<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-
REGISTRATION NO. 333- -01
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
<TABLE>
<S> <C>
FIRST BANKS, INC. FIRST PREFERRED CAPITAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
43-1175538 43-1765214
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
135 NORTH MERAMEC AVENUE, ST. LOUIS, MISSOURI 63105 (314) 854-4600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S AND CO-REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
---------------------
ALLEN H. BLAKE
EXECUTIVE VICE PRESIDENT
FIRST BANKS, INC.
11901 OLIVE BOULEVARD, ST. LOUIS, MISSOURI 63141
(314) 995-8700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------------
WITH COPIES TO:
<TABLE>
<S> <C>
THOMAS C. ERB, ESQ. FREDERICK W. SCHERRER, ESQ.
LEWIS, RICE & FINGERSH, L.C. BRYAN CAVE LLP
500 NORTH BROADWAY, SUITE 2000 211 NORTH BROADWAY, SUITE 3600
ST. LOUIS, MISSOURI 63102 ST. LOUIS, MISSOURI 63102-2750
(314) 444-7600 (314) 259-2000
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED<F1> PER UNIT PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred Securities of First Preferred Capital
Trust<F1>......................................... 2,760,000 $25.00 $69,000,000 $20,909.09
- ------------------------------------------------------------------------------------------------------------------------------------
Subordinated Debentures of First Banks, Inc.<F2>.... <F2> -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Guarantee of First Banks, Inc., with respect to
Preferred Securities<F3>.......................... <F3> -- -- --
====================================================================================================================================
<FN>
<F1>Includes 360,000 Preferred Securities which may be sold by First Preferred
Capital Trust to cover over-allotments.
<F2>The Subordinated Debentures will be purchased by First Preferred Capital
Trust with the proceeds of the sale of the Preferred Securities. Such
securities may later be distributed for no additional consideration to the
holders of the Preferred Securities of First Preferred Capital Trust upon
its dissolution and the distribution of its assets.
<F3>This Registration Statement is deemed to cover the Subordinated Debentures
of First Banks, Inc., the rights of holders of Subordinated Debentures of
First Banks, Inc. under the Indenture, and the rights of holders of the
Preferred Securities under the Trust Agreement, the Guarantee and the
Expense Agreement entered into by First Banks, Inc. No separate
consideration will be received for the Guarantee.
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
===============================================================================
<PAGE> 2
FIRST BANKS, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM S-2 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus.................................. Facing Page of Registration Statement; Cross Reference
Sheet; Outside Cover Page of Prospectus.
2. Inside Front and Outside Back Cover Pages of
Prospectus................................................ Inside Front Cover Page; Back Cover Page; Incorporation of
Certain Documents by Reference; Available Information.
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges............................................. Prospectus Summary; Selected Consolidated Financial Data;
Risk Factors.
4. Use of Proceeds
5. Determination of Offering Price............................. Not Applicable.
6. Dilution.................................................... Not Applicable.
7. Selling Security Holders
8. Plan of Distribution........................................ Outside Front Cover Page; Underwriting.
9. Description of Securities to be Registered.................. Prospectus Summary; Description of the Preferred Securities;
Description of the Subordinated Debentures; Description of
the Guaranty; Description of Other Capital Stock.
10. Interests of Named Experts and Counsel...................... Validity of Securities; Experts.
11. Information With Respect to the Registrant.................. Prospectus Summary; Capitalization; Selected Consolidated
Financial Data; Management's Discussion and Analysis;
Business; Incorporation of Certain Documents by Reference;
Description of the Preferred Securities; Description of
the Subordinated Debentures; Description of the Guarantee;
Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee; Description of
Other Capital Stock; Consolidated Financial Statements.
12. Incorporation of Certain Information by Reference........... Incorporation of Certain Documents by Reference.
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities............ Not Applicable.
</TABLE>
<PAGE> 3
********************************************************************************
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH *
* THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD *
* NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION *
* STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN *
* OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE *
* ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, *
* SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
********************************************************************************
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
PROSPECTUS
2,400,000 PREFERRED SECURITIES
FIRST PREFERRED CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) FIRST
GUARANTEED, AS DESCRIBED HEREIN, BY BANK
FIRST BANKS, INC.
-----------------
$60,000,000 % SUBORDINATED DEBENTURES OF
FIRST BANKS, INC.
-----------------
The % Cumulative Trust Preferred Securities (the ``Preferred Securities'')
offered hereby represent preferred undivided beneficial interests in the assets
of First Preferred Capital Trust, a statutory business trust created under the
laws of the State of Delaware (``First Capital''). First Banks, Inc., a
Missouri corporation (``First Banks''), will own all the common securities (the
``Common Securities'' and, together with the Preferred Securities, the ``Trust
Securities'') representing undivided beneficial interests in the assets of
First Capital.
(continued on next page)
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the symbol
``FBNKO.''
-----------------
SEE ``RISK FACTORS'' ON PAGE 8 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
-----------------
THE SECURITIES OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS OR DEPOSIT
ACCOUNTS, ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NON-
BANKING AFFILIATE OF FIRST BANKS (EXCEPT TO THE EXTENT THAT PREFERRED
SECURITIES ARE GUARANTEED BY FIRST BANKS AS DESCRIBED HEREIN), ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT<F1> FIRST CAPITAL<F2><F3>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.......................... $25.00 <F2> $
- ------------------------------------------------------------------------------------------------------------------
Total<F4>....................................... $60,000,000 <F2> $
==================================================================================================================
<FN>
<F1>First Capital and First Banks have each agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See ``Underwriting.''
<F2>In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Subordinated Debentures, First Banks has
agreed to pay the Underwriters as compensation for its arranging the
investment therein of such proceeds, $ per Preferred Security,
or $ in the aggregate, ($ if the over-allotment
option is exercised in full). See ``Underwriting.''
<F3>Before deducting expenses payable by First Banks, estimated to be $300,000.
<F4>First Capital has granted the Underwriters an option exercisable within 30
days from the date of this Prospectus to purchase up to 360,000 additional
Preferred Securities on the same terms and conditions set forth above to
cover over-allotments, if any. If all such additional Preferred Securities
are purchased, the total Price to Public and Proceeds to First Capital will
be $69,000,000 and $ respectively. See ``Underwriting.''
</TABLE>
-----------------
The Preferred Securities are offered by the Underwriters subject to receipt
and acceptance by them, prior sale and the Underwriters' right to reject any
order in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that delivery of certificates for the Preferred
Securities will be made on or about , 1997.
STIFEL, NICOLAUS & COMPANY
INCORPORATED
, 1997
<PAGE> 4
(continued from previous page)
State Street Bank and Trust Company is the Property Trustee (as defined
herein) of First Capital. First Capital exists for the purpose of issuing the
Preferred Securities and investing the proceeds thereof in an equivalent amount
of % Subordinated Debentures (the ``Subordinated Debentures'') of First
Banks. The Subordinated Debentures will mature on March 31, 2027, which date
may be (i) shortened to a date not earlier than March 31, 2002, or (ii)
extended to a date not later than March 31, 2046, in each case if certain
conditions are met (including, in the case of shortening the Stated Maturity
(as defined herein), First Banks having received prior approval of the Board of
Governors of the Federal Reserve System (``Federal Reserve'') to do so if then
required under applicable capital guidelines or policies of the Federal
Reserve). The Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
``Description of the Preferred Securities--Subordination of Common
Securities.''
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of % of the liquidation
amount of $25 per Preferred Security (the ``Liquidation Amount''), accruing
from the date of original issuance and payable quarterly in arrears on the last
day of March, June, September and December of each year, commencing March 31,
1997 (the ``Distributions''). First Banks has the right, so long as no
Debenture Event of Default (as defined herein) has occurred and is continuing,
to defer payment of interest on the Subordinated Debentures at any time or from
time to time for a period not to exceed 20 consecutive quarters with respect to
each deferral period (each, an ``Extended Interest Payment Period''); provided
that no Extended Interest Payment Period may extend beyond the Stated Maturity
of the Subordinated Debentures. Upon the termination of any such Extended
Interest Payment Period and the payment of all amounts then due, First Banks
may elect to begin a new Extended Interest Payment Period subject to the
requirements set forth herein. If interest payments on the Subordinated
Debentures are so deferred, Distributions on the Preferred Securities will also
be deferred, and First Banks will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to its capital stock or debt securities that rank pari passu with or
junior to the Subordinated Debentures. DURING AN EXTENDED INTEREST PAYMENT
PERIOD, INTEREST ON THE SUBORDINATED DEBENTURES WILL CONTINUE TO ACCRUE (AND
THE AMOUNT OF DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED SECURITIES ARE
ENTITLED WILL ACCUMULATE) AT THE RATE OF % PER ANNUM, COMPOUNDED QUARTERLY,
AND HOLDERS OF THE PREFERRED SECURITIES WILL BE REQUIRED TO INCLUDE INTEREST
INCOME IN THEIR GROSS INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES IN
ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT TO SUCH DEFERRED
INTEREST PAYMENTS. A HOLDER OF PREFERRED SECURITIES THAT DISPOSES OF ITS
PREFERRED SECURITIES BETWEEN RECORD DATES FOR PAYMENTS OF DISTRIBUTIONS (AND
CONSEQUENTLY DOES NOT RECEIVE A DISTRIBUTION FROM FIRST CAPITAL FOR THE PERIOD
PRIOR TO SUCH DISPOSITION) WILL NEVERTHELESS BE REQUIRED TO INCLUDE ACCRUED BUT
UNPAID INTEREST ON THE SUBORDINATED DEBENTURES THROUGH THE DATE OF DISPOSITION
IN INCOME AS ORDINARY INCOME AND TO ADD SUCH AMOUNT TO ITS ADJUSTED TAX BASIS
IN ITS PRO RATA SHARE OF THE UNDERLYING SUBORDINATED DEBENTURES DEEMED DISPOSED
OF. See ``Description of the Subordinated Debentures--Option to Extend Interest
Payment Period,'' ``Certain Federal Income Tax Consequences--Potential
Extension of Interest Payment Period and Original Issue Discount'' and
``--Dispositions of Preferred Securities.''
First Banks and First Capital believe that, taken together, the obligations
of First Banks under the Guarantee, the Trust Agreement, the Subordinated
Debentures, the Indenture and the Expense Agreement (each as defined herein)
provide, in the aggregate, a full, irrevocable and unconditional guaranty, on a
subordinated basis, of all of the obligations of First Capital under the
Preferred Securities. See ``Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee--Full and Unconditional Guarantee.''
The Guarantee of First Banks guarantees the payment of Distributions and
payments on liquidation or redemption of the Preferred Securities, but only in
each case to the extent of funds held by First Capital, as described herein.
See ``Description of the Guarantee--General.'' If First Banks does not make
interest payments on the Subordinated Debentures held by First Capital, First
Capital will have insufficient funds to pay Distributions on the Preferred
Securities. The Guarantee does not cover payments of Distributions when First
Capital does not have sufficient funds to pay such Distributions. In such
event, a holder of Preferred Securities may institute a legal proceeding
directly against First Banks pursuant to the terms of the Indenture to enforce
payments of amounts equal to such Distributions to such holder. See
``Description of the Subordinated Debentures--Enforcement of Certain Rights by
Holders of the Preferred Securities.'' The obligations of First Banks under the
Guarantee and the Preferred Securities are subordinate and junior in right of
payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations
(each as defined herein) of First Banks. The Subordinated Debentures are
unsecured obligations of First Banks and are subordinated to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of First Banks.
(continued on next page)
<PAGE> 5
(continued from previous page)
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Subordinated Debentures at maturity or their
earlier redemption. Subject to Federal Reserve approval, if then required under
applicable capital guidelines or policies of the Federal Reserve, the
Subordinated Debentures are redeemable prior to maturity at the option of First
Banks (i) on or after March 31, 2002, in whole at any time or in part from time
to time, or (ii) at any time, in whole (but not in part), within 180 days
following the occurrence of a Tax Event or an Investment Company Event (each as
defined herein), in each case at a redemption price equal to the accrued and
unpaid interest on the Subordinated Debentures so redeemed to the date fixed
for redemption, plus 100% of the principal amount thereof. See ``Description of
the Preferred Securities--Redemption or Exchange.''
First Banks has the right at any time to dissolve, wind-up or terminate
First Capital subject to First Banks having received prior approval of the
Federal Reserve to do so if then required under applicable capital guidelines
or policies of the Federal Reserve. In the event of the voluntary or
involuntary dissolution, winding up or termination of First Capital, after
satisfaction of liabilities to creditors of First Capital as required by
applicable law, the holders of Preferred Securities will be entitled to receive
a Liquidation Amount of $25 per Preferred Security, plus accumulated and unpaid
Distributions thereon to the date of payment, which may be in the form of a
Subordinated Debenture having an aggregate principal amount equal to the
Liquidation Amount of such Preferred Securities (and carrying with it
accumulated interest in an amount equal to the accumulated and unpaid
Distributions then due on such Preferred Securities), subject to certain
exceptions. See ``Description of the Preferred Securities--Redemption or
Exchange'' and ``--Liquidation Distribution Upon Termination.''
-----------------
First Banks will provide to the holders of the Preferred Securities quarterly
reports containing unaudited financial statements and annual reports containing
financial statements audited by First Banks' independent auditors. First Banks
will also furnish annual reports on Form 10-K and quarterly reports on Form
10-Q free of charge to holders of the Preferred Securities who so request in
writing addressed to the Secretary of First Banks.
-----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED
SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
<PAGE> 6
FIRST BANKS, INC. AND SUBSIDIARIES
MAP OF LOCATIONS
[MAP]
METRO MISSOURI
Arnold
Bogey Hills
Chesterfield Village
Clayton
Craig
Creve Coeur
Ellisville
Florissant (2)
Four Seasons
Graham
Gravois
Hampton
Kirkwood
Lemay
Manchester
Riverview
Shrewsbury
St. Peters (2)
Telegraph
Tesson Ferry
Town & Country
Twin Oaks
Warson Woods
Webster Groves
St. Charles
REGIONAL
MISSOURI
Beaufort
Bismarck
Dutzow
Fulton
Gerald
Hermann
Lake Saint Louis
Middletown
Montgomery City
Morrison
Owensville
Park Hills (2)
Warrenton
Washington
Wentzville
SOUTHERN
ILLINOIS
Belleville
Breese
Carbondale
Chester (2)
Columbia
Fairview Heights
Greenville
Johnston City
Lawrenceville (2)
O'Fallon (2)
Granite City
Red Bud
Salem (4)
Valmeyer
Vandalia
Waterloo
West Frankfort (2)
CENTRAL &
NORTHERN
ILLINOIS
Abingdon
Avon
Bartonville
Bunker Hill
Cambridge
Canton
Carlinville
Chicago (2)
Cuba
Decatur
Galesburg (2)
Galva
Havana
Jacksonville
Knoxville
Mount Pulaski
Peoria (4)
Pittsfield
Pleasant Hill
Quincy (2)
Rock Falls
Roodhouse
Springfield
Sterling
Winchester
[MAP]
CALIFORNIA
FIRST BANK & TRUST
Bellflower
Bolsa Chica
Huntington Beach
Irvine
IrvineCulver
San Jose
Santa Barbara
Northside
Santa Barbara
Downtown
Santa Maria
Walnut Creek
Bixby Knolls
Fountain Valley
Long Beach
SUNRISE BANK OF
CALIFORNIA
Roseville
Citrus Heights
San Francisco
FIRST COMMERCIAL
BANK
Campbell
Concord
Douglas
Howe
San Francisco
Vernon
TEXAS
BANKTEXAS N.A.
(Dallas)
Abrams
Irving-Las Colinas
McKinney
(Houston)
Allen Parkway
Northside
Westheimer
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements of First Banks, including the
related notes, appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information in this Prospectus assumes that the Underwriters'
over-allotment option will not be exercised. Prospective investors should
carefully consider the information set forth under the heading ``Risk
Factors.''
FIRST BANKS
First Banks is a registered bank holding company headquartered in St. Louis
County, Missouri. First Banks' principal business is the ownership and
operation of its subsidiary banks and thrifts (the ``Subsidiary Banks''), which
offer a broad range of commercial and personal banking services through its
banking facilities located in Missouri, Illinois, California and Texas. Of
these banking facilities, 27 are located in the St. Louis metropolitan area,
which is First Banks' primary market area with a population of approximately
2.5 million. At September 30, 1996, First Banks had total assets of $3.5
billion, total loans of $2.7 billion, total deposits of $3.1 billion, and total
shareholders' equity of $244 million. The principal executive office of First
Banks is 135 North Meramec Avenue, St. Louis, Missouri 63105, and its telephone
number is (314) 854-4600.
First Banks has grown through a combination of acquisitions and internal
growth. Prior to 1994, First Banks' acquisitions had been concentrated within
its primary market area of eastern Missouri and southern Illinois. The premiums
required to successfully pursue acquisitions escalated sharply in 1993,
reducing dramatically the economic viability of many potential acquisitions in
that area. Recognizing this, First Banks began to expand the geographic area in
which it approached acquisition candidates. While First Banks was successful in
making acquisitions in Chicago and northern Illinois, it became apparent that
acquisition pricing, in Chicago and other areas being considered, was
comparable to that of First Banks' primary acquisition area. As a result, while
First Banks continued to pursue acquisitions within these areas, it turned much
of its attention in 1994 and 1995 to institutions which could be acquired at
more attractive prices which were within major metropolitan areas outside its
immediate market area. This resulted in two acquisitions in Missouri, three in
Illinois, one in Texas and seven in California during this period and the
increase in total assets by 75% from December 31, 1993 to September 30, 1996.
First Banks follows a policy of retaining earnings to support its growth.
First Banks has never paid, and has no present intention to pay, dividends on
its Common Stock and has, therefore, increased retained earnings by 37% since
December 31, 1993.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets.................................. $3,546 3,700 3,623 2,880 2,032 2,047 1,996
Retained earnings....................... 164 153 157 138 120 102 85
Stockholders' equity.................... 244 230 235 217 202 181 111
Net income.............................. 11 20 24 24 23 19 17
Locations............................... 123 120 125 92 80 80 78
</TABLE>
Through the 126 locations of its Subsidiary Banks, First Banks offers a
broad range of commercial and personal banking services including certificate
of deposit accounts, individual retirement and other time deposit accounts,
checking and other demand deposit accounts, interest checking accounts, savings
accounts, and money market accounts. Loans include commercial, financial,
agricultural, municipal and industrial development, real estate construction
and development, commercial and residential real estate, consumer and
installment loans. Other financial services include mortgage banking, discount
brokerage, credit-related insurance, automatic teller machines, safe deposit
boxes, and trust services offered by certain Subsidiary Banks.
First Banks' management philosophy is to centralize overall corporate
policies, procedures, and administrative functions and to provide operational
support functions for the Subsidiary Banks. Primary responsibility for managing
the Subsidiary Banks rests with each of the officers and directors of the
respective Subsidiary Banks.
All of the voting stock of First Banks is owned by various trusts which
were created by and are administered by and for the benefit of Mr. James F.
Dierberg, Chairman of the Board, President and Chief Executive Officer of First
Banks, and members of his immediate family. Mr. Dierberg, therefore, controls
the management and policies of First
2
<PAGE> 8
Banks and the election of its directors. See ``Risk Factors--Risk Factors
Relating to First Banks--Control of First Banks.'' First Banks also has a class
of non-voting preferred stock, the Class C 9.00% Increasing Rate, Redeemable,
Cumulative Preferred Stock (the ``Class C Preferred Stock''), which is traded
on The Nasdaq Stock Market's National Market under the symbol FBNKP. On
December 1, 1997, the annual dividend rate on the Class C Preferred Stock will
increase by 0.75% to 9.75% and, on such date, the Class C Preferred Stock will
become redeemable by First Banks.
FIRST CAPITAL
First Capital is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement, dated as of December 12, 1996, executed by
First Banks, as depositor, and the trustees of First Capital (together with the
Property Trustee, the ``Trustees''), and (ii) a certificate of trust filed with
the Secretary of State of the State of Delaware on December 13, 1996. The
initial trust agreement will be amended and restated in its entirety (as so
amended and restated, the ``Trust Agreement'') substantially in the form filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part. The Trust Agreement will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the ``Trust Indenture Act''). Upon issuance
of the Preferred Securities, the purchasers thereof will own all of the
Preferred Securities. First Banks will acquire all of the Common Securities
which will represent an aggregate liquidation amount equal to at least 3% of
the total capital of First Capital. The Common Securities will rank pari passu,
and payments will be made thereon pro rata, with the Preferred Securities,
except that upon the occurrence and during the continuance of an Event of
Default (as defined herein) under the Trust Agreement resulting from a
Debenture Event of Default, the rights of First Banks as holder of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Preferred Securities. See ``Description of the Preferred
Securities--Subordination of Common Securities.'' First Capital exists for the
exclusive purposes of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of First Capital, (ii) investing the gross
proceeds of the Trust Securities in the Subordinated Debentures issued by First
Banks, and (iii) engaging in only those other activities necessary, advisable,
or incidental thereto. The Subordinated Debentures and payments thereunder will
be the only assets of First Capital and payments under the Subordinated
Debentures will be the only revenue of First Capital. First Capital has a term
of 55 years, but may terminate earlier as provided in the Trust Agreement. The
principal executive office of First Capital is 135 North Meramec Avenue, St.
Louis, Missouri 63105, and its telephone number is (314) 854-4600.
The number of Trustees will, pursuant to the Trust Agreement, initially be
five. Three of the Trustees (the ``Administrative Trustees'') will be persons
who are employees or officers of, or who are affiliated with, First Banks. The
fourth trustee will be a financial institution that is unaffiliated with First
Banks, which trustee will serve as institutional trustee under the Trust
Agreement and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the ``Property Trustee''). State Street
Bank and Trust Company, a Massachusetts banking corporation, will be the
Property Trustee until removed or replaced by the holder of the Common
Securities. For purposes of compliance with the provisions of the Trust
Indenture Act, State Street Bank and Trust Company will also act as trustee
(the ``Guarantee Trustee'') under the Guarantee and as Debenture Trustee (as
defined herein) under the Indenture. The fifth trustee will be an entity that
maintains its principal place of business in the State of Delaware (the
``Delaware Trustee''). Wilmington Trust Company, a Delaware chartered trust
company, will act as Delaware Trustee.
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and in such capacity will have
the power to exercise all rights, powers and privileges under the Indenture.
The Property Trustee will also maintain exclusive control of a segregated
non-interest-bearing bank account (the ``Property Account'') to hold all
payments made in respect of the Subordinated Debentures for the benefit of the
holders of the Trust Securities. The Property Trustee will make payments of
Distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities. First Banks, as the holder of all the Common Securities,
will have the right to appoint, remove or replace any Trustee and to increase
or decrease the number of Trustees. First Banks will pay all fees and expenses
related to First Capital and the offering of the Trust Securities.
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the Trust
Agreement, the Delaware Business Trust Act (the ``Trust Act'') and the Trust
Indenture Act. See ``Description of the Preferred Securities.''
3
<PAGE> 9
<TABLE>
THE OFFERING
<S> <C>
Securities Offered................. 2,400,000 Preferred Securities having a Liquidation Amount of $25 per
Preferred Security. The Preferred Securities represent preferred
undivided beneficial interests in the assets of First Capital, which
will consist solely of the Subordinated Debentures and payments
thereunder. First Capital has granted the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to
purchase up to an additional 360,000 Preferred Securities at the
initial offering price, solely to cover over-allotments, if any.
Distributions...................... The Distributions payable on each Preferred Security will be fixed at
a rate per annum of % of the Liquidation Amount of $25 per Preferred
Security, will be cumulative, will accrue from , 1997,
the date of issuance of the Preferred Securities, and will be payable
quarterly in arrears, on March 31, June 30, September 30 and December
31 of each year, commencing March 31, 1997. See ``Description of the
Preferred Securities--Distributions--Payment of Distributions.''
Option to Extend Interest Payment
Period........................... First Banks has the right, at any time, so long as no Debenture Event
of Default has occurred and is continuing, to defer payments of
interest on the Subordinated Debentures for a period not exceeding 20
consecutive quarters; provided, that no Extended Interest Payment
Period may extend beyond the Stated Maturity of the Subordinated
Debentures. As a consequence of the extension by First Banks of the
interest payment period, quarterly Distributions on the Preferred
Securities will be deferred (though such Distributions would continue
to accrue with interest thereon compounded quarterly, since interest
will continue to accrue and compound on the Subordinated Debentures)
during any such Extended Interest Payment Period. During an Extended
Interest Payment Period, First Banks will be prohibited, subject to
certain exceptions described herein, from declaring or paying any cash
distributions with respect to its capital stock or debt securities
that rank pari passu with or junior to the Subordinated Debentures.
Upon the termination of any Extended Interest Payment Period and the
payment of all amounts then due, First Banks may commence a new Ex-
tended Interest Payment Period, subject to the foregoing requirements.
See ``Description of the Preferred Securities--Distributions--Extended
Interest Payment Period'' and ``Description of the Subordinated Deben-
tures--Option to Extend Interest Payment Period.''
Should an Extended Interest Payment Period occur, holders of Preferred
Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in
advance of receipt of the cash distributions with respect to such
deferred interest payments. See ``Certain Federal Income Tax
Consequences--Potential Extension of Interest Payment Period and
Original Issue Discount.''
Optional Redemption................ The Preferred Securities are subject to mandatory redemption, in whole
or in part, upon repayment of the Subordinated Debentures at maturity
or their earlier redemption. Subject to Federal Reserve approval, if
then required under applicable capital guidelines or policies of the
Federal Reserve, the Subordinated Debentures are redeemable prior to
maturity at the option of First Banks (i) on or after March 31, 2002,
in whole at any time or in part from time to time, or (ii) at any
time, in whole (but not in part), within 180 days following the
occurrence of a Tax Event or an Investment Company Event, in each case
at the redemption price equal to 100% of
4
<PAGE> 10
the principal amount of the Subordinated Debenture, together with any
accrued but unpaid interest to the date fixed for redemption. See
``Description of the Subordinated Debentures--Redemption or
Exchange.''
Distribution of Subordinated
Debentures....................... First Banks has the right at any time to terminate the Preferred
Securities and cause the Subordinated Debentures to be distributed to
holders of Preferred Securities in liquidation of First Capital,
subject to First Banks having received prior approval of the Federal
Reserve to do so if then required under applicable capital guidelines
or policies of the Federal Reserve. See ``Description of the Preferred
Securities--Redemption or Exchange'' and ``Description of the
Preferred Securities--Liquidation Distribution Upon Termination.''
Guarantee.......................... First Banks has guaranteed the payment of Distributions and payments
on liquidation or redemption of the Preferred Securities, but only in
each case to the extent of funds held by First Capital, as described
herein. First Banks and First Capital believe that, taken together,
the obligations of First Banks under the Guarantee, the Trust
Agreement, the Subordinated Debentures, the Indenture and the Expense
Agreement provide, in the aggregate, a full, irrevocable and
unconditional guaranty, on a subordinated basis, of all of the
obligations of First Capital under the Preferred Securities. The
obligations of First Banks under the Guarantee and the Preferred
Securities are subordinate and junior in right of payment to all
Senior Debt, Subordinated Debt and Additional Senior Obligations of
First Banks. If First Banks does not make principal or interest
payments on the Subordinated Debentures, First Capital will not have
sufficient funds to make distributions on the Preferred Securities; in
which event, the Guarantee will not apply to such Distributions until
First Capital has sufficient funds available therefor. See
``Description of the Guarantee.''
Voting Rights...................... The holders of the Preferred Securities generally will have no voting
rights except in limited circumstances. See ``Description of the
Preferred Securities--Voting Rights; Amendment of Trust Agreement.''
Use of Proceeds.................... The proceeds from the sale of the Preferred Securities offered hereby
will be used by First Capital to purchase the Subordinated Debentures
issued by First Banks. First Banks intends to use the net proceeds
from the sale of the Subordinated Debentures to, temporarily, reduce
the amount of its indebtedness under the Credit Agreement (as defined
herein), although First Banks expects the amount outstanding
thereunder to increase in the future and to use any subsequent
borrowings under the Credit Agreement for general corporate purposes,
including the possible (i) repurchase or redemption of all or a
portion of its outstanding Class C Preferred Stock (which becomes
redeemable on December 1, 1997), (ii) funding of investments in,
or extensions of credit to, its banking and nonbanking subsidiaries,
(iii) acquisition of other financial institutions or their assets or
liabilities, and (iv) acquisition of or investment in other
businesses of a type eligible for bank holding companies. See ``Use of
Proceeds.''
Nasdaq National Market Symbol...... Application has been made to have the Preferred Securities approved
for quotation on The Nasdaq Stock Market's National Market under the
symbol FBNKO.
</TABLE>
5
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL DATA<F1>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income......... $ 197,008 192,051 261,621 162,435 140,012 161,303 178,714
Interest expense........ 106,580 106,350 144,945 70,760 58,058 79,529 106,848
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income..... 90,428 85,701 116,676 91,765 81,954 81,774 71,866
Provision for possible
loan losses........... 8,774 8,449 10,361 1,858 4,456 10,435 9,773
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
possible loan
losses................ 81,654 77,252 106,315 89,907 77,498 71,339 62,093
Noninterest income...... 15,798 17,642 19,407 13,634 9,953 11,140 12,742
Noninterest expense..... 81,237 66,701 91,566 67,734 53,431 53,953 49,088
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision
for income taxes,
minority interest in
(income) loss of
subsidiary and
cumulative effect of
change in accounting
principle............. 16,215 28,193 34,156 35,807 34,020 28,526 25,747
Provision for income
taxes................. 4,304 9,414 11,038 12,012 11,592 9,510 9,039
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest in (income)
loss of subsidiary and
cumulative effect of
change in accounting
principle............. 11,911 18,779 23,118 23,795 22,428 19,016 16,708
Minority interest in
(income) loss of
subsidiary............ (472) 816 1,353 237 -- -- --
Cumulative effect of
change in accounting
principle............. -- -- -- -- 766 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 11,439 19,595 24,471 24,032 23,194 19,016 16,708
========== ========== ========== ========== ========== ========== ==========
DIVIDENDS
Preferred stock......... $ 4,237 4,237 5,736 5,735 5,766 1,951 906
Common stock............ -- -- -- -- -- -- --
Ratio of total dividends
declared to net
income................ 37.04% 21.62% 23.44% 23.86% 24.86% 10.26% 5.42%
PER SHARE DATA
Earnings per common
share:
Primary............. 304.39 649.08 791.82 773.31 741.69 719.51 682.75
Fully diluted....... 302.68 617.39 758.66 734.80 690.43 656.54 608.65
Weighted average shares
of common stock
outstanding........... 23,661 23,661 23,661 23,661 23,498 23,144 23,144
BALANCE SHEET DATA (AT
PERIOD-END)
Investment securities... $ 498,785 579,079 508,323 587,878 531,148 518,525 443,057
Loans, net of unearned
discount.............. 2,733,026 2,748,715 2,744,219 2,073,570 1,362,018 1,371,417 1,409,067
Total assets............ 3,546,154 3,699,961 3,622,962 2,879,570 2,031,909 2,047,022 1,996,459
Total deposits.......... 3,054,741 3,170,652 3,183,691 2,333,144 1,779,389 1,768,225 1,753,422
Notes payable........... 66,840 89,146 88,135 46,203 -- 30,038 34,630
Common stockholders'
equity................ 175,754 162,079 166,542 149,249 133,781 110,751 95,970
Total stockholders'
equity................ 243,592 230,142 234,605 217,312 201,844 180,814 111,033
EARNINGS RATIOS
Return on average total
assets<F2>............ 0.43% 0.76% 0.70% 1.00% 1.16% 0.95% 0.85%
Return on average total
stockholders'
equity<F2>............ 6.40 11.61 10.79 11.48 12.27 14.13 16.13
ASSET QUALITY RATIOS
Allowance for possible
loan losses to
loans................. 1.66 1.86 1.92 1.37 1.69 1.52 1.37
Nonperforming loans to
loans<F3>............. 1.22 1.43 1.44 0.78 0.90 0.81 0.74
Allowance for possible
loan losses to
nonperforming
loans<F3>............. 135.86 129.39 133.70 175.37 188.50 188.43 185.30
Nonperforming assets to
loans and foreclosed
assets<F4>............ 1.59 1.74 1.71 1.10 1.08 1.31 1.59
Net loan charge-offs to
average loans<F2>..... 0.79 0.50 0.41 0.09 0.33 0.65 0.47
CAPITAL RATIOS
Average total
stockholders' equity
to average total
assets................ 6.76 6.55 6.49 8.70 9.46 6.70 5.26
Total risk-based capital
ratio................. 9.56 9.67 9.34 12.68 16.90 14.71 10.20
Leverage ratio.......... 6.13 5.60 5.32 7.54 9.30 7.66 5.26
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS<F5>
Including interest on
deposits.............. 1.11 1.21 1.18 1.39 1.44 1.32 1.22
Excluding interest on
deposits.............. 1.58 1.80 1.75 3.24 4.65 4.55 4.47
<FN>
- ----------
<F1>The comparability of the selected data presented is affected by First
Banks' acquisition of nine banks and six thrifts during the periods
presented. The acquisitions were accounted for as purchases and, therefore,
the selected data includes the financial position and results of operations
of each acquired entity only for the periods subsequent to its date of
acquisition. See ``Management's Discussion and Analysis--Acquisitions.''
<F2>Ratios for the nine-month periods are annualized.
<F3>Nonperforming loans consist of nonaccrual loans and loans with restructured
terms.
<F4>Nonperforming assets consist of nonperforming loans and foreclosed assets.
<F5>For purposes of calculating the ratio of earnings to combined fixed charges
and preferred stock dividends, earnings consist of income before taxes plus
interest and rent expense. Fixed charges consist of interest and rent
expense.
</TABLE>
6
<PAGE> 12
RISK FACTORS
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors in evaluating First Banks and its business and First
Capital before purchasing the Preferred Securities offered hereby. Prospective
investors should note, in particular, that this Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the ``Securities Act''), and Section 21E of the
Securities Act of 1934, as amended (the ``Exchange Act''), and that actual
results could differ materially from those contemplated by such statements. The
considerations listed below represent certain important factors First Banks
believes could cause such results to differ. These considerations are not
intended to represent a complete list of the general or specific risks that may
affect First Banks and First Capital. It should be recognized that other risks
may be significant, presently or in the future, and the risks set forth below
may affect First Banks and First Capital to a greater extent than indicated.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
The obligations of First Banks under the Guarantee issued for the benefit
of the holders of Preferred Securities and under the Subordinated Debentures
are unsecured and rank subordinate and junior in right of payment to all Senior
Debt, Subordinated Debt and Additional Senior Obligations of First Banks. At
September 30, 1996, the aggregate outstanding Senior Debt, Subordinated Debt
and Additional Senior Obligations of First Banks was approximately $66.8
million. Because First Banks is a holding company, the right of First Banks to
participate in any distribution of assets of any Subsidiary Bank upon such
Subsidiary Bank's liquidation or reorganization or otherwise (and thus the
ability of holders of the Preferred Securities to benefit indirectly from such
distribution) is subject to the prior claims of creditors of that Subsidiary
Bank, except to the extent that First Banks may itself be recognized as a
creditor of that Subsidiary Bank. The Subordinated Debentures, therefore, will
be effectively subordinated to all existing and future liabilities of the
Subsidiary Banks and holders of Subordinated Debentures and Preferred
Securities should look only to the assets of First Banks for payments on the
Subordinated Debentures. Neither the Indenture, the Guarantee nor the Trust
Agreement places any limitation on the amount of secured or unsecured debt,
including Senior Debt, Subordinated Debt and Additional Senior Obligations,
that may be incurred by First Banks. See ``Description of the Guarantee--Status
of the Guarantee'' and ``Description of the Subordinated
Debentures--Subordination.''
The ability of First Capital to pay amounts due on the Preferred Securities
is solely dependent upon First Banks making payments on the Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSEQUENCES
First Banks has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Subordinated Debentures at any time or from time to time for a
period not exceeding 20 consecutive quarters with respect to each Extended
Interest Payment Period; provided that no Extended Interest Payment Period may
extend beyond the Stated Maturity of the Subordinated Debentures. As a
consequence of any such deferral, quarterly Distributions on the Preferred
Securities by First Capital will be deferred (and the amount of Distributions
to which holders of the Preferred Securities are entitled will accumulate
additional Distributions thereon at the rate of % per annum, compounded
quarterly from the relevant payment date for such Distributions) during any
such Extended Interest Payment Period. During any such Extended Interest
Payment Period, First Banks may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of First Banks' capital stock (other than the
reclassification of any class of First Banks' capital stock into another class
of capital stock or the conversion of the Class A Preferred Stock (as defined
herein) into Common Stock (as defined herein)), (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of First Banks that rank pari passu with or junior in interest
to the Subordinated Debentures or make any guarantee payments with respect to
any guarantee by First Banks of the debt securities of any subsidiary of First
Banks if such guarantee ranks pari passu with or junior in interest to the
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Subordinated Debentures or any
of the Preferred Securities. Prior to the termination of any such Extended
Interest Payment Period, First Banks may further defer the payment of interest;
provided that no
7
<PAGE> 13
Extended Interest Payment Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Subordinated Debentures. Upon the termination
of any Extended Interest Payment Period and the payment of all interest then
accrued and unpaid (together with interest thereon at the annual rate of %
compounded quarterly, to the extent permitted by applicable law), First Banks
may elect to begin a new Extended Interest Payment Period, subject to the above
requirements. Subject to the foregoing, there is no limitation on the number of
times that First Banks may elect to begin an Extended Interest Payment Period.
See ``Description of the Preferred Securities--Distributions--Extended Interest
Payment Period'' and ``Description of the Subordinated Debentures--Option to
Extend Interest Payment Period.''
Should an Extended Interest Payment Period occur, each holder of Preferred
Securities will be required to accrue and recognize income (in the form of
original issue discount) in respect of its pro rata share of the interest
accruing on the Subordinated Debentures held by First Capital for United States
federal income tax purposes. A holder of Preferred Securities must, as a
result, include such income in gross income for United States federal income
tax purposes in advance of the receipt of cash, and will not receive the cash
related to such income from First Capital if the holder disposes of the
Preferred Securities prior to the record date for the payment of the related
Distributions. See ``Certain Federal Income Tax Consequences--Potential
Extension of Interest Payment Period and Original Issue Discount.''
First Banks has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. Should First Banks elect, however, to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. A holder that disposes of its Preferred Securities
during an Extended Interest Payment Period, therefore, might not receive the
same return on its investment as a holder that continues to hold its Preferred
Securities. As a result of the existence of First Banks' right to defer
interest payments, the market price of the Preferred Securities may be more
volatile than the market prices of other securities on which original issue
discount accrues that are not subject to such optional deferrals.
TAX EVENT OR INVESTMENT COMPANY EVENT; REDEMPTION
First Banks has the right to redeem the Subordinated Debentures in whole
(but not in part) within 180 days following the occurrence of a Tax Event or
Investment Company Event (whether occurring before or after March 31, 2002),
and, therefore, cause a mandatory redemption of the Preferred Securities. The
exercise of such right is subject to First Banks having received prior approval
of the Federal Reserve to do so if then required under applicable capital
guidelines or policies of the Federal Reserve.
``Tax Event'' means the receipt by First Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) First Capital is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Subordinated Debentures, (ii) interest
payable by First Banks on the Subordinated Debentures is not, or, within 90
days of such opinion, will not be, deductible by First Banks, in whole or in
part, for United States federal income tax purposes, or (iii) First Capital is,
or will be within 90 days of the date of the opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges. First
Banks must request and receive an opinion with regard to such matters within a
reasonable period of time after it becomes aware of the possible occurrence of
any of the events described in clauses (i) through (iii) above.
``Investment Company Event'' means the receipt by First Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, First Capital is or will be
considered an ``investment company'' that is required to be registered under
the Investment Company Act of 1940, as amended (the ``Investment Company
Act''), which change becomes effective on or after the date of original
issuance of the Preferred Securities.
8
<PAGE> 14
See ``--Risk Factors Relating to the Preferred Securities--Proposed Tax
Legislation'' for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit First Banks to cause
a redemption of the Preferred Securities prior to March 31, 2002.
SHORTENING OR EXTENSION OF STATED MATURITY OF SUBORDINATED DEBENTURES
First Banks has the right, at any time, to shorten the maturity of the
Subordinated Debentures to a date not earlier than March 31, 2002. The exercise
of such right is subject to First Banks having received prior approval of the
Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve. First Banks also has the right to extend the
maturity of the Subordinated Debentures (whether or not First Capital is
terminated and the Subordinated Debentures are distributed to holders of the
Preferred Securities) to a date no later than March 31, 2046, the 49th
anniversary of the initial issuance of the Preferred Securities. Such right may
only be exercised, however, if at the time such election is made and at the
time of such extension (i) First Banks is not in bankruptcy, otherwise
insolvent or in liquidation, (ii) First Banks is not in default in the payment
of any interest or principal on the Subordinated Debentures, (iii) First
Capital is not in arrears on payments of Distributions on the Preferred
Securities and no deferred Distributions are accumulated, and (iv) First Banks
has a Senior Debt rating of investment grade. See ``Description of the
Subordinated Debentures--General.''
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the
extent not paid by First Capital, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that First
Capital has funds available therefor at such time, (ii) the Redemption Price
(as defined herein) with respect to any Preferred Securities called for
redemption, to the extent that First Capital has funds available therefor at
such time, and (iii) upon a voluntary or involuntary dissolution, winding-up or
liquidation of First Capital (other than in connection with the distribution of
Subordinated Debentures to the holders of Preferred Securities or a redemption
of all of the Preferred Securities), the lesser of (a) the amount of the
Liquidation Distribution (as defined herein), to the extent First Capital has
funds available therefor at such time, and (b) the amount of assets of First
Capital remaining available for distribution to holders of the Preferred
Securities in liquidation of First Capital. The holders of not less than a
majority in Liquidation Amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee under the
Guarantee. Any holder of the Preferred Securities may institute a legal
proceeding directly against First Banks to enforce its rights under the
Guarantee without first instituting a legal proceeding against First Capital,
the Guarantee Trustee or any other Person (as defined in the Guarantee). If
First Banks were to default on its obligation to pay amounts payable under the
Subordinated Debentures, First Capital would lack funds for the payment of
Distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and, in such event, holders of Preferred Securities would not be
able to rely upon the Guarantee for such amounts. In the event, however, that a
Debenture Event of Default has occurred and is continuing and such event is
attributable to the failure of First Banks to pay interest on or principal of
the Subordinated Debentures on the payment date on which such payment is due
and payable, then a holder of Preferred Securities may institute a legal
proceeding directly against First Banks for enforcement of payment to such
holder of the principal of or interest on such Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Preferred
Securities of such holder (a ``Direct Action''). The exercise by First Banks of
its right, as described herein, to defer the payment of interest on the
Subordinated Debentures does not constitute a Debenture Event of Default. In
connection with such Direct Action, First Banks will have a right of set-off
under the Indenture to the extent of any payment made by First Banks to such
holder of Preferred Securities in the Direct Action. Except as described
herein, holders of Preferred Securities will not be able to exercise directly
any other remedy available to the holders of the Subordinated Debentures or
assert directly any other rights in respect of the Subordinated Debentures. See
``Description of the Subordinated Debentures--Enforcement of Certain Rights by
Holders of Preferred Securities,'' ``Description of the Subordinated
Debentures--Debenture Events of Default'' and ``Description of the Guarantee.''
The Trust Agreement provides that each holder of Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
9
<PAGE> 15
NO VOTING RIGHTS EXCEPT IN LIMITED CIRCUMSTANCES
Holders of Preferred Securities will have no voting rights except in
limited circumstances relating only to the modification of the Preferred
Securities and the exercise of the rights of First Capital as holder of the
Subordinated Debentures and the Guarantee. Holders of Preferred Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee or
the Delaware Trustee, as such voting rights are vested exclusively in the
holder of the Common Securities (except upon the occurrence of certain events
described herein). The Property Trustee, the Administrative Trustees and First
Banks may amend the Trust Agreement without the consent of holders of Preferred
Securities to ensure that First Capital will be classified for United States
federal income tax purposes as a grantor trust even if such action adversely
affects the interests of such holders. See ``Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement'' and ``Description of
the Preferred Securities--Removal of First Capital Trustees.''
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the ``Proposed Legislation'') if such debt obligations have a maximum
term in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the ``Joint Statement'')
indicating their intent that certain legislative proposals initiated by the
Clinton administration, including the Proposed Legislation, that may be adopted
by either of the tax-writing committees of Congress would have an effective
date that is no earlier than the date of ``appropriate Congressional action.''
In addition, subsequent to the publication of the Joint Statement, Senator
Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B.
Rangel wrote letters to Treasury Department officials concurring with the views
expressed in the Joint Statement (the ``Democrat Letters''). Based upon the
Joint Statement and the Democrat Letters, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Subordinated Debentures. There can be no assurances, however, that the
effective date guidance contained in the Joint Statement and the Democrat
Letters will be incorporated into the Proposed Legislation, if enacted, or that
other legislation enacted after the date hereof will not otherwise adversely
affect the ability of First Banks to deduct the interest payable on the
Subordinated Debentures. There can, therefore, be no assurance that a Tax Event
will not occur. A Tax Event would permit First Banks, upon approval of the
Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve, to cause a redemption of the Preferred
Securities before, as well as after, March 31, 2002. See ``Description of the
Subordinated Debentures--Redemption or Exchange--Tax Event Redemption or
Investment Company Event Redemption'' and ``Certain Federal Income Tax
Consequences--Effect of Proposed Changes in Tax Laws.''
REDEMPTION; EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
First Banks has the right at any time to dissolve, wind-up or terminate
First Capital and cause the Subordinated Debentures to be distributed to the
holders of the Preferred Securities in exchange therefor in liquidation of
First Capital. The exercise of such right is subject to First Banks having
received prior approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve. First Banks
will have the right, in certain circumstances, to redeem the Subordinated
Debentures in whole or in part, in lieu of a distribution of the Subordinated
Debentures by First Capital, in which event First Capital will redeem the Trust
Securities on a pro rata basis to the same extent as the Subordinated
Debentures are redeemed by First Banks. Any such distribution or redemption
prior to the Stated Maturity will be subject to prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of the
Federal Reserve. See ``Description of the Preferred Securities--Redemption or
Exchange--Tax Event Redemption or Investment Company Event Redemption.''
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of First Capital would not be a
taxable event to holders of the Preferred Securities. If, however, First
Capital is characterized as an association taxable as a corporation at the time
of the dissolution of First Capital, the distribution of the Subordinated
Debentures may constitute a taxable event to holders of Preferred Securities.
Moreover, upon occurrence of a Tax Event, a dissolution of First Capital in
which holders of the Preferred Securities
10
<PAGE> 16
receive cash may be a taxable event to such holders. See ``Certain Federal
Income Tax Consequences--Receipt of Subordinated Debentures or Cash Upon
Liquidation of First Capital.''
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities upon a dissolution or liquidation of First Capital.
The Preferred Securities or the Subordinated Debentures, may, therefore, trade
at a discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Subordinated Debentures, prospective purchasers of Preferred Securities are
also making an investment decision with regard to the Subordinated Debentures
and should carefully review all the information regarding the Subordinated
Debentures contained herein.
If the Subordinated Debentures are distributed to the holders of Preferred
Securities upon the liquidation of First Capital, First Banks will use its best
efforts to list the Subordinated Debentures on The Nasdaq Stock Market's
National Market or such stock exchanges, if any, on which the Preferred
Securities are then listed.
TRADING PRICE; ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES
The Preferred Securities may trade at prices that do not fully reflect the
value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder of Preferred Securities that disposes of its
Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from First Capital for the period
prior to such disposition) will nevertheless be required to include accrued but
unpaid interest on the Subordinated Debentures through the date of disposition
in income as ordinary income and to add such amount to its adjusted tax basis
in its pro rata share of the underlying Subordinated Debentures deemed disposed
of. Such holder will recognize a capital loss to the extent the selling price
(which may not fully reflect the value of accrued but unpaid interest) is less
than its adjusted tax basis (which will include all accrued but unpaid
interest). Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes. See ``Certain Federal Income Tax Consequences--Disposition of
Preferred Securities.''
There is no current public market for the Preferred Securities. Although
application has been made to approve the Preferred Securities for quotation on
The Nasdaq Stock Market's National Market, there can be no assurance that an
active public market will develop for the Preferred Securities or that, if such
market develops, the market price will equal or exceed the public offering
price set forth on the cover page of this Prospectus. The public offering price
for the Preferred Securities has been determined through negotiations between
First Banks and the Underwriters. Prices for the Preferred Securities will be
determined in the marketplace and may be influenced by many factors, including
prevailing interest rates, the liquidity of the market for the Preferred
Securities, investor perceptions of First Banks and general industry and
economic conditions.
PREFERRED SECURITIES ARE NOT INSURED
The Preferred Securities are not insured by the Bank Insurance Fund (the
``BIF'') or the Savings Association Insurance Fund (the ``SAIF'') of the
Federal Deposit Insurance Corporation (the ``FDIC'') or by any other
governmental agency.
RISK FACTORS RELATING TO FIRST BANKS
IMPACT OF INTEREST RATE CHANGES
First Banks' results of operations are derived from the operations of the
Subsidiary Banks and are principally dependent on net interest income,
calculated as the difference between interest earned on loans and investments
and the interest expense paid on deposits and other borrowings. Like other bank
holding companies and financial institutions, First Banks' interest income and
interest expense are affected by general economic conditions and by the
policies of regulatory authorities, including the monetary policies of the
Federal Reserve. While management has taken measures intended to manage the
risks of operating in a changing interest rate environment, there can be no
assurance that such measures will be effective in avoiding undue interest rate
risk. See ``Management's Discussion and Analysis--General,'' ``--Net Interest
Income'' and ``--Interest Rate Risk Management.''
11
<PAGE> 17
CREDIT RISKS
First Banks, as a financial institution, is exposed to the risk that
customers to whom the Subsidiary Banks have made loans will be unable to repay
those loans according to their terms and that collateral securing such loans
(if any) may not be sufficient in value to assure repayment. Credit losses
could have a material adverse effect on First Banks' operating results. See
``Management's Discussion and Analysis--General'' and ``--Loans and Allowances
for Possible Loan Losses.''
GOVERNMENT REGULATION
Banking organizations are subject to extensive federal and state regulation
and supervision. These regulations and laws are primarily intended to protect
depositors and the FDIC, not shareholders or other creditors. Regulations and
laws affecting the financial institutions industry are undergoing continuous
change, and the ultimate effect of such changes cannot be predicted.
Regulations and laws affecting First Banks and the Subsidiary Banks may be
modified at any time, and new legislation affecting financial institutions may
be proposed and enacted. There is no assurance that such modifications or new
laws will not materially and adversely affect the business, condition or
operations of First Banks and the Subsidiary Banks or benefit competing
entities which may not be subject to the same regulation and supervision. See
``Supervision and Regulation--Recent and Pending Legislation.''
COMPETITION
The banking business is highly competitive. The Subsidiary Banks compete
with other commercial banks, savings and loan associations, credit unions,
mortgage banking companies, securities brokerage companies, insurance
companies, and money market mutual funds. Many of these competitors have
substantially greater resources than First Banks and the Subsidiary Banks and
offer certain services that First Banks and the Subsidiary Banks do not
currently provide. Such competitors may also have greater lending limits than
the Subsidiary Banks. The number of competitors may increase as a result of the
easing of restrictions on interstate banking effected under the Riegle-Neal
Interstate Banking and Efficiency Act of 1994. Non-bank competitors are also
generally not subject to the extensive regulations applicable to First Banks
and the Subsidiary Banks. See ``Business--Competition and Branch Banking'' and
``Supervision and Regulation--Recent and Pending Legislation.''
DIVIDENDS FROM SUBSIDIARY BANKS
The ability of First Banks to pay interest on the Subordinated Debentures
is largely dependent on its receipt of dividends from the Subsidiary Banks. The
amount of dividends that the Subsidiary Banks may pay to First Banks is limited
by various state and federal laws and by the regulations promulgated by their
respective primary regulators, which impose certain minimum capital
requirements. The amount of dividends that the Subsidiary Banks may pay to
First Banks is also limited by the provisions of the Credit Agreement, which
imposes certain minimum capital requirements. Under the most restrictive of
these requirements, the future payment of dividends to First Banks from the
Subsidiary Banks is limited, as of September 30, 1996, to approximately $37.8
million, unless permission of the regulatory authorities and, if necessary, the
lead bank for the lenders is obtained. See ``Supervision and Regulation--Bank
and Bank Holding Company Regulation--Dividends.''
CONTROL OF FIRST BANKS
All of the voting stock of First Banks is owned by various trusts which
were created by and are administered by and for the benefit of Mr. James F.
Dierberg, Chairman of the Board, President and Chief Executive Officer of First
Banks, and members of his immediate family. Mr. Dierberg, therefore, controls
the management and policies of First Banks and the election of its directors by
and through these trusts. The Class C Preferred Stock of First Banks has no
voting rights, except as required by law in certain limited situations and
except for the ability to elect two directors if First Banks fails to pay
dividends on such stock for six quarterly dividend periods. See ``Description
of Other Capital Stock.''
POTENTIAL LIABILITY FOR UNDERCAPITALIZED SUBSIDIARY BANK; CROSS GUARANTEE
Under federal law, a bank holding company may be required to guarantee a
capital plan filed by an undercapitalized bank or thrift subsidiary with its
primary regulator. If the subsidiary defaults under the plan, the holding
company
12
<PAGE> 18
may be required to contribute to the capital of the subsidiary bank an amount
equal to the lesser of 5% of the bank's assets at the time it became
undercapitalized or the amount necessary to bring the bank into compliance with
applicable capital standards. It is, therefore, possible that First Banks would
be required to contribute capital to one or more of the Subsidiary Banks or any
other bank that it may acquire in the event that one or more of the Subsidiary
Banks or such other bank becomes undercapitalized. As described under
``Management's Discussion and Analysis--Capital,'' for these purposes, First
Banks and each of its Subsidiary Banks have, as of September 30, 1996, capital
in excess of the requirements for a ``well-capitalized'' institution. A bank
insured by the FDIC may also be liable for costs incurred by the FDIC as a
result of the failure or near failure of another FDIC-insured bank under common
control with the bank. See ``Supervision and Regulation--Recent and Pending
Legislation.''
FIRST BANKS
First Banks, incorporated in Missouri in 1978, is headquartered in St.
Louis, Missouri and is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the ``BHCA'').
First Banks' wholly-owned Subsidiary Banks are First Bank, headquartered in
St. Louis County, Missouri (``First Bank (Missouri)''), First Bank,
headquartered in O'Fallon, Illinois (``First Bank (Illinois)''), and First Bank
FSB, headquartered in St. Louis County, Missouri (``First Bank FSB''). First
Banks' wholly-owned bank holding company subsidiary is CCB Bancorp, Inc.,
headquartered in Irvine, California (``CCB''). CCB's wholly-owned subsidiary is
First Bank & Trust, headquartered in Irvine, California (``FB&T''). First
Banks' majority-owned bank holding company subsidiaries are First Banks
America, Inc., headquartered in Houston, Texas (``FBA''), in which First Banks
holds a 67.30% equity interest, and First Commercial Bancorp, Inc.,
headquartered in Sacramento, California (``FCB''), in which First Banks holds a
61.46% equity interest (excluding the effect of the conversion of certain
debentures owned by First Banks). FCB owns all of the capital stock of First
Commercial Bank, headquartered in Sacramento, California (``First
Commercial''). FBA, through its wholly-owned subsidiary, owns all of the
capital stock of BankTEXAS, N.A., headquartered in Houston, Texas (``BTX''),
and Sunrise Bank of California, headquartered in Roseville, California
(``Sunrise''), which was acquired on November 1, 1996. First Bank (Missouri),
First Bank (Illinois), First Bank FSB, FB&T, First Commercial, BTX and Sunrise
are referred to herein as the ``Subsidiary Banks.''
The voting stock of First Banks is owned by various trusts which were
created by and are administered by and for the benefit of Mr. James F.
Dierberg, Chairman of the Board, President and Chief Executive Officer of First
Banks, and members of his immediate family. Mr. Dierberg, therefore, controls
the management and policies of First Banks and the election of its directors.
First Banks also has a class of non-voting preferred stock, the Class C
Preferred Stock, which is traded on The Nasdaq Stock Market's National Market
under the symbol FBNKP.
First Banks' principal executive office is located at 135 North Meramec
Avenue, Clayton, Missouri 63105, and its telephone number is (314) 854-4600.
USE OF PROCEEDS
First Capital will use the gross proceeds received from the sale of the
Preferred Securities to purchase Subordinated Debentures from First Banks.
First Banks intends to use the net proceeds from the sale of the Subordinated
Debentures to, temporarily, reduce the amount of its indebtedness under the
Credit Agreement, although First Banks expects the amount outstanding
thereunder to increase in the future and to use any subsequent borrowings under
the Credit Agreement (see ``Capitalization'') for general corporate purposes,
including the possible (i) repurchase or redemption of all or a portion of its
outstanding Class C Preferred Stock (which becomes redeemable on December 1,
1997), (ii) funding of investments in, or extensions of credit to, its
banking and nonbanking subsidiaries, (iii) acquisition of other financial
institutions or their assets or liabilities, and (iv) acquisition of or
investment in other businesses of a type eligible for bank holding companies.
First Banks may, from time to time, engage in additional capital financings of
a character and in amounts to be determined by First Banks in light of its
needs at such time or times and in light of prevailing market conditions.
The Credit Agreement, which is among First Banks and The Boatmen's National
Bank of St. Louis, as lender and agent, and various other unaffiliated
financial institutions, includes a $50 million term loan and a $40 million
revolving line of credit to be used for acquisitions and other corporate
requirements. The obligations of First Banks under the Credit Agreement are
secured by the stock of the wholly-owned Subsidiary Banks and the stock First
13
<PAGE> 19
Banks owns in any intermediate bank holding company. The term loan requires
quarterly principal payments of $2.5 million and matures on July 12, 2000. The
revolving line of credit matures on July 11, 1997, subject to annual renewal.
The interest rate for the term loan is the agent bank's corporate base rate or,
at the option of First Banks, the London Inter-Bank Offered Rate (``LIBOR'')
plus 1.5%, and the interest rate for the revolving line of credit is the agent
bank's corporate base rate or, at the option of First Banks, LIBOR plus 1.25%.
At September 30, 1996, $47.5 million was outstanding under the term loan
portion of the Credit Agreement and $18.0 million was outstanding under the
revolving line of credit portion of the Credit Agreement. At December 19, 1996,
$45.0 million was outstanding under the term loan portion of the Credit
Agreement and $30.0 million was outstanding under the revolving line of credit
portion of the Credit Agreement.
MARKET FOR THE PREFERRED SECURITIES
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market under the symbol FBNKO.
Although the Underwriters have informed First Banks that they presently intend
to make a market in the Preferred Securities, there can be no assurance that an
active and liquid trading market will develop or, if developed, that such a
market will continue. The offering price and distribution rate have been
determined by negotiations among representatives of First Banks and the
Underwriters, and the offering price of the Preferred Securities may not be
indicative of the market price following the offering. See ``Underwriting.''
ACCOUNTING TREATMENT
First Capital will be treated, for financial reporting purposes, as a
subsidiary of First Banks and, accordingly, the accounts of First Capital will
be included in the consolidated financial statements of First Banks. The
Preferred Securities will be presented as a separate line item in the
consolidated balance sheet of First Banks under the caption ``Guaranteed
Preferred Beneficial Interests in Company's Subordinated Debentures,'' and
appropriate disclosures about the Preferred Securities, the Guarantee and the
Subordinated Debentures will be included in the notes to consolidated financial
statements. First Banks will record Distributions payable on the Preferred
Securities as an expense in the consolidated statements of operations for
financial reporting purposes.
All future reports of First Banks filed under the Exchange Act will (a)
present the Trust Securities issued by First Capital on the balance sheet as a
separate line-item entitled ``Guaranteed preferred beneficial interests
Company's subordinated debentures,'' (b) include in a footnote to the financial
statements disclosure that the sole assets of First Capital are the
Subordinated Debentures (including the outstanding principal amount, interest
rate and maturity date of such Subordinated Debentures), and (c) include in an
audited footnote to the financial statements disclosure that First Banks owns
all of the Common Securities of First Capital, the sole assets of First Capital
are the Subordinated Debentures, and the back-up obligations, in the aggregate,
constitute a full and unconditional guarantee by First Banks of the obligations
of First Capital under the Preferred Securities.
14
<PAGE> 20
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of First
Banks at September 30, 1996 and (ii) the consolidated capitalization of First
Banks giving effect to the issuance of the Preferred Securities hereby offered
by First Capital and receipt by First Banks of the net proceeds from the
corresponding sale of the Subordinated Debentures to First Capital, as if the
sale of the Preferred Securities had been consummated on September 30, 1996,
and assuming the Underwriters' over-allotment option was not exercised.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
LONG-TERM DEBT:
Notes payable......................................................................... $ 66,840 9,390<F1>
-------- -------
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN FIRST BANKS' SUBORDINATED DEBENTURES:
Guaranteed preferred beneficial interests in First Banks' subordinated
debentures...................................................................... -- 60,000
Less expenses relating to the issuance of the Preferred Securities................ -- (2,550)
-------- -------
Net proceeds from the sale of guaranteed preferred beneficial interests in
First Banks' subordinated debentures....................................... -- 57,450
-------- -------
STOCKHOLDERS' EQUITY:
Preferred stock:
Class C 9.00%, increasing rate, redeemable, cumulative, $1.00 par value, $25.00
stated value; 5,000,000 shares authorized; 2,191,000 shares issued and
outstanding as of September 30, 1996............................................ 54,775 54,775
Class A convertible, adjustable rate, $20.00 par value; 750,000 shares authorized,
641,082 shares issued and outstanding........................................... 12,822 12,822
Class B adjustable rate, $1.50 par value; 200,000 shares authorized; 160,505
shares issued and outstanding................................................... 241 241
Common stock, $250.00 par value; 25,000 shares authorized; 23,661 shares issued and
outstanding.......................................................................... 5,915 5,915
Capital surplus....................................................................... 4,237 4,237
Retained earnings..................................................................... 163,894 163,894
Net fair value adjustment for securities available for sale........................... 1,708 1,708
-------- -------
Total stockholders' equity.................................................... 243,592 243,592
-------- -------
Total capitalization.......................................................... $310,432 310,432
======== =======
CAPITAL RATIOS:
Stockholders' equity to total assets.................................................. 6.87% 6.87%
Leverage ratio<F2><F3><F4>............................................................ 6.13 6.13
Risk-based capital ratios:<F4>
Tier 1 capital to risk-weighted assets............................................ 8.23 8.23
Total risk-based capital to risk-weighted assets.................................. 9.56 11.80
<FN>
- --------
<F1>Reflects the temporary reduction of indebtedness under the Credit
Agreement. See ``Use of Proceeds.''
<F2>The leverage ratio is Tier 1 capital divided by average quarterly assets,
after deducting intangible assets and net deferred tax assets in excess of
regulatory maximum limits. See ``Management's Discussion and Analysis--
Capital.''
<F3>The capital ratios, as adjusted, are computed including the total estimated
net proceeds from the sale of the Preferred Securities, in a manner
consistent with Federal Reserve guidelines.
<F4>Federal Reserve guidelines for calculation of Tier 1 capital to
risk-weighted assets limits the amount of cumulative preferred stock which
can be included in Tier 1 capital to 25% of other Tier 1 capital. The Class
C Preferred Stock currently outstanding exceeds this limitation. The
Preferred Securities, although eligible for treatment as Tier 1 capital
under current Federal Reserve guidelines, will not increase First Banks'
Tier 1 capital until either the other components of First Banks' Tier 1
capital increase or the Class C Preferred Stock outstanding decreases
sufficiently to satisfy the foregoing limitation.
</TABLE>
15
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA<F1>
The selected consolidated financial data set forth below, insofar as it
relates to the five years ended December 31, 1995, are derived from the audited
consolidated financial statements of First Banks. The data for the nine-month
periods ended September 30, 1995 and 1996 have been derived from unaudited
interim financial statements; however, in the opinion of First Banks, such
unaudited interim statements include all adjustments (consisting of normal
recurring accruals) necessary to fairly present the data for such periods. The
results of operations for the nine month period ended September 30, 1996, are
not necessarily indicative of results to be achieved for the full year. Such
data are qualified by reference to the consolidated financial statements
included elsewhere in this Prospectus or incorporated by reference and should
be read in conjunction with such financial statements and related notes thereto
and ``Management's Discussion and Analysis.''
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA
Interest income......... $ 197,008 192,051 261,621 162,435 140,012 161,303 178,714
Interest expense........ 106,580 106,350 144,945 70,760 58,058 79,529 106,848
---------- --------- --------- --------- --------- --------- ---------
Net interest income..... 90,428 85,701 116,676 91,765 81,954 81,774 71,866
Provision for possible
loan losses........... 8,774 8,449 10,361 1,858 4,456 10,435 9,773
---------- --------- --------- --------- --------- --------- ---------
Net interest income
after provision for
possible loan
losses................ 81,654 77,252 106,315 89,907 77,498 71,339 62,093
Noninterest income...... 15,798 17,642 19,407 13,634 9,953 11,140 12,742
Noninterest expense..... 81,237 66,701 91,566 67,734 53,431 53,953 49,088
---------- --------- --------- --------- --------- --------- ---------
Income before provision
for income taxes,
minority interest in
(income) loss of
subsidiary and
cumulative effect of
change in accounting
principle............. 16,215 28,193 34,156 35,807 34,020 28,526 25,747
Provision for income
taxes................. 4,304 9,414 11,038 12,012 11,592 9,510 9,039
---------- --------- --------- --------- --------- --------- ---------
Income before minority
interest in (income)
loss of subsidiary and
cumulative effect of
change in accounting
principle............. 11,911 18,779 23,118 23,795 22,428 19,016 16,708
Minority interest in
(income) loss of
subsidiary............ (472) 816 1,353 237 -- -- --
Cumulative effect of
change in accounting
principle............. -- -- -- -- 766 -- --
---------- --------- --------- --------- --------- --------- ---------
Net income.............. $ 11,439 19,595 24,471 24,032 23,194 19,016 16,708
========== ========= ========= ========= ========= ========= =========
DIVIDENDS
Preferred stock......... $ 4,237 4,237 5,736 5,735 5,766 1,951 906
Common stock............ -- -- -- -- -- -- --
Ratio of total dividends
declared to net
income................ 37.04% 21.62% 23.44% 23.86% 24.86% 10.26% 5.42%
PER SHARE DATA
Earnings per common
share:
Primary............. 304.39 649.08 791.82 773.31 741.69 719.51 682.75
Fully diluted....... 302.68 617.39 758.66 734.80 690.43 656.54 608.65
Weighted average shares
of common stock
outstanding........... 23,661 23,661 23,661 23,661 23,498 23,144 23,144
BALANCE SHEET DATA (AT
PERIOD-END)
Investment securities... $ 498,785 579,079 508,323 587,878 531,148 518,525 443,057
Loans, net of unearned
discount.............. 2,733,026 2,748,715 2,744,219 2,073,570 1,362,018 1,371,417 1,409,067
Total assets............ 3,546,154 3,699,961 3,622,962 2,879,570 2,031,909 2,047,022 1,996,459
Total deposits.......... 3,054,741 3,170,652 3,183,691 2,333,144 1,779,389 1,768,225 1,753,422
Notes payable........... 66,840 89,146 88,135 46,203 -- 30,038 34,630
Common stockholders'
equity................ 175,754 162,079 166,542 149,249 133,781 110,751 95,970
Total stockholders'
equity................ 243,592 230,142 234,605 217,312 201,844 180,814 111,033
EARNINGS RATIOS
Return on average total
assets<F2>............ 0.43% 0.76% 0.70% 1.00% 1.16% 0.95% 0.85%
Return on average total
stockholders'
equity<F2>............ 6.40 11.61 10.79 11.48 12.27 14.13 16.13
ASSET QUALITY RATIOS
Allowance for possible
loan losses to
loans................. 1.66 1.86 1.92 1.37 1.69 1.52 1.37
Nonperforming loans to
loans<F3>............. 1.22 1.43 1.44 0.78 0.90 0.81 0.74
Allowance for possible
loan losses to
nonperforming
loans<F3>............. 135.86 129.39 133.70 175.37 188.50 188.43 185.30
Nonperforming assets to
loans and foreclosed
assets<F4>............ 1.59 1.74 1.71 1.10 1.08 1.31 1.59
Net loan charge-offs to
average loans<F2>..... 0.79 0.50 0.41 0.09 0.33 0.65 0.47
CAPITAL RATIOS
Average total
stockholders' equity
to average total
assets................ 6.76 6.55 6.49 8.70 9.46 6.70 5.26
Total risk-based capital
ratio................. 9.56 9.67 9.34 12.68 16.90 14.71 10.20
Leverage ratio.......... 6.13 5.60 5.32 7.54 9.30 7.66 5.26
Ratio of earnings to
combined fixed charges
and preferred stock
dividends<F5>:
Including interest
on deposits........ 1.11 1.21 1.18 1.39 1.44 1.32 1.22
Excluding interest
on deposits........ 1.58 1.80 1.75 3.24 4.65 4.55 4.47
<FN>
- ----------
<F1>The comparability of the selected data presented is affected by First
Banks' acquisition of nine banks and six thrifts during the periods
presented. The acquisitions were accounted for as purchases and, therefore,
the selected data includes the financial position and results of operations
of each acquired entity only for the periods subsequent to its date of
acquisition. See ``Management's Discussion and Analysis--Acquisitions.''
