respectively exercise such
powers and perform such duties as pertain to their several offices, or as may be
conferred upon, or assigned to them by the Board, the Human Resources Committee,
the Chief Executive Officer or the President of the Corporation.
SECTION 5.13. DELEGATION. In case of the absence of any officer of the
Corporation, or for any other reason that the Board may deem sufficient, the
Board may delegate for the time being the powers or duties, or any of them, of
such officers to any other officer, or to any Director, provided a majority of
the entire Board concur therein.
SECTION 5.14. RETIREMENT OF OFFICERS AND EMPLOYEES. Any officer or
salaried employee of the Corporation shall retire at the end of the month in
which he reaches age sixty-five (65) or, if mandatory retirement at such age
shall be prohibited by law, at such next older age as shall be legally
permissible. Provided, however, that the Board by specific action may delay for
not more than (1) year beyond the mandatory retirement age set forth in the
preceding sentence, the retirement of any officer or salaried employee who is
performing such services for the Corporation that continuation in active
employment is deemed by the Board to be in the best interest of the Corporation.
Provided, further, that if deemed in the best interest of the Corporation, the
Board, by specific action and as an alternative to extension of the retirement
age of such officer or salaried employee, may employ him in a consulting
capacity beyond his mandatory retirement age.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
SECTION 6.1. APPLICATION. Unless contrary to court order, the
Corporation shall indemnify any person who was or is a party or who is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding or investigation, whether civil, criminal or administrative
by reason of the fact that he is or was a director (or counsel to the Board)
advisory director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise, and in each
case, the heirs, executors or administrators of any such person (all such
persons, heirs, executors or administrators being referred to hereafter as
"Official") against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney fees actually and reasonably incurred as a result
of such proceeding, including any appeal therein, provided he acted in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interest of the Corporation and with respect to any criminal
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any general
proceeding, that he had reasonable cause to believe his conduct was unlawful.
SECTION 6.2. WILLFUL MISCONDUCT. No indemnification shall be made to or
on behalf of any Official:
(A) if a judgment or other final adjudication adverse to the
Official establishes his liability for intentional misconduct
or knowing violation of the law or under T.C.A. ss. 48-18-304
for unlawful distributions;
(B) if a judgment or other final adjudication adverse to the
Official for breach of the Official's duty of loyalty to the
Corporation is based upon such Official gaining in fact
personal profit or advantage to which he was not entitled;
(C) in a proceeding by or in the right of the Corporation (i) for
any amounts if the Official is adjudged liable to the
Corporation, or (ii) for any amounts paid to the Corporation
in settlement of such a proceeding by such Official; or
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(D) in a proceeding by the Corporation directly (and not
derivatively) for expenses, unless such proceeding shall be
brought after a change in control of the Corporation.
SECTION 6.3. DETERMINATION OF NO INDEMNIFICATION. Unless contrary to
court order, the Corporation shall provide the indemnification pursuant to
Section 6.1, unless a determination that the Official did not meet the standard
of conduct therein specified is reasonably and promptly made:
(A) by the Board of Directors acting by a quorum consisting of
disinterested directors,
(B) by independent legal counsel if such a quorum is not
obtainable, or even if obtainable the majority of a quorum of
disinterested directors so directs; or
(C) by the shareholders.
SECTION 6.4. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Except in the case of a proceeding brought by the Corporation directly (and not
derivatively) which does not follow a change in control of the Corporation, to
the extent that an Official has been successful on the merits or otherwise,
including the dismissal of an action without prejudice or the settlement of an
action without admission of liability, in defense of any proceeding or in
defense of any claim, issue or matter therein, such Official shall be
indemnified against all expenses incurred in connection therewith.
SECTION 6.5. ADVANCES OF EXPENSES. Except as limited by Section 6.6 of
this Article, expenses reasonably incurred in any action, suit, proceeding or
investigation (other than an action, suit or proceeding brought by the
Corporation directly (and not derivatively) which does not follow a change in
control of the Corporation) shall be paid by the Corporation in advance of the
final disposition of such matter, if the Official shall undertake to repay such
amount in the event that it is ultimately determined, as provided herein, that
such person is not entitled to indemnification. Notwithstanding the foregoing,
no advance shall be made by the Corporation if a determination is reasonably and
promptly made by the board of directors by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable, and a majority
of disinterested directors so directs) by independent legal counsel in a written
opinion, that based upon the facts known to the board or counsel at the time
such determination is made, the Official acted in bad faith, or in a manner that
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the Official did not believe to be in or not opposed to the best interest of the
Corporation, or, with respect to any criminal proceeding, that the Official
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the board or independent
legal counsel reasonably determines that the Official deliberately breached his
duty to the Corporation or its shareholders.
SECTION 6.6. RIGHT OF OFFICIAL TO INDEMNIFICATION UPON APPLICATION;
PROCEDURE UPON APPLICATION. Any indemnification under Sections 6.1, 6.3 or 6.4,
or advance under Section 6.5 of this Article, shall be made promptly, and in any
event within ninety (90) days, upon the written request of the Official, unless
with respect to applications under Sections 6.1, 6.3, 6.4, or 6.5, a
determination is reasonably and promptly made by the Board of Directors by a
majority vote of a quorum of disinterested directors that such Official acted in
a manner set forth in such Sections as to justify the Corporation's not
indemnifying or making an advance to the Official. In the event no quorum of
disinterested directors is obtainable, the board of directors shall promptly
direct that independent legal counsel shall decide whether the Official acted in
the manner set forth in such Sections as to justify the Corporation's not
indemnifying or making an advance to the Official. The right to indemnification
or advances as granted by this Article shall be enforceable by the Official in
any court of competent jurisdiction, if the board or independent legal counsel
denies the claim, in whole or in part, or if no disposition of such claim is
made within ninety days. The Official's expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
SECTION 6.7. OTHER RIGHTS AND REMEDIES. It is the intent of this
Article to grant to Officials the broadest indemnity rights legally permissable.
Therefore the provisions of this Article shall be deemed additional and
supplemental to but not in limitation of any other rights to which an Official
seeking indemnification may be entitled under the common law, any statute,
provision of the charter, these Bylaws, agreement, insurance policy, resolution
adopted by stockholders or directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be an Official and
shall inure to the benefit of the heirs, executors and administrators of such a
person. All rights to indemnification under this Article shall be deemed to be
provided by a contract between the Corporation and the Official who serves in
such capacity at any time while these bylaws and other relevant provisions of
the
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Act and other applicable law, if any, are in effect. Any repeal or modification
thereof shall not affect any rights or obligations then existing.
SECTION 6.8. CONSTITUENT CORPORATIONS. For the purposes of this
Article, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, trustee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would if he had served the resulting or
surviving corporation in the same capacity.
SECTION 6.9. OTHER ENTERPRISES, FINES, AND SERVING AT CORPORATION'S
REQUEST. For purposes of this Article, references to "other enterprises" in
Section 1 and 9 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, advisory director, officer, trustee or
agent of the Corporation which imposes duties on, or involves services by, such
director, advisory director, officer or agent with respect to any employee
benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of any employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article.
SECTION 6.10. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may indemnify and advance expenses to any employee or agent of the Corporation
who is not a director or officer (and his heirs, executors and administrators)
to the same extent as to a director or officer, if the Board of Directors
determines that to do so is in the best interests of the Corporation.
SECTION 6.11. SAVINGS CLAUSE. If this Article or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Official as to expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit, proceeding or investigation, whether civil,
criminal or administrative, and whether internal or external, including a grand
jury proceeding and an action or suit brought by or in the right of the
Corporation,
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to the full extent permitted by any applicable portion of this Article that
shall not have been invalidated, or by any other applicable law.
SECTION 6.12. INSURANCE. The Corporation may purchase insurance
coverage for the purpose of indemnifying the Corporation and its subsidiaries
and the directors, officers, and employees of the Corporation and its
subsidiaries. Said insurance shall be for such coverage, (whether or not broader
than the permissable indemnity provided in this Article) and in such amounts as
may be approved by the Board from time to time.
ARTICLE VII
CONTRACTS, AND OTHER INSTRUMENTS, LOANS, CHECKS AND DEPOSITS
SECTION 7.1. CONTRACTS AND OTHER INSTRUMENTS; VOTING SECURITIES HELD BY
THE CORPORATION. The Chairman of the Board, the Vice Chairman of the Board, the
President, any Executive Vice President, any Senior Vice President or any Vice
President may execute, sign, acknowledge, verify, deliver or accept on behalf of
the Corporation, all contracts, agreements, transfers, certificates,
declarations, receipts, discharges, releases, satisfactions, settlements,
petitions, schedules, accounts, affidavits, bonds, undertaking and other
instruments on behalf of and in the name of the Corporation and any such
instrument so signed may be attested and the corporate seal affixed by the
Secretary or an Assistant Secretary. The Board may authorize any other officer
or officers, agent or agents to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances. Unless otherwise required by
the Board of Directors, the Chairman of the Board, Vice Chairman of the Board or
the President shall have full power and authority on behalf of the Corporation
to attend any meeting of security holders, or to take action on written consent
as a security holder, of other corporations in which the Corporation may hold
securities. In connection therewith the Chairman of the Board, Vice Chairman of
the Board or the President shall possess and may exercise any and all rights and
powers incident to the ownership of such securities which the Corporation
possesses. The Board of Directors may, from time to time, confer like powers
upon any other person or persons.
SECTION 7.2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Chief Executive Officer or the Board. Such authority may be
general or confined to specific instances.
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SECTION 7.3. CHECKS, DRAFTS, ETC. All checks, drafts, bills of exchange
and other negotiable instruments of the Corporation shall be signed by either
the Chairman of the Board, the Vice Chairman of the Board, the President, or, by
such other officer or agent of the Corporation as may be authorized so to do by
the Board. Such authority may be general or confined to specific business, and,
if so directed by the Board, the signatures of two or more such officers may be
required.
SECTION 7.4. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks or other depositories as the Board may authorize.
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ARTICLE VIII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 8.1. SHARES WITH OR WITHOUT CERTIFICATES. The Board of
Directors may authorize that some or all of the shares of any or all of the
Corporation's classes or series of stock be evidenced by a certificate or
certificates of stock. The Board of Directors may also authorize the issue of
some or all of the shares of any or all of the Corporation's classes or series
of stock without certificates. The rights and obligations of shareholders with
the same class and/or series of stock shall be identical whether or not their
shares are represented by certificates.