<F2>Ratios for the nine-month periods are annualized.
<F3>Nonperforming loans consist of nonaccrual loans and loans with restructured
terms.
<F4>Nonperforming assets consist of nonperforming loans and foreclosed assets.
<F5>For purposes of calculating the ratio of earnings to combined fixed charges
and preferred stock dividends, earnings consist of income before taxes plus
interest and rent expense. Fixed charges consist of interest and rent
expense.
</TABLE>
16
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis contains forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Actual results could differ materially from those projected in
such forward-looking statements as a result of, among other things, the factors
set forth in the section entitled ``Risk Factors.''
GENERAL
First Banks expanded rapidly through acquisitions during the years ended
December 31, 1994 and 1995. Total assets increased from $2.03 billion on
January 1, 1994 to $3.62 billion on December 31, 1995, an increase of 78.3%.
First Banks' net income for these periods was, however, adversely affected by
expenses resulting from the amalgamation of those acquisitions into its systems
and operating culture, as well as certain other non-recurring items.
Consequently, net income of First Banks was $11.4 million for the nine months
ended September 30, 1996, compared with $19.6 million for the same period in
1995. For the year ended December 31, 1995, net income was $24.5 million,
compared with $24.0 million for the year 1994. This represents a return on
average assets of .43% and .76% for the nine months ended September 30, 1996
and 1995, respectively. This compares to First Banks' historical levels of
return on average assets of .70%, 1.00% and 1.16% for the years ended December
31, 1995, 1994 and 1993, respectively.
First Banks has, in the development of its banking franchise, traditionally
placed primary emphasis upon acquiring other financial institutions as a means
of achieving its growth objectives in order to enhance its presence in a given
market, expand the extent of its market area, or enter new or non-contiguous
markets. First Banks supplements its acquisitions through marketing and
business development efforts designed to broaden the customer bases, strengthen
particular segments of the business or fill in voids in the overall market
coverage. Because all of the Common Stock of First Banks is owned by various
trusts which were created by and are administered by and for the benefit of Mr.
James F. Dierberg and members of his immediate family, First Banks has
determined to use only cash, not common stock, in its acquisitions. Given the
market attractiveness of financial institutions' stock, the advantages of
tax-free exchanges and the structuring flexibility inherent in stock
transactions, the fact that First Bank has determined not to issue stock in its
acquisitions places it at a competitive disadvantage relative to other
acquirers willing to offer stock. In light of these factors, First Banks'
acquisition activities have been sporadic, with multiple transactions
consummated in particular periods, followed by other relatively inactive
periods. Furthermore, the resulting intangible assets recorded in conjunction
with such acquisitions create an immediate reduction in regulatory capital.
This reduction, as required by regulatory policy, provides further financial
disincentives to paying large premiums in cash acquisitions.
Recognizing these facts, First Banks has followed certain patterns in its
acquisitions. First, it tends to acquire several smaller institutions,
sometimes over an extended period of time, rather than a single larger one.
This is due both to the constraints imposed by the amount of funds required for
the larger transaction, as well as the opportunity to minimize the aggregate
premium required through smaller individual transactions. Secondly, it may
acquire institutions which have some problems which could reduce the
attractiveness to other potential acquirers, and therefore reduce the amount of
acquisition premiums required. Finally, First Banks realizes that various
acquisition markets may become so competitive at times that cash transactions
are not economically viable, thereby requiring it to pursue its acquisition
strategy in other geographic areas. This pattern has been evident in First
Banks acquisitions in the two years ended December 31, 1995.
During 1995 and 1994, First Banks experienced substantial growth through
the acquisition of seven banks and five thrifts. These included two
acquisitions in Missouri, three in Illinois, one in Texas and six in
California. These acquisitions, as more fully discussed below, provided access
into several new major market areas and, accordingly, an attractive opportunity
for future growth and profitability. While providing this long term
opportunity, these acquisitions presented several immediate challenges. Many of
the acquired institutions, particularly those in California, continue to
experience significant asset quality problems. While these asset quality
problems had been identified and considered in the acquisition pricing, these
problems led to the substantial increase in the level of First Banks'
nonperforming assets to $43.7 million at September 30, 1996 and $47.1 million
at December 31, 1995, from $22.9 million and $14.8 million at December 31, 1994
and 1993, respectively. In addition to the loss of income on these assets, they
required substantial dedication of management and other resources to control.
17
<PAGE> 23
The combination of five diverse institutions into a single financial
institution, FB&T, and the conversion of that entity to First Banks' systems
and policies required a further commitment of time and effort. The relatively
high operating costs at these institutions necessitated the re-engineering of
the operating structures and cultures, including the redeployment and repricing
of assets, the realignment of deposit products, the reorganization of personnel
and the centralization of various bank functions. The combination of the costs
of managing and servicing the portfolios of nonperforming assets, the excessive
operating cost structures of the acquired entities and the additional costs
associated with the re-engineering process inhibited the acquired institutions
from generating income since their acquisition dates commensurate with their
acquisition costs.
Operating results during the years 1994 and 1995 and the nine months ended
September 30, 1996 have also been adversely affected by the lower net interest
margin earned by the thrifts acquired by First Banks compared with those
generally earned by commercial banks. The lower net interest margin earned by
the acquired thrifts, primarily River Valley Holdings, Inc. (``River Valley'')
and First Federal Savings Bank of Proviso Township (``First Federal''), is
attributable to their primary source of interest income and the composition of
their deposit bases. Their primary source of interest income is their portfolio
of residential mortgage loans and residential mortgage-backed securities, which
typically yield lower interest rates than other types of interest-earning
assets. In addition, the cost of deposits is generally higher due to the
composition, which includes a smaller portion of noninterest bearing accounts,
and slightly higher rates paid to maintain the time deposits within the
competitive markets.
Recognizing that the acquisition program involved the assumption of
additional credit risk and lower than normal net interest margins for the
thrift acquisitions, First Banks pursued a strategy of maintaining higher than
average asset quality for its Missouri and Illinois operations through strict
adherence to its lending policies and practices. To accomplish this, First
Banks expanded its credit administration and loan review functions. In
addition, in response to the interest rate risk inherent within the balance
sheets of its thrifts, First Banks commenced a program designed to reduce its
exposure to interest rate fluctuations.
The effort to increase control over the interest rate exposure of First
Banks led to substantially more sophisticated measurement systems and the
implementation of a hedging program. Once the interest rate risk profile of
First Banks was adequately analyzed, the hedging program was implemented during
early 1994. At that time, however, interest rates had already increased. While
the hedging program prevented further deterioration in the net interest margin,
it eliminated the opportunity to recover from the increase in interest rates
which had already occurred. As more fully discussed under ``--Interest Rate
Risk Management,'' as interest rates began to decline in 1995, the underlying
hedges were adjusted to reflect the increase in prepayments which were
subsequently received and the corresponding shortening of the effective lives
of the residential real estate asset portfolios. These factors and the cost of
implementing the hedging program have had an adverse effect on net interest
income and the net interest margin.
Finally, in September 1996, a one-time special assessment to recapitalize
the SAIF of the FDIC was enacted. The assessment was applied to all thrift
deposits as of March 31, 1995. Because First Banks had been active in acquiring
thrifts, a substantial portion of its deposit base was subject to the special
assessment. This special assessment resulted in an $8.6 million charge, which
was recorded as an expense during the nine months ended September 30, 1996. As
a result of this special assessment, First Banks' cost of deposit insurance for
SAIF insured deposits is expected to decrease by approximately $2.0 million for
the year ended December 31, 1997 in comparison to December 31, 1996, excluding
the effect of the special one-time assessment.
ACQUISITIONS
Prior to 1994, First Banks' acquisitions had been concentrated within its
primary market area of eastern Missouri and southern Illinois. The premiums
required to successfully pursue acquisitions escalated sharply in 1993,
reducing dramatically the economic viability of many potential acquisitions in
that area. Recognizing this, First Banks began to expand the geographic area in
which it approached acquisition candidates. While First Banks was successful in
making acquisitions in Chicago and northern Illinois, it became apparent that
acquisition pricing, in Chicago and other areas being considered, was
comparable to that of First Banks' primary acquisition area. As a result, while
First Banks continued to pursue acquisitions within these areas, it turned much
of its attention in 1994 and 1995 to institutions which could be acquired at
more attractive prices which were within major metropolitan areas outside its
immediate market area. This led to the acquisition of financial institutions
which had offices in Dallas and Houston,
18
<PAGE> 24
Texas in 1994 and Los Angeles, Orange County, Santa Barbara, San Francisco, San
Jose and Sacramento, California in 1995.
During 1996, 1995 and 1994, First Banks completed thirteen acquisitions.
These acquisitions, as more fully described in Notes 2 and 21 to the
Consolidated Financial Statements, are summarized as follows:
<TABLE>
<CAPTION>
LOANS, NET OF NUMBER OF
TOTAL UNEARNED INVESTMENT BANKING
ENTITY DATE ASSETS DISCOUNT SECURITIES DEPOSITS LOCATIONS
------ ---- ------ ------------- ---------- -------- ---------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1996
Sunrise Bancorp, Inc.
Roseville, California<F1> November 1, 1996 $ 112,400 61,100 18,100 92,000 3
========== ======= ======= ======= ==
1995
QCB Bancorp
Long Beach, California<F2> November 30, 1995 $ 56,200 35,100 10,700 50,200 3
La Cumbre Savings Bank F.S.B.
Santa Barbara, California<F2> September 1, 1995 144,000 131,000 1,000 124,000 3
First Commercial Bancorp, Inc.
Sacramento, California August 23, 1995 169,000 84,600 30,700 163,600 7
Irvine City Financial
Irvine, California<F2> May 31, 1995 83,300 68,700 7,500 61,600 2
HNB Financial Group
Huntington Beach,
California<F2> April 28, 1995 88,000 62,800 10,500 76,300 3
CCB Bancorp, Inc.
Santa Ana, California March 15, 1995 193,400 114,500 31,100 156,400 3
River Valley Holdings, Inc.
Chicago, Illinois<F3> January 4, 1995 412,000 225,000 125,000 286,000 10
---------- ------- ------- ------- --
$1,145,900 721,700 216,500 918,100 31
========== ======= ======= ======= ==
1994
St. Charles Federal Savings and Loan
Association
St. Charles, Missouri<F6> November 30, 1994 $ 90,000 54,400 29,600 68,900 1
First Banks America, Inc.
(formerly BancTEXAS Group Inc.)
Houston, Texas August 31, 1994 367,000 177,000 167,000 243,600 6
Farmers Bancshares, Inc.
Breese, Illinois<F4> June 3, 1994 60,700 27,100 28,300 54,500 2
Heritage National Bank
St. Louis County, Missouri<F5> March 31, 1994 63,800 32,200 21,200 57,100 2
First Federal Savings Bank of Proviso
Township
Chicago, Illinois<F3> January 3, 1994 230,000 57,900 153,800 168,500 1
---------- ------- ------- ------- --
$ 811,500 348,600 399,900 592,600 12
========== ======= ======= ======= ==
<FN>
- --------
<F1>Sunrise Bancorp, Inc. was acquired subsequent to September 30, 1996 and,
accordingly, is not reflected in the consolidated financial statements as
of September 30, 1996.
<F2>QCB Bancorp, Irvine City Financial and HNB Financial Group and their
respective banking and thrift subsidiaries were merged into CCB Bancorp,
Inc. and its wholly owned banking subsidiary, FB&T. LaCumbre Savings Bank
F.S.B. was merged into FB&T.
<F3>River Valley Savings Bank, F.S.B., a wholly-owned thrift subsidiary of
River Valley Holdings, Inc., and First Federal Savings Bank of Proviso
Township were merged into First Bank FSB.
<F4>Farmers Bancshares, Inc. and its banking subsidiaries were merged into
First Banks and First Bank Illinois, respectively.
<F5>Heritage National Bank was merged into First Bank Missouri.
<F6>First Bank FSB and St. Charles Federal Savings and Loan Association (``St.
Charles Federal'') merged on December 12, 1996 and will collectively
operate as First Bank FSB.
</TABLE>
19
<PAGE> 25
The aforementioned acquisitions were funded by First Banks, Inc. from
available cash reserves, proceeds from the sales and maturities of available
for sale investment securities, borrowings under promissory notes to former
shareholders, and borrowings under the Credit Agreement. See ``Notes 2 and 21
to the Consolidated Financial Statements.''
FINANCIAL CONDITION AND AVERAGE BALANCES
First Banks' total average assets were $3.53 billion and $3.44 billion for
the nine month periods ended September 30, 1996 and 1995, respectively, in
comparison to $3.50 billion, $2.41 billion and $2.00 billion for the years
ended December 31, 1995, 1994 and 1993, respectively. Total assets decreased by
$70 million to $3.55 billion at September 30, 1996 from $3.62 billion at
December 31, 1995. The decrease is primarily attributable to the reduction in
net loans of $11 million and the settlement in January 1996 of the sale of $41
million of investment securities carried as a receivable at December 31, 1995.
In addition, cash and cash equivalents and investment securities decreased by
$17 million and $10 million, respectively, as of September 30, 1996, in
comparison to December 31, 1995. The funds generated from the reduction in
total assets were utilized to reduce rate-sensitive deposits. The decrease in
net loans is comprised of the reductions in the residential mortgage and
consumer and installment loan portfolios of $108.5 million and $68.0 million,
respectively, at September 30, 1996 in comparison to December 31, 1995.
Substantially offsetting these decreases, is an increase of $135.8 million in
loans within the corporate banking portfolio. These changes reflect a
restructuring of the loan portfolio which was initiated in early 1995. In
accordance with that plan, First Banks has sold substantially all of its
conforming residential mortgage production in the secondary mortgage market and
has significantly reduced its origination of indirect consumer automobile
loans. Tables summarizing the composition of the loan portfolio and deposits
are presented under ``--Lending and Credit Management'' and ``--Deposits.''
For the year ended December 31, 1995, total average assets increased by
$1.09 billion primarily as a result of the assets provided by acquisitions of
$1.15 billion and internal loan growth of $66 million. This was partially
offset by sales of investment securities and residential mortgage loans of $399
million and $147 million, respectively, most of which were used to fund loan
growth and to reduce borrowings. The internal loan growth is primarily
attributable to the corporate banking activities of First Banks. Each regional
lending area within First Banks' marketplace experienced growth during 1995.
The continued growth within corporate banking is reflective of First Banks'
commitment to expand its presence in its markets. The sales of investment
securities were executed in connection with the restructuring of the acquired
entities' investment portfolios, to provide funds for internal loan growth and
to reduce borrowings.
First Banks' acquisition program during 1994 and 1995, coupled with its
internal growth in residential mortgage loans resulted in a consolidated loan
portfolio which had a disproportionate amount of such loans. Although the
credit risk associated with residential mortgage loans is generally relatively
small, the performance of these loans in periods of changing interest rates
makes their interest rate risk more difficult to manage than most other types
of loans. Consequently, First Banks concluded that its residential mortgage
loan portfolio as a percentage of the total loans should be reduced.
Accordingly, during the nine months ended September 30, 1996, First Banks sold
$147 million of residential mortgage loans which resulted in a loss of
$284,000. During the nine months ended September 30, 1996, First Banks sold
various pools of residential mortgage loans held by entities acquired in 1995.
The net gains and losses from these transactions was not material.
The average balance of notes payable increased by $67.6 million to $83.1
million for 1995, in comparison to $15.5 million and $3.3 million for 1994 and
1993, respectively. The increase was used to provide funds for acquisitions
completed during 1995 and 1994.
For the year ended December 31, 1994, total average assets increased by
$409 million. The increase is attributable to the five acquisitions completed
during the year and internal loan growth primarily within the residential and
commercial real estate loan portfolios. The residential loan growth resulted
from a shift in customer preference from longer term fixed-rate loans, which
First Banks sells in the secondary mortgage market, to adjustable rate and
balloon type residential loans, which are eligible for inclusion in First
Banks' loan portfolio. This shift in customer preference is normal during
periods of increasing interest rates such as 1994. The growth in the commercial
real estate loan portfolio is the result of the acquisitions completed during
the year, the increased business development efforts of First Banks' lending
officers, and generally improving economic conditions.
20
<PAGE> 26
Average stockholders' equity continued to increase over these periods, from
$189.0 million at December 31, 1993 to $238.3 million at September 30, 1996, or
by $49.3 million. The increase is attributable to First Banks' practice of
retaining most of its net income to further support future growth.
The following table sets forth, on a tax-equivalent basis, certain
information relating to First Banks' average balance sheet, and reflects the
average yield earned on interest-earning assets, the average cost of
interest-bearing liabilities and the resulting net interest income for the
periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------------
1996 1995
------------------------------ ------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- -------- ------ ------- -------- ------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans:<F1><F2>
Taxable................................... $2,701,314 174,608 8.62% $2,538,575 161,143 8.46%
Tax-exempt<F3>............................ 12,130 1,003 11.03 13,321 1,182 11.83
Investment securities:
Taxable<F4>............................... 470,919 16,939 4.80 593,007 26,513 5.96
Tax-exempt<F3>............................ 23,551 1,544 8.74 27,056 1,650 8.13
Federal funds sold............................ 62,424 2,437 5.21 43,877 1,606 4.88
Other......................................... 31,994 1,345 5.61 11,714 971 11.05
---------- ------- ---------- -------
Total interest-earning assets......... 3,302,332 197,876 7.99 3,227,550 193,065 7.98
------- -------
Nonearning assets................................. 222,692 210,314
---------- ----------
Total assets.......................... $3,525,024 $3,437,864
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing demand deposits.............. $ 298,990 3,530 1.57% $ 275,788 4,238 2.05%
Savings deposits.............................. 684,640 16,953 3.30 645,951 16,675 3.44
Time deposits of $100 or more<F4>............. 169,889 7,545 5.92 153,274 6,810 5.92
Other time deposits<F4>....................... 1,590,836 71,332 5.98 1,398,234 59,630 5.69
---------- ------- ---------- -------
Total interest-bearing deposits....... 2,744,355 99,360 4.83 2,473,247 87,353 4.71
Federal funds purchased, repurchase agreements and
Federal Home Loan Bank advances<F4>............. 62,354 3,187 6.81 295,474 14,653 6.61
Notes payable and other........................... 78,340 4,032 6.86 80,465 4,344 7.20
---------- ------- ---------- -------
Total interest-bearing liabilities.... 2,885,049 106,579 4.93 2,849,186 106,350 4.98
------- -------
Noninterest-bearing liabilities:
Demand deposits............................... 365,413 331,067
Other liabilities............................. 36,252 32,585
---------- ----------
Total liabilities..................... 3,286,714 3,212,838
Stockholders' equity.............................. 238,310 225,026
---------- ----------
Total liabilities and stockholders'
equity.............................. $3,525,024 $3,437,864
========== ==========
Net interest income................... 91,297 86,715
======= =======
Net interest margin................... 3.69% 3.58%
===== =====
<FN>
- ---------
<F1>For purposes of these computations, nonaccrual loans are included in the
average loan amounts.
<F2>Interest income on loans includes loan fees.
<F3>Information is presented on a tax-equivalent basis assuming a tax rate of
35%. The tax-equivalent adjustments were approximately $892,000 and
$991,000 for the nine months ended September 30, 1996 and 1995, respec-
tively, and $1.3 million, $1.3 million and $984,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
<F4>Includes the effects of interest rate exchange agreements.
</TABLE>
21
<PAGE> 27
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------- --------------------------------- ---------------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------ ------- -------- ------ ------- -------- ------
(DOLLARS EXPRESSED IN THOUSANDS)
<C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,585,763 220,931 8.54% $1,602,661 128,708 8.03% $1,327,306 110,106 8.30%
13,173 1,543 11.71 13,973 1,346 9.63 13,335 1,088 8.16
585,868 34,379 5.87 593,460 29,385 4.95 497,922 26,634 5.35
26,751 2,138 7.99 27,492 2,259 8.22 18,436 1,725 9.36
52,208 2,905 5.56 37,587 1,533 4.08 50,225 1,418 2.82
14,602 1,013 6.94 9,605 466 4.85 1,691 25 1.48
- ---------- ------- ---------- ------- ---------- -------
3,278,365 262,909 8.02 2,284,778 163,697 7.16 1,908,915 140,996 7.39
------- ------- -------
219,445 122,922 90,124
- ---------- ---------- ----------
$3,497,810 $2,407,700 $1,999,039
========== ========== ==========
$ 279,681 5,760 2.06% $ 234,839 4,421 1.88% $ 209,600 4,008 1.91%
663,870 22,737 3.42 537,462 15,198 2.83 425,555 11,947 2.81
166,232 9,931 5.97 72,976 3,300 4.52 54,061 2,496 4.62
1,443,026 83,595 5.79 969,840 41,170 4.25 870,929 38,635 4.44
- ---------- ------- ---------- ------- ---------- -------
2,552,809 122,023 4.78 1,815,117 64,089 3.53 1,560,145 57,086 3.66
256,333 16,850 6.57 107,185 5,498 5.13 25,679 780 3.04
83,068 6,072 7.31 15,500 1,083 6.99 3,341 192 5.74
- ---------- ------- ---------- ------- ---------- -------
2,892,210 144,945 5.01 1,937,802 70,670 3.65 1,589,165 58,058 3.65
------- ------- -------
345,397 243,829 210,022
33,345 16,692 10,804
- ---------- ---------- ----------
3,270,952 2,198,323 1,809,991
226,858 209,377 189,048
- ---------- ---------- ----------
$3,497,810 $2,407,700 $1,999,039
========== ========== ==========
117,964 93,027 82,938
======= ======= =======
3.60% 4.07% 4.34%
===== ===== =====
</TABLE>
22
<PAGE> 28
The following table indicates, on a tax-equivalent basis, the changes in
interest income and interest expense which are attributable to changes in
average volume and changes in average rates, in comparison with the same period
in the preceding year. The change in interest due to the combined rate/volume
variance has been allocated to rate and volume changes in proportion to the
dollar amounts of the change in each.
<TABLE>
<CAPTION>
INCREASE (DECREASE) ATTRIBUTABLE TO CHANGE IN:
--------------------------------------------------------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1994
SEPTEMBER 30, 1996 COMPARED COMPARED COMPARED
TO SEPTEMBER 30, 1995 TO DECEMBER 31, 1994 TO DECEMBER 31, 1993
--------------------------- ------------------------ -----------------------
NET NET NET
VOLUME RATE CHANGE VOLUME RATE CHANGE VOLUME RATE CHANGE
------ ---- ------ ------ ---- ------ ------ ---- ------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Loans:<F1><F2>
Taxable......................... $ 10,398 3,067 13,465 83,570 8,653 92,223 22,061 (3,459) 18,602
Tax-exempt<F3>.................. (101) (78) (179) (71) 268 197 54 204 258
Investment securities:
Taxable<F4>..................... (4,921) (4,653) (9,574) (368) 5,362 4,994 4,461 (1,710) 2,751
Tax-exempt<F3>.................. (252) 146 (106) (59) (62) (121) 710 (176) 534
Federal funds sold.................. 716 115 831 710 662 1,372 (148) 263 115
Other............................... 523 (149) 374 299 248 547 297 144 441
--------- ------- ------- ------ -------- ------ ------ ------ ------
Total interest income....... 6,363 (1,552) 4,811 84,081 15,131 99,212 27,435 (4,734) 22,701
--------- ------- ------- ------ -------- ------ ------ ------ ------
INTEREST PAID ON:
Interest-bearing demand deposits.... 397 (1,105) (708) 892 447 1,339 475 (62) 413
Savings deposits.................... 867 (589) 278 3,965 3,574 7,539 3,165 86 3,251
Time deposits of $100 or more<F4>... 735 -- 735 5,300 1,331 6,631 857 (53) 804
Other time deposits<F4>............. 8,542 3,160 11,702 24,345 18,080 42,425 4,068 (1,533) 2,535
Federal funds purchased, repurchase
agreements and Federal Home Loan
Bank advances<F4>................. (11,923) 457 (11,466) 9,446 1,906 11,352 3,877 841 4,718
Notes payable and other............. (112) (200) (312) 4,937 52 4,989 841 50 891
--------- ------- ------- ------ -------- ------ ------ ------ ------
Total interest expense...... (1,494) 1,723 229 48,885 25,390 74,275 13,283 (671) 12,612
--------- ------- ------- ------ -------- ------ ------ ------ ------
Net interest income......... $ 7,857 (3,275) 4,582 35,196 (10,259) 24,937 14,152 (4,063) 10,089
========= ======= ======= ====== ======== ====== ====== ====== ======
<FN>
- ----------
<F1>For purposes of these computations, nonaccrual loans are included in the
average loan amounts.
<F2>Interest income on loans includes loan fees.
<F3>Information is presented on a tax-equivalent basis assuming a tax rate of
35%.
<F4>Includes the effect of interest rate exchange agreements.
</TABLE>
NET INTEREST INCOME
First Banks' primary source of earnings is its net interest income, which
is the difference between the interest earned on its earning assets and the
interest paid on its interest-bearing liabilities. Net interest income
(expressed on a tax-equivalent basis) increased to $91.3 million for the nine
months ended September 30, 1996, from $86.7 million for the same period in
1995. For the years ended December 31, 1995, 1994 and 1993, net interest income
was $118.0 million, $93.0 million and $82.9 million, respectively.
23
<PAGE> 29
While net interest income continued to increase during these periods, the
net interest margin, which is net interest income (expressed on a
tax-equivalent basis) expressed as a percentage of earning assets, decreased
for all periods other than September 30, 1996. This is indicative of the fact
that net interest income increased at a slower rate than the increase of
earning assets, as follows:
<TABLE>
<CAPTION>
INCREASE IN INCREASE IN
EARNING ASSETS NET INTEREST NET
EARNING FROM PRECEDING NET INTEREST INCOME FROM INTEREST
ASSETS PERIOD INCOME PRECEDING PERIOD MARGIN
------- -------------- ------------ ---------------- --------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 1996.............. $3,302,332 2.32% $ 91,297 5.28% 3.69%
Year ended December 31:
1995.......................................... 3,278,365 43.49 117,964 26.81 3.60
1994.......................................... 2,284,778 19.69 93,027 12.16 4.07
1993.......................................... 1,908,915 .05 82,938 .28 4.34
</TABLE>
This is not an unusual phenomena during periods of rapid growth by cash
acquisition because the reduction of interest income on internally generated
funds used in acquisitions and the interest expense on debt incurred in the
transactions offsets a portion of the net interest income of the entities
acquired. As indicated, however, by the severity of the decline in net interest
margin, other factors were involved.
Since 1990, First Banks has acquired ten thrifts in various transactions.
Both the regulatory requirements and the historic customer bases of thrifts
tend to result in balance sheets which are predominately comprised of
residential mortgage loans, frequently supplemented by mortgage-backed
securities, for earning assets, and certificates of deposit, as a source of
funds. For example, First Bank FSB, First Banks' largest thrift entity, had
loans, net of unearned discount of $855.8 million at December 31, 1995 of which
$619.2 million, or 72.4%, were residential mortgage loans, and deposits of
$911.6 million of which $626.5 million, or 68.7%, were certificates of deposit.
Because of the competitive, homogeneous nature of residential mortgage loans
and certificates of deposit, the interest rate spreads between them tend to be
more narrow than other types of loans and funding sources. For the year ended
December 31, 1995, First Banks' average yield on residential real estate loans
and average cost of certificates of deposit, compared to other segments of its
loan portfolio and interest-bearing deposits, were as follows:
<TABLE>
<CAPTION>
INTEREST
AVERAGE PERCENT OF INCOME/ YIELD/
BALANCES TOTAL EXPENSE RATE
-------- ---------- -------- ------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Residential mortgage loans.................................. $1,253,474 48.48% $ 99,656 7.95%
Other Loans................................................. 1,332,289 51.52 122,818 9.22
---------- -------- --------
Total loans............................................. $2,585,763 100.00% $222,474 8.60%
========== ======== ======== =====
Certificates of deposit..................................... $1,609,258 63.04% $ 93,526 5.81%
Other interest-bearing deposits............................. 943,551 36.96 28,497 3.02
---------- -------- --------
Total interest-bearing deposits......................... $2,552,809 100.00% $122,023 4.78%
========== ======== ======== =====
</TABLE>
In addition to the narrow interest spread between the yield on residential
mortgage loans and the rates paid on certificates of deposit, mortgage loans
introduce various prepayment alternatives for borrowers which exacerbate the
inherent interest rate risk associated with their typically long maturities.
For these two reasons, in 1994, First Banks initiated a plan to reduce its
reliance on residential mortgage loans within its portfolio. The change in the
portfolio composition required the concurrent internal generation of other
types of loans, particularly commercial and industrial, real estate
construction and development and commercial real estate loans, a process which
had previously been initiated. Consequently, this process focused on continuing
to build this business development function as well as the control and
servicing staff which are necessary to support it. As the growth of other loans
developed, First Banks began selling essentially all of its production of
conforming residential mortgage loans in the secondary market. This process was
expedited by the sale of a portfolio of residential mortgage loans of $147
million in 1995 and various pools of residential mortgage loans held by
acquired entities during the nine months ended September 30, 1996. See
``--Mortgage Banking Activities'' and ``--Loans and Allowance for Possible Loan
Losses.''
24
<PAGE> 30
While this process was occurring, First Banks expanded its interest rate
risk management to improve its risk measurement techniques and reporting, and
increase its risk control abilities. This included initiating a program of
substantial use of derivative financial instruments to reduce interest rate
exposure. Beginning in early 1994, First Banks used a combination of interest
rate futures, options on futures, swaps, caps and floors to reduce its
exposure, primarily arising from residential mortgage loans and mortgage-backed
securities. The expense of these derivative financial instruments is a
component of net interest income as summarized below.
<TABLE>
<CAPTION>
COST OF INTEREST RATE:
---------------------------------
SWAP, CAP REDUCTION EFFECT ON
FUTURES AND AND FLOOR OF NET NET INTEREST
OPTIONS ON FUTURES AGREEMENTS INTEREST INCOME MARGIN<F1>
------------------ ---------- --------------- ------------
(DOLLARS EXPRESSED (EXPRESSED IN
IN THOUSANDS) BASIS POINTS)
<S> <C> <C> <C> <C>
Nine months ended September 30:
1996................................ $2,713 6,035 8,748 (35)
1995................................ 1,050 5,168 6,218 (26)
Year ended December 31:
1995................................ 2,210 6,911 9,121 (28)
1994................................ -- 490 490 (2)
1993................................ -- -- -- --
<FN>
- --------
<F1>Effect on net interest margin is expressed as reduction of net interest
income divided by average earning assets, annualized.
</TABLE>
INTEREST RATE RISK MANAGEMENT
In financial institutions, the maintenance of a satisfactory level of net
interest income is a primary factor in achieving acceptable income levels. The
maturity and repricing characteristics of the institution's loan and investment
portfolios, relative to those within its deposit structure, may, however,
differ significantly. Furthermore, the ability of borrowers to repay loans and
depositors to withdraw funds prior to stated maturity dates introduces
divergent option characteristics which operate primarily as interest rates
change. This causes various elements of the institution's balance sheet to
react in different manners and at different times relative to changes in
interest rates, thereby leading to increases or decreases in net interest
income over time. Depending upon the nature and velocity of interest rate
movements and their effect on the specific components of the institution's
balance sheet, the effects on net interest income can be substantial.
Consequently, a fundamental requirement in managing a financial institution is
establishing effective control of the exposure of the institution to changes in
interest rates.
First Banks manages its interest rate risk by: (1) maintaining an Asset
Liability Committee (``ALCO'') responsible to First Banks' Board of Directors
to review the overall interest rate risk management activity and approve
actions taken to reduce risk; (2) maintaining an effective monitoring mechanism
to determine First Banks' exposure to changes in interest rates; (3)
coordinating the lending, investing and deposit-generating functions to control
the assumption of interest rate risk; and (4) employing various
off-balance-sheet financial instruments to offset inherent interest rate risk
when it becomes excessive. The objective of these procedures is to limit the
adverse impact which changes in interest rates may have on net interest income.
The ALCO has overall responsibility for the effective management of
interest rate risk and the approval of policy guidelines. The ALCO includes the
Chairman and Chief Executive Officer, the senior executives of investments,
credit, retail banking and finance, and certain other officers. The ALCO is
supported by the Asset Liability Management Group which monitors interest rate
risk, prepares analyses for review by the ALCO and implements actions which are
either specifically directed by the ALCO or established by policy guidelines.
To measure the effect of interest rate changes, First Banks recalculates its
net income over two one-year horizons on a pro forma basis assuming
instantaneous, permanent parallel and non-parallel shifts in the yield curve,
in varying amounts both upward and downward.
As discussed previously, during 1994, First Banks expanded its use of
off-balance-sheet derivative financial instruments to assist in the management
of interest rate sensitivity. These off-balance-sheet derivative financial
25
<PAGE> 31
instruments are utilized to modify the repricing, maturity and option
characteristics of on-balance-sheet assets and liabilities. First Banks
utilizes a combination of off-balance-sheet derivative financial instruments,
generally limited to interest rate swap agreements, interest rate cap and floor
agreements, interest rate futures contracts, options on interest rate futures
contracts and forward contracts to sell mortgage-backed securities. The use of
such derivative financial instruments is strictly limited to reducing the
interest rate exposure of First Banks. See ``Notes 1 and 11 to the Consolidated
Financial Statements.''
Derivative financial instruments held by First Banks for purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1995 1994
--------------------- --------------------- ---------------------
NOTIONAL CREDIT NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- -------- -------- --------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest rate swap agreements..................... $145,000 -- 145,000 -- 265,000 2,441
Interest rate floor agreements.................... 105,000 131 105,000 608 -- --
Interest rate cap agreements...................... 30,000 437 30,000 292 10,000 577
Forward commitments to sell mortgage-backed
securities...................................... 31,000 -- 42,000 -- 24,000 --
</TABLE>
The notional amounts of derivative financial instruments do not represent
amounts exchanged by the parties and, therefore, are not a measure of First
Banks' credit exposure through its use of derivative financial instruments. The
amounts exchanged are determined by reference to the notional amounts and the
other terms of the derivatives.
First Banks sold interest rate futures contracts and purchased options on
interest rate futures contracts to hedge the interest rate risk of its
available-for-sale securities portfolio. Interest rate futures contracts are
commitments to either purchase or sell designated financial instruments at a
future date for a specified price and may be settled in cash or through
delivery of such financial instruments. Options on interest rate futures
contracts confer the right to purchase or sell financial futures contracts at a
specified price and are settled in cash.
With the emphasis on limiting First Banks' reliance on residential mortgage
based assets and the overall expansion of the loan portfolio during 1994 and
1995, the relative magnitude and primary function of the investment portfolio
changed. During the year ended December 31, 1994, investments securities
represented 27.2% of average earning assets. This decreased to 18.7% for the
year ended December 31, 1995 and 15.0% for the nine months ended September 30,
1996. This reduction in the investment security portfolio and corresponding
increase in the magnitude of the loan portfolio increased the importance of
liquidity as a securities selection criteria. Generally, this resulted in
reducing the average maturity of the portfolio and directing available funds
into more readily marketable securities, primarily U.S. Treasury and generic
U.S. government agencies obligations. Consequently, mortgage-backed securities
in the portfolio decreased from $351.8 million, or 59.8% of the portfolio, at
December 31, 1994, to $235.5 million, or 46.3% of the portfolio, at December
31, 1995, and $197.2 million, or 39.5% of the portfolio at September 30, 1996.
These changes had a substantial effect on the interest rate risk
characteristics of the portfolio, and consequently the magnitude of hedging
required and methods used to limit interest rate risk.
As a result, beginning in the second quarter of 1995, First Banks began to
reduce its hedge position to coincide with the current expected life of the
available for sale securities portfolio by decreasing the number of outstanding
interest rate futures contracts. First Banks continued to reduce its hedge
position through additional reductions in the number of outstanding interest
rate futures contracts during the third quarter as a result of certain
investment security sales and further declines in interest rates. In addition,
during the fourth quarter of 1995, the remaining outstanding interest rate
futures contracts were closed. The closure of the remaining contracts reflects
First Banks' decision to manage the interest rate risk of the overall balance
sheet, rather than specific components.
The net change in the unamortized balance of net deferred losses to $4.6
million at December 31, 1995, from a net deferred gain of $6.5 million at
December 31, 1994, is attributable to the significant decline in interest rates
which occurred during 1995. The losses incurred on the interest rate futures
contracts were partially offset by gains in the available for sale securities
portfolio. The loss in market value, net of related tax benefit, for the
available for sale securities portfolio totaled $1.3 million during the period
from December 31, 1994 to December 31, 1995. The loss in market value resulted
from an increase in the projected prepayments of principal underlying the
available for sale
26
<PAGE> 32
securities portfolio. These increased prepayment projections disproportionately
shortened the expected lives of the available for sale securities portfolio in
comparison to the effective maturity created with the hedge position.
The decrease in the unamortized balance of net deferred futures losses
during the nine month period ended September 30, 1996 consists of amortization
of $2.7 million and recognition of $700,000 of realized hedging losses in
connection with sales of investment securities.
The unamortized balance of net deferred losses on interest rate futures
contracts of $1.2 million and $4.6 million at September 30, 1996 and December
31, 1995, respectively, and net deferred gains on interest rate futures
contracts of $6.5 million at December 31, 1994, respectively, were applied to
the carrying value of the available for sale securities portfolio as part of
the mark-to-market valuation.
Interest rate swap agreements are utilized to extend the repricing
characteristics of certain interest-bearing liabilities to correspond more
closely with the assets of First Banks, with the objective of stabilizing net
interest income over time. The net interest expense for these agreements was
$5.8 million and $4.9 million for the nine months ended September 30, 1996 and
1995, respectively, and $6.6 million and $490,000 for the years ended December
31, 1995 and 1994, respectively. The maturity dates, notional amounts, interest
rates paid and received, and fair values of interest rate swap agreements
outstanding as of the dates indicated are summarized as follows:
<TABLE>
<CAPTION>
INTEREST
NOTIONAL RATE FAIR VALUE
MATURITY DATE AMOUNT PAID RECEIVED GAIN (LOSS)
------------- -------- ---- -------- -----------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
September 30, 1996:
September 30, 1997..................................................... $ 35,000 7.04% 5.55% $ (364)
December 8, 1997....................................................... 15,000 7.90 5.66 (333)
September 30, 1999..................................................... 35,000 7.32 5.55 (744)
September 30, 2001..................................................... 35,000 7.65 5.55 (1,250)
January 30, 2005....................................................... 25,000 8.13 5.63 (1,753)
-------- --------
$145,000 7.53 5.56 $ (4,444)
======== ==== ==== ========
December 31, 1995:
September 30, 1997..................................................... $ 35,000 7.04% 5.69% $ (932)
December 8, 1997....................................................... 15,000 7.90 5.81 (711)
September 30, 1999..................................................... 35,000 7.32 5.69 (2,073)
September 30, 2001..................................................... 35,000 7.65 5.69 (3,207)
January 30, 2005....................................................... 25,000 8.13 5.94 (3,703)
-------- --------
$145,000 7.53 5.74 $(10,626)
======== ==== ==== ========
December 31, 1994:
December 8, 1996....................................................... $100,000 7.79% 6.38% $ 8
December 8, 1997....................................................... 65,000 7.90 6.38 309
October 21, 1997....................................................... 50,000 7.20 5.56 1,086
October 21, 1999....................................................... 30,000 7.56 5.56 667
October 21, 2001....................................................... 20,000 7.77 5.56 371
-------- --------
$265,000 7.68 6.07 $ 2,441
======== ==== ==== ========
</TABLE>
In connection with the sale of a pool of approximately $147 million of
residential mortgage loans and repayment of the related short-term borrowings,
on May 25, 1995, First Banks terminated a $100 million interest rate swap
agreement resulting in a loss of $3.3 million. The loss on the termination of
the $100 million interest rate swap agreement has been reflected in the
consolidated statement of income for the year ended December 31, 1995.
In addition, First Banks experienced a shortening of the expected life of
its loan portfolio. This decrease was the result of the decision by First Banks
to reduce its portfolio of residential mortgage loans by selling essentially
all of its new loan originations in the secondary market as well as significant
decline in interest rates during 1995, which caused
27
<PAGE> 33
an increase in the projections of principal prepayments of residential mortgage
loans. These factors disproportionately shortened the expected life of the loan
portfolio relative to the effective maturity created with the interest rate swap
agreements. Consequently, during July 1995, First Banks shortened the effective
maturity of its interest-bearing liabilities through the termination of $225
million interest rate swap agreements at a loss of $13.5 million. This loss has
been deferred and is being amortized over the remaining lives of the swap
agreements. If all or any portion of the underlying liabilities are repaid, the
related deferred loss will be charged to operations.
During November 1996, First Banks shortened the effective maturity of its
interest-bearing liabilities through the termination of $75 million of interest
rate swap agreements at a loss of $5.3 million. This termination reduced the
effective maturity of liabilities in response to the decrease in the effective
life of the loan portfolio, which occurred primarily as a result of continuing
reduction in the residential mortgage loan portfolio. The loss incurred will be
deferred and amortized over the remaining lives of the swap agreements, unless
the underlying liabilities are repaid prior to that date.
First Banks also has interest rate cap and floor agreements to limit the
interest expense associated with certain of its interest-bearing liabilities
and the net interest expense of certain interest rate swap agreements,
respectively. At September 30, 1996, December 31, 1995 and 1994, the
unamortized costs for these agreements were $470,000, $685,000 and $577,000,
respectively, and were included in other assets. There are no amounts
receivable under these agreements.
As more fully discussed under ``--Mortgage Banking Activities,'' derivative
financial instruments issued by First Banks consist of commitments to originate
fixed-rate loans. Commitments to originate fixed-rate loans consist primarily
of residential real estate loans. These loan commitments, net of estimated
underwriting fallout, and loans held for sale are hedged with forward contracts
to sell mortgage-backed securities.
28
<PAGE> 34
In addition to the simulation model employed by First Banks, a more
traditional interest rate sensitivity position is prepared and reviewed in
conjunction with the results of the simulation model. The following table
presents the projected maturities and periods to repricing of First Banks'
rate-sensitive assets and liabilities as of December 31, 1995, adjusted to
account for prepayment assumptions:
<TABLE>
<CAPTION>
OVER THREE OVER SIX
THREE THROUGH THROUGH OVER ONE
MONTHS SIX TWELVE THROUGH OVER FIVE
IMMEDIATE OR LESS MONTHS MONTHS FIVE YEARS YEARS TOTAL
--------- ------- ---------- -------- ---------- --------- -----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans<F1>..................................... $347,887 231,398 400,654 660,505 1,006,406 97,369 2,744,219
Investment securities......................... 59,029 76,869 57,098 50,790 196,714 67,823 508,323
Federal funds sold............................ 53,800 -- -- -- -- -- 53,800
Receivable from sale of investment
securities.................................. -- 41,265 -- -- -- -- 41,265
Interest-bearing deposits with other financial
institutions................................ 16,110 750 -- -- -- -- 16,860
-------- -------- -------- ------- --------- ------- ---------
Total interest-earning assets............. $476,826 350,282 457,752 711,295 1,203,120 165,192 3,364,467
======== ======== ======== ======= ========= ======= =========
Interest-bearing liabilities:
Interest-bearing demand accounts.............. -- 113,805 70,745 46,138 33,834 43,062 307,584
Savings accounts.............................. -- 56,609 46,619 39,959 56,610 133,198 332,995
Money market demand accounts.................. 357,907 -- -- -- -- -- 357,907
Time deposits................................. -- 491,217 304,631 499,595 499,105 999 1,795,547
Other borrowed funds.......................... 62,977 86,688 1,110 4,787 3,570 544 159,676
-------- -------- -------- ------- --------- ------- ---------
Total interest-bearing liabilities........ 420,884 748,319 423,105 590,479 593,119 177,803 2,953,709
Effect of interest rate exchange agreements on
rate-sensitive liabilities...................... -- (145,000) -- -- 85,000 60,000 --
-------- -------- -------- ------- --------- ------- ---------
Total rate-sensitive liabilities adjusted
for impact of interest rate exchange
agreements.............................. $420,884 603,319 423,105 590,479 678,119 237,803 2,953,709
======== ======== ======== ======= ========= ======= =========
Interest sensitivity gap:
Periodic...................................... $ 55,942 (253,037) 34,647 120,816 525,001 72,611 410,758
=========
Cumulative.................................... 55,942 (197,095) (162,448) (41,632) 483,369 410,758
======== ======== ======== ======= ========= =======
Ratio of interest-sensitive assets to interest-
sensitive liabilities:
Periodic...................................... 1.13 0.58 1.08 1.20 1.77 0.69 1.14
=========
Cumulative.................................... 1.13 0.81 0.89 0.98 1.18 1.14
======== ======== ======== ======= ========= =======
<FN>
- ---------
<F1>Loans presented net of unearned discount.
</TABLE>
Management makes certain assumptions in preparing the table above. These
assumptions include: (i) loans will repay at historic repayment speeds; (ii)
mortgage-backed securities, included in investment securities, will repay at
projected repayment speeds; (iii) interest-bearing demand accounts and savings
accounts are interest sensitive at a rate of 37% and 17%, respectively, of the
remaining balance for each period presented; and (iv) fixed maturity deposits
will not be withdrawn prior to maturity. Actual experience may differ from the
rates assumed in preparing this table.
At December 31, 1995, First Banks was liability sensitive on a cumulative
basis through the twelve-month time horizon by $41.6 million or 1.1% of total
assets. This compares to a liability-sensitive position on a cumulative basis
over the same time horizon of $80.6 million or 2.8% of total assets at December
31, 1994. The reduced liability-sensitive position for 1995 reflects the
reduction in short-term borrowings and the change in the composition of
acquired assets and liabilities.
29
<PAGE> 35
The interest sensitivity position is one of several measurements of the
impact of interest rate changes on net interest income. Its usefulness in
assessing the effect of potential changes in net interest income varies with
the constant change in the composition of First Banks' assets and liabilities
and changes in interest rates. For this reason, First Banks places greater
emphasis on a simulation model for monitoring its interest rate exposure.
MORTGAGE BANKING ACTIVITIES
The mortgage banking activities of First Banks consist of the origination
and purchase of residential mortgage loans. Generally, First Banks sells its
production of residential mortgage loans in the secondary loan markets.
Servicing rights are retained with respect to conforming fixed rate loans.
Other loans are sold on a servicing released basis.
In conjunction with its de-emphasis of residential mortgage lending for its
loan portfolio, First Banks is considering subcontracting its mortgage loan
servicing and transferring its origination function to an entity which would be
indirectly owned by First Banks' voting shareholders. It is not anticipated
that any such subcontract and transfer, if consummated, would have a material
effect on the financial condition or results of operations of First Banks.
First Banks may also consider selling its residential mortgage servicing,
either to an unrelated entity or an entity which would be indirectly owned by
First Banks' voting shareholders. If such a transaction is initiated, its
purpose would be to redeploy the capital allocated to its mortgage servicing to
assets which would provide a greater and more stable return on capital to First
Banks.
For the nine month periods ended September 30, 1996 and 1995, First Banks
originated and purchased loans for resale totaling $104 million and $139
million and sold loans totaling $91 million and $27 million, respectively. For
the three years ended December 31, 1995, 1994 and 1993, First Banks originated
and purchased loans for resale totaling $67 million, $81 million and $266
million and sold loans totaling $207 million, $168 million and $268 million,
respectively. Mortgage loans serviced for investors totaled $856 million and
$861 million at September 30, 1996 and 1995, and $888 million, $699 million and
$661 million at December 31, 1995, 1994 and 1993, respectively. The increase
for the year ended December 31, 1995 reflects the production of new loans and
servicing held by various acquired entities, partially offset by First Banks'
sale of $427 million of mortgage loan servicing rights during the year. First
Banks elected to sell the servicing rights after a review of the prospective
profitability of its mortgage servicing portfolio, the favorable sales prices
available in the market, and the substantial increases to the portfolio
resulting from various acquisitions. This sale resulted in a gain of $3.8
million for the nine month period ended September 30, 1995.
The interest income earned on loans held for sale prior to interest expense
and the cost of capital was $2.5 million and $2.2 million for the nine month
periods ended September 30, 1996 and 1995 and $3.2 million, $4.7 million and
$8.2 million for the three years ended December 31, 1995, 1994 and 1993,
respectively. The fluctuations in interest income during these periods relate
primarily to changes in the average balance of loans held for sale and the
related loan volumes, and the prevailing interest rate when the loans were
made. The average balance of loans held for sale was $39.8 million and $33.2
million for the nine month periods ended September 30, 1996 and 1995, and $36.8
million, $59.2 million and $109.0 million for the years ended December 31,
1995, 1994 and 1993, respectively.
The mortgage loan servicing fees are reported net of mortgage-backed
security guarantee fee expense, interest shortfall and amortization of
purchased mortgage servicing rights. Loan servicing fees were $2.0 million and
$2.3 million for the nine month periods ended September 30, 1996 and 1995, and
$2.9 million, $1.6 million and $1.2 million for the years ended December 31,
1995, 1994 and 1993, respectively.
Associated with the activity of originating and purchasing loans to be sold
into the secondary market are the realized and unrealized gains, net of losses,
incurred during the period prior to sale. These net gains or losses include:
(1) the adjustments of the carrying values of loans held for sale to current
market values; (2) the adjustments for any gains or losses on loan commitments
for which the interest rate has been established, net of anticipated
underwriting ``fallout''; and (3) the related cost of hedging the loans held
for sale and loan commitments during the period First Banks is exposed to
interest rate risk. The loss on mortgage loans originated for resale, including
loans sold and held for sale, was $7,000 and $622,000 for the nine month
periods ended September 30, 1996 and 1995, respectively. The loss on mortgage
loans originated for resale, including loans sold and held for sale, was
$608,000 for the year ended December 31, 1995, in comparison to a gain of
$126,000 and a loss of $1.7 million for the years ended December 31, 1994 and
1993, respectively. The loss incurred during 1993 was primarily attributable to
the unprecedented high
30
<PAGE> 36
volumes of residential fixed-rate loan commitments and residential fixed-rate
loans held for sale during this period. For the nine month period ended
September 30, 1996 and for the years ended December 31, 1995 and 1994, the
origination volumes of residential fixed-rate loans declined. With the reduced
volumes, the mortgage banking operation was able to originate, package and sell
its production on a more timely basis and, accordingly, reduce the associated
hedge cost. While First Banks experienced higher levels of losses during 1993,
these losses were more than offset by the additional net interest income earned
from the higher average balance of the portfolio of loans held for sale during
these same periods.
As more fully described under ``--Interest Rate Risk Management,'' First
Banks' interest rate risk management policy provides certain hedging parameters
to reduce the interest rate exposure arising from changes in loan prices from
the time of commitment until the sale of the security or the loan. To reduce
this exposure, First Banks utilizes forward commitments to sell fixed-rate
mortgage-backed securities at a specified date in the future. At September 30,
1996, December 31, 1995 and 1994, First Banks had $35.7 million, $42.4 million
and $25.0 million of loans held for sale and related commitments, net of
committed loan sales and estimated underwriting fallout, of which $31.0
million, $42.0 million and $24.0 million, respectively, were hedged through the
use of such forward commitments.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER
30, 1996 AND 1995
NET INCOME. Net income for the nine months ended September 30, 1996 was
$11.4 million compared to $19.6 million for the same period in 1995. This
represents a return on average assets of .43% and .76% for the nine months
ended September 30, 1996 and 1995, respectively. This compares to First Banks'
historical levels of return on average assets of .70%, 1.00% and 1.16% for the
years ended December 31, 1995, 1994 and 1993, respectively.
The decline in operating results in 1996 and 1995 reflects several
influences which have had significant adverse effects on earnings. As
previously discussed, during this period First Banks completed 12 acquisitions
located in four states, increasing total assets approximately $2.0 billion. See
``--General.'' Eight of these acquired entities have been merged with other
First Banks subsidiaries. Most of the acquired institutions exhibited
significant financial distress prior to their acquisition, generally related to
asset quality problems and/or high operating expenses.
Consequently, in the periods since their respective dates of acquisition,
management of First Banks has worked with management of the acquired
institutions to completely reorient their positions within their market places,
restructure their balance sheets and revise their systems and procedures. This
has required a significant dedication of resources by First Banks, both in
terms of expenses and personnel. Substantial expenses have been incurred in
reorganizing, retraining and reducing staff, converting data processing
systems, instituting and controlling new policies and procedures, and merging
corporate cultures, not only with that of First Banks, but also between
acquired institutions.
This process has been complicated by the existence of what is collectively
a substantial portfolio of problem assets. While the provisions for possible
loan losses in California and Texas have been substantial, this represents only
a portion of the cost of carrying the problem assets. In addition to that
expense is the loss of income on nonperforming assets, the management, legal
and other costs associated with managing and collecting problem loans, and the
expenses incurred in foreclosing, operating, holding and disposing of real
estate and other collateral acquired from problem borrowers.
Although these factors were anticipated prior to the acquisitions and are
considered acceptable as costs of building the long term franchise value of
First Banks, they had a substantial effect on First Banks' profitability for
the
31
<PAGE> 37
nine month periods ended September 30, 1996 and 1995. A comparison of the
relative profitability of First Banks' investment in bank and thrift
subsidiaries by area is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------
CALIFORNIA TEXAS OTHER
---------------- --------------- ----------------
1996<F1> 1995 1996<F1> 1995 1996<F1> 1995
-------- ---- -------- ---- -------- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Equity in income (loss) of subsidiaries....... $ 3,106 2,689 666 (1,681) 16,834 21,112
Average investment in subsidiaries............ 50,819 43,790 25,893 27,888 213,843 222,258
Return on average investment, annualized...... 8.15 8.19 3.43 (8.04) 10.50 12.67
<FN>
- --------
<F1>Excludes the effect of the one-time FDIC special assessment, net of related
tax benefit.
</TABLE>
As previously discussed, during 1994 First Banks expanded its hedging
activities through the use of derivative financial instruments as a means to
reduce its interest rate risk exposure. The hedges were generally established
between September 1994, after a significant increase in interest rates had
already occurred, and March 1995, when interest rates began to decrease. While
being conceptually appropriate in reducing interest rate risk, because of its
timing, this hedging process did not have an opportunity to contribute to
protecting First Banks from the adverse effects of increasing interest rates,
but limited substantially its opportunity to benefit from decreasing interest
rates. The expense of such derivative financial instruments was $8.7 million
for the nine months ended September 30, 1996, in comparison to $6.2 million for
the same period in 1995. The expense of derivative financial instruments was
$9.1 million and $490,000 for the years ended December 31, 1995 and 1994,
respectively.
The results of operations for the nine months ended September 30, 1996 were
also adversely affected by an $8.6 million charge for the one-time special
deposit insurance assessment passed by Congress and signed by President Clinton
on September 30, 1996. This special assessment will be used to recapitalize the
SAIF of the FDIC in order to bring it into parity with the BIF of the FDIC.
In addition, income for the nine months ended September 30, 1995 included
net securities gains of $2.8 million compared to net securities losses of
$421,000 for the same period in 1996.
As previously discussed, net interest income (expressed on a tax-equivalent
basis) for the nine months ended September 30, 1996 was $91.3 million, or 3.69%
of average interest earning assets, compared to $86.7 million, or 3.58% of
average interest earning assets, for the same period in 1995.
PROVISION FOR POSSIBLE LOAN LOSSES. The provision for possible loan losses
was $8.8 million and $8.4 million for the nine months ended September 30, 1996
and 1995, respectively, while net loan charge-offs were $16.1 million and $9.6
million for the same periods.
Several of First Banks' acquisitions in 1995 and 1994 included significant
portfolios of problem assets. This is particularly evident in California, where
the economy has been weak in recent years. Of First Banks' total nonperforming
assets of $43.7 million at September 30, 1996, $18.1 million, or 41.4%, were
held by the California and Texas banks. As this would suggest, during the nine
month periods ended September 30, 1996 and 1995, a substantial portion of First
Banks' net loan charge-offs and provisions for possible loan losses related to
loans of the California or Texas banks.
32
<PAGE> 38
The following is a summary of loan loss experience by geographic areas for
the nine month periods ended September 30, 1996 and 1995:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------
CALIFORNIA TEXAS OTHER TOTAL
--------------- --------------- ----------------- -----------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total loans................... $402,378 441,542 172,737 202,336 2,157,911 2,104,837 2,733,026 2,748,715
Total assets.................. 559,950 610,983 271,700 306,744 2,714,504 2,782,234 3,546,154 3,699,961
Provisions for possible loan
losses...................... 4,024 415 600 5,525 4,150 2,509 8,774 8,449
Net loan charge-offs.......... (8,612) (6,158) (1,921) (2,328) (5,541) (1,122) (16,074) (9,609)
Net loan charge-offs as a
percentage of average
loans<F1>................... 2.67% 2.58% 1.47% 1.50% .35% .07% .79% .50%
<FN>
- --------
<F1>Ratios of net loan charge-offs as a percentage of average loans are
annualized.
</TABLE>
The provision for possible loan losses for the nine months ended September
30, 1995 reflects a special provision of $3.7 million. This special provision
related to FBA's portfolio of automobile loans which had experienced increased
levels of loan charge-offs and loans past due 30 days or more within that
portfolio during 1995.
The provision for possible loan losses for the nine month period ended
September 30, 1996 reflects an additional provision attributable to a single
commercial loan of First Bank (Missouri) of approximately $3.7 million which
was fully charged-off. The loan was identified in 1995 as having potential
problems creating uncertainty as to its collectibility. During the nine months
ended September 30, 1996, the borrower failed to meet certain previously-agreed
financial measures and principal reductions. As a result, it became apparent
the loan could not be collected in the normal course of business and was
charged-off.
Tables summarizing nonperforming assets, past due loans and charge-off
experience are presented under ``--Loans and Allowance for Possible Loan
Losses.''
33
<PAGE> 39
NONINTEREST INCOME AND EXPENSE. The following table summarizes noninterest
income and noninterest expense for the nine month periods September 30, 1996
and 1995, respectively.
<TABLE>
<CAPTION>
SEPTEMBER 30, INCREASE (DECREASE)
---------------- -------------------
1996 1995 AMOUNT %
---- ---- ------ -
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest income:
Service charges on deposit accounts and customer service fees................ $ 9,411 7,634 1,777 23.28%
Credit card fees............................................................. 1,897 1,615 282 17.46
Loan servicing fees, net..................................................... 2,027 2,286 (259) (11.33)
Gain (loss) on mortgage loans sold and held for sale:
Originated for sale...................................................... (7) (338) 331 (97.93)
Other loan sales......................................................... -- (284) 284 --
Trust and brokerage fees..................................................... 512 530 (18) (3.40)
Net gain (loss) on sales of securities....................................... (421) 2,765 (3,186) (115.23)
Gain on sale of mortgage loan servicing rights............................... -- 3,843 (3,843) --
(Loss) on cancellation of interest rate swap agreement....................... -- (3,342) 3,342 --
Other........................................................................ 2,379 2,933 (554) (18.89)
------- ------ ------
Total noninterest income............................................. $15,798 17,642 (1,844) (10.45)
======= ====== ====== =======
Noninterest expense:
Salaries and employee benefits............................................... $30,085 27,938 2,147 7.68%
Occupancy, net of rental income.............................................. 7,245 6,244 1,001 16.03
Furniture and equipment...................................................... 5,404 4,982 422 8.47
Federal Deposit Insurance Corporation premiums............................... 11,355 3,810 7,545 198.03
Postage, printing and supplies............................................... 3,660 3,360 300 8.93
Data processing fees......................................................... 3,479 3,560 (81) (2.28)
Legal, examination and professional fees..................................... 3,620 3,975 (355) (8.93)
Credit card expenses......................................................... 2,149 1,762 387 21.96
Communications............................................................... 1,992 1,744 248 14.22
Advertising.................................................................. 1,253 1,473 (220) (14.94)
Losses and expenses on foreclosed real estate, net of gains.................. 951 539 412 76.44
Other........................................................................ 10,044 7,314 2,730 37.33
------- ------ ------
Total noninterest expense............................................ $81,237 66,701 14,536 21.79
======= ====== ====== =======
</TABLE>
Noninterest income was $15.8 million for the nine months ended September
30, 1996, in comparison to $17.6 million for the same period in 1995. The
decrease for the nine months ended September 30, 1996 is primarily attributable
to net security losses of $421,000 for the nine months ended September 30, 1996
in comparison to net securities gains of $2.8 million for the same period in
1995, partially offset by the additional noninterest income generated from the
acquisitions completed throughout 1995 and 1994.
An increase of $2.1 million in service charges, customer service fees and
credit card fees for the nine months ended September 30, 1996, compared to the
same period in 1995, relates primarily to the aforementioned acquisitions.
For the nine months ended September 30, 1996, loan servicing fees, net,
decreased by $259,000, in comparison to the same period in 1995. As more fully
described under ``--Mortgage Banking Activities'', the decrease is attributable
to the sale of $427 million of mortgage loan servicing rights during July 1995.
During the nine months ended September 30, 1995, First Banks decided to
sell $427 million of mortgage servicing rights due to favorable pricing
available in the marketplace at that time. This sale resulted in a gain of $3.8
million.
34
<PAGE> 40
In addition, First Banks sold $147 million of residential mortgage loans
during the nine months ended September 30, 1995, resulting in a loss of
$284,000. In connection with the sale of these loans, First Banks terminated an
interest rate swap agreement, resulting in a loss of $3.3 million for the nine
months ended September 30, 1995.
Noninterest income also includes net security losses of $421,000 for the
nine months ended September 30, 1996, in comparison to net security gains of
$2.8 million for the same period in 1995. The securities sold were classified
as available for sale within the investment security portfolio. Gross gains and
losses were $445,000 and $166,000, respectively, for the nine months ended
September 30, 1996. For the nine months ended September 30, 1995, the gross
gains and losses were $8.0 million and $1.2 million, respectively. The net
security losses include the recognition of $700,000 and $4.0 million of
realized hedging losses for the nine month periods ended September 30, 1996 and
1995, respectively.
The increase in other income for the nine months ended September 30, 1996
relates primarily to a non-recurring gain of $795,000 realized from the
termination of a leveraged lease and the related sale of the underlying leased
assets. Included in other income for the nine months ended September 30, 1995
was $802,000 from the termination of a self-insurance trust.
Noninterest expense was $81.2 million and $66.7 million for the nine months
ended September 30, 1996 and 1995, respectively. The increase of $14.5 million
is primarily attributable to the one-time special assessment discussed below
and incremental operating expenses of the seven acquisitions completed
throughout 1995. In particular, salaries and employee benefits increased by
$2.2 million to $30.1 million from $27.9 million for the nine month periods
ended September 30, 1996 and 1995, respectively. In addition, occupancy and
furniture and equipment expenses increased by $1.4 million to $12.6 million
from $11.2 million for the nine month periods ended September 30, 1996 and
1995, respectively.
FDIC expense for the nine months ended September 30, 1996 includes an $8.6
million charge for the one-time special deposit insurance assessment passed by
Congress and signed by President Clinton on September 30, 1996. This special
assessment will be used to recapitalize the SAIF of the FDIC and bring it into
parity with the BIF of the FDIC. As a result of this special assessment, First
Banks' cost of deposit insurance for SAIF insured deposits is expected to
decrease by approximately $2.0 million for the year ended December 31, 1997 in
comparison to December 31, 1996, excluding the effect of the special
assessment. The expected decrease in the cost of deposit insurance is based on
an overall assessment rate for 1997 of 1.29 basis points and 6.44 basis points
for each $100.00 of assessable BIF and SAIF deposits respectively, in
comparison to the current assessment rate, of 23 basis points. First Banks
currently has $1.2 billion of SAIF insured deposits.
COMPARISON OF RESULTS OF OPERATIONS FOR YEARS ENDED 1995 AND 1994
NET INCOME. Net income for the year ended December 31, 1995 was $24.5
million, compared with $24.0 million earned in 1994. Although income increased
in 1995, the substantial increase in total assets resulting from acquisitions
caused the return on average assets to decrease to .70% for the year ended
December 31, 1995, compared to 1.00% in 1994. This is indicative of the
marginal operating results of certain of the acquired entities during the
periods subsequent to their respective acquisition dates, as well as the cost
of the funds used in their acquisitions and the expenses associated with
amalgamating them into First Banks' systems and culture.
As discussed previously, net interest income (expressed on a tax-equivalent
basis) was $118.0 million, or 3.60%, of average interest-earning assets for
1995, compared to $93.0 million, or 4.07%, for 1994.
PROVISION FOR POSSIBLE LOAN LOSSES. The provision for possible loan losses
was $10.4 million and $1.9 million for the years ended December 31, 1995 and
1994, respectively, which was partially attributable to the increase in net
loan charge-offs to $10.8 million in 1995 from $1.5 million in 1994. First
Banks substantially increased its provision for possible loan losses in 1995 in
recognition of the internal growth in the loan portfolio as well as its
assessment of the risk inherent in the various portfolios of acquired entities.
The unusually high level of recoveries of previously charged-off loans
experienced in prior years decreased, contributing to the increase in the
amount of net loan charge-offs for the year. At the same time, an increase in
the amount of loans past due over 30 days, particularly in portfolios of
recently acquired entities, and the desire to deal aggressively with loan
problems as they arise, led to First Banks' decision to continue to strengthen
its allowance for possible loan losses.
35
<PAGE> 41
The increased level of net loan charge-offs and loans past due over 30 days
primarily related to the portfolios of CCB and FBA, which were acquired by
First Banks on March 15, 1995 and August 31, 1994, respectively. Net loan
charge-offs for both CCB and FBA were approximately $9.2 million and $514,000
for the years ended December 31, 1995 and 1994, respectively.
CCB's charge-offs resulted primarily from the application of First Banks'
more aggressive approach to resolving loan problems within its consolidated
portfolio. This approach has resulted in a reduction in the level of acquired
problem loans to $23.7 million at December 31, 1995, from $38.5 million at
March 15, 1995, the acquisition date.
FBA has experienced an increase in its automobile loan charge-offs and
automobile loans past due 30 days or more which resulted in a special provision
of $3.7 million during the three month period ended September 30, 1995. The
increase in charge-offs for FBA is partly due to changes in the practice and
timing of recording such charge-offs. Previously, FBA charged-off the remaining
balance of a loan after reducing that amount by the estimated value of the
collateral even if the collateral was not yet in its possession. Commencing in
the second quarter of 1995, FBA, consistent with First Banks' practice, charges
off a loan when it becomes 120 days or more past due, regardless of whether the
collateral is in its possession. When the collateral is subsequently received,
the charged-off amount is adjusted for the value of the collateral. In
addition, in an effort to further reduce the overall level of loan charge-offs
and loans past due 30 days or more within this portfolio, FBA has increased its
collection efforts and has implemented more stringent lending practices,
including regular reviews of new loans originated and strict adherence to
approved policies and practices.
Contributing further to the increase in net loan charge-offs for 1995 in
comparison to 1994 were reductions in the level of recoveries of previously
charged-off loans. Recoveries of previously charged-off loans decreased by
$300,000 to $4.9 million from $5.2 million for the years ended December 31,
1995 and 1994, respectively. The decrease reflects the reduced levels of loan
charge-offs from $12.2 million for the year ended December 31, 1992, to $9.5
million and $6.7 million for the years ended December 31, 1993 and 1994,
respectively, and the corresponding reduction in the opportunities to obtain
recoveries.
36
<PAGE> 42
NONINTEREST INCOME AND EXPENSE. The following table summarizes noninterest
income and noninterest expense for the years ended December 31, 1995 and 1994,
respectively.