(A) SHARES WITH CERTIFICATES. If the Board of Directors chooses to
issue shares of stock evidenced by a certificate or certificates, each
individual certificate shall include the following on its face: (i) the
Corporation's name, (ii) the fact that the Corporation is organized under the
laws of the State of Tennessee, (iii) the name of the person to whom the
certificate is issued, (iv) the number of shares represented thereby, (v) the
class of shares and the designation of the series, if any, which the certificate
represents, and (vi) such other information as applicable law may require or as
may be lawful.
If the Corporation is authorized to issue different classes of shares
or different series within a class, the designations, relative rights,
preferences and limitations determined for each series (and the authority of the
Board of Directors to determine variations for future series) shall be
summarized on the front or back of each certificate. Alternatively, each
certificate shall state on its front or back that the Corporation will furnish
the shareholder this information in writing, without charge, upon request.
Each certificate of stock issued by the Corporation shall be signed
(either manually or if countersigned by a transfer agent or registered by a
registrar in facsimile) by the Chairman of the Board, the Vice Chairman of the
Board or the President, and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer or any other officer authorized by the
Board. If the person who signed or whose facsimile signature has been placed
upon a certificate no longer holds office when the certificate is issued, the
certificate is nonetheless valid.
(B) SHARES WITHOUT CERTIFICATES. If the Board of Directors chooses to
issue shares of stock without certificates, the Corporation, if required by the
Act, shall, within a reasonable time after the issue or transfer of shares
without
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certificates, send the shareholder a written statement of the information
required on certificates by Section 6.1(a) of these Bylaws and any other
information required by the Act.
8.2 SUBSCRIPTIONS FOR SHARES. Subscriptions for shares of the
Corporation shall be valid only if they are in writing. Unless the subscription
agreement provides otherwise, subscriptions for shares, regardless of the time
when they are made, shall be paid in full at such time, or in such installments
and at such periods, as shall be determined by the Board of Directors. All calls
for payment on subscriptions shall be uniform as to all shares of the same class
or of the same series, unless the subscription agreement specifies otherwise.
8.3 TRANSFERS. Transfers of shares of the capital stock of the
Corporation shall be made only on the books of the Corporation by (i) the holder
of record thereof, (ii) by his legal representative, who, upon request of the
Corporation, shall furnish proper evidence of authority to transfer, or (iii)
his attorney, authorized by a power of attorney duly executed and filed with the
Secretary of the Corporation or a duly appointed transfer agent. Such transfers
shall be made only upon surrender, if applicable, of the certificate or
certificates for such shares properly endorsed and with all taxes thereon paid.
SECTION 8.4. LOST, DESTROYED OR STOLEN CERTIFICATES. No certificate for
shares of stock of the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen except on production of evidence,
satisfactory to the Board of Directors, of such loss, destruction or theft, and,
if the Board of Directors so requires, upon the furnishing of an indemnity bond
in such amount and with such terms and such surety as the Board of Directors may
in its discretion require.
ARTICLE IX
CORPORATE SEAL
SECTION 9.1. CORPORATE SEAL. The Chairman of the Board, a Vice
Chairman, the President, the Secretary, or any Vice President, or Assistant
Secretary or any other officer designated thereunto by the Board shall have
authority to affix the corporate seal to any document requiring such seal, and
to attest the same. Such seal shall be substantially in the following form:
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ARTICLE X
FISCAL YEAR
SECTION 10.1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January and end on the thirty-first day of December in
each year.
ARTICLE XI
DIVIDENDS
SECTION 11.1. DIVIDENDS. The Board may from time to time declare, and
the Corporation may pay, dividends on its outstanding shares in the manner and
upon terms and conditions provided by law.
ARTICLE XII
AMENDMENTS
SECTION 12.1. AMENDMENT TO BY-LAWS. These By-Laws may be altered,
amended, or repealed, or new By-Laws may be adopted, by the Board. Except as
provided in Articles X and XI of the Charter, By-Laws made by the Board may be
repealed or changed and new By-Laws made, by the shareholders upon the
affirmative vote of a majority of the votes entitled to be cast by all holders
of voting stock of the Corporation voting together as a single class at a
meeting called for such purpose. The shareholders may prescribe that any By-Law
made by them shall not be altered, amended or repealed by the Board.
ARTICLE XIII
CONTROL SHARE ACQUISITIONS
SECTION 13.1. APPLICABILITY OF CONTROL SHARE ACQUISITION ACT. The
Tennessee Control Share Acquisition Act, Tenn. Code Annot. Section 48-103-301 to
312, shall not be applicable to control share acquisitions respecting shares of
the Corporation.
29
<PAGE> 1
EXHIBIT 10
EXECUTION COPY
================================================================================
$100,000,000
CREDIT AGREEMENT
AMONG
FIRST AMERICAN CORPORATION,
as Borrower,
THE LENDERS NAMED HEREIN
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
DATED AS OF
July 17, 1998
================================================================================
Arranged By
FIRST CHICAGO CAPITAL MARKETS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS..............................................................................................1
ARTICLE II
THE CREDITS.............................................................................................11
2.1. Commitment.....................................................................................11
2.2. Required Payments; Termination.................................................................12
2.3. Ratable Loans..................................................................................12
2.4. Types of Advances..............................................................................12
2.5. Facility and Utilization Fees; Reductions in Aggregate Commitment..............................12
2.6. Minimum Amount of Each Advance.................................................................12
2.7. Optional Principal Payments....................................................................12
2.8. Method of Selecting Types and Interest Periods for New Advances................................13
2.9. Conversion and Continuation of Outstanding Advances............................................13
2.10. Changes in Interest Rate, etc..................................................................14
2.11. Rates Applicable After Default.................................................................14
2.12. Method of Payment..............................................................................14
2.13. Noteless Agreement; Evidence of Indebtedness...................................................15
2.14. Telephonic Notices.............................................................................15
2.15. Interest Payment Dates; Interest and Fee Basis.................................................15
2.16. Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions.....................................................................................16
2.17. Lending Installations..........................................................................16
2.18. Non-Receipt of Funds by the Agent..............................................................16
2.19. Extension of Facility Termination Date.........................................................17
ARTICLE III
YIELD PROTECTION; TAXES.................................................................................17
3.1. Yield Protection...............................................................................17
3.2. Changes in Capital Adequacy Regulations........................................................18
3.3. Availability of Types of Advances..............................................................18
3.4. Funding Indemnification........................................................................19
3.5. Taxes..........................................................................................19
3.6. Lender Statements; Survival of Indemnity.......................................................20
ARTICLE IV
CONDITIONS PRECEDENT....................................................................................21
4.1. Initial Advance................................................................................21
4.2. Each Advance...................................................................................22
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES..........................................................................23
5.1. Existence and Standing.........................................................................23
5.2. Authorization and Validity.....................................................................23
5.3. No Conflict; Government Consent................................................................23
5.4. Financial Statements...........................................................................23
5.5. Material Adverse Effect........................................................................24
5.6. Taxes..........................................................................................24
5.7. Litigation.....................................................................................24
5.8. Subsidiaries...................................................................................24
5.9. ERISA..........................................................................................24
5.10. Accuracy of Information........................................................................25
5.11. Regulation U...................................................................................25
5.12. Material Agreements............................................................................25
5.13. Compliance With Laws...........................................................................25
5.14. Ownership of Properties........................................................................25
5.15. Plan Assets; Prohibited Transactions...........................................................26
5.16. Investment Company Act.........................................................................26
5.17. Public Utility Holding Company Act.............................................................26
5.18. Year 2000......................................................................................26
ARTICLE VI
COVENANTS...............................................................................................26
6.1. Financial Reporting............................................................................26
6.2. Use of Proceeds................................................................................28
6.3. Notice of Default..............................................................................29
6.4. Conduct of Business............................................................................29
6.5. Taxes..........................................................................................29
6.6. Insurance......................................................................................29
6.7. Compliance with Laws...........................................................................29
6.8. Maintenance of Properties......................................................................29
6.9. Inspection.....................................................................................30
6.10. Fundamental Change.............................................................................30
6.11. Sale of Assets.................................................................................30
6.12. Liens..........................................................................................31
6.13. Year 2000......................................................................................32
6.14. Financial Covenants............................................................................32
</TABLE>
ii
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<TABLE>
<S> <C>
ARTICLE VII
DEFAULTS................................................................................................33
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES..........................................................35
8.1. Acceleration...................................................................................35
8.2. Amendments.....................................................................................35
8.3. Preservation of Rights.........................................................................36
ARTICLE IX
GENERAL PROVISIONS......................................................................................36
9.1. Survival of Representations....................................................................36
9.2. Governmental Regulation........................................................................37
9.3. Headings.......................................................................................37
9.4. Entire Agreement...............................................................................37
9.5. Several Obligations; Benefits of this Agreement................................................37
9.6. Expenses; Indemnification......................................................................37
9.7. Numbers of Documents...........................................................................38
9.8. Accounting.....................................................................................38
9.9. Severability of Provisions.....................................................................38
9.10. Nonliability of Lenders........................................................................38
9.11. Confidentiality................................................................................39
9.12. Nonreliance....................................................................................39
ARTICLE X
THE AGENT...............................................................................................39
10.1. Appointment; Nature of Relationship............................................................39
10.2. Powers.........................................................................................39
10.3. General Immunity...............................................................................39
10.4. No Responsibility for Loans, Recitals, etc.....................................................40
10.5. Action on Instructions of Lenders..............................................................40
10.6. Employment of Agents and Counsel...............................................................40
10.7. Reliance on Documents; Counsel.................................................................40
10.8. Agent's Reimbursement and Indemnification......................................................41
10.9. Notice of Default..............................................................................41
10.10. Rights as a Lender.............................................................................41
10.11. Lender Credit Decision.........................................................................41
10.12. Successor Agent................................................................................42
10.13. Agent's Fee....................................................................................42
10.14. Delegation to Affiliates.......................................................................42
</TABLE>
iii
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<TABLE>
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ARTICLE XI
SETOFF; RATABLE PAYMENTS................................................................................43
11.1. Setoff.........................................................................................43
11.2. Ratable Payments...............................................................................43
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.......................................................43
12.1. Successors and Assigns.........................................................................43
12.2. Participations.................................................................................44
12.2.1 Permitted Participants; Effect
12.2.2. Voting Rights
12.2.3. Benefit of Setoff
12.3. Assignments....................................................................................45
12.3.1. Permitted Assignments
12.3.2. Effect; Effective Date
12.4. Dissemination of Information...................................................................46
12.5. Tax Treatment..................................................................................46
ARTICLE XIII
NOTICES.................................................................................................46
13.1. Notices........................................................................................46
13.2. Change of Address..............................................................................47
ARTICLE XIV
COUNTERPARTS............................................................................................47
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL............................................................................................47
15.1. CHOICE OF LAW..................................................................................47
15.2. CONSENT TO JURISDICTION........................................................................47
15.3. WAIVER OF JURY TRIAL...........................................................................48
</TABLE>
iv
<PAGE> 6
SCHEDULES
Schedule 1 - Subsidiaries and Other Investments
Schedule 2 - Indebtedness and Liens
EXHIBITS
Exhibit A - Compliance Certificate
Exhibit B - Assignment Agreement
Exhibit C - Loan/Credit Related Money Transfer Instruction
Exhibit D - Note
v
<PAGE> 7
CREDIT AGREEMENT
This Agreement, dated as of July 17, 1998, is among First American
Corporation, a Tennessee corporation, the Lenders and The First National Bank of
Chicago, as Agent.