<TABLE>
<CAPTION>
INCREASE
DECEMBER 31, (DECREASE)
---------------- ---------------
1995 1994 AMOUNT %
---- ---- ------ -
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest income:
Service charges on deposit accounts and customer service fees................... $10,661 8,300 2,361 28.4%
Credit card fees................................................................ 2,179 1,746 433 24.8
Loan servicing fees, net........................................................ 2,932 1,645 1,287 78.2
Gain (loss) on mortgage loans sold and held for sale:
Originated for sale......................................................... (324) 126 (450) (357.1)
Other loan sales............................................................ (284) -- (284) --
Trust and brokerage fees........................................................ 699 744 (45) (6.0)
Net loss on sales of securities................................................. (866) (290) (576) (198.6)
Gain on sale of mortgage loan servicing rights.................................. 3,843 -- 3,843 --
Loss on cancellation of interest rate swap agreement............................ (3,342) -- (3,342) --
Other........................................................................... 3,909 1,363 2,546 186.8
------- ------ ------
Total noninterest income................................................ $19,407 13,634 5,773 42.3
======= ====== ====== ======
Noninterest expense:
Salaries and employee benefits.................................................. $37,941 28,337 9,604 33.9%
Occupancy, net of rental income................................................. 8,709 5,260 3,449 65.6
Furniture and equipment......................................................... 6,852 5,209 1,643 31.5
Federal Deposit Insurance Corporation premiums.................................. 4,911 4,484 427 9.5
Postage, printing and supplies.................................................. 4,678 3,304 1,374 41.6
Data processing fees............................................................ 4,838 3,733 1,105 29.6
Legal, examination and professional fees........................................ 5,412 3,562 1,850 51.9
Credit card expenses............................................................ 2,490 2,455 35 1.4
Communications.................................................................. 2,476 1,816 660 36.3
Advertising..................................................................... 2,182 1,767 415 23.5
Losses and expenses on foreclosed real estate, net of gains..................... 1,302 792 510 64.4
Other........................................................................... 9,775 7,015 2,760 39.3
------- ------ ------
Total noninterest expense............................................... $91,566 67,734 23,832 35.2
======= ====== ====== ======
</TABLE>
Noninterest income increased by $5.8 million to $19.4 million from $13.6
million for the year ended December 31, 1995 in comparison to December 31,
1994. The increase is attributable to mortgage banking activities, additional
service charges and customer fee income, partially offset by sales of
investment securities and residential mortgage loans. A more thorough
discussion and analysis of the increases attributable to mortgage banking
operations has been presented under ``--Mortgage Banking Activities.''
Increases of $4.1 million for the year ended December 31, 1995, in
comparison to the same period in 1994, in service charges, customer service
fees, credit card fees and loan servicing fees relate primarily to the
aforementioned acquisitions.
Offsetting the increase in noninterest income was a net loss on sales of
securities of $866,000 and $290,000 for the years ended December 31, 1995 and
1994, respectively. The sales were executed to restructure acquired entities'
investment portfolios, to provide funds for internal loan growth and to reduce
borrowings.
As previously discussed, First Banks sold $147 million of residential
mortgage loans resulting in a net loss of $284,000 for the year ended December
31, 1995. The proceeds from the sale of these loans were used to repay certain
37
<PAGE> 43
interest-bearing liabilities, which resulted in the termination of an interest
rate swap agreement. The loss on cancellation of the interest rate swap
agreement was $3.3 million.
Other income for the year ended December 31, 1995 increased by $2.5 million
to $3.9 million from $1.4 million for 1994. In addition to the increase
associated with the overall growth of First Banks, other income for the year
ended December 31, 1995 includes a $294,000 gain upon sale of bank building and
related deposits, $179,000 of income from the termination of FBA's Directors'
Retirement Plan and $802,000 of funds returned to FBA which were maintained in
a trust. During 1990, FBA established a trust in lieu of officer and director
liability insurance. Since such coverage is now available and in place through
First Banks, the trust was terminated and the funds were returned to FBA.
Noninterest expense was $91.6 million and $67.7 million for the years ended
December 31, 1995 and 1994, respectively, representing an increase of $23.8
million. As a percentage of average assets, noninterest expenses were 2.62% and
2.81% for the years ended December 31, 1995 and 1994, respectively. To some
extent, the year-to-year noninterest expenses are not comparable, due to the
incremental operating expenses of acquired entities, which are accounted for
under the purchase method of accounting, merger-related expenses and expenses
associated with amalgamating acquired entities into First Banks' systems and
culture.
Salaries and employee benefits represent the largest category of
noninterest expense, which totaled $37.9 million, or 41.4% of noninterest
expense, for the year ended December 31, 1995. This compares to salaries and
employee benefits of $28.3 million, or 41.8% of noninterest expense, for the
year ended December 31, 1994. The $9.6 million increase is primarily
attributable to the acquisitions completed during 1995, partially offset by
staff reductions, occurring primarily in the third and fourth quarters of 1995,
due to the effects of both acquisition-related synergy's and increasing
economies of scale.
Occupancy and furniture and equipment expenses increased by $5.1 million to
$15.6 million from $10.5 million for the years ended December 31, 1995 and
1994, respectively. The increase is a result of First Banks' market expansion
in central and northern Illinois, Dallas and Houston, Texas, and California. In
addition, the increase in these expenses reflects the upgrading of systems to
enhance both the quality of service to First Banks' expanding customer base and
improving staff productivity.
On August 8, 1995, the FDIC voted to reduce the deposit insurance premiums
paid by most members of the BIF and to keep existing assessment rates intact
for members of the SAIF. The reduction in the BIF rates were effective June 1,
1995, resulting in a reduction in First Banks' FDIC insurance premium expense
by approximately $1.6 million for the year ended December 31, 1995.
COMPARISON OF RESULTS OF OPERATIONS FOR YEARS ENDED 1994 AND 1993
NET INCOME. Net income for the year ended December 31, 1994 was $24.0
million, compared with $23.2 million earned in 1993. Net income for the year
ended December 31, 1993 included a $766,000 benefit from the cumulative effect
of a change in accounting principle due to the adoption of Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes (``SFAS
109'').
Net interest income (expressed on a tax-equivalent basis) was $93.0
million, or 4.07%, of average interest-earning assets for 1994, compared to
$82.9 million, or 4.34%, for 1993. The increase in net income for 1994 is
primarily attributable to the decrease in the provision for possible loan
losses during 1994 in comparison to 1993.
PROVISION FOR POSSIBLE LOAN LOSSES. The provision for possible loan losses
was $1.9 million and $4.5 million for the years ended December 31, 1994 and
1993, respectively. Net loan charge-offs were $1.5 million and $4.4 million for
the same periods. The decrease in the provision for possible loan losses during
1994, in comparison to 1993, is attributable to a decrease in loan charge-offs,
increase in recoveries of loans previously charged-off and management's
assessment of the required reserves based on the risks identified in the
various loan portfolios of each Subsidiary Bank.
38
<PAGE> 44
NONINTEREST INCOME AND EXPENSE. The following table summarizes noninterest
income and noninterest expense for the years ended December 31, 1994 and 1993,
respectively.
<TABLE>
<CAPTION>
INCREASE
DECEMBER 31, (DECREASE)
---------------- ---------------
1994 1993 AMOUNT %
---- ---- ------ -
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest income:
Service charges on deposit accounts and customer service fees.................... $ 8,300 6,821 1,479 21.7%
Credit card fees................................................................. 1,746 1,231 515 41.8
Loan servicing fees, net......................................................... 1,645 1,163 482 41.4
Gain (loss) on mortgage loans sold and held for sale............................. 126 (1,693) 1,819 --
Trust and brokerage fees......................................................... 744 752 (8) (1.1)
Net (loss) gain on sales of securities........................................... (290) 155 (445) --
Other............................................................................ 1,363 1,524 (161) (10.6)
------- ------ ------
Total noninterest income................................................. $13,634 9,953 3,681 37.0
======= ====== ====== =====
Noninterest expense:
Salaries and employee benefits................................................... $28,337 22,087 6,250 28.3%
Occupancy, net of rental income.................................................. 5,260 4,450 810 18.2
Furniture and equipment.......................................................... 5,209 4,783 426 8.9
Federal Deposit Insurance Corporation premiums................................... 4,484 4,289 195 4.5
Postage, printing and supplies................................................... 3,304 3,000 304 10.1
Data processing fees............................................................. 3,733 2,929 804 27.4
Legal, examination and professional fees......................................... 3,562 2,369 1,193 50.4
Credit card expenses............................................................. 2,455 1,843 612 33.2
Communications................................................................... 1,816 1,235 581 47.0
Advertising...................................................................... 1,767 1,313 454 34.6
Losses and expenses on foreclosed real estate, net of gains...................... 792 28 764 --
Other............................................................................ 7,015 5,105 1,910 37.4
------- ------ ------
Total noninterest expense................................................ $67,734 53,431 14,303 26.8
======= ====== ====== =====
</TABLE>
Noninterest income increased by $3.6 million to $13.6 million from $10.0
million for the years ended December 31, 1994 and 1993, respectively. The
increase is attributable to mortgage banking activities and additional service
charges and customer fee income. A more thorough discussion and analysis of the
increase attributable to mortgage banking operations has been presented under
``--Mortgage Banking Activities.'' The increased service charges and customer
fee income is associated with the acquisitions completed during 1994 and
improved product offerings to the existing customer base.
Noninterest expense was $67.7 million and $53.4 million for the years ended
December 31, 1994 and 1993, respectively, representing an increase of $14.3
million. The increase is primarily attributable to the five acquisitions
completed during 1994 which affected virtually every aspect of noninterest
expense. In addition to the general increase in expenses resulting from the
acquisitions in 1994, credit card expenses increased primarily from the
development and marketing costs associated with the introduction of the new
variable rate credit card program. Similarly, legal, examination and
professional fees increased to $3.6 million in 1994 from $2.4 million in 1993.
The increase was primarily attributable to a $620,000 increase in regulatory
examination and audit fees and a $574,000 increase in legal and other
professional fees. The increase in regulatory examination and audit fees is
primarily attributable to the increase in the organizational size of First
Banks. The increase in legal and other professional fees is primarily
associated with the increased use of such outside expertise in connection with
the loan growth experienced during 1994 as well as the ongoing requirements of
the existing loan portfolios.
39
<PAGE> 45
LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Interest earned on the loan portfolio is the primary source of income for
the Subsidiary Banks. Loans, net of unearned discount, represent 77.1% of total
assets as of September 30, 1996, compared to 75.7% and 72.0% at December 31,
1995 and 1994, respectively.
Loans, net of unearned discount and excluding loans held for sale,
increased by $10.2 million. This increase is primarily attributable to the
corporate banking loan portfolio of First Banks which experienced an increase
of $135.8 million during the nine months ended September 30, 1996. Offsetting
this increase were reductions in residential real estate mortgage and consumer
and installment loan portfolios of $108.5 million and $68.0 million,
respectively, at September 30, 1996, in comparison to December 31, 1995. These
changes reflect a restructuring of the loan portfolio which was initiated in
early 1995. In accordance with that plan, First Banks has sold substantially
all of its conforming residential mortgage production in the secondary mortgage
market and has significantly reduced its origination of indirect automobile
loans.
For 1995, loan growth, net of unearned discount and excluding loans held
for sale, was $646.0 million, compared to $798.9 million for 1994. The
acquisitions completed during 1995 and 1994 provided loans of approximately
$722 million and $349 million, or 63.0% and 43.0%, respectively, of the total
acquired assets. Internally generated loan growth was $65.9 million and $356.1
million for 1995 and 1994, respectively. Offsetting the loan growth in 1995 was
a sale of $147 million of residential mortgage loans. As previously discussed
under ``--Financial Condition and Average Balances,'' as a result of the growth
which had occurred in the residential mortgage loan portfolio, relative to
other types of loans, and the effects which these loans have on the interest
rate risk management process, First Banks concluded that its residential
mortgage loan portfolio, as a percentage of the total loans, should be reduced.
First Banks' lending strategy stresses quality, growth, and diversification
by collateral, geography and industry. A common credit underwriting structure
is in place throughout First Banks. The commercial lenders focus principally on
small to middle-market companies. The retail lenders focus principally on
residential loans, including home equity loans, automobile financing and other
consumer financing needs arising out of First Banks' branch banking network.
Commercial, financial, agricultural, and municipal and industrial
development loans include loans that are made primarily on the strength of the
borrowers' general credit standing and ability to generate repayment cash flows
from income sources even though such loans and bonds may also be secured by
real estate or other assets. Real estate construction and development loans,
primarily residential properties, represent interim financing secured by real
estate under construction. Real estate mortgage loans consist primarily of
loans secured by single-family owner-occupied properties and various types of
commercial properties whereby the income from the property is the intended
source of repayment. Consumer and installment loans are loans to individuals
and consist primarily of loans secured by automobiles. Loans held for sale are
primarily fixed-rate residential loans pending sale in the secondary loan
market in the form of a GNMA or FNMA mortgage-backed security and the excess
production of ARMs sold directly to private third-party investors.
40
<PAGE> 46
The following table shows the composition of the loan portfolio by major
category and the percent of each to the total portfolio as of the dates
presented:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ ------------ ------------- ------------ ------------ ------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ - ------ - ------ - ------ -
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial,
agricultural
and municipal
and industrial
development... $ 443,750 16.4% $ 364,018 13.5% $ 208,649 10.2% $ 160,211 12.8% $ 154,322 12.2% $ 181,978 13.7%
Real estate
construction
and
development... 259,607 9.6 209,802 7.8 122,912 6.0 76,049 6.1 77,208 6.2 94,118 7.1
Real estate
mortgage:
One- to
four-family
residential
loans....... 1,082,705 40.0 1,199,491 44.4 967,129 47.1 584,868 46.6 606,847 48.1 625,801 47.1
Other real
estate loans 579,902 21.3 512,264 19.0 332,075 16.1 243,382 19.4 189,267 15.0 188,623 14.2
Consumer and
installment,
net of
unearned
discount...... 343,375 12.7 413,609 15.3 422,461 20.6 189,851 15.1 234,552 18.5 237,116 17.9
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
Total loans,
excluding
loans held
for sale... 2,709,339 100.0% 2,699,184 100.0% 2,053,226 100.0% 1,254,361 100.0% 1,262,196 100.0% 1,327,636 100.0%
===== ===== ===== ===== ===== =====
Loans held
for sale....... 23,687 45,035 20,344 107,657 109,221 81,431
---------- ---------- ---------- ---------- ---------- ----------
Total loans.. $2,733,026 $2,744,219 $2,073,570 $1,362,018 $1,371,417 $1,409,067
========== ========== ========== ========== ========== ==========
</TABLE>
Loans at December 31, 1995 mature as follows:
<TABLE>
<CAPTION>
OVER ONE YEAR
THROUGH FIVE YEARS OVER FIVE YEARS
------------------ -------------------
ONE YEAR FIXED FLOATING FIXED FLOATING
OR LESS RATE RATE RATE RATE TOTAL
-------- ----- -------- ----- -------- -----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial, agricultural and municipal and
industrial development................................ $166,215 53,663 106,403 3,299 34,438 364,018
Real estate construction and development................ 141,524 5,068 58,139 173 4,898 209,802
Real estate mortgage.................................... 250,239 309,201 294,792 169,586 687,937 1,711,755
Consumer and installment, net of unearned discount...... 50,573 317,223 4,204 20,498 21,111 413,609
Loans held for sale..................................... 45,035 -- -- -- -- 45,035
-------- ------- ------- -------- -------- ---------
Total loans......................................... $653,586 685,155 463,538 193,556 748,384 2,744,219
======== ======= ======= ======== ======== =========
</TABLE>
41
<PAGE> 47
Following is a summary of loan loss experience for the nine months ended
September 30, 1996 and 1995 and the five years ended December 31, 1995:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for possible loan losses,
beginning of period............... $ 52,665 28,410 28,410 23,053 20,897 19,238 15,797
Acquired allowances for possible
loan losses....................... -- 23,761 24,655 5,026 2,079 399 --
---------- --------- --------- --------- --------- --------- ---------
52,665 52,171 53,065 28,079 22,976 19,637 15,797
---------- --------- --------- --------- --------- --------- ---------
Loans charged-off:
Commercial, financial and
agricultural................... (7,296) (1,811) (2,337) (813) (2,023) (3,885) (1,991)
Real estate construction and
development.................... (1,142) (253) (275) (119) (19) (424) (272)
Real estate mortgage............. (6,943) (5,640) (5,948) (1,282) (2,212) (2,697) (2,310)
Consumer and installment......... (5,922) (5,152) (7,060) (4,482) (5,277) (5,197) (3,076)
---------- --------- --------- --------- --------- --------- ---------
Total.................... (21,303) (12,856) (15,620) (6,696) (9,531) (12,203) (7,649)
---------- --------- --------- --------- --------- --------- ---------
Recoveries of loans previously
charged-off:
Commercial, financial and
agricultural................... 1,099 945 1,714 831 1,191 1,083 410
Real estate construction and
development.................... 376 479 666 401 241 34 --
Real estate mortgage............. 1,563 249 290 840 1,396 503 144
Consumer and installment......... 2,191 1,574 2,189 3,097 2,324 1,408 763
---------- --------- --------- --------- --------- --------- ---------
Total.................... 5,229 3,247 4,859 5,169 5,152 3,028 1,317
---------- --------- --------- --------- --------- --------- ---------
Net loans charged-off.... (16,074) (9,609) (10,761) (1,527) (4,379) (9,175) (6,332)
---------- --------- --------- --------- --------- --------- ---------
Provision for possible loan losses... 8,774 8,449 10,361 1,858 4,456 10,435 9,773
---------- --------- --------- --------- --------- --------- ---------
Allowance for possible loan losses,
end of period...................... $ 45,365 51,011 52,665 28,410 23,053 20,897 19,238
========== ========= ========= ========= ========= ========= =========
Loans outstanding:
Average.......................... $2,713,444 2,551,896 2,598,936 1,616,634 1,340,641 1,416,597 1,360,169
End of period.................... 2,733,026 2,748,715 2,744,219 2,073,570 1,362,018 1,371,417 1,409,067
End of period, excluding loans
held for sale.................. 2,709,339 2,704,047 2,699,184 2,053,226 1,254,361 1,262,196 1,327,636
========== ========= ========= ========= ========= ========= =========
Ratio of allowance for possible
loan losses to loans
outstanding:
Average.................... 1.67% 2.00% 2.03% 1.76% 1.72% 1.48% 1.41%
End of period.............. 1.66 1.86 1.92 1.37 1.69 1.52 1.37
End of period, excluding
loans held for sale...... 1.67 1.89 1.95 1.38 1.84 1.66 1.45
Ratio of net charge-offs to
average loans outstanding<F1>.. 0.79 0.50 0.41 0.09 0.33 0.65 0.47
==== ==== ==== ==== ==== ==== ====
Allocation of allowance for possible
loan losses at end of period:
Commercial, financial,
agricultural and municipal
and industrial development..... $ 13,408 12,216 12,501 4,160 3,531 2,912 3,431
Real estate construction and
development.................... 5,598 4,371 4,665 2,440 2,867 2,895 3,529
Real estate mortgage............. 13,798 17,125 19,849 8,051 6,712 4,186 4,290
Consumer and installment......... 6,740 10,523 10,016 6,225 2,925 2,428 1,778
Unallocated...................... 5,821 6,776 5,634 7,534 7,018 8,476 6,210
---------- --------- --------- --------- --------- --------- ---------
Total.................... $ 45,365 51,011 52,665 28,410 23,053 20,897 19,238
========== ========= ========= ========= ========= ========= =========
Percent of categories to loans,
net of unearned discount:
Commercial, financial and
agricultural................... 15.79% 11.56% 12.81% 9.40% 10.83% 10.19% 11.68%
Municipal and industrial
development.................... .44 .48 0.46 0.66 0.93 1.06 1.23
Real estate construction and
development.................... 9.50 7.40 7.65 5.93 5.58 5.63 6.68
Real estate mortgage............. 60.84 63.41 62.49 62.66 60.81 58.05 57.80
Consumer and installment......... 12.56 15.52 14.95 20.37 13.94 17.10 16.83
Loans held for sale.............. .87 1.63 1.64 0.98 7.91 7.97 5.78
---------- --------- --------- --------- --------- --------- ---------
Total..................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
========== ========= ========= ========= ========= ========= =========
<FN>
- ----------
<F1>The ratios for the nine month periods are annualized.
</TABLE>
42
<PAGE> 48
Following is a summary of nonperforming assets by category:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------ ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural:
Nonaccrual...................... $ 4,867 4,261 9,930 2,540 4,278 2,707 1,703
Restructured terms.............. 142 -- -- 60 60 122 314
Real estate construction and
development--
Nonaccrual...................... 2,093 2,175 2,002 1,448 70 89 --
Real estate mortgage:
Nonaccrual...................... 25,669 32,476 27,159 11,637 7,546 7,292 7,443
Restructured terms.............. 106 -- -- 222 227 568 772
Consumer and installment:
Nonaccrual...................... 508 331 300 293 49 312 82
Restructured terms.............. 7 -- -- -- -- -- 68
---------- --------- --------- --------- --------- --------- ---------
Total nonperforming
loans................. 33,392 39,423 39,391 16,200 12,230 11,090 10,382
Other real estate................... 10,298 8,783 7,753 6,740 2,529 6,938 12,282
---------- --------- --------- --------- --------- --------- ---------
Total nonperforming
assets.............. $ 43,690 48,026 47,144 22,940 14,759 18,028 22,664
========== ========= ========= ========= ========= ========= =========
Loans, net of unearned discount..... $2,733,026 2,748,715 2,744,219 2,073,570 1,362,018 1,371,417 1,409,067
========== ========= ========= ========= ========= ========= =========
Loans past due 90 days or more
and still accruing................ $ 5,988 5,314 8,474 1,885 1,199 3,074 5,637
========== ========= ========= ========= ========= ========= =========
Allowance for possible loan
losses to loans................... 1.66% 1.86% 1.92% 1.37% 1.69% 1.52% 1.37%
Nonperforming loans to loans........ 1.22 1.43 1.44 0.78 0.90 0.81 0.74
Allowance for possible loan
losses to nonperforming
loans............................. 135.86 129.99 133.70 175.37 188.50 188.43 185.30
Nonperforming assets to loans and
foreclosed assets................. 1.59 1.74 1.71 1.10 1.08 1.31 1.59
==== ==== ==== ==== ==== ==== ====
</TABLE>
As of September 30, 1996, December 31, 1995 and 1994, $24.5 million, $47.9
million and $18.4 million, respectively, of loans not included in the table
above were identified by management as having potential credit problems which
raised doubts as to the ability of the borrowers to comply with the present
loan repayment terms.
First Banks' credit management policy and procedures focuses on identifying
and managing credit exposure. First Banks utilizes a lender-initiated system of
rating credits, which is subsequently tested by internal loan review and bank
regulators. Adversely rated credits are included on a watch list, and are
reviewed at the bank level and centrally at least every four months. Loans may
be added to the watch list for reasons which are temporary and correctable,
such as the absence of current financial statements of the borrower, or a
deficiency in loan documentation. Other loans are added as soon as any problem
is detected which might affect the borrower's ability to meet the terms of the
loan. This could be initiated by the delinquency of a scheduled loan payment, a
deterioration in the borrower's financial condition identified in a review of
periodic financial statements, a decrease in the value of the collateral
securing the loan, or a change in the economic environment within which the
borrower operates.
In addition to the rating system, credit administration coordinates the
periodic credit reviews and provides management with information on risk
levels, trends, delinquencies and portfolio concentrations.
The allowance for possible loan losses is based on past loan loss
experience, on First Banks management's evaluation of the quality of the loans
in the portfolio and on the anticipated effect of national and local economic
conditions relative to the ability of loan customers to repay. Each quarter,
the allowance for possible loan losses is reviewed relative to the watch list
and other data to determine its adequacy. The provision for possible loan
losses is management's estimate of the amount necessary to maintain the
allowance at a level consistent with this evaluation. As adjustments to the
allowance for possible loan losses are considered necessary, they are reflected
in the consolidated statements of income.
First Banks does not lend funds for foreign loans. Additionally, First
Banks does not have any concentrations of loans exceeding 10% of total loans
which are not otherwise disclosed in the loan portfolio composition table.
First Banks does not have a material amount of interest-bearing assets which
would have been included in nonaccrual, past due or restructured loans if such
assets were loans.
43
<PAGE> 49
INVESTMENT SECURITIES
Effective December 31, 1993, First Banks adopted SFAS 115, Accounting for
Certain Investments in Debt and Equity Securities (``SFAS 115''), for which the
cumulative effect was recorded on the consolidated balance sheet on that date.
Under SFAS 115, First Banks is required to classify debt and equity
securities into one of three categories. Held to maturity includes debt
securities which First Banks has the positive intent and ability to hold to
maturity. Trading includes debt and equity securities purchased and held
principally for the purpose of selling them in the near term. Available for
sale includes debt securities not classified as held to maturity or trading and
equity investments not classified as trading, and which, therefore, are
investments which First Banks has no plans to sell in the near term but which
may be sold in the future under different circumstances.
As of December 31, 1993, First Banks conducted an initial evaluation of the
investment security portfolio and practices for purposes of allocation into one
of the three categories. First Banks does not engage in the trading of
securities as defined by SFAS 115 and, accordingly, there are no securities
designated as trading. This evaluation further concluded the composition of
debt securities eligible for inclusion in the held-to-maturity portfolio should
be limited to debt securities purchased to enhance overall profitability of
First Banks. The remaining securities were allocated as available for sale.
While First Banks plans to hold available-for-sale securities for an indefinite
period, management may dispose of these securities as part of its
asset/liability strategy, in response to changing interest rates, to adjust for
liquidity requirements in response to loan demand or other similar factors. The
available-for-sale portfolio also includes investments in equity securities
since it was not First Banks' intent to purchase these securities principally
for the purpose of selling them in the near term.
As a result of this evaluation, debt securities with an amortized cost of
$242.0 million were classified as held-to-maturity securities, and debt and
equity securities with an amortized cost of $283.6 million were classified as
available-for-sale securities. A market valuation account was established for
the available-for-sale securities of $5.5 million, to increase the recorded
balance of such securities at December 31, 1993 to their fair value on that
date; a deferred tax liability of $1.9 million was recorded to reflect the tax
effect of the market valuation account; and the net increase resulting from the
market valuation adjustment at December 31, 1993 was recorded as a separate
component of stockholders' equity. Subsequent to December 31, 1993, the federal
banking and thrift regulatory agencies concluded the impact of applying SFAS
115 would not be considered part of the capital base for purposes of
calculating regulatory capital compliance. In addition, state banking
regulatory agencies have also elected to exclude the impact of applying SFAS
115, except for the California State Banking Department which includes the
impact of SFAS 115.
In October 1995, the FASB issued a Special Report, A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities (``Special Report''). The Special Report was issued in
response to various questions that have been raised as a result of initially
applying SFAS 115 including the regulatory treatment for purposes of
calculating capital compliance. The Special Report also provided an enterprise
the opportunity to reassess the appropriateness of the classifications of all
investment securities without bringing into question the intent of an
enterprise to hold other debt securities to maturity. Such reassessment had to
occur by December 31, 1995.
In light of the Special Report and the regulatory capital treatment of the
impact of SFAS 115, First Banks again reviewed its investment securities
portfolios and practices. First Banks concluded the economic benefits available
to First Banks by increasing the types of securities classified as available
for sale exceeded the disadvantages of reflecting market value changes of such
investment securities, net of deferred income taxes, as a component of
stockholders' equity. The primary benefits available to First Banks within its
available-for-sale portfolio, in contrast to the held-to-maturity portfolio,
are: (1) the ability to provide and absorb funds based on the liquidity
position of First Banks; (2) the ability to reposition the interest rate risk
of the portfolio to respond to changes in the overall interest rate risk
profile of First Banks; and (3) the ability to sell selected securities in
response to favorable market conditions. Accordingly, during December 1995,
First Banks concluded the investment securities portfolios would be classified
as available for sale except for investments in state and political
subdivisions and certain securities of FCB. Investments in state and political
subdivisions are generally limited to communities served by First Banks and
would be held to maturity under First Banks' on-going support of the community.
The classifications of FCB's investment securities remain as originally
classified by FCB reflecting the investment strategies of that bank's
management.
As of December 31, 1995, debt securities with an amortized cost of $174.1
million were reclassified from held to maturity to available for sale. The
market valuation account was adjusted by $2.7 million, representing a decrease
in the recorded balance of such securities at December 31, 1995 to their fair
value on that date, the related deferred tax
44
<PAGE> 50
asset of $950,000 was recorded to reflect the tax effect of the market
valuation account adjustment, and the net decrease resulting from the
reclassification at December 31, 1995 of $1.8 million was reflected within the
separate component of stockholders' equity.
The following table shows the composition of the investment security
portfolio by major category as of the dates presented:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1996 1995 1994 1993
---- ---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Available For Sale
U.S. Treasuries............................................. $ 82,466 44,012 46,036 108,498
U.S. Government Agencies and Corporations:
Mortgage backed......................................... 197,124 235,496 173,368 30,072
Other................................................... 160,431 160,297 98,289 127,993
Other securities............................................ 781 3,303 -- --
Federal Home Loan Bank and Federal Reserve Bank stock....... 21,167 18,173 25,883 6,713
Equity investments in other financial institutions.......... 11,306 10,510 12,382 15,889
-------- ------- ------- -------
Total available for sale........................ 473,275 471,791 355,958 289,165
-------- ------- ------- -------
Held to Maturity
U.S. Treasuries............................................. 3,004 7,018 10,251 --
U.S. Government Agencies and Corporations:
Mortgage-backed......................................... -- -- 178,434 190,920
Other................................................... -- 3,940 9,767 5,000
State and Political Subdivisions............................ 22,506 25,574 27,237 21,539
Other....................................................... -- -- 6,231 24,524
-------- ------- ------- -------
Total held to maturity.......................... 25,510 36,532 231,920 241,983
-------- ------- ------- -------
Total investment securities..................... $498,785 508,323 587,878 531,148
======== ======= ======= =======
</TABLE>
DEPOSITS
Deposits are the primary source of funds for the Subsidiary Banks. First
Banks' deposits consist principally of core deposits from its Subsidiary Banks'
local market areas. The following table sets forth the distribution of First
Banks' deposit accounts at the dates indicated and the weighted average nominal
interest rates on each category of deposit:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------
PERCENT
OF
AMOUNT DEPOSITS RATE
------ -------- ----
(DOLLARS EXPRESSED IN
THOUSANDS)
<S> <C> <C> <C>
Demand deposits.................... $ 393,401 12.9% --%
Interest-bearing demand deposits... 289,535 9.5 1.77
Savings deposits................... 664,142 21.7 3.12
Time deposits of $100,000 or
more............................. 149,695 4.9 5.34
Other time deposits................ 1,557,968 51.0 5.55
---------- ----- ====
Total deposits.................
$3,054,741 100.0%
========== =====
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
1995 1994 1993
------------------------ ------------------------ ------------------------
PERCENT PERCENT PERCENT
OF OF OF
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE
------ -------- ---- ------ -------- ---- ------ -------- ----
(DOLLARS EXPRESSED IN
THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits.................... $ 389,658 12.2% --% $ 290,039 12.4% --% $ 224,041 12.6% --%
Interest-bearing demand deposits... 307,584 9.7 1.89 268,212 11.5 2.04 223,297 12.5 1.75
Savings deposits................... 690,902 21.7 3.16 538,027 23.1 3.03 446,294 25.1 2.63
Time deposits of $100,000 or
more............................. 201,025 6.3 5.69 113,381 4.9 4.87 49,874 2.8 3.81
Other time deposits................ 1,594,522 50.1 5.72 1,123,485 48.1 4.84 835,883 47.0 4.15
---------- ----- ==== ---------- ----- ==== ---------- ----- ====
Total deposits.................
$3,183,691 100.0% $2,333,144 100.0% $1,779,389 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
CAPITAL
Risk-based capital guidelines for financial institutions are designed to
relate regulatory capital requirements to the risk profiles of the specific
institutions and to provide more uniform requirements among the various
regulators. First Banks and the Subsidiary Banks are required to maintain a
minimum risk-based capital to risk-weighted assets ratio of 8.00%, with at
least 4.00% being ``Tier 1'' capital. Tier 1 capital is composed of common
stockholders' equity,
45
<PAGE> 51
qualifying perpetual preferred stock instruments (including instruments such as
the Preferred Securities) and minority interests in equity accounts of
consolidated subsidiaries, less intangibles associated with the purchase of
subsidiaries, net losses on financial futures contracts deferred for financial
reporting purposes, and the excess of net deferred tax assets which is more
fully described below. Tier 1 capital also excludes the fair value adjustment
for available for sale investment securities. In addition, a minimum leverage
ratio (Tier 1 capital to total assets) of 3.00% plus an additional cushion of
100 to 200 basis points is expected. First Banks' preferred stock qualifies as
Tier 1 capital under the risk-based guidelines.
At September 30, 1996 and December 31, 1995 and 1994, First Banks' and the
Subsidiary Banks' capital ratios were as follows:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
--------------------------------------------------
TOTAL TIER 1 LEVERAGE RATIO
------------------------ ------------------------ -------------------------
SEPTEMBER DECEMBER 31, SEPTEMBER DECEMBER 31, SEPTEMBER DECEMBER 31
30, ------------- 30, ------------- 30, -------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
--------- ---- ---- --------- ---- ---- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Banks........................ 9.56% 9.34% 12.68% 8.23% 7.77% 11.37% 6.13% 5.32% 7.54
First Bank (Missouri).............. 10.26 10.03 10.66 9.01 8.78 9.41 7.22 7.01 7.57
First Bank (Illinois).............. 11.40 12.91 14.95 10.15 11.66 13.70 7.15 7.22 8.00
First Bank FSB<F1>................. 10.15 11.90 15.34 8.90 10.80 14.31 6.00 6.74 8.24
CCB Bancorp, Inc.<F2>.............. 18.86 15.25 -- 17.58 13.96 -- 11.96 9.58 --
FBA................................ 13.99 11.69 17.50 12.73 10.43 16.28 9.64 8.38 11.97
FCB<F3>............................ 6.61 4.99 -- 5.33 3.68 -- 3.95 2.14 --
St. Charles Federal<F1>............ 14.80 18.95 17.90 14.17 18.46 17.62 7.69 8.73 7.24
<FN>
- ---------
<F1>St. Charles Federal merged with First Bank FSB on December 12, 1996.
<F2>CCB was acquired by First Banks on March 15, 1995.
<F3>First Commercial was acquired by First Banks on August 23, 1995. First
Banks' investment in First Commercial was exchanged into FCB common stock
on December 28, 1995.
</TABLE>
On April 1, 1995, a new capital regulation became effective which limits
the amount of net deferred tax assets that First Banks and the Subsidiary Banks
may include in regulatory capital. A deferred tax asset arises as a result of
an expense recorded currently in the financial statements which will not become
a tax deduction until some time in the future, such as the allowance for
possible loan losses, income which may be recognized for tax purposes before it
is recorded in the financial statements, or tax benefits which may be available
in the future for which there is no corresponding financial statement benefit,
such as a tax loss carryforward. The change in regulation limits the amount of
net deferred tax assets, excluding any amounts applicable to SFAS 115, that are
included in Tier 1 capital to the lesser of the amount of net deferred tax
assets that the entity expects to realize over the next twelve month period or
10% of its Tier 1 capital.
The new capital regulation effects regulatory capital of First Banks, First
Bank FSB and FBA as their net deferred tax assets, as adjusted, exceed the
lesser of the amount expected to be realized over the next twelve month period
or 10% of Tier 1 capital. The amounts expected to be realized over the next
twelve months for First Banks, First Bank FSB and FBA have been estimated to be
at $12.2 million, $1.2 million and $2.6 million at September 30, 1996 and $13.8
million, $1.4 million and $1.8 million at December 31, 1995, respectively, and
are included in Tier 1 capital as these amounts are less than 10% of their Tier
1 capital. The remaining amount of the net deferred tax assets, as adjusted, of
$20.5 million, $12.6 million and $9.6 million at September 30, 1996, and of
$21.3 million, $13.7 million and $11.4 million at December 31, 1995, for First
Banks, First Bank FSB and FBA, respectively, have been subtracted from
stockholders' equity in arriving at Tier 1 capital at September 30, 1996 and
December 31, 1995.
Historically, First Banks accumulates capital to support its acquisitions
by retaining most of its earnings. Relatively small dividends are paid on the
Class A Preferred Stock and the Class B Preferred Stock, totaling $524,000 for
the nine months ended September 30, 1996 and 1995, and $786,000 and $785,000
for the years ended December 31, 1995 and 1994, respectively. The dividends
paid on the Class C Preferred Stock were $3.71 million for the nine months
ended September 30, 1996 and 1995, and $4.95 million for the years ended
December 31, 1995 and 1994. First Banks has never paid, and has no present
intention to pay, dividends on the Common Stock.
FCB's capital, for regulatory purposes, has improved to
``undercapitalized'' at September 30, 1996 from ``significantly
undercapitalized'' at December 31, 1995 as a result of the offering of
newly-issued common stock as more fully described in note 21 to the
Consolidated Financial Statements. The risk based total and Tier 1 capital
ratios
46
<PAGE> 52
and leverage ratio for FCB's subsidiary bank, First Commercial, were 12.65%,
11.37% and 8.41%, respectively, at September 30, 1996 and is considered ``well
capitalized'' for regulatory purposes.
As a result of substantial losses, incurred in prior years, particularly
related to its portfolio of commercial real estate and construction loans, FCB
is operating under the provisions of a Memorandum of Understanding (the
``MOU'') from the Federal Reserve Bank of San Francisco and First Commercial is
subject to Capital Impairment Orders of the California State Banking Department
(the ``Impairment Orders''). The MOU places certain restrictions on the
operations of FCB, particularly with respect to the payment of dividends and
the receipt of dividends from First Commercial, the incurrence of expenses and
the reduction of problem assets of First Commercial. Management of FCB believes
it is in compliance with the provisions of the MOU. Because the underlying
Cease and Desist Order of the FDIC and the Memorandum of Understanding of the
California State Banking Department with respect to FCB's subsidiary bank,
First Commercial, have been terminated, management anticipates that the MOU
will be terminated in the near future.
The Impairment Orders result from a provision of California State Banking
Regulations limiting the relationship of the retained deficit of a bank to its
contributed capital. Because the retained deficit of First Commercial exceeds
that limitation, it is subject to the Impairment Orders. First Commercial has
applied to the California State Banking Department for permission to record a
``quasi-reorganization,'' which would result in adjusting its asset and
liabilities to current fair values and offsetting its retained deficit against
its contributed capital. Management anticipates that its application will be
approved in the near future, allowing it to record the quasi-reorganization, at
which time the Impairment Orders will be terminated.
LIQUIDITY
The liquidity of First Banks and the Subsidiary Banks is the ability to
maintain a cash flow which is adequate to fund operations, service its debt
obligations and meet other commitments on a timely basis. The Subsidiary Banks'
primary sources for liquidity are customer deposits, loan payments, maturities
and sales of investments and earnings. In addition, First Banks and Subsidiary
Banks may avail themselves of more volatile sources of funds through issuance
of certificates of deposit in denominations of $100,000 or more, federal funds
borrowed, securities sold under agreements to repurchase, borrowings from the
Federal Home Loan Banks (FHLB) and other borrowings, including First Banks' $90
million credit agreement. The aggregate funds acquired from those sources were
$344.9 million, $359.2 million and $400.7 million at September 30, 1996,
December 31, 1995 and 1994, respectively.
At September 30, 1996 and December 31, 1995, First Banks' more volatile
sources of funds mature as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Three months or less........................................ $178,871 118,568
Over three months through six months........................ 35,839 35,589
Over six months through twelve months....................... 100,904 128,239
Over twelve months.......................................... 29,242 76,827
-------- -------
Total............................................... $344,856 359,223
======== =======
</TABLE>
Management believes the earnings of its Subsidiary Banks will be sufficient
to provide funds for growth and to permit the distribution of dividends to
First Banks sufficient to meet its operating and debt service requirements both
on a short-term and long-term basis and to pay the dividends on the Class C
Preferred Stock and the Distributions on the Preferred Securities.
EFFECT OF NEW ACCOUNTING STANDARDS
First Banks adopted the provisions of Statement of Financial Accounting
Standards (``SFAS'') 114, Accounting by Creditors for Impairment of a Loan, and
SFAS 118, Accounting by Creditors for Impairment of a Loan--Income Recognition
and Disclosures SFAS 118, which amends SFAS 114, on January 1, 1995. SFAS 114
defines the recognition criterion for loan impairment and the measurement
methods for certain impaired loans and loans whose terms have been modified in
troubled-debt restructurings. SFAS 118 amends SFAS 114 to allow a creditor to
use existing methods for recognizing interest income on an impaired loan. The
implementation of these statements did not have a material effect on First
Banks' financial position and resulted in no additional provision for possible
loan losses.
First Banks adopted the provisions of SFAS 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
SFAS 121, on January 1, 1996. SFAS 121 established accounting standards for
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<PAGE> 53
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of.
SFAS 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset.
First Banks adopted the provisions of SFAS 122, Accounting for Mortgage
Servicing Rights (``SFAS 122''), on January 1, 1996. SFAS 122 amends SFAS 65,
Accounting for Certain Mortgage Banking Activities. SFAS 122 requires that a
mortgage banking enterprise recognize as separate assets rights to service
mortgage loans for others, regardless of how those servicing rights are
acquired.
A mortgage banking enterprise that acquires mortgage servicing rights
through either the purchase or origination of mortgage loans and sells or
securitizes those loans with servicing rights retained should allocate the
total cost of the mortgage loans to the servicing rights and the loans (without
the mortgage servicing rights), based on their relative fair values if it is
practicable to estimate those fair values. If it is not practicable to estimate
the fair values of the mortgage servicing rights and the mortgage loans
(without the mortgage servicing rights), the entire cost of purchasing or
originating the loans should be allocated to the mortgage loans (without the
mortgage servicing rights) and no cost should be allocated to the mortgage
servicing rights.
SFAS 122 requires that a mortgage banking enterprise assess its capitalized
mortgage servicing rights for impairment based on the fair value of those
rights. The entity should stratify its mortgage servicing rights that are
capitalized after the adoption of this statement based on one or more of the
predominate risk characteristics of the underlying loans. Impairment should be
recognized through a valuation allowance for each impaired stratum.
The implementation of SFAS 121 and SFAS 122 did not have a material effect
on First Banks' consolidated financial statements.
In June 1995, the FASB issued SFAS 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities (``SFAS 125'').
SFAS 125 established accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities.
The standards established by SFAS 125 are based on consistent applications
of a financial-components approach that focuses on control. Under that
approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
First Banks does not believe the implementation of SFAS 125 will have a
material effect on its consolidated financial position or results of operation.
EFFECTS OF INFLATION
Financial institutions are less affected by inflation than other types of
companies. Financial institutions make relatively few significant asset
acquisitions which are directly affected by changing prices. Instead, the
assets and liabilities are primarily monetary in nature. Consequently, interest
rates are more significant to the performance of financial institutions than
the effect of general inflation levels. While a relationship exists between the
inflation rate and interest rates, First Banks believes this is generally
manageable through its interest rate risk management program.
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<PAGE> 54
BUSINESS
GENERAL
First Banks, incorporated in Missouri in 1978, is a registered bank holding
company under the BHCA and is headquartered in St. Louis, Missouri. At
September 30, 1996, First Banks had $3.5 billion in total assets, $2.7 billion
in total loans, $3.1 billion in total deposits, and $244 million in total
shareholders' equity. First Banks operates primarily through two wholly-owned
bank subsidiaries, one wholly-owned thrift subsidiary, one wholly-owned bank
holding company subsidiary and two majority-owned bank holding company
subsidiaries.
First Banks' wholly-owned Subsidiary Banks are First Bank (Missouri), First
Bank (Illinois), First Bank FSB and FB&T, which First Banks owns indirectly
through its wholly-owned subsidiary, CCB. First Banks' majority-owned bank
holding company subsidiaries are FBA, in which First Banks currently holds a
67.30% equity interest, and FCB, in which First Banks currently holds a 61.46%
equity interest (excluding the effect of the conversion of certain debentures
owned by First Banks). FCB owns all of the capital stock of First Commercial.
FBA indirectly owns all of the capital stock of BTX and Sunrise.
Through the 126 locations of its Subsidiary Banks, First Banks offers a
broad range of commercial and personal banking services including certificate
of deposit accounts, individual retirement and other time deposit accounts,
checking and other demand deposit accounts, interest checking accounts, savings
accounts, and money market accounts. Loans include commercial, financial,
agricultural, municipal and industrial development, real estate construction
and development, commercial and residential real estate, consumer and
installment loans. Other financial services include mortgage banking, discount
brokerage, credit-related insurance, automatic teller machines, safe deposit
boxes, and trust services offered by certain Subsidiary Banks.
First Banks' management philosophy is to centralize overall corporate
policies, procedures, and administrative functions and to provide operational
support functions for the Subsidiary Banks. Primary responsibility for managing
the Subsidiary Banks rests with each of the officers and directors of the
respective Subsidiary Banks.
The following table lists, as of September 30, 1996, the Subsidiary Banks
(or their intermediate holding company parent) ranked by asset size:
<TABLE>
<CAPTION>
LOANS, NET OF
NUMBER OF TOTAL UNEARNED TOTAL
SUBSIDIARY BANKS<F1> LOCATIONS ASSETS DISCOUNT DEPOSITS
- -------------------- --------- ------ ------------- --------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
First Bank FSB<F2>................................ 39 $1,013,966 841,206 817,133
First Bank (Missouri)............................. 31 837,561 655,790 733,230
First Bank (Illinois)............................. 27 832,082 595,856 763,945
CCB............................................... 13 410,970 308,109 338,044
FBA............................................... 6 271,700 172,737 229,418
FCB............................................... 6 148,980 94,299 133,656
St. Charles Federal<F2>........................... 1 76,313 65,069 60,320
<FN>
- --------
<F1>Does not include Sunrise, which was acquired on November 1, 1996.
<F2>St. Charles Federal merged with First Banks FSB on December 12, 1996.
</TABLE>
In addition to the Subsidiary Banks, First Banks owns FirstServ, Inc. which
provides data processing services and operational support for First Banks and
its subsidiaries, through a management services agreement with an affiliated
entity, First Services, L.P. First Services, L.P. is a limited partnership
which is indirectly owned by First Banks' voting shareholders.
For a discussion of First Banks' recent acquisitions, see ``Management's
Discussion and Analysis--Acquisitions.''
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<PAGE> 55
MARKET AREAS
As of September 30, 1996, the Subsidiary Banks' 123 banking facilities were
located throughout eastern Missouri, Illinois, California and Texas. First
Banks' primary market area is the St. Louis, Missouri metropolitan area. First
Banks' second and third largest markets are central and southern Illinois and
southern and northern California, respectively. First Banks also has locations
in the Houston, Dallas and McKinney, Texas metropolitan areas, rural eastern
Missouri and the greater Chicago, Illinois metropolitan area.
The following table lists the market areas in which the Subsidiary Banks
operate by number of locations and deposits as of September 30, 1996 updated to
reflect the acquisition of Sunrise on November 1, 1996:
<TABLE>
<CAPTION>
TOTAL DEPOSITS
DEPOSITS AS PERCENT NO. OF
GEOGRAPHIC AREA (IN MILLIONS) OF TOTAL LOCATIONS
--------------- ------------- ---------- ---------
<S> <C> <C> <C>
St. Louis, Missouri Metropolitan Area<F1>......... $ 664.2 21.1% 27
Rural Eastern Missouri<F2>........................ 321.7 10.2 16
Central and Southern Illinois<F3>................. 969.8 30.8 40
Northern Illinois<F4>............................. 397.9 12.6 15
Texas<F5>......................................... 229.4 7.3 6
Southern and Central California<F6>............... 313.4 10.0 11
Northern California<F7>........................... 250.4 8.0 11
-------- ----- ---
Total Deposits................................ $3,146.8 100.0% 126
======== ===== ===
<FN>
- --------
<F1>First Bank (Missouri), First Bank (Illinois) and First Bank FSB operate in
the St. Louis metropolitan market area.
<F2>First Bank FSB and First Bank (Missouri) operate in rural eastern Missouri.
<F3>First Bank FSB and First Bank (Illinois) operate in central and southern
Illinois outside of the St. Louis metropolitan market area.
<F4>First Bank FSB operates facilities in northern Illinois, including Chicago.
<F5>BTX operates in the Houston, Dallas and McKinney metropolitan areas.
<F6>FB&T operates in the greater Los Angeles metropolitan area, including
Orange County, California. Three of the branches are also located in Santa
Barbara County, California.
<F7>FB&T, First Commercial and Sunrise (as of November 1, 1996) operate in
northern California, including the greater San Francisco, San Jose and
Sacramento metropolitan market areas.
</TABLE>
LENDING ACTIVITIES
Lending activities are conducted pursuant to a written loan policy which
has been adopted by each of the Subsidiary Banks. Each loan officer has a
defined lending authority and loans made by each such officer must be reviewed
by a loan committee of the banking facility at which the loan officer is
located, the Subsidiary Bank's board of directors or the Central Finance
Committee of First Banks, depending upon the amount of the loan request. Loan
requests for amounts in excess of $4 million, and loan requests for amounts in
excess of $1 million where the aggregate indebtedness of the borrower exceeds
$8 million, must also be approved by First Banks' Chairman of the Board or
Chief Financial Officer.
Loans generally are limited to borrowers residing or doing business in the
immediate market area of the originating Subsidiary Bank. First Banks' policy
is for each Subsidiary Bank to meet the quality loan demand and credit needs of
its local community before it considers the purchase of loan participations
from an affiliate.
First Banks offers commercial, financial, agricultural, municipal and
industrial development, real estate construction and development, commercial
and residential real estate, consumer and installment loans. Additional
information regarding First Banks' loan portfolio is included under
``Management's Discussion and Analysis--Loans and Allowance for Possible Loan
Losses.''
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<PAGE> 56
MORTGAGE BANKING OPERATIONS
First Banks provides mortgage banking services through the First Bank
Mortgage division of First Bank FSB (``First Bank Mortgage''). First Bank
Mortgage has originated, underwritten, closed and serviced a full line of
residential mortgage loan products, both for the portfolios of First Bank FSB
and First Banks' other Subsidiary Banks and for resale in the secondary
mortgage market. First Bank Mortgage has also acquired loans originated by the
other Subsidiary Banks or by unrelated entities, which it has underwritten and
serviced. See, ``Management's Discussion and Analysis--Mortgage Banking
Activities,'' for a discussion of possible changes to the business of First
Bank Mortgage.
INVESTMENT PORTFOLIO
First Banks has established a written investment policy which has been
adopted by the Subsidiary Banks and is reviewed annually. The investment policy
identifies investment criteria and states specific objectives in terms of risk,
interest rate sensitivity, and liquidity. The investment policy directs
management of the Subsidiary Banks to consider, among other criteria, the
quality, term, and marketability of the securities acquired for their
respective investment portfolios. First Banks does not engage in the practice
of trading securities for the purpose of generating portfolio gains. The
investment portfolio composition is included in the Notes to Consolidated
Financial Statements. See, also, ``Management's Discussion and
Analysis--Investment Securities.''
DEPOSITS
First Banks' deposits consist principally of core deposits from the local
market areas of the Subsidiary Banks. The Subsidiary Banks currently do not
hold brokered deposits, except for any such deposits which acquired
institutions may have had prior to their acquisition by First Banks. A table
summarizing the distribution of First Banks' deposit accounts and the weighted
average nominal interest rates on each category of deposits for the three years
ending December 31, 1995 and for the nine months ended September 30, 1996 is
included under ``Management's Discussion and Analysis--Deposits.''
COMPETITION AND BRANCH BANKING
The activities in which the Subsidiary Banks engage are highly competitive.
Those activities and the geographic markets served involve primarily
competition with other banks, some of which are affiliated with large bank
holding companies. Competition among financial institutions is based upon
interest rates offered on deposit accounts, interest rates charged on loans and
other credit and service charges, the quality of services rendered, the
convenience of banking facilities and, in the case of loans to large commercial
borrowers, relative lending limits.
In addition to competing with other banks within their primary service
areas, the Subsidiary Banks also compete with other financial intermediaries,
such as credit unions, industrial loan associations, securities firms,
insurance companies, small loan companies, finance companies, mortgage
companies, real estate investment trusts, certain governmental agencies, credit
organizations and other enterprises. Additional competition for depositors'
funds comes from United States Government securities, private issuers of debt
obligations and suppliers of other investment alternatives for depositors. Many
of First Banks' non-bank competitors are not subject to the same extensive
federal regulations that govern bank holding companies and federally-insured
banks and thrifts or the state regulations governing state-chartered banks and
thrifts. Such non-bank competitors may, as a result, have certain advantages
over First Banks in providing some services.
The trend in Missouri, Illinois, Texas and California has been for
multi-bank holding companies to acquire independent banks and thrifts in
communities throughout these states. First Banks believes it will continue to
face competition in the acquisition of such banks and thrifts from bank holding
companies based in those states and from bank holding companies based in other
states under interstate banking laws. Many of the financial institutions with
which First Banks competes are larger than First Banks and have substantially
greater resources available for making acquisitions.
Subject to regulatory approval, commercial banks situated in Missouri,
Illinois, Texas and California are permitted to establish branches throughout
their respective states, thereby creating the potential for additional
competition in the services areas of the Subsidiary Banks.
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<PAGE> 57
SUPERVISION AND REGULATION
GENERAL
First Banks and its Subsidiary Banks are extensively regulated under
federal and state law. These laws and regulations are intended to protect
depositors, not shareholders. To the extent that the following information
describes statutory or regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect on the business
and prospects of First Banks. The operations of First Banks may be affected by
legislative changes and by the policies of various regulatory authorities.
First Banks is unable to predict the nature or the extent of the effects on its
business and earnings that fiscal or monetary policies, economic controls or
new federal or state legislation may have in the future.
First Banks is a registered bank holding company under the BHCA and, as
such, is subject to regulation, supervision and examination by the Federal
Reserve. First Banks is required to file annual reports with the Federal
Reserve and to provide the Federal Reserve such additional information as it
may require.
First Banks' state-chartered Subsidiary Banks (First Bank (Missouri), First
Bank (Illinois), FB&T, First Commercial and Sunrise) are subject to supervision
and regulation by the bank supervisory authorities in their respective states
and also by their respective primary federal bank regulators. The primary such
regulator for First Bank (Missouri), as a member of the Federal Reserve System,
is the Federal Reserve, while the primary federal bank regulator for First Bank
(Illinois), FB&T, First Commercial and Sunrise, which are not members of the
Federal Reserve System, is the FDIC. First Bank FSB, as a federally chartered
savings institution, is subject to supervision and regulation by the Office of
Thrift Supervision (``OTS''), and BTX, as a national banking association, is
subject to the supervision and regulation of the Office the Comptroller of the
Currency (the ``OCC''). Because the FDIC provides deposit insurance to the
Subsidiary Banks, the Subsidiary Banks are also subject to supervision and
regulation by the FDIC (even where the FDIC is not their primary federal
regulator).
RECENT AND PENDING LEGISLATION
The enactment of the legislation described below has significantly affected
the banking industry generally and will have an ongoing effect on First Banks
and its Subsidiary Banks in the future.
FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989. The
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(``FIRREA'') reorganized and reformed the regulatory structure applicable to
financial institutions generally. FIRREA, among other things, enhanced the
supervisory and enforcement powers for the federal bank regulatory agencies,
required insured financial institutions to guaranty repayment of losses
incurred by the FDIC in connection with the failure of an affiliated financial
institution, required financial institutions to provide their primary federal
regulator with notice (under certain circumstances) of changes in senior
management and broadened authority for bank holding companies to acquire
savings institutions.
Under FIRREA, federal bank regulators were granted expanded enforcement
authority over ``institution-affiliated parties'' (i.e., officers, directors,
controlling shareholders, as well as attorneys, appraisers or accountants who
knowingly or recklessly participate in wrongful action likely to have an
adverse effect on an insured institution). Federal banking regulators have
greater flexibility to bring enforcement actions against insured institutions
and institution-affiliated parties, including cease and desist orders,
prohibition orders, civil money penalties, termination of insurance and the
imposition of operating restrictions and capital plan requirements. These
enforcement actions, in general, may be initiated for violations of laws and
regulations and unsafe or unsound practices. Since the enactment of FIRREA, the
federal bank regulators have significantly increased the use of written
agreements to correct compliance deficiencies with respect to applicable laws
and regulations and to ensure safe and sound practices. Violations of such
written agreements are grounds for initiation of cease-and-desist proceedings.
FIRREA granted the FDIC back-up enforcement authority to recommend enforcement
action to an appropriate federal banking agency and to bring such enforcement
action against a financial institution or an institution-affiliated party if
such federal banking agency fails to follow the FDIC's recommendation. FIRREA
also requires, except under certain circumstances, public disclosure of final
enforcement actions by the federal banking agencies.
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<PAGE> 58
FIRREA also established a cross guarantee provision pursuant to which the
FDIC may recover from a depository institution losses that the FDIC incurs in
providing assistance to, or paying off the depositors of, any of such
depository institution's affiliated insured banks or thrifts. The cross
guarantee thus enables the FDIC to assess a holding company's healthy BIF
members and SAIF members for the losses of any of such holding company's failed
BIF and SAIF members. Cross guarantee liabilities are generally superior in
priority to obligations of the depository institution to its shareholders due
solely to their status as shareholders and obligations to other affiliates.
Cross guarantee liabilities are generally subordinated to deposit liabilities,
secured obligations or any other general or senior liabilities, and any
obligations subordinated to depositors or other general creditors.
THE FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. The
Federal Deposit Insurance Corporation Improvement Act of 1991 (``FDICIA'') was
adopted to recapitalize the BIF and impose certain supervisory and regulatory
reforms on insured depository institutions. FDICIA, in general, includes
provisions, among others, to (i) increase the FDIC's line of credit with the
U.S. Treasury in order to provide the FDIC with additional funds to cover the
losses of federally insured banks, (ii) reform the deposit insurance system,
including the implementation of risk-based deposit insurance premiums, (iii)
establish a format for closer monitoring of financial institutions to enable
prompt corrective action by banking regulators when a financial institution
begins to experience financial difficulty, (iv) establish five capital levels
for financial institutions (``well capitalized,'' ``adequately capitalized,''
``undercapitalized,'' ``significantly undercapitalized'' and ``critically
undercapitalized'') that would impose more scrutiny and restrictions on less
capitalized institutions, (v) require the banking regulators to set operational
and managerial standards for all insured depository institutions and their
holding companies, including limits on excessive compensation to executive
officers, directors, employees and principal shareholders, and establish
standards for loans secured by real estate, (vi) adopt certain accounting
reforms and require annual on-site examinations of federally insured
institutions, including the ability to require independent audits of banks and
thrifts, (vii) revise risk-based capital standards to ensure that they (a) take
adequate account of interest-rate changes, concentration of credit risk and the
risks of nontraditional activities, and (b) reflect the actual performance and
expected risk of loss of multi-family mortgages, and (viii) restrict
state-chartered banks from engaging in activities not permitted for national
banks unless they are adequately capitalized and have FDIC approval. FDICIA
also permits the FDIC to make special assessments on insured depository
institutions, in amounts determined by the FDIC to be necessary to give it
adequate assessment income to repay amounts borrowed from the U.S. Treasury and
other sources or for any other purpose the FDIC deems necessary. FDICIA also
grants authority to the FDIC to establish semiannual assessment rates on BIF
and SAIF member banks so as to maintain these funds at the designated reserve
ratios.
FDICIA, as noted above, authorizes and (under certain circumstances)
requires the federal banking agencies to take certain actions against
institutions that fail to meet certain capital-based requirements. The federal
banking agencies are required, under FDICIA, to establish five levels of
insured depository institutions based on leverage limit and risk-based capital
requirements established for institutions subject to their jurisdiction plus,
in their discretion, individual additional capital requirements for such
institutions. Under the final rules that have been adopted by each of the
federal banking agencies, an institution will be designated (i)
``well-capitalized'' if the institution has a total risk-based capital ratio of
10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a
leverage ratio of 5% or greater, and the institution is not subject to an
order, written agreement, capital directive, or prompt corrective action
directive to meet and maintain a specific capital level for any capital
measure, (ii) ``adequately capitalized'' if the institution has a total
risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of
4% or greater, and a leverage ratio of 4% or greater (or a leverage ratio of 3%
or greater if the institution is rated composite 1 in its most recent report of
examination), (iii) ``undercapitalized'' if the institution has a total
risk-based capital ratio that is less than 8%, a Tier 1 risk-based capital
ratio that is less than 4%, or a leverage ratio that is less than 4% (or a
leverage ratio that is less than 3% if the institution is rated composite 1 in
its most recent report of examination), (iv) ``significantly undercapitalized''
if the institution has a total risk-based capital ratio that is less than 6%, a
Tier 1 risk-based capital ratio that is less than 3%, or a leverage ratio that
is less than 3%, and (v) ``critically undercapitalized'' if the institution has
a ratio of tangible equity to total assets that is equal to or less than 2%.
Undercapitalized institutions are required to submit capital restoration
plans to the appropriate federal banking agency and are subject to certain
operational restrictions. Companies controlling an undercapitalized institution
are also required to guarantee the subsidiary institution's compliance with the
capital restoration plan subject to an aggregate limitation of the lesser of 5%
of the institution's assets or the amount of the capital deficiency when the
institution first failed to meet the plan.
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<PAGE> 59
Significantly or critically undercapitalized institutions and
undercapitalized institutions that did not submit or comply with acceptable
capital restoration plans will be subject to regulatory sanctions. A forced
sale of shares or merger, restriction on affiliate transactions and
restrictions on rates paid on deposits are required to be imposed by the
banking agency unless it is determined that they would not further capital
improvement. FDICIA generally requires the appointment of a conservator or
receiver within 90 days after an institution becomes critically
undercapitalized. The federal banking agencies have adopted uniform procedures
for the issuance of directives by the appropriate federal banking agency. Under
these procedures, an institution will generally be provided advance notice when
the appropriate federal banking agency proposes to impose one or more of the
sanctions set forth above. These procedures provide an opportunity for the
institution to respond to the proposed agency action or, where circumstances
warrant immediate agency action, an opportunity for administrative review of
the agency's action.
As described under ``Management's Discussion and Analysis--Capital,'' First
Banks and each of its Subsidiary Banks have, as of September 30, 1996, capital
in excess of the requirements for a ``well-capitalized'' institution.
Pursuant to FDICIA, the Federal Reserve and the other federal banking
agencies adopted real estate lending guidelines pursuant to which each insured
depository institution is required to adopt and maintain written real estate
lending policies in conformity with the prescribed guidelines. Under these
guidelines, each institution is expected to set loan to value ratios not
exceeding the supervisory limits set forth in the guidelines. A loan to value
ratio is generally defined as the total loan amount divided by the appraised
value of the property at the time the loan is originated. The guidelines
require that the institution's real estate policy also require proper loan
documentation, and that it establish prudent underwriting standards. These
guidelines became effective on March 19, 1993. These rules have had no material
adverse impact on First Banks.
FDICIA also contained the Truth in Savings Act, which requires clear and
uniform disclosure of the rates of interest payable on deposit accounts by
depository institutions, and the fees assessable against deposit accounts, so
that consumers can make a meaningful comparison between the competing claims of
financial institutions with regard to deposit accounts and products.
RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994.
Congress enacted the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the ``Interstate Act'') in September 1994. Beginning in September
1995, bank holding companies have the right to expand, by acquiring existing
banks, into all states, even those which had theretofore restricted entry. The
legislation also provides that, subject to future action by individual states,
a holding company will have the right, commencing in 1997, to convert the banks
which its owns in different states to branches of a single bank. A state is
permitted to ``opt out'' of the law which will permit conversion of separate
banks to branches, but is not permitted to ``opt out'' of the law allowing bank
holding companies from other states to enter the state. Of those states in
which the Subsidiary Banks are located, Texas has adopted legislation to ``opt
out'' of the interstate branching provisions (which Texas law currently expires
on September 2, 1999). The federal legislation also establishes limits on
acquisitions by large banking organizations, providing that no acquisition may
be undertaken if it would result in the organization having deposits exceeding
either 10% of all bank deposits in the United States or 30% of the bank
deposits in the state in which the acquisition would occur.
ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION ACT OF 1996. The
Economic Growth and Regulatory Paperwork Reduction Act of 1996 (``EGRPRA'') was
signed into law on September 30, 1996. EGRPRA streamlined the non-banking
activities application process for well-capitalized and well-managed bank
holding companies. Under EGRPRA, qualified bank holding companies may commence
a regulatory approved non-banking activity without prior notice to the Federal
Reserve; written notice is required within 10 days after commencing the
activity. Under EGRPRA, the prior notice period is reduced to 12 days in the
event of any non-banking acquisition or share purchase, assuming the size of
the acquisition does not exceed 10% of risk-weighted assets of the acquiring
bank holding company and the consideration does not exceed 15% of Tier 1
capital. The foregoing prior notice requirement also applies to commencing
non-banking activity de novo which has been previously approved by order of the
Federal Reserve, but not yet implemented by regulations.
EGRPRA also provides for the recapitalization of the SAIF in order to bring
it into parity with the BIF of the FDIC. First Banks recorded an $8.6 million
charge in the third quarter of 1996 for the one-time special deposit insurance
assessment. As a result of this special assessment, however, First Banks' cost
of deposit insurance is expected to decrease by approximately $2 million for
the year ended December 31, 1997, compared to its deposit insurance cost for
the year ended December 31, 1996, excluding the effect of the special
assessment. The expected
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decrease in the cost of deposit insurance is based on an overall assessment
rate for 1997 of 1.3 basis points and 6.4 basis points for each $100 of
assessable deposits of BIF and SAIF deposits, respectively, in comparison to
the current assessment rate, applicable only to SAIF deposits, of 23 basis
points. See ``Management's Discussion and Analysis--General.''
PENDING LEGISLATION. Because of concerns relating to competitiveness and
the safety and soundness of the banking industry, Congress is considering a
number of wide-ranging proposals for altering the structure, regulation and
competitive relationships of the nation's financial institutions. Among such
bills are new proposals to merge the BIF and the SAIF insurance funds, to
eliminate the federal thrift charter, to alter the statutory separation of
commercial and investment banking and to further expand the powers of banks,
bank holding companies and competitors of banks. It cannot be predicted whether
or in what form any of these proposals will be adopted or the extent to which
the business of First Banks may be affected thereby.
BANK AND BANK HOLDING COMPANY REGULATION
BHCA. Under the BHCA, the activities of a bank holding company are limited
to businesses so closely related to banking, managing or controlling banks as
to be a proper incident thereto. First Banks is also subject to capital
requirements applied on a consolidated basis in a form substantially similar to
those required of the Subsidiary Banks. The BHCA also requires a bank holding
company to obtain approval from the Federal Reserve before (i) acquiring,
directly or indirectly, ownership or control of any voting shares of another
bank or bank holding company if, after such acquisition, it would own or
control more than 5% of such shares (unless it already owns or controls the
majority of such shares), (ii) acquiring all or substantially all of the assets
of another bank or bank holding company, or (iii) merging or consolidating with
another bank holding company. The Federal Reserve will not approve any
acquisition, merger or consolidation that would have a substantially
anticompetitive result, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by a greater public interest in meeting the
convenience and needs of the community to be served. The Federal Reserve also
considers capital adequacy and other financial and managerial factors in
reviewing acquisitions or mergers.
The BHCA also prohibits a bank holding company, with certain limited
exceptions, (i) from acquiring or retaining direct or indirect ownership or
control of more than 5% of the voting shares of any company which is not a bank
or bank holding company, or (ii) from engaging directly or indirectly in
activities other than those of banking, managing or controlling banks, or
providing services for its subsidiaries. The principal exceptions to these
prohibitions involve certain non-bank activities which, by statute or by
Federal Reserve regulation or order, have been identified as activities closely
related to the business of banking or of managing or controlling banks. The
Federal Reserve, in making such determination, considers whether the
performance of such activities by a bank holding company can be expected to
produce benefits to the public such as greater convenience, increased
competition or gains in efficiency in resources, which can be expected to
outweigh the risks of possible adverse effects such as decreased or unfair
competition, conflicts of interest or unsound banking practices. FIRREA
(described in more detail herein) made a significant addition to the list of
permitted non-bank activities for bank holding companies by providing that bank
holding companies may acquire thrift institutions upon approval by the Federal
Reserve and the applicable regulatory authority for the thrift institutions.
INSURANCE OF ACCOUNTS. The FDIC provides insurance, through the BIF and the
SAIF, to deposit accounts at the Subsidiary Banks to a maximum of $100,000 for
each insured depositor. Certain of the Subsidiary Banks have deposits which
were added through the merger of acquired thrifts. Consequently, First Bank
(Missouri), First Bank (Illinois), First Bank FSB and FB&T are members of both
the BIF and the SAIF. BTX, First Commercial and Sunrise are members of the BIF
only.