R E C I T A L S:
A. The Borrower has requested the Lenders to make financial
accommodations to it in the aggregate principal amount of $100,000,000, the
proceeds of which the Borrower will use for the general corporate needs of the
Borrower and its Subsidiaries.
B. The Lenders are willing to extend such financial accommodations on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders and the Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Adequately Capitalized" means "adequately capitalized" for purposes of
12 U.S.C. 1831(o) and any rules and regulations issued thereunder (including,
without limitation, 12 C.F.R. 565.4), as amended, supplemented or otherwise
modified from time to time.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans made on the
same Borrowing Date (or date of conversion or continuation) by the Lenders to
the Borrower of the same Type and, in the case of Eurodollar Advances, for the
same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means The First National Bank of Chicago in its capacity as
contractual representative of the Lenders pursuant to Article X, and not in its
individual capacity as a Lender, and any successor Agent appointed pursuant to
Article X.
1
<PAGE> 8
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.4.;
provided, however, that for purposes of all computations required to be made
with respect to compliance by the Borrower with Section 6.14, such term shall
mean generally accepted accounting principles as in effect on the date hereof,
applied in a manner consistent with those used in preparing the financial
statements referred to in Section 5.4.
"Allowance for Possible Loan Losses" means the allowance for possible
loan losses set forth on the consolidated balance sheet of the Borrower and its
Subsidiaries determined in accordance with Agreement Accounting Principles.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Fee Rate" means, at any time, as applicable, the percentage
rate per annum at which facility fees are accruing on the Aggregate Commitment
(without regard to usage) at such time pursuant to Section 2.5 or at which the
utilization fee is to be computed at such time pursuant to Section 2.5, in each
case as set forth in the Pricing Schedule.
"Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.
"Arranger" means First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the chief executive officer, the
president or the chief administrative officer of the Borrower or, with respect
to financial matters, the chief accounting officer, the principal financial
officer or the treasurer of the Borrower, acting singly.
"Banking Subsidiary" means any insured depository institution (within
the meaning of 12 U.S.C. 1813(c), as amended, supplemented or otherwise modified
from time to time), which is controlled (within the meaning of 12 U.S.C. 1841,
as amended, supplemented or otherwise modified from time to time) by the
Borrower, including with limitation First American National Bank, First American
Federal Savings Bank and Deposit Guaranty National Bank.
2
<PAGE> 9
"Borrower" means First American Corporation, a Tennessee corporation,
and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Change in Control" means (i) the acquisition by any Person, or two or
more Persons acting in concert of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock
of the Borrower, or (ii) during any period of 25 consecutive calendar months,
commencing on the date of this Agreement, the ceasing of those individuals (the
"Continuing Directors") who (a) were directors of the Borrower on the first day
of each such period or (b) subsequently became directors of the Borrower and
whose initial election or initial nomination for election subsequent to that
date was approved by a majority of the Continuing Directors then on the board of
directors of the Borrower, to constitute a majority of the board of directors of
the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or as
set forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Consolidated Assets" means the consolidated assets of the Borrower and
its Subsidiaries, determined in accordance with Agreement Accounting Principles.
"Consolidated Net Income" means the consolidated net income of the
Borrower and its Subsidiaries, determined in accordance with Agreement
Accounting Principles.
3
<PAGE> 10
"Consolidated Net Worth" means, as at any date of determination
thereof, total shareholders' equity of the Borrower and its Subsidiaries,
determined on a consolidated basis without duplication in accordance with
Agreement Accounting Principles.
"Consolidated Tangible Net Worth" means Consolidated Assets of the
Borrower and its Subsidiaries less (i) the intangible assets of the Borrower and
its Subsidiaries (including, but not limited to, deposit rights and goodwill)
and (ii) the consolidated liabilities of the Borrower and its Subsidiaries, in
each case determined in accordance with Agreement Accounting Principles.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes. The Corporate Base Rate is a
reference rate and does not necessarily represent the lowest or best rate of
interest actually charged to any customer. First Chicago may make commercial
loans or other loans at rates of interest at, above or below the Corporate Base
Rate.
"Default" means an event described in Article VII.
"Double Leverage Ratio" means, at any date of determination thereof,
the ratio of (i) the sum of (a) the Borrower's intangibles plus (b) the
aggregate investment of the Borrower in the capital stock of its Subsidiaries
and associated companies (calculated without duplication and adjusted for any
intercompany eliminations) to (ii) Consolidated Net Worth, all calculated in
accordance with Agreement Accounting Principles.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at the
applicable Eurodollar Rate.
4
<PAGE> 11
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the rate determined by the Agent to be the rate at
which First Chicago offers to place deposits in U.S. dollars with first-class
banks in the London interbank market at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period, in the
approximate amount of First Chicago's relevant Eurodollar Loan and having a
maturity approximately equal to such Interest Period.
"Eurodollar Loan" means a Loan which bears interest at the applicable
Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
the Applicable Margin. The Eurodollar Rate shall be rounded to the next higher
multiple of 1/16 of 1% if the rate is not such a multiple.
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Agent, taxes imposed on its overall net income, and
franchise taxes imposed on it, by (i) the jurisdiction under the laws of which
such Lender or the Agent is incorporated or organized or (ii) the jurisdiction
in which the Agent's or such Lender's principal executive office or such
Lender's applicable Lending Installation is located.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Extension Date" is defined in Section 2.19.
"Extension Request" is defined in Section 2.19.
"Facility Termination Date" means July 17, 2001 or any later date as
may be specified as the Facility Termination Date in accordance with Section
2.19 or any earlier date on which the Aggregate Commitment is reduced to zero or
otherwise terminated pursuant to the terms hereof.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day.
5
<PAGE> 12
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Form FR Y-9LP" means "Parent Company Only Financial Statements for
Bank Holding Companies" report no. FR Y-9LP (or any successor form of the
Federal Reserve System).
"Form FR Y-9C " means "Consolidated Financial Statements for Bank
Holding Companies" report no. FR Y-9C (or any successor form of the Federal
Reserve System).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indebtedness" means, with respect to any Person at any date, (i) all
indebtedness or other obligations of such Person for borrowed money or for the
deferred purchase price of property or services (but not including any amounts
classified in accordance with Agreement Accounting Principles as current
accounts payable and not arising out of any indebtedness or obligation for
borrowed money or pursuant to conditional sales or other title retention
agreements or purchase option obligations), excluding, however, in the case of
any Banking Subsidiary, (a) indebtedness in respect of deposits made in ordinary
course of banking business, (b) obligations in respect of federal funds
purchased in the ordinary course of banking business, (c) indebtedness in
respect of agreements in the ordinary course of banking business to purchase or
repurchase securities or loans, and (d) indebtedness arising out of transactions
in the normal course of banking business, other than capital notes, commercial
paper or similar debt obligations of such Banking Subsidiary; (ii) all
indebtedness or other obligations of any other Person for borrowed money or for
the deferred purchase price of property or services in respect of which such
Person is liable, contingently or otherwise, to pay or advance money or property
as surety, endorsed or otherwise (except as endorser for collection in the
ordinary course of business), or which such Person has agreed to purchase or
otherwise acquire, excluding, however, in the case of any Banking Subsidiary,
contingent liabilities incurred in the ordinary course of its banking business
(including, without limitation, banker's acceptances, trade acceptances, letters
of credit and finance acceptances); (iii) all indebtedness or other obligations
of any other Person for borrowed money or for the deferred purchase price of
property or services secured by (or for which the holder of such indebtedness
has an existing right, contingent or otherwise, to be secured by) any mortgage,
deed of trust, pledge, lien, security interest or other charge or encumbrance
upon or in property (including, without limitation, accounts and contract
rights) owned by such Person, whether or not such Person has assumed or become
liable for the payment of such indebtedness or obligations, excluding, however,
in the case of any Banking Subsidiary, indebtedness in respect of advances from
the Federal Home Loan Bank (the "FHLB"); and (iv) in the case of any Banking
Subsidiary, any capital note due to any Person other than an Affiliate of such
Banking Subsidiary.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on the day
which corresponds numerically to such date one, two, three or six months
thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period
6
<PAGE> 13
shall end on the last Business Day of such next, second, third or sixth
succeeding month. If an Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next succeeding
Business Day, provided, however, that if said next succeeding Business Day falls
in a new calendar month, such Interest Period shall end on the immediately
preceding Business Day.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
the office, branch, subsidiary or affiliate of such Lender or the Agent listed
on the signature pages hereof or on a Schedule or otherwise selected by such
Lender or the Agent pursuant to Section 2.17.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
"Loan Documents" means this Agreement and any Notes issued pursuant to
Section 2.13.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise) or results of operations
of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the
Borrower to perform its obligations under the Loan Documents, or (iii) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent or the Lenders thereunder.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Non-Performing Assets" means the aggregate of all non-accrual loans,
restructured loans, those loans more than 90 days past due and foreclosed
properties of the Borrower and its Subsidiaries on a consolidated basis.
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any promissory note issued at the request of a Lender
pursuant to Section 2.13 in the form of Exhibit D.
"Notice of Assignment" is defined in Section 12.3.2.
7
<PAGE> 14
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent or any indemnified party arising under the Loan
Documents.
"Other Taxes" is defined in Section 3.5(ii).
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last Business Day of each March, June,
September and December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
8
<PAGE> 15
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Reports" is defined in Section 9.6.
"Required Lenders" means Lenders in the aggregate having at least 66
2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66 2/3% of the aggregate
unpaid principal amount of the outstanding Advances.
"Requirement of Law" means, as to any Person, the Charter and By-Laws
or other organizational or governing documents of such Person, and any law,
treaty, rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 10% of
the consolidated assets of the Borrower and its Subsidiaries as would be shown
in the consolidated financial statements of the Borrower and its Subsidiaries as
at the beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of the
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consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial statements referred to in clause (i)
above.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Well-Capitalized" means "well-capitalized" for purposes of 12 U.S.C.
1831(o) and any rules and regulations issued thereunder (including, without
limitation, 12 C.F.R. 565.4), as amended, supplemented or otherwise modified
from time to time.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled; provided, however, that for so long as the Borrower is
the direct or indirect owner of at least 98.6% of each class of equity
securities thereof, IFC Holdings, Inc., a Delaware corporation, shall be deemed
to be a Wholly-Owned Subsidiary of the Borrower. Unless otherwise indicated,
"Wholly-Owned Subsidiary" refers to a Wholly-Owned Subsidiary of the Borrower.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
affects the business, operations and financial condition of the Borrower and its
Subsidiaries and of the Borrower's and its Subsidiaries' material customers,
suppliers and vendors.
"Year 2000 Program" is defined in Section 5.18.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
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ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
from time to time in amounts not to exceed in the aggregate at any one time
outstanding the amount of its Commitment. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow at any time prior to the
Facility Termination Date. The Commitments to lend hereunder shall expire on the
Facility Termination Date.
2.2. Required Payments; Termination. Any outstanding Advances and all
other unpaid Obligations shall be paid in full by the Borrower on the Facility
Termination Date.
2.3. Ratable Loans. Each Advance hereunder shall consist of Loans made
from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.4. Types of Advances. The Advances may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.
2.5. Facility and Utilization Fees; Reductions in Aggregate Commitment.
The Borrower agrees to pay to the Agent for the account of each Lender (i) a
facility fee at a per annum rate equal to the Applicable Fee Rate on the average
daily amount of such Lender's Commitment (regardless of usage) from the date
hereof to and including the Facility Termination Date and (ii) for each calendar
quarter (or, in the event the Facility Termination Date is a date other than a
Payment Date, for the applicable portion of the calendar quarter in which the
Facility Termination Date occurs) that the average daily principal amount of
Loans exceeds 50% of the average daily Aggregate Commitment for such calendar
quarter or portion thereof, a utilization fee at a per annum rate equal to the
Applicable Fee Rate on the average daily principal amount of Loans outstanding
during such quarter or portion thereof, in each case payable on each Payment
Date hereafter and on the Facility Termination Date. The Borrower may
permanently reduce the Aggregate Commitment in whole, or in part ratably among
the Lenders in integral multiples of $5,000,000, upon at least five Business
Days' written notice to the Agent, which notice shall specify the amount of any
such reduction, provided, however, that the amount of the Aggregate Commitment
may not be reduced below the aggregate principal amount of the outstanding
Advances. All accrued commitment fees shall be payable on the effective date of
any termination of the obligations of the Lenders to make Loans hereunder.
2.6. Minimum Amount of Each Advance. Each Advance shall be in the
minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof); provided, however, that any Floating Rate Advance may be in the amount
of the unused Aggregate Commitment.
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2.7. Optional Principal Payments. The Borrower may from time to time
pay, without penalty or premium, all outstanding Floating Rate Advances, or, in
a minimum aggregate amount of $1,000,000 or any integral multiple of $1,000,000
in excess thereof, any portion of the outstanding Floating Rate Advances upon
two Business Days' prior notice to the Agent. The Borrower may from time to time
pay, subject to the payment of any funding indemnification amounts required by
Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances,
or, in a minimum aggregate amount of $1,000,000 or any integral multiple of
$1,000,000 in excess thereof, any portion of the outstanding Eurodollar Advances
upon three Business Days' prior notice to the Agent.
2.8. Method of Selecting Types and Interest Periods for New Advances.
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable thereto from time to time.
The Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not
later than 10:00 a.m. (Chicago time) at least one Business Day before the
Borrowing Date of each Floating Rate Advance and three Business Days before the
Borrowing Date for each Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIII. The Agent will make
the funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address.
2.9. Conversion and Continuation of Outstanding Advances. Floating
Rate Advances shall continue as Floating Rate Advances unless and until such
Floating Rate Advances are converted into Eurodollar Advances pursuant to this
Section 2.9 or are repaid in accordance with Section 2.7. Each Eurodollar
Advance shall continue as a Eurodollar Advance until the end of the then
applicable Interest Period therefor, at which time such Eurodollar Advance shall
be automatically converted into a Floating Rate Advance unless (x) such
Eurodollar Advance is or was repaid in accordance with Section 2.7 or (y) the
Borrower shall have given the Agent a Conversion/Continuation Notice (as defined
below) requesting that, at the end of such Interest Period, such Eurodollar
Advance continue as a Eurodollar Advance for the same or another Interest
Period. Subject to the terms of Section 2.6, the Borrower may elect from time to
time to convert all or any part of a Floating Rate Advance into a Eurodollar
Advance. The Borrower shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of a Floating Rate Advance
into a Eurodollar Advance or continuation of a Eurodollar Advance not later than
10:00 a.m. (Chicago time) at least three Business Days prior to the date of the
requested conversion or continuation, specifying:
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(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued, and
(iii) the amount of such Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the
Interest Period applicable thereto.
2.10. Changes in Interest Rate, etc. Each Floating Rate Advance shall
bear interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but
excluding the date it is paid or is converted into a Eurodollar Advance pursuant
to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on that portion of any Advance maintained
as a Floating Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined by the Agent as applicable to
such Eurodollar Advance based upon the Borrower's selections under Section 2.8
and 2.9 and otherwise in accordance with the terms hereof. No Interest Period
may end after the Facility Termination Date.
2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured Default the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. During the continuance of a
Default the Required Lenders may, at their option, by notice to the Borrower
(which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates), declare that (i) each Eurodollar Advance
shall bear interest for the remainder of the applicable Interest Period at the
rate otherwise applicable to such Interest Period plus 2% per annum and (ii)
each Floating Rate Advance shall bear interest at a rate per annum equal to the
Floating Rate in effect from time to time plus 2% per annum, provided that,
during the continuance of a Default under Section 7.6 or 7.7, the interest rates
set forth in clauses (i) and (ii) above shall be applicable to all Advances
without any election or action on the part of the Agent or any Lender.
2.12. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XIII, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, by noon (local time) on the date when due
and shall be applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be delivered promptly
by the Agent to such Lender in the same type of funds that the Agent received at
its address specified pursuant to Article XIII or
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at any Lending Installation specified in a notice received by the Agent from
such Lender. The Agent is hereby authorized to charge the account of the
Borrower maintained with First Chicago for each payment of principal, interest
and fees as it becomes due hereunder.
2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each
Loan made by such Lender from time to time, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will record (a)
the amount of each Loan made hereunder, the Type thereof and the Interest Period
with respect thereto, (b) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (c) the amount of any sum received by the Agent hereunder from the Borrower
and each Lender's share thereof.
(iii) The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Agent or any Lender to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Obligations
in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a promissory
note (a "Note"). In such event, the Borrower shall prepare, execute and deliver
to such Lender a Note payable to the order of such Lender in a form supplied by
the Agent. Thereafter, the Loans evidenced by such Note and interest thereon
shall at all times (including after any assignment pursuant to Section 12.3) be
represented by one or more Notes payable to the order of the payee named therein
or any assignee pursuant to Section 12.3, except to the extent that any such
Lender or assignee subsequently returns any such Note for cancellation and
requests that such Loans once again be evidenced as described in paragraphs (i)
and (ii) above.
2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders
and the Agent to extend, convert or continue Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by any
person or persons the Agent or any Lender in good faith believes to be acting on
behalf of the Borrower. The Borrower agrees to deliver promptly to the Agent a
written confirmation, if such confirmation is requested by the Agent or any
Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders shall govern
absent manifest error.
2.15. Interest Payment Dates; Interest and Fee Basis. Interest accrued
on each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the Floating Rate Advance is prepaid, whether due to acceleration or otherwise,
and at maturity. Interest accrued on that portion of the outstanding principal
amount of any Floating Rate Advance converted into a Eurodollar Advance on a day
other than a Payment Date shall be payable on the date of conversion. Interest
accrued
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on each Eurodollar Advance shall be payable on the last day of its applicable
Interest Period, on any date on which the Eurodollar Advance is prepaid, whether
by acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Advance having an Interest Period longer than three months shall also
be payable on the last day of each three-month interval during such Interest
Period. Interest and facility and utilization fees shall be calculated for
actual days elapsed on the basis of (i) a 360-day year in the case of Eurodollar
Advances and (ii) a 365 or 366-day year, as applicable, in the case of Floating
Rate Advances, facility fees and utilization fees. Interest shall be payable for
the day an Advance is made but not for the day of any payment on the amount paid
if payment is received prior to noon (local time) at the place of payment. If
any payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.17. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Loans and any Notes issued hereunder shall be
deemed held by each Lender for the benefit of such Lending Installation. Each
Lender may, by written notice to the Agent and the Borrower in accordance with
Article XIII, designate replacement or additional Lending Installations through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (y) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.
2.19. Extension of Facility Termination Date. The Borrower may request
an extension of the Facility Termination Date by submitting a request for an
extension to the Agent (an "Extension Request") no more than 60 days prior to
the Facility Termination Date. The Extension
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Request must specify the new Facility Termination Date requested by the Borrower
and the date (which must be at least 30 days after the Extension Request is
delivered to the Agent) as of which the Lenders must respond to the Extension
Request (the "Response Date"). The new Facility Termination Date shall be the
date one year after the Facility Termination Date in effect at the time the
Extension Request is received. Promptly upon receipt of an Extension Request,
the Agent shall notify each Lender of the contents thereof and shall request
each Lender to approve the Extension Request. Each Lender, acting in its sole
discretion, may approve or decline to approve such Extension Request. Each
Lender approving the Extension Request shall deliver its written consent no
later than the Response Date. If the written consent of each of the Lenders is
received by the Agent prior to the then effective Facility Termination Date, the
Facility Termination Date specified in the Extension Request shall become
effective on the existing Facility Termination Date and the Agent shall promptly
notify the Borrower and each Lender of the new Facility Termination Date.
Notwithstanding the foregoing, in no event shall there be more than two one-year
extensions pursuant to this Section.
ARTICLE III
YIELD PROTECTION; TAXES
3.1. Yield Protection. If, on or after the date of this Agreement, the
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or any applicable Lending Installation to
any Taxes, or changes the basis of taxation of payments (other
than with respect to Excluded Taxes) to any Lender in respect
of its Eurodollar Loans, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any
applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest
rate applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining its Eurodollar Loans or
reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with its Eurodollar Loans,
or requires any Lender or any applicable Lending Installation
to make any payment calculated by reference to the amount of
Eurodollar Loans held or interest received by it, by an amount
deemed material by such Lender,
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and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Eurodollar Loans or
Commitment or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurodollar Loans or Commitment, then,
within 30 days of demand by such Lender, the Borrower shall pay such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction in amount received.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a Change, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender the amount necessary to compensate
for any shortfall in the rate of return on the portion of such increased capital
which such Lender determines is attributable to this Agreement, its Loans or its
Commitment to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States on the date
of this Agreement, including transition rules, and (ii) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to a Type of Advance does not
accurately reflect the cost of making or maintaining such Advance, then the
Agent shall suspend the availability of the affected Type of Advance and require
any affected Eurodollar Advances to be repaid or converted to Floating Rate
Advances, subject to the payment of any funding indemnification amounts required
by Section 3.4.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.