Through December 31, 1992, all FDIC-insured institutions, whether members
of the BIF, the SAIF or both, paid the same premium (23 cents per $100 of
assessable deposits) under a flat-rate system mandated by law. FDICIA required
the FDIC to raise the reserves of the BIF and the SAIF, implement a
risk-related premium system and adopt a long-term schedule for recapitalizing
the BIF. Effective January 1, 1993, the FDIC amended its regulations regarding
insurance premiums to provide that a bank or thrift would pay an insurance
assessment within a range of 23 cents to 31 cents for each $100 of assessable
deposits, depending on its risk classification.
On January 1, 1996, the FDIC adopted an amendment to the BIF risk-based
assessment schedule which effectively eliminated deposit insurance assessments
for most commercial banks and other depository institutions
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with deposits insured by the BIF only, while maintaining the assessment rate
for SAIF-insured institutions in even the lowest risk-based premium category at
23 cents for each $100 of assessable deposits. Following enactment of EGRPRA,
First Banks paid a one-time special deposit insurance assessment with respect
to its SAIF insured deposits, as part of the recapitalization of the SAIF, and
the overall assessment rate for 1997 was revised to equal 1.29 cents and 6.44
cents for each $100 of assessable deposits of BIF and SAIF, respectively, in
comparison to the current assessment rate, applicable only to SAIF deposits, of
23 cents for each $100 of assessable deposits.
THE PREFERRED SECURITIES AND THE SUBORDINATED DEBENTURES OFFERED BY THIS
PROSPECTUS ARE NOT SAVINGS OR DEPOSIT ACCOUNTS, ARE NOT OBLIGATIONS OF ANY
BANKING OR NONBANKING AFFILIATE OF FIRST BANKS (EXCEPT TO THE EXTENT THAT
PREFERRED SECURITIES ARE GUARANTEED BY FIRST BANKS AS DESCRIBED HEREIN), ARE
NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
REGULATIONS GOVERNING CAPITAL ADEQUACY. The federal bank regulatory
agencies use capital adequacy guidelines in their examination and regulation of
bank holding companies and banks. If the capital falls below the minimum levels
established by these guidelines, the bank holding company or bank may be denied
approval to acquire or establish additional banks or nonbank businesses or to
open facilities.
The Federal Reserve, the FDIC and the OCC adopted risk-based capital
guidelines for banks and bank holding companies, and the OTS has adopted
similar guidelines for thrifts. The risk-based capital guidelines are designed
to make regulatory capital requirements more sensitive to differences in risk
profile among banks and bank holding companies, to account for off-balance
sheet exposure and to minimize disincentives for holding liquid assets. Assets
and off-balance sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items. The
Federal Reserve has noted that bank holding companies contemplating significant
expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios well in excess of the minimums. Under these
guidelines, all bank holding companies and federally regulated banks must
maintain a minimum risk-based total capital ratio equal to 8%, of which at
least one-half must be Tier 1 capital. Pursuant to FDICIA, banking regulators
are to revise the risk-based capital standards to take into account interest
rate risk, concentration of credit risk and the risks of nontraditional
activities and multi-family mortgages.
The Federal Reserve also has implemented a leverage ratio, which is Tier 1
capital to total assets, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The Federal Reserve requires a minimum leverage ratio
of 3%. For all but the most highly-rated bank holding companies and for bank
holding companies seeking to expand, however, the Federal Reserve expects that
additional capital sufficient to increase the ratio by at least 100 to 200
basis points will be maintained.
On October 21, 1996, the Federal Reserve issued a press release (the
``Federal Reserve Press Release'') announcing that it had approved the use of
certain cumulative preferred stock instruments, such as the Preferred
Securities, in Tier 1 capital for bank holding companies. Because, subject to
certain regulatory limitations, the Preferred Securities may qualify as Tier 1
capital and, under current United States federal tax law, the issuer will
receive a tax deduction for interest in respect of the Subordinated Debentures,
the issuance of the Preferred Securities is a cost effective method of raising
capital on an after-tax basis.
See ``Management's Discussion and Analysis--Capital'' for a discussion of
the capital adequacy of First Banks and the Subsidiary Banks.
Management of First Banks believes that the risk-weighting of assets and
the risk-based capital guidelines do not have a material adverse impact on
First Banks' operations or on the operations of its Subsidiary Banks. The
requirement of deducting certain intangibles in computing capital ratios
contained in the guidelines, however, could adversely affect the ability of
First Banks to make acquisitions in the future in transactions that would be
accounted for using the purchase method of accounting. Although these
requirements would not reduce the ability of First Banks to make acquisitions
using the pooling of interests method of accounting, First Banks has not
historically made, and has no present plans to make, acquisitions on this
basis.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act of 1977 (the
``CRA'') requires that, in connection with examinations of financial
institutions within their jurisdiction, the federal banking regulators must
evaluate the record of the financial institutions in meeting the credit needs
of their local communities, including low
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and moderate income neighborhoods, consistent with the safe and sound operation
of those banks. These factors are also considered in evaluating mergers,
acquisitions and applications to open a branch or facility. The CRA is likely
to be the subject of regulatory reform in the next few years, and proposed
rules have been published for comment by the four regulatory agencies noted
above. Although it is not possible to predict the extent to which the CRA will
be modified, these changes may change the process by which a financial
institution, such as First Banks and the Subsidiary Banks, is able to grow
through acquisitions or establishing new branches.
REGULATIONS GOVERNING EXTENSIONS OF CREDIT. The Subsidiary Banks are
subject to certain restrictions imposed by the Federal Reserve Act on
extensions of credit to the bank holding company or its subsidiaries, or
investments in their securities and on the use of their securities as
collateral for loans to any borrowers. These regulations and restrictions may
limit the ability of First Banks to obtain funds from its Subsidiary Banks for
its cash needs, including funds for acquisitions and for payment of dividends,
interest and operating expenses. Transactions among the Subsidiary Banks (other
than BTX, First Commercial and Sunrise) that do not involve First Banks or
FirstServ, Inc. are generally exempt from the foregoing regulations and
restrictions. Because the exemption is available only to those Subsidiary Banks
that are at least 80% owned by First Banks, it would not apply to such
transactions involving BTX, Sunrise and First Commercial. Further, under the
BHCA and certain regulations of the Federal Reserve, a bank holding company and
its subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit, lease or sale of property or
furnishing of services. For example, a Subsidiary Bank may not generally
require a customer to obtain other services from such Subsidiary Bank or any
other Subsidiary Bank or First Banks, and may not require the customer to
promise not to obtain other services from a competitor, as a condition to an
extension of credit to the customer.
The Subsidiary Banks are also subject to certain restrictions imposed by
the Federal Reserve Act on extensions of credit to executive officers,
directors, principal shareholders or any related interest of such persons.
Extensions of credit (i) must be made on substantially the same terms,
including interest-rates and collateral as, and following credit underwriting
procedures that are not less stringent than, those prevailing at the time for
comparable transactions with persons not covered above and who are not
employees, and (ii) must not involve more than the normal risk of repayment or
present other unfavorable features. The Subsidiary Banks are also subject to
certain lending limits and restrictions on overdrafts to such persons. A
violation of these restrictions may result in the assessment of substantial
civil monetary penalties on a Subsidiary Bank or any officer, director,
employee, agent or other person participating in the conduct of the affairs of
a Subsidiary Bank or the imposition of a cease and desist order.
RESERVE REQUIREMENTS. The Federal Reserve requires all depository
institutions to maintain reserves against their transaction accounts and
non-personal time deposits. Reserves of 3% must be maintained against total
transaction accounts of $51.9 million or less (subject to adjustment by the
Federal Reserve) and an initial reserve of $1,557,000 plus 10% (subject to
adjustment by the Federal Reserve to a level between 8% and 14%) must be
maintained against that portion of total transaction accounts in excess of such
amount. The balances maintained to meet the reserve requirements imposed by the
Federal Reserve may be used to satisfy liquidity requirements.
Institutions are authorized to borrow from the Federal Reserve Bank
``discount window,'' but Federal Reserve regulations require institutions to
exhaust other reasonable alternative sources of funds, including Federal Home
Loan Bank advances, before borrowing from the Federal Reserve Bank.
FEDERAL HOME LOAN BANK SYSTEM. First Bank FSB, First Bank (Missouri), First
Bank (Illinois), FB&T and BTX are members of the Federal Home Loan Bank System
(the ``FHLB System''). The FHLB System consists of twelve regional Federal Home
Loan Banks (each, a ``FHLB''), each subject to supervision and regulation by
the Federal Housing Finance Board, an independent agency created by FIRREA. The
FHLBs provide a central credit facility primarily for member institutions.
First Bank FSB and First Bank (Missouri), as members of the FHLB of Des Moines,
First Bank (Illinois), as a member of the FHLB of Chicago, BTX, as a member of
the FHLB of Dallas, and FB&T, as a member of the FHLB of San Francisco, are
required to acquire and hold shares of capital stock in the FHLB in amounts at
least equal to 1% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20th
of its advances (borrowings) from the FHLB, whichever is greater. Each of the
Subsidiary Banks which is a member of the FHLB is in compliance with these
regulations.
QUALIFIED THRIFT LENDER STATUS. First Bank FSB must, and currently does,
meet a ``Qualified Thrift Lender'' (the ``QTL'') test for, among other things,
future eligibility for FHLB advances. The QTL test requires savings
associations to maintain a specified percentage of assets in ``qualifying''
investments, which may include, for example, home
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mortgage loans, mortgage-backed securities and a percentage of consumer loans.
Any savings association that fails to meet the QTL test must convert to a
commercial bank charter, unless it requalifies as a QTL on an average basis in
at least three out of every four quarters for two out of three years and
thereafter remains a QTL. If an institution that fails the QTL test has not yet
requalified and has not converted to a commercial bank, its new investments and
activities are limited to those permissible for a national bank. Such an
association is also immediately ineligible to receive any new FHLB advances and
is subject to national bank limits for payment of dividends and may not
establish a branch office at any location at which a national bank located in
the savings association's home state could not establish a branch. If such
association has not requalified or converted to a commercial bank charter three
years after its failure to meet the QTL test, it must divest all investments
and cease all activities not permissible for a national bank. Such an
association must also repay promptly any outstanding FHLB advances. Certain
temporary and limited exceptions from meeting the QTL test may be granted by
the OTS.
DIVIDENDS. First Banks' primary sources of funds are the dividends and
management fees paid by its Subsidiary Banks. The ability of the Subsidiary
Banks to pay dividends and management fees is limited by various state and
federal laws, by the regulations promulgated by their respective primary
regulators and by the principles of prudent bank management. The amount of
dividends that the Subsidiary Banks may pay to First Banks is also limited by
the provisions of the Credit Agreement, which imposes certain minimum capital
requirements. Under the most restrictive of these requirements, dividends from
the Subsidiary Banks are limited to approximately $37.8 million as of September
30, 1996, unless prior permission of the regulatory authorities and, if
necessary, the lead bank for the lenders is obtained.
USURY LAWS. The maximum legal rate of interest which the Subsidiary Banks
charge on a particular loan depends on a variety of factors such as the type of
borrower, the purpose of the loan, the amount of the loan and the date the loan
is made. There are several state and federal statutes which set maximum legal
rates of interest for various kinds of loans. If a loan qualifies under more
than one statute, a bank may often charge the highest rate for which the loan
is eligible.
MONETARY POLICY AND ECONOMIC CONTROL. The commercial banking business in
which First Banks engages is affected not only by general economic conditions,
but also by the monetary policies of the Federal Reserve. Changes in the
discount rate on member bank borrowing, availability of borrowing at the
``discount window,'' open market operations, the imposition of changes in
reserve requirements against member banks deposits and assets of foreign
branches, and the imposition of and changes in reserve requirements against
certain borrowings by banks and their affiliates are some of the instruments of
monetary policy available to the Federal Reserve. These monetary policies are
used in varying combinations to influence overall growth and distributions of
bank loans, investments and deposits, and such use may affect interest rates
charged on loans or paid on deposits. The monetary policies of the Federal
Reserve have had a significant effect on the operating results of commercial
banks and are expected to do so in the future. The monetary policies of the
Federal Reserve are influenced by various factors, including inflation,
unemployment, short-term and long-term changes in the international trade
balance and in the fiscal policies of the U.S. Government. Future monetary
policies and the effect of such policies on the future business and earnings of
First Banks and the Subsidiary Banks cannot be predicted.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, State Street Bank and Trust Company,
will act as indenture trustee for the Preferred Securities under the Trust
Agreement for purposes of complying with the provisions of the Trust Indenture
Act. The terms of the Preferred Securities will include those stated in the
Trust Agreement and those made part of the Trust Agreement by the Trust
Indenture Act. The following summary of the material terms and provisions of
the Preferred Securities and the Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Agreement, the Trust Act, and the Trust Indenture Act. Wherever
particular defined terms of the Trust Agreement are referred to, but not
defined herein, such defined terms are incorporated herein by reference. The
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
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GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of
First Capital, will issue the Trust Securities. All of the Common Securities
will be owned by First Banks. The Preferred Securities will represent preferred
undivided beneficial interests in the assets of First Capital and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by First Capital of
any securities other than the Trust Securities or the incurrence of any
indebtedness by First Capital.
The Preferred Securities will rank pari passu, and payments will be made
thereon pro rata, with the Common Securities, except as described under
``--Subordination of Common Securities.'' Legal title to the Subordinated
Debentures will be held by the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The Guarantee executed by First Banks for the
benefit of the holders of the Preferred Securities will be a guarantee on a
subordinated basis with respect to the Preferred Securities, but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Preferred Securities when First Capital does not have funds
on hand available to make such payments. State Street Bank and Trust Company,
as Guarantee Trustee, will hold the Guarantee for the benefit of the holders of
the Preferred Securities. See ``Description of the Guarantee.''
DISTRIBUTIONS
PAYMENT OF DISTRIBUTIONS. Distributions on each Preferred Security will be
payable at the annual rate of % of the stated Liquidation Amount of $25,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, to the holders of the Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a ``Distribution Date''). The record date will be the 15th day of
the month in which the relevant Distribution Date occurs. Distributions will
accumulate from the date of original issuance. The first Distribution Date for
the Preferred Securities will be March 31, 1997. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions, interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. ``Business Day'' means any day
other than a Saturday or a Sunday, a day on which banking institutions in The
City of New York are authorized or required by law or executive order to remain
closed or a day on which the corporate trust office of the Property Trustee or
the Debenture Trustee is closed for business.
EXTENSION PERIOD. First Banks has the right under the Indenture, so long as
no Debenture Event of Default has occurred and is continuing, to defer the
payment of interest on the Subordinated Debentures at any time, or from time to
time (each, an ``Extended Interest Payment Period''), which, if exercised,
would defer quarterly Distributions on the Preferred Securities during any such
Extended Interest Payment Period. Distributions to which holders of the
Preferred Securities are entitled will accumulate additional Distributions
thereon at the rate per annum of % thereof, compounded quarterly from the
relevant Distribution Date. ``Distributions,'' as used herein, includes any
such additional Distributions. The right to defer the payment of interest on
the Subordinated Debentures is limited, however, to a period, in each instance,
not exceeding 20 consecutive quarters and no Extended Interest Payment Period
may extend beyond the Stated Maturity of the Subordinated Debentures. During
any such Extended Interest Payment Period, First Banks may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of First Banks' capital stock (other
than the reclassification of any class of First Banks' capital stock into
another class of capital stock or the conversion of the Class A Preferred Stock
into Common Stock), (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of First Banks that
rank pari passu with or junior in interest to the Subordinated Debentures or
make any guarantee payments with respect to any guarantee by First Banks of the
debt securities of any subsidiary of First Banks if such guarantee ranks pari
passu with or junior in interest to the Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Subordinated Debentures or any of the Preferred Securities. Prior to
the termination of any such Extended Interest Payment Period, First Banks may
further defer the payment of interest; provided that such Extended Interest
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Payment Period may not exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the Subordinated Debentures. Upon the termination of any
such Extended Interest Payment Period and the payment of all amounts then due,
First Banks may elect to begin a new Extended Interest Payment Period, subject
to the above requirements. Subject to the foregoing, there is no limitation on
the number of times that First Banks may elect to begin an Extended Interest
Payment Period.
First Banks has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
SOURCE OF DISTRIBUTIONS. The funds of First Capital available for
distribution to holders of its Preferred Securities will be limited to payments
under the Subordinated Debentures in which First Capital will invest the
proceeds from the issuance and sale of its Trust Securities. See ``Description
of the Subordinated Debentures.'' Distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Subordinated
Debentures in the Property Account for the benefit of the holders of the Trust
Securities. If First Banks does not make interest payments on the Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Preferred Securities. The payment of Distributions (if and
to the extent First Capital has funds legally available for the payment of such
Distributions and cash sufficient to make such payments) is guaranteed by First
Banks. See ``Description of the Guarantee.'' Distributions on the Preferred
Securities will be payable to the holders thereof as they appear on the
register of holders of the Preferred Securities on the relevant record dates,
which will be the 15th day of the month in which the relevant Distribution Date
occurs.
REDEMPTION OR EXCHANGE
GENERAL. The Subordinated Debentures will mature on March 31, 2027. First
Banks will have the right to redeem the Subordinated Debentures (i) on or after
March 31, 2002, in whole at any time or in part from time to time, or (ii) at
any time, in whole (but not in part), within 180 days following the occurrence
of a Tax Event or an Investment Company Event, in each case subject to receipt
of prior approval by the Federal Reserve if then required under applicable
capital guidelines or policies of the Federal Reserve. First Banks will not
have the right to purchase the Subordinated Debentures, in whole or in part,
from First Capital until after March 31, 2002. See ``Description of the
Subordinated Debentures--General.''
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any Subordinated Debentures, whether at Stated Maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption will be applied by the Property Trustee to redeem a
Like Amount (as defined herein) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the ``Redemption Price'')
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
``Redemption Date''). See ``Description of the Subordinated
Debentures--Redemption or Exchange.'' If less than all of the Subordinated
Debentures are to be repaid or redeemed on a Redemption Date, then the proceeds
from such repayment or redemption will be allocated to the redemption of the
Trust Securities pro rata.
DISTRIBUTION OF SUBORDINATED DEBENTURES. Subject to First Banks having
received prior approval of the Federal Reserve if so required under applicable
capital guidelines or policies of the Federal Reserve, First Banks will have
the right at any time to dissolve, wind-up or terminate First Capital and,
after satisfaction of the liabilities of creditors of First Capital as provided
by applicable law, cause the Subordinated Debentures to be distributed to the
holders of Trust Securities in liquidation of First Capital. See
``--Liquidation Distribution Upon Termination.''
TAX EVENT REDEMPTION OR INVESTMENT COMPANY EVENT REDEMPTION. If a Tax Event
or an Investment Company Event in respect of the Trust Securities occurs and is
continuing, First Banks has the right to redeem the Subordinated Debentures in
whole (but not in part) and thereby cause a mandatory redemption of such Trust
Securities in whole (but not in part) at the Redemption Price within 180 days
following the occurrence of such Tax Event or Investment Company Event. In the
event a Tax Event or an Investment Company Event in respect of the Trust
Securities has occurred and First Banks does not elect to redeem the
Subordinated Debentures and thereby cause a mandatory redemption of such Trust
Securities or to liquidate First Capital and cause the Subordinated Debentures
to be distributed to holders of such Trust Securities in liquidation of First
Capital as described below under ``--Liquidation Distribution Upon
Termination,'' such Preferred Securities will remain outstanding and Additional
Interest (as defined herein) may be payable on the Subordinated Debentures.
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``Additional Interest'' means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by First Capital on
the outstanding Trust Securities will not be reduced as a result of any
additional taxes, duties and other governmental charges to which First Capital
has become subject as a result of a Tax Event.
``Like Amount'' means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, which will be used to pay the Redemption Price
of such Trust Securities, and (ii) with respect to a distribution of
Subordinated Debentures to holders of Trust Securities in connection with a
dissolution or liquidation of First Capital, Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Subordinated Debentures are distributed. Each Subordinated
Debenture distributed pursuant to clause (ii) above will carry with it
accumulated interest in an amount equal to the accumulated and unpaid interest
then due on such Subordinated Debentures.
``Liquidation Amount'' means the stated amount of $25 per Trust Security.
After the liquidation date fixed for any distribution of Subordinated
Debentures for Preferred Securities (i) such Preferred Securities will no
longer be deemed to be outstanding, and (ii) any certificates representing
Preferred Securities will be deemed to represent the Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Preferred
Securities, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on the Preferred Securities until such
certificates are presented to the Administrative Trustees or their agent for
transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution and liquidation of First Capital were
to occur. The Preferred Securities that an investor may purchase, or the
Subordinated Debentures that an investor may receive on dissolution and
liquidation of First Capital, may, therefore, trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Subordinated Debentures. Redemptions of the Preferred
Securities will be made and the Redemption Price will be payable on each
Redemption Date only to the extent that First Capital has funds on hand
available for the payment of such Redemption Price. See ``--Subordination of
Common Securities.''
If First Capital gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably
deposit with the paying agent for the Preferred Securities funds sufficient to
pay the aggregate Redemption Price and will give the paying agent for the
Preferred Securities irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Preferred
Securities called for redemption will be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption will have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day which is a
Business Day (and without any additional Distribution, interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on such date. In the event that payment of the Redemption Price in respect of
Preferred Securities called for redemption is improperly withheld or refused
and not paid either by First Capital, or by First Banks pursuant to the
Guarantee, Distributions on such Preferred Securities will continue to accrue
at the then applicable rate, from the Redemption Date originally established by
First Capital for such Preferred Securities to the date such
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Redemption Price is actually paid, in which case the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
Redemption Price. See ``Description of the Guarantee.''
Subject to applicable law (including, without limitation, United States
federal securities law), First Banks or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Subordinated Debentures to holders of Preferred Securities will
be made to the applicable recordholders thereof as they appear on the register
for the Preferred Securities on the relevant record date, which date will be
the date 15 days prior to the Redemption Date or liquidation date, as
applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, then the aggregate Liquidation Amount of such Trust Securities to be
redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $25 or an integral
multiple of $25 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $25. The Property Trustee will
promptly notify the registrar for the Preferred Securities in writing of the
Preferred Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the Liquidation Amount thereof to
be redeemed. For all purposes of the Trust Agreement, unless the context
otherwise requires, all provisions relating to the redemption of Preferred
Securities will relate to the portion of the aggregate Liquidation Amount of
Preferred Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless First Banks defaults in payment of
the redemption price on the Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Subordinated Debentures
or portions thereof (and Distributions will cease to accrue on the related
Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, will be made pro rata based on
the Liquidation Amount of the Preferred Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default has occurred and is continuing, no payment of any
Distribution on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, will be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all of the outstanding Preferred Securities then called for
redemption, will have been made or provided for, and all funds available to the
Property Trustee will first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Preferred Securities then due and
payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, First Banks as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of First Banks, as holder of the Common
Securities, and only the holders of the Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
First Banks will have the right at any time to dissolve, wind-up or
terminate First Capital and cause the Subordinated Debentures to be distributed
to the holders of the Preferred Securities. Such right is subject, however,
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to First Banks having received prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal
Reserve.
Pursuant to the Trust Agreement, First Capital will automatically terminate
upon expiration of its term and will terminate earlier on the first to occur of
(i) certain events of bankruptcy, dissolution or liquidation of First Banks,
(ii) the distribution of a Like Amount of the Subordinated Debentures to the
holders of its Trust Securities, if First Banks, as depositor, has given
written direction to the Property Trustee to terminate First Capital (which
direction is optional and wholly within the discretion of First Banks, as
depositor), (iii) redemption of all of the Preferred Securities as described
under ``Description of the Preferred Securities--Redemption or
Exchange--Mandatory Redemption,'' and (iv) the entry of an order for the
dissolution of First Capital by a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, First Capital will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of First Capital as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Subordinated Debentures, unless such distribution is determined by the Property
Trustee not to be practical, in which event such holders will be entitled to
receive out of the assets of First Capital available for distribution to
holders, after satisfaction of liabilities to creditors of First Capital as
provided by applicable law, an amount equal to, in the case of holders of
Preferred Securities, the aggregate of the Liquidation Amount plus accrued and
unpaid Distributions thereon to the date of payment (such amount being the
``Liquidation Distribution''). If such Liquidation Distribution can be paid
only in part because First Capital has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by First Capital on the Preferred Securities will be paid on a pro rata basis.
First Banks, as the holder of the Common Securities, will be entitled to
receive distributions upon any such liquidation pro rata with the holders of
the Preferred Securities, except that, if a Debenture Event of Default has
occurred and is continuing, the Preferred Securities will have a priority over
the Common Securities. See ``--Subordination of Common Securities.''
Under current United States federal income tax law and interpretations and
assuming, as expected, that First Capital is treated as a grantor trust, a
distribution of the Subordinated Debentures should not be a taxable event to
holders of the Preferred Securities. Should there be a change in law, a change
in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See ``Certain Federal Income Tax Consequences--Receipt of Subordinated
Debentures or Cash Upon Liquidation of First Capital.'' If First Banks elects
neither to redeem the Subordinated Debentures prior to maturity nor to
liquidate First Capital and distribute the Subordinated Debentures to holders
of the Preferred Securities, the Preferred Securities will remain outstanding
until the repayment of the Subordinated Debentures.
If First Banks elects to liquidate First Capital and thereby causes the
Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of First Capital, First Banks will continue to have
the right to shorten or extend the maturity of such Subordinated Debentures,
subject to certain conditions. See ``Description of the Subordinated
Debentures--General.''
LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred
Securities in the event of any liquidation of First Capital is $25 per
Preferred Security plus accrued and unpaid Distributions thereon to the date of
payment, which may be in the form of a distribution of such amount in
Subordinated Debentures, subject to certain exceptions. See ``--Liquidation
Distribution Upon Termination.''
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
Trust Agreement (an ``Event of Default'') with respect to the Preferred
Securities (whatever the reason for such Event of Default and whether voluntary
or involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of a Debenture Event of Default (see ``Description
of the Subordinated Debentures--Debenture Events of Default''); or
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(ii) default by First Capital in the payment of any Distribution when
it becomes due and payable, and continuation of such default for a period
of 30 days; or
(iii) default by First Capital in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in the Trust Agreement (other than
a covenant or warranty a default in the performance of which or the breach
of which is dealt with in clauses (ii) or (iii) above), and continuation of
such default or breach for a period of 60 days after there has been given,
by registered or certified mail, to the Trustee(s) by the holders of at
least 25% in aggregate Liquidation Amount of the outstanding Preferred
Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a ``Notice of
Default'' under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by First Banks to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and First Banks, as depositor, unless such Event of
Default has been cured or waived. First Banks, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of First Capital. See ``--Liquidation Distribution Upon
Termination.'' The existence of an Event of Default does not entitle the
holders of Preferred Securities to accelerate the maturity thereof.
REMOVAL OF FIRST CAPITAL TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
and the Delaware Trustee may be removed at such time by the holders of a
majority in Liquidation Amount of the outstanding Preferred Securities. In no
event, however, will the holders of the Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in First Banks as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee will be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust Property (as defined
in the Trust Agreement) may at the time be located, First Banks, as the holder
of the Common Securities, will have power to appoint one or more Persons (as
defined in the Trust Agreement) either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such Trust Property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in such Person or
Persons in such capacity any property, title, right or power deemed necessary
or desirable, subject to the provisions of the Trust Agreement. In case a
Debenture Event of Default has occurred and is continuing, the Property Trustee
alone will have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee is a party, or any Person
succeeding to all or substantially
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all the corporate trust business of such Trustee, will be the successor of such
Trustee under the Trust Agreement, provided such Person is otherwise qualified
and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF FIRST CAPITAL
First Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described below. First
Capital may, at the request of First Banks, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either
(a) expressly assumes all of the obligations of First Capital with respect to
the Preferred Securities, or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
``Successor Securities'') so long as the Successor Securities rank the same as
the Preferred Securities rank in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) First Banks expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee in its capacity as the holder of the
Subordinated Debentures, (iii) the Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or other organization on which the Preferred
Securities are then listed (including, if applicable, The Nasdaq Stock Market's
National Market), if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, (v) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, First Banks has received an opinion from independent counsel to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither First Capital nor such successor entity will be required to register as
an ``investment company'' under the Investment Company Act, and (vi) First
Banks owns all of the common securities of such successor entity and guarantees
the obligations of such successor entity under the Successor Securities at
least to the extent provided by the Guarantee. Notwithstanding the foregoing,
First Capital will not, except with the consent of holders of 100% in
Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge
with or into, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to any other Person or permit any other
Person to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause First Capital or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under ``Description of the
Guarantee--Amendments and Assignment'' and as otherwise required by the Trust
Act and the Trust Agreement, the holders of the Preferred Securities will have
no voting rights.
The Trust Agreement may be amended from time to time by First Banks, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) with respect to acceptance of
appointment by a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement), or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such
extent as is necessary to ensure that First Capital will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are outstanding or to ensure that First Capital will not
be required to register as an ``investment company'' under the Investment
Company Act; provided, however, that in the case of clause (ii), such action
may not adversely affect in any material respect the interests of any holder of
Trust Securities, and any amendments of such Trust Agreement will become
effective when notice thereof is given to the holders of Trust Securities. The
Trust Agreement may be amended by the Trustees and First Banks with (i) the
consent of holders representing not less than a majority in the aggregate
Liquidation Amount of the outstanding Trust
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Securities, and (ii) receipt by the Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power granted to the Trustees
in accordance with such amendment will not affect First Capital's status as a
grantor trust for United States federal income tax purposes or First Capital's
exemption from status as an ``investment company'' under the Investment Company
Act. Notwithstanding anything in this paragraph to the contrary, without the
consent of each holder of Trust Securities, the Trust Agreement may not be
amended to (a) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date,
or (b) restrict the right of a holder of Trust Securities to institute suit for
the enforcement of any such payment on or after such date.
The Trustees will not, so long as any Subordinated Debentures are held by
the Property Trustee, (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on the Property Trustee with respect to the
Subordinated Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures will be due and payable, or (iv)
consent to any amendment, modification or termination of the Indenture or the
Subordinated Debentures, where such consent is required, without, in each case,
obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Preferred Securities; provided, however,
that where a consent under the Indenture requires the consent of each holder of
Subordinated Debentures affected thereby, no such consent will be given by the
Property Trustee without the prior consent of each holder of the Preferred
Securities. The Trustees may not revoke any action previously authorized or
approved by a vote of the holders of the Preferred Securities except by
subsequent vote of the holders of the Preferred Securities. The Property
Trustee will notify each holder of Preferred Securities of any notice of
default with respect to the Subordinated Debentures. In addition to obtaining
the foregoing approvals of the holders of the Preferred Securities, prior to
taking any of the foregoing actions, the Trustees must obtain an opinion of
counsel experienced in such matters to the effect that First Capital will not
be classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be given to each holder of record of Preferred Securities in the manner set
forth in the Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for First Capital to redeem and cancel its Preferred Securities in accordance
with the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by First Banks, the Trustees or any
affiliate of First Banks or any Trustee, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made by check
mailed to the address of the holder entitled thereto as such address appears on
the register of holders of the Preferred Securities. The paying agent for the
Preferred Securities will initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and First Banks. The paying agent for the Preferred Securities may
resign as paying agent upon 30 days' written notice to the Property Trustee and
First Banks. In the event that the Property Trustee no longer is the paying
agent for the Preferred Securities, the Administrative Trustees will appoint a
successor (which must be a bank or trust company acceptable to the
Administrative Trustees and First Banks) to act as paying agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for
the Preferred Securities. Registration of transfers of Preferred Securities
will be effected without charge by or on behalf of First Capital, but upon
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. First Capital
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will not be required to register or cause to be registered the transfer of
Preferred Securities after such Preferred Securities have been called for
redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of Preferred
Securities are entitled under the Trust Agreement to vote, then the Property
Trustee will take such action as is directed by First Banks and if not so
directed, will take such action as it deems advisable and in the best interests
of the holders of the Trust Securities and will have no liability except for
its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate First Capital in such a way that First Capital will
not be deemed to be an ``investment company'' required to be registered under
the Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so that the
Subordinated Debentures will be treated as indebtedness of First Banks for
United States federal income tax purposes. First Banks and the Administrative
Trustees are authorized, in this connection, to take any action, not
inconsistent with applicable law, the certificate of trust of First Capital or
the Trust Agreement, that First Banks and the Administrative Trustees determine
in their discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, First Capital
will invest the proceeds thereof, together with the consideration paid by First
Banks for the Common Securities, in the Subordinated Debentures issued by First
Banks. The Subordinated Debentures will be issued as unsecured debt under the
Indenture, dated as of January , 1997 (the ``Indenture''), between First
Banks and State Street Bank and Trust Company, as trustee (the ``Debenture
Trustee''). The Indenture will be qualified as an indenture under the Trust
Indenture Act. The following summary of the material terms and provisions of
the Subordinated Debentures and the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Indenture and to the Trust Indenture Act. Wherever particular defined terms of
the Indenture are referred to, but not defined herein, such defined terms are
incorporated herein by reference. The form of the Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
The Subordinated Debentures will be limited in aggregate principal amount
to approximately $61,855,700 (or $71,134,000 if the option described under the
heading ``Underwriting'' is exercised by the Underwriters), such amount being
the sum of the aggregate stated Liquidation Amount of the Trust Securities. The
Subordinated Debentures will bear interest at the annual rate of % of the
principal amount thereof, payable quarterly in arrears on March 31, June 30,
September 30, and December 31 of each year (each, an ``Interest Payment Date'')
beginning March 31, 1997, to the Person (as defined in the Indenture) in whose
name each Subordinated Debenture is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such Interest
Payment Date. It is anticipated that, until the liquidation, if any, of First
Capital, the Subordinated Debentures will be held in the name of
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the Property Trustee in trust for the benefit of the holders of the Preferred
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the Subordinated Debentures is not a Business
Day, then payment of the interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on the date such payment was originally payable. Accrued interest that is not
paid on the applicable Interest Payment Date will bear additional interest on
the amount thereof (to the extent permitted by law) at the rate per annum of
% thereof, compounded quarterly. The term ``interest,'' as used herein,
includes quarterly interest payments, interest on quarterly interest payments
not paid on the applicable Interest Payment Date and Additional Interest, as
applicable.
The Subordinated Debentures will mature on March 31, 2027 (such date, as it
may be shortened or extended as hereinafter described, the ``Stated
Maturity''). Such date may be shortened at any time by First Banks to any date
not earlier than March 31, 2002, subject to First Banks having received prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Such date may also be extended
at any time at the election of First Banks but in no event to a date later than
March 31, 2046, provided that at the time such election is made and at the time
of extension (i) First Banks is not in bankruptcy, otherwise insolvent or in
liquidation, (ii) First Banks is not in default in the payment of any interest
or principal on the Subordinated Debentures, (iii) First Capital is not in
arrears on payments of Distributions on the Preferred Securities and no
deferred Distributions are accumulated, and (iv) First Banks has a Senior Debt
rating of investment grade. In the event that First Banks elects to shorten or
extend the Stated Maturity of the Subordinated Debentures, it will give notice
thereof to the Debenture Trustee, First Capital and to the holders of the
Subordinated Debentures no more than 180 days and no less than 90 days prior to
the effectiveness thereof. First Banks will not have the right to purchase the
Subordinated Debentures, in whole or in part, from First Capital until after
March 31, 2002.
The Subordinated Debentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debt, Subordinated Debt and
Additional Senior Obligations of First Banks. Because First Banks is a holding
company, the right of First Banks to participate in any distribution of assets
of any Subsidiary Bank, upon any such Subsidiary Bank's liquidation or
reorganization or otherwise (and thus the ability of holders of the
Subordinated Debentures to benefit indirectly from such distribution), is
subject to the prior claim of creditors of such Subsidiary Bank, except to the
extent that First Banks may itself be recognized as a creditor of such
Subsidiary Bank. The Subordinated Debentures will, therefore, be effectively
subordinated to all existing and future liabilities of the Subsidiary Banks,
and holders of Subordinated Debentures should look only to the assets of First
Banks for payments on the Subordinated Debentures. The Indenture does not limit
the incurrence or issuance of other secured or unsecured debt of First Banks,
including Senior Debt, Subordinated Debt and Additional Senior Obligations,
whether under the Indenture or any existing indenture or other indenture that
First Banks may enter into in the future or otherwise. See ``--Subordination.''
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving First Banks that may
adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
First Banks has the right under the Indenture at any time during the term
of the Subordinated Debentures, so long as no Debenture Event of Default has
occurred and is continuing, to defer the payment of interest at any time, or
from time to time (each, an ``Extended Interest Payment Period''). The right to
defer the payment of interest on the Subordinated Debentures is limited,
however, to a period, in each instance, not exceeding 20 consecutive quarters
and no Extended Interest Payment Period may extend beyond the Stated Maturity
of the Subordinated Debentures. At the end of each Extended Interest Payment
Period, First Banks must pay all interest then accrued and unpaid (together
with interest thereon at the annual rate of %, compounded quarterly, to the
extent permitted by applicable law). During an Extended Interest Payment
Period, interest will continue to accrue and holders of Subordinated Debentures
(or the holders of Preferred Securities if such securities are then
outstanding) will be required to accrue and recognize income for United States
federal income tax purposes. See ``Certain Federal Income Tax
Consequences--Potential Extension of Interest Payment Period and Original Issue
Discount.''
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During any such Extended Interest Payment Period, First Banks may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of First Banks' capital
stock (other than the reclassification of any class of First Banks' capital
stock into another class of capital stock or the conversion of the Class A
Preferred Stock into Common Stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of First Banks that rank pari passu with or junior in interest to
the Subordinated Debentures or make any guarantee payments with respect to any
guarantee by First Banks of the debt securities of any subsidiary of First
Banks if such guarantee ranks pari passu or junior in interest to the
Subordinated Debentures (other than payments under the Guarantee), or (iii)
redeem, purchase or acquire less than all of the Subordinated Debentures or any
of the Preferred Securities. Prior to the termination of any such Extended
Interest Payment Period, First Banks may further defer the payment of interest;
provided that no Extended Interest Payment Period may exceed 20 consecutive
quarters or extend beyond the Stated Maturity of the Subordinated Debentures.
Upon the termination of any such Extended Interest Payment Period and the
payment of all amounts then due on any Interest Payment Date, First Banks may
elect to begin a new Extended Interest Payment Period subject to the above
requirements. No interest will be due and payable during an Extended Interest
Payment Period, except at the end thereof. First Banks has no present intention
of exercising its rights to defer payments of interest on the Subordinated
Debentures. First Banks must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of such Extended
Interest Payment Period at least one Business Day prior to the earlier of (i)
the next succeeding date on which Distributions on the Trust Securities would
have been payable except for the election to begin such Extended Interest
Payment Period, or (ii) the date the Trust is required to give notice of the
record date, or the date such Distributions are payable, to The Nasdaq Stock
Market's National Market (or other applicable self-regulatory organization) or
to holders of the Preferred Securities, but in any event at least one Business
Day before such record date. Subject to the foregoing, there is no limitation
on the number of times that First Banks may elect to begin an Extended Interest
Payment Period.
ADDITIONAL SUMS
If First Capital or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of the occurrence of a
Tax Event, First Banks will pay as additional amounts (referred to herein as
``Additional Interest'') on the Subordinated Debentures such additional amounts
as may be required so that the net amounts received and retained by First
Capital after paying any such additional taxes, duties or other governmental
charges will not be less than the amounts First Capital would have received had
such additional taxes, duties or other governmental charges not been imposed.
REDEMPTION OR EXCHANGE
First Banks will have the right to redeem the Subordinated Debentures prior
to maturity (i) on or after March 31, 2002, in whole at any time or in part
from time to time, or (ii) at any time in whole (but not in part), within 180
days following the occurrence of a Tax Event or an Investment Company Event, in
each case at a redemption price equal to the accrued and unpaid interest on the
Subordinated Debentures so redeemed to the date fixed for redemption, plus 100%
of the principal amount thereof. Any such redemption prior to the Stated
Maturity will be subject to prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal
Reserve.
``Tax Event'' means the receipt by First Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Subordinated Debentures under the Indenture, there is more than an
insubstantial risk that (i) interest payable by First Banks on the Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by First Banks, in whole or in part, for United States federal
income tax purposes, (ii) First Capital is, or will be within 90 days after the
date of such opinion of counsel, subject to United States federal income tax
with respect to income received or accrued on the Subordinated Debentures, or
(iii) First Capital is, or will be within 90 days after the date of such
opinion of counsel, subject to more than a de minimis amount of other taxes,
duties, assessments or other governmental charges. First Banks must request and
receive an opinion with regard to
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such matters within a reasonable period of time after it becomes aware of the
possible occurrence of any of the events described in clauses (i) through (iii)
above.
``Investment Company Event'' means the receipt by First Capital of an
opinion of counsel experienced in such matters to the effect that, as a result
of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, First Capital is or will be
considered an ``investment company'' that is required to be registered under
the Investment Company Act, which change becomes effective on or after the date
of original issuance of the Preferred Securities.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debentures to
be redeemed at its registered address. Unless First Banks defaults in payment
of the redemption price for the Subordinated Debentures, on and after the
redemption date interest ceases to accrue on such Subordinated Debentures or
portions thereof called for redemption.
The Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under ``Description of the Preferred Securities--Liquidation
Distribution Upon Termination,'' under certain circumstances involving the
termination of First Capital, the Subordinated Debentures may be distributed to
the holders of the Preferred Securities in liquidation of First Capital after
satisfaction of liabilities to creditors of First Capital as provided by
applicable law. Any such distribution will be subject to receipt of prior
approval by the Federal Reserve if then required under applicable policies or
guidelines of the Federal Reserve. If the Subordinated Debentures are
distributed to the holders of Preferred Securities upon the liquidation of
First Capital, First Banks will use its best efforts to list the Subordinated
Debentures on The Nasdaq Stock Market's National Market or such stock
exchanges, if any, on which the Preferred Securities are then listed. There can
be no assurance as to the market price of any Subordinated Debentures that may
be distributed to the holders of Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default, (ii)
First Banks is in default with respect to its obligations under the Guarantee,
or (iii) First Banks has given notice of its election of an Extended Interest
Payment Period as provided in the Indenture with respect to the Subordinated
Debentures and has not rescinded such notice, or such Extended Interest Payment
Period, or any extension thereof, is continuing, First Banks will not (1)
declare or pay any dividends or distributions on, or redeem, purchase, acquire,
or make a liquidation payment with respect to, any of First Banks' capital
stock (other than the reclassification of any class of First Banks' capital
stock into another class of capital stock or the conversion of the Class A
Preferred Stock into Common Stock), (2) make any payment of principal, interest
or premium, if any, on or repay or repurchase or redeem any debt securities of
First Banks that rank pari passu with or junior in interest to the Subordinated
Debentures or make any guarantee payments with respect to any guarantee by
First Banks of the debt securities of any subsidiary of First Banks if such
guarantee ranks pari passu or junior in interest to the Subordinated Debentures
(other than payments under the Guarantee), or (3) redeem, purchase or acquire
less than all of the Subordinated Debentures or any of the Preferred
Securities.
SUBORDINATION
The Indenture provides that the Subordinated Debentures issued thereunder
are subordinated and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of First Banks. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceedings of First Banks, the holders of Senior Debt, Subordinated
Debt and Additional Senior Obligations of First Banks will first be entitled to
receive payment in full of principal of (and premium, if any) and interest, if
any, on such Senior Debt, Subordinated Debt and Additional Senior Obligations
of First Banks before the holders of Subordinated Debentures will be entitled
to receive or retain any payment in respect of the principal of or interest on
the Subordinated Debentures.
In the event of the acceleration of the maturity of any Subordinated
Debentures, the holders of all Senior Debt, Subordinated Debt and Additional
Senior Obligations of First Banks outstanding at the time of such acceleration
will
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first be entitled to receive payment in full of all amounts due thereon
(including any amounts due upon acceleration) before the holders of the
Subordinated Debentures will be entitled to receive or retain any payment in
respect of the principal of or interest on the Subordinated Debentures.
No payments on account of principal or interest in respect of the
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt, Subordinated Debt or
Additional Senior Obligations of First Banks or an event of default with
respect to any Senior Debt, Subordinated Debt or Additional Senior Obligations
of First Banks resulting in the acceleration of the maturity thereof, or if any
judicial proceeding is pending with respect to any such default.
``Debt'' means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of such Person, and (vi) and
every obligation of the type referred to in clauses (i) through (v) of another
Person and all dividends of another Person the payment of which, in either
case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor or otherwise.
``Senior Debt'' means, with respect to First Banks, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to
First Banks whether or not such claim for post-petition interest is allowed in
such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is
provided that such obligations are not superior in right of payment to the
Subordinated Debentures or to other Debt which is pari passu with, or
subordinated to, the Subordinated Debentures; provided, however, that Senior
Debt will not be deemed to include (i) any Debt of First Banks which when
incurred and without respect to any election under section 1111(b) of the
United States Bankruptcy Code of 1978, as amended, was without recourse to
First Banks, (ii) any Debt of First Banks to any of its subsidiaries, (iii) any
Debt to any employee of First Banks, (iv) any Debt which by its terms is
subordinated to trade accounts payable or accrued liabilities arising in the
ordinary course of business to the extent that payments made to the holders of
such Debt by the holders of the Subordinated Debentures as a result of the
subordination provisions of the Indenture would be greater than they otherwise
would have been as a result of any obligation of such holders to pay amounts
over to the obligees on such trade accounts payable or accrued liabilities
arising in the ordinary course of business as a result of subordination
provisions to which such Debt is subject, and (v) Debt which constitutes
Subordinated Debt.
``Subordinated Debt'' means, with respect to First Banks, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating
to First Banks whether or not such claim for post-petition interest is allowed
in such proceeding), on Debt, whether incurred on or prior to the date of the
Indenture or thereafter incurred, which is by its terms expressly provided to
be junior and subordinate to other Debt of First Banks (other than the
Subordinated Debentures).
``Additional Senior Obligations'' means, with respect to First Banks, all
indebtedness, whether incurred on or prior to the date of the Indenture or
thereafter incurred, for claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements; provided, however, that Additional Senior Obligations do not
include claims in respect of Senior Debt or Subordinated Debt or obligations
which, by their terms, are expressly stated to be not superior in right of
payment to the Subordinated Debentures or to rank pari passu in right of
payment with the Subordinated Debentures. ``Claim,'' as used herein, has the
meaning assigned thereto in Section 101(4) of the United States Bankruptcy Code
of 1978, as amended.
The Indenture places no limitation on the amount of additional Senior Debt,
Subordinated Debt or Additional Senior Obligations that may be incurred by
First Banks. First Banks expects from time to time to incur additional
indebtedness constituting Senior Debt, Subordinated Debt and Additional Senior
Obligations. As of September 30,
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1996, First Banks had aggregate Senior Debt, Subordinated Debt and Additional
Senior Obligations of approximately $66.8 million. Because First Banks is a
holding company, the Subordinated Debentures are effectively subordinated to
all existing and future liabilities of First Banks' subsidiaries, including
obligations to depositors.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Subordinated Debentures
will be made at the office of the Debenture Trustee in Boston, Massachusetts,
except that, at the option of First Banks, payment of any interest may be made
(i) by check mailed to the address of the Person entitled thereto as such
address appears in the register of holders of the Subordinated Debentures, or
(ii) by transfer to an account maintained by the Person entitled thereto as
specified in the register of holders of the Subordinated Debentures, provided
that proper transfer instructions have been received by the regular record
date. Payment of any interest on Subordinated Debentures will be made to the
Person in whose name such Subordinated Debenture is registered at the close of
business on the regular record date for such interest, except in the case of
defaulted interest. First Banks may at any time designate additional paying
agents for the Subordinated Debentures or rescind the designation of any paying
agent for the Subordinated Debentures; however, First Banks will at all times
be required to maintain a paying agent in New York, New York and each place of
payment for the Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent for the
Subordinated Debentures, or then held by First Banks in trust, for the payment
of the principal of or interest on the Subordinated Debentures and remaining
unclaimed for two years after such principal or interest has become due and
payable will be repaid to First Banks on May 31 of each year or (if then held
in trust by First Banks) will be discharged from such trust and the holder of
such Subordinated Debenture will thereafter look, as a general unsecured
creditor, only to First Banks for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent for
the Subordinated Debentures. Subordinated Debentures may be presented for
registration of transfer (with the form of transfer endorsed thereon, or a
satisfactory written instrument of transfer, duly executed), at the office of
the registrar. First Banks may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts; provided that First Banks maintains a transfer agent in
New York, New York. First Banks may at any time designate additional transfer
agents with respect to the Subordinated Debentures. In the event of any
redemption, neither First Banks nor the Debenture Trustee will be required to
(i) issue, register the transfer of or exchange Subordinated Debentures during
a period beginning at the opening of business 15 days before the day of
selection for redemption of Subordinated Debentures and ending at the close of
business on the day of mailing of the relevant notice of redemption, or (ii)
transfer or exchange any Subordinated Debentures so selected for redemption,
except, in the case of any Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
MODIFICATION OF INDENTURE
First Banks and the Debenture Trustee may, from time to time without the
consent of the holders of the Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The
Indenture contains provisions permitting First Banks and the Debenture Trustee,
with the consent of the holders of not less than a majority in principal amount
of the outstanding Subordinated Debentures, to modify the Indenture; provided,
that no such modification may, without the consent of the holder of each
outstanding Subordinated Debenture affected by such proposed modification, (i)
extend the fixed maturity of the Subordinated Debentures, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or (ii) reduce the percentage of principal amount of
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture; provided that so long as any of the
Preferred Securities remain outstanding, no such modification may be made that
requires the consent of the holders of the Subordinated Debentures, and no
termination of the Indenture may occur, and no waiver of any Debenture Event of
Default may be effective, without the prior consent of the holders of at least
a majority of the aggregate Liquidation Amount of the Preferred Securities and
that if the consent of the holder of each Subordinated Debenture is required,
such modification will not be effective until each holder of Trust Securities
has consented thereto.
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DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures that has occurred and is
continuing constitutes an event of default (each, a ``Debenture Event of
Default'') with respect to the Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Subordinated
Debentures, when due (subject to the deferral of any due date in the case
of an Extended Interest Payment Period); or
(ii) failure to pay any principal on the Subordinated Debentures when
due whether at maturity, upon redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain
other covenants contained in the Indenture for 90 days after written notice
to First Banks from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of
First Banks.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee.
The Debenture Trustee, or the holders of not less than 25% in aggregate
outstanding principal amount of the Subordinated Debentures, may declare the
principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Preferred Securities will have such right.
First Banks is required to file annually with the Debenture Trustee a
certificate as to whether or not First Banks is in compliance with all the
conditions and covenants applicable to it under the Indenture.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures, and any other amounts payable under
the Indenture, to be forthwith due and payable and to enforce its other rights
as a creditor with respect to such Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of First Banks to pay interest on or
principal of the Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Preferred Securities may institute
a legal proceeding directly against First Banks for enforcement of payment to
such holder of the principal of or interest on such Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such holder (a ``Direct Action''). In connection with
such Direct Action, First Banks will have a right of set-off under the
Indenture to the extent of any payment made by First Banks to such holder of
Preferred Securities in the Direct Action. First Banks may not amend the
Indenture to remove the foregoing right to bring a Direct Action without the
prior written consent of the holders of all of the Preferred Securities. If the
right to bring a Direct Action is removed, First Capital may become subject to
the reporting obligations under the Exchange Act. First Banks has the right
under the Indenture to set-off any payment made to such holder of Preferred
Securities by First Banks in connection with a Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debentures unless there has been
an Event of Default under the Trust Agreement. See ``Description of the
Preferred Securities--Events of Default; Notice.''
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CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
First Banks may not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to
any Person, and any Person may not consolidate with or merge into First Banks
or sell, convey, transfer or otherwise dispose of its properties and assets
substantially as an entirety to First Banks, unless (i) in the event First
Banks consolidates with or merges into another Person or conveys or transfers
its properties and assets substantially as an entirety to any Person, the
successor Person is organized under the laws of the United States or any State
or the District of Columbia, and such successor Person expressly assumes by
supplemental indenture First Banks' obligations on the Subordinated Debentures
issued under the Indenture, (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time
or both, would become a Debenture Event of Default, has occurred and is
continuing, and (iii) certain other conditions as prescribed in the Indenture
are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to First Banks'
obligations to pay certain sums due pursuant to the Indenture and to provide
certain officers' certificates and opinions of counsel described therein) and
First Banks will be deemed to have satisfied and discharged the Indenture when,
among other things, all Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation (i) have become due and payable, or (ii)
will become due and payable at their Stated Maturity within one year or are to
be called for redemption within one year, and First Banks deposits or causes to
be deposited with the Debenture Trustee funds, in trust, for the purpose and in
an amount sufficient to pay and discharge the entire indebtedness on the
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal and interest to the date of the deposit or to
the Stated Maturity or redemption date, as the case may be.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by and
construed in accordance with the laws of the State of Missouri.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The Debenture Trustee is not required to expend or
risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
First Banks has agreed, pursuant to the Indenture, for so long as Trust
Securities remain outstanding, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of First Capital (provided that certain
successors which are permitted pursuant to the Indenture may succeed to First
Banks' ownership of the Common Securities), (ii) not to voluntarily terminate,
wind up or liquidate First Capital, except upon prior approval of the Federal
Reserve if then so required under applicable capital guidelines or policies of
the Federal Reserve, and (a) in connection with a distribution of Subordinated
Debentures to the holders of the Preferred Securities in liquidation of First
Capital, or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the Trust Agreement, and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the Trust Agreement, to
cause First Capital to remain classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes.
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DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the ``Guarantee'') will be
executed and delivered by First Banks concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Guarantee Trustee will act as indenture trustee under the
Guarantee for purposes of complying with the provisions of the Trust Indenture
Act. The Guarantee Trustee, State Street Bank and Trust Company, will hold the
Guarantee for the benefit of the holders of the Preferred Securities. The
following summary of the material terms and provisions of the Guarantee does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Guarantee and the Trust Indenture
Act. Wherever particular defined terms of the Guarantee are referred to, but
not defined herein, such defined terms are incorporated herein by reference.
The form of the Guarantee has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
GENERAL
First Banks will, pursuant to the Guarantee, irrevocably agree to pay in
full on a subordinated basis, to the extent set forth therein, the Guarantee
Payments (as defined below) to the holders of the Preferred Securities, as and
when due, regardless of any defense, right of set-off or counterclaim that
First Capital may have or assert other than the defense of payment. The
following payments with respect to the Preferred Securities, to the extent not
paid by or on behalf of First Capital (the ``Guarantee Payments''), will be
subject to the Guarantee: (i) any accrued and unpaid Distributions required to
be paid on the Preferred Securities, to the extent that First Capital has funds
available therefor at such time, (ii) the Redemption Price with respect to any
Preferred Securities called for redemption to the extent that First Capital has
funds available therefor at such time, and (iii) upon a voluntary or
involuntary dissolution, winding up or liquidation of First Capital (other than
in connection with the distribution of Subordinated Debentures to the holders
of Preferred Securities or a redemption of all of the Preferred Securities),
the lesser of (a) the amount of the Liquidation Distribution, to the extent
First Capital has funds available therefor at such time, and (b) the amount of
assets of First Capital remaining available for distribution to holders of
Preferred Securities in liquidation of First Capital. The obligation of First
Banks to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by First Banks to the holders of the Preferred Securities or
by causing First Capital to pay such amounts to such holders.
The Guarantee will not apply to any payment of Distributions except to the
extent First Capital has funds available therefor. If First Banks does not make
interest payments on the Subordinated Debentures held by First Capital, First
Capital will not pay Distributions on the Preferred Securities and will not
have funds legally available therefor.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of First Banks and
will rank subordinate and junior in right of payment to all Senior Debt,
Subordinated Debt and Additional Senior Obligations of First Banks in the same
manner as the Subordinated Debentures. The Guarantee does not place a
limitation on the amount of additional Senior Debt, Subordinated Debt or
Additional Senior Obligations that may be incurred by First Banks. First Banks
expects from time to time to incur additional indebtedness constituting Senior
Debt, Subordinated Debt and Additional Senior Obligations.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against First Banks to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other Person). The Guarantee will
not be discharged except by payment of the Guarantee Payments in full to the
extent not paid by First Capital or upon distribution of the Subordinated
Debentures to the holders of the Preferred Securities. Because First Banks is a
holding company, the right of First Banks to participate in any distribution of
assets of any Subsidiary Bank upon such Subsidiary Bank's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
Subsidiary Bank, except to the extent First Banks may itself be recognized as a
creditor of that Subsidiary Bank. First Banks' obligations under the Guarantee,
therefore, will be effectively subordinated to all existing and future
liabilities of First Banks' subsidiaries, and claimants should look only to the
assets of First Banks for payments thereunder.
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AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will
be required), the Guarantee may not be amended without the prior approval of
the holders of not less than a majority of the aggregate Liquidation Amount of
the outstanding Preferred Securities. See ``Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement.'' All guarantees and
agreements contained in the Guarantee will bind the successors, assigns,
receivers, trustees and representatives of First Banks and will inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of
First Banks to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against First Banks to enforce its rights under the Guarantee without
first instituting a legal proceeding against First Capital, the Guarantee
Trustee or any other Person.
First Banks, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not First Banks is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by First Banks in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care
and skill as a prudent person would exercise or use in the conduct of his or
her own affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of any Preferred Securities, unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (a)
full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of First Capital, or (c)
distribution of the Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the Preferred Securities must
restore payment of any sums paid under such Preferred Securities or the
Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of Missouri.
EXPENSE AGREEMENT
First Banks will, pursuant to the Agreement as to Expenses and Liabilities
entered into by it under the Trust Agreement (the ``Expense Agreement''),
irrevocably and unconditionally guarantee to each person or entity to whom
First Capital becomes indebted or liable, the full payment of any costs,
expenses or liabilities of First Capital, other than obligations of First
Capital to pay to the holders of the Preferred Securities or other similar
interests in First Capital of the amounts due such holders pursuant to the
terms of the Preferred Securities or such other similar interests, as the case
may be. Third party creditors of First Capital may proceed directly against
First Banks under the Expense Agreement, regardless of whether such creditors
had notice of the Expense Agreement.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent First Capital has funds available for the payment of such
Distributions) are irrevocably guaranteed by First Banks as and to the extent
set forth under ``Description of the Guarantee.'' First Banks and First Capital
believe that, taken together, the obligations of First Banks under the
Subordinated Debentures, the Indenture, the Trust Agreement, the Expense
Agreement, and the Guarantee provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment of Distributions
and other amounts due on the Preferred Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the obligations of First Capital under the Preferred
Securities. If and to the extent that First Banks does not make payments on the
Subordinated Debentures, First Capital will not pay Distributions or other
amounts due on the Preferred Securities. The Guarantee does not cover payment
of Distributions when First Capital does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of Preferred Securities is
to institute a legal proceeding directly against First Banks for enforcement of
payment of such Distributions to such holder. The obligations of First Banks
under the Guarantee are subordinate and junior in right of payment to all
Senior Debt, Subordinated Debt and Additional Senior Obligations of First
Banks.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Subordinated Debentures will
be equal to the sum of the aggregate stated Liquidation Amount of the Trust
Securities, (ii) the interest rate and interest and other payment dates on the
Subordinated Debentures will match the Distribution rate and Distribution and
other payment dates for the Preferred Securities, (iii) First Banks will pay
for all and any costs, expenses and liabilities of First Capital (except the
obligations of First Capital to holders of the Preferred Securities), and (iv)
the Trust Agreement further provides that First Capital will not engage in any
activity that is not consistent with the limited purposes of First Capital.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against First Banks to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, First
Capital or any other Person. A default or event of default under any Senior
Debt, Subordinated Debt or Additional Senior Obligations of First Banks would
not constitute a default or Event of Default. In the event, however, of payment
defaults under, or acceleration of, Senior Debt, Subordinated Debt or
Additional Senior Obligations of First Banks, the subordination provisions of
the Indenture provide that no payments may be made in respect of the
Subordinated Debentures until such Senior Debt, Subordinated Debt or Additional
Senior Obligations has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on the Subordinated
Debentures would constitute an Event of Default.
LIMITED PURPOSE OF FIRST CAPITAL
The Preferred Securities evidence a preferred undivided beneficial interest
in the assets of First Capital. First Capital exists for the sole purpose of
issuing the Trust Securities and investing the proceeds thereof in Subordinated
Debentures. A principal difference between the rights of a holder of a
Preferred Security and the rights of a holder of a Subordinated Debenture is
that a holder of a Subordinated Debenture is entitled to receive from First
Banks the principal amount of and interest accrued on Subordinated Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions from First Capital (or from First Banks under the Guarantee) if
and to the extent First Capital has funds available for the payment of such
Distributions.
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RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
First Capital involving the liquidation of the Subordinated Debentures, the
holders of the Preferred Securities will be entitled to receive, out of assets
held by First Capital, the Liquidation Distribution in cash. See ``Description
of the Preferred Securities--Liquidation Distribution Upon Termination.'' Upon
any voluntary or involuntary liquidation or bankruptcy of First Banks, the
Property Trustee, as holder of the Subordinated Debentures, would be a
subordinated creditor of First Banks, subordinated in right of payment to all
Senior Debt, Subordinated Debt and Additional Senior Obligations of First Banks
(as set forth in the Indenture), but entitled to receive payment in full of
principal and interest before any shareholders of First Banks receive payments
or distributions. Since First Banks is the guarantor under the Guarantee and
has agreed to pay for all costs, expenses and liabilities of First Capital
(other than the obligations of First Capital to the holders of its Preferred
Securities), the positions of a holder of the Preferred Securities and a holder
of the Subordinated Debentures relative to other creditors and to shareholders
of First Banks in the event of liquidation or bankruptcy of First Banks are
expected to be substantially the same.
DESCRIPTION OF OTHER CAPITAL STOCK
COMMON STOCK
The Amended and Restated Articles of Incorporation of First Banks (the
``Restated Articles'') authorize the issuance of 25,000 shares of common stock,
$250 par value per share (the ``Common Stock''). Holders of Common Stock are
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for that purpose, dividends payable in cash, stock or
otherwise. Each share of Common Stock is entitled to one vote on all matters
except that shareholders have cumulative voting rights in the election of
Directors of First Banks. On liquidation, the holders of Common Stock are
entitled to receive pro rata any assets distributable to stockholders in
respect of the Common Stock held by them after any required distributions to
the holders of First Banks' preferred stock, including the Class A Preferred
Stock, the Class B Preferred Stock and the Class C Preferred Stock.
As of September 30, 1996, First Banks had outstanding 23,661 shares of
Common Stock, all of which shares are owned by various trusts which were
created by and are administered by and for the benefit of Mr. James F.
Dierberg, Chairman of the Board, President and Chief Executive Officer of First
Banks and members of his immediate family. All of the issued and outstanding
shares are fully paid and nonassessable. The holders of the Common Stock, the
Class A Preferred Stock and the Class B Preferred Stock and First Banks have
entered into an agreement limiting the transferability of all such securities
and providing for first rights of refusal with respect to proposed sales for
such securities.
PREFERRED STOCK
The Restated Articles authorize, in addition to 750,000 shares of Class A
Convertible, Adjustable Rate, $20 par value, Preferred Stock (the ``Class A
Preferred Stock''), and 200,000 shares of Class B Adjustable Rate, $1.50 par
value, Preferred Stock (the ``Class B Preferred Stock''), 5,000,000 shares of
preferred stock, par value $1 per share, 2,200,000 of which have been
designated Class C 9.00%, Cumulative, Increasing Rate, $25 stated value
(defined herein as the ``Class C Preferred Stock''). The following is a summary
of the terms of the Class A Preferred Stock, the Class B Preferred Stock and
the Class C Preferred Stock.
CLASS A PREFERRED STOCK
DIVIDENDS. As and when declared by the Board of Directors of First Banks,
the dividend rate on the Class A Preferred Stock for any quarterly period is 4%
less than the higher of the Treasury Bill Rate or the Ten Year Treasury
Constant Maturity Rate, calculated in the manner set forth in the Restated
Articles, except that in no event may the dividend paid be less than 6% per
annum or greater than 12% per annum. Dividends on the Class A Preferred Stock
are noncumulative.
REDEMPTION. The Class A Preferred Stock is redeemable at any time at the
option of First Banks, with the prior written consent of the Federal Reserve,
as long as dividends for all classes of preferred stock have been paid, at a
redemption price of $21 per share (105% of the par value of the Class A
Preferred Stock) plus declared and unpaid dividends to the date fixed for
redemption.
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LIQUIDATION. Holders of the Class A Preferred Stock are entitled to receive
in a liquidation, dissolution or winding-up (either voluntary or involuntary)
of First Banks, the par value per share plus a liquidation premium equal to 5%
of the par value, in addition to all previously declared and unpaid dividends.
CONVERTIBILITY. The Class A Preferred Stock is convertible at the option of
the holder, into shares of Common Stock at a rate based on the ratio of the par
value of the Class A Preferred Stock to the current market value of the Common
Stock at the date of conversion as determined by independent appraisal at the
time of conversion. The number of appraisers and the procedures by which the
appraisers are to be selected are set forth in the Restated Articles.
VOTING RIGHTS. Holders of the Class A Preferred Stock possess full voting
rights and power as are enjoyed by the holders of the Common Stock, except that
the right to vote the shares of the Class A Common Stock lapses upon the date
of death of the first recorded holder of such shares or, if held in trust, upon
the death of the income beneficiary of the trust. No shares of any capital
stock of First Banks ranking prior to or on a parity with the Class A Preferred
Stock may be issued by First Banks unless such issuance is approved by a vote
of the holders of two-thirds of the issued and outstanding shares of Class A
Preferred Stock.
CLASS B PREFERRED STOCK
DIVIDENDS. As and when declared by the Board of Directors of First Banks,
the dividend rate on the Class B Preferred Stock for any quarterly period is 1%
less than the higher of the Treasury Bill Rate or the Ten Year Treasury
Constant Maturity Rate, calculated in the manner set forth in the Restated
Articles, except that in no event may the dividend paid be less than 7% per
annum or greater than 15% per annum. Dividends are noncumulative.
REDEMPTION. The Restated Articles provide that the Class B Preferred Stock
may not be redeemed.
LIQUIDATION. Holders of the Class B Preferred Stock are entitled to receive
in a liquidation, dissolution or winding-up (either voluntary or involuntary)
of First Banks, the par value per share plus all previously declared and unpaid
dividends.
CONVERTIBILITY. The Class B Preferred Stock is not convertible into any
other class of capital stock of First Banks.
VOTING RIGHTS. Holders of the Class B Preferred Stock possess full voting
rights and power as are enjoyed by the holders of the Common Stock. The right
to vote the shares lapses, however, on and upon the date of sale, exchange,
assignment, pledge, gift, bequest or other form of transfer of ownership to a
party other than the first recorded holder of the Class B Preferred Stock or
one of the lineal descendants of each holder or, if held in trust, one of the
lineal descendants of the income beneficiary of said trust, except that the
voting rights will not lapse because of (i) a transfer of Class B Preferred
Stock to a personal representative of a deceased shareholder, or (ii) a pledge
of Class B Preferred Stock by the first-recorded holder thereof to secure
performance of obligations to another party or the subsequent foreclosure of
such pledge or any subsequent transfers thereafter. No shares of any capital
stock of First Banks ranking prior to or on a parity with the Class B Preferred
Stock may be issued by First Banks unless such issuance is approved by a vote
of the holders of two-thirds of the issued and outstanding shares of the Class
B Preferred Stock.