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3.5. Taxes. (i) All payments by the Borrower to or for the account of
any Lender or the Agent hereunder or under any Note shall be made free and clear
of and without deduction for any and all Taxes. If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, (a) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 3.5) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (b) the Borrower shall make such
deductions, (c) the Borrower shall pay the full amount deducted to the relevant
authority in accordance with applicable law and (d) the Borrower shall furnish
to the Agent the original copy of a receipt evidencing payment thereof within 30
days after such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any present or
future stamp or documentary taxes and any other excise or property taxes,
charges or similar levies which are directly attributable to any payment made
hereunder or under any Note or from the execution or delivery of, or otherwise
with respect to, this Agreement or any Note ("Other Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent and each Lender
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by
the Agent or such Lender and any liability (including penalties, interest and
expenses) arising from such Taxes or Other Taxes or with respect thereto.
Payments due under this indemnification shall be made within 30 days of the date
the Agent or such Lender makes demand therefor pursuant to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof (each a "Non-U.S. Lender") agrees that it
will, not less than ten Business Days after the date of this Agreement, (i)
deliver to each of the Borrower and the Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes, and
(ii) deliver to each of the Borrower and the Agent a United States Internal
Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to
an exemption from United States backup withholding tax. Each Non-U.S. Lender
further undertakes to deliver to each of the Borrower and the Agent (x) renewals
or additional copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the occurrence of any
event requiring a change in the most recent forms so delivered by it, such
additional forms or amendments thereto as may be reasonably requested by the
Borrower or the Agent. All forms or amendments described in the preceding
sentence shall certify that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form or amendment with respect to it and such Lender advises the Borrower and
the Agent that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
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(v) For any period during which a Non-U.S. Lender has failed to provide
the Borrower with an appropriate form pursuant to clause (iv), above (unless
such failure is due to a change in treaty, law or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes imposed by the United States; provided
that, should a Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of its failure
to deliver a form required under clause (iv), above, the Borrower shall take
such steps as such Non-U.S. Lender shall reasonably request to assist such
Non-U.S. Lender to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or reduction of
withholding tax with respect to payments under this Agreement or any Note
pursuant to the law of any relevant jurisdiction or any treaty shall deliver to
the Borrower (with a copy to the Agent), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at
a reduced rate.
3.6. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of
Eurodollar Advances under Section 3.3, so long as such designation is not, in
the judgment of such Lender, disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender to the Borrower (with a copy to the
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such
written statement shall set forth in reasonable detail the calculations upon
which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as though each Lender funded its Eurodollar Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrower of such written statement. The obligations
of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of
the Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. The Lenders shall not be required to make the
initial Advance hereunder unless the Borrower has furnished to the Agent with
sufficient copies for the Lenders:
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(i) Copies of the charter of the Borrower, together with all
amendments, and a certificate of good standing, each certified
by the appropriate governmental officer in its jurisdiction of
incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary of
the Borrower, of its by-laws and of its Board of Directors'
resolutions and of resolutions or actions of any other body
authorizing the execution of the Loan Documents to which the
Borrower is a party.
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signatures of the Authorized
Officers and any other officers of the Borrower authorized to
sign the Loan Documents, upon which certificate the Agent and
the Lenders shall be entitled to rely until informed of any
change in writing by the Borrower.
(iv) A certificate, signed by the treasurer of the Borrower,
stating that (a) on the date hereof no Default or Unmatured
Default has occurred and is continuing and (b) on the date
hereof the representations and warranties contained in Article
V are true and correct except to the extent any such
representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty
shall have been true and correct on and as of such earlier
date.
(v) A written opinion of the Borrower's counsel, addressed to the
Lenders in form and substance satisfactory to the Agent.
(vi) Any Notes requested by a Lender pursuant to Section 2.13
payable to the order of each such requesting Lender.
(vii) Written money transfer instructions, in substantially the form
of Exhibit C, addressed to the Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as the Agent may have reasonably
requested.
(viii) Evidence satisfactory to the Agent that all amounts owing
under the Amended and Restated Credit Agreement dated as of
March 31, 1994 among the Borrower, the lenders party thereto
and Chemical Bank, as agent, as amended, shall have been paid
in full and that such agreement shall have been terminated.
(ix) Information satisfactory to the Agent and the Required Lenders
regarding the Borrower's Year 2000 Program.
(x) Such other documents as any Lender or its counsel may have
reasonably requested.
4.2. Each Advance. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and to the
application of the proceeds thereof, does
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not increase the aggregate amount of outstanding Advances), unless on the
applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are
true and correct as of such Borrowing Date except to the
extent any such representation or warranty is stated to relate
solely to an earlier date, in which case such representation
or warranty shall have been true and correct on and as of such
earlier date.
(iii) All legal matters incident to the making of such Advance shall
be satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may
require a duly completed compliance certificate in substantially the form of
Exhibit A as a condition to making an Advance.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Existence and Standing. Each of the Borrower and its Subsidiaries
is a corporation or a banking association or federal savings bank duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.
5.2. Authorization and Validity. The Borrower has the power and
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by the Borrower
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper corporate proceedings, and the Loan Documents to
which the Borrower is a party constitute legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate (i) any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Borrower or any of its Subsidiaries or (ii) the
Borrower's or any Subsidiary's charter, articles or certificate of incorporation
or by-laws, or (iii) the provisions of any indenture, instrument or agreement to
which the Borrower or any of its Subsidiaries is a party or is subject, or by
which it, or its Property, is bound, or conflict with or constitute a default
thereunder, or result in, or require, the creation or imposition of any Lien in,
of or on the Property of the Borrower or a Subsidiary pursuant to the terms of
any such indenture, instrument or agreement. No order, consent, adjudication,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of any
governmental or public body or authority, or any subdivision thereof, which has
not been obtained by the Borrower or any of its Subsidiaries, is required to be
obtained by the Borrower or any of its Subsidiaries in connection with the
execution and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Borrower of the Obligations or the
legality, validity, binding effect or enforceability of any of the Loan
Documents.
5.4. Financial Statements. The December 31, 1997 audited consolidated
financial statements of the Borrower and its Subsidiaries and the March 31, 1998
unaudited financial statements of the Borrower and its Subsidiaries heretofore
delivered to the Lenders were prepared in accordance with generally accepted
accounting principles in effect on the dates such statements were prepared and
fairly present the consolidated financial condition and operations of the
Borrower and its Subsidiaries at such dates and the consolidated results of
their operations for the periods then ended. Neither the Borrower nor any of its
consolidated Subsidiaries had, at March 31,
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1998, any material contingent obligation or liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto.
5.5. Material Adverse Effect. Since March 31, 1998 there has been no
change in the business, Property, condition (financial or otherwise) or results
of operations of the Borrower and its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
5.6. Taxes. The Borrower and its Subsidiaries have filed all United
States federal tax returns and all other material tax returns which are required
to be filed and have paid all taxes due pursuant to said returns or pursuant to
any assessment received by the Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided in accordance with Agreement Accounting Principles
and as to which no Lien exists. As of the date hereof, the United States income
tax returns of the Borrower and its Subsidiaries have been audited by the
Internal Revenue Service or the applicable statute of limitations has expired
through the fiscal year ended December 31, 1993. No tax liens have been filed
and no claims are being asserted with respect to any such taxes. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of any taxes or other governmental charges are adequate.
5.7. Litigation. There is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or, to the knowledge of any of
their officers, threatened against or affecting the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or which seeks to prevent, enjoin or delay the making of any Loans.
5.8. Subsidiaries. Schedule 1 contains an accurate list of all
Subsidiaries of the Borrower as of the date of this Agreement, setting forth
their respective jurisdictions of organization and the percentage of their
respective capital stock or other ownership interests owned by the Borrower or
other Subsidiaries. All of the issued and outstanding shares of capital stock or
other ownership interests of such Subsidiaries have been duly authorized and
issued and are fully paid and non-assessable.
5.9. ERISA. Neither a Reportable Event, except as noted below, nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the six-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan has
occurred, and no lien in favor of PBGC or a Plan exists or has arisen, during
such six-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither the Borrower nor any member of
the Controlled Group has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Borrower nor any member of the Controlled
Group would become subject to any liability under ERISA if the Borrower or any
such member of the Controlled Group were to withdraw completely from all
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Multiemployer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made. No such Multiemployer Plan is
in reorganization or insolvent. The November 30, 1995 merger of the Pension Plan
for Employees of Heritage Bank for Savings into the First American Corporation
Master Retirement Plan constituted a Reportable Event.
5.10. Accuracy of Information. No information, exhibit or report
furnished by the Borrower or any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of the value of those assets of the Borrower and its
Subsidiaries which are subject to any limitation on sale, pledge, or other
restriction hereunder.
5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect.
5.13. Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except for any failure
to comply with any of the foregoing which could not reasonably be expected, in
the aggregate, to have a Material Adverse Effect.
5.14. Ownership of Properties. Except as set forth on Schedule 2, on
the date of this Agreement, the Borrower and its Subsidiaries have good title,
free of all Liens other than those permitted by Section 6.12, to all of the
Property and assets reflected in the Borrower's most recent consolidated
financial statements provided to the Agent as owned by the Borrower and its
Subsidiaries.
5.15. Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. ss.
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of Section
4975 of the Code), and neither the execution of this Agreement nor the making of
Loans hereunder gives rise to a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
5.16. Investment Company Act. Neither the Borrower nor any Subsidiary
is an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
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5.17. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
5.18. Year 2000. The Borrower has made a full and complete assessment
of the Year 2000 Issues and has a realistic and achievable program for
remediating the Year 2000 Issues on a timely basis (the "Year 2000 Program").
Based on such assessment and on the Year 2000 Program the Borrower does not
reasonably anticipate that Year 2000 Issues will have a Material Adverse Effect.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lenders:
(i) As soon as available, but in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous
year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of
the scope of the audit, by KPMG Peat Marwick or other
independent certified public accountants of nationally
recognized standing; and
(ii) As soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated
balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and retained
earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such quarter and the portion of
the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous
year, certified by an Authorized Officer of the Borrower as
being fairly stated in all material respects when considered
in relation to the consolidated financial statements of the
Borrower and its consolidated subsidiaries (subject to normal
year-end audit adjustments);
All such financial statements referenced in (i) and (ii) above shall be complete
and correct in all material respects and shall be prepared in reasonable detail
and in accordance with Agreement
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Accounting Principles applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
(iii) Together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the
form of Exhibit A signed by an Authorized Officer of the
Borrower showing the calculations necessary to determine
compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured
Default exists, stating the nature and status thereof.