CLASS C PREFERRED STOCK
DIVIDENDS. As and when declared by the Board of Directors of First Banks,
the dividend rate on the Class C Preferred Stock is 9% per annum. On December
1, 1997, the annual dividend rate will increase by 0.75% to 9.75%, which will
thereafter be the annual dividend rate. Dividends are cumulative. So long as
any shares of Class C Preferred Stock remain outstanding, no dividend may be
paid or declared and no other distribution made on the Class A Preferred Stock,
the Class B Preferred Stock, the Common Stock or any other junior stock that
may in the future be issued by First Banks (collectively, the ``Junior Stock'')
other than a dividend payable in Junior Stock, and no shares of Junior Stock
may be purchased, redeemed or otherwise acquired for consideration by First
Banks, directly or indirectly (other than as a result of a reclassification of
Junior Stock or the exchange or conversion of one Junior Stock for or into
another Junior Stock, or other than through the use of the proceeds of a
substantially contemporaneous sale of other Junior Stock) unless all dividends
on shares of the cumulative preferred stock of all classes for all quarterly
dividend periods ended prior to such action have been paid. Subject to the
foregoing, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors of First Banks may be declared and paid on
any Junior Stock from time to time out of any funds legally available
therefore, and the Class C Preferred
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Stock will not be entitled to participate in any such dividends, whether
payable in cash, stock or otherwise. No dividends may be paid or declared upon
any shares of any class or series of capital stock of First Banks ranking on a
parity with the Class C Preferred Stock for any period unless all dividends
payable on the Class C Preferred Stock for all quarterly dividend periods ended
prior to the date of such payment or declaration have been paid. When dividends
are not paid in full, as aforesaid, upon the Class C Preferred Stock and any
other preferred stock ranking on a parity as to dividends with the Class C
Preferred Stock, all dividends declared upon the Class C Preferred Stock and
any other preferred stock ranking on a parity as to dividends with the Class C
Preferred Stock will be declared pro rata so that the amount of dividends
declared per share on the Class C Preferred Stock and such other preferred
stock will in all cases bear to each other the same ratio that accumulated
dividends per share on the Class C Preferred Stock and such other preferred
stock bear to each other. No interest, or sum or money in lieu of interest,
will be payable in respect of any dividend payment or payments on the shares of
Class C Preferred Stock which may be in arrears. During any period in which a
dividend payment or payments on the Class C Preferred Stock are in arrears,
however, (i) no bonus or extraordinary salary may be paid to any officer of
First Banks who is also the owner of more than 10% of the outstanding voting
capital stock of First Banks, and (ii) no payments may otherwise be made to Mr.
James F. Dierberg or his affiliates except for payments for products and
services not in excess of the costs (excluding profits) incurred by Mr.
Dierberg or his affiliates.
REDEMPTION. The Class C Preferred Stock may not be redeemed prior to
December 1, 1997. The Class C Preferred Stock may be redeemed in whole or in
part, with not less than 40 nor more than 70 days notice, except as described
below, on or after December 1, 1997, at the option of First Banks, at $25 per
share plus all unpaid dividends calculated to the date of redemption. If any
proposed redemption is for less than all of the outstanding shares, then the
shares to be redeemed will be selected pro rata or by lot as determined by the
Board of Directors of First Banks. The shares may not be redeemed without the
prior approval of the Federal Reserve.
LIQUIDATION. If First Banks is voluntarily or involuntarily liquidated,
dissolved or its affairs wound up, the holders of the Class C Preferred Stock
will have a preference of $25 per share plus all dividends accumulated and
unpaid thereon to the date of payment, or such lesser amount remaining after
the claims of all creditors have been satisfied, before any payments are made
with respect to Junior Stock of First Banks or any other class of stock of
First Banks ranking junior to the Class C Preferred Stock. In the event that
upon any such voluntary or involuntary liquidation, the available assets of
First Banks are insufficient to pay the full liquidation preference on the
outstanding Class C Preferred Stock and the liquidation preferences on all
shares of other classes or series of capital stock of First Banks ranking on a
parity with the Class C Preferred Stock, the holders of all such shares will
share ratably in any distribution of assets in proportion to the full amounts
to which they would otherwise be respectively entitled. After payment of the
full amount of the liquidation preference to which they are entitled, the
holders of the Class C Preferred Stock will not be entitled to any further
participation in any distribution of assets by First Banks. The consolidation
or merger of First Banks with any entity will not be considered to constitute a
liquidation, dissolution or winding up of First Banks.
VOTING RIGHTS. Holders of the Class C Preferred Stock do not have any
voting rights except as described below and except as may be expressly required
by law.
If at any time First Banks falls in arrears in the payment of dividends on
the Class C Preferred Stock in an aggregate amount at least equal to the full
accumulated dividends for six quarterly dividend periods, the number of
directors of First Banks will be increased by two and the holders of the Class
C Preferred Stock (and all classes of preferred stock ranking on parity
therewith), voting separately on a noncumulative basis as a single class, will
have the right to elect such two additional directors of First Banks, such
right will continue until all dividends in arrears have been paid or declared
and set apart for payment. The Class A Preferred Stock and Class B Preferred
Stock will not vote with the Class C Preferred Stock for such purpose.
The affirmative vote of the holders of at least 66 2/3% of the outstanding
Class C Preferred Stock is required to amend the Restated Articles to create or
authorize any class of stock ranking prior to the Class C Preferred Stock or to
issue any class of stock to Mr. James F. Dierberg or any entity affiliated with
Mr. Dierberg which would rank on a parity with the Class C Preferred Stock in
respect of dividends or distribution of assets on liquidation or otherwise
alter or abolish the liquidation preferences or any other preferential right of
the Class C Preferred Stock, reduce the redemption price or otherwise alter any
redemption rights of the Class C Preferred Stock, alter or abolish any right of
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the holders of the Class C Preferred Stock to receive dividends, or exclude or
limit the voting rights as to these matters.
If dividends for any past quarterly dividend period are not paid on all
outstanding Class C Preferred Stock, First Banks may not, without the consent
of the holders of at least 66 2/3% shares of the then outstanding Class C
Preferred Stock, purchase or redeem less than all then outstanding shares of
Class C Preferred Stock; provided, however, that nothing will prevent the
purchase or acquisition of the shares pursuant to a purchase or Class C
Preferred Stock exchange offer made on the same terms to holders of all
outstanding shares of Class C Preferred Stock.
If at any time First Banks issues any class or series of preferred stock on
a parity with the Class C Preferred Stock with respect to dividends and
distributions on liquidation, holders of the Class C Preferred Stock will
thereafter possess equivalent voting rights, if any, with such class or series.
The voting rights for all classes or series of preferred stock, except the
Class A Preferred Stock and the Class B Preferred Stock, will not, however,
exceed 25% of the total voting rights of all outstanding capital stock of First
Banks.
TRANSFER AGENT. The transfer agent for the Class C Preferred Stock is
Boatmen's Trust Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the material United States federal income tax
considerations that may be relevant to the purchasers of Preferred Securities
which has been passed upon by Lewis, Rice & Fingersh, L.C., counsel to First
Banks and First Capital insofar as it relates to matters of law and legal
conclusions. The conclusions expressed herein are based upon current provisions
of the Internal Revenue Code of 1986, as amended (the ``Code''), regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change at any time, with possible retroactive effect. Subsequent
changes may cause tax consequences to vary substantially from the consequences
described below. Furthermore, the authorities on which the following summary is
based are subject to various interpretations, and it is therefore possible that
the United States federal income tax treatment of the purchase, ownership, and
disposition of Preferred Securities may differ from the treatment described
below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and
who acquire Preferred Securities on their original issue at their offering
price and hold Preferred Securities as capital assets. The discussion has only
limited application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position in
a ``straddle,'' as part of a ``synthetic security'' or ``hedge,'' as part of a
``conversion transaction'' or other integrated investment, or as other than a
capital asset. The following summary also does not address the tax consequences
to persons that have a functional currency other than the U.S. dollar or the
tax consequences to shareholders, partners or beneficiaries of a holder of
Preferred Securities. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. Accordingly, each prospective investor should consult, and should
rely exclusively on, such investor's own tax advisors in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Preferred Securities.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
First Banks intends to take the position that the Subordinated Debentures
will be classified for United States federal income tax purposes as
indebtedness of First Banks under current law, and, by acceptance of a
Preferred Security, each holder covenants to treat the Subordinated Debentures
as indebtedness and the Preferred Securities as evidence of an indirect
beneficial ownership interest in the Subordinated Debentures. No assurance can
be given, however, that such position of First Banks will not be challenged by
the Internal Revenue Service or, if challenged, that such a challenge will not
be successful. The remainder of this discussion assumes that the Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of First Banks.
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CLASSIFICATION OF FIRST CAPITAL
Under current law and assuming full compliance with the terms of the Trust
Agreement and Indenture (and certain other documents described herein), First
Capital will be classified for United States federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for United States federal income tax purposes, each holder of Preferred
Securities generally will be treated as owning an undivided beneficial interest
in the Subordinated Debentures, and each holder will be required to include in
its gross income any original issue discount (``OID'') accrued with respect to
its allocable share of the Subordinated Debentures whether or not cash is
actually distributed to such holder.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Because First Banks has the option, under the terms of the Subordinated
Debentures, to defer (so long as no Debenture Event of Default has occurred and
is continuing) payments of interest by extending interest payment periods for
up to 20 consecutive quarters, all of the stated interest payments on the
Subordinated Debentures will be treated as OID. Holders of debt instruments
issued with OID must include that discount in income on an economic accrual
basis before the receipt of cash attributable to the interest, regardless of
their method of tax accounting. Generally, all of a holder's taxable interest
income with respect to the Subordinated Debentures will be accounted for as
OID. Actual payments and distributions of stated interest will not, however, be
separately reported as taxable income. The amount of OID that accrues in any
quarter will approximately equal the amount of the interest that accrues on the
Subordinated Debentures in that quarter at the stated interest rate. In the
event that the interest payment period is extended, holders will continue to
accrue OID approximately equal to the amount of the interest payment due at the
end of the extended interest payment period on an economic accrual basis over
the length of the extended interest payment period.
Because income on the Preferred Securities will constitute interest income
generally and OID specifically, corporate holders of Preferred Securities will
not be entitled to a dividends-received deduction with respect to any income
recognized with respect to the Preferred Securities.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Subordinated Debentures with ``market
discount'' or ``acquisition premium'' as such phrases are defined for United
States federal income tax purposes. Such holders are advised to consult their
tax advisors as to the income tax consequences of the acquisition, ownership
and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF FIRST CAPITAL
Under certain circumstances, as described under ``Description of the
Preferred Securities--Redemption or Exchange'' and ``--Liquidation Distribution
Upon Termination,'' the Subordinated Debentures may be distributed to holders
of Preferred Securities upon a liquidation of First Capital. Under current
United States federal income tax law, such a distribution would be treated as a
nontaxable event to each such holder and would result in such holder having an
aggregate tax basis in the Subordinated Debentures received in the liquidation
equal to such holder's aggregate tax basis in the Preferred Securities
immediately before the distribution. A holder's holding period in the
Subordinated Debentures so received in liquidation of First Capital would
include the period for which such holder held the Preferred Securities.
If, however, a Tax Event occurs which results in First Capital being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to holders of the Preferred Securities. Under
certain circumstances described herein, the Subordinated Debentures may be
redeemed for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and a holder would recognize
gain or loss as if the holder sold such Preferred Securities for cash. See
``Description of the Preferred Securities--Redemption or Exchange'' and
``--Liquidation Distribution Upon Termination.''
82
<PAGE> 88
DISPOSITION OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between the amount realized on the sale of the Preferred
Securities and the holder's adjusted tax basis in such Preferred Securities. A
holder's adjusted tax basis in the Preferred Securities generally will be its
initial purchase price increased by OID previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Preferred Securities to the date of disposition. Such gain or loss will
generally be a capital gain or loss and will be a long-term capital gain or
loss if the Preferred Securities have been held for more than one year at the
time of sale.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder that disposes of its Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Subordinated Debentures through the
date of disposition in income as ordinary income, and to add such amount to its
adjusted tax basis in its pro rata share of the underlying Subordinated
Debentures deemed disposed of. To the extent the selling price is less than the
holder's adjusted tax basis (which basis will include, in the form of OID, all
accrued but unpaid interest), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the ``Proposed Legislation'') if such debt obligations have a maximum
term in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the ``Joint Statement'')
indicating their intent that certain legislative proposals initiated by the
Clinton administration, including the Proposed Legislation, that may be adopted
by either of the tax-writing committees of Congress would have an effective
date that is no earlier than the date of ``appropriate Congressional action.''
In addition, subsequent to the publication of the Joint Statement, Senator
Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B.
Rangel wrote letters to Treasury Department officials concurring with the views
expressed in the Joint Statement (the ``Democrat Letters''). Based upon the
Joint Statement and the Democrat Letters, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Subordinated Debentures. There can be no assurances, however, that the
effective date guidance contained in the Joint Statement and the Democrat
Letters will be incorporated into the Proposed Legislation, if enacted, or that
other legislation enacted after the date hereof will not otherwise adversely
affect the ability of First Banks to deduct the interest payable on the
Subordinated Debentures. There can, therefore, be no assurance that a Tax Event
will not occur. A Tax Event would permit First Banks, upon approval of the
Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve, to cause a redemption of the Preferred
Securities before, as well as after, March 31, 2002. See ``Description of the
Subordinated Debentures--Redemption or Exchange'' and ``Description of the
Preferred Securities--Redemption or Exchange--Tax Event Redemption or
Investment Company Event Redemptions.''
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of OID accrued on the Preferred Securities held of record by
individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the Internal Revenue Service on
Forms 1099, which forms should be mailed to such holders of Preferred
Securities by January 31 following each calendar year. Payments made on, and
proceeds from the sale of, the Preferred Securities may be subject to a
``backup'' withholding tax (currently at 31%) unless the holder complies with
certain identification and other requirements. Any amounts withheld under the
backup withholding rules will be allowed as a credit against the holder's
United States federal income tax liability, provided the required information
is provided to the Internal Revenue Service.
83
<PAGE> 89
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED
SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended (``ERISA''), or Section 4975 of the Code
(``Plans''), generally may purchase Preferred Securities, subject to the
investing fiduciary's determination that the investment in Preferred Securities
satisfies ERISA's fiduciary standards and other requirements applicable to
investments by the Plan.
In any case, First Banks and/or any of its affiliates may be considered a
``party in interest'' (within the meaning of ERISA) or a ``disqualified
person'' (within the meaning of Section 4975 of the Code) with respect to
certain plans (generally, Plans maintained or sponsored by, or contributed to
by, any such persons with respect to which First Banks or an affiliate is a
fiduciary or Plans for which First Banks or an affiliate provides services).
The acquisition and ownership of Preferred Securities by a Plan (or by an
individual retirement arrangement or other Plans described in Section
4975(e)(1) of the Code) with respect to which First Banks or any of its
affiliates is considered a party in interest or a disqualified person may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, Plans with respect to which First Banks or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable exemption. Any other Plans or other
entities whose assets include Plan assets subject to ERISA or Section 4975 of
the Code proposing to acquire Preferred Securities should consult with their
own counsel.
UNDERWRITING
The Underwriters named below, represented by Stifel, Nicolaus & Company,
Incorporated (the ``Representative''), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement, the form of which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, to purchase from First Capital the number of Preferred Securities
set forth opposite their respective names below. The several Underwriters have
agreed in the Underwriting Agreement, subject to the terms and conditions set
forth therein, to purchase all the Preferred Securities offered hereby if any
of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Stifel, Nicolaus & Company, Incorporated............................................................
---------
Total............................................................................................... 2,400,000
=========
</TABLE>
84
<PAGE> 90
The Representative has advised First Capital that it proposes initially to
offer the Preferred Securities to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per Preferred Security to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of First Banks,
the Underwriting Agreement provides that First Banks will pay as compensation
to the Underwriters arranging the investment therein of such proceeds, an
amount in immediately available funds of $ per Preferred Security (or
$ in the aggregate) for the accounts of the several Underwriters.
First Capital has granted the Underwriters an option to purchase up to an
additional 360,000 Preferred Securities at the initial public offering price.
Such option, which expires 30 days from the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage of
the additional Preferred Securities that the number of Preferred Securities to
be purchased initially by the Underwriter is of the 2,400,000 Preferred
Securities initially purchased by the Underwriters.
To the extent that the Underwriters exercise their option to purchase
additional Preferred Securities, First Capital will issue and sell to First
Banks additional Common Securities and First Banks will issue and sell to First
Capital Subordinated Debentures in an aggregate principal amount equal to the
total aggregate Liquidation Amount of the additional Preferred Securities being
purchased pursuant to the option.
During a period of 30 days from the date of this Prospectus, neither First
Capital nor First Banks will, subject to certain exceptions, without the prior
written consent of the Representative, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Preferred Securities or Subordinated Debentures or any debt securities
substantially similar to the Subordinated Debentures or equity securities
substantially similar to the Preferred Securities (except for Subordinated
Debentures and the Preferred Securities offered hereby).
Application has been made to have the Preferred Securities approved for
quotation on The Nasdaq Stock Market's National Market. The Representative has
advised First Capital that it presently intends to make a market in the
Preferred Securities after the commencement of trading on The Nasdaq Stock
Market's National Market, but no assurances can be made as to the liquidity of
such Preferred Securities. The Representative will have no obligation to make a
market in the Preferred Securities, however, and may cease market-making
activities, if commenced, at any time.
First Capital and First Banks have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to
make in respect of, certain liabilities, including liabilities under the
Securities Act.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, First Banks and its subsidiaries in the
ordinary course of business.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of
First Capital will be passed upon by Richards, Layton & Finger, special
Delaware counsel to First Banks and First Capital. Certain legal matters for
First Banks and First Capital, including the validity of the Guarantee and the
Subordinated Debentures will be passed upon for First Banks and First Capital
by Lewis, Rice & Fingersh, L.C., St. Louis, Missouri, counsel to First Banks
and First Capital. Certain legal matters will be passed upon for the
Underwriters by Bryan Cave LLP, St. Louis, Missouri. Lewis, Rice & Fingersh,
L.C. and Bryan Cave LLP, will rely on the opinion of Richards, Layton & Finger
as to matters of Delaware law. Certain matters relating to United States
federal income tax considerations will be passed upon for First Banks by Lewis,
Rice & Fingersh, L.C.
85
<PAGE> 91
EXPERTS
The consolidated financial statements of First Banks and FCB are included
in this Prospectus in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, for the periods indicated in their
reports thereon which appear elsewhere herein and upon authority of said firm
as experts in accounting and auditing.
The consolidated financial statements of FCB are included in this
Prospectus in reliance upon the report of Arthur Andersen LLP, independent
certified public accountants, for the periods indicated in their reports
thereon which appear elsewhere herein and upon authority of said firm as
experts in accounting and auditing.
On November 17, 1995, FCB's independent auditors, Arthur Andersen LLP, were
dismissed. The independent auditors' report issued by Arthur Andersen LLP on
FCB's consolidated financial statements as of and for the year ended December
31, 1994, as included herein, was modified as to uncertainty and contained an
explanatory paragraph that described FCB's uncertain ability to continue as a
going concern and the various regulatory agreements entered into by FCB and
First Commercial with the FDIC, the California State Banking Department and the
Federal Reserve Bank of San Francisco. There were no disagreements during 1994,
or any preceding year, between FCB and Arthur Andersen LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope of procedure, which disagreements, if not resolved to the satisfaction of
Arthur Andersen LLP, would have caused it to make reference to the subject
matter of the disagreements in connection with its report.
On December 26, 1995, FCB engaged KPMG Peat Marwick LLP to serve as the new
independent auditors and to report on FCB's consolidated financial statements
as of and for the year ended December 31, 1995. This decision to change
accountants was recommended by FCB's Board of Directors and approved by FCB's
Audit Committee in conjunction with the acquisition of a majority ownership
percentage of FCB by First Banks.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by First Banks with the
Securities and Exchange Commission pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference:
(a) First Banks' Annual Report on Form 10-K for the year ended December
31, 1995; and
(b) First Banks' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
All reports and any definitive proxy or information statements filed by
First Banks with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Preferred Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
FIRST BANKS WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO THE OFFICE OF THE SECRETARY, FIRST BANKS, INC., 11901 OLIVE BLVD.,
ST. LOUIS, MISSOURI 63141. TELEPHONE REQUESTS MAY BE DIRECTED TO (314)
995-8700.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-2
(together with all amendments and exhibits thereto, the ``Registration
Statement'') filed by First Banks and First Capital with the Commission under
the Securities Act, with respect to the Preferred Securities and the
Subordinated Debentures. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
although it does include a summary of the material terms of the Indenture and
the Trust Agreement. Reference is made to such Registration Statement and to
the
86
<PAGE> 92
exhibits relating thereto for further information with respect to the First
Banks, First Capital, the Preferred Securities and the Subordinated Debentures.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
First Banks is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copies at the following public reference
facilities maintained by the Commission: 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, upon payment of prescribed rates. The Commission
maintains in Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
reports, proxy statements and other information concerning First Banks may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
No separate financial statements of First Capital have been included
herein. First Banks does not consider that such financial statements would be
material to holders of Preferred Securities because (i) all of the voting
securities of First Capital will be owned by First Banks, a reporting company
under the Exchange Act, (ii) First Capital has no independent operations but
exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of First Capital and investing the proceeds
thereof in Subordinated Debentures issued by First Banks, and (iii) the
obligations of First Banks described herein to provide certain indemnities in
respect of and be responsible for certain costs, expenses, debts and
liabilities of First Capital under the Indenture and pursuant to the Trust
Agreement, the guarantee issued by First Banks with respect to the Preferred
Securities, the Subordinated Debentures purchased by First Capital and the
related Indenture, taken together, constitute, in the belief of First Banks and
First Capital, a full and unconditional guarantee of payments due on the
Preferred Securities. See ``Description of the Subordinated Debentures'' and
``Description of the Guarantee.''
First Capital is not currently subject to the information reporting
requirements of the Exchange Act. First Capital will become subject to such
requirements upon the effectiveness of the Registration Statement, although it
intends to seek and expects to receive an exemption therefrom.
87
<PAGE> 93
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FIRST BANKS, INC. AND SUBSIDIARIES AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report........................................................................ F-2
Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 and 1994..... F-3
Consolidated Statements of Income for the nine months ended September 30, 1996 and 1995 (unaudited)
and for each of the years ended December 31, 1995, 1994 and 1993.................................. F-5
Consolidated Statements of Changes in Stockholders' Equity for the nine months ended September 30,
1996 (unaudited) and for each of the years ended December 31, 1995, 1994 and 1993................. F-6
Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995
(unaudited) and for each of the years ended December 31, 1995, 1994 and 1993...................... F-7
Notes to Consolidated Financial Statements.......................................................... F-8
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Reports....................................................................... F-38
Consolidated Balance Sheets as of December 31, 1995 and 1994........................................ F-40
Consolidated Statements of Operations for each of the years ended December 31, 1995, 1994 and
1993.............................................................................................. F-42
Consolidated Statements of Changes in Stockholders' Equity for each of the years ended December 31,
1995, 1994 and 1993............................................................................... F-43
Consolidated Statements of Cash Flows for each of the years ended December 31, 1995, 1994 and
1993.............................................................................................. F-44
Notes to Consolidated Financial Statements.......................................................... F-45
Interim Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995...... F-65
Interim Consolidated Statements of Operations for the nine months ended September 30, 1996 and 1995
(unaudited)....................................................................................... F-67
</TABLE>
F-1
<PAGE> 94
FIRST BANKS, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
KPMG PEAT MARWICK LLP
The Board of Directors and Stockholders
First Banks, Inc.:
We have audited the accompanying consolidated balance sheets
of First Banks, Inc. and subsidiaries (the Company) as of
December 31, 1995 and 1994, and the related consolidated
statements of income, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above, present fairly, in all material respects, the
financial position of First Banks, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
St. Louis, Missouri
March 8, 1996
F-2
<PAGE> 95
<TABLE>
FIRST BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- ---- ----
ASSETS (UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents:
Cash and due from banks................................................ $ 121,788 128,553 91,028
Interest-bearing deposits with other financial institutions--
with maturities of three months or less.............................. 9,436 16,860 31,568
Federal funds sold..................................................... 51,200 53,800 8,700
---------- --------- ---------
Total cash and cash equivalents................................ 182,424 199,213 131,296
---------- --------- ---------
Investment securities:
Available for sale, at fair value...................................... 473,275 471,791 355,958
Held to maturity, at amortized cost (estimated fair value of $25,839,
$37,021 and $217,658 at September 30, 1996, December 31, 1995 and
December 31, 1994, respectively)..................................... 25,510 36,532 231,920
---------- --------- ---------
Total investment securities.................................... 498,785 508,323 587,878
---------- --------- ---------
Loans:
Commercial, financial and agricultural................................. 443,750 364,018 208,649
Real estate construction and development............................... 259,607 209,802 122,912
Real estate mortgage:
Residential........................................................ 1,082,705 1,191,236 967,129
Commercial......................................................... 579,902 523,816 332,075
Consumer and installment............................................... 351,853 419,894 423,345
Loans held for sale.................................................... 23,687 45,035 20,344
---------- --------- ---------
Total loans.................................................... 2,741,504 2,753,801 2,074,454
Unearned discount...................................................... (8,478) (9,582) (884)
Allowance for possible loan losses..................................... (45,365) (52,665) (28,410)
---------- --------- ---------
Net loans...................................................... 2,687,661 2,691,554 2,045,160
---------- --------- ---------
Bank premises and equipment, net of accumulated depreciation and
amortization............................................................. 48,521 50,278 43,661
Intangibles associated with the purchase of subsidiaries................... 20,882 23,841 13,257
Purchased mortgage servicing rights, net of amortization................... 10,678 12,122 5,755
Accrued interest receivable................................................ 22,851 22,027 16,741
Receivable from sales of investment securities............................. -- 41,265 --
Other real estate.......................................................... 10,298 7,753 6,740
Deferred income taxes...................................................... 41,898 41,576 21,132
Other assets............................................................... 22,156 25,010 7,950
---------- --------- ---------
Total assets................................................... $3,546,154 3,622,962 2,879,570
========== ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE> 96
FIRST BANKS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES
Deposits:
Demand:
Non-interest-bearing............................................... $ 393,401 389,658 290,039
Interest-bearing................................................... 289,535 307,584 268,212
Savings................................................................ 664,142 690,902 538,027
Time:
Time deposits of $100 or more...................................... 149,695 201,025 113,381
Other time deposits................................................ 1,557,968 1,594,522 1,123,485
---------- --------- ---------
Total deposits................................................. 3,054,741 3,183,691 2,333,144
Federal Home Loan Bank advances............................................ 71,576 49,883 146,359
Federal funds purchased.................................................... 15,000 3,000 22,000
Securities sold under agreements to repurchase............................. 41,745 17,180 72,794
Other borrowings........................................................... -- 1,478 2,331
Notes payable.............................................................. 66,840 88,135 46,203
Accrued interest payable................................................... 9,641 10,726 7,606
Deferred income taxes...................................................... 9,991 6,517 6,037
Accrued and other liabilities.............................................. 19,172 15,310 11,726
Minority interest in subsidiaries.......................................... 13,856 12,437 14,058
---------- --------- ---------
Total liabilities.............................................. 3,302,562 3,388,357 2,662,258
---------- --------- ---------
STOCKHOLDERS' EQUITY
Preferred stock:
Class C 9.00% increasing rate, redeemable, cumulative, $1.00 par value,
$25.00 stated value; 5,000,000 shares authorized, 2,191,000 shares
issued and outstanding at September 30, 1996 and 2,200,000 issued and
outstanding at December 31, 1995 and 1994............................ 54,775 55,000 55,000
Class A, convertible, adjustable rate, $20.00 par value; 750,000 shares
authorized; 641,082 shares issued and outstanding.................... 12,822 12,822 12,822
Class B, adjustable rate, $1.50 par value; 200,000 shares authorized,
160,505 shares issued and outstanding................................ 241 241 241
Common stock, $250.00 par value; 25,000 shares authorized; 23,661 shares
issued and outstanding................................................... 5,915 5,915 5,915
Capital surplus............................................................ 4,237 4,307 4,479
Retained earnings.......................................................... 163,894 156,692 137,957
Net fair value adjustment for securities available for sale................ 1,708 (372) 898
---------- --------- ---------
Total stockholders' equity..................................... 243,592 234,605 217,312
---------- --------- ---------
Total liabilities and stockholders' equity..................... $3,546,154 3,622,962 2,879,570
========== ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-4
<PAGE> 97
FIRST BANKS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- --------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income: (UNAUDITED)
Interest and fees on loans........................................ $175,260 161,912 221,934 129,583 110,813
Investment securities:
Taxable....................................................... 16,999 26,504 34,379 29,385 26,635
Nontaxable.................................................... 967 1,058 1,390 1,468 1,121
Federal funds sold and other...................................... 3,782 2,577 3,918 1,999 1,443
-------- ------- ------- ------- -------
Total interest income..................................... 197,008 192,051 261,621 162,435 140,012
-------- ------- ------- ------- -------
Interest expense:
Deposits:
Interest-bearing demand....................................... 3,530 4,238 5,760 4,421 4,008
Savings....................................................... 16,953 16,675 22,737 15,198 11,947
Time deposits of $100 or more................................. 6,960 6,381 9,315 3,300 2,496
Other time deposits........................................... 66,060 55,718 78,250 41,170 38,635
Federal Home Loan Bank advances................................... 1,954 10,699 12,548 3,443 527
Federal funds purchased and securities sold under agreements to
repurchase....................................................... 762 2,190 3,352 1,565 253
Interest rate exchange agreements, net............................ 6,035 5,168 6,911 490 --
Notes payable and other borrowings................................ 4,326 5,281 6,072 1,083 192
-------- ------- ------- ------- -------
Total interest expense.................................... 106,580 106,350 144,945 70,670 58,058
-------- ------- ------- ------- -------
Net interest income....................................... 90,428 85,701 116,676 91,765 81,954
Provision for possible loan losses.................................... 8,774 8,449 10,361 1,858 4,456
-------- ------- ------- ------- -------
Net interest income after provision for possible loan
losses................................................. 81,654 77,252 106,315 89,907 77,498
-------- ------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts and customer service fees..... 9,411 7,634 10,661 8,300 6,821
Credit card fees.................................................. 1,897 1,615 2,179 1,746 1,231
Loan servicing fees, net.......................................... 2,027 2,286 2,932 1,645 1,163
Gain (loss) on mortgage loans sold and held for sale.............. (7) (622) (608) 126 (1,693)
Net gain (loss) on sales of securities............................ (421) 2,765 (866) (290) 155
Gain on sale of mortgage loan servicing rights.................... -- 3,843 3,843 -- --
Loss on cancellation of interest rate exchange agreements......... -- (3,342) (3,342) -- --
Other income...................................................... 2,891 3,463 4,608 2,107 2,276
-------- ------- ------- ------- -------
Total noninterest income.................................. 15,798 17,642 19,407 13,634 9,953
-------- ------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits.................................... 30,085 27,938 37,941 28,337 22,087
Occupancy, net of rental income................................... 7,245 6,244 8,709 5,260 4,450
Furniture and equipment........................................... 5,404 4,982 6,852 5,209 4,783
Federal Deposit Insurance Corporation premiums.................... 11,355 3,810 4,911 4,484 4,289
Postage, printing and supplies.................................... 3,660 3,360 4,678 3,304 3,000
Data processing fees.............................................. 3,479 3,560 4,838 3,733 2,929
Legal, examination and professional fees.......................... 3,620 3,975 5,412 3,562 2,369
Credit card expenses.............................................. 2,149 1,762 2,490 2,455 1,843
Communications.................................................... 1,992 1,744 2,476 1,816 1,235
Advertising....................................................... 1,253 1,473 2,182 1,767 1,313
Losses and expenses on foreclosed real estate, net of gains....... 951 539 1,302 792 28
Other expenses.................................................... 10,044 7,314 9,775 7,015 5,105
-------- ------- ------- ------- -------
Total noninterest expense................................. 81,237 66,701 91,566 67,734 53,431
-------- ------- ------- ------- -------
Income before provision for income taxes, minority
interest in (income) loss of subsidiaries and
cumulative effect of change in accounting principle.... 16,215 28,193 34,156 35,807 34,020
Provision for income taxes............................................ 4,304 9,414 11,038 12,012 11,592
-------- ------- ------- ------- -------
Income before minority interest in (income) loss of
subsidiaries and cumulative effect of change in
accounting principle................................... 11,911 18,779 23,118 23,795 22,428
Minority interest in (income) loss of subsidiaries.................... (472) 816 1,353 237 --
-------- ------- ------- ------- -------
Income before cumulative effect of change in accounting
principle.............................................. 11,439 19,595 24,471 24,032 22,428
Cumulative effect of change in accounting principle................... -- -- -- -- 766
-------- ------- ------- ------- -------
Net income................................................ 11,439 19,595 24,471 24,032 23,194
Preferred stock dividends............................................. 4,237 4,237 5,736 5,735 5,766
-------- ------- ------- ------- -------
Net income available to common stockholders............... $ 7,202 15,358 18,735 18,297 17,428
======== ======= ======= ======= =======
Earnings per common share (primary):
Income before cumulative effect of change in accounting
principle........................................................ $ 304.39 649.08 791.82 773.31 709.10
Cumulative effect of change in accounting principle............... -- -- -- -- 32.59
-------- ------- ------- ------- -------
Primary earnings per share................................ $ 304.39 649.08 791.82 773.31 741.69
======== ======= ======= ======= =======
Earnings per common share (fully diluted):
Income before cumulative effect of change in accounting
principle........................................................ $ 302.68 617.39 758.66 734.80 661.42
Cumulative effect of change in accounting principle............... -- -- -- -- 29.01
-------- ------- ------- ------- -------
Fully diluted earnings per share.......................... $ 302.68 617.39 758.66 734.80 690.43
======== ======= ======= ======= =======
Weighted average shares of common stock outstanding................... 23,661 23,661 23,661 23,661 23,498
======== ======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 98
FIRST BANKS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE YEARS ENDED DECEMBER 31, 1995
AND NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<CAPTION>
CLASS C ADJUSTABLE RATE NET FAIR
PREFERRED PREFERRED STOCK VALUE ADJUST-
STOCK, ------------------ MENT FOR TOTAL
INCREASING CLASS A, SECURITIES STOCK-
RATE, CONVER- COMMON CAPITAL RETAINED AVAILABLE HOLDERS'
REDEEMABLE TIBLE CLASS B STOCK SURPLUS EARNINGS FOR SALE EQUITY
---------- -------- ------- ------ ------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated balances, January 1,
1993.................................. $ 55,000 14,822 241 5,786 2,733 102,232 -- 180,814
Year ended December 31, 1993:
Consolidated net income............. -- -- -- -- -- 23,194 -- 23,194
Conversion of 100,000 shares of
Class A preferred stock into
516.83 shares of common stock..... -- (2,000) -- 129 1,871 -- -- --
Class C preferred stock dividends,
$2.25 per share................... -- -- -- -- -- (4,950) -- (4,950)
Class A preferred stock dividends,
$1.20 per share................... -- -- -- -- -- (799) -- (799)
Class B preferred stock dividends,
$.11 per share.................... -- -- -- -- -- (17) -- (17)
Net fair value adjustment for
securities available for sale..... -- -- -- -- -- -- 3,602 3,602
--------- ------ ------ ----- ----- ------- ----- -------
Consolidated balances, December 31,
1993.................................. 55,000 12,822 241 5,915 4,604 119,660 3,602 201,844
Year ended December 31, 1994:
Consolidated net income............. -- -- -- -- -- 24,032 -- 24,032
Class C preferred stock dividends,
$2.25 per share................... -- -- -- -- -- (4,950) -- (4,950)
Class A preferred stock dividends,
$1.20 per share................... -- -- -- -- -- (768) -- (768)
Class B preferred stock dividends,
$.11 per share.................... -- -- -- -- -- (17) -- (17)
Effect of capital stock transactions
of majority owned subsidiary...... -- -- -- -- (125) -- -- (125)
Net fair value adjustment for
securities available for sale..... -- -- -- -- -- -- (2,704) (2,704)
--------- ------ ------ ----- ----- ------- ----- -------
Consolidated balances, December 31,
1994.................................. 55,000 12,822 241 5,915 4,479 137,957 898 217,312
Year ended December 31, 1995:
Consolidated net income............. -- -- -- -- -- 24,471 -- 24,471
Class C preferred stock dividends,
$2.25 per share................... -- -- -- -- -- (4,950) -- (4,950)
Class A preferred stock dividends,
$1.20 per share................... -- -- -- -- -- (769) -- (769)
Class B preferred stock dividends,
$.11 per share.................... -- -- -- -- -- (17) -- (17)
Effect of capital stock transactions
of majority owned subsidiary...... -- -- -- -- (172) -- -- (172)
Net fair value adjustment for
securities available for sale..... -- -- -- -- -- -- (1,270) (1,270)
--------- ------ ------ ----- ----- ------- ----- -------
Consolidated balances, December 31,
1995.................................. 55,000 12,822 241 5,915 4,307 156,692 (372) 234,605
Nine months ended September 30, 1996
(Unaudited):
Consolidated net income............. -- -- -- -- -- 11,439 -- 11,439
Class C preferred stock dividends,
$1.69 per share................... -- -- -- -- -- (3,713) -- (3,713)
Class A preferred stock dividends,
$.90 per share.................... -- -- -- -- -- (513) -- (513)
Class B preferred stock dividends,
$.08 per share.................... -- -- -- -- -- (11) -- (11)
Purchase and retirement of Class C
preferred shares.................. (225) -- -- -- (5) -- -- (230)
Effect of capital stock transactions
of majority owned subsidiary...... -- -- -- -- (65) -- -- (65)
Net fair value adjustment for
securities available for sale..... -- -- -- -- -- -- 2,080 2,080
--------- ------ ------ ----- ----- ------- ----- -------
Consolidated balances, September 30,
1996.................................. $ 54,775 12,822 241 5,915 4,237 163,894 1,708 243,592
========= ====== ====== ===== ===== ======= ===== =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-6
<PAGE> 99
FIRST BANKS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS EXPRESSED IN THOUSANDS)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ ------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Income before cumulative effect of change in accounting
principle.................................................. $ 11,439 19,595 24,471 24,032 22,428
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of bank premises and
equipment.............................................. 4,314 3,997 5,534 4,164 3,936
Amortization, net of accretion........................... 3,360 3,107 4,520 5,364 7,180
Originations and purchases of loans held for sale........ (104,923) (33,434) (67,005) (80,630) (273,395)
Proceeds from the sale of loans held for sale............ 91,336 173,873 207,077 167,942 267,828
Provision for possible loan losses....................... 8,774 8,449 10,361 1,858 4,456
Provision for income taxes currently payable............. 4,304 9,414 11,039 12,012 11,568
Payments of income taxes................................. (5,018) (385) (1,105) (12,125) (9,957)
(Increase) decrease in accrued interest receivable....... (824) 568 1,320 (469) 1,517
Interest accrued on liabilities.......................... 106,579 106,450 144,946 70,670 58,058
Payments of interest on liabilities...................... (107,665) (106,350) (145,066) (69,370) (60,100)
Other operating activities, net.......................... 7,028 (2,545) (5,190) (883) 838
Minority interest in income (loss) of subsidiary......... 453 (815) (1,353) (237) --
--------- -------- -------- -------- --------
Net cash provided by operating activities............ 19,157 181,924 189,549 122,328 34,357
--------- -------- -------- -------- --------
Cash flows from investing activities:
Cash paid for acquired entities, net of cash and cash
equivalents received....................................... -- 51,275 54,458 (24,171) 4,466
Sales of investment securities of acquired entity............ -- 86,723 88,334 133,990 --
Sales of investment securities available for sale............ 83,616 170,270 279,537 145,757 16,128
Maturities of investment securities available for sale....... 299,362 119,927 147,395 262,953 450,395
Maturities of investment securities held to maturity......... 9,049 22,423 36,469 94,359 --
Purchases of investment securities available for sale........ (337,979) (175,107) (282,599) (235,093) (468,279)
Purchases of investment securities held to maturity.......... (596) (2,250) (2,397) (81,096) --
Net (increase) decrease in loans............................. (4,566) (103,938) (71,211) (458,172) 32,315
Recoveries of loans previously charged-off................... 5,229 3,247 4,859 5,169 5,152
Purchases of bank premises and equipment..................... (2,550) (4,056) (5,337) (4,190) (2,775)
Interest rate futures contracts, net......................... -- -- (22,167) 7,469 --
Other investing activities................................... 10,420 (32,042) 3,946 (3,285) 6,360
--------- -------- -------- -------- --------
Net cash provided by (used in) investing
activities........................................ 61,985 136,472 231,287 (156,310) 43,762
--------- -------- -------- -------- --------
Cash flows from financing activities:
Other increases (decreases) in deposits:
Demand and savings deposits.............................. (41,067) (82,306) (123,260) (77,075) 17,405
Time deposits............................................ (87,883) 51,862 55,885 38,151 (53,653)
Increase (decrease) in federal funds purchased............... 12,000 (70,300) (67,300) 18,000 --
Increase (decrease) in Federal Home Loan Bank advances....... 21,693 (84,157) (170,644) 11,464 (15,900)
Increase (decrease) in securities sold under agreements to
repurchase................................................. 24,565 (55,496) (55,615) 40,762 (10,509)
Increase (decrease) in notes payable......................... (22,772) 17,639 13,751 47,493 (30,038)
Purchase and retirement of Class C preferred shares.......... (230) -- -- -- --
Payment of preferred stock dividends......................... (4,237) (4,237) (5,736) (5,735) (5,766)
--------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities........................................ (97,931) (226,995) (352,919) 73,060 (98,461)
--------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents....................................... (16,789) 91,401 67,917 39,078 (20,342)
Cash and cash equivalents, beginning of period................... 199,213 131,296 131,296 92,218 112,560
--------- -------- -------- -------- --------
Cash and cash equivalents, end of period......................... $ 182,424 222,697 199,213 131,296 92,218
========= ======== ======== ======== ========
Noncash investing and financing activities:
Loans transferred to foreclosed real estate.................. $ 7,332 1,893 5,395 5,030 1,496
Loans to facilitate sale of foreclosed real estate........... 168 213 587 1,724 1,270
Investment securities transferred to available for sale...... -- -- 174,113 -- 283,624
Receivable from sale of investment securities................ -- -- 41,265 -- --
Loans transferred to held for sale........................... -- 146,991 146,991 -- --
========= ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
F-7
<PAGE> 100
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of First Banks, Inc. and
subsidiaries (First Banks) have been prepared in accordance with generally
accepted accounting principles and conform to practices prevalent among
financial institutions. The following is a summary of the more significant
policies followed by First Banks:
BUSINESS
First Banks provides a full range of banking services to individual and
corporate customers through its subsidiaries located in Missouri, Illinois,
California and Texas. First Banks and its banking and thrift subsidiaries are
subject to the regulations of certain federal and state agencies and undergo
periodic examinations by these regulatory agencies.
BASIS OF PRESENTATION
In preparing the consolidated financial statements, management of First
Banks is required to make estimates and assumptions which significantly affect
the reported amounts of assets, liabilities, income and expenses. The most
significant estimate, which is particularly susceptible to change in the
near-term, relates to the determination of the allowance for possible loan
losses. While management uses relevant information to recognize potential
losses on loans, changes in economic conditions and customer conditions could
cause actual experience to differ from that anticipated.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of First Banks,
Inc. and all of its subsidiaries, net of minority interest, as more fully
described below. All significant intercompany accounts and transactions have
been eliminated in consolidation.
First Banks operates primarily through two wholly owned bank subsidiaries,
two wholly owned thrift subsidiaries, one wholly owned bank holding company
subsidiary and two majority owned bank holding company subsidiaries. First
Banks' subsidiary financial institutions (Subsidiary Banks) are:
First Bank, headquartered in St. Louis County, Missouri (First Bank
(Missouri));
First Bank, headquartered in O'Fallon, Illinois (First Bank (Illinois));
First Bank FSB, headquartered in St. Louis County, Missouri (First Bank
FSB);
First Banks America, Inc., headquartered in Houston, Texas (FBA);
CCB Bancorp, Inc., headquartered in Santa Ana, California (CCB);
First Commercial Bancorp, Inc., headquartered in Sacramento, California
(FCB); and
St. Charles Federal Savings and Loan Association, headquartered in St.
Charles, Missouri (St. Charles Federal).
CCB Bancorp, Inc., a wholly owned bank holding company subsidiary, operates
through First Bank & Trust, headquartered in Irvine, California (FB&T), La
Cumbre Savings Bank F.S.B., headquartered in Santa Barbara, California (La
Cumbre), and Queen City Bank, N.A., headquartered in Long Beach, California
(Queen City). FBA, a majority-owned bank holding company subsidiary, operates
through BankTEXAS N.A., headquartered in Houston, Texas (BTX). First Banks
owned 65.41% and 64.60% of FBA at December 31, 1995 and 1994, respectively.
FCB, a majority-owned bank holding company subsidiary, operates through First
Commercial Bank, headquartered in Sacramento, California (First Commercial).
First Bank acquired its interest in FCB in a series of transactions beginning
in August 1995. First Banks owned 93.29% of FCB at December 31, 1995. In
addition to the Subsidiary Banks, First Banks owns FirstServ, Inc. Through a
facilities management agreement with First Services, L.P., FirstServ, Inc.
provides data processing services and operational support for First Banks.
F-8
<PAGE> 101
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS
First Banks' subsidiaries maintain deposit balances with various banks
which are necessary for check collection and account activity charges. Cash in
excess of immediate requirements is invested on a daily basis in federal funds
or interest-bearing deposits with other financial institutions. Cash, due from
banks, federal funds sold, and interest-bearing deposits with original
maturities of three months or less are considered to be cash and cash
equivalents for purposes of the consolidated statements of cash flows.
First Banks' subsidiaries are required to maintain certain daily reserve
balances on hand in accordance with regulatory requirements. The reserve
balances maintained in accordance with such requirements at December 31, 1995
and 1994 were $38.2 million and $31.5 million, respectively.
INVESTMENT SECURITIES
The classification of investment securities as available for sale or held
to maturity is determined at the date of purchase. First Banks does not engage
in the trading of investment securities. Investment securities designated as
available for sale, which include any security which First Banks has no
immediate plan to sell but which may be sold in the future under different
circumstances, are stated at fair value. Unrealized gains and losses with
respect to available for sale securities are recorded, net of related income
tax effects, in a separate component of stockholders' equity. When securities
designated as available for sale are sold, the resulting realized gains and
losses are included in noninterest income upon commitment to sell, based on the
amortized cost of each individual security sold. All previous fair value
adjustments included in the separate component of stockholders' equity are
reversed upon sale.
Investment securities designated as held to maturity, which include any
security for which First Banks has the positive intent and ability to hold to
maturity, are stated at cost, net of amortization of premiums and accretion of
discounts computed on the level yield method taking into consideration the
level of current and anticipated prepayments.
As more fully described in Note 3 to the accompanying consolidated
financial statements, in 1995 First Banks reclassified $174.1 million of
held-to-maturity investment securities to available-for-sale investment
securities.
LOANS HELD FOR PORTFOLIO
Loans held for portfolio are carried at cost, adjusted for amortization of
premiums and accretion of discounts using a method which approximates the level
yield method. Interest and fees on loans are recognized as income using the
interest method. Loans held for portfolio are stated at cost as First Banks has
the ability and it is management's intention to hold them to maturity.
The accrual of interest on loans is discontinued when it appears that
interest or principal may not be paid in a timely manner in the normal course
of business. Generally, payments received on nonaccrual loans are recorded as
principal reductions. Interest income is recognized after all principal has
been repaid or an improvement in the condition of the loan has occurred which
would warrant resumption of interest accruals.
First Banks adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan
(SFAS 114) and SFAS No. 118, Accounting by Creditors for Impairment of a
Loan--Income Recognition and Disclosures (SFAS 118), which amends SFAS 114, on
January 1, 1995. SFAS 114 defines the recognition criterion for loan impairment
and the measurement methods for certain impaired loans and loans whose terms
have been modified in troubled-debt restructurings. SFAS 118 amends SFAS 114 to
allow a creditor to use existing methods for recognizing interest income on an
impaired loan. First Banks has elected to continue to use its existing methods
for recognizing interest on impaired loans. First Banks continues to apply all
payments received to the outstanding balance of the impaired loan until the
collection of the outstanding balance is no longer in doubt. When this occurs,
interest payments are recorded as interest income, until an improvement in the
condition of the loan has occurred which would warrant resumption of interest
accruals.
F-9
<PAGE> 102
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In accordance with SFAS 114, in-substance foreclosures have been
reclassified to loans. This reclassification did not significantly affect First
Banks' financial condition or results of operations. The initial application of
SFAS 114 and SFAS 118 did not have a material effect on First Banks' financial
position and resulted in no additional provision for possible loan losses.
LOANS HELD FOR SALE
Mortgage loans held for sale are carried at the lower of cost or market
value which is determined on an individual loan basis. Gains or losses on the
sale of loans held for sale are determined on a specific identification method.
LOAN SERVICING INCOME
Loan servicing income represents fees earned for servicing real estate
mortgage loans owned by investors, net of federal agency guarantee fees,
interest shortfall, and amortization of the cost of purchased loan servicing
rights. The fees are generally calculated on the outstanding principal balance
of the loans serviced and are recorded as income when earned.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential losses. The provision for possible loan
losses is based on a periodic analysis of the loans held for portfolio and held
for sale, considering, among other factors, current economic conditions, loan
portfolio composition, past loan loss experience, independent appraisals, loan
collateral and payment experience. In addition to the allowance for estimated
losses on identified problem loans, an overall unallocated allowance is
established to provide for unidentified credit losses which are inherent in the
portfolio. As adjustments become necessary, they are reflected in the results
of operations in the periods in which they become known.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed primarily using the
straight-line method over the estimated useful lives of the related assets.
Amortization of leasehold improvements is calculated using the straight-line
method over the shorter of the useful life of the improvement or term of the
lease. Bank premises and improvements are depreciated over five to 50 years and
equipment over two to seven years.
INTANGIBLES ASSOCIATED WITH THE PURCHASE OF SUBSIDIARIES
Intangibles associated with the purchase of subsidiaries include excess of
cost over net assets acquired and deposit base premium. The excess of cost over
net assets acquired of purchased subsidiaries is amortized using the
straight-line method over the estimated periods to be benefited, which range
from approximately 10 to 15 years. In various acquisitions, First Banks has
recorded the valuation of the deposit base premium, representing the estimated
present value of the future net income to be generated from the deposits which
existed at the dates of acquisition. This premium is amortized using various
accelerated methods over the expected lives of the deposit bases, which range
from seven to 10 years.
PURCHASED MORTGAGE SERVICING RIGHTS
Purchased mortgage servicing rights are amortized in proportion to the
related estimated net servicing income on a disaggregated, discounted basis
over the estimated lives of the related mortgages considering the level of
current and anticipated repayments, which range from five to 12 years.
F-10
<PAGE> 103
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER REAL ESTATE
Other real estate, consisting of real estate acquired through foreclosure
or deed in lieu of foreclosure, is stated at the lower of fair value less
applicable selling costs or cost at the time the property is acquired. The
excess of cost over fair value of other real estate at the date of acquisition
is charged to the allowance for possible loan losses. Subsequent reductions in
carrying value to reflect current fair value or costs incurred in maintaining
the properties are charged to expense as incurred.
Sales of other real estate are recorded when the title to the property has
passed to the purchaser, minimum down payment requirements have been met, the
terms of any notes received by First Banks satisfy continuing payment
requirements, and First Banks is relieved of any requirement for continued
involvement in the property.
INCOME TAXES
First Banks, Inc. and its eligible subsidiaries file a consolidated federal
income tax return and unitary or consolidated state income tax returns in
California, Illinois and Missouri. In addition, First Bank (Missouri), First
Bank FSB and St. Charles Federal are subject to a financial institutions tax
which is based on income. The unitary Illinois and California income tax
returns include the investment in FBA because First Banks' ownership is greater
than 50%. FBA and its eligible subsidiaries file a consolidated federal income
tax return which is separate from that of First Banks. As described in Note 10
to the consolidated financial statements, First Banks has adopted the method of
accounting for income taxes set forth in SFAS No. 109, Accounting for Income
Taxes (SFAS 109).
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Subsidiaries of First Banks enter into sales of securities under agreements
to repurchase at a specified future date. Such repurchase agreements are
considered financing agreements and, accordingly, the obligation to repurchase
assets sold is reflected as a liability in the consolidated balance sheets.
Repurchase agreements are collateralized by debt and mortgage-backed
securities.
EARNINGS PER COMMON SHARE
Earnings per common share data is calculated using the weighted average
number of shares of common stock outstanding during each period. The Class A,
Class B, and Class C preferred stock are not common stock equivalents. The
Class A preferred stock has been reflected in fully diluted earnings per share
because of its conversion feature, using the if-converted method.
FINANCIAL INSTRUMENTS
A financial instrument is defined as cash, evidence of an ownership
interest in an entity, or a contract that conveys or imposes on an entity the
contractual right or obligation to either receive or deliver cash or another
financial instrument.
During October 1994, the FASB issued SFAS No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments (SFAS
119). SFAS 119 requires disclosures about the amounts, nature and terms of
derivative financial instruments that are not subject to SFAS No. 105,
Disclosure of Information About Financial Instruments With Off-Balance-Sheet
Risk and Financial Instruments with Concentrations of Credit Risk. SFAS 119
requires that a distinction be made between financial instruments held or
issued for trading purposes and financial instruments held or issued for
purposes other than trading. First Banks implemented SFAS 119 on December 31,
1994, which resulted in no effect on the consolidated financial statements
other than the additional disclosure requirements presented in Note 11.
F-11
<PAGE> 104
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
First Banks utilizes financial instruments to reduce the interest rate risk
arising from its financial assets and liabilities. These instruments involve,
in varying degrees, elements of interest rate risk and credit risk in excess of
the amount recognized in the consolidated balance sheets. Risk that interest
rates may move unfavorably from the perspective of First Banks is defined as
interest rate risk. The risk that a counterparty to an agreement entered into
by First Banks may default is defined as credit risk. These financial
instruments include interest rate swap, floor and cap agreements; interest rate
futures contracts; and forward contracts to sell mortgage-backed securities.
First Banks is party to commitments to extend credit and commercial and
standby letters of credit in the normal course of business to meet the
financing needs of its customers. These commitments involve, in varying
degrees, elements of interest rate risk and credit risk in excess of the amount
recognized in the consolidated balance sheets.
INTEREST RATE SWAP, FLOOR AND CAP AGREEMENTS
First Banks enters into interest rate swap, floor and cap agreements to
manage interest rate risk. The purpose of entering into these agreements is to
reduce the future impact of unfavorable interest rate fluctuations on certain
of First Banks' interest-bearing liabilities. Interest rate swap, floor and cap
agreements are accounted for on an accrual basis with the net interest
differential being recognized as an adjustment to interest expense of the
related liability. Premiums and fees paid upon the purchase of interest rate
swap, floor and cap agreements are amortized to interest expense over the life
of the agreement using the interest method. In the event of early termination
of these derivative financial instruments, the net proceeds received or paid
are deferred and amortized over the shorter of the remaining contract life of
the derivative financial instrument or the maturity of the related liability.
If, however, the amount of the underlying hedged liability is repaid, then the
gains or losses on the agreements are recognized immediately in the
consolidated statements of income. The unamortized premiums, fees paid and
deferred losses on early terminations are included in other assets in the
accompanying consolidated balance sheets.
INTEREST RATE FUTURES CONTRACTS
Interest rate futures contracts were utilized to manage the interest rate
risk of the securities available for sale portfolio until the fourth quarter of
1995. Gains and losses on interest rate futures, which qualify as hedges, are
deferred. Amortization of the net deferred gains or losses is applied to the
interest income of the securities available-for-sale portfolio using the
straight-line method. The net deferred gains and losses are applied to the
carrying value of the securities available-for-sale portfolio as part of the
mark-to-market valuation. In the event the hedged assets are sold, the related
gain or loss of the interest rate futures contracts is immediately recognized
in the consolidated statements of income.
FORWARD CONTRACTS TO SELL MORTGAGE-BACKED SECURITIES
Forward contracts to sell mortgage-backed securities are utilized to manage
the interest rate risk of the residential fixed-rate mortgage loan commitments
and loans held for sale. Gains and losses on forward contracts, which qualify
as hedges, are deferred. The net unamortized balance of such deferred gains and
losses is applied to the carrying value of the loans held for sale as part of
the lower of cost or market valuation.
RECLASSIFICATIONS
Certain 1994 and 1993 amounts have been reclassified to conform with the
classifications and format used for 1995.
(2) ACQUISITIONS
On November 30, 1993, First Banks completed its acquisition of American
Home Savings and Loan Association, St. Louis County, Missouri (American), in
exchange for $1.0 million in cash and subsequently merged American with
F-12
<PAGE> 105
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
First Banks' wholly owned subsidiary, First Bank FSB. The American acquisition
added four banking locations and $47 million in assets. The acquisition was
funded from available cash of First Banks. The transaction was accounted for
using the purchase method of accounting and, accordingly, the consolidated
financial statements include the financial position and results of operations
for the period subsequent to the acquisition date and the assets acquired and
liabilities assumed were recorded at fair value at the acquisition date.
On January 3, 1994, First Banks completed its acquisition of First Federal
Savings Bank of Proviso Township, Chicago, Illinois (First Federal) in exchange
for $23.1 million in cash. First Federal's total assets were $230 million,
consisting primarily of residential loans of $54 million and investment
securities and federal funds sold of $165 million. First Federal, which was
subsequently merged with First Bank FSB, conducts business from one banking
location centrally located in the Hillside community of the greater Chicago
metropolitan area. The acquisition was funded by available cash, proceeds from
the maturity of short-term investments and borrowings under First Banks' credit
agreement. The transaction was accounted for using the purchase method of
accounting. The excess of the cost over the fair value of net assets acquired
was approximately $450,000 and is being amortized over 10 years.
On March 31, 1994, First Banks completed its acquisition of Heritage
National Bank, St. Louis, Missouri (Heritage) in exchange for $6.5 million in
cash. Heritage's total assets were $63.8 million, consisting primarily of loans
of $32.2 million and investment securities and federal funds sold of $27.2
million. Heritage was merged into First Bank (Missouri). The acquisition was
funded from available liquidity. The transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of
the net assets acquired was approximately $2.8 million and is being amortized
over 10 years.
On June 3, 1994, First Banks completed its acquisition of Farmers
Bancshares, Inc., Breese and Valmeyer, Illinois (Farmers) in exchange for $8.1
million in cash. Farmers' total assets were $60.7 million, consisting primarily
of loans of $27.1 million and investment securities and federal funds sold of
$31.0 million. Farmers was merged into First Bank (Illinois). The acquisition
was primarily funded from available liquidity. The transaction was accounted
for using the purchase method of accounting. The excess of the cost over the
fair value of the net assets acquired was approximately $1.9 million and is
being amortized over 10 years.
On August 31, 1994, First Banks completed its acquisition of approximately
65.05% of the voting stock of FBA in exchange for $30 million in cash. FBA
operates through its wholly owned banking subsidiary, BTX. At the time of the
transaction, FBA's total assets were $367 million, consisting primarily of
loans of $177 million and investment securities of $167 million. FBA conducts
business primarily from six banking locations in Dallas and Houston, Texas. The
acquisition was funded by available cash and borrowings under First Banks'
credit agreement. The transaction was accounted for using the purchase method
of accounting. The outside investors' interest in FBA is reflected as minority
interest in the accompanying consolidated financial statements. The excess of
the cost over the fair value of the net assets acquired was approximately $4.0
million and is being amortized over 10 years.
On November 30, 1994, First Banks acquired 96.3% of St. Charles Federal in
exchange for $19.3 million in cash. The purchase, combined with the 3.7% of the
stock of St. Charles Federal previously acquired by First Banks, increased
First Banks' ownership of St. Charles Federal to 100%. St. Charles Federal had
total assets of approximately $90.0 million. The acquisition was funded from
available liquidity, borrowings under First Banks' credit agreement, and notes
payable to former shareholders of St. Charles Federal. The transaction was
accounted for using the purchase method of accounting. The excess of the cost
over the fair value of the net assets acquired was approximately $3.9 million
and is being amortized over 12 years.
On January 4, 1995, First Banks completed its acquisition of River Valley
Holdings, Inc. and its wholly owned subsidiary, River Valley Savings Bank,
F.S.B. (River Valley), for a purchase price of $37.4 million. River Valley's
total assets were $412 million, consisting primarily of residential loans of
$225 million and investment securities of $125 million. River Valley was merged
with First Bank FSB. In addition, River Valley operated a mortgage banking
division which serviced approximately $669 million of residential loans for
others which was merged into and centralized with First Banks' mortgage banking
division effective upon completion of the acquisition. The acquisition
F-13
<PAGE> 106
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
was funded by cash of $18.8 million and a promissory note payable to a former
stockholder of River Valley of $18.6 million. The transaction was accounted for
using the purchase method of accounting. The excess of the cost over the fair
value of the net assets acquired was approximately $11.5 million and is being
amortized over 15 years.
On March 15, 1995, First Banks completed its acquisition of CCB and its
wholly owned subsidiary, Commercial Center Bank, in exchange for $30.4 million
in cash. CCB was headquartered in Santa Ana, California and operated three
banking locations in Santa Ana, San Jose and Walnut Creek. The acquisition of
CCB represents First Banks' initial entry into the southern California market.
CCB's total assets were $193.4 million, consisting primarily of loans and
investment securities of $114.5 million and $31.1 million, respectively. The
acquisition was funded from available cash and borrowings under First Banks'
credit agreement. The transaction was accounted for using the purchase method
of accounting. The excess of the fair value of the net assets acquired over the
cost was approximately $3.3 million and is being accreted to income over 10
years.
On April 28, 1995, First Banks completed its acquisition of HNB Financial
Group, Huntington Beach, California (HNB) and its wholly owned subsidiary,
Huntington National Bank, in exchange for $10.9 million in cash. HNB's total
assets were $88.0 million, consisting primarily of loans and investment
securities of $62.8 million and $10.5 million, respectively. The acquisition
was funded from available cash and borrowings under First Banks' credit
agreement. The transaction was accounted for using the purchase method of
accounting. The excess of the cost over the fair value of the net assets
acquired was approximately $1.1 million and is being amortized over 10 years.
HNB and Huntington National Bank were merged into CCB and FB&T, formerly
Commercial Center Bank, respectively, on August 18, 1995.
On May 31, 1995, First Banks completed its acquisition of Irvine City
Financial, Irvine, California (Irvine) and its wholly owned subsidiary, Irvine
City Bank, f.s.b., in exchange for $4.2 million in cash. Irvine's total assets
were $83.3 million, consisting primarily of loans of $68.7 million and
investment securities and federal funds sold of $10.6 million. The acquisition
was funded from available cash and borrowings under First Banks' credit
agreement. The transaction was accounted for using the purchase method of
accounting. The purchase price approximated the fair value of the net assets
acquired. Irvine and Irvine City Bank, f.s.b. were merged into CCB and FB&T,
respectively, on August 23, 1995.
On July 21, 1995, First Banks completed its investment in QCB Bancorp
(QCB), a California corporation and sole shareholder of Queen City Bank, N.A.
(Queen City), Long Beach, California. As provided by the agreement, First Banks
invested $5.5 million in a convertible debenture issued by QCB. In addition,
First Banks has purchased all other outstanding convertible debentures and
accrued but unpaid interest of QCB totaling $534,000. Under the terms of the
debentures, the principal outstanding balance and the related accrued but
unpaid interest will be converted into shares of common stock of QCB (QCB
Common) on December 31, 1996. Prior to December 31, 1996, the debentures are
convertible into QCB Common at the option of First Banks. The conversion price
is determined by the relationship of the book value per share at the end of the
preceding quarter to that as of September 30, 1994 ($2.03) multiplied by $1.10
per share. On November 30, 1995, First Banks converted $2.2 million of the $5.5
million convertible debenture and related accrued interest of $201,000 into 48
million shares of QCB Common, resulting in an ownership interest in QCB of
96.63%. QCB's total assets were $56.2 million, consisting primarily of loans of
$35.1 million and cash and cash equivalents and investment securities of $20.5
million. The investment was funded from available cash and borrowings under
First Banks' credit agreement. The transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of
the net assets acquired was approximately $465,000 and is being amortized over
10 years. It is expected that QCB will be merged into CCB in March 1996. Queen
City is expected to be merged into FB&T during April 1996.
On August 7, 1995, First Banks executed an Amended and Restated Stock
Purchase Agreement (FCB Agreement) with FCB. Under the FCB Agreement and
subsequent agreements entered into with FCB, FCB and its subsidiary, First
Commercial, were recapitalized through a series of transactions as follows:
F-14
<PAGE> 107
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
a. On August 22, 1995, First Banks acquired $1.5 million of preferred
stock of First Commercial from Mr. James F. Dierberg, for the $1.5 million
paid for the stock by Mr. Dierberg on June 30, 1995.
b. On August 23, 1995, First Banks purchased 116,666,666 shares of
First Commercial common stock for an additional $3.5 million.
c. On October 31, 1995, First Banks purchased a convertible debenture
of FCB for $1.5 million, the proceeds of which were used to increase the
capital of First Commercial.
d. Following the completion of a Special Stockholders' Meeting of FCB
on December 27, 1995, the shares of First Commercial preferred stock and
First Commercial common stock held by First Banks were exchanged for
50,000,000 shares of FCB common stock. In addition, First Banks purchased a
convertible debenture of FCB for $5.0 million, the proceeds of which,
except for $250,000 retained by FCB, were contributed to the capital of
First Commercial.
e. On December 28, 1995, First Banks purchased an additional 15,000,000
shares of FCB common stock for $1.5 million, the proceeds of which were
used to increase the capital of First Commercial.
The FCB transactions were funded from available cash and an advance of $6.0
million under First Banks' existing credit agreement with a group of
unaffiliated commercial banks. The transaction was accounted for using the
purchase method of accounting. The excess of the cost over the fair value of
the net assets acquired was approximately $2.4 million and is being amortized
over 10 years.
As a result of these transactions, First Banks owns 93.29% of the
outstanding common stock of FCB and $6.5 million of convertible debentures
maturing in October and December 2000. The debentures bear interest at 12%
annually. Interest thereon is payable in cash only if permitted by the
appropriate regulatory authorities of FCB and First Commercial and their Boards
of Directors. The debentures and any accrued but unpaid interest thereon must
be converted at maturity, but may be converted at any time prior thereto at the
option of First Banks, at $.10 per share.
The FCB Agreement also provides for FCB to offer to its shareholders, other
than First Banks, rights to acquire an aggregate of $5 million of newly-issued
common stock at $.10 per share. A maximum of $1.0 million of this offering not
otherwise subscribed to may be offered to individuals who are not stockholders
of FCB. In addition, $969,000 of common stock is to be offered in exchange for
certain outstanding dividend obligations and accrued interest thereon of FCB.
If this offering is fully subscribed, First Banks' ownership in FCB could be
reduced to 50.25%, prior to the conversion of the debentures, or 66.95%, if the
debentures and accrued interest thereon had been converted as of December 31,
1995.
For each of the three years ended December 31, 1994, FCB and First
Commercial incurred substantial operating losses related primarily to asset
quality problems. These problems continued throughout 1995, resulting in the
elimination of FCB's stockholders' equity, and the substantial reduction of
First Commercial's stockholders' equity, by June 30, 1995. First Commercial's
reduced capital level caused it to be classified as ``critically
undercapitalized'' for regulatory purposes, subjecting it to the Prompt
Corrective Action provisions of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989. These provisions required it to seek additional
capital or face the possible imposition of a conservatorship or receivership
within 90 days. As a result of the FCB Agreement, Tier 1 capital ratios of FCB
and First Commercial as of December 31, 1995 have increased to 2.14% and 6.58%,
respectively. Although FCB continues to be considered ``significantly
undercapitalized'' for regulatory purposes, First Commercial is considered
``adequately capitalized.'' First Banks has committed that it will purchase in
the offering described above, as a standby-purchaser, after the expiration of
the offering and dividend exchange offer, if necessary, such number of shares
as may be required to raise First Commercial's Tier 1 capital ratio to 7.00% as
required by the Capital Impairment Order of the California State Banking
Division.
On September 1, 1995, First Banks completed its acquisition of La Cumbre in
exchange for $5.5 million in cash. La Cumbre's total assets were $144 million,
consisting primarily of loans of $131 million and cash and cash equivalents and
investment securities of $7.6 million. The transaction was accounted for using
the purchase method of accounting.
F-15
<PAGE> 108
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The excess of the cost over the fair value of the net assets acquired was
approximately $697,000 and is being amortized over 10 years. The acquisition
was funded from available cash. La Cumbre operated as a wholly owned thrift
subsidiary of CCB until it was merged into First Bank & Trust on January 16,
1996.
The following unaudited summary information presents the pro forma results
of operations of First Banks combined with the acquisitions completed during
1995 as if First Banks had completed the transactions on January 1, 1994. The
pro forma results of operations also include FBA, which was acquired by First
Banks on August 31, 1994, for the periods prior to the acquisition date.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net interest income....................................................... $127,602 136,221
Provision for possible loan losses........................................ 24,770 16,141
Net income (loss)......................................................... 4,018 (4,599)
Preferred stock dividends................................................. 5,736 5,736
Net loss available to common stockholders................................. (1,718) (10,335)
======== =======
Weighted average shares of common stock outstanding....................... 23,661 23,661
======== =======
Net loss per common share:
Primary............................................................... $ (72.60) (436.76)
Fully diluted......................................................... (36.91) (368.67)
======== =======
</TABLE>
The unaudited pro forma condensed statements of income reflect the
application of the purchase method of accounting and certain other assumptions.