(iv) As soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by an Authorized
Officer of the Borrower, describing said Reportable Event and
the action which the Borrower proposes to take with respect
thereto.
(v) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim to
the effect that the Borrower or any of its Subsidiaries is or
may be liable to any Person as a result of the release by the
Borrower, any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the environment,
and (b) any notice alleging any violation of any federal,
state or local environmental, health or safety law or
regulation by the Borrower or any of its Subsidiaries, which,
in either case, could reasonably be expected to have a
Material Adverse Effect.
(vi) Promptly upon the furnishing thereof to the shareholders of
the Borrower, copies of all financial statements, reports and
proxy statements so furnished.
(vii) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Borrower or any of its Subsidiaries files
with the Securities and Exchange Commission.
(viii) Simultaneously with the preparation thereof, and not more than
45 days after the close of each of the first three fiscal
quarters of the Borrower and not more than 90 days after the
close of the last fiscal quarter of the Borrower in each
fiscal year (a) the Form FR Y-9C and the Form FR Y-9LP of the
Borrower as at the end of such quarter, each in the form
delivered to the appropriate Federal Reserve District Bank and
each to include all schedules thereto, and (b) if requested by
the Agent, call reports for each Banking Subsidiary designated
by the Agent in the form delivered to the Federal Reserve
District Bank, the Comptroller of the Currency or The Federal
Deposit Insurance Corporation, as the case may be.
(ix) Promptly after the Borrower's or any Subsidiary's receipt
thereof, unless disclosure is prohibited by the terms thereof
and after the Borrower or such Subsidiary has in good faith
attempted to obtain the consent of the relevant regulatory
authority and such authority will not consent to the
disclosure thereof, copies of any (i) notice
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of material charges, (ii) notice of intent to revoke deposit
insurance, (iii) cease and desist order, (iv) suspension or
removal order, (v) memorandum of understanding, (vi)
assessment of civil money penalties of $1,000,000 or more,
(vii) directive relating to holding company activities
constituting a Banking Subsidiary, (viii) directive, order or
disapproval of any exception or exemption request, plan or
proposal related to capital requirements, (ix) request that
the Borrower guarantee any capital restoration plan of any
Banking Subsidiary, (x) notification that any Banking
Subsidiary is, or is to be treated as if it were, not
Well-Capitalized or Adequately Capitalized or (xi) request or
directive from any regulatory authority requiring any Banking
Subsidiary to submit a capital restoration plan or restricting
the payment of dividends by any Subsidiary to the Borrower or
any other Subsidiary.
(x) Promptly upon learning thereof, notice of any change in Status
(as defined on the Pricing Schedule).
(xi) Such other information (including non-financial information)
relating to the Borrower and its Subsidiaries as the Agent or
any Lender may from time to time reasonably request.
6.2. Use of Proceeds. The Borrower will, and will cause each Subsidiary
to, use the proceeds of the Advances for general corporate purposes, including
acquisitions. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances to purchase or carry any "margin stock" (as
defined in Regulation U) or to finance the acquisition of any Person which has
not been approved and recommended by the Board of Directors (or functional
equivalent) of such Person.
6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise (including, without limitation, developments with respect to Year 2000
Issues), which could reasonably be expected to have a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated or organized,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation or organization, as the case may be, and maintain
all requisite authority to conduct its business in each jurisdiction in which
its business is conducted.
6.5. Taxes. The Borrower will, and will cause each Subsidiary to,
timely file complete and correct United States federal and applicable foreign,
state and local tax returns required by law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in
accordance with Agreement Accounting Principles.
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6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to any Lender upon
request full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject including, without limitation, all Environmental Laws. The
Borrower will ensure that each Banking Subsidiary will at all times be, and will
at all times be treated by the relevant regulatory authorities as if it were,
Well-Capitalized or Adequately Capitalized. The Borrower will, and will cause
each of its Banking Subsidiaries to, comply at all times with any and all
minimum risk-based capital guidelines, leverage measure capital guidelines and
any other capital guidelines now or hereafter published by the Federal Reserve
Bank System or any federal or state regulatory authorities having jurisdiction
over them.
6.8. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, books and financial records of the
Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Agent or any Lender may designate.
6.10. Fundamental Change. The Borrower will not, nor will it permit any
Subsidiary to, enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, except:
(i) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that the Borrower shall be
the continuing or surviving corporation) or with or into any
one or more Wholly-Owned Subsidiaries of the Borrower
(provided that the Wholly-Owned Subsidiary or Subsidiaries
shall be the continuing or surviving corporation);
(ii) any Wholly-Owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other
Wholly-Owned Subsidiary; and
(iii) the Borrower or any Subsidiary of the Borrower may merge with
any other Person provided that the Borrower or such Subsidiary
is the surviving Person and
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immediately after such merger, no Default or Unmatured Default
exists under this Agreement.
6.11. Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property to any Person
other than the Borrower or a Wholly-Owned Subsidiary, except:
(i) Sales of readily marketable securities in the ordinary course
of business.
(ii) Leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its
Subsidiaries previously leased, sold or disposed of (other
than sales described in Section 6.11(i)) as permitted by this
Section during the twelve-month period ending with the month
in which any such lease, sale or other disposition occurs, do
not constitute a Substantial Portion of the Property of the
Borrower and its Subsidiaries.
6.12. Liens. The Borrower will not, nor will it permit any Subsidiary
to, create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, except for:
(i) Liens required by law to secure deposits of Governmental
Authorities and trustees in bankruptcy;
(ii) Liens granted with respect to the assets of Bank Subsidiaries
which were made or created in the ordinary course of
conducting their banking business as required or permitted by
any Requirement of Law;
(iii) Liens securing Indebtedness of the Borrower and its
Subsidiaries incurred to finance the acquisition of fixed or
capital assets, provided that (a) such Liens shall be created
substantially simultaneously with the acquisition of such
fixed or capital assets, (b) such Liens do not at any time
encumber any property other than the property financed by such
Indebtedness, (c) the amount of Indebtedness secured thereby
is not increased and (d) the principal amount of Indebtedness
secured by any such Lien shall at no time exceed 100% of the
original purchase price of such property at the time it was
acquired;
(iv) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of
the Borrower or its Subsidiaries, as the case may be, in
conformity with Agreement Accounting Principles;
(v) carriers', warehouses, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate
proceedings;
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(vi) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation
and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(vii) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary
course of business;
(viii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and
which do not in any case materially detract from the value of
the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or such
Subsidiary;
(ix) Liens in existence on the date hereof listed on Schedule 2,
provided that no such Lien is expanded to cover any additional
property after the date hereof and that the amount of
Indebtedness secured thereby is not increased;
(x) Liens on the property or assets of a corporation which becomes
a Subsidiary after the date hereof, provided that (a) such
Liens existed at the time such corporation became a Subsidiary
and were not created in anticipation thereof, (b) any such
Lien is not expanded to cover any property or assets of such
corporation after the time such corporation becomes a
Subsidiary, and (c) the amount of Indebtedness secured thereby
is not increased;
(xi) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Borrower and all
Subsidiaries) $5,000,000 in aggregate amount at any time
outstanding; and
(xii) Liens securing Indebtedness of Banking Subsidiaries to the
FHLB.
6.13. Year 2000. The Borrower will take and will cause each of its
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that Year 2000 Issues
will not have a Material Adverse Effect. At the request of the Agent or any
Lender, the Borrower will provide a description of the Year 2000 Program,
together with any updates or progress reports with respect thereto.
6.14. Financial Covenants. The Borrower will not:
(i) Maintenance of Consolidated Tangible Net Worth. Permit
Consolidated Tangible Net Worth at any time to be less than
the sum of (a) $950,000,000 and (b) fifty percent (50%) of the
Borrower's positive Consolidated Net Income, if any, for each
of its completed fiscal quarters ending after March 31, 1998.
(ii) Double Leverage Ratio. Permit the Double Leverage Ratio at any
time to be greater than 1.25 to 1.00.
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(iii) Non-Performing Assets Coverage. Permit the ratio of (a)
Consolidated Net Worth plus the Allowance for Possible Loan
Losses to (b) Non-Performing Assets at any time to be less
than 4.0 to 1.0.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent
under or in connection with this Agreement, any Loan, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan when due, or nonpayment of
interest upon any Loan or of any facility or utilization fee or other
obligations under any of the Loan Documents within five days after the same
becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
Section 6.2, 6.3, 6.10, 6.11, 6.12 or 6.14.
7.4. The breach by the Borrower (other than a breach which constitutes
a Default under another Section of this Article VII) of any of the terms or
provisions of this Agreement which is not remedied within thirty days after
written notice from the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries to pay when
due any Indebtedness aggregating in excess of $5,000,000 ("Material
Indebtedness"); or the default by the Borrower or any of its Subsidiaries in the
performance (beyond the applicable grace period with respect thereto, if any) of
any term, provision or condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other event shall occur
or condition exist, the effect of which default or event is to cause, or to
permit the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its stated maturity; or any
Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof; or
the Borrower or any of its Subsidiaries shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries shall (i) have an order
for relief entered with respect to it under the Federal bankruptcy laws as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any Substantial Portion of its Property, (iv) institute any proceeding seeking
an order for relief under
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the Federal bankruptcy laws as now or hereafter in effect or seeking to
adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v) take any
corporate or partnership action to authorize or effect any of the foregoing
actions set forth in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Borrower or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 60 consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of the Borrower and its Subsidiaries which, when taken together
with all other Property of the Borrower and its Subsidiaries so condemned,
seized, appropriated, or taken custody or control of, during the twelve-month
period ending with the month in which any such action occurs, constitutes a
Substantial Portion.
7.9. One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) of $10,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof.
7.10. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $5,000,000 or any Reportable Event shall occur in
connection with any Plan.
7.11. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds $10,000,000 or
requires payments exceeding $5,000,000 per annum.
7.12. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and the other
members of the Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by an amount
exceeding $5,000,000.
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7.13. Any Change in Control shall occur.
7.14. The representations and warranties set forth in Section 5.15
("Plan Assets; Prohibited Transactions") shall at any time not be true and
correct.