The purchase accounting adjustments reflect the assets acquired and liabilities
assumed at fair value. Purchase accounting adjustments have been applied to
investment securities, loans, bank premises and equipment, deferred tax assets
and liabilities and excess cost required to reflect the assets acquired and
liabilities assumed at fair value. The resulting premiums and discounts are
amortized or accreted to income consistent with the accounting policies of
First Banks. The application of the purchase method of accounting will not have
a material impact on the future operating results of First Banks.
(3) INVESTMENTS IN DEBT AND EQUITY SECURITIES
Effective December 31, 1993, First Banks adopted SFAS No. 115, Accounting
for Certain Investments in Debt and Equity Securities (SFAS 115), for which the
cumulative effect was recorded on the consolidated balance sheet on that date.
F-16
<PAGE> 109
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SECURITIES AVAILABLE FOR SALE
The amortized cost, contractual maturity, unrealized gains and losses and
fair value of investment securities available for sale at December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
MATURITY GROSS
--------------- TOTAL UNREALIZED
AFTER AMOR- --------------- WEIGHTED
1 YEAR 1-5 5-10 10 TIZED FAIR AVERAGE
OR LESS YEARS YEARS YEARS COST GAINS LOSSES VALUE YIELD
------- ----- ----- ----- ----- ----- ------ ----- --------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995:
Carrying value:
U.S. Treasury.............. $ 20,080 23,823 -- -- 43,903 134 (25) 44,012 5.54%
U.S. government agencies
and corporations:
Mortgage-backed........ 2,863 56,178 29,268 148,897 237,206 1,436 (3,146) 235,496 6.32
Other.................. 92,343 67,926 -- -- 160,269 766 (738) 160,297 5.82
Other...................... 2,383 804 100 9 3,296 7 -- 3,303 5.11
Equity investments in other
financial institutions... 5,256 -- -- -- 5,256 5,254 -- 10,510 3.97
Federal Home Loan Bank and
Federal Reserve Bank
stock.................... 18,173 -- -- -- 18,173 -- -- 18,173 7.02
Net deferred (gain) loss on
interest rate futures
contracts................ 2,059 2,517 -- 4,576 -- (4,576) -- --
-------- ------- ------ ------- ------- ------ ------ ------- ----
Total............. $143,157 151,248 29,368 148,906 472,679 7,597 (8,485) 471,791 6.07
======== ======= ====== ======= ======= ====== ====== ======= ====
Market value:
Debt securities............ $117,693 147,690 29,315 148,410
Equity securities.......... 28,683 -- -- --
-------- ------- ------ -------
Total............. $146,376 147,690 29,315 148,410
======== ======= ====== =======
Weighted average yield............. 5.88% 5.49% 6.45% 6.44%
==== ==== ==== ====
December 31, 1994:
Carrying value:
U.S. Treasury.............. $ 36,367 9,854 507 -- 46,728 -- (692) 46,036 4.66%
U.S. government agencies
and corporations:
Mortgage-backed........ -- 5,893 28,244 142,207 176,344 155 (3,131) 173,368 6.51
Other.................. 27,114 74,556 496 383 102,549 4 (4,264) 98,289 5.28
Equity investments in other
financial institutions... 8,720 -- -- -- 8,720 3,662 -- 12,382 1.68
Federal Home Loan Bank and
Federal Reserve Bank
stock.................... 25,883 -- -- -- 25,883 -- -- 25,883 7.60
Net deferred (gain) loss on
interest rate futures
contracts................ (224) (6,309) -- -- (6,533) 6,533 -- -- --
-------- ------- ------ ------- ------- ------ ------ ------- ---
Total............. $ 97,860 83,994 29,247 142,590 353,691 10,354 (8,087) 355,958 5.84
======== ======= ====== ======= ======= ====== ====== ======= ====
Market value:
Debt securities............ $ 62,442 85,592 29,035 140,624
Equity securities.......... 38,265 -- -- --
-------- ------- ------ -------
Total............. $100,707 85,592 29,035 140,624
======== ======= ====== =======
Weighted average yield............. 5.38% 5.22% 7.55% 6.30%
==== ==== ==== ====
</TABLE>
F-17
<PAGE> 110
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SECURITIES HELD TO MATURITY
The amortized cost, contractual maturity, unrealized gains and losses and
fair value of investment securities held to maturity at December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
MATURITY GROSS
--------------- TOTAL UNREALIZED
AFTER AMOR- --------------- WEIGHTED
1 YEAR 1-5 5-10 10 TIZED FAIR AVERAGE
OR LESS YEARS YEARS YEARS COST GAINS LOSSES VALUE YIELD
------- ----- ----- ----- ----- ----- ------ ----- --------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995:
Carrying value:
U.S. Treasury.............. $ 7,018 -- -- -- 7,018 63 -- 7,081 6.51%
U.S. government agencies
and corporations:
Mortgage-backed........ -- -- -- -- -- -- -- -- --
Other.................. 2,004 1,936 -- -- 3,940 -- (16) 3,924 4.83
State and political
subdivisions............. 2,787 3,545 13,781 5,461 25,574 509 (67) 26,016 5.55
------- ------ ------ ------- ------- --- ------- ------- ----
Total............. $11,809 5,481 13,781 5,461 36,532 572 (83) 37,021 5.93
======= ====== ====== ======= ======= === ======= ======= ====
Market value:
Debt securities............ $11,906 5,572 14,035 5,508
Equity securities.......... -- -- -- --
------- ------ ------ -------
Total............. $11,906 5,572 14,035 5,508
======= ====== ====== =======
Weighted average yield............. 6.01% 5.78% 5.18% 5.25%
==== ==== ==== ====
December 31, 1994:
Carrying value:
U.S. Treasury.............. $ -- 10,251 -- -- 10,251 -- (493) 9,758 5.49%
U.S. government agencies
and corporations:
Mortgage-backed........ 3,283 31,753 34,637 108,761 178,434 85 (12,512) 166,007 5.99
Other.................. -- 9,767 -- -- 9,767 -- (464) 9,303 4.95
State and political
subdivisions............. 4,052 4,669 14,006 4,510 27,237 143 (927) 26,453 5.68
Other...................... 3,063 2,939 91 138 6,231 2 (96) 6,137 6.14
------- ------ ------ ------- ------- --- ------- ------- ----
Total............. $10,398 59,379 48,734 113,409 231,920 230 (14,492) 217,658 5.89
======= ====== ====== ======= ======= === ======= ======= ====
Market value:
Debt securities............ $10,461 56,496 45,270 105,431
Equity securities.......... -- -- -- --
------- ------ ------ -------
Total............. $10,461 56,496 45,270 105,431
======= ====== ====== =======
Weighted average yield............. 6.95% 5.92% 5.59% 5.92%
==== ==== ==== ====
</TABLE>
The expected maturities of investment securities may differ from
contractual maturities since borrowers have the right to call or prepay the
obligations with or without prepayment penalties. The stated maturity of the
net deferred losses and gains on interest rate futures contracts represents the
period the net deferred losses and gains are expected to be amortized and
accreted, respectively, into interest income.
Proceeds from the sales of debt securities classified as available for sale
during 1995 were $388.0 million. Gross gains of $9.1 million and gross losses
of $900,000 were realized on those sales. The gross gains, net of gross losses,
were offset by the recognition of $10.1 million of hedging losses. Proceeds
from the sales of equity securities classified as available for sale during
1995 were $20.5 million. Gross gains of $1.3 million and gross losses of
$200,000 were realized on those sales. Gains and losses were computed using the
specific identification basis for each security sold.
Proceeds from the sales of debt securities classified as available for sale
totaling $1.3 million were previously classified as held to maturity. Gross
gains realized from the sales of these securities were $36,000. These
securities were transferred from held to maturity to available for sale in
accordance with the provisions of a special report issued by the FASB, A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities (Special Report).
F-18
<PAGE> 111
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Special Report provided an enterprise the opportunity to reclassify any
of its investment securities through December 31, 1995 without bringing into
question the intent of an enterprise to hold other debt securities to maturity.
Under the Special Report, First Banks reclassified $174.1 million of securities
from held to maturity to available for sale, of which $1.3 million were sold.
Accordingly, at December 31, 1995, debt securities of $172.8 million previously
classified as held to maturity are currently classified as available for sale.
The market valuation account, for the securities reclassified to available for
sale remaining in the portfolio at December 31, 1995, was adjusted by $2.7
million, representing a decrease in the recorded balance of such securities at
December 31, 1995 to their fair value on that date; the deferred tax asset of
$950,000 was recorded to reflect the tax effect of the market valuation account
adjustment; and the net decrease resulting from the reclassification at
December 31, 1995 of $1.8 million was reflected within a separate component of
stockholders' equity.
Proceeds from the sales of debt securities classified as available for sale
during 1994 were $261.1 million. Gross gains of $1.7 million and gross losses
of $3.5 million were realized on those sales. Proceeds from the sales of equity
securities classified as available for sale during 1994 were $8.4 million.
Gross gains of $2.1 million and gross losses of $96,000 were realized on those
sales.
Proceeds from the sales of debt securities classified as held to maturity
during 1994 were $10.3 million. Gross losses of $488,000 were realized on those
sales. There were no gains realized on those sales. These sales are allowable
under SFAS 115 as they related to investment securities acquired in connection
with the acquisition of First Federal and the sale was necessary in order to
maintain First Banks' existing interest rate risk position. Proceeds from the
sales of debt securities during 1993 were $16.1 million. Gross gains of
$246,000 and gross losses of $91,000 were realized on those sales. There were
no sales of equity securities during 1993.
Various subsidiaries of First Banks maintain investments in the Federal
Home Loan Bank (FHLB) or the Federal Reserve Bank (FRB). The investment in FHLB
stock is maintained at a minimum amount equal to the greater of 1% of the
aggregate outstanding balance of the applicable Subsidiary Banks' loans secured
by residential real estate, or 5% of advances from the FHLB to each Subsidiary
Bank. First Bank FSB, First Bank (Missouri), BTX, La Cumbre and St. Charles
Federal are members of the FHLB system. The investment in the FRB stock is
maintained at a minimum of 6% of the applicable Subsidiary Banks' capital stock
and capital surplus. First Bank (Missouri), BTX and Queen City are members of
the FRB system.
Investment securities with a carrying value of approximately $230.2 million
and $263.4 million at December 31, 1995 and 1994, respectively, were pledged in
connection with deposits of public and trust funds and for other purposes as
required by law.
(4) LOANS
Changes in the allowance for possible loan losses for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1........................................... $ 28,410 23,053 20,897
Acquired allowances for possible loan losses................. 24,655 5,026 2,079
-------- ------ ------
53,065 28,079 22,976
-------- ------ ------
Loans charged-off............................................ (15,620) (6,696) (9,531)
Recoveries of loans previously charged-off................... 4,859 5,169 5,152
-------- ------ ------
Net loans charged-off........................................ (10,761) (1,527) (4,379)
-------- ------ ------
Provision charged to operations.............................. 10,361 1,858 4,456
-------- ------ ------
Balance, December 31......................................... $ 52,665 28,410 23,053
======== ====== ======
</TABLE>
F-19
<PAGE> 112
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1995 and 1994, First Banks had $43.4 million and $15.9
million, respectively, of loans on a nonaccrual status. Interest on nonaccrual
loans, which would have been recorded under the original terms of the loans,
was $4.2 million and $1.7 million for the years ended December 31, 1995, and
1994, respectively. Of these amounts, $1.9 million and $982,000 was actually
recorded as interest income on such loans in 1995 and 1994, respectively. At
December 31, 1995, First Banks had impaired loans in the amount of $31.5
million, which is represented by certain loans on a nonaccrual status and
consumer installment loans 60 days or more past due. The impaired loans had no
specific reserves at December 31, 1995. The average recorded investment in
impaired loans since the adoption of SFAS 114 and SFAS 118 on January 1, 1995
was $34.3 million. The amount of interest income recognized using a cash basis
method of accounting during the time these loans were impaired was $1.2 million
in 1995.
First Banks' primary market areas are the states of Missouri, Illinois and
California. At December 31, 1995, approximately 92.9% of the total loan
portfolio, and 95.7% of the commercial, financial and agricultural loan
portfolio, were to borrowers within these regions. The diversity of the
region's economic base tends to provide a stable lending environment.
Real estate lending constituted the only other significant concentration of
credit risk. Real estate loans comprised approximately 73% of the consolidated
loan portfolio at December 31, 1995. Of the total real estate loans,
approximately 58% were consumer-related in the form of residential real estate
mortgages and home equity lines of credit.
First Banks is, in general, a secured lender. At December 31, 1995,
approximately 97% of the loan portfolio was secured. Collateral is required in
accordance with the normal credit evaluation process based upon the
creditworthiness of the customer and the credit risk associated with the
particular transaction.
(5) MORTGAGE BANKING ACTIVITIES
At December 31, 1995 and 1994, First Banks serviced loans for others
amounting to $856.6 million and $698.6 million, respectively. Servicing loans
generally consists of collecting mortgage loan payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure processing. In
connection with these loans serviced for others, First Banks held borrowers'
escrow balances of $4.5 million and $4.8 million at December 31, 1995 and 1994,
respectively.
Changes in the purchased mortgage servicing rights for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Balance, January 1.......................................... $ 5,755 4,095
Acquired purchased mortgage servicing rights................ 10,601 --
Purchases of mortgage servicing rights...................... 685 2,371
Sales of mortgage servicing rights.......................... (2,771) --
Amortization................................................ (2,148) (711)
------- -----
Balance, December 31........................................ $12,122 5,755
======= =====
</TABLE>
F-20
<PAGE> 113
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) BANK PREMISES AND EQUIPMENT
Bank premises and equipment were comprised of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Land........................................................ $12,393 9,621
Buildings and improvements.................................. 40,405 38,281
Furniture, fixtures and equipment........................... 37,211 24,348
Leasehold improvements...................................... 6,582 1,466
Construction in progress.................................... 985 545
------- ------
97,576 74,261
Less accumulated depreciation and amortization.............. 47,298 30,600
------- ------
Bank premises and equipment, net.................... $50,278 43,661
======= ======
</TABLE>
Total rent expense was $3.2 million, $1.1 million and $1.0 million for the
years ended December 31, 1995, 1994 and 1993, respectively.
(7) FEDERAL HOME LOAN BANK ADVANCES
Advances from the FHLB of Des Moines, Dallas and San Francisco at December
31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Advances under a $50,000,000 revolving variable rate line of
credit maturing July 19, 1995............................. $ -- 41,020
Adjustable-rate advances, maturing from October 1995 through
December 1996............................................. 44,220 85,727
Fixed-rate advances, maturing from June 1995 through May
1998...................................................... 5,663 19,612
------- -------
Total............................................... $49,883 146,359
======= =======
</TABLE>
All stock in the FHLB and first mortgage loans with principal balances
aggregating 150% of outstanding and available advances are pledged as
collateral to secure outstanding advances. In addition, FBA has collateralized
$5.7 million and $19.4 million of advances with U.S. government agency and
corporation securities which had an aggregate market value of $8.1 million and
$22.6 million at December 31, 1995 and 1994, respectively. The average rates
paid on advances outstanding during the years ended December 31, 1995, 1994 and
1993 were 6.3%, 5.6% and 3.6%, respectively.
(8) NOTES PAYABLE
Notes payable include a Revolving Line and Term Credit Agreement (Credit
Agreement), promissory notes payable to former shareholders of acquired
entities and convertible subordinated debentures.
First Banks' Credit Agreement, dated July 14, 1995, replaced the revolving
credit agreement outstanding at November 30, 1994. The Credit Agreement
provides a $50 million revolving loan commitment and a $40 million term loan.
Interest under the revolving loan commitment and the term loan is payable at
the lead bank's corporate base rate or, at the option of First Banks, is
payable at the London Interbank Offered Rate plus 1.50% and 1.25%,
respectively, and is paid monthly. Loans may be made under the revolving loan
commitment until July 12, 1996 at which date the principal and accrued interest
is due and payable. The term loan requires quarterly principal payments of $1.0
million and matures on July 31, 2000, at which date the remaining principal and
accrued interest is due and
F-21
<PAGE> 114
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
payable. Loans under the Credit Agreement are secured by all of the stock of
the Subsidiary Banks which is owned by First Banks.
The Credit Agreement requires maintenance of certain minimum capital ratios
for each financial institution subsidiary. In addition, it prohibits the
payment of dividends on First Banks' common stock. At December 31, 1995, First
Banks and the Subsidiary Banks were in compliance with all restrictions and
requirements in the Credit Agreement.
The promissory notes of $18.6 million and $2.1 million are payable to
former shareholders of River Valley and St. Charles Federal, respectively.
Interest under the promissory notes are payable under similar terms as the
Credit Agreement. The promissory note payable to a former shareholder of River
Valley matured on January 2, 1996 and was repaid through an advance under the
Credit Agreement. The promissory notes payable to the former shareholders of
St. Charles Federal are payable in equal installments of $1.1 million on
January 2, 1996 and 1997. The promissory notes are secured by letters of credit
issued under the Credit Agreement.
At December 31, 1995 and 1994, FBA had $1.1 million of 9% convertible
subordinated debentures due May 15, 1996. These debentures are guaranteed by
FBA and are convertible into common stock of FBA. Management does not expect
these debentures to be converted into common stock of FBA because the exercise
price is substantially in excess of current market prices.
The average balance and maximum month-end balance of the notes payable
outstanding for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Average balance............................................. $80,647 15,518
Maximum month-end balance................................... 89,811 46,760
======= ======
</TABLE>
The average rates paid on notes payable outstanding during the years ended
December 31, 1995, 1994 and 1993 were 7.22%, 7.17% and 6.00%, respectively.
(9) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Certain Subsidiary Banks sell securities under agreements to repurchase.
The securities underlying the agreements are book entry securities and were
delivered, by appropriate entry, to an unaffiliated bank. These borrowings were
collateralized by investment securities in the available-for-sale portfolio,
consisting of U.S. Treasury securities, U.S. government agencies and
corporations and interest-bearing deposits with the FHLB of Des Moines and
Dallas which had an aggregate market value of $29.3 million and $117.1 million
at December 31, 1995 and 1994, respectively. The average balance and maximum
month-end balance of securities sold under agreements to repurchase for the
years ended December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Average balance outstanding................................. $42,530 28,237
Maximum month-end balance outstanding....................... 88,337 72,795
======= ======
</TABLE>
(10) INCOME TAXES
SFAS 109 requires a change from the deferred method of accounting for
income taxes under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax
F-22
<PAGE> 115
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
First Banks, Inc. adopted SFAS 109 effective January 1, 1993. The
cumulative effect of this change in accounting for income taxes was $766,000 as
of January 1, 1993. Prior years' consolidated financial statements have not
been restated to apply the provisions of SFAS 109.
Income tax expense (benefit) attributable to income from continuing
operations for the years ended December 31 consists of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Current income taxes:
Federal................................................... $ 2,638 11,978 10,037
State..................................................... 870 906 24
------- ------ ------
3,508 12,884 10,061
------- ------ ------
Deferred income tax expense (benefit):
Federal................................................... 7,624 (872) 1,531
State..................................................... (94) -- --
------- ------ ------
7,530 (872) 1,531
------- ------ ------
Total................................................. $11,038 12,012 11,592
======= ====== ======
</TABLE>
The federal income tax rates and amounts are reconciled with the effective
income tax rates and amounts as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income before provision for income taxes, minority interest in loss
of subsidiaries and cumulative effect of change in accounting
principle......................................................... $34,156 $35,807 $34,020
======= ======= =======
Taxes on income calculated at statutory rates....................... 11,955 35.0% 12,532 35.0% 11,899 35.0%
Effects of differences in tax reporting:
Tax-exempt interest income...................................... (817) (2.4) (795) (2.2) (628) (1.8)
Tax preference adjustment of interest income.................... 99 .3 78 .2 56 .1
Amortization of excess cost..................................... 645 1.8 152 .4 47 .1
State income taxes.............................................. 504 1.5 589 1.6 24 .1
Change in deferred valuation allowance.......................... (960) (2.8) -- -- -- --
Other, net...................................................... (388) (1.1) (544) (1.5) 196 .6
------- ----- ------- ----- ------- -----
Provision for income taxes.................................. $11,038 32.3% $12,012 33.5% $11,594 34.1%
======= ===== ======= ===== ======= =====
</TABLE>
F-23
<PAGE> 116
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities for periods
after the adoption of SFAS 109 are below. The net deferred tax assets reflect
amounts attributable to entities acquired in purchase transactions.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1995 1994
---- ----
(DOLLARS EXPRESSED
IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for possible loan losses............................................................. $21,642 9,571
Other real estate.............................................................................. 2,736 1,984
Alternative minimum tax credits................................................................ 1,754 60
Book losses on investment securities currently not allowable for tax purposes.................. -- 920
Net fair value adjustment for securities available for sale.................................... 329 --
Net operating loss carryforwards............................................................... 36,145 9,270
Other.......................................................................................... 3,081 2,058
------- ------
Total gross deferred tax assets............................................................ 65,687 23,863
Less valuation allowance....................................................................... (24,111) (2,731)
------- ------
Gross deferred tax assets, net of valuation allowance...................................... 41,576 21,132
------- ------
Deferred tax liabilities:
Depreciation on bank premises and equipment.................................................... 2,467 2,737
FHLB stock dividends........................................................................... 997 835
Mortgage loan hedging loss..................................................................... -- 236
Purchase accounting adjustments................................................................ -- 869
State taxes.................................................................................... 1,660 --
Net fair value adjustment for securities available for sale.................................... -- 483
Book losses on investment securities currently not allowable for tax purposes.................. 266 --
Other.......................................................................................... 1,393 877
------- ------
Total gross deferred tax liabilities....................................................... 6,517 6,037
------- ------
Net deferred tax assets.................................................................... $35,059 15,095
======= ======
</TABLE>
At December 31, 1995 and 1994, the accumulation of prior years' earnings
representing tax bad debt deductions of First Bank FSB, St. Charles Federal and
La Cumbre were approximately $31.4 million and $20.1 million, respectively. If
these tax bad debt reserves were charged for losses other than bad debt losses,
First Bank FSB, St. Charles Federal and La Cumbre would be required to
recognize taxable income in the amount of the charge. It is not contemplated
that such tax-restricted retained earnings will be used in a manner which will
create federal income tax liabilities. A deferred tax liability has been
recorded for approximately $4.0 million and $3.5 million of the accumulation at
December 31, 1995 and 1994, respectively which represents that portion of the
tax bad debt deductions which may require future tax recapture.
At December 31, 1995, First Banks has separate limitation year (SRLY) net
operating loss (NOL) carryforwards of $70.6 million. These SRLY carryforwards
were incurred by institutions acquired between 1992 and 1995 and their
utilization is subject to annual limitations. In addition, these institutions
have alternative minimum tax credits of $1.8 million which are also subject to
annual limitations.
F-24
<PAGE> 117
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1995, for federal income taxes purposes, First Banks had
NOL carryforwards of approximately $70.6 million, exclusive of the NOL
carryforwards available to FBA as further described below. The NOL
carryforwards for First Banks expire as follows:
<TABLE>
<CAPTION>
(DOLLARS EXPRESSED
IN THOUSANDS)
<S> <C>
Year ending December 31:
1998........................................................................... $ 156
2000........................................................................... 4,903
2001........................................................................... 363
2002........................................................................... 5,582
2003-2009...................................................................... 59,563
-------
$70,567
=======
</TABLE>
With the completion of the 1994 acquisition of 65.05% of FBA, the NOL
carryforwards generated prior to the transaction were subject to an annual
limitation under Internal Revenue Code (IRC) Section 382 for all subsequent tax
years. The following schedule reflects the NOL carryforwards that will be
available, after consideration of IRC Section 382 limitations, to offset future
taxable income. These NOLs are only available on the consolidated federal
income tax return of FBA and do not affect the taxable income of First Banks.
At December 31, 1995, for federal income tax purposes, FBA had NOL
carryforwards of approximately $32.7 million. The NOL carryforwards expire as
follows:
<TABLE>
<CAPTION>
(DOLLARS EXPRESSED
IN THOUSANDS)
<S> <C>
Year ending December 31:
1996........................................................................... $ 858
1998........................................................................... 4,140
1999........................................................................... 2,241
2000........................................................................... 103
2001-2010...................................................................... 25,363
=======
$32,705
=======
</TABLE>
The remaining net deferred tax assets of FBA were reevaluated to determine
whether it is more likely than not that the deferred tax assets will be
recognized in the future. Taking all positive and negative criteria into
consideration, it was determined that the valuation allowance established for
FBA should remain at $2.7 million. Subsequently recognized tax benefits
relating to a decrease in the valuation allowance from the balance at December
31, 1994 will be credited directly to intangibles associated with the purchase
of FBA.
The realization of First Banks' net deferred tax assets is based on the
availability of carrybacks to prior taxable periods, the anticipation of future
taxable income in certain periods and the utilization of tax planning
strategies. Management has determined that it is more likely than not that the
net deferred tax assets relating to entities owned prior to 1995 can be
supported by carrybacks to federal taxable income in the three-year federal
carryback period and by expected future taxable income which will exceed
amounts necessary to fully realize remaining deferred tax assets resulting from
NOL carryforwards and the scheduling of temporary differences. However, it has
been determined that the net deferred tax assets of certain entities acquired
in 1995 should not be fully valued until they can provide an earnings history
sufficient to support their respective net deferred tax asset. A valuation
reserve was determined using the same criteria as used for other First Bank
entities. This valuation reserve is shown as an addition to the valuation
allowance in the following schedule.
F-25
<PAGE> 118
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Changes to the deferred tax assets valuation allowance are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year.................................... $ 2,731 --
Current year deferred provision, change in deferred tax
valuation allowance......................................... (960) --
Purchase acquisitions......................................... 22,340 2,731
------- -----
Balance, end of year.......................................... $24,111 2,731
======= =====
</TABLE>
(11) INTEREST RATE RISK MANAGEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK
First Banks manages its interest rate risk by: (1) maintaining an Asset
Liability Committee (ALCO) responsible to First Banks' Board of Directors to
review the overall interest rate risk management activity and approve actions
taken to reduce risk; (2) maintaining an effective monitoring mechanism to
determine First Banks' exposure to changes in interest rates; (3) coordinating
the lending, investing and deposit-generating functions to control the
assumption of interest rate risk; and (4) employing various off-balance-sheet
financial instruments to offset inherent interest rate risk when it becomes
excessive. The objective of these procedures is to limit the adverse impact
which changes in interest rates may have on net interest income.
The ALCO has overall responsibility for the effective management of
interest rate risk and the approval of policy guidelines. The ALCO includes the
Chairman and Chief Executive Officer, the senior executives of investments,
credit administration, retail banking and finance, and certain other officers.
The ALCO is supported by the Asset Liability Management Group which monitors
interest rate risk, prepares analyses for review by the ALCO and implements
actions which are either specifically directed by the ALCO or established by
policy guidelines. To measure the effect of interest rate changes, First Banks
recalculates its net income over a one-year horizon on a pro forma basis
assuming instantaneous, permanent parallel and nonparallel shifts in the yield
curve, in varying amounts both upward and downward.
During 1994, First Banks expanded its use of off-balance-sheet derivative
financial instruments to assist in the management of interest rate sensitivity.
These off-balance-sheet derivative financial instruments are utilized to modify
the repricing, maturity and option characteristics of on-balance-sheet assets
and liabilities. As more fully described in Note 1 to the accompanying
consolidated financial statements, First Banks holds a combination of off-
balance-sheet derivative financial instruments, generally limited to interest
rate swap agreements, interest rate cap and floor agreements, interest rate
futures contracts, options on interest rate futures contracts and forward
contracts to sell mortgage-backed securities. The use of such derivative
financial instruments is strictly limited to reducing the interest rate
exposure of First Banks.
F-26
<PAGE> 119
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Derivative financial instruments held by First Banks for purposes of
managing interest rate risk are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1995 1994
---------------------- -----------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest rate futures contracts............ $ -- -- 3,587,000 --
Interest rate swap agreements.............. 145,000 -- 265,000 2,441
Interest rate floor agreements............. 105,000 608 -- --
Interest rate cap agreements............... 30,000 292 10,000 577
Forward commitments to sell mortgage-backed
securities............................... 42,000 -- 24,000 --
</TABLE>
The notional amounts of derivative financial instruments do not represent
amounts exchanged by the parties and, therefore, are not a measure of First
Banks' credit exposure through its use of derivative financial instruments. The
amounts exchanged are determined by reference to the notional amounts and the
other terms of the derivatives.
First Banks sold interest rate futures contracts and purchased options on
interest rate futures contracts to hedge the interest rate risk of its
available-for-sale securities portfolio. Interest rate futures contracts are
commitments to either purchase or sell designated financial instruments at a
future date for a specified price and may be settled in cash or through
delivery of such financial instruments. Options on interest rate futures
contracts confer the right to purchase or sell financial futures contracts at a
specified price and are settled in cash. The unamortized balance of net
deferred losses on interest rate futures contracts of $4.6 million at December
31, 1995 and net deferred gains on interest rate futures contracts of $6.5
million at December 31, 1994, respectively, were applied to the carrying value
of the available-for-sale securities portfolio as part of the mark-to-market
valuation.
F-27
<PAGE> 120
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Interest rate swap agreements are utilized to extend the repricing
characteristics of certain interest-bearing liabilities to correspond more
closely with the assets of First Banks, with the objective of stabilizing net
interest income over time. The net interest expense for these agreements was
$6.6 million and $490,000 for the years ended December 31, 1995 and 1994,
respectively. The maturity dates, notional amounts, interest rates paid and
received, and fair values of interest rate swap agreements outstanding as of
the dates indicated are summarized as follows:
<TABLE>
<CAPTION>
NOTIONAL INTEREST RATE FAIR VALUE-
AMOUNT PAID RECEIVED GAIN (LOSS)
-------- ---- ------------- -----------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995:
September 30, 1997..................................................... $ 35,000 7.04% 5.69% $ (932)
December 8, 1997....................................................... 15,000 7.90 5.81 (711)
September 30, 1999..................................................... 35,000 7.32 5.69 (2,073)
September 30, 2001..................................................... 35,000 7.65 5.69 (3,207)
January 30, 2005....................................................... 25,000 8.13 5.94 (3,703)
-------- --------
$145,000 7.53 5.74 $(10,626)
======== ==== ==== ========
December 31, 1994:
December 8, 1996....................................................... $100,000 7.79% 6.38% $ 8
December 8, 1997....................................................... 65,000 7.90 6.38 309
October 21, 1997....................................................... 50,000 7.20 5.56 1,086
October 21, 1999....................................................... 30,000 7.56 5.56 667
October 21, 2001....................................................... 20,000 7.77 5.56 371
-------- --------
$265,000 7.68 6.07 $ 2,441
======== ==== ==== ========
</TABLE>
In connection with the sale of certain residential mortgage loans and
repayment of certain borrowings, on May 25, 1995, First Banks terminated a $100
million interest rate swap agreement resulting in a loss of $3.3 million. The
loss on the termination of the $100 million interest rate swap agreement has
been reflected in the consolidated statements of income for the year ended
December 31, 1995.
In addition, First Banks experienced a shortening of the expected life of
its loan portfolio. This shortening resulted from the significant decline in
interest rates during 1995, which caused an increase in the projections of
principal prepayments of residential mortgage loans. These increased prepayment
projections disproportionately shortened the expected life of the loan
portfolio in comparison to the effective maturity created with the interest
rate swap agreements. As a result, during July 1995, First Banks shortened the
maturity of its interest-bearing liabilities through the termination of $225
million of interest rate swap agreements resulting in a loss of $13.5 million.
This loss has been deferred and is being amortized over the remaining lives of
the agreements, unless the underlying liabilities are repaid. The unamortized
balance of this loss was $11.6 million at December 31, 1995 and was included in
other assets.
First Banks also has interest rate cap and floor agreements to limit the
interest expense associated with certain of its interest-bearing liabilities
and the net interest expense of certain interest rate swap agreements,
respectively. At December 31, 1995 and 1994, the unamortized costs for these
agreements were $685,000 and $577,000, respectively, and were included in other
assets. There are no amounts receivable under these agreements.
Derivative financial instruments issued by First Banks consist of
commitments to originate fixed-rate loans. Commitments to originate fixed-rate
loans consist primarily of residential real estate loans. These loan
commitments, net of estimated underwriting fallout, and loans held for sale
were $42.4 million and $25.0 million at December 31, 1995 and 1994,
respectively. These net loan commitments and loans held for sale are hedged
with forward contracts to sell mortgage-backed securities. Forward contracts
are transactions in which First Banks has agreed to sell mortgage-
F-28
<PAGE> 121
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
backed securities at a specified future date. Prior to the settlement date,
First Banks closes the hedge by entering into an offsetting transaction with
the same settlement date. Gains and losses from forward contracts are deferred
and included in the cost basis of loans held for sale. At December 31, 1995 and
1994, the net unamortized losses were $737,000 and $925,000, respectively,
which were applied to the carrying value of the loans held for sale as part of
the lower of cost or market valuation.
(12) CREDIT COMMITMENTS
First Banks is party to commitments to extend credit and commercial and
standby letters of credit in the normal course of business to meet the
financing needs of its customers. These commitments involve, in varying
degrees, elements of interest rate risk and credit risk in excess of the amount
recognized in the consolidated balance sheets.
The interest rate risk associated with these credit commitments relates
primarily to the commitments to originate residential fixed-rate loans. As more
fully discussed in Note 11 to the accompanying consolidated financial
statements, the interest rate risk of the commitments to originate fixed-rate
loans has been hedged with forward contracts to sell mortgage-backed
securities.
The credit risk amounts are equal to the contractual amounts, assuming that
the amounts are fully advanced and that, in accordance with the requirements of
SFAS 105, collateral or other security is of no value. First Banks uses the
same credit policies in granting commitments and conditional obligations as it
does for on-balance-sheet loans.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit........................................... $578,750 422,982
Commercial and standby letters of credit............................... 29,468 13,380
-------- -------
$608,218 436,362
======== =======
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since certain of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
First Banks evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained if deemed necessary by First Banks
upon extension of credit is based on management's credit evaluation of the
counterparty. Collateral held varies, but is generally residential or
income-producing commercial property.
Commercial and standby letters of credit are conditional commitments issued
by First Banks to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. First Banks holds real property as collateral supporting those
commitments for which collateral is deemed necessary.
(13) FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments are management's estimate of the
values at which the instruments could be exchanged in a transaction between
willing parties. These estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In addition, other
significant assets are not considered financial assets including the mortgage
banking operation, deferred tax assets, premises and equipment and goodwill.
Further, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on the fair value estimates and
have not been considered in any of the estimates.
F-29
<PAGE> 122
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated fair values of First Banks' financial instruments at December
31 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- --------- ----------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents............................... $ 199,213 199,213 131,296 131,296
Investment securities:
Available for sale.................................. 471,791 471,791 355,958 355,958
Held to maturity.................................... 36,532 37,021 231,920 217,658
Net loans............................................... 2,691,554 2,749,133 2,045,160 2,028,274
Accrued interest receivable............................. 22,027 22,027 16,741 16,741
========== ========= ========= =========
Financial liabilities:
Deposits:
Demand:
Non-interest-bearing............................ $ 389,658 389,658 290,039 290,039
Interest-bearing................................ 307,584 307,584 268,212 268,212
Savings and money market........................ 690,902 690,902 538,027 538,027
Time deposits....................................... 1,795,547 1,804,347 1,236,866 1,227,015
Borrowings.............................................. 159,676 159,676 289,687 289,687
Accrued interest payable................................ 10,726 10,726 7,606 7,606
========== ========= ========= =========
Off-balance-sheet:
Interest rate futures contracts......................... $ -- -- 6,533 6,533
Interest rate swap, cap and floor agreements............ 14,509 (9,726) 577 3,018
Forward contracts to sell mortgage-backed securities.... (234) (234) (81) (81)
Credit commitments -- -- -- --
========== ========= ========= =========
</TABLE>
The following methods and assumptions were used in estimating fair values
of financial instruments.
FINANCIAL ASSETS:
Cash and cash equivalents and accrued interest receivable: The carrying
values reported in the consolidated balance sheets approximate fair value.
Investment securities: Fair value for securities available for sale are the
amounts reported in the consolidated balance sheets, and securities held to
maturity are based on quoted market prices where available. If quoted market
prices are not available, fair values are based upon quoted market prices of
comparable instruments.
Net loans: The fair values for most loans held for investment are estimated
utilizing discounted cash flow calculations that apply interest rates currently
being offered for similar loans to borrowers with similar risk profiles. The
fair values of loans held for sale, which are the amounts on the consolidated
balance sheets, are based on quoted market prices where available. If quoted
market prices are not available, fair values are based upon quoted market
prices of comparable instruments. The carrying value for loans is net of the
allowance for possible loan losses and unearned discount.
F-30
<PAGE> 123
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FINANCIAL LIABILITIES:
Deposits: The fair value disclosed for deposits generally payable on demand
(i.e., non-interest-bearing and interest-bearing demand, savings and money
market accounts) is considered equal to their respective carrying amounts as
reported in the consolidated balance sheets. The fair value disclosed for
demand deposits does not include the benefit that results from the low-cost
funding provided by deposit liabilities compared to the cost of borrowing funds
in the market. Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on similar certificates to a schedule of aggregated monthly maturities
of time deposits.
Borrowings and accrued interest payable: The carrying values reported in
the consolidated balance sheets approximate fair value.
OFF-BALANCE SHEET:
Interest rate futures contracts: The fair values for interest rate futures
contracts are based upon quoted market prices. The fair value of these
contracts has been reflected in the consolidated balance sheets in the carrying
value of the securities available-for-sale portfolio as part of the
mark-to-market valuation.
Interest Rate Swap, Cap and Floor Agreements: The fair values of interest
rate swap, cap and floor agreements are estimated by comparing the contractual
rates First Banks is paying to market rates quoted on new agreements with
similar creditworthiness.
Forward contracts to sell mortgage-backed securities: The fair values for
forward contracts to sell mortgage-backed securities are based upon quoted
market prices. The fair value of these contracts has been reflected in the
consolidated balance sheets in the carrying value of the loans held for sale
portfolio as part of the lower of cost or market valuation.
Credit commitments: The majority of the commitments to extend credit and
commercial and standby letters of credit contain variable interest rates and
credit deterioration clauses and, therefore, the carrying value of these credit
commitments approximates fair value.
(14) EMPLOYEE BENEFITS
First Banks and all of its subsidiaries had participated in a
noncontributory defined contribution pension plan covering substantially all
employees who met minimum age and service requirements. The annual
contributions to the plan were equal to 3.5% of each participant's covered
compensation under 50% of the Social Security taxable wage base and 7% of
covered compensation in excess of that amount. This pension plan was terminated
as of December 31, 1993 and the vested benefits were distributed during the
first quarter of 1994 to the participants of the plan or directly rolled over
into First Banks' new profit-sharing plan which was effective April 1, 1994.
Maximum covered compensation under the plan was $200,000 as indexed for
inflation by the Secretary of the Treasury. The trustee of the plan was the
trust department of one of the Subsidiary Banks. Total pension expense was
$725,000 for the year ended December 31, 1993.
First Banks' new profit-sharing plan is a self-administered savings and
incentive plan, which qualifies under Section 401(k) of the IRC, covering
substantially all employees. Under the plan, employer matching contributions
are determined annually by First Banks' Board of Directors. Employee
contributions are limited to 15% of an employee's compensation, not to exceed
$9,500 for 1995. Total employer contributions under the plan were $448,000 and
$477,000 for the years ended December 31, 1995 and 1994, respectively.
Postretirement benefits other than pensions and postemployment benefits are
generally not provided for First Banks' employees.
F-31
<PAGE> 124
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) PREFERRED STOCK
First Banks has three classes of preferred stock outstanding.
On September 15, 1992, First Banks issued and sold, pursuant to an
effective registration statement under the Securities Act of 1933, 2,200,000
shares of Class C 9% cumulative increasing rate, redeemable, preferred stock.
Class C preferred stock ranks senior to both the Class A preferred stock and
the Class B preferred stock in terms of dividend and liquidation rights.
Holders of the Class C preferred stock do not have any voting rights except in
limited circum-stances or as expressly required by law. The holders of the
Class A and Class B preferred stock have full voting rights.
Dividends on the Class A and Class B preferred stock are adjustable
quarterly based on the highest of the Treasury Bill Rate or the Ten Year
Constant Maturity Rate for the two-week period immediately preceding the
beginning of the quarter. This rate shall not be less than 6% nor more than 12%
on Class A preferred stock, or less than 7% nor more than 15% on Class B
preferred stock. Dividends on the Class C preferred stock are 9% through
November 30, 1997. On December 1, 1997, the annual dividend rate increases to
9.75%.
Class A preferred stock is convertible into shares of common stock at a
rate based on the ratio of the par value of the preferred stock to the current
market value of the common stock at the date of conversion, to be determined by
independent appraisal at the time of conversion. Shares of Class A preferred
stock may be redeemed by First Banks at any time at 105% of par value. On April
26, 1993, 100,000 shares of Class A preferred stock was converted into 516.83
shares of First Banks common stock. The conversion of the Class A preferred
stock into common stock had an insignificant effect on earnings per share and,
thus, supplemental information has not been provided. Class B preferred stock
may not be redeemed or converted. Class C preferred stock may not be converted,
but may be redeemed at stated value after December 1, 1997. Redemption of any
issue of preferred stock requires the prior approval of the Federal Reserve
Board.
The annual dividend rates were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Class C preferred stock............................................... 9.0% 9.0% 9.0%
Class A preferred stock............................................... 6.0 6.0 6.0
Class B preferred stock............................................... 7.0 7.0 7.0
</TABLE>
(16) TRANSACTIONS WITH RELATED PARTIES
Outside of normal customer relationships, no directors or officers of First
Banks, no stock-holders holding over 5% of First Banks' voting securities and
no corporations or firms with which such persons or entities are associated
currently maintain or have maintained, since the beginning of the last full
fiscal year, any significant business or personal relationship with First Banks
or its subsidiaries, other than such as arises by virtue of such position or
ownership interest in First Banks or its subsidiaries, except as described in
the following paragraphs.
During 1995, 1994 and 1993, Tidal Insurance Limited (Tidal), a corporation
owned indirectly by First Banks' Chairman and his children, received
approximately $192,000, $233,000 and $126,000, respectively, in insurance
premiums for accident and health insurance policies purchased by loan customers
of First Banks. The insurance policies are issued by an unaffiliated company
and then ceded to Tidal. First Banks believes the premiums paid by the loan
customers of First Banks are comparable to those that such loan customers would
have paid if the premiums were subsequently being ceded to an unaffiliated
third-party insurer. In addition, for the years ended December 31, 1995, 1994
and 1993, First Securities America, Inc., doing business as First Banc
Insurors, received approximately $196,000, $195,000 and $256,000, respectively,
in commissions or insurance premiums for mortgage, forced hazard and collateral
protection insurance paid by customers of the Subsidiary Banks to the
unaffiliated, third-party insurors to which First Banc Insurors placed such
policies. In addition, First Banc Insurors received approximately $999,000,
$635,000 and $1,067,000 for each of the three years ended December 31, 1995,
1994 and 1993, respectively, in
F-32
<PAGE> 125
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
commissions in connection with the purchase and/or sale of annuities and
securities by certain customers of the Subsidiary Banks. Commissions received
by First Banc Insurors in connection with the purchase and/or sale of such
annuities and securities were paid by an unaffiliated, third-party company.
First Securities America, Inc. is owned by a trust established and administered
by and for the benefit of First Banks' Chairman and members of his immediate
family. The insurance premiums on which the aforementioned commissions were
earned were competitively bid and First Banks deems the commissions First Banc
Insurors earned to be comparable to those which would have been earned by an
unaffiliated third-party agent.
Through a facilities management agreement with FirstServ, Inc., First
Services, L.P. provides data processing services and operational support for
First Banks and its subsidiaries. First Services, L.P. is a limited partnership
indirectly owned by First Banks' Chairman and his children through its General
Partners and Limited Partners. FirstServ, Inc. paid $2.9 million, $2.5 million
and $2.3 million in fees to First Services, L.P. under the terms of the
facilities management agreement for the years ended December 31, 1995, 1994 and
1993, respectively.
(17) CAPITAL STOCK OF SUBSIDIARIES
FIRST BANKS AMERICA, INC.
First Banks owns all of the Class B Common Stock (Class B common) of FBA
representing 65.41% of all classes of outstanding voting stock at December 31,
1995. FBA Common Stock (Class A common), which is publicly traded on the New
York Stock Exchange, is the only other class of voting stock.
During 1995 and 1994, options were exercised to purchase 30,633 and 35,567
shares of Class A common at an exercise price of $3.75 per share. Offsetting
the decrease in First Banks' ownership interest in FBA are repurchases of FBA's
Class A common. For the year ended December 31, 1995, FBA repurchased 79,603
shares of Class A common. As a result of these transactions, First Banks'
ownership interest changed from 65.05% as of August 31, 1994 to 65.41% and
64.60% at December 31, 1995 and 1994, respectively. The exercising of the
options and repurchasing of Class A common resulted in a reduction of First
Banks' capital surplus of $172,000 and $125,000 for the years ended December
31, 1995 and 1994, respectively.
The Stock Purchase and Operating Agreement (FBA Agreement) between First
Banks and FBA provides for certain limitations on the capital structure of FBA.
The FBA Agreement provides that, after August 31, 1999, each share of Class B
common will be convertible into one share of Class A common. The Class B common
will not be registered with the Securities and Exchange Commission or listed
for trading on the New York Stock Exchange until at least August 31, 1999.
Thereafter, First Banks will have the right to require FBA to register with the
Securities and Exchange Commission all or a portion of the shares of Class A
common received upon conversion of First Banks' Class B common. First Banks, as
the owner of the Class B common, has certain antidilutive rights for 7 1/2
years after the date of transaction which would enable First Banks to maintain
an ownership interest of at least 55% in the event FBA issues additional shares
of Class A common. The Class B common may not be transferred by First Banks
without the prior approval of FBA, except in certain limited instances. In
addition, the Class B common has dividend rights which are inferior to those of
the Class A common, in the event FBA commences the payment of dividends in the
future.
FBA has a stock option plan under which options were granted to certain
directors and senior officers to purchase shares of Class A Common. At December
31, 1995 and 1994, FBA had options outstanding to purchase up to 67,500 and
98,133, respectively, shares of Class A common at an exercise price of $3.75.
In connection with a previous corporate restructuring, FBA issued warrants
for the purchase of additional Class A common. At December 31, 1995 and 1994,
FBA had warrants outstanding to purchase 196,999 shares of Class A common. The
exercise prices with respect to these warrants are $.75 for 131,336 shares and
$81.15 for 65,663 shares. Management believes the latter warrants have little,
if any, fair market value.
F-33
<PAGE> 126
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The market value of FBA's Class A common was approximately $12.25 per share
at December 31, 1995. If the options to acquire 67,500 shares and the warrants
to acquire 131,336 shares of Class A common were exercised, First Banks'
ownership interest in FBA would be reduced from 65.41% to 62.17%.
FIRST COMMERCIAL BANCORP, INC.
First Banks owns 93.29% of all outstanding voting stock of FCB at December
31, 1995. FCB Common is traded on the NASDAQ Small Cap Market System.
First Banks also purchased $6.5 million of debentures (FCB Debentures)
secured by all of the outstanding stock of First Commercial. The FCB Debentures
bear interest at 12% per year and mature five years after issuance. The FCB
Debentures, including any accrued but unpaid interest thereon, will be
converted at maturity into FCB Common at $.10 per share. However, at the
election of First Banks, the FCB Debentures may be converted into FCB Common at
the same rate at any time after issuance.
FCB is in process of offering up to $5.0 million of FCB Common (Rights
Offering) to current shareholders of FCB at $0.10 per share. If the Rights
Offering is completed and fully subscribed, First Banks' ownership of FCB will
be reduced to approximately 50.25%, excluding the effect of conversion of the
FCB Debenture. If the FCB Debentures and the accrued interest thereon had been
converted by First Banks following the Rights Offering, its ownership would be
approximately 66.95%.
In addition, eligible shareholders of FCB Common have the right to receive
additional stock or cash based on certain future events. At June 30, 1996, FCB
will issue additional shares of FCB Common or cash if the adjusted
stockholders' equity per share exceeds $.10 per share. For this purpose,
stockholders' equity is adjusted to the extent the allowance for possible loan
losses at June 30, 1995 is determined to exceed the amount derived from a
specified formula applied to the remaining loan portfolio and reduced by an
imputed interest factor applied to the capital provided by First Banks and the
subscribers to the Rights Offering. Thereafter, through October 31, 1998,
present stockholders may receive additional shares of FCB Common or cash based
on recoveries received from a pool of specified charged-off loans. First Banks
does not believe that the issuance of additional FCB Common or cash based on
the occurrence of these certain events, if any, will have a significant impact
on the financial condition or results of operations of First Banks.
(18) DISTRIBUTION OF EARNINGS OF SUBSIDIARIES
The Subsidiary Banks are restricted by various state and federal
regulations, as well as by the terms of the Credit Agreement described in Note
8, in the amount of dividends which is available for payment of dividends to
First Banks, Inc. Under the most restrictive of these requirements, the future
payment of dividends from subsidiary financial institutions is limited to
approximately $45.3 million, unless prior permission of the regulatory
authorities or the lending banks is obtained.
F-34
<PAGE> 127
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(19) PARENT COMPANY ONLY FINANCIAL INFORMATION
Following are condensed balance sheets of First Banks (parent company only)
as of December 31, 1995 and 1994, and condensed statements of income and cash
flows for the years ended December 31, 1995, 1994 and 1993:
<TABLE>
CONDENSED BALANCE SHEETS
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash deposited in subsidiary banks.............................................. $ 1,331 7,974
Investment in subsidiaries, at equity........................................... 289,211 236,328
Investment securities........................................................... 17,544 18,370
Other assets.................................................................... 19,943 4,591
-------- -------
Total assets............................................................ $328,029 267,263
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable................................................................... 88,135 46,203
Accrued expenses and other liabilities.......................................... 5,289 3,748
-------- -------
Total liabilities....................................................... 93,424 49,951
Stockholders' equity............................................................ 234,605 217,312
-------- -------
Total liabilities and stockholders' equity.............................. $328,029 267,263
======== =======
</TABLE>
<TABLE>
CONDENSED STATEMENTS OF INCOME
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Income:
Dividends from subsidiaries................................................. $ 57,901 42,500 14,047
Management fees from subsidiaries........................................... 5,108 4,304 4,081
Other income................................................................ 2,015 2,410 854
-------- ------- ------
Total income............................................................ 65,024 49,214 18,982
-------- ------- ------
Expenses:
Interest expense............................................................ 5,861 1,034 169
Salaries and employee benefits.............................................. 4,597 4,723 3,735
Legal and professional fees................................................. 2,426 1,892 994
Other expenses.............................................................. 3,035 2,391 1,931
-------- ------- ------
Total expenses.......................................................... 15,919 10,040 6,829
-------- ------- ------
Income before income tax benefit, equity in undistributed earnings
(loss) of subsidiaries and cumulative effect of change in accounting
principle............................................................. 49,105 39,174 12,153
Income tax benefit.............................................................. (2,007) (1,162) (631)
-------- ------- ------
Income before equity in undistributed earnings (loss) of subsidiaries
and cumulative effect of change in accounting principle............... 51,112 40,336 12,784
Equity in undistributed earnings (loss) of subsidiaries, net of dividends
paid.......................................................................... (26,641) (16,304) 9,644
Income before cumulative effect of change in accounting principle....... 24,471 24,032 22,428
Cumulative effect of change in accounting principle............................. -- -- 766
-------- ------- ------
Net income.............................................................. $ 24,471 24,032 23,194
======== ======= ======
</TABLE>
F-35
<PAGE> 128
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Income before cumulative effect of change in accounting principle........... $ 24,471 24,032 22,428
Adjustments to reconcile net income to net cash provided by operating
activities:
Net income of subsidiaries.............................................. (30,973) (24,931) (23,691)
Dividends from subsidiaries............................................. 57,901 42,500 14,047
Other, net.............................................................. 58 (511) 1,931
-------- ------- -------
Net cash provided by operating activities........................... 51,457 41,090 14,715
-------- ------- -------
Cash flows from investing activities:
(Increase) decrease in investment securities................................ 2,420 (2,017) 31,988
Acquisitions of subsidiaries................................................ (49,996) (72,624) --
Capital contributions to subsidiaries....................................... (44,329) (14,656) (2,528)
Return of subsidiary capital................................................ 12,149 -- --
(Decrease) increase in advances to subsidiaries............................. (13,529) -- 1,600
Other, net.................................................................. (1,011) (125) --
-------- ------- -------
Net cash provided by (used in) investing activities................. (94,296) (89,422) 31,060
-------- ------- -------
Cash flows from financing activities:
Increase (decrease) in notes payable........................................ 41,932 46,203 (30,000)
Payment of preferred stock dividends........................................ (5,736) (5,735) (5,766)
-------- ------- -------
Net cash provided by (used in) financing activities................. 36,196 40,468 (35,766)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents................ (6,643) (7,864) 10,009
Cash and cash equivalents, beginning of year.................................... 7,974 15,838 5,829
-------- ------- -------
Cash and cash equivalents, end of year.......................................... $ 1,331 7,974 15,838
======== ======= =======
</TABLE>
(20) CONTINGENT LIABILITIES
In the ordinary course of business, there are various legal proceedings
pending against First Banks. Management, after consultation with legal counsel,
is of the opinion that the ultimate resolution of these proceedings will have
not material effect on the consolidated financial position or results of
operations of First Banks.
(21) EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
AUDITORS
In accordance with the provisions of the FCB Agreement described in Note 2
to the consolidated financial statements, on May 18, 1996, FCB completed an
offering of a maximum of $5.0 million of newly-issued common stock at $.10 per
share to its shareholders, other than First Banks, and to individuals who were
not shareholders of FCB. In June 1996, FCB concluded a concurrent offering to
exchange shares of its common stock for certain outstanding dividend
obligations and accrued interest thereon of FCB. As a result of these
offerings, FCB issued 29.7 million additional shares of common stock for $2.97
million and exchanged 6.4 million shares of its common stock for its obligation
to pay $643,000 of dividends and accrued interest. This newly-issued stock
reduced the ownership of First Banks in FCB to 61.46%, excluding the effect of
the potential conversion of the debentures held by First Banks. If the
debentures and accrued interest thereon had been converted as of September 30,
1996, First Banks' ownership of FCB would have been 76.96%.
For the periods from their respective dates of acquisition through May 18,
1996, FCB and First Commercial were included in the consolidated federal income
tax return and the unitary or consolidated state income tax returns of First
Banks. Due to the reduction of its ownership below 80%, for periods subsequent
to that date FCB and First
F-36
<PAGE> 129
FIRST BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Commercial are no longer eligible for consolidation with First Banks for
federal tax purposes. Furthermore, in the event First Banks' interest in FCB
were to increase to over 80% in the future, current tax regulations preclude
FCB and First Commercial from reconsolidating with First Banks for five years
from the date of deconsolidation, without the permission of the Internal
Revenue Service.
On November 1, 1996, FBA completed its acquisition of Sunrise Bancorp,
Roseville, California, (Sunrise) and its wholly owned subsidiary, Sunrise Bank
of California, in exchange for $17.6 million in cash. Sunrise's total assets
were $112.4 million, consisting primarily of loans of $61.1 million and cash
and cash equivalents and investment securities of $48.2 million. The
acquisition was funded from available cash of $3.6 million, and borrowings from
First Banks of $14.0 million. The funds provided by First Banks were borrowed
by it under its Credit Agreement. The transaction was accounted for using the
purchase method of accounting. The excess of cost over the fair value of the
net assets acquired was approximately $3.1 million and is being amortized over
15 years. The results of operations of Sunrise for periods prior to its
acquisition are not material to the consolidated financial statements.
On July 18, 1996, First Banks renewed its Credit Agreement under which its
revolving credit facility was scheduled to mature as of July 12, 1996. The
renewed Credit Agreement provides a $40 million revolving loan commitment and a
$50 million term loan. Interest under the revolving loan commitment and the
term loan is payable monthly at the lead bank's corporate base rate or, at the
option of First Banks, at the London Interbank Offered Rate plus 1.50% and
1.25%, respectively. Loans and accrued interest under the revolving loan
commitment mature on July 11, 1997. The term loan requires quarterly principal
payments of $2.5 million until its maturity on July 12, 2000, at which time the
remaining principal and accrued interest is due and payable. The Credit
Agreement is collateralized by all of the stock of the Subsidiary Banks which
is owned by First Banks. The Credit Agreement requires maintenance of certain
minimum capital ratios for each financial institution subsidiary and prohibits
the payment of dividends on First Banks' common stock. At September 30, 1996,
First Banks and the Subsidiary Banks were in compliance with all restrictions
and requirements in the Credit Agreement.
On September 30, 1996, President Clinton signed legislation establishing a
one-time special deposit insurance assessment to recapitalize the Savings
Association Insurance Fund (SAIF) of the Federal Deposit Insurance Corporation
(FDIC), thereby bringing it into parity with the Bank Insurance Fund (BIF) of
the FDIC. As a result of this legislation, First Banks recorded an $8.6 million
charge for the assessment in its consolidated financial statements as of
September 30, 1996. It is expected that First Banks' cost of deposit insurance
will decrease by approximately $2.0 million for the year ended December 31,
1997 compared to its cost of deposit insurance for the year ending December 31,
1996, excluding the effect of the special assessment. The expected decrease in
the cost of deposit insurance is predicated on an assessment rate for 1997 of
1.29 basis points and 6.44 basis points for each $100 of assessable deposits of
BIF and SAIF deposits, respectively, compared to the current assessment rate,
applicable only to SAIF deposits, of 23 basis points.
During 1996, First Banks has shortened the expected life of its loan
portfolio by changing the distribution of that portfolio primarily between
residential mortgage and indirect automobile loans to commercial, commercial
real estate and construction and development loans. This change created a
disparity between the estimated life of the portfolio and that which had been
originally anticipated in its interest rate risk simulation models. These
models are used to determine the need for hedges of its interest rate exposure.
Consequently, in November 1996, First Banks realigned the maturity of its
interest-bearing liabilities with the current estimated life of its loan
portfolio through the termination of $75 million of interest rate swap
agreements. This resulted in a loss of $5.3 million which has been deferred.
The deferred loss will be amortized over the remaining lives of the agreements,
unless the underlying liabilities are repaid in advance of their expected
maturities.
(22) BASIS OF PRESENTATION-INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited interim consolidated financial statements include the
accounts of First Banks and its subsidiaries after elimination of material
intercompany transactions. This unaudited data, in the opinion of First Banks,
includes all adjustments necessary for the fair presentation thereof. All
adjustments made were of a normal and recurring nature.
F-37
<PAGE> 130
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
INDEPENDENT AUDITORS' REPORT
KPMG PEAT MARWICK LLP
The Board of Directors and Stockholders
First Commercial Bancorp, Inc.:
We have audited the accompanying consolidated balance sheet of First
Commercial Bancorp, Inc. and subsidiary (the Company) as of December 31, 1995,
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. The accompanying 1994 and 1993 consolidated
financial statements of First Commercial Bancorp, Inc. and subsidiary were
audited by other auditors whose report thereon dated March 29, 1995 included an
explanatory paragraph that described the Company's uncertain ability to
continue as a going concern and the Company's various regulatory agreements
with the Federal Deposit Insurance Corporation, the California State Banking
Department and the Federal Reserve Bank of San Francisco.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of First
Commercial Bancorp, Inc. and subsidiary as of December 31, 1995, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
St. Louis, Missouri
March 8, 1996
F-38
<PAGE> 131
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
First Commercial Bancorp, Inc.:
We have audited the consolidated balance sheets of FIRST COMMERCIAL
BANCORP, INC. (a Delaware corporation) and subsidiary as of December 31, 1994,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the two years in the period ended December
31, 1994 as restated (see Note 16). These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Commercial Bancorp,
Inc. and subsidiary as of December 31, 1994 and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that both
First Commercial Bancorp, Inc. (the ``Company'') and First Commercial Bank (the
``Bank'') will continue as going concerns. As discussed in Notes 2 and 15 to
the financial statements, both the Company and the Bank have entered into
various regulatory agreements (the ``Agreements'') with the Federal Deposit
Insurance Corporation (the ``FDIC''), the California State Banking Department
and the Federal Reserve Bank of San Francisco. These Agreements require the
Company and the Bank, among other compliance terms, to maintain certain minimum
capital levels. The Company and the Bank are not in compliance with these
minimum capital requirements and have suffered recurring losses from
operations. An amended capital plan has been submitted to the bank regulators,
which plan was approved by the FDIC on January 30, 1995. The plan consists of
both an intent to decrease the Bank's asset size and the raising of capital
through the sale of stock. There is no assurance that the Company will be able
to raise sufficient capital to meet the minimum capital requirements. Failure
to meet regulatory capital requirements or comply with the terms of the
Agreements could subject the Company and the Bank to additional actions by the
bank regulatory authorities, including restrictions on operations, mandatory
asset dispositions or seizure. These matters raise substantial doubt about the
ability of the Company and the Bank to continue as going concerns. Their
ability to continue as going concerns is dependent on many factors, one of
which is regulatory action and the ability to raise sufficient capital.
Management's plans in regard to these matters are described in Notes 2 and 15.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Arthur Andersen LLP
San Francisco, California
March 29, 1995
F-39
<PAGE> 132
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
DECEMBER 31,
----------------
1995 1994
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks................................................ $ 9,768 19,059
Federal funds sold..................................................... 9,000 27,200
Securities purchased under resale agreements........................... -- 40,000
-------- -------
Total cash and cash equivalents.................................... 18,768 86,259
-------- -------
Interest-bearing deposits with other financial institutions with original
maturities over three months............................................. -- 299
Investment securities:
Available for sale, at market value.................................... 63,291 13,727
Held to maturity, at amortized cost (estimated market value of $11,005
and $3,815 at December 31, 1995 and 1994, respectively)............... 10,958 3,963
-------- -------
Total investment securities........................................ 74,249 17,690
-------- -------
Loans:
Commercial and financial............................................... 33,752 69,597
Real estate construction and development............................... 4,094 16,386
Real estate mortgage................................................... 32,857 38,439
Consumer and installment............................................... 3,508 5,993
-------- -------
Total loans........................................................ 74,211 130,415
Unearned discount.......................................................... (196) (243)
Allowance for possible loan losses......................................... (5,388) (7,437)
-------- -------
Net loans.......................................................... 68,627 122,735
-------- -------
Lease receivable, net...................................................... 991 1,038
Bank premises and equipment, net........................................... 2,247 2,637
Accrued interest receivable................................................ 1,429 1,287
Other real estate.......................................................... 1,380 5,222
Other assets............................................................... 1,844 2,139
-------- -------
Total assets....................................................... $169,535 239,306
======== =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-40
<PAGE> 133
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
DECEMBER 31,
----------------
1995 1994
---- ----
LIABILITIES
<S> <C> <C>
Deposits:
Demand:
Non-interest-bearing............................................... $ 27,517 56,483
Interest-bearing................................................... 39,646 68,840
Savings................................................................ 16,707 21,695
Time deposits:
Time deposits of $100 or more...................................... 18,764 25,317
Other time deposits................................................ 53,530 61,201
-------- -------
Total deposits................................................. 156,164 233,536
Accrued interest payable................................................... 487 335
Accrued and other liabilities.............................................. 2,805 1,080
12% convertible debentures................................................. 6,500 --
-------- -------
Total liabilities.............................................. 165,956 234,951
-------- -------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares
issued and outstanding................................................... -- --
Common stock, $.01 par value, 250,000,000 shares and 5,000,000 shares
authorized at December 31, 1995 and 1994, respectively; 69,675,110 shares
issued and outstanding at December 31, 1995 and 4,775,110 shares issued
and 4,675,110 shares outstanding at December 31, 1994, respectively...... 697 48
Capital surplus............................................................ 33,251 28,495
Retained deficit........................................................... (30,311) (22,880)
Treasury stock, at cost: 1995, none; 1994, 100,000 shares.................. -- (709)
Net fair value adjustment for securities available for sale................ (58) (599)
-------- -------
Total stockholders' equity..................................... 3,579 4,355
-------- -------
Total liabilities and stockholders' equity..................... $169,535 239,306
======== =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-41
<PAGE> 134
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans........................................ $ 9,734 15,126 17,787
Investment securities............................................. 1,981 1,109 1,286
Federal funds sold, securities purchased under resale agreements
and other....................................................... 2,035 2,121 1,027
------- ------- -------
Total interest income..................................... 13,750 18,356 20,100
------- ------- -------
Interest expense:
Deposits:
Interest-bearing demand....................................... 1,082 1,989 2,405
Savings....................................................... 481 589 723
Time deposits of $100 or more................................. 1,054 1,123 1,131
Other time deposits........................................... 3,366 2,157 2,026
Other borrowings.................................................. 153 52 85
------- ------- -------
Total interest expense.................................... 6,136 5,910 6,370
------- ------- -------
Net interest income....................................... 7,614 12,446 13,730
Provision for possible loan losses.................................... 3,885 9,809 8,100
------- ------- -------
Net interest income after provision for possible loan
losses.................................................. 3,729 2,637 5,630
------- ------- -------
Noninterest income:
Service charges on deposit accounts and customer service fees..... 801 1,282 1,426
Other income...................................................... 527 691 1,569
------- ------- -------
Total noninterest income.................................. 1,328 1,973 2,995
------- ------- -------
Noninterest expense:
Salaries and employee benefits.................................... 4,117 6,568 6,951
Occupancy, net of rental income................................... 1,603 1,443 1,475
Furniture and equipment........................................... 581 930 1,075
Federal Deposit Insurance Corporation premiums.................... 629 820 866
Postage, printing and supplies.................................... 297 372 527
Legal, examination and professional fees.......................... 1,164 725 843
Data processing................................................... 145 80 72
Communications.................................................... 210 82 162
Losses and expenses on foreclosed property........................ 2,631 6,035 4,805
Amortization and write-off of acquisition intangibles............. -- 1,047 73
Other............................................................. 1,212 2,291 2,854
------- ------- -------
Total noninterest expense................................. 12,589 20,393 19,703
------- ------- -------
Loss before provision (benefit) for income taxes.......... (7,532) (15,783) (11,078)
Provision (benefit) for income taxes.................................. (101) 2,407 (3,767)
------- ------- -------
Net loss.................................................. $(7,431) (18,190) (7,311)
======= ======= =======
Net loss per common share............................................. $ (.33) (3.89) (1.56)
======= ======= =======
Weighted average common stock and common stock equivalents outstanding
(in thousands)...................................................... 22,826 4,675 4,675
======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-42
<PAGE> 135
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1995
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
NET FAIR
VALUE
ADJUSTMENT TOTAL
RETAINED FOR SECURITIES STOCK-
COMMON CAPITAL EARNINGS TREASURY AVAILABLE HOLDERS'
STOCK SURPLUS (DEFICIT) STOCK FOR SALE EQUITY
------ ------- --------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993................ $ 48 28,484 2,621 (709) -- 30,444
Net loss................................ -- -- (7,311) -- -- (7,311)
Exercise of stock options............... -- 11 -- -- -- 11
---- ------ ------- ---- ---- -------
Balance, December 31, 1993.............. 48 28,495 (4,690) (709) -- 23,144
Adoption of SFAS 115.................... -- -- -- -- 342 342
Net loss................................ -- -- (18,190) -- -- (18,190)
Net fair value adjustment for securities
available for sale.................... -- -- -- -- (941) (941)
---- ------ ------- ---- ---- -------
Balance, December 31, 1994.............. 48 28,495 (22,880) (709) (599) 4,355
Net loss................................ -- -- (7,431) -- -- (7,431)
Retirement of treasury stock............ (1) (708) -- 709 -- --
Net fair value adjustment for securities
available for sale.................... -- -- -- -- 541 541
Issuance of common stock pursuant to
stock purchase agreement.............. 650 5,464 -- -- -- 6,114
---- ------ ------- ---- ---- -------
Balance, December 31, 1995.............. $697 33,251 (30,311) -- (58) 3,579
==== ====== ======= ==== ==== =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-43
<PAGE> 136
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................................... $ (7,431) (18,190) (7,311)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization........................................... 899 958 1,024
Provision for possible loan losses...................................... 3,885 9,809 8,100
Write-down of other real estate......................................... 1,141 4,963 2,981
Loss (gain) on disposal of assets....................................... (149) 88 36
Benefit of deferred taxes............................................... (6,081) (6,497) (1,090)
Write-off of intangible................................................. -- 1,047 --
Valuation allowance for deferred taxes.................................. 6,081 8,904 --
Increase (decrease) in interest receivable and other assets............. 521 3,156 (1,459)
Increase (decrease) in interest payable................................. 275 (19) (11)
Increase (decrease) in accrued expenses and other liabilities........... 1,602 (1,404) 612
-------- ------- -------
Net cash provided by operating activities........................... 743 2,815 2,882
-------- ------- -------
Cash flows from investing activities:
Net (increase) decrease in interest-bearing deposits with other financial
institutions.............................................................. 299 3,674 (308)
Proceeds from maturity of investment securities............................. 2,168 30,982 8,160
Proceeds from the sale of investment securities............................. 1,062 -- --
Purchase of investment securities........................................... (59,451) (5,135) (30,028)
Net decrease in loans....................................................... 46,423 48,082 28,452
Net decrease in deferred loan fees.......................................... (47) (301) (179)
Purchases of premises and equipment......................................... (156) (222) (387)
Net decrease in lease financing............................................. 47 47 23
Proceeds from sale of other real estate..................................... 4,522 10,340 8,111
Payments to complete other real estate...................................... -- (638) (487)
-------- ------- -------
Net cash provided by investing activities........................... (5,133) 86,829 13,357
-------- ------- -------
Cash flows from financing activities:
Net increase (decrease) in demand and savings deposits...................... (49,980) (97,634) 12,156
Net increase (decrease) in time deposits.................................... (10,827) 7,375 11,894
Payment from sale of deposits, net.......................................... (14,541) -- --
Proceeds from the issuance of common stock.................................. 6,114 -- 11
Proceeds from the issuance of convertible debentures........................ 6,133 -- --
-------- ------- -------
Net cash (used in) provided by financing activities................. (63,101) (90,259) 24,061
-------- ------- -------
Net increase (decrease) in cash and cash equivalents................ (67,491) (615) 40,300
Cash and cash equivalents at beginning of year.................................. 86,259 86,874 46,574
-------- ------- -------
Cash and cash equivalents at end of year........................................ $ 18,768 86,259 86,874
======== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................................ $ 5,861 5,929 6,380
Income taxes............................................................ -- 17 24
======== ======= =======
Supplemental schedule of noncash investing and financing activities--net
decrease in other real estate as a result of foreclosure or financing, and
other related transactions.................................................... $ 1,672 6,714
======== ======= =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
F-44
<PAGE> 137
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of First Commercial
Bancorp, Inc. and subsidiary (FCB or the Company) have been prepared in
accordance with generally accepted accounting principles and conform to
practices prevalent among financial institutions.