7.15. Any Banking Subsidiary shall cease to be insured under the
Federal Deposit Insurance Act and any rules and regulations issued thereunder,
as amended, supplemented or otherwise modified from time to time; or a cease and
desist order shall be issued against the Borrower or U.S. Bank pursuant to 12
U.S.C. 1818(b) or (c) or any similar applicable provision of state law and any
rules and regulations issued thereunder, as amended, supplemented or otherwise
modified from time to time; or there shall occur, with respect to any Banking
Subsidiary, any event which is grounds for the required submission of a capital
restoration plan under 12 U.S.C. ss.1831(o)(e)(2) and any rules and regulations
issued thereunder, as amended, supplemented or otherwise modified from time to
time, or for seeking the appointment of a receiver or conservator under 12
U.S.C. 1821(c) and any rules and regulations issued thereunder, as amended,
supplemented or otherwise modified from time to time; or any conservator or
receiver shall be appointed for any Banking Subsidiary under any such provisions
or any other state or federal law.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part of
the Agent or any Lender. If any other Default occurs, the Required Lenders (or
the Agent with the consent of the Required Lenders) may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower hereby expressly waives.
If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of all of the Lenders:
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(i) Extend the final maturity of any Loan or forgive all or any
portion of the principal amount thereof, or reduce the rate or
extend the time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Extend the Facility Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required
under Section 2.2, or increase the amount of the Commitment of
any Lender hereunder, or permit the Borrower to assign its
rights under this Agreement.
(iv) Amend this Section 8.2.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3.2 without obtaining the consent of any
other party to this Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders or
the Agent to exercise any right under the Loan Documents shall impair such right
or be construed to be a waiver of any Default or an acquiescence therein, and
the making of a Loan notwithstanding the existence of a Default or the inability
of the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties of
the Borrower contained in this Agreement shall survive the making of the Loans
herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.4. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrower, the Agent and the Lenders and supersede
all prior agreements
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and understandings among the Borrower, the Agent and the Lenders relating to the
subject matter thereof other than the fee letter described in Section 10.13.
9.5. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.
9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the
Agent and the Arranger for any costs, internal charges and out-of-pocket
expenses (including reasonable attorneys' fees and time charges of attorneys for
the Agent, which attorneys may be employees of the Agent) paid or incurred by
the Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Agent, the Arranger and the Lenders for any costs, internal charges and
out-of-pocket expenses (including attorneys' fees and time charges of attorneys
for the Agent, the Arranger and the Lenders, which attorneys may be employees of
the Agent, the Arranger or the Lenders) paid or incurred by the Agent, the
Arranger or any Lender in connection with the collection and enforcement of the
Loan Documents. Expenses being reimbursed by the Borrower under this Section
include, without limitation, costs and expenses incurred in connection with the
Reports described in the following sentence. The Borrower acknowledges that from
time to time First Chicago may prepare and may distribute to the Lenders (but
shall have no obligation or duty to prepare or to distribute to the Lenders)
certain audit reports (the "Reports") pertaining to the Borrower's assets for
internal use by First Chicago from information furnished to it by or on behalf
of the Borrower, after First Chicago has exercised its rights of inspection
pursuant to this Agreement.
(ii) The Borrower hereby further agrees to indemnify the Agent, the
Arranger and each Lender, its directors, officers and employees against all
losses, claims, damages, penalties, judgments, liabilities and expenses
(including, without limitation, all expenses of litigation or preparation
therefor whether or not the Agent, the Arranger or any Lender is a party
thereto) which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or the
direct or indirect application or proposed application of the proceeds of any
Loan hereunder except to the extent that they are determined in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the party seeking
indemnification. The obligations of the Borrower under this Section 9.6 shall
survive the termination of this Agreement.
9.7. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
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9.8. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
9.9. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.10. Nonliability of Lenders. The relationship between the Borrower on
the one hand and the Lenders and the Agent on the other hand shall be solely
that of borrower and lender. Neither the Agent, the Arranger nor any Lender
shall have any fiduciary responsibilities to the Borrower. Neither the Agent,
the Arranger nor any Lender undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the Agent,
the Arranger nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Loan Documents, or any act,
omission or event occurring in connection therewith, unless it is determined in
a final non-appealable judgment by a court of competent jurisdiction that such
losses resulted from the gross negligence or willful misconduct of the party
from which recovery is sought. Neither the Agent, the Arranger nor any Lender
shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect, consequential or
punitive damages suffered by the Borrower in connection with, arising out of, or
in any way related to the Loan Documents or the transactions contemplated
thereby.
9.11. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by law,
regulation, or legal process, and (v) permitted by Section 12.4.
9.12. Nonreliance. Each Lender hereby represents that it is not relying
on or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.
ARTICLE X
THE AGENT
10.1. Appointment; Nature of Relationship. The First National Bank of
Chicago is hereby appointed by each of the Lenders as its contractual
representative (herein referred to as the "Agent") hereunder and under each
other Loan Document, and each of the Lenders irrevocably authorizes the Agent to
act as the contractual representative of such Lender with the rights and duties
expressly set
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forth herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
X. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a "representative" of the Lenders within
the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting
as an independent contractor, the rights and duties of which are limited to
those expressly set forth in this Agreement and the other Loan Documents. Each
of the Lenders hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all of
which claims each Lender hereby waives.
10.2. Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Agent; (d) the existence
or possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; (f) the
value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Borrower or any
guarantor of any of the Obligations or of any of the Borrower's or any such
guarantor's respective Subsidiaries. The Agent shall have no duty to disclose to
the Lenders information that is not required to be furnished by the Borrower to
the Agent at such time, but is voluntarily furnished by the Borrower to the
Agent (either in its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be
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taken by it pursuant to the provisions of this Agreement or any other Loan
Document unless it shall be requested in writing to do so by the Required
Lenders. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders) and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of the Loan
Documents or any other document delivered in connection therewith or the
transactions contemplated thereby (including, without limitation, for any such
amounts incurred by or asserted against the Agent in connection with any dispute
between the Agent and any Lender or between two or more of the Lenders), or the
enforcement of any of the terms of the Loan Documents or of any such other
documents, provided that no Lender shall be liable for any of the foregoing to
the extent any of the foregoing is found in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the Agent. The obligations of the Lenders under this
Section 10.8 shall survive payment of the Obligations and termination of this
Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, the Agent shall give prompt notice thereof to
the Lenders.
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10.10. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Subsidiaries in which the Borrower or such Subsidiary is not
restricted hereby from engaging with any other Person.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice received by the Agent from the Required Lenders, such removal
to be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on
behalf of the Borrower and the Lenders, a successor Agent. If no successor Agent
shall have been so appointed by the Required Lenders within thirty days after
the resigning Agent's giving notice of its intention to resign, then the
resigning Agent may appoint, on behalf of the Borrower and the Lenders, a
successor Agent. Notwithstanding the previous sentence, the Agent may at any
time without the consent of the Borrower or any Lender, appoint any of its
Affiliates which is a commercial bank as a successor Agent hereunder. If the
Agent has resigned or been removed and no successor Agent has been appointed,
the Lenders may perform all the duties of the Agent hereunder and the Borrower
shall make all payments in respect of the Obligations to the applicable Lender
and for all other purposes shall deal directly with the Lenders. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
having capital and retained earnings of at least $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning or removed Agent. Upon
the effectiveness of the resignation or removal of the Agent, the resigning or
removed Agent shall be discharged from its duties and obligations hereunder and
under the Loan Documents. After the effectiveness of the resignation or removal
of an Agent, the provisions of this Article X shall continue in effect for the
benefit of such Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder and under the other Loan
Documents. In the event that there is a successor to the Agent by merger, or the
Agent assigns its duties and obligations to an Affiliate pursuant to this
Section 10.12, then the term "Corporate Base Rate" as used in this Agreement
shall mean the prime rate, base rate or other analogous rate of the new Agent.
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10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its
own account, the fees agreed to by the Borrower and the Agent pursuant to that
certain letter agreement dated June 3, 1998, or as otherwise agreed from time to
time.
10.14. Delegation to Affiliates. The Borrower and the Lenders agree
that the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant to
Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and
40
<PAGE> 47
any Note to a Federal Reserve Bank; provided, however, that no such assignment
to a Federal Reserve Bank shall release the transferor Lender from its
obligations hereunder. The Agent may treat the Person which made any Loan or
which holds any Note as the owner thereof for all purposes hereof unless and
until such Person complies with Section 12.3 in the case of an assignment
thereof or, in the case of any other transfer, a written notice of the transfer
is filed with the Agent. Any assignee or transferee of the rights to any Loan or
any Note agrees by acceptance of such transfer or assignment to be bound by all
the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the owner of the rights to any Loan (whether or not a
Note has been issued in evidence thereof), shall be conclusive and binding on
any subsequent holder, transferee or assignee of the rights to such Loan.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the owner of its Loans and the holder of any Note
issued to it in evidence thereof for all purposes under the Loan
Documents, all amounts payable by the Borrower under this Agreement
shall be determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan or Commitment, extends the
Facility Termination Date, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on,
any such Loan or Commitment, releases any guarantor of any such Loan or
releases all or substantially all of the collateral, if any, securing
any such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise
41
<PAGE> 48
of its right of setoff, such amounts to be shared in accordance with
Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all
or any part of its rights and obligations under the Loan Documents.
Such assignment shall be substantially in the form of Exhibit B or in
such other form as may be agreed to by the parties thereto. The consent
of the Borrower and the Agent shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or
an Affiliate thereof; provided, however, that if a Default has occurred
and is continuing, the consent of the Borrower shall not be required.
Such consent shall not be unreasonably withheld or delayed. Each such
assignment shall (unless each of the Borrower and the Agent otherwise
consents) be in an amount not less than the lesser of (i) $10,000,000
or (ii) the remaining amount of the assigning Lender's Commitment
(calculated as at the date of such assignment).
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as
Exhibit I to Exhibit B (a "Notice of Assignment"), together with any
consents required by Section 12.3.1, and (ii) payment of a $3,500 fee
to the Agent for processing such assignment, such assignment shall
become effective on the effective date specified in such Notice of
Assignment. The Notice of Assignment shall contain a representation by
the Purchaser to the effect that none of the consideration used to make
the purchase of the Commitment and Loans under the applicable
assignment agreement are "plan assets" as defined under ERISA and that
the rights and interests of the Purchaser in and under the Loan
Documents will not be "plan assets" under ERISA. On and after the
effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan
Document executed by or on behalf of the Lenders and shall have all the
rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no further
consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the
percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 12.3.2, the transferor Lender, the Agent and
the Borrower shall, if the transferor Lender or the Purchaser desires
that its Loans be evidenced by Notes, make appropriate arrangements so
that new Notes or, as appropriate, replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes,
are issued to such Purchaser, in each case in principal amounts
reflecting their respective Commitments, as adjusted pursuant to such
assignment.