As more fully discussed in Note 2, FCB executed an Amended and Restated
Stock Purchase Agreement (Stock Purchase Agreement) with First Banks, Inc., St.
Louis, Missouri (First Banks) and Mr. James F. Dierberg, Chairman, President
and Chief Executive Officer of First Banks, to provide for the recapitalization
of FCB and its wholly owned subsidiary, First Commercial Bank (Bank). As a
result, First Banks owned 93.29% of the outstanding voting stock of FCB at
December 31, 1995.
As provided by the Stock Purchase Agreement, First Banks initially owned
Bank preferred stock and Bank common stock which was subsequently converted
into FCB common stock on December 27, 1995. The consolidated financial
statements have been prepared as if such conversion had occurred on August 22
and 23, 1995, respectively, and as if FCB had owned all of the outstanding
stock of the Bank throughout 1995. The Bank preferred stock was nonvoting stock
and had no dividend requirement, except to the extent dividends may be paid on
Bank common stock. The Bank common stock, during the period it was held by
First Banks, was subject to an irrevocable proxy giving the FCB Board of
Directors the right to vote such shares. Consequently, although First Banks
owned approximately 99% of the outstanding Bank common stock during this
period, it did not have voting control until its stock was converted to FCB
common stock.
The following is a summary of the more significant policies followed by
FCB:
BUSINESS
FCB provides a full range of banking services to individual and corporate
customers through its subsidiary bank, First Commercial Bank, located in
Sacramento, Campbell, Concord, Roseville, and San Francisco, California. FCB
and the Bank are subject to regulations of various federal agencies and undergo
periodic examinations by these regulatory agencies.
BASIS OF PRESENTATION
The consolidated financial statements of FCB have been prepared in
accordance with generally accepted accounting principles and conform to
predominant practices within the banking industry. Management of FCB has made a
number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to prepare
the consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its wholly owned subsidiary. All significant intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Bank maintains deposit balances with various banks which are necessary
for check collection and account activity charges. Cash in excess of immediate
requirements is invested on a daily basis in federal funds, interest-bearing
deposits with other financial institutions and securities purchased under
resale agreements. Cash, due from banks, federal funds sold, interest-bearing
deposits with original maturities of three months or less and securities
purchased under resale agreements are considered to be cash and cash
equivalents for purposes of the consolidated statements of cash flows. The Bank
is required to maintain certain daily reserve balances in accordance with
F-45
<PAGE> 138
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
regulatory requirements. These reserve balances maintained in accordance with
such requirements were $1.13 million and $2.34 million at December 31, 1995 and
1994, respectively.
INVESTMENT SECURITIES
The classification of investment securities as available for sale or held
to maturity is determined at the date of purchase. FCB does not engage in the
trading of investment securities.
Investment securities designated as available for sale, which include any
security which FCB has no immediate plan to sell but which may be sold in the
future under different circumstances, are stated at fair value. Realized gains
and losses are included in noninterest income upon commitment to sell, based on
the amortized cost of the individual security sold. Unrealized gains and losses
are recorded, net of related income tax effects, in a separate component of
stockholders' equity. All previous fair value adjustments included in the
separate component of stockholders' equity are reversed upon sale.
Investment securities designated as held to maturity, which include any
security for which FCB has the positive intent and ability to hold to maturity,
are stated at cost, net of amortization of premium and accretion of discount
computed on the level yield method, taking into consideration the level of
current and anticipated prepayments.
LOANS
Loans are carried at cost, adjusted for amortization of premiums and
accretion of discounts using a method which approximates the level yield
method. Interest and fees on loans are recognized as income using the interest
method. Loans are stated at cost as FCB has the ability and it is management's
intention to hold them to maturity.
The accrual of interest on loans is discontinued when it appears that
interest or principal may not be paid in a timely manner in the normal course
of business. Generally, payments received on nonaccrual loans are recorded as
principal reductions. Interest income is recognized after all principal has
been repaid or an improvement in the condition of the loan has occurred which
would warrant resumption of interest accruals.
FCB adopted the provisions of Statement of Financial Accounting Standards
(SFAS) No. 114, Accounting by Creditors for Impairment of a Loan, and SFAS No.
118, Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures, which amends SFAS 114, on January 1, 1995. SFAS 114 defines the
recognition criterion for loan impairment and the measurement methods for
certain impaired loans and loans whose terms have been modified in
troubled-debt restructurings. SFAS 118 amends SFAS 114 to allow a creditor to
use existing methods for recognizing interest income on an impaired loan. FCB
has elected to continue to use its existing method for recognizing interest on
impaired loans as described above. The implementation of these statements did
not have a material effect on FCB's financial position and resulted in no
additional provision for possible loan losses.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential losses. The provision for possible loan
losses is based on a periodic analysis of the loan portfolio by management,
considering, among other factors, current economic conditions, loan portfolio
composition, past loan loss experience, independent appraisals, loan collateral
and payment experience. In addition to the allowance for estimated losses on
impaired loans, an overall unallocated allowance is established to provide for
unidentified credit losses which are inherent in the portfolio. As adjustments
become necessary, they are reflected in the results of operations in the
periods in which they become known.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed on the straight-line
method over the estimated useful lives of the related assets. Leasehold
improvements
F-46
<PAGE> 139
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
are capitalized and amortized over the shorter of their estimated useful lives
or the related lease terms. Bank premises are depreciated on the straight-line
method over 11 to 41 years. Furniture, fixtures and equipment are depreciated
on the straight-line method over one to seven years.
OTHER REAL ESTATE
Other real estate (ORE) which includes real estate acquired through
foreclosure or by deed in lieu of foreclosure, is stated at the lower of fair
value less applicable selling costs or cost at the time the property is
acquired. The excess of cost over fair value of ORE at the date of acquisition
is charged to the allowance for possible loan losses. Subsequent reductions in
carrying value to reflect current fair value or costs incurred in maintaining
the properties are charged to expense as incurred.
INTANGIBLES
As part of the 1982 acquisition of the business of thirteen branches of
California Canadian Bank, a leasehold interest intangible asset was established
and is being amortized over the remaining lives of the leases. The unamortized
balance at December 31, 1995 and 1994 was $72,000 and $232,000, respectively,
and is included in other assets.
In 1988, FCB acquired the business of three branches of Citizens Bank of
Roseville resulting in excess cost over net assets acquired of $1.43 million.
FCB concluded that there was no future value to the intangible and,
accordingly, the remaining intangible was charged-off resulting in amortization
expense for the year ended December 31, 1994 of $1.05 million. Amortization
expense for the year ended December 31, 1993 was $73,000.
INCOME TAXES
FCB and its subsidiary filed a consolidated federal income tax return for
the periods preceding First Banks' acquisition of FCB and the Bank. For the
periods subsequent to First Banks' acquisition, FCB and the Bank have joined in
filing a consolidated federal income tax return with First Banks. Prior to
August 24, 1995, FCB and the Bank each paid their respective portion of federal
income taxes or received payments to the extent that tax benefits were
realized. Subsequent to the acquisition of FCB common stock by First Banks, FCB
and the Bank each pay their respective portion of federal income taxes to, or
receive payments from, First Banks to the extent that tax benefits are
available within First Banks' consolidated group. As more fully described in
Note 8, should First Banks' ownership percentage fall below 80%, any subsequent
tax benefits to be realized by FCB will be dependent on the separate
profitability of FCB.
Effective January 1, 1993, FCB adopted SFAS No. 109, Accounting for Income
Taxes. SFAS 109 requires a change from the deferred method of accounting for
income taxes, pursuant to Accounting Principles Board Opinion No. 11 (APB 11),
to the asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Upon adoption of SFAS 109, the one-time
cumulative effect of this change in accounting for income taxes was not
material to the financial position or results of operations of FCB. Prior
years' consolidated financial statements have not been restated to apply the
provisions of SFAS 109.
FINANCIAL INSTRUMENTS
A financial instrument is defined as cash, evidence of an ownership
interest in an entity, or a contract that conveys or imposes on an entity the
contractual right or obligation to either receive or deliver cash or another
financial instrument.
F-47
<PAGE> 140
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NET LOSS PER COMMON AND COMMON EQUIVALENT SHARES
Net loss per share is computed using the weighted average number of shares
outstanding during the year plus the dilutive effect, if any, of stock options.
RECLASSIFICATIONS
Certain 1994 and 1993 amounts have been reclassified to conform with the
1995 presentation.
(2) RECAPITALIZATION
For each of the three years ended December 31, 1994, FCB and the Bank
incurred substantial operating losses related primarily to asset quality
problems. These problems continued throughout 1995, resulting in the
elimination of FCB's stockholders' equity, and the substantial reduction of the
Bank's stockholders' equity, by June 30, 1995. Recognizing that new capital was
imperative for the Company's survival, the Board of Directors and management
had begun a concerted effort in early 1995 to replenish its capital base.
However, the rapidity with which losses were incurred during the first six
months of 1995 necessitated expediting this process. As a result, as of June
30, 1995, the Company and the Bank entered into a Stock Purchase Agreement with
First Banks and Mr. James F. Dierberg. Pursuant to the Stock Purchase
Agreement, Mr. Dierberg provided interim financing for the Bank in the form of
a purchase of $1.5 million of nonvoting preferred stock. However, in spite of
this additional capital, the leverage capital ratios of FCB and the Bank as of
June 30, 1995 had declined to (.23%) and 1.08%, respectively.
The Bank's reduced capital level caused it to be classified as ``critically
undercapitalized'' for regulatory purposes, subjecting it to the Prompt
Corrective Action provisions of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989. These provisions required it to seek additional
capital or face the possible imposition of a conservatorship or receivership
within 90 days. In order to achieve the capital levels required, on August 7,
1995, FCB and the Bank entered into the Stock Purchase Agreement with First
Banks and Mr. Dierberg. The Stock Purchase Agreement, and subsequent agreements
entered into with First Banks, resulted in a series of transactions as follows:
a. On August 22, 1995, First Banks acquired the Bank preferred stock
from Mr. Dierberg for $1.5 million.
b. On August 23, 1995, First Banks purchased 116,666,666 shares of Bank
common stock for an additional $3.5 million.
c. On October 31, 1995, First Banks purchased a convertible debenture
of FCB for $1.5 million, the proceeds of which were used to increase the
capital of the Bank.
d. Following the completion of a Special Stockholders' Meeting on
December 27, 1995, the shares of Bank preferred stock and Bank common stock
held by First Banks were exchanged for 50,000,000 shares of FCB common
stock. In addition, First Banks purchased a convertible debenture of FCB
for $5.0 million, the proceeds of which, except for $250,000 retained by
First Commercial Bancorp, Inc., were contributed to the capital of the
Bank.
e. On December 28, 1995, First Banks purchased an additional 15,000,000
shares of FCB common stock for $1.5 million, the proceeds of which were
used to increase the capital of the Bank.
As a result of these transactions, the leverage capital ratios of FCB and
the Bank as of December 31, 1995 were 2.14% and 6.58%, respectively. Although
FCB continues to be considered ``significantly undercapitalized'' for
regulatory purposes, the Bank is considered ``adequately capitalized.'' A
``significantly undercapitalized'' institution is one that has a total
risk-based capital ratio of less than 6%, a core risk-based capital ratio of
less than 3%, or a leverage ratio that is less than 3%. An ``adequately
capitalized'' institution is one that has a total risk-based capital ratio of
8% or greater, a core risk-based capital ratio of 4% or greater, and a leverage
ratio of 4% or greater. As of December 31, 1995, First Banks owned 93.29% of
the issued and outstanding common stock of FCB.
F-48
<PAGE> 141
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As more fully described in Note 19, subsequent to December 31, 1995, FCB
has commenced an offering, to its stockholders other than First Banks, of an
aggregate of $5.0 million of newly-issued common stock at $.10 per share. A
maximum of $1.0 million of this, if not otherwise subscribed to, may be offered
to individuals who are not stockholders of FCB. In addition, $969,000 of common
stock is being offered in exchange for certain outstanding dividend obligations
and accrued interest thereon of FCB. If this offering is fully subscribed,
First Banks' ownership in FCB could be reduced to 50.25%, prior to the
conversion of the debentures, or 66.95%, if the debentures are immediately
converted.
(3) SECURITIES PURCHASED UNDER RESALE AGREEMENTS
Securities purchased under resale agreements are typically collateralized
by U.S. Treasury securities, U.S. government agencies, or mortgage-backed
securities and generally have maturities of one month or less. There were no
securities purchased under resale agreements at December 31, 1995. On December
31, 1994, there were $40 million of such agreements outstanding which had a
maturity date of January 3, 1995.
(4) INVESTMENT SECURITIES
As of January 1, 1994, FCB adopted SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. SFAS 115 requires that investments
in debt and equity securities be classified as ``held to maturity,'' ``trading
securities'' or ``available for sale.'' It requires that investments classified
as ``held to maturity'' be reported at amortized cost, that investments
classified as ``trading'' securities be reported at fair value with unrealized
gains and losses included in earnings, and that investments classified as
``available for sale'' be reported at fair value with unrealized gains and
losses reported, net of related income tax effects, as a separate component of
stockholders' equity. As of January 1, 1994, a security with an amortized cost
of $2.09 million and a market value of $2.10 million was classified as ``held
to maturity.'' Securities with an amortized cost of $42.34 million and a market
value of $42.68 million were classified as ``available for sale.'' The effect
of adopting SFAS 115 was to reflect an unrealized gain of $342,000 which was
reported as an increase in stockholders' equity as of January 1, 1994.
F-49
<PAGE> 142
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The amortized cost, unrealized gains and losses and fair value of
investment securities at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE YIELD
--------- ---------- ---------- ----- -----
(DOLLAR EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1995:
Available for sale:
U.S. Treasury securities............................ $10,034 25 (9) 10,050 6.02%
U.S. government agencies............................ 53,251 67 (77) 53,241 5.64
------- --- ---- ------
Total........................................... 63,285 92 (86) 63,291 5.70
------- --- ---- ------
Held to maturity:
U.S. Treasury securities............................ 7,018 63 -- 7,081 6.51
U.S. government agencies............................ 3,940 -- (16) 3,924 4.83
------- --- ---- ------
10,958 63 (16) 11,005 5.90
------- --- ---- ------
Total........................................... $74,243 155 (102) 74,296 5.73
======= === ==== ====== ====
December 31, 1994:
Available for sale:
U.S. Treasury securities............................ $ 3,146 -- (108) 3,038 4.76%
U.S. government agencies............................ 11,096 9 (416) 10,689 6.27
======= === ==== ======
14,242 9 (524) 13,727 5.94
Held to maturity:
U.S. Treasury agencies.............................. 3,963 -- (148) 3,815 5.22
======= === ==== ======
Total........................................... $18,205 9 (672) 17,542 5.78
</TABLE>
The amortized cost and estimated fair value of investment securities by
contractual maturity at December 31, 1995 are summarized below. Maturities of
mortgage-backed securities are classified in accordance with contractual
repayment schedules. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------ ------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE YIELD COST VALUE YIELD
--------- ----- ----- --------- ----- -----
(DOLLAR EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Maturing within one year:
U.S. Treasury securities...................... $10,034 10,050 6.02% $ 7,018 7,081 6.51%
U.S. government agencies...................... 48,703 48,707 5.67 2,005 2,005 4.70
-------- ------ ------- ------
Total maturing within one year............ 58,737 58,757 5.73 9,023 9,086 6.11
Maturing from one to five years:
U.S. government agencies...................... 4,548 4,534 5.29 1,935 1,919 4.97
-------- ------ ------- ------
Total..................................... $63,285 63,291 5.70 $10,958 11,005 5.91
======== ====== ======= ====== ====
</TABLE>
Proceeds from the sale of a debt security classified as available for sale
during 1995 were $1.06 million, resulting in a gain of $3,000. There were no
sales of securities for the years ended December 31, 1994 and 1993.
F-50
<PAGE> 143
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Investment securities with a carrying value of $18.9 million and $17.2
million at December 31, 1995 and 1994, respectively, were pledged to secure
U.S. government and other public deposits and for other purposes required or
permitted by law.
(5) LOANS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The changes to the allowance for possible loan losses for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ---
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1..................................................................... $ 7,437 7,337 5,484
------- ------- ------
Loans charged-off...................................................................... (6,270) (10,023) (6,509)
Recoveries of loans previously charged-off............................................. 363 314 262
------- ------- ------
Net loans charged-off.............................................................. (5,907) (9,709) (6,247)
------- ------- ------
Provision charged to operations........................................................ 3,885 9,809 8,100
Reduction in allowance for possible loan losses from sale of loans..................... (27) -- --
------- ------- ------
Balance, December 31................................................................... $ 5,388 7,437 7,337
======= ======= ======
</TABLE>
Nonaccruing loans aggregated $4.00 million and $11.43 million at December
31, 1995 and 1994, respectively. At December 31, 1995, the recorded investment
in loans considered impaired was $4.53 million, representing loans on
nonaccrual status and restructured loans. The impaired loans had no valuation
reserves at December 31, 1995. The average recorded investment in impaired
loans, since the adoption of SFAS 114 and SFAS 118 on January 1, 1995, was $8.5
million. The interest income related disclosures, including the amount of
interest that would have been recorded under the original terms of impaired
loans and the amount of income received, were not available. Such information
was not practicable to obtain due to the discontinuance of FCB's former data
processing system in December 1995.
(6) LEASE FINANCING
FCB has an equity participation in a leveraged lease agreement. Under the
terms of the agreement, FCB's equity investment represents approximately 35% of
the cost of the leased equipment. The remaining 65% is provided by a third
party through long-term debt which provides no recourse against FCB and is
secured by first liens on the leased equipment. FCB's net investment in the
leveraged lease at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Lease rental receivable..................................................... $641 695
Estimated residual value.................................................... 378 378
Less unearned and deferred income........................................... (28) (35)
---- -----
Investment in leverage leases............................................... $991 1,038
==== =====
</TABLE>
The net income from FCB's investment in the leveraged lease was $7,100 for
each of the years ended December 31, 1995, 1994 and 1993.
F-51
<PAGE> 144
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) BANK PREMISES AND EQUIPMENT
Bank premises and equipment were comprised of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Buildings....................................................................... $ 616 616
Land and land improvements...................................................... 894 894
Leasehold improvements.......................................................... 1,801 1,485
Furniture, fixtures, and equipment.............................................. 4,520 4,669
------ -----
7,831 7,664
Less accumulated depreciation and amortization.................................. 5,584 5,027
------ -----
Bank premises and equipment, net............................................ $2,247 2,637
====== =====
</TABLE>
Depreciation and amortization expense was $695,000, $667,000 and $875,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
At December 31, 1995, the approximate minimum future lease rentals payable
under noncancellable operating leases for bank premises were as follows:
<TABLE>
<CAPTION>
(DOLLARS EXPRESSED
IN THOUSANDS)
<S> <C>
1996............................................. $ 563
1997............................................. 395
1998............................................. 265
1999............................................. 233
2000............................................. 236
Thereafter....................................... 95
------
Total minimum lease payments................. $1,787
======
</TABLE>
The net rental expense included in occupancy expense for bank premises was
$965,000, $871,000 and $844,000 for the years ended December 31, 1995, 1994 and
1993, respectively. Rental income under noncancellable subleases was $114,000,
$99,000 and $99,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. At December 31, 1995, these subleases extend through 1998 and
future minimum rental income is $105,000, $99,000 and $25,000 for 1996, 1997
and 1998, respectively.
(8) INCOME TAXES
FCB and the Bank filed a consolidated federal income tax return for the
period prior to their respective acquisitions by First Banks. Because of the
structure of the transaction described in Note 2 to the consolidated financial
statements, current regulations of the Internal Revenue Code prohibit FCB and
the Bank from continuing to file a consolidated income tax return for the
period after August 23, 1995, because the acquisition by First Banks of the
Bank stock caused its disaffiliation with FCB. However, subsequent to the
exchange of Bank stock and the acquisition of additional FCB stock by First
Banks, both FCB and the Bank will file a consolidated federal income tax return
with First Banks for the periods First Banks owned greater than 80% of the
respective entities. As more fully discussed in Note 19, should the stock
rights offering cause First Banks' ownership percentage to fall below 80%, FCB
and the Bank would be disaffiliated from First Banks, and neither FCB nor the
Bank would be permitted to be included in the consolidated return of First
Banks for five years. In addition, the Bank, which was disaffiliated from FCB
on August 22, 1995, would not be permitted to file a consolidated return with
FCB for five years. However, regulations do provide procedures for FCB to
request permission from the Internal Revenue Service to join in filing a
F-52
<PAGE> 145
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
consolidated return with the Bank. FCB would need to request a waiver from the
Internal Revenue Service in the form of a private letter ruling, prior to the
due date of the consolidated return, in order to file a consolidated federal
return with the bank. This is not an automatic reaffiliation.
Provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Current income taxes:
Federal................................................. $ (101) -- (2,677)
State................................................... -- -- --
------- ------ ------
(101) -- (2,677)
------- ------ ------
Deferred income tax expense (benefit):
Federal................................................. 5,386 (4,761) (1,090)
State................................................... 695 (1,736) --
------- ------ ------
6,081 (6,497) (1,090)
------- ------ ------
Valuation allowance......................................... (6,081) 8,904 --
------- ------ ------
Total............................................... $ (101) 2,407 (3,767)
======= ====== ======
</TABLE>
The effective federal income tax rates differ from amounts which would be
calculated using statutory tax rates as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loss before provision (benefit) for income taxes............... $(7,532) $(15,783) $(11,078)
======= ======== ========
Taxes on loss calculated at statutory rates.................... (2,636) (35.0)% (5,366) (34.0)% (3,767) (34.0)%
Effects of differences in tax reporting:
Change in the deferred tax valuation allowance............. (6,081) (80.7) 8,904 56.4 -- --
Change in tax attributes available to be carried forward... 8,616 114.4 -- -- -- --
State income taxes......................................... -- -- (1,131) (7.2) -- --
------- ----- -------- ----- -------- -----
Provision (benefit) for income taxes................... $ (101) (1.3)% $ 2,407 15.2% $ (3,767) (34.0)%
======= ===== ======== ===== ======== =====
</TABLE>
F-53
<PAGE> 146
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities for periods
after the adoption of SFAS 109 are shown below.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for possible loan losses................................................................. $ 1,648 1,377
Other real estate.................................................................................. 654 2,981
AMT tax credit carryforwards....................................................................... 448 435
Depreciation on bank premises and equipment........................................................ 145 83
Other.............................................................................................. 23 --
Net operating loss carryforwards (federal and state)............................................... 382 4,346
------- ------
Total gross deferred tax assets................................................................ 3,300 9,222
Less valuation allowance........................................................................... (2,823) (8,904)
------- ------
Gross deferred tax assets, net of valuation allowance.......................................... 477 318
------- ------
Deferred tax liabilities:
Leveraged leases................................................................................... 203 268
Accretion.......................................................................................... 10 50
State taxes........................................................................................ 264 --
------- ------
Total gross deferred tax liabilities....................................................... 477 318
------- ------
Net deferred tax assets.................................................................... $ -- --
======= ======
</TABLE>
With the completion of the 1995 acquisitions of FCB and the Bank by First
Banks, the federal and state net operating loss (NOL) carryforwards generated
prior to the two transactions are subject to an annual limitation under
Internal Revenue Code (IRC) Section 382 and California Revenue and Taxation
Code Section 24451, respectively, for all subsequent tax years. The federal and
state annual limitations for the Bank are $28,598. The following schedules
reflect the NOL carryforwards that will be available, after consideration of
these limitations, to offset future taxable income. If taxable income for a
post-transaction year does not equal or exceed the annual limitation, the
unused limitation is carried forward to increase the limitation amount for the
succeeding years until the excess limitation is utilized. This does not affect
the original expiration dates of the NOL. Also acquired in the acquisitions are
alternative minimum tax credits of $448,000. These credits are also subject to
annual limitations.
For federal income tax purposes, FCB had NOL carryforwards of approximately
$988,000. The NOL carryforwards expire as follows:
<TABLE>
<CAPTION>
(DOLLARS EXPRESSED
IN THOUSANDS)
<S> <C>
Year ending December 31:
2008......................................... $479
2009......................................... 509
----
$988
====
</TABLE>
F-54
<PAGE> 147
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For California income tax purposes, FCB had NOL carryforwards of
approximately $353,000. The NOL carryforwards expire as follows:
<TABLE>
<CAPTION>
(DOLLARS EXPRESSED
IN THOUSANDS)
<S> <C>
Year ending December 31:
1996........................................................................... $ 89
1997........................................................................... 88
1998........................................................................... 88
1999........................................................................... 88
----
$353
====
</TABLE>
Subsequent to the acquisition by First Banks, the net deferred tax assets
of FCB were evaluated to determine whether it is more likely than not that the
deferred tax assets will be recognized in the future. Due to the uncertainty of
future operating results and possible disaffiliation with respect to filing a
consolidated federal income tax return with First Banks, as previously
discussed, it was determined that the valuation allowance established for FCB
should wholly offset any net deferred tax asset.
Changes to the deferred tax assets valuation allowance are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year.................................................... $ 8,904 --
Current year deferred provision, change in deferred tax valuation allowance... (6,081) 8,904
------- -----
Balance, end of year.......................................................... $ 2,823 8,904
======= =====
</TABLE>
(9) 12% CONVERTIBLE DEBENTURES
Pursuant to the Stock Purchase Agreement discussed in Note 2 to the
accompanying consolidated financial statements, FCB issued to First Banks two
5-year, 12% convertible debentures in exchange for a total of $6.5 million. The
principal and any accrued but unpaid interest thereon is convertible at any
time prior to maturity, at the option of First Banks, into FCB common stock at
$.10 per share. At maturity, any unpaid principal and accrued interest will be
converted into FCB common stock at $.10 per share. The initial debenture of
$1.5 million was issued on October 31, 1995 and matures on October 31, 2000.
The second debenture was issued on December 28, 1995 and matures on December
28, 2000. Cash may be paid with respect to either the principal or interest on
the debentures only when, in the sole and absolute discretion of the Board of
Directors of FCB, it is determined that FCB has sufficient funds to make such
payment in accordance with all applicable regulatory requirements. The
debentures are secured by all of the shares of Bank common stock held by FCB.
Accrued and unpaid interest on the debentures was $37,667 at December 31,
1995. At that date, the principal and accrued interest on the debentures could
have been converted into an aggregate of 65,376,670 shares of FCB common stock.
(10) COMMITMENTS AND CONTINGENT LIABILITIES
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
In the ordinary course of business, FCB enters into various types of
transactions which involve financial instruments with off-balance-sheet risk.
These instruments include commitments to extend credit and letters of credit
F-55
<PAGE> 148
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and are not reflected in the accompanying consolidated balance sheets. These
financial transactions carry various degrees of credit risk. Credit risk is
defined as the possibility that a loss may occur from the failure of another
party to perform according to the terms of the contract.
FCB's loans, and related credit risks, are primarily concentrated in
Northern California. The cities and surrounding metropolitan areas where the
majority of FCB's loan customers reside are Sacramento, Roseville, San
Francisco, Concord, and Campbell, California. Economic fluctuations in the
California regions of the Sacramento Valley and San Francisco Bay Area have
had, and will continue to have, a direct impact on the credit risk of the
Company.
Commitments to extend credit are legally binding loan commitments, subject
to certain conditions, with set expiration dates. FCB typically receives a fee
for providing a commitment. FCB evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
FCB upon the extension of credit, is based on management's evaluation.
Collateral held varies, but may include cash, marketable securities, accounts
receivable, inventory, equipment and real estate property.
Standby letters of credit are provided to customers to guarantee their
performance, generally in the production of goods and services or under
contractual commitments in the financial markets. Commercial letters of credit
are issued to customers to facilitate trade transactions. They represent a
substitution of FCB's credit for the customer's credit.
The contractual amounts of commitments to extend credit and standby letters
of credit represent the amount of credit risk. Since many of the commitments
and letters of credit are expected to expire without being fully drawn, the
contractual amounts do not necessarily represent future cash requirements. The
following is a summary of financial instruments with off-balance-sheet risk at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit................................................. $22,578 41,504
Standby letters of credit.................................................... 2,078 3,329
======= ======
</TABLE>
Real estate construction loan commitments were $637,000 and $3.43 million
at December 31, 1995 and 1994, respectively, and are included in commitments to
extend credit in the schedule above.
LITIGATION
FCB is involved in various routine legal actions as both plaintiff and
defendant. In the opinion of management, based upon the present status of
litigation and the advice of legal counsel, the ultimate resolution of any of
these matters will not have a material adverse impact on the financial position
of FCB.
(11) DIVIDENDS
The stockholders of FCB will be entitled to receive dividends, when and as
declared by the Board of Directors, out of funds legally available, subject to
the dividends preference, if any, on preferred shares that may be outstanding
and also subject to the restrictions of the Delaware General Corporation Law.
At December 31, 1995 and 1994, there were no outstanding shares of preferred
stock.
On December 31, 1991, the Board of Directors of FCB declared a $.32 per
share cash dividend on its common stock. This dividend was payable in four
installments during 1992. On July 9, 1992, the Company made the decision to
suspend payment of the third and fourth quarter dividends which totaled $.16
per share. FCB will continue to accrue interest on these suspended dividends at
the current legal rate until such time as the dividends are paid to
stockholders of record as of June 15, 1992 and September 14, 1992. As of
December 31, 1995, the aggregate accrued dividends and accrued but unpaid
interest thereon was approximately $969,000. The payment of the accrued
F-56
<PAGE> 149
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
dividends and declaration of subsequent dividends is subject to approval by the
Federal Reserve Bank of San Francisco (see Note 15). In connection with its
offering to stockholders commenced subsequent to December 31, 1995, as
described in Note 19, FCB is offering, to those individuals eligible to receive
the accrued and unpaid 1992 dividends, one share of FCB common stock for each
$.10 of dividends and accrued interest, in satisfaction of that obligation.
Dividends by the Bank to FCB are restricted under California law to the
lesser of the Bank's retained earnings or the Bank's net income for the latest
three fiscal years, less dividends previously declared during that period, or,
with the approval of the California Superintendent of Banks, to the greater of
the retained earnings of the Bank, the net income of the Bank for its last
fiscal year or the net income of the Bank for its current fiscal year. In
addition, the Federal Reserve Board and the Federal Deposit Insurance
Corporation (FDIC) have indicated that it would generally be considered to be
an unsafe and unsound banking practice for banks to pay dividends except out of
current operating earnings. Further, FCB and the Bank are restricted from
paying dividends under the terms of certain regulatory agreements (see Note
15). During 1995, 1994 and 1993, the Bank paid no dividends to FCB. As of
December 31, 1995, the retained deficit of the Bank was approximately $30.31
million.
(12) STOCK OPTION PLANS
In 1987, the Board of Directors amended and restated the Company's employee
stock option plan (the Employee Plan) for full-time salaried officers and
employees who have substantial responsibility for the successful operation of
FCB and the Bank. The Employee Plan provides for the grant of ``incentive stock
options,'' as defined in Section 422A of the Internal Revenue Code. The
Employee Plan reserved an aggregate of 783,000 shares of FCB common stock.
Options may be granted at an exercise price not less than the fair market value
of the stock at the date of grant and vest at a rate of 20% per year for a
period of five years from date of grant. Options expire ten years from date of
grant and may be exercised with shares of FCB stock or other valuable
consideration. Options may be granted, pursuant to the Employee Plan, until its
expiration on March 11, 1997.
The Employee Plan is administered by the Board of Directors or a committee
appointed by the Board (in either case, the ``Committee''). The Committee
determines to whom options will be granted and the terms of each option
granted, including the exercise price, number of shares subject to the option,
the vesting provisions thereof, and whether the option will be an incentive or
nonstatutory option.
F-57
<PAGE> 150
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Activity for the three years ended December 31, 1995 related to the
Employee Plan was as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ----------------------
AVAILABLE PRICE PER
FOR GRANT SHARES SHARE
--------- ------ ---------
<S> <C> <C> <C>
Balance, January 1, 1993.............................. 119,552 523,700 $4.38-11.12
Options granted....................................... (15,000) 15,000 4.00-5.88
Options cancelled..................................... 25,500 (25,500) 6.13-10.75
Options exercised..................................... -- (2,000) 5.63
------- -------- -----------
Balance, December 31, 1993............................ 130,052 511,200 4.00-11.12
Options granted....................................... (3,500) 3,500 4.25-5.38
Options cancelled..................................... 328,900 (328,900) 4.00-11.12
Options exercised -- -- --
------- -------- -----------
Balance, December 31, 1994 455,452 185,800 4.25-11.12
Options granted -- -- --
Options cancelled..................................... 90,500 (90,500) 5.00-8.44
Options exercised -- -- --
------- -------- -----------
Balance, December 31, 1995............................ 545,952 95,300 4.25-11.12
======= ======== ===========
</TABLE>
At December 31, 1995, options for 82,140 shares were exercisable at prices
ranging from $4.25 to $11.12. On August 22, 1989, the Board of Directors
amended the Employee Plan to provide that in the event of a sale, dissolution
or liquidation, merger or consolidation in which FCB is not the surviving
corporation (other than a merger or consolidation solely for the purpose of
charter migration), an optionee shall have the right immediately preceding any
such transaction, to exercise any unvested and unexercised portion of said
optionee's options. Although the transactions with First Banks pursuant to the
Stock Purchase Agreement provided optionees this right, the exercise prices on
options currently outstanding are substantially in excess of market prices.
Consequently, no options were exercised as a result of those transactions.
On September 26, 1989 (Commencement Date), the Board of Directors of FCB
adopted the First Commercial Bancorp, Inc., Directors' Stock Option Plan
(Directors' Plan), which was approved by the stockholders of FCB at its Annual
Stockholders' Meeting held on May 23, 1990. There are presently reserved for
issuance under the Directors' Plan 250,000 shares of FCB's common stock. Only
non-employee directors of FCB are eligible to receive options in accordance
with the Directors' Plan. As of December 31, 1995, only two directors are
eligible to participate in the Directors' Plan.
One present director of FCB received a onetime grant of a nonstatutory
option to purchase 10,000 shares, which became exercisable upon approval by the
stockholders, service as a Board member for at least six months, and
satisfaction of certain vesting requirements set forth below.
On each anniversary date of the Commencement Date, each director who has
been a director continuously for the preceding year and who has not previously
received one or more grants of options to purchase a total of 10,000 shares,
will receive a grant of an option to purchase 2,000 shares. The maximum number
of shares for which options may be granted under the Directors' Plan to any
director is 10,000 shares. Options granted to directors to purchase common
stock of FCB shall vest and become exercisable at the rate of 20% of the shares
per year from the exercise date and may be exercised by the optionee during a
period of 10 years.
The Directors' Plan will expire on September 26, 1998, unless terminated
earlier by the Board of Directors. At December 31, 1995, options for 70,000
vested shares under the Directors' Plan were exercisable at a price of $11.12
per share.
F-58
<PAGE> 151
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) EMPLOYEE BENEFIT PLANS
FCB's profit-sharing plan is a self-administered savings and incentive
plan, which qualifies under Section 401(k) of the Internal Revenue Code,
covering substantially all employees. Under the plan, employer matching
contributions are determined annually by FCB's Board of Directors. An
employee's interest in such contributions vest on a 5-year schedule according
to years of service rendered. Employee contributions are limited to 15% of an
employee's compensation, not to exceed $9,500 for 1995, and vest immediately.
The employer matching contributions were suspended as of January 1, 1995. Total
employer contributions under the plan were $105,000 and $116,000 for the years
ended December 31, 1994 and 1993, respectively. For these same three years, the
Bank paid for the plan's administrative, accounting and legal expenses of
approximately $16,000, $20,000 and $33,000, respectively.
FCB adopted an Employee Stock Ownership Plan (ESOP) for all eligible
employees. Under the terms of the ESOP, the amount of contributions made is
within the sole discretion of the Board of Directors. Employees may not
contribute to the ESOP. Contributions to the ESOP are allocated among eligible
employees' accounts in relation to their compensation as shares of stock of FCB
are acquired and vest over a period specified in the ESOP. Any shares held by
the ESOP are distributed to employees following death, disability, retirement
or other separation from employment in accordance with the terms of the ESOP.
There were no contributions to the ESOP for the years ended December 31, 1995,
1994 and 1993.
Postretirement benefits other than pensions and postemployment benefits are
generally not provided for FCB's employees.
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values for financial instruments are management's estimate of the
values at which the instruments could be exchanged in a transaction between
willing parties. These estimates are subjective and may vary significantly from
amounts that would be realized in actual transactions. In addition, other
significant assets are not considered financial assets including, deferred tax
assets and bank premises and equipment. Further, the tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on the fair value estimates and have not been considered in any of the
estimates.
The estimated fair values of FCB's financial instruments at December 31
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents..................... $18,768 18,768 86,259 86,259
Interest-bearing deposits with other financial
institutions with original maturities over
three months................................ -- -- 299 299
Investment securities......................... 74,249 74,296 17,690 17,541
Loans, net.................................... 68,627 68,681 122,735 116,315
Lease financing, net.......................... 991 991 1,038 1,038
Accrued interest receivable................... 1,429 1,429 1,287 1,287
Liabilities:
Demand and savings deposits................... 83,870 83,870 147,018 147,018
Time deposits................................. 72,294 72,371 86,518 86,769
12% convertible debentures.................... 6,500 6,500 -- --
Accrued interest payable...................... 487 487 335 335
Off balance sheet--unfunded loan commitments...... -- -- -- --
</TABLE>
F-59
<PAGE> 152
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following methods and assumptions were used in estimating fair values
for financial instruments:
FINANCIAL ASSETS:
Cash and cash equivalents, interest-bearing deposits, lease financing and
accrued interest receivable: The carrying values reported in the consolidated
balance sheets approximate fair value.
Investment securities: Fair value for investment securities is based upon
quoted market prices. If quoted market prices are not available, fair values
are based upon quoted market prices of comparable instruments.
Net loans: The fair values for most loans held for investment are estimated
utilizing discounted cash flow calculations that apply interest rates currently
being offered for similar loans to borrowers with similar risk profiles. The
carrying values for loans are net of the allowance for possible loan losses and
unearned discount.
FINANCIAL LIABILITIES:
Deposits: The fair value disclosed for deposits generally payable on demand
(i.e., non-interest-bearing and interest-bearing demand, savings and money
market accounts) are considered equal to their respective carrying amounts as
reported in the consolidated balance sheets. The fair value disclosed for
demand deposits does not include the benefit that results from the low-cost
funding provided by deposit liabilities compared to the cost of borrowing funds
in the market. Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on similar certificates to a schedule of aggregated monthly maturities
of time deposits.
Convertible debentures and accrued interest payable: The carrying value
reported in the consolidated balance sheets approximates fair value.
OFF-BALANCE SHEET:
Credit commitments: The majority of the commitments to extend credit and
commercial and standby letters of credit contain variable interest rates and
credit deterioration clauses and, therefore, the carrying value of these credit
commitments approximates fair value.
(15) REGULATORY AGREEMENTS
For each of the three years ended December 31, 1995, FCB has incurred
substantial losses from operations. These losses were associated primarily with
the emphasis which FCB had placed on real estate based lending and the
deterioration of the California economy during that period, particularly as it
related to the real estate sector. Because of the magnitude of problem assets
which arose and the reduction of FCB's capital due to the losses, FCB has been
operating under the terms of a Memorandum of Understanding with the Federal
Reserve Bank of San Francisco (MOU) and the Bank has been operating under the
terms of a Cease and Desist Order issued by the FDIC, a Final Order issued by
the State Banking Department and several Capital Impairment Orders
(collectively the Orders). The MOU and the Orders have placed significant
restrictions on FCB and the Bank including restrictions on the payment of
dividends, requirements of specified capital levels and reduction of classified
assets. As a result of the recapitalization and numerous actions taken by FCB,
management believes FCB is in substantial compliance with the MOU and the
Orders. However, full compliance, particularly with certain capital
requirements, has not yet been achieved.
FCB and the Bank entered into a Stock Purchase Agreement with First Banks
and James F. Dierberg as outlined in Note 2, which resulted in a substantial
recapitalization of FCB and the Bank during 1995. In addition, as more fully
described in Note 19, subsequent to December 31, 1995, FCB has commenced an
offering of its common stock to existing stockholders in exchange for dividends
owed to certain stockholders. However, FCB has continued to incur losses from
operations through December 31, 1995. Furthermore, the effect of a large
portfolio of problem assets and the potential of a substantial interest cost
associated with the Debenture issued to First Banks under the Stock
F-60
<PAGE> 153
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Purchase Agreement may impair FCB's ability to generate sufficient future
profitability to satisfy all of FCB's regulatory agreements. Consequently,
there can be no assurance that: (1) FCB will not incur substantial additional
losses in the liquidation of its portfolio of problem assets; (2) continued
losses will not adversely effect FCB's ability to comply with the requirement
of the MOU and the Orders; or (3) because of any of the preceding, FCB and the
Bank may not be required to raise additional capital or have additional
regulatory agreements imposed upon it in the future.
(16) RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
During the second quarter of 1994, FCB became aware of the existence of
certain previously unknown information which affected the reported carrying
value of certain assets included in FCB's December 31, 1993 and 1992 financial
statements. FCB believes that had this information been known at December 31,
1992, FCB would have written off certain assets and recognized a loss at that
time. Thus, FCB's financial statements for the fiscal years ended December 31,
1993 and 1992 have been restated to reflect the effects of these charge-offs
and losses. The effect of this restatement for 1994 was to decrease ORE by
$3.90 million, increase the allowance for possible loan losses by $974,000 for
a charge-off recorded in 1993, decrease interest income by $14,000, record a
tax benefit of $5,000, increase cash by $47,000 and increase savings accounts
by $96,000. The net of these transactions increased previously reported loss
and retained deficit by $9,000.
The effect of this restatement for 1992 was to charge-off real estate
construction loans of $4.89 million to the allowance for possible loan losses
and establish a corresponding addition to the provision for possible loan
losses. In addition, interest income was reversed by $18,000 and a tax benefit
was recorded for $1.72 million. The net of these transactions increased
previously reported net loss and retained deficit in 1992 by $3.19 million.
(17) TRANSACTIONS WITH FIRST BANKS
In October 1995, the Board of Directors of the Bank approved a management
services agreement with First Banks and a cost sharing agreement with First
Bank & Trust, Irvine, California, a wholly owned subsidiary of First Banks. The
management fee agreement provides that the Bank will compensate First Banks on
an hourly basis for its use of personnel for various functions including
internal auditing, loan review, income tax preparation and assistance,
accounting and other management and administrative services. Hourly rates for
such services compare favorably with those of similar services from unrelated
sources, as well as the internal costs of the Bank personnel which were used
previously. It is estimated that the aggregate cost for such services will be
more economical than those previously incurred separately by the Bank.
Because of this affiliation through First Banks and the geographic
proximity of certain of these banking offices, the Bank and First Bank & Trust
plan to share the cost of certain personnel and services which will be used by
both banks. This will include the salaries and benefits of certain loan and
administrative personnel. The banks have entered into a cost sharing agreement
for the purpose of allocating these expenses between them. Expenses associated
with loan origination personnel will be allocated based on the relative loan
volume between the banks. Costs of most other personnel will be allocated on an
hourly basis. Because this involves distributing essentially fixed costs over a
larger asset base, it allows each bank to receive the benefit of personnel and
services at a reduced cost.
The Bank also entered into a data processing agreement with FirstServ,
Inc., a wholly owned data processing subsidiary of First Banks, on December 8,
1995. Under this agreement, FirstServ, Inc. began providing data processing and
item processing to the Bank in December 1995. The fees for such services are
substantially less than the Bank had incurred in connection with its previous
data processing operation or than it would incur with non-affiliated vendors.
The management services agreement, cost sharing agreement and data
processing agreement are subject to the review and approval of the Bank's
regulatory authorities. Fees paid by the Bank under any of these agreements
totaled $99,000 for the year ended December 31, 1995.
F-61
<PAGE> 154
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In addition, the Bank may purchase certain services and supplies from or
through First Banks as one of its subsidiaries. This would include insurance
policies, office supplies and other commonly used banking products which can be
acquired more economically than had previously been possible for the Bank
separately. These items are purchased on a cost pass-through basis and the
amount of such purchases is not expected to be material to FCB's consolidated
financial position or results of operations.
In connection with the recapitalization of FCB, and as more fully discussed
in Notes 2 and 9 to the accompanying consolidated financial statements, First
Banks purchased convertible debentures of FCB of $1.5 million and $5.0 million
on October 31, 1995 and December 28, 1995, respectively. The related interest
expense for these debentures was $37,667 for the year ended December 31, 1995.
(18) PARENT COMPANY ONLY FINANCIAL STATEMENTS
<TABLE>
CONDENSED BALANCE SHEETS
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C>
Assets:
Cash.................................................... $ 200 22
Investment in First Commercial Bank..................... 10,987 5,219
Other assets............................................ 413 --
------- -----
Total assets........................................ $11,600 5,241
======= =====
Liabilities and stockholders' equity:
Dividends payable....................................... $ 748 748
12% convertible debentures.............................. 6,500 --
Accrued expenses and other liabilities.................. 773 138
------- -----
Total liabilities................................... 8,021 886
Stockholders' equity.................................... 3,579 4,355
------- -----
Total liabilities and stockholders' equity.......... $11,600 5,241
======= =====
</TABLE>
F-62
<PAGE> 155
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Income:
Interest income............................... $ 1 95 224
Other income.................................. -- -- 1
------- ------- ------
Total income.............................. 1 95 225
------- ------- ------
Expense:
Management fee................................ -- 56 14
Other......................................... 716 1,182 591
------- ------- ------
Total expense............................. 716 1,238 605
------- ------- ------
Loss before income tax expense (benefit)
and equity in undistributed loss of
subsidiary.............................. (715) (1,143) (380)
Income tax expense (benefit)...................... 4 (9) (108)
------- ------- ------
Loss before equity in undistributed loss
of subsidiary........................... (719) (1,134) (272)
Equity in undistributed loss of subsidiary........ (6,712) (17,056) (7,039)
------- ------- ------
Net loss.................................. $(7,431) (18,190) (7,311)
======= ======= ======
</TABLE>
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
---- ---- ----
(DOLLARS EXPRESSED IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $(7,431) (18,190) (7,311)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization............. -- 1,047 73
Equity in undistributed loss of
subsidiary.............................. 6,712 17,056 7,039
(Increase) decrease in other assets....... (46) 308 (118)
Increase in liabilities................... 351 33 97
------- ------- ------
Net cash (used in) provided by
operating activities................ (414) 254 (220)
------- ------- ------
Cash flows from investing
activities--contributions to subsidiary......... (7,325) (1,404) --
------- ------- ------
Cash flows from financing activities:
Proceeds from issuance of common stock........ 1,500 -- 11
Proceeds from issuance of debentures.......... 6,133 -- --
Proceeds from advances from subsidiary........ 284 -- --
------- ------- ------
Net cash provided by financing
activities.......................... 7,917 -- 11
------- ------- ------
Net increase (decrease) in cash and
cash equivalents.................... 178 (1,150) (209)
Cash and cash equivalents at beginning of year.... 22 1,172 1,381
------- ------- ------
Cash and cash equivalents at end of year.......... $ 200 22 1,172
======= ======= ======
Noncash financing activities--exchange of Company
common stock for Bank common stock (see Note
2).............................................. $ 6,500 -- --
======= ======= ======
</TABLE>
F-63
<PAGE> 156
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(19) SUBSEQUENT EVENTS
In January 1996, FCB filed an Amended Registration Statement with the
Securities and Exchange Commission for a rights offering to its existing
stockholders other than First Banks, of an aggregate of $5.0 million of
newly-issued common stock at $.10 per share. A maximum of $1.0 million of this,
if not otherwise subscribed to, may be offered to individuals who are not
stockholders of FCB. In addition, $969,000 of common stock is being offered in
exchange for certain outstanding dividend obligations and accrued interest
thereon of FCB. If this offering is fully subscribed, the capital of FCB and
the Bank would exceed regulatory requirements. In addition, First Banks'
ownership in FCB would be reduced to 50.25%, prior to the conversion of the
debentures, or 66.95%, if the debentures are immediately converted.
First Banks has agreed, pursuant to the Stock Purchase Agreement, that it
will purchase on the offering as a standby-purchaser, after the expiration of
the rights offering and dividend exchange offer, if necessary, such number of
shares as may be required to raise the Bank's Tier 1 capital ratio to 7.00% as
required by the SBD's capital impairment order.
The offering was declared effective by the Securities and Exchange
Commission on February 16, 1996, and the Prospectuses were recently mailed to
eligible stockholders.
(20) INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited interim consolidated financial statements include
the accounts of FCB and its subsidiary, the Bank, after elimination of material
intercompany transactions. The unaudited information, in the opinion of FCB,
includes all adjustments necessary for the fair presentation thereof. All
adjustments made were of a normal and recurring nature.
F-64
<PAGE> 157
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks................................. $ 8,069 9,768
Federal funds sold...................................... 9,100 9,000
-------- -------
Total cash and cash equivalents................. 17,169 18,768
-------- -------
Investment securities:
Available for sale, at fair value....................... 33,269 63,291
Held to maturity, at amortized cost (estimated fair
value of $3,012 and $11,005 at September 30, 1996 and
December 31, 1995, respectively)...................... 3,004 10,958
-------- -------
Total investment securities..................... 36,273 74,249
-------- -------
Loans:
Commercial.............................................. 30,738 33,764
Real estate construction and development................ 10,666 4,094
Real estate mortgage:
Residential......................................... 19,720 17,824
Commercial.......................................... 23,015 15,021
Consumer and installment................................ 10,465 3,508
-------- -------
Total loans..................................... 94,604 74,211
Unearned discount....................................... (305) (196)
Allowance for possible loan losses...................... (4,037) (5,388)
-------- -------
Net loans....................................... 90,262 68,627
-------- -------
Lease receivable, net....................................... -- 991
Bank premises and equipment, net of accumulated
depreciation.............................................. 2,000 2,247
Accrued interest receivable................................. 1,377 1,429
Other real estate owned..................................... 524 1,380
Other assets................................................ 1,375 1,844
-------- -------
Total assets.................................... $148,980 169,535
======== =======
</TABLE>
F-65
<PAGE> 158
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
(CONTINUED)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
LIABILITIES
Deposits:
Demand:
Non-interest bearing................................ $ 24,381 27,517
Interest bearing.................................... 16,660 19,367
Savings................................................. 32,821 36,986
Time:
Time deposits of $100 or more....................... 10,837 18,764
Other time deposits................................. 48,957 53,530
-------- -------
Total deposits.................................. 133,656 156,164
Accrued interest payable.................................... 812 487
Accrued and other liabilities............................... 2,063 2,805
12% convertible debentures.................................. 6,500 6,500
-------- -------
Total liabilities............................... 143,031 165,956
-------- -------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding
Common stock, $.01 par value, 250,000,000 shares authorized;
105,765,932 shares issued and outstanding at September 30,
1996 and 69,675,110 shares issued and outstanding at
December 31, 1995......................................... 1,058 697
Capital surplus............................................. 36,107 33,251
Retained deficit............................................ (31,185) (30,311)
Net fair value adjustment for securities available for
sale...................................................... (31) (58)
-------- -------
Total stockholders' equity...................... 5,949 3,579
-------- -------
Total liabilities and stockholders' equity...... $148,980 169,535
======== =======
</TABLE>
F-66
<PAGE> 159
FIRST COMMERCIAL BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans.............................. $ 6,147 7,792
Investment securities................................... 2,248 1,180
Federal funds sold and other............................ 390 1,679
------- ------
Total interest income........................... 8,785 10,651
------- ------
Interest expense:
Deposits:
Interest-bearing demand............................. 211 297
Savings............................................. 1,086 892
Time deposits of $100 or more....................... 492 818
Other time deposits................................. 1,743 2,546
Other borrowings........................................ 677 86
------- ------
Total interest expense.......................... 4,209 4,639
------- ------
Net interest income............................. 4,576 6,012
Provision for possible loan losses.......................... 1,150 3,345
------- ------
Net interest income after provision for possible
loan losses................................... 3,426 2,667
------- ------
Noninterest income:
Service charges on deposit accounts and customer service
fees................................................... 581 639
Other income............................................ 921 492
------- ------
Total noninterest income........................ 1,502 1,131
------- ------
Noninterest expense:
Salaries and employee benefits.......................... 1,705 3,916
Occupancy, net of rental income......................... 668 1,318
Furniture and equipment................................. 309 483
Federal Deposit Insurance Corporation premiums.......... 281 498
Postage, printing and supplies.......................... 440 195
Data processing fees.................................... 304 61
Legal, examination and professional fees................ 1,153 793
Losses and expenses on foreclosed real estate, net of
gains.................................................. 952 2,410
Other expenses.......................................... 722 1,143
------- ------
Total noninterest expense....................... 6,534 10,097
------- ------
Income (loss) before benefit (provision) for
income taxes.................................. (1,606) (6,299)
Provision (benefit) for income taxes........................ (732) 2
------- ------
Net income (loss)............................... $ (874) (6,301)
======= ======
Income (loss) per common shares............................. (0.01) (1.35)
======= ======
Weighted average shares of common stock and common stock
equivalents outstanding (in thousands).................... 87,778 4,675
======= ======
</TABLE>
F-67
<PAGE> 160
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................... 2
Risk Factors................................................. 7
First Banks.................................................. 13
Use of Proceeds.............................................. 13
Market for the Preferred Securities.......................... 14
Accounting Treatment......................................... 14
Capitalization............................................... 15
Selected Consolidated Financial Data......................... 16
Management's Discussion and Analysis......................... 17
Business..................................................... 49
Supervision and Regulation................................... 52
Description of the Preferred Securities...................... 58
Description of the Subordinated Debentures................... 67
Description of the Guarantee................................. 75
Relationship Among the Preferred Securities, the Subordinated
Debentures and the Guarantee............................... 77
Description of Other Capital Stock........................... 78
Certain Federal Income Tax Consequences...................... 81
ERISA Considerations......................................... 84
Underwriting................................................. 84
Validity of Securities....................................... 85
Experts...................................................... 86
Incorporation of Certain Documents by Reference.............. 86
Available Information........................................ 86
Index to Consolidated Financial Statements................... F-1
</TABLE>
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST
BANKS, FIRST CAPITAL OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FIRST BANKS SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,400,000 PREFERRED SECURITIES
FIRST PREFERRED
CAPITAL TRUST
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED
HEREIN, BY
FIRST
BANK
FIRST BANKS, INC.
-------------------
$60,000,000
% SUBORDINATED DEBENTURES
OF
FIRST BANKS, INC.
--------------------
Prospectus
, 1997
--------------------
STIFEL, NICOLAUS & COMPANY
INCORPORATED
- --------------------------------------------------------------------------------
<PAGE> 161
FIRST BANKS, INC.
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14--OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee................................................... $20,909.09
NASD Filing Fee........................................................
Nasdaq Listing Fee.....................................................
Blue Sky Qualification Fees and Expenses...............................
Accounting Fees and Expenses...........................................
Legal Fees and Expenses................................................
Printing and Engraving Expenses........................................
Transfer and Registrar Fees............................................
Miscellaneous..........................................................
----------
Total.......................................................... $
==========
</TABLE>
ITEM 15--INDEMNIFICATION OF DIRECTORS AND OFFICERS
Mo. Rev. Stat. 351.355 enumerates standards of conduct that are requisite
to a corporation's obligation to provide indemnity to officers and directors
and allows a corporation to indemnify based on a lower standard of conduct, if
authorized in the corporation's articles of incorporation or any amendment
thereto.
Article Nine of the Restated Articles of Incorporation of First Banks
provides that First Banks shall indemnify its officers and directors in all
actions, whether derivative, nonderivative, criminal, administrative or
investigative, if such party's conduct is not finally adjudged to be gross
negligence or willful misconduct. This is a lower standard than that set forth
in the statute described in the preceding sentence.
Pursuant to a policy of directors' and officers' liability insurance, with
total annual limits of $15 million, officers and directors of First Banks are
insured, subject to the limits, retention, exceptions and other terms and
conditions of such policy, against liability for any actual or alleged error,
misstatement, misleading statement, act or omission, or neglect or breach of
duty by the directors or officers of First Banks in the discharge of their
duties solely in their capacity as directors or officers of First Banks,
individually or collectively, or any matter claimed against them solely by
reason of their being directors or officers of First Banks.
Under the Trust Agreement, First Banks will agree to indemnify each of the
Trustees of First Capital or any predecessor Trustee for First Capital, and to
hold each Trustee harmless against, any loss, damage, claims, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the Trust Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties under the Trust Agreement.
First Banks and First Capital have agreed to indemnify the Underwriters,
and the Underwriters have agreed to indemnify First Capital and First Banks
against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended. Reference is made to the Underwriting Agreement filed
as Exhibit 1 herewith.
ITEM 16--EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits--See Exhibit Index on Page II-5 hereof.
(b) Financial Statement Schedules--Not applicable as all required
information is contained in the financial statements and the notes thereto
or in the selected financial data.
ITEM 17--UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, (the ``Act'') may be permitted to directors, officers and
controlling persons of First Banks pursuant to the provisions described under
II-1
<PAGE> 162
``Item 15--Indemnification of Directors and Officers'' above, or otherwise,
First Banks has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by First Banks
of expenses incurred or paid by a director, officer or controlling person of
First Banks in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, First Banks will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
First Banks hereby undertakes that: (1) For purposes of determining any
liability under the Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by First Banks pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and (2) For
the purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 163
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, First Banks
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Louis, State of Missouri on December 20, 1996.
FIRST BANKS, INC.
By: /s/ JAMES F. DIERBERG
-----------------------------------------
James F. Dierberg, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of Securities Act of 1933, First Preferred
Capital Trust certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis, and the State of Missouri on
December 20, 1996.
FIRST PREFERRED CAPITAL TRUST
By: /s/ JAMES F. DIERBERG
-----------------------------------------
Trustee
By: /s/ ALLEN H. BLAKE
-----------------------------------------
Trustee
By: /s/ LAURENCE J. BROST
-----------------------------------------
Trustee
II-3
<PAGE> 164
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James F. Dierberg, Allen H. Blake and Laurence
J. Brost and each of them (with full power to each of them to act alone), his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES F. DIERBERG Chairman of the Board of Directors, December 20, 1996
- -------------------------------------- President and Chief Executive Officer
James F. Dierberg (Principal Executive Officer)
/s/ ALLEN H. BLAKE Executive Vice President, Chief December 20, 1996
- -------------------------------------- Financial Officer, Secretary and
Allen H. Blake Director (Principal Financial Officer)
/s/ LAURENCE J. BROST Vice President and Controller December 20, 1996
- -------------------------------------- (Principal Accounting Officer)
Laurence J. Brost
/s/ DONALD GUNN, JR. Director December 20, 1996
- --------------------------------------
Donald Gunn, Jr.
/s/ GEORGE MARKOS Director December 20, 1996
- --------------------------------------
George Markos
</TABLE>
II-4
<PAGE> 165
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1 Form of Underwriting Agreement (including the Agreement Among the Underwriters).
4.1 Form of Indenture.
4.2 Form of Subordinated Debenture (included as an exhibit to Exhibit 4.1).
4.3 Certificate of Trust of First Preferred Capital Trust.
4.4 Trust Agreement of First Preferred Capital Trust.
4.5 Form of Amended and Restated Trust Agreement.
4.6 Form of Preferred Security Certificate of First Preferred Capital Trust (included as an exhibit to Exhibit 4.5.).
4.7 Form of Preferred Securities Guarantee Agreement for First Preferred Capital Trust.
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.5.).
5.1 Opinion of Lewis, Rice & Fingersh, L.C. as to the validity of the issuance of the Subordinated Debentures.
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity of the issuance of the Preferred
Securities to be issued by First Capital Trust.
8.1 Opinion of Lewis, Rice & Fingersh, L.C. as to certain federal income tax matters.
10.1 Shareholders' Agreement by and among James F. Dierberg, II and Mary W. Dierberg, Trustees under Living Trust of
James F. Dierberg II, dated July 24, 1989, Michael James Dierberg and Mary W. Dierberg, Trustees under the Living
Trust of Michael James Dierberg, dated July 24, 1989; Ellen C. Dierberg and Mary W. Dierberg, Trustees under
Living Trust of Ellen C. Dierberg dated July 17, 1992, and First Banks, Inc. (incorporated herein by reference to
Exhibit 10.3 to First Banks, Inc.'s Registration Statement on Form S-1 (File No. 33-50576) dated August 6, 1992).
10.2 Comprehensive Banking System License and Service Agreement dated as of July 24, 1991, by and between First Banks,
Inc. and Fiserv CIR, Inc. (incorporated herein by reference to Exhibit 10.4 to First Banks, Inc.'s Registration
Statement on Form S-1 (File No. 33-50576) dated August 6, 1992).
10.3 Facilities Management Agreement dated December 30, 1992 by and among FirstServ, Inc. and First Services, L.P.
(incorporated herein by reference to Exhibit 10(i) to First Banks, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1992).
10.4 Employment Agreement by and among the Company, First Bank-Missouri and John A. Schreiber, dated September 21, 1992
(incorporated herein by reference to Exhibit 10(iii)(A) to the Company's Form 10-K for the year ended December
31, 1993).
10.5 Employment Agreement by and among First Banks, Inc., First Bank-Missouri and Donald W. Williams dated March 22,
1993 (incorporated herein by reference to Exhibit 10(iii)(A) to First Banks, Inc.'s Form 10-K for the year ended
December 31, 1993).
10.6 $90,000,000 Secured Credit Agreement, dated as of July 18, 1996, among First Banks, Inc., The Boatmen's National
Bank of St. Louis, Harris Trust and Savings Bank, American National Bank and Trust Company, The Frost National
Bank and The Boatmen's National Bank of St. Louis, as Agent.
10.7 Stock Purchase and Operating Agreement by and between First Banks, Inc. and BancTEXAS, Inc. dated May 19, 1994
(incorporated herein by reference to Exhibit 2 to First Banks, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994).
11.1 Statement Regarding Computation of Per Share Earnings.
II-5
<PAGE> 166
EXHIBIT
NUMBER DESCRIPTION
------- -----------
12.1 Statement Regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
16.1 Letter from Arthur Andersen LLP re change in certifying accountant.
23.1 Consents of KPMG Peat Marwick LLP, Independent Auditors.
23.2 Consent of Arthur Andersen LLP, Independent Auditors.
23.3 Consent of Lewis, Rice & Fingersh, L.C. (to be included in their opinion filed herewith as Exhibit 5.1).
23.4 Consent of Richards, Layton & Finger (to be included in their opinion filed herewith as Exhibit 5.2).
24 Power of Attorney (included on the signature page).
25.1 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under Amended and
Restated Trust Agreement.
25.3 Form T-1 Statement of Eligibility of State Street Bank and Trust Company to act as trustee under the Preferred
Securities Guarantee Agreement.
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1.1
<PAGE> 2
2,400,000 Preferred Securities
First Preferred Capital Trust
---% Cumulative Trust Preferred Securities
(Liquidation Amount of $25 per Preferred Security)
UNDERWRITING AGREEMENT
----------------------
---------- --, 1997
STIFEL, NICOLAUS & COMPANY, INCORPORATED
As Representative of the Several Underwriters
named in Schedule I hereto
500 North Broadway
St. Louis, Missouri 63102
Dear Sirs:
First Banks, Inc., a Missouri corporation (the
"Company") and its financing subsidiary, First Preferred Capital
Trust, a Delaware business trust (the "Trust", and hereinafter
together with the Company, the "Offerors"), propose that the
Trust issue and sell to the several underwriters listed on
Schedule I hereto (the "Underwriters"), pursuant to the terms of
this Agreement, 2,400,000 of the Trust's ----% Cumulative Trust
Preferred Securities, with a liquidation amount of $25.00 per
preferred security (the "Preferred Securities"), to be issued
under the Trust Agreement (as hereinafter defined), the terms of
which are more fully described in the Prospectus (as hereinafter
defined). The aforementioned 2,400,000 Preferred Securities to
be sold to the Underwriter are herein called the "Firm Preferred
Securities". Solely for the purpose of covering over-allotments
in the sale of the Firm Preferred Securities, the Offerors
further propose that the Trust issue and sell to the
Underwriters, at their option, up to an additional 360,000
Preferred Securities (the "Option Preferred Securities") upon
exercise of the over-allotment option granted in Section 1
hereof. The Firm Preferred Securities and any Option Preferred
Securities are herein collectively referred to as the "Designated
Preferred Securities". You are acting as representative of the
Underwriters and in such capacity are sometimes herein referred
to as the "Representative."
The Offerors hereby confirm as follows their agreement
with each of the Underwriters in connection with the proposed
purchase of the Designated Preferred Securities.
1. SALE, PURCHASE AND DELIVERY OF DESIGNATED PREFERRED
---------------------------------------------------
SECURITIES; DESCRIPTION OF DESIGNATED PREFERRED SECURITIES.
- -----------------------------------------------------------
(a) On the basis of the representations, warranties
and agreements herein contained, and subject to the terms and
conditions herein set forth, the Offerors hereby agree that the
Trust shall issue and sell to each of the Underwriters and each
of the Underwriters agrees,
<PAGE> 3
severally and not jointly, to purchase from the Trust, at a purchase price of
$25.00 per share (the "Purchase Price"), the respective number of Firm
Preferred Securities set forth opposite the name of such Underwriter in
Schedule I hereto. Because the proceeds from the sale of the
Firm Preferred Securities will be used to purchase from the
Company its Subordinated Debentures (as hereinafter defined and
as described in the Prospectus), the Company shall pay to each
Underwriter a commission of $---- per Firm Preferred Security
purchased (the "Firm Preferred Securities Commission"). The
Representative may by notice to the Company amend Schedule I to
add, eliminate or substitute names set forth therein (other than
to eliminate the name of the Representative) and to amend the
number of firm Preferred Securities to be purchased by any firm
or corporation listed thereon, provided that the total number of
Firm Preferred Securities listed on Schedule I shall equal
2,400,000.