12.4. Dissemination of Information. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries, including
without limitation any information contained in any Reports; provided that the
Borrower consents
42
<PAGE> 49
in writing to the disclosure of such information (which consent shall not be
unreasonably withheld or delayed and shall not be required during the pendency
of a Default); and provided further that each Transferee and prospective
Transferee agrees in writing to be bound by Section 9.11 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 3.5(iv).
ARTICLE XIII
NOTICES
13.1. Notices. Except as otherwise permitted by Section 2.13 with
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Agent, at its address or facsimile number set
forth on the signature pages hereof, (y) in the case of any Lender, at its
address or facsimile number set forth below its signature hereto or (z) in the
case of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower in
accordance with the provisions of this Section 13.1. Each such notice, request
or other communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered
(or, in the case of electronic transmission, received) at the address specified
in this Section; provided that notices to the Agent under Article II shall not
be effective until received.
13.2. Change of Address. The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by facsimile
transmission or telephone that it has taken such action.
43
<PAGE> 50
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS.
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
[signature pages follow]
44
<PAGE> 51
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
FIRST AMERICAN CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
First American Center
Nashville, Tennessee 37237
Attention: Terry Spencer,
Executive Vice
President and Treasurer
cc: Mary Neil Price,
Executive Vice
President and
General Counsel
Telephone: (615) 736-6735
Telecopy: (615) 748-2538
Commitments
$40,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
--------------------------------------
Title:
-----------------------------------
One First National Plaza
Chicago, Illinois 60670
Attention: Julia A. Beringer,
Vice President
Telephone: (312) 732-2246
Telecopy: (312) 732-6222
<PAGE> 52
$30,000,000 BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
--------------------------------------
Title:
-----------------------------------
555 South Flower Street
9th Floor
Los Angeles, California 90071
Attention: Kurt Cardoza,
Director
Telephone: (213) 228-6487
Telecopy: (213) 228-6474
$30,000,000 THE BANK OF NEW YORK
By:
--------------------------------------
Title:
-----------------------------------
1 Wall Street
17th Floor
New York, New York 10286
Attention: Patricia Aquaro,
Vice President
Telephone: (212) 635-6642
Telecopy: (212) 609-9620
$100,000,000
============
<PAGE> 53
PRICING SCHEDULE
<TABLE>
<CAPTION>
========================================================================================================================
APPLICABLE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
MARGIN STATUS STATUS STATUS STATUS STATUS
<S> <C> <C> <C> <C> <C>
Eurodollar Rate .20% .275% .35% .475% .50%
Floating Rate 0% 0% 0% 0% 0%
========================================================================================================================
APPLICABLE FEE LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
RATE STATUS STATUS STATUS STATUS STATUS
========================================================================================================================
Facility Fee .10% .125% .15% .175% .25%
========================================================================================================================
Utilization Fee .05% .05% .075% .10% .15%
========================================================================================================================
</TABLE>
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Level I Status" exists at any date if, on such date, the Borrower's
Moody's Rating is A3 or better or the Borrower's S&P Rating is A- or better.
"Level II Status" exists at any date if, on such date, (i) the Borrower
has not qualified for Level I Status and (ii) the Borrower's Moody's Rating is
Baa1 or better or the Borrower's S&P Rating is BBB+ or better.
"Level III Status" exists at any date if, on such date, (i) the
Borrower has not qualified for Level I Status or Level II Status and (ii) the
Borrower's Moody's Rating is Baa2 or better or the Borrower's S&P Rating is BBB
or better.
"Level IV Status" exists at any date if, on such date, (i) the Borrower
has not qualified for Level I Status, Level II Status or Level III Status and
(ii) the Borrower's Moody's Rating is Baa3 or better and the Borrower's S&P
Rating is BBB- or better.
"Level V Status" exists at any date if, on such date, the Borrower has
not qualified for Level I Status, Level II Status, Level III Status or Level IV
Status.
"Moody's Rating" means, at any time, the rating issued by Moody's and
then in effect with respect to the Borrower's senior unsecured long-term debt
securities without third-party credit enhancement; provided that if at such time
the Borrower's senior unsecured long-term debt securities are not rated by
Moody's, then the rating one Moody's level above the rating issued by Moody's
and then in effect with respect to the Borrower's subordinated unsecured
long-term debt securities without third-party credit enhancement.
<PAGE> 54
"S&P Rating" means, at any time, the rating issued by S&P and then in
effect with respect to the Borrower's senior unsecured long-term debt securities
without third-party credit enhancement; provided that if at such time the
Borrower's senior unsecured long-term debt securities are not rated by S&P, then
the rating one S&P level above the rating issued by S&P and then in effect with
respect to the Borrower's subordinated unsecured long-term debt securities
without third-party credit enhancement.
"Status" means either Level I Status, Level II Status, Level III
Status, Level IV Status or Level V Status.
The Applicable Margin and Applicable Fee Rate shall be determined in
accordance with the foregoing table based on the Borrower's Status as determined
from its then-current Moody's and S&P Ratings. The credit rating in effect on
any date for the purposes of this Schedule is that in effect at the close of
business on such date. If at any time the Borrower has no Moody's Rating or has
no S&P Rating, Level V Status shall exist.
In the event that Status IV would otherwise exist but there exists a
differential of two or more levels between the Moody's Rating and the S&P
Rating, the Status shall be that one Level above the Level which would be
applicable if both the Moody's Rating and the S&P Rating were at the Level of
the lower of such ratings. Notwithstanding the foregoing, until adjusted
pursuant hereto, the Applicable Margin and Applicable Fee Rate shall be
predicated on Level II Status.
<PAGE> 55
SCHEDULE 1
SUBSIDIARIES
(See Section 5.8)
<PAGE> 56
SCHEDULE 2
INDEBTEDNESS AND LIENS
(See Sections 5.14 and 6.12)
<TABLE>
<CAPTION>
Maturity
Indebtedness Indebtedness Property and Amount
Incurred By Owed To Encumbered (If Any) of Indebtedness
<S> <C> <C> <C>
None
</TABLE>
<PAGE> 1
Exhibit 15. Letter regarding unaudited interim financial information from
KPMG Peat Marwick LLP
Independent Auditors' Review Report
The Board of Directors and Shareholders
First American Corporation:
We have reviewed the consolidated balance sheets of First American Corporation
and subsidiaries as of June 30, 1998 and 1997, and the related consolidated
income statements, changes in shareholders' equity and cash flows for the
three-month and six-month periods ended June 30, 1998 and 1997. These
consolidated financial statements are the responsibility of the Corporation's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the supplemental consolidated balance sheet of First American
Corporation and subsidiaries as of December 31, 1997; and the related
supplemental consolidated income statements, changes in shareholders' equity and
cash flows for the year then ended (not presented herein); and in our report
dated July 10, 1998, we expressed an unqualified opinion on those supplemental
consolidated financial statements. In our opinion, the information set forth in
the accompanying supplemental consolidated balance sheet as of December 31,
1997, is fairly stated, in all material respects, in relation to the
supplemental consolidated balance sheet from which it has been derived.
/s/ KPMG Peat Marwick LLP
- ------------------------------------
July 16, 1998
Nashville, Tennessee
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,004,527
<INT-BEARING-DEPOSITS> 4,910
<FED-FUNDS-SOLD> 104,250
<TRADING-ASSETS> 109,577
<INVESTMENTS-HELD-FOR-SALE> 4,906,133
<INVESTMENTS-CARRYING> 985,792
<INVESTMENTS-MARKET> 993,118
<LOANS> 11,099,030
<ALLOWANCE> 180,138
<TOTAL-ASSETS> 19,059,601
<DEPOSITS> 13,641,535
<SHORT-TERM> 2,786,341
<LIABILITIES-OTHER> 474,557
<LONG-TERM> 600,125
0
0
<COMMON> 266,829
<OTHER-SE> 1,290,214
<TOTAL-LIABILITIES-AND-EQUITY> 19,059,601
<INTEREST-LOAN> 479,844
<INTEREST-INVEST> 151,601
<INTEREST-OTHER> 5,029
<INTEREST-TOTAL> 636,474
<INTEREST-DEPOSIT> 222,923
<INTEREST-EXPENSE> 293,987
<INTEREST-INCOME-NET> 342,487
<LOAN-LOSSES> 11,000
<SECURITIES-GAINS> 3,143
<EXPENSE-OTHER> 427,186
<INCOME-PRETAX> 132,512
<INCOME-PRE-EXTRAORDINARY> 132,512
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,104
<EPS-PRIMARY> .77
<EPS-DILUTED> .75
<YIELD-ACTUAL> 4.30
<LOANS-NON> 31,853
<LOANS-PAST> 26,445
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 98,436
<ALLOWANCE-OPEN> 180,043
<CHARGE-OFFS> 27,296
<RECOVERIES> 15,074
<ALLOWANCE-CLOSE> 180,138
<ALLOWANCE-DOMESTIC> 115,253
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 64,885
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 971,418
<INT-BEARING-DEPOSITS> 10,216
<FED-FUNDS-SOLD> 98,066
<TRADING-ASSETS> 58,902
<INVESTMENTS-HELD-FOR-SALE> 2,959,051
<INVESTMENTS-CARRYING> 896,609
<INVESTMENTS-MARKET> 901,600
<LOANS> 11,318,111
<ALLOWANCE> 188,179
<TOTAL-ASSETS> 17,088,911
<DEPOSITS> 13,104,456
<SHORT-TERM> 1,820,780
<LIABILITIES-OTHER> 272,851
<LONG-TERM> 417,053
0
0
<COMMON> 266,086
<OTHER-SE> 1,207,685
<TOTAL-LIABILITIES-AND-EQUITY> 17,088,911
<INTEREST-LOAN> 460,485
<INTEREST-INVEST> 136,565
<INTEREST-OTHER> 5,453
<INTEREST-TOTAL> 602,503
<INTEREST-DEPOSIT> 223,604
<INTEREST-EXPENSE> 277,221
<INTEREST-INCOME-NET> 325,282
<LOAN-LOSSES> 3,750
<SECURITIES-GAINS> 1,392
<EXPENSE-OTHER> 330,323
<INCOME-PRETAX> 179,715
<INCOME-PRE-EXTRAORDINARY> 179,715
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,913
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 4.31
<LOANS-NON> 37,597
<LOANS-PAST> 29,625
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 66,650
<ALLOWANCE-OPEN> 185,470
<CHARGE-OFFS> 22,368
<RECOVERIES> 13,746
<ALLOWANCE-CLOSE> 188,179
<ALLOWANCE-DOMESTIC> 104,080
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 84,099
</TABLE>