In addition, on the basis of the representations,
warranties and agreements herein contained and subject to the
terms and conditions herein set forth, the Trust hereby grants to
the Underwriters, severally and not jointly, an option to
purchase all or any portion of the 360,000 Option Preferred
Securities, and upon the exercise of such option in accordance
with this Section 1, the Offerors hereby agree that the Trust
shall issue and sell to the Underwriters, severally and not
jointly, all or any portion of the Option Preferred Securities at
the same Purchase Price per share paid for the Firm Preferred
Securities. If any Option Preferred Securities are to be
purchased, each Underwriter, severally and not jointly, agrees to
purchase from the Trust that proportion (subject to adjustment as
you may determine to avoid fractional shares) of the number of
Option Preferred Securities to be purchased that the number of
Firm Preferred Securities set forth opposite the name of such
Underwriter in Schedule I hereto (or such number increased as set
forth in Section 9 hereof) bears to 2,400,000. Because the
proceeds from the sale of the Option Preferred Securities will be
used to purchase from the Company its Subordinated Debentures,
the Company shall pay to the Underwriters a commission of $------
per Option Preferred Security for each Option Preferred Security
purchased (the "Option Preferred Securities Commission"). The
option hereby granted (the "Option") shall expire 30 days after
the date upon which the Registration Statement (as hereinafter
defined) becomes effective and may be exercised only for the
purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Firm
Preferred Securities. The Option may be exercised in whole or in
part at any time (but not more than once) by you giving notice
(confirmed in writing) to the Trust setting forth the number of
Option Preferred Securities as to which the Underwriters are
exercising the Option and the time, date and place for payment
and delivery of certificates for such Option Preferred
Securities. Such time and date of payment and delivery for the
Option Preferred Securities (the "Option Closing Date") shall be
determined by you, but shall not be earlier than two nor later
than five full business days after the exercise of such Option,
nor in any event prior to the Closing Date (as hereinafter
defined). The Option Closing Date may be the same as the Closing
Date.
Payment of the Purchase Price and the Firm Preferred
Securities Commission and delivery of certificates for the Firm
Preferred Securities shall be made at the offices of Stifel,
Nicolaus & Company, Incorporated, 500 North Broadway, St. Louis,
Missouri 63102, or such other place as shall be agreed to by you
and the Offerors, at 10:00 a.m., St. Louis time, on ----- --,
1997, or at such other time not more than five full business days
thereafter as the Offerors and you shall determine (the "Closing
Date"). If the Underwriters exercise the option to
2
<PAGE> 4
purchase any or all of the Option Preferred Securities, payment of the
Purchase Price and Option Preferred Securities Commission and
delivery of certificates for such Option Preferred Securities
shall be made on the Option Closing Date at the Underwriters'
offices, or at such other place as the Offerors and you shall
determine. Such payments shall be made to an account designated
by the Trust by wire transfer or certified or bank cashier's
check, in clearing house or similar next day available funds, in
the amount of the Purchase Price therefor, against delivery by or
on behalf of the Trust to you for the respective accounts of the
several Underwriters of certificates for the Designated Preferred
Securities to be purchased by the Underwriters.
The Agreement contained herein with respect to the
timing of the Closing Date and Option Closing Date is intended
to, and does, constitute an express agreement, as described in
Rule 15c6-1(c) and (d) promulgated under the 1934 Act (as defined
herein), for a settlement date other than four business days
after the date of the contract.
Certificates for Designated Preferred Securities to be
purchased by the Underwriters shall be delivered by the Offerors
in fully registered form in the name of Cede & Co., the nominee
of the Depositary (as defined in the Prospectus) which shall act
as securities depositary for the Designated Preferred Securities,
not later than 12:00 noon, St. Louis time, two business days
prior to the Closing Date and, if applicable, the Option Closing
Date. Certificates for Designated Preferred Securities to be
purchased by the Underwriters shall be made available by the
Offerors to you for inspection, checking and packaging at the
offices of the Depositary not later than 1:00 p.m., St. Louis
time, on the last business day prior to the Closing Date and, if
applicable, on the last business day prior to the Option Closing
Date.
Time shall be of the essence, and delivery of the
certificates for the Designated Preferred Securities at the time
and place specified pursuant to this Agreement is a further
condition of the obligations of each Underwriter hereunder.
(b) The Offerors propose that the Trust issue the
Designated Preferred Securities pursuant to an Amended and
Restated Trust Agreement among State Street Bank and Trust
Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee, the Administrative Trustees named therein,
(collectively, the "Trustees"), and the Company, in substantially
the form heretofore delivered to the Underwriters, said Agreement
being hereinafter referred to as the "Trust Agreement". In
connection with the issuance of the Designated Preferred
Securities, the Company proposes (i) to issue its Subordinated
Debentures ( the "Debentures") pursuant to an Indenture, dated as
of -------------, 1997, between the Company and State Street Bank
and Trust Company, as Trustee (the "Indenture") and (ii) to
guarantee certain payments on the Designated Preferred Securities
pursuant to a Guarantee Agreement between the Company and State
Street Bank and Trust Company, as guarantee trustee (the
"Guarantee"), to the extent described therein.
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
(a) The Offerors jointly and severally represent and
warrant to, and agree with, each of the Underwriters that:
3
<PAGE> 5
(i) The reports filed with the Securities and
Exchange Commission (the "Commission") by the Company under
the Securities Exchange Act of 1934, as amended (the "1934
Act") and the rules and regulations thereunder (the "1934
Act Regulations") at the time they were filed with the
Commission, complied as to form in all material respects
with the requirements of the 1934 Act and the 1934 Act
Regulations and did not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were
made, not misleading.
(ii) The Offerors have prepared and filed with the
Commission a registration statement on Form S-2 (File
Numbers 333------ and 333-------01) for the registration of
the Designated Preferred Securities, the Guarantee and
$69,000,000 aggregate principal amount of Debentures under
the Securities Act of 1933, as amended (the "1933 Act"),
including the related prospectus subject to completion, and
one or more amendments to such registration statement may
have been so filed, in each case in conformity in all
material respects with the requirements of the 1933 Act, the
rules and regulations promulgated thereunder (the "1933 Act
Regulations") and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and the rules and
regulations thereunder. Copies of such registration
statement, including any amendments thereto, each
Preliminary Prospectus (as defined herein) contained therein
and the exhibits, financial statements and schedules to such
registration statement, as finally amended and revised, have
heretofore been delivered by the Offerors to the
Representative. After the execution of this Agreement, the
Offerors will file with the Commission (A) if such
registration statement, as it may have been amended, has
been declared by the Commission to be effective under the
1933 Act, a prospectus in the form most recently included in
an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration
statement), with such changes or insertions as are required
by Rule 430A of the 1933 Act Regulations ("Rule 430A") or
permitted by Rule 424(b) of the 1933 Act Regulations ("Rule
424(b)") and as have been provided to and not objected to by
the Representative prior to (or as are agreed to by the
Representative subsequent to) the execution of this
Agreement, or (B) if such registration statement, as it may
have been amended, has not been declared by the Commission
to be effective under the 1933 Act, an amendment to such
registration statement, including a form of final
prospectus, necessary to permit such registration statement
to become effective, a copy of which amendment has been
furnished to and not objected to by the Representative prior
to (or is agreed to by the Representative subsequent to) the
execution of this Agreement. As used in this Agreement, the
term "Registration Statement" means such registration
statement, as amended at the time when it was or is declared
effective under the 1933 Act, including (1) all financial
schedules and exhibits thereto, (2) all documents (or
portions thereof) incorporated by reference therein filed
under the 1934 Act, and (3) any information omitted
therefrom pursuant to Rule 430A and included in the
Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion
filed with such registration statement or any amendment
thereto including all documents (or portions thereof)
incorporated by reference therein under the 1934 Act
(including the prospectus subject to completion, if any,
included in the Registration Statement and each prospectus
filed pursuant to Rule 424(a) under the 1933 Act); and the
4
<PAGE> 6
term "Prospectus" means the prospectus first filed with the
Commission pursuant to Rule 424(b)(1) or (4) or, if no
prospectus is required to be filed pursuant to Rule
424(b)(1) or (4), the prospectus included in the
Registration Statement, in each case including the financial
schedules and all documents (or portions thereof)
incorporated by reference therein under the 1934 Act. The
date on which the Registration Statement becomes effective
is hereinafter referred to as the "Effective Date."
(iii) The documents incorporated by reference
in the Preliminary Prospectus or Prospectus or from which
information is so incorporated by reference, when they
became effective or were filed with the Commission, as the
case may be, complied in all material respects with the
requirements of the 1934 Act and the 1934 Act Regulations,
and when read together and with the other information in the
Preliminary Prospectus or Prospectus, as the case may be, at
the time the Registration Statement became or becomes
effective and at the Closing Date and any Option Closing
Date, did not or will not, as the case may be, contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading.
(iv) No order preventing or suspending the use of
any Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) has been issued by
the Commission, nor has the Commission, to the knowledge of
the Offerors, threatened to issue such an order or
instituted proceedings for that purpose. Each Preliminary
Prospectus, at the time of filing thereof, (A) complied in
all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and (B) did not contain an
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; provided,
--------
however, that this representation and warranty does not
-------
apply to statements or omissions made in reliance upon and
in conformity with information furnished in writing to the
Offerors by any of the Underwriters expressly for inclusion
in the Prospectus beneath the heading "Underwriting" (such
information referred to herein as the "Underwriters'
Information").
(v) At the Effective Date and at all times
subsequent thereto, up to and including the Closing Date
and, if applicable, the Option Closing Date, the
Registration Statement and any post-effective amendment
thereto (A) complied and will comply in all material
respects with the requirements of the 1933 Act, the 1933 Act
Regulations and the Trust Indenture Act (and the rules and
regulations thereunder) and (B) did not and will not contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, not misleading. At the
Effective Date and at all times when the Prospectus is
required to be delivered in connection with offers and sales
of Designated Preferred Securities, including, without
limitation, the Closing Date and, if applicable, the Option
Closing Date, the Prospectus, as amended or supplemented,
(A) complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act
Regulations and the Trust Indenture Act (and the rules and
regulations thereunder) and (B) did not contain and will not
contain an untrue statement of a material fact or omit to
state any material fact required to
5
<PAGE> 7
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty does not apply
-----------------
to Underwriters' Information.
(vi) (A) The Company is duly organized, validly
existing and in good standing under the laws of the State of
Missouri, with full corporate and other power and authority
to own, lease and operate its properties and conduct its
business as described in and contemplated by the
Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and as currently being conducted and is duly
registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHC Act").
(B) The Trust has been duly created and is
validly existing as a statutory business trust in good
standing under the Delaware Business Trust Act with the
power and authority (trust and other) to own its property
and conduct its business as described in the Registration
Statement and Prospectus, to issue and sell its common
securities (the "Common Securities") to the Company pursuant
to the Trust Agreement, to issue and sell the Designated
Preferred Securities, to enter into and perform its
obligations under this Agreement and to consummate the
transactions herein contemplated; the Trust has no
subsidiaries and is duly qualified to transact business and
is in good standing in each jurisdiction in which the
conduct of its business or the ownership of its property
requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not
have a material adverse effect on the Trust; the Trust has
conducted and will conduct no business other than the
transactions contemplated by this Agreement and described in
the Prospectus; the Trust is not a party to or bound by any
agreement or instrument other than this Agreement, the Trust
Agreement and the agreements and instruments contemplated by
the Trust Agreement and described in the Prospectus; the
Trust has no liabilities or obligations other than those
arising out of the transactions contemplated by this
Agreement and the Trust Agreement and described in the
Prospectus; the Trust is not a party to or subject to any
action, suit or proceeding of any nature; the Trust is not,
and at the Closing Date or any Option Closing Date will not
be, to the knowledge of the Offerors, classified as an
association taxable as a corporation for United States
federal income tax purposes; and the Trust is, and as of the
Closing Date or any Option Closing Date will be, treated as
a consolidated subsidiary of the Company pursuant to
generally accepted accounting principles.
(vii) The Company has ---- subsidiaries. They
are listed on Exhibit A attached hereto and incorporated
---------
herein (the "Subsidiaries"). The Company does not own or
control, directly or indirectly, more than 5% of any class
of equity security of any corporation, association or other
entity other than the Subsidiaries. First Bank (St. Louis
County, Missouri), First Bank (O'Fallon, Illinois), First
Bank FSB, First Bank & Trust, BankTEXAS, N.A., First
Commercial Bank and Sunrise Bank of California are
collectively referred to as the "Banks". Each Subsidiary is
a bank, bank holding company or corporation duly
incorporated, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation.
Each such Subsidiary has full corporate and other power and
authority to own, lease and operate its properties and to
conduct its
6
<PAGE> 8
business as described in and contemplated by the
Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and as currently being conducted. The deposit
accounts of each Bank are insured by the Bank Insurance Fund
administered by the Federal Deposit Insurance Corporation
(the "FDIC") up to the maximum amount provided by law,
except to the extent the Prospectus discloses such deposit
accounts are insured by the Savings Association Insurance
Fund administered by the FDIC ("SAIF") and to such extent
the deposit accounts are so insured up to the maximum amount
provided by law; and no proceedings for the modification,
termination or revocation of any such insurance are pending
or, to the knowledge of the Offerors, threatened.
(viii) The Company and each of the Subsidiaries
is duly qualified to transact business as a foreign
corporation and is in good standing in each other
jurisdiction in which it owns or leases property or conducts
its business so as to require such qualification and in
which the failure to so qualify would, individually or in
the aggregate, have a material adverse effect on the
condition (financial or otherwise), earnings, business,
prospects or results of operations of the Company and the
Subsidiaries on a consolidated basis. All of the issued and
outstanding shares of capital stock of the Subsidiaries (A)
have been duly authorized and are validly issued, (B) are
fully paid and nonassessable except to the extent such
shares may be deemed assessable under 12 U.S.C. Section 55
or 12 U.S.C. Section 1831o, and (C) except as disclosed in
the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), are directly owned
by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, restriction upon voting
or transfer, preemptive rights, claim or equity. Except as
disclosed in the Prospectus, there are no outstanding
rights, warrants or options to acquire or instruments
convertible into or exchangeable for any capital stock or
equity securities of the Offerors or the Subsidiaries.
(ix) The capital stock of the Company and the
equity securities of the Trust conform to the description
thereof contained in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary
Prospectus). The outstanding shares of capital stock and
equity securities of each Offeror have been duly authorized
and validly issued and are fully paid and nonassessable, and
no such shares were issued in violation of the preemptive or
similar rights of any security holder of an Offeror; no
person has any preemptive or similar right to purchase any
shares of capital stock or equity securities of the
Offerors. Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding rights, options or
warrants to acquire any securities of the Offerors, and
there are no outstanding securities convertible into or
exchangeable for any such securities and no restrictions
upon the voting or transfer of any capital stock of the
Company or equity securities of the Trust pursuant to the
Company's corporate charter or bylaws, the Trust Agreement
or any agreement or other instrument to which an Offeror is
a party or by which an Offeror is bound.
(x) (A) The Trust has all requisite power and
authority to issue, sell and deliver the Designated
Preferred Securities in accordance with and upon the terms
7
<PAGE> 9
and conditions set forth in this Agreement, the Trust
Agreement, the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). All corporate and trust action
required to be taken by the Offerors for the authorization,
issuance, sale and delivery of the Designated Preferred
Securities in accordance with such terms and conditions has
been validly and sufficiently taken. The Designated
Preferred Securities, when delivered in accordance with this
Agreement, will be duly and validly issued and outstanding,
will be fully paid and nonassessable undivided beneficial
interests in the assets of the Trust, will be entitled to
the benefits of the Trust Agreement, will not be issued in
violation of or subject to any preemptive or similar rights,
and will conform to the description thereof in the
Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and the Trust Agreement. None of the Designated
Preferred Securities, immediately prior to delivery, will be
subject to any security interest, lien, mortgage, pledge,
encumbrance, restriction upon voting or transfer, preemptive
rights, claim, equity or other defect.
(B) The Debentures have been duly and
validly authorized, and, when duly and validly executed,
authenticated and issued as provided in the Indenture and
delivered to the Trust pursuant to the Trust Agreement, will
constitute valid and legally binding obligations of the
Company entitled to the benefits of the Indenture and will
conform to the description thereof contained in the
Prospectus.
(C) The Guarantee has been duly and validly
authorized, and, when duly and validly executed and
delivered to the guarantee trustee for the benefit of the
Trust, will constitute a valid and legally binding
obligation of the Company and will conform to the
description thereof contained in the Prospectus.
(xi) The Offerors and the Subsidiaries have
complied in all material respects with all federal, state
and local statutes, regulations, ordinances and rules
applicable to the ownership and operation of their
properties or the conduct of their businesses as described
in and contemplated by the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) and as currently being
conducted.
(xii) The Offerors and the Subsidiaries have
all material permits, easements, consents, licenses,
franchises and other governmental and regulatory
authorizations from all appropriate federal, state, local or
other public authorities ("Permits") as are necessary to own
and lease their properties and conduct their businesses in
the manner described in and contemplated by the Registration
Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) and as
currently being conducted in all material respects. All
such Permits are in full force and effect and each of the
Offerors and the Subsidiaries are in all material respects
complying therewith, and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or
termination thereof or will result in any other material
impairment of the rights of the holder of any such Permit,
subject in each case to such qualification as may be
adequately disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus). Such Permits contain no
8
<PAGE> 10
restrictions that would materially impair the ability of the Company or
the Subsidiaries to conduct their businesses in the manner
consistent with their past practices. Neither the Offerors
nor any of the Subsidiaries have received notice or
otherwise has knowledge of any proceeding or action relating
to the revocation or modification of any such Permit.
(xiii) Neither of the Offerors nor any of the
Subsidiaries is in breach or violation of their corporate
charter, by-laws or other governing documents (including
without limitation, the Trust Agreement). Neither of the
Offerors nor any of the Subsidiaries are, and to the
knowledge of the Offerors no other party is, in violation,
breach or default (with or without notice or lapse of time
or both) in the performance or observance of any term,
covenant, agreement, obligation, representation, warranty or
condition contained in (A) any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note,
lease, franchise, license, Permit or any other agreement or
instrument to which it is a party or by which it or any of
its properties may be bound, which such breach, violation or
default could have material adverse consequences to the
Offerors and the Subsidiaries on a consolidated basis, and
to the knowledge of the Offerors, no other party has
asserted that the Offerors or any of the Subsidiaries is in
such violation, breach or default (provided that the
foregoing shall not apply to defaults by borrowers from the
Banks), or (B) except as disclosed in the Prospectus (or, if
the Prospectus is not in existence, the most recent
Preliminary Prospectus), any order, decree, judgment, rule
or regulation of any court, arbitrator, government, or
governmental agency or instrumentality, domestic or foreign,
having jurisdiction over the Offerors or the Subsidiaries or
any of their respective properties the breach, violation or
default of which could have a material adverse effect on the
condition, financial or otherwise, earnings, affairs,
business, prospects, or results of operations of the
Offerors and the Subsidiaries on a consolidated basis.
(xiv) The execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated by this Agreement, the Trust Agreement, the
Registration Statement and the Prospectus (or, if the
Prospectus in not in existence, the most recent Preliminary
Prospectus) do not and will not conflict with, result in the
creation or imposition of any material lien, claim, charge,
encumbrance or restriction upon any property or assets of
the Offerors or the Subsidiaries or the Designated Preferred
Securities pursuant to, constitute a breach or violation of,
or constitute a default under, with or without notice or
lapse of time or both, any of the terms, provisions or
conditions of the charter or by-laws of the Company or the
Subsidiaries, the Trust Agreement, the Guarantee, the
Indenture, any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease, franchise, license,
Permit or any other agreement or instrument to which the
Offerors or the Subsidiaries is a party or by which any of
them or any of their respective properties may be bound or
any order, decree, judgment, rule or regulation of any
court, arbitrator, government, or governmental agency or
instrumentality, domestic or foreign, having jurisdiction
over the Offerors or the Subsidiaries or any of their
respective properties which conflict, creation, imposition,
breach, violation or default would have either singly or in
the aggregate a material adverse effect on the condition,
financial or otherwise, earnings, affairs, business,
prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated
9
<PAGE> 11
basis. No authorization, approval, consent or order of, or filing,
registration or qualification with, any person (including, without
limitation, any court, governmental body or authority) is
required in connection with the transactions contemplated by
this Agreement, the Trust Agreement, the Indenture, the
Guarantee, the Registration Statement and the Prospectus (or
such Preliminary Prospectus), except such as may be required
under the 1933 Act, and such as may be required under state
securities laws in connection with the purchase and
distribution of the Designated Preferred Securities by the
Underwriters. No authorization, approval, consent or order
of or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body
or authority) is required in connection with the
transactions contemplated by this Agreement, the Trust
Agreement, the Indenture, the Guarantee, the Registration
Statement and the Prospectus, except such as have been
obtained under the 1933 Act, and such as may be required
under state securities laws or Interpretations or Rules of
the National Association of Securities Dealers, Inc.
("NASD") in connection with the purchase and distribution of
the Designated Preferred Securities by the Underwriters.
(xv) The Offerors have all requisite corporate
power and authority to enter into this Agreement and this
Agreement has been duly and validly authorized, executed and
delivered by the Offerors and constitutes the legal, valid
and binding agreement of the Offerors, enforceable against
the Offerors in accordance with its terms, except as the
enforcement thereof may be limited by general principles of
equity and by bankruptcy or other laws relating to or
affecting creditors' rights generally and except as any
indemnification or contribution provisions thereof may be
limited under applicable securities laws. Each of the
Indenture, the Trust Agreement, the Guarantee and the
Agreement as to Expenses and Liabilities (the "Expense
Agreement") has been duly authorized by the Company, and,
when executed and delivered by the Company on the Closing
Date, each of said agreements will constitute a valid and
legally binding obligation of the Company and will be
enforceable against the Company in accordance with its
terms, except as the enforcement thereof may be limited by
general principles of equity and by bankruptcy or other laws
relating to or affecting creditors' rights generally and
except as any indemnification or contribution provisions
thereof may be limited under applicable securities laws.
Each of the Indenture, the Trust Agreement and the Guarantee
has been duly qualified under the Trust Indenture Act and
will conform to the description thereof contained in the
Prospectus.
(xvi) The Company and the Subsidiaries have
good and marketable title in fee simple to all real property
and good title to all personal property owned by them and
material to their business, in each case free and clear of
all security interests, liens, mortgages, pledges,
encumbrances, restrictions, claims, equities and other
defects except such as are referred to in the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) or such as do not materially affect
the value of such property in the aggregate and do not
materially interfere with the use made or proposed to be
made of such property; and all of the leases under which the
Company or the Subsidiaries hold real or personal property
are valid, existing and enforceable leases and in full force
and effect with such exceptions as are not material and do
not materially interfere with the use made or proposed to be
made of such real or personal property, and
10
<PAGE> 12
neither the Company nor any of the Subsidiaries is in default in any
material respect of any of the terms or provisions of any leases.
(xvii) KPMG Peat Marwick LLP, who have
certified certain of the consolidated financial statements
of the Company and the Subsidiaries including the notes
thereto, included in the Registration Statement and
Prospectus, are independent public accountants with respect
to the Company and the Subsidiaries, as required by the 1933
Act and the 1933 Act Regulations.
(xviii) The consolidated financial statements
including the notes thereto, included in the Registration
Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) with
respect to the Company and the Subsidiaries comply in all
material respects with the 1933 Act and the 1933 Act
Regulations and present fairly the consolidated financial
position of the Company and the Subsidiaries as of the dates
indicated and the consolidated results of operations, cash
flows and shareholders' equity of the Company and the
Subsidiaries for the periods specified and have been
prepared in conformity with generally accepted accounting
principles applied on a consistent basis. The selected and
summary consolidated financial data concerning the Offerors
and the Subsidiaries included in the Registration Statement
and the Prospectus (or such Preliminary Prospectus) comply
in all material respects with the 1933 Act and the 1933 Act
Regulations, present fairly the information set forth
therein, and have been compiled on a basis consistent with
that of the consolidated financial statements of the
Offerors and the Subsidiaries in the Registration Statement
and the Prospectus (or such Preliminary Prospectus). The
other financial, statistical and numerical information
included in the Registration Statement and the Prospectus
(or such Preliminary Prospectus) comply in all material
respects with the 1933 Act and the 1933 Act Regulations,
present fairly the information shown therein, and to the
extent applicable have been compiled on a basis consistent
with the consolidated financial statements of the Company
and the Subsidiaries included in the Registration Statement
and the Prospectus (or such Preliminary Prospectus).
(xix) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), except as otherwise
stated therein:
(A) neither of the Offerors nor any of the
Subsidiaries have sustained any loss or interference
with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action,
order or decree which is material to the condition
(financial or otherwise), earnings, business, prospects
or results of operations of the Offerors and the
Subsidiaries on a consolidated basis;
(B) there has not been any material adverse
change in, or any development which is reasonably
likely to have a material adverse effect on, the
condition (financial or otherwise), earnings, business,
prospects or results of operations of the Offerors and
the Subsidiaries on a consolidated basis, whether or
not arising in the ordinary course of business;
11
<PAGE> 13
(C) neither of the Offerors nor any of the
Subsidiaries have incurred any liabilities or
obligations, direct or contingent, or entered into any
material transactions, other than in the ordinary
course of business which is material to the condition
(financial or otherwise), earnings, business, prospects
or results of operations of the Offerors and the
Subsidiaries on a consolidated basis;
(D) neither of the Offerors have declared or
paid any dividend, and neither of the Offerors nor any
of the Subsidiaries have become delinquent in the
payment of principal or interest on any outstanding
borrowings; and
(E) there has not been any change in the
capital stock, equity securities, long-term debt,
obligations under capital leases or, other than in the
ordinary course of business, short-term borrowings of
the Offerors or the Subsidiaries.
(xx) Except as set forth in the Registration
Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), no
charge, investigation, action, suit or proceeding is pending
or, to the knowledge of the Offerors, threatened, against or
affecting the Offerors or the Subsidiaries or any of their
respective properties before or by any court or any
regulatory, administrative or governmental official,
commission, board, agency or other authority or body, or any
arbitrator, wherein an unfavorable decision, ruling or
finding could have a material adverse effect on the
consummation of this Agreement or the transactions
contemplated herein or the condition (financial or
otherwise), earnings, affairs, business, prospects or
results of operations of the Offerors and the Subsidiaries
on a consolidated basis or which is required to be disclosed
in the Registration Statement or the Prospectus (or such
Preliminary Prospectus) and is not so disclosed.
(xxi) There are no contracts or other
documents required to be filed as exhibits to the
Registration Statement by the 1933 Act or the 1933 Act
Regulations or the Trust Indenture Act (or any rules or
regulations thereunder) which have not been filed as
exhibits or incorporated by reference to the Registration
Statement, or that are required to be summarized in the
Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) that are not so
summarized.
(xxii) Neither of the Offerors has taken,
directly or indirectly, any action designed to result in or
which has constituted or which might reasonably be expected
to cause or result in stabilization or manipulation of the
price of any security of the Offerors to facilitate the sale
or resale of the Designated Preferred Securities, and
neither of the Offerors is aware of any such action taken or
to be taken by any affiliate of the Offerors.
(xxiii) The Offerors and the Subsidiaries own,
or possess adequate rights to use, all patents, copyrights,
trademarks, service marks, trade names and other rights
necessary to conduct the businesses now conducted by them in
all material respects or as described in the Prospectus (or,
if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and neither the Offerors nor the
Subsidiaries have received any notice of infringement or
conflict with asserted rights of others with respect to any
12
<PAGE> 14
patents, copyrights, trademarks, service marks, trade names
or other rights which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition
(financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis, and the Offerors do
not know of any basis for any such infringement or conflict.
(xxiv) Except as adequately disclosed in the
Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), no labor dispute
involving the Company or the Subsidiaries exists or, to the
knowledge of the Offerors, is imminent which might be
expected to have a material adverse effect on the condition
(financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis or which is required to
be disclosed in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus).
Neither the Company nor any of the Subsidiaries have
received notice of any existing or threatened labor dispute
by the employees of any of its principal suppliers,
customers or contractors which might be expected to have a
material adverse effect on the condition (financial or
otherwise), earnings, affairs, business, prospects or
results of operations of the Company and the Subsidiaries on
a consolidated basis.
(xxv) The Offerors and the Subsidiaries have
timely and properly prepared and filed all necessary
federal, state, local and foreign tax returns which are
required to be filed and have paid all taxes shown as due
thereon and have paid all other taxes and assessments to the
extent that the same shall have become due, except such as
are being contested in good faith or where the failure to so
timely and properly prepare and file would not have a
material adverse effect on the condition (financial or
otherwise), earnings, affairs, business, prospects or
results of operations of the Offerors and the Subsidiaries
on a consolidated basis. The Offerors have no knowledge of
any tax deficiency which has been or might be assessed
against the Offerors or the Subsidiaries which, if the
subject of an unfavorable decision, ruling or finding, would
have a material adverse effect on the condition (financial
or otherwise), earnings, affairs, business, prospects or
results of operations of the Offerors and the Subsidiaries
on a consolidated basis.
(xxvi) Each of the material contracts,
agreements and instruments described or referred to in the
Registration Statement or the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus) and each contract, agreement and instrument
filed as an exhibit to the Registration Statement is in full
force and effect and is the legal, valid and binding
agreement of the Offerors or the Subsidiaries, enforceable
in accordance with its terms, except as the enforcement
thereof may be limited by general principles of equity and
by bankruptcy or other laws relating to or affecting
creditors' rights generally. Except as disclosed in the
Prospectus (or such Preliminary Prospectus), to the
knowledge of the Offerors, no other party to any such
agreement is (with or without notice or lapse of time or
both) in breach or default in any material respect
thereunder.
13
<PAGE> 15
(xxvii) No relationship, direct or indirect,
exists between or among the Offerors or the Subsidiaries, on
the one hand, and the directors, officers, trustees,
shareholders, customers or suppliers of the Offerors or the
Subsidiaries, on the other hand, which is required to be
described in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) which is not adequately described
therein.
(xxviii) No person has the right to request or
require the Offerors or the Subsidiaries to register any
securities for offering and sale under the 1933 Act by
reason of the filing of the Registration Statement with the
Commission or the issuance and sale of the Designated
Preferred Securities except as adequately disclosed in the
Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xxix) The Designated Preferred Securities have
been approved for quotation on the Nasdaq National Market
subject to official notice of issuance.
(xxx) Except as described in the Prospectus
(or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), there are no contractual
encumbrances or restrictions or material legal restrictions,
on the ability of the Subsidiaries (A) to pay dividends or
make any other distributions on its capital stock or to pay
any indebtedness owed to the Company, (B) to make any loans
or advances to, or investments in, the Company or (C) to
transfer any of its property or assets to the Company.
(xxxi) Neither of the Offerors is an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company
Act").
(xxxii) The Offerors have not distributed and
will not distribute prior to the Closing Date any prospectus
in connection with the Offering, other than a Preliminary
Prospectus, the Prospectus, the Registration Statement and
the other materials permitted by the 1933 Act and the 1933
Act Regulations and reviewed by the Representative.
3. OFFERING BY THE UNDERWRITERS. After the
----------------------------
Registration Statement becomes effective or, if the Registration
Statement is already effective, after this Agreement becomes
effective, the Underwriters propose to offer the Firm Preferred
Securities for sale to the public upon the terms and conditions
set forth in the Prospectus. The Underwriters may from time to
time thereafter reduce the public offering price and change the
other selling terms, provided the proceeds to the Trust shall not
be reduced as a result of such reduction or change.
The Underwriters may reserve and sell such of the
Designated Preferred Securities purchased by the Underwriters as
the Underwriters may elect to dealers chosen by it (the "Selected
Dealers") at the public offering price set forth in the
Prospectus less the applicable Selected Dealers' concessions set
forth therein, for re-offering by Selected Dealers to the public
at the public offering price. The Underwriters may allow, and
Selected Dealers may re-allow, a concession set forth in the
Prospectus to certain other brokers and dealers.
14
<PAGE> 16
4. CERTAIN COVENANTS OF THE OFFERORS. The Offerors
------------------------------------
jointly and severally covenant with the Underwriters as follows:
(a) The Offerors shall use their best efforts to cause
the Registration Statement and any amendments thereto, if not
effective at the time of execution of this Agreement, to become
effective as promptly as possible. If the Registration Statement
has become or becomes effective pursuant to Rule 430A and
information has been omitted therefrom in reliance on Rule 430A,
then, the Offerors will prepare and file in accordance with
Rule 430A and Rule 424(b) copies of the Prospectus or, if
required by Rule 430A, a post-effective amendment to the
Registration Statement (including the Prospectus) containing all
information so omitted and will provide evidence satisfactory to
the Representative of such timely filing.
(b) The Offerors shall notify you immediately, and
confirm such notice in writing:
(i) when the Registration Statement, or any
post-effective amendment to the Registration Statement, has
become effective, or when the Prospectus or any supplement
to the Prospectus or any amended Prospectus has been filed;
(ii) of the receipt of any comments or requests
from the Commission;
(iii) of any request of the Commission to
amend or supplement the Registration Statement, any
Preliminary Prospectus or the Prospectus or for additional
information; and
(iv) of the issuance by the Commission or any
state or other regulatory body of any stop order or other
order suspending the effectiveness of the Registration
Statement, preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, or suspending the
qualification of any of the Designated Preferred Securities
for offering or sale in any jurisdiction or the institution
or threat of institution of any proceedings for any of such
purposes. The Offerors shall use their best efforts to
prevent the issuance of any such stop order or of any other
such order and if any such order is issued, to cause such
order to be withdrawn or lifted as soon as possible.
(c) The Offerors shall furnish to the Underwriters,
from time to time without charge, as soon as available, as many
copies as the Underwriters may reasonably request of (i) the
registration statement as originally filed and of all amendments
thereto, in executed form, including exhibits, whether filed
before or after the Registration Statement becomes effective,
(ii) all exhibits and documents incorporated therein or filed
therewith, (iii) all consents and certificates of experts in
executed form, (iv) each Preliminary Prospectus and all
amendments and supplements thereto, and (v) the Prospectus, and
all amendments and supplements thereto.
(d) During the time when a prospectus is required to
be delivered under the 1933 Act, the Offerors shall comply to the
best of their ability with the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations so as
to permit the completion of the distribution of the Designated
Preferred Securities as contemplated herein and in the Trust
Agreement and the Prospectus. The Offerors shall not file any
amendment to the registration
15
<PAGE> 17
statement as originally filed or to the Registration Statement and shall not
file any amendment thereto or make any amendment or supplement to any
Preliminary Prospectus or to the Prospectus of which you shall not previously
have been advised in writing and provided a copy a reasonable
time prior to the proposed filings thereof or to which you or
counsel for the Underwriter shall object. If it is necessary, in
the Company's reasonable opinion or in the reasonable opinion of
the Company's counsel to amend or supplement the Registration
Statement or the Prospectus in connection with the distribution
of the Designated Preferred Securities, the Offerors shall
forthwith amend or supplement the Registration Statement or the
Prospectus, as the case may be, by preparing and filing with the
Commission (provided the Underwriters or counsel for the
Underwriters does not reasonably object), and furnishing to you,
such number of copies as you may reasonably request of an
amendment or amendments of, or a supplement or supplements to,
the Registration Statement or the Prospectus, as the case may be
(in form and substance reasonably satisfactory to you and counsel
for the Underwriters). If any event shall occur as a result of
which it is necessary to amend or supplement the Prospectus to
correct an untrue statement of a material fact or to include a
material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
or if for any reason it is necessary at any time to amend or
supplement the Prospectus to comply with the 1933 Act and the
1933 Act Regulations, the Offerors shall, subject to the second
sentence of this subsection (d), forthwith amend or supplement
the Prospectus by preparing and filing with the Commission, and
furnishing to you, such number of copies as you may reasonably
request of an amendment or amendments of, or a supplement or
supplements to, the Prospectus (in form and substance
satisfactory to you and counsel for the Underwriters) so that, as
so amended or supplemented, the Prospectus shall not contain an
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) The Offerors shall cooperate with you and counsel
for the Underwriters in order to qualify the Designated
Preferred Securities for offering and sale under the securities
or blue sky laws of such jurisdictions as you may reasonably
request and shall continue such qualifications in effect so long
as may be advisable for distribution of the Designated Preferred
Securities; provided, however, that the Offerors shall not be
required to qualify to do business as a foreign corporation or
file a general consent to service of process in any jurisdiction
in connection with the foregoing. The Offerors shall file such
statements and reports as may be required by the laws of each
jurisdiction in which the Designated Preferred Securities have
been qualified as above. The Offerors will notify you
immediately of, and confirm in writing, the suspension of
qualification of the Designated Preferred Securities or threat
thereof in any jurisdiction.
(f) The Offerors shall make generally available to
their security holders in the manner contemplated by Rule 158 of
the 1933 Act Regulations and furnish to you as soon as
practicable, but in any event not later than 16 months after the
Effective Date, a consolidated earnings statement of the Offerors
conforming with the requirements of Section 11(a) of the 1933 Act
and Rule 158.
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(g) The Offerors shall use the net proceeds from the
sale of the Designated Preferred Securities to be sold by the
Trust hereunder in the manner specified in the Prospectus under
the caption "Use of Proceeds."
(h) For five years from the Effective Date, the
Offerors shall furnish to the Representative copies of all
reports and communications (financial or otherwise) furnished by
the Offerors to the holders of the Designated Preferred
Securities as a class, copies of all reports and financial
statements filed with or furnished to the Commission (other than
portions for which confidential treatment has been obtained from
the Commission) or with any national securities exchange or the
Nasdaq National Market and such other documents, reports and
information concerning the business and financial conditions of
the Offerors as the Representative may reasonably request, other
than such documents, reports and information for which the
Offerors has the legal obligation not to reveal to the
Representative.
(i) For a period of 30 days from the date hereof, the
Offerors shall not, directly or indirectly, offer for sale, sell
or agree to sell or otherwise dispose of any Designated Preferred
Securities, any other beneficial interests in the assets of the
Trust or any securities of the Trust or the Company that are
substantially similar to the Designated Preferred Securities,
including any guarantee of such beneficial interests or
substantially similar securities, or securities convertible into
or exchangeable for or that represent the right to receive any
such beneficial interest or substantially similar securities,
without the prior written consent of the Representative.
(j) The Offerors shall use their best efforts to cause
the Designated Preferred Securities to become quoted on the
Nasdaq National Market, or in lieu thereof a national securities
exchange, and to remain so quoted for at least five years from
the Effective Date or for such shorter period as may be specified
in a written consent of the Representative, provided this shall
not prevent the Company from redeeming the Designated Preferred
Securities pursuant to the terms of the Trust Agreement. If the
Designated Preferred Securities are exchanged for Debentures, the
Company will use its best efforts to have the Debentures promptly
listed on the Nasdaq National Market or other organization on
which the Designated Preferred Securities are then listed, and to
have the Debentures promptly registered under the Exchange Act.
(k) Subsequent to the date of this Agreement and
through the date which is the later of (i) the day following the
date on which the Underwriters' option to purchase the Option
Preferred Securities shall expire or (ii) the day following the
Option Closing Date with respect to any Option Preferred
Securities that the Underwriters shall elect to purchase, except
as described in or contemplated by the Prospectus, neither the
Offerors nor any of the Subsidiaries shall take any action (or
refrain from taking any action) which will result in the Offerors
or the Subsidiaries incurring any material liability or
obligation, direct or contingent, or enter into any material
transaction, except in the ordinary course of business, and there
will not be any material change in the financial position,
capital stock, or any material increase in long-term debt,
obligations under capital leases or short-term borrowings of the
Offerors and the Subsidiaries on a consolidated basis.
(l) The Offerors shall not, for a period of 180 days
after the date hereof, without the prior written consent of the
Representative, purchase, redeem or call for redemption,
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<PAGE> 19
or prepay or give notice of prepayment (or announce any redemption
or call for redemption, or any repayment or notice of prepayment)
of any of the Offerors' securities.
(m) The Offerors shall not take, directly or
indirectly, any action designed to result in or which has
constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any
security of the Offerors to facilitate the sale or resale of the
Designated Preferred Securities and the Offerors are not aware of
any such action taken or to be taken by any affiliate of the
Offerors.
(n) Prior to the Closing Date (and, if applicable, the
Option Closing Date), the Offerors will not issue any press
release or other communication directly or indirectly or hold any
press conference with respect to the Offerors, the Subsidiaries
or the offering of the Designated Preferred Securities (the
"Offering") without your prior written consent.
5. PAYMENT OF EXPENSES. Whether or not this Agreement
-------------------
is terminated or the sale of the Designated Preferred Securities
to the Underwriters is consummated, the Company covenants and
agrees that it will pay or cause to be paid (directly or by
reimbursement) all costs and expenses incident to the performance
of the obligations of the Offerors under this Agreement,
including:
(a) the preparation, printing, filing, delivery and
shipping of the initial registration statement, the Preliminary
Prospectus or Prospectuses, the Registration Statement and the
Prospectus and any amendments or supplements thereto, and the
printing, delivery and shipping of this Agreement and any other
underwriting documents (including, without limitation, selected
dealers agreements), the certificates for the Designated
Preferred Securities and the Preliminary and Final Blue Sky
Memoranda and any legal investment surveys and any supplements
thereto;
(b) all fees, expenses and disbursements of the
Offerors' counsel and accountants;
(c) all fees and expenses incurred in connection with
the qualification of the Designated Preferred Securities,
Debentures and the Guarantee under the securities or blue sky
laws of such jurisdictions as you may request, including all
filing fees and fees and disbursements of counsel for the
Underwriters in connection therewith, including, without
limitation, in connection with the preparation of the Preliminary
and Final Blue Sky Memoranda and any legal investment surveys and
any supplements thereto;
(d) all fees and expenses incurred in connection with
filings made with the NASD;
(e) any applicable fees and other expenses incurred in
connection with the listing of the Designated Preferred
Securities and, if applicable, the Guarantee and the Debentures
on the Nasdaq National Market;
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<PAGE> 20
(f) the cost of furnishing to you copies of the
initial registration statements, any Preliminary Prospectus, the
Registration Statement and the Prospectus and all amendments or
supplements thereto;
(g) the costs and charges of any transfer agent or
registrar and the fees and disbursements of counsel for any
transfer agent or registrar;
(h) all costs and expenses (including stock transfer
taxes) incurred in connection with the printing, issuance and
delivery of the Designated Preferred Securities to the
Underwriters;
(i) all expenses incident to the preparation,
execution and delivery of the Trust Agreements, the Indenture and
the Guarantee; and
(j) all other costs and expenses incident to the
performance of the obligations of the Company hereunder and under
the Trust Agreement that are not otherwise specifically provided
for in this Section 5.
If the sale of Designated Preferred Securities
contemplated by this Agreement is not completed for any reason
whatsoever, whether or not such termination is allowable
hereunder, the Company will pay you your accountable out-of-
pocket expenses in connection herewith or in contemplation of the
performance of your obligations hereunder, including without
limitation travel expenses, reasonable fees, expenses and
disbursements of counsel or other out-of-pocket expenses incurred
by you in connection with any discussion of the Offering or the
contents of the Registration Statement, any investigation of the
Offerors and the Subsidiaries, or any preparation for the
marketing, purchase, sale or delivery of the Designated Preferred
Securities, in each case following presentation of reasonably
detailed invoices therefor.
If the sale of Designated Preferred Securities
contemplated by this Agreement is completed, the Company shall
not be responsible for payment of fees or disbursements of
counsel for the Underwriters other than in accordance with
paragraph (c) above, or for the reimbursement of any expenses of
the Underwriters.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The
-------------------------------------------
obligations of the Underwriters to purchase and pay for the Firm
Preferred Securities and, following exercise of the option
granted by the Offerors in Section 1 of this Agreement, the
Option Preferred Securities, are subject, in your sole
discretion, to the accuracy of and compliance with the
representations and warranties and agreements of the Offerors
herein as of the date hereof and as of the Closing Date (or in
the case of the Option Preferred Securities, if any, as of the
Option Closing Date), to the accuracy of the written statements
of the Offerors made pursuant to the provisions hereof, to the
performance by the Offerors of their covenants and obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement or any amendment
thereto filed prior to the Closing Date has not been declared
effective prior to the time of execution hereof, the Registration
Statement shall become effective not later than 10:00 a.m., St.
Louis time, on the first business day following the time of
execution of this Agreement, or at such later time and
19
<PAGE> 21
date as you may agree to in writing. If required, the Prospectus and any
amendment or supplement thereto shall have been timely filed in
accordance with Rule 424(b) and Rule 430A under the 1933 Act and
Section 4(a) hereof. No stop order suspending the effectiveness
of the Registration Statement or any amendment or supplement
thereto shall have been issued under the 1933 Act or any
applicable state securities laws and no proceedings for that
purpose shall have been instituted or shall be pending, or, to
the knowledge of the Offerors or the Representative, shall be
contemplated by the Commission or any state authority. Any
request on the part of the Commission or any state authority for
additional information (to be included in the Registration
Statement or Prospectus or otherwise) shall have been disclosed
to you and complied with to your satisfaction and to the
satisfaction of counsel for the Underwriters.
(b) No Underwriter shall have advised the Company at
or before the Closing Date (and, if applicable, the Option
Closing Date) that the Registration Statement or any post-
effective amendment thereto, or the Prospectus or any amendment
or supplement thereto, contains an untrue statement of a fact
which, in your opinion, is material or omits to state a fact
which, in your opinion, is material and is required to be stated
therein or is necessary to make statements therein (in the case
of the Prospectus or any amendment or supplement thereto, in
light of the circumstances under which they were made) not
misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this
Agreement, the Trust Agreement, and the Designated Preferred
Securities, and the authorization and form of the Registration
Statement and Prospectus, other than financial statements and
other financial data, and all other legal matters relating to
this Agreement and the transactions contemplated hereby or by the
Trust Agreement shall be satisfactory in all respects to counsel
for the Underwriters, and the Offerors and the Subsidiaries shall
have furnished to such counsel all documents and information
relating thereto that they may reasonably request to enable them
to pass upon such matters.
(d) Lewis, Rice & Fingersh, L.C., counsel for the
Offerors, shall have furnished to you their signed opinion, dated
the Closing Date or the Option Closing Date, as the case may be,
in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Company has been duly incorporated and is
validly existing and in good standing under the laws of the
State of Missouri, and is duly registered as a bank holding
company under the BHC Act. Each of the Subsidiaries is duly
incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Each of the
Company and the Subsidiaries has full corporate power and
authority to own or lease its properties and to conduct its
business as such business is described in the Prospectus and
is currently conducted in all material respects. All
outstanding shares of capital stock of the Subsidiaries have
been duly authorized and validly issued and are fully paid
and nonassessable except to the extent such shares may be
deemed assessable under 12 U.S.C. Section 1831 and, to the
best of such counsel's knowledge, except as disclosed in the
Prospectus, there are no outstanding rights, options or
warrants to purchase any such shares or securities
convertible into or exchangeable for any such shares.
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<PAGE> 22
(ii) The capital stock, Debentures and Guarantee
of the Company and the equity securities of the Trust
conform to the description thereof contained in the
Prospectus in all material respects. The capital stock of
the Company authorized and issued as of September 30, 1996
is as set forth under the caption "Capitalization" in the
Prospectus, has been duly authorized and validly issued, and
is fully paid and nonassessable. The form of certificates
to evidence the Designated Preferred Securities has been
approved by the Trust and is in due and proper form and
complies with all applicable requirements. To the best of
such counsel's knowledge, there are no outstanding rights,
options or warrants to purchase, no other outstanding
securities convertible into or exchangeable for, and no
commitments, plans or arrangements to issue, any shares of
capital stock of the Company or equity securities of the
Trust, except as described in the Prospectus.
(iii) The issuance, sale and delivery of the
Designated Preferred Securities and Debentures in accordance
with the terms and conditions of this Agreement and the
Indenture have been duly authorized by all necessary actions
of the Offerors. All of the Designated Preferred Securities
have been duly and validly authorized and, when delivered in
accordance with this Agreement will be duly and validly
issued, fully paid and nonassessable, and will conform to
the description thereof in the Registration Statement, the
Prospectus and the Trust Agreement. The Designated
Preferred Securities have been approved for quotation on the
Nasdaq National Market subject to official notice of
issuance. There are no preemptive or other rights to
subscribe for or to purchase, and other than as disclosed in
the Prospectus no restrictions upon the voting or transfer
of, any shares of capital stock or equity securities of the
Offerors or the Subsidiaries pursuant to the corporate
charter, by-laws or other governing documents (including
without limitation, the Trust Agreement) of the Offerors or
the Subsidiaries, or, to the best of such counsel's
knowledge, any agreement or other instrument to which either
Offeror or any of the Subsidiaries is a party or by which
either Offeror or any of the Subsidiaries may be bound.
(iv) The Offerors have all requisite corporate and
trust power to enter into and perform their obligations
under this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Offerors
and constitutes the legal, valid and binding obligations of
the Offerors enforceable in accordance with its terms,
except as the enforcement hereof or thereof may be limited
by general principles of equity and by bankruptcy or other
laws relating to or affecting creditors' rights generally,
and except as the indemnification and contribution
provisions hereof may be limited under applicable laws and
certain remedies may not be available in the case of a non-
material breach.
(v) Each of the Indenture, the Trust Agreement
and the Guarantee has been duly qualified under the Trust
Indenture Act, has been duly authorized, executed and
delivered by the Company, and is a valid and legally binding
obligation of the Company enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws
affecting the rights and remedies of creditors generally and
of general principles of equity;
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<PAGE> 23
(vi) The Debentures have been duly authorized,
executed, authenticated and delivered by the Company, are
entitled to the benefits of the Indenture and are legal,
valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, subject
to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights
and remedies of creditors generally and of general
principles of equity;
(vii) The Expense Agreement has been duly
authorized, executed and delivered by the Company, and is a
valid and legally binding obligation of the Company
enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights
and remedies of creditors generally and of general
principles of equity;
(viii) To the best of such counsel's knowledge,
neither of the Offerors nor any of the Subsidiaries is in
breach or violation of, or default under, with or without
notice or lapse of time or both, its corporate charter, by-
laws or governing document (including without limitation,
the Trust Agreement). The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated by this Agreement, and the Trust
Agreement do not and will not conflict with, result in the
creation or imposition of any material lien, claim, charge,
encumbrance or restriction upon any property or assets of
the Offerors or the Subsidiaries or the Designated Preferred
Securities pursuant to, or constitute a material breach or
violation of, or constitute a material default under, with
or without notice or lapse of time or both, any of the
terms, provisions or conditions of the charter, by-laws or
governing document (including without limitation, the Trust
Agreement) of the Offerors or the Subsidiaries, or to the
best of such counsel's knowledge, any material contract,
indenture, mortgage, deed of trust, loan or credit
agreement, note, lease, franchise, license or any other
agreement or instrument to which either Offeror or the
Subsidiaries is a party or by which any of them or any of
their respective properties may be bound or any order,
decree, judgment, franchise, license, Permit, rule or
regulation of any court, arbitrator, government, or
governmental agency or instrumentality, domestic or foreign,
known to such counsel having jurisdiction over the Offerors
or the Subsidiaries or any of their respective properties
which, in each case, is material to the Offerors and the
Subsidiaries on a consolidated basis. No authorization,
approval, consent or order of, or filing, registration or
qualification with, any person (including, without
limitation, any court, governmental body or authority) is
required under Missouri law in connection with the
transactions contemplated by this Agreement in connection
with the purchase and distribution of the Designated
Preferred Securities by the Underwriters.
(ix) To the best of such counsel's knowledge,
holders of securities of the Offerors either do not have any
right that, if exercised, would require the Offerors to
cause such securities to be included in the Registration
Statement or have waived such right. To the best of such
counsel's knowledge, neither the Offerors nor any of the
Subsidiaries is a party to any agreement or other instrument
which grants rights for or relating to the registration of
any securities of the Offerors.
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<PAGE> 24
(x) Except as set forth in the Registration
Statement and the Prospectus, to the best of such counsel's
knowledge, (i) no action, suit or proceeding at law or in
equity is pending or threatened in writing to which the
Offerors or the Subsidiaries is or may be a party, and (ii)
no action, suit or proceeding is pending or threatened in
writing against or affecting the Offerors or the
Subsidiaries or any of their properties, before or by any
court or governmental official, commission, board or other
administrative agency, authority or body, or any arbitrator,
wherein an unfavorable decision, ruling or finding could
have a material adverse effect on the consummation of this
Agreement or the issuance and sale of the Designated
Preferred Securities as contemplated herein or the condition
(financial or otherwise), earnings, affairs, business, or
results of operations of the Offerors and the Subsidiaries
on a consolidated basis or which is required to be disclosed
in the Registration Statement or the Prospectus and is not
so disclosed.
(xi) No authorization, approval, consent or order
of or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body
or authority) is required in connection with the
transactions contemplated by this Agreement, the Trust
Agreement, the Registration Statement and the Prospectus,
except such as have been obtained under the 1933 Act, and
except such as may be required under state securities laws
or Interpretations or Rules of the NASD in connection with
the purchase and distribution of the Designated Preferred
Securities by the Underwriters.
(xii) The Registration Statement and the
Prospectus and any amendments or supplements thereto (other
than the financial statements or other financial data
included therein or omitted therefrom and Underwriters'
Information, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations as
of their respective dates of effectiveness.
(xiii) To the best of such counsel's knowledge,
there are no contracts, agreements, leases or other
documents of a character required to be disclosed in the
Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement that are not so
disclosed or filed.
(xiv) The statements under the captions
"Description of Other Capital Stock", "Supervision and
Regulation", "Description of the Preferred Securities",
"Description of the Subordinated Debentures", "Description
of the Guarantee", "Relationship Among the Preferred
Securities, the Subordinated Debentures and the Guarantee",
"Certain Federal Income Tax Consequences", "Book Entry
Issuance" and "ERISA Considerations" in the Prospectus,
insofar as such statements constitute a summary of legal and
regulatory matters, documents or proceedings referred to
therein are accurate in all material respects and fairly
present the information called for with respect to such
legal matters, documents and proceedings, other than
financial and statistical data as to which said counsel
expresses no opinion or belief.
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<PAGE> 25
(xv) Such counsel has been advised by the staff of
the Commission that the Registration Statement has become
effective under the 1933 Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been made within the
time period required by Rule 424(b); to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for a stop order are pending or
threatened by the Commission.
(xvi) Except as set forth in the Prospectus,
to the best of such counsel's knowledge, there are no
contractual encumbrances or restrictions, or material legal
restrictions on the ability of the Subsidiaries (A) to pay
dividends or make any other distributions on its capital
stock or to pay indebtedness owed to the Offerors, (B) to
make any loans or advances to, or investments in, the
Offerors or (C) to transfer any of its property or assets to
the Offerors.
(xvii) To the best of such counsel's knowledge,
(A) the business and operations of the Offerors and the
Subsidiaries comply in all material respects with all
statutes, ordinances, laws, rules and regulations applicable
thereto and which are material to the Offerors and the
Subsidiaries on a consolidated basis, except in those
instances where non-compliance would not materially impair
the ability of the Offerors and the Subsidiaries to conduct
their business; and (B) the Offerors and the Subsidiaries
possess and are operating in all material respects in
compliance with the terms, provisions and conditions of all
permits, consents, licenses, franchises and governmental and
regulatory authorizations ("Permits") and required to
conduct their businesses as described in the Prospectus and
which are material to the Offerors and the Subsidiaries on a
consolidated basis, except in those instances where the loss
thereof or non-compliance therewith would not have a
material adverse effect on the condition (financial or
otherwise), earnings, affairs, business, prospects or
results of operations of the Offerors and the Subsidiaries
on a consolidated basis; to the best of such counsel's
knowledge, all such Permits are valid and in full force and
effect, and, to the best of such counsel's knowledge, no
action, suit or proceeding is pending or threatened which
may lead to the revocation, termination, suspension or non-
renewal of any such Permit, except in those instances where
the loss thereof or non-compliance therewith would not
materially impair the ability of the Offerors or the
Subsidiaries to conduct their businesses.
In giving the above opinion, such counsel may state
that, insofar as such opinion involves factual matters, they have
relied upon certificates of officers of the Offerors including,
without limitation, certificates as to the identity of any and
all material contracts, indentures, mortgages, deeds of trust,
loans or credit agreements, notes, leases, franchises, licenses
or other agreements or instruments, and all material permits,
easements, consents, licenses, franchises and government
regulatory authorizations, for purposes of paragraphs (viii),
(xiii) and (xvii) hereof and certificates of public officials.
Such counsel shall also confirm that, in connection
with the preparation of the Registration Statement and
Prospectus, such counsel has participated in conferences with
officers and representatives of the Offerors and with their
independent public accountants and with you and your counsel, at
which conferences such counsel made inquiries of such officers,
representatives and accountants and discussed in detail the
contents of the Registration Statement
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<PAGE> 26
and Prospectus and such counsel has no reason to believe (A) that the
Registration Statement or any amendment thereto (except for the financial
statements and related schedules and statistical data included
therein or omitted therefrom or Underwriters' Information, as to
which such counsel need express no opinion), at the time the
Registration Statement or any such amendment became effective,
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
(B) that the Prospectus or any amendment or supplement thereto
(except for the financial statements and related schedules and
statistical data included therein or omitted therefrom or
Underwriters' Information, as to which such counsel need express
no opinion), at the time the Registration Statement became
effective (or, if the term "Prospectus" refers to the prospectus
first filed pursuant to Rule 424(b) of the 1933 Act Regulations,
at the time the Prospectus was issued), at the time any such
amended or supplemented Prospectus was issued, at the Closing
Date and, if applicable, the Option Closing Date, contained or
contains any untrue statement of a material fact or omitted or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (C)
that there is any amendment to the Registration Statement
required to be filed that has not already been filed.
(e) Richards, Layton and Finger, special Delaware
counsel to the Offerors, shall have furnished to you their signed
opinion, dated as of Closing Date or the Option Closing Date, as
the case may be, in form and substance satisfactory to such
counsel, to the effect that:
(i) The Trust has been duly created and is
validly existing in good standing as a business trust under
the Delaware Business Trust Act and, under the Trust
Agreement and the Delaware Business Trust Act, has the trust
power and authority to conduct its business as described in
the Prospectus.
(ii) The Trust Agreement is a legal, valid and
binding agreement of the Trust and the Trustees, and is
enforceable against the Trust and the Trustees, in
accordance with its terms.
(iii) Under the Trust Agreement and the
Delaware Business Trust Act, the execution and delivery of
the Underwriting Agreement by the Trust, and the performance
by the Trust of its obligations thereunder, have been
authorized by all requisite trust action on the part of the
Trust.
(iv) The Designated Preferred Securities have been
duly authorized by the Trust Agreement, and when issued and
sold in accordance with the Trust Agreement, the Designated
Preferred Securities will be, subject to the qualifications
set forth in paragraph (v) below, fully paid and
nonassessable beneficial interest in the assets of the Trust
and entitled to the benefits of the Trust Agreement.
(v) Holders of Designated Preferred Securities,
as beneficial owners of the Trust, will be entitled to the
same limitation of personal liability extended to
shareholders of private, for-profit corporations organized
under the General Corporation Law of the State of Delaware.
Such opinion may note that the holders of Designated
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<PAGE> 27
Preferred Securities may be obligated to make payments as
set forth in the Trust Agreement.
(vi) Under the Delaware Business Trust Act and the
Trust Agreement, the issuance of the Designated Preferred
Securities is not subject to preemptive rights.
(vii) The issuance and sale by the Trust of
the Designated Preferred Securities and the Common
Securities, the execution, delivery and performance by the
Trust of this Agreement, and the consummation of the
transactions contemplated by this Agreement, do not violate
(a) the Trust Agreement, or (b) any applicable Delaware law,
rule or regulation.
Such opinion may state that it is limited to the laws
of the State of Delaware and that the opinion expressed in
paragraph (ii) above is subject to the effect upon the Trust
Agreement of (i) bankruptcy, insolvency, moratorium,
receivership, reorganization, liquidation, fraudulent conveyance
and other similar laws relating to or affecting the rights and
remedies of creditors generally, (ii) principles of equity,
including applicable law relating to fiduciary duties (regardless
of whether considered and applied in a proceeding in equity or at
law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution.
(f) Bryan Cave LLP, counsel for the Underwriters,
shall have furnished you their signed opinion, dated the Closing
Date or the Option Closing Date, as the case may be, with respect
to the sufficiency of all corporate procedures and other legal
matters relating to this Agreement, the validity of the
Designated Preferred Securities, the Registration Statement, the
Prospectus and such other related matters as you may reasonably
request and there shall have been furnished to such counsel such
documents and other information as they may request to enable
them to pass on such matters. In giving such opinion, Bryan Cave
LLP may rely as to matters of fact upon statements and
certifications of officers of the Offerors and of other
appropriate persons and may rely as to matters of law, other than
law of the United States and the State of Missouri, and upon the
opinions of Lewis, Rice & Fingersh, L.C. and Richards, Layton and
Finger described herein.
(g) On the date of this Agreement and on the Closing
Date (and, if applicable, any Option Closing Date), the
Representative shall have received from KPMG Peat Marwick LLP a
letter, dated the date of this Agreement and the Closing Date
(and, if applicable, the Option Closing Date), respectively, in
form and substance satisfactory to the Representative, confirming
that they are independent public accountants with respect to
Company, within the meaning of the 1933 Act and the 1933 Act
Regulations, and stating in effect that:
(i) In their opinion, the consolidated financial
statements of the Company audited by them and included in
the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the
1933 Act and the 1933 Act Regulations.
(ii) On the basis of the procedures specified by
the American Institute of Certified Public Accountants as
described in SAS No. 71, "Interim Financial
26
<PAGE> 28
Information", inquiries of officials of the Company responsible for
financial and accounting matters, and such other inquiries
and procedures as may be specified in such letter, which
procedures do not constitute an audit in accordance with
U.S. generally accepted auditing standards, nothing came to
their attention that caused them to believe that, if
applicable, the unaudited interim consolidated financial
statements of the Company included in the Registration
Statement do not comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act
and 1933 Act Regulations or are not in conformity with U.S.
generally accepted accounting principles applied on a basis
substantially consistent, except as noted in the
Registration Statement, with the basis for the audited
consolidated financial statements of the Company included in
the Registration Statement.
(iii) On the basis of limited procedures, not
constituting an audit in accordance with U.S. generally
accepted auditing standards, consisting of a reading of the
unaudited interim financial statements and other information
referred to below, a reading of the latest available
unaudited condensed consolidated financial statements of the
Company, inspection of the minute books of the Company since
the date of the latest audited financial statements of the
Company included in the Registration Statement, inquiries of
officials of the Company responsible for financial and
accounting matters and such other inquiries and procedures
as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) as of a specified date not more than
five days prior to the date of such letter, there have
been any changes in the consolidated capital stock of
the Company, any increase in the consolidated debt of
the Company, any decreases in consolidated total assets
or shareholders equity of the Company, or any changes,
decreases or increases in other items specified by the
Underwriters, in each case as compared with amounts
shown in the latest unaudited interim consolidated
statement of financial condition of the Company
included in the Registration Statement except in each
case for changes, increases or decreases which the
Registration Statement specifically discloses, have
occurred or may occur or which are described in such
letter; and
(B) for the period from the date of the
latest unaudited interim consolidated financial
statements included in the Registration Statement to
the specified date referred to in Clause (iii)(A),
there were any decreases in the consolidated interest
income, net interest income, or net income of the
Company or in the per share amount of net income of the
Company, or any changes, decreases or increases in any
other items specified by the Representative, in each
case as compared with the comparable period of the
preceding year and with any other period of
corresponding length specified by the Underwriters,
except in each case for increases or decreases which
the Registration Statement discloses have occurred or
may occur, or which are described in such letter.
(iv) In addition to the audit referred to in their
report included in the Registration Statement and the
limited procedures, inspection of minute books, inquiries
and other procedures referred to in paragraphs (ii) and
(iii) above, they have carried out
27
<PAGE> 29
certain specified procedures, not constituting an audit in accordance
with U.S. generally accepted auditing standards, with respect to
certain amounts, percentages and financial information
specified by the Underwriters which are derived from the
general accounting records and consolidated financial
statements of the Company which appear in the Registration
Statement specified by the Underwriters in the Registration
Statement, and have compared such amounts, percentages and
financial information with the accounting records and the
material derived from such records and consolidated
financial statements of the Company have found them to be in
agreement.
In the event that the letters to be delivered referred
to above set forth any such changes, decreases or increases as
specified in Clauses (iii)(A) or (iii)(B) above, or any
exceptions from such agreement specified in Clause (iv) above, it
shall be a further condition to the obligations of the
Underwriters that the Representative shall have determined, after
discussions with officers of the Company responsible for
financial and accounting matters, that such changes, decreases,
increases or exceptions as are set forth in such letters do not
(x) reflect a material adverse change in the items specified in
Clause (iii)(A) above as compared with the amounts shown in the
latest unaudited consolidated statement of financial condition of
the Company included in the Registration Statement, (y) reflect a
material adverse change in the items specified in Clause (iii)(B)
above as compared with the corresponding periods of the prior
year or other period specified by the Representative, or (z)
reflect a material change in items specified in Clause (iv) above
from the amounts shown in the Preliminary Prospectus distributed
by the Underwriters in connection with the offering contemplated
hereby or from the amounts shown in the Prospectus.
(h) At the Closing Date and, if applicable, the Option
Closing Date, you shall have received certificates of the chief
executive officer and the chief financial and accounting officer
of the Company, which certificates shall be deemed to be made on
behalf of the Company dated as of the Closing Date and, if
applicable, the Option Closing Date, evidencing satisfaction of
the conditions of Section 6(a) and stating that (i) the
representations and warranties of the Company set forth in
Section 2(a) hereof are accurate as of the Closing Date and, if
applicable, the Option Closing Date, and that the Offerors have
complied with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to such
Closing Date; (ii) since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any material adverse change in the
condition (financial or otherwise), earnings, affairs, business,
prospects or results of operations of the Offerors and the
Subsidiaries on a consolidated basis; (iii) since such dates
there has not been any material transaction entered into by the
Offerors or the Subsidiaries other than transactions in the
ordinary course of business; and (iv) they have carefully
examined the Registration Statement and the Prospectus as amended
or supplemented and nothing has come to their attention that
would lead them to believe that either the Registration Statement
or the Prospectus, or any amendment or supplement thereto as of
their respective effective or issue dates, contained, and the
Prospectus as amended or supplemented at such Closing Date (and,
if applicable, the Option Closing Date), contains any untrue
statement of a material fact, or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and (v) covering such other matters
28
<PAGE> 30
as you may reasonably request. The officers' certificate of
the Company shall further state that no stop order affecting
the Registration Statement is in effect or, to their knowledge,
threatened.
(i) At the Closing Date and, if applicable, the Option
Closing Date, you shall have received a certificate of an
authorized representative of the Trust to the effect that to the
best of his or her knowledge based upon a reasonable
investigation, the representations and warranties of the Trust in
this Agreement are true and correct as though made on and as of
the Closing Date (and, if applicable, the Option Closing Date);
the Trust has complied with all the agreements and satisfied all
the conditions required by this Agreement to be performed or
satisfied by the Trust on or prior to the Closing Date and since
the most recent date as of which information is given in the
Prospectus, except as contemplated by the Prospectus, the Trust
has not incurred any material liabilities or obligations, direct
or contingent, or entered into any material transactions not in
the ordinary course of business and there has not been any
material adverse change in the condition (financial or otherwise)
of the Trust.
(j) On the Closing Date, you shall have received duly
executed counterparts of the Trust Agreement, the Guarantee, the
Indenture and the Expense Agreement.
(k) The NASD, upon review of the terms of the public
offering of the Designated Preferred Securities, shall not have
objected to the Underwriters' participation in such offering.
(l) Prior to the Closing Date and, if applicable, the
Option Closing Date, the Offerors shall have furnished to you and
counsel for the Underwriters all such other documents,
certificates and opinions as they have reasonably requested.
All opinions, certificates, letters and other documents
shall be in compliance with the provisions hereof only if they
are reasonably satisfactory in form and substance to you. The
Offerors shall furnish you with conformed copies of such
opinions, certificates, letters and other documents as you shall
reasonably request.
If any of the conditions referred to in this Section 6
shall not have been fulfilled when and as required by this
Agreement, this Agreement and all of the Underwriters'
obligations hereunder may be terminated by you on notice to the
Company at, or at any time before, the Closing Date or the Option
Closing Date, as applicable. Any such termination shall be
without liability of the Underwriters to the Offerors.
7. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) The Offerors agree to jointly and severally
indemnify and hold harmless each Underwriter, each of its
directors, officers and agents, and each person, if any, who
controls any Underwriter within the meaning of the 1933 Act,
against any and all losses, claims, damages, liabilities and
expenses (including reasonable costs of investigation and
reasonable attorney fees and expenses), joint or several, arising
out of or based (i) upon any untrue statement or alleged untrue
statement of a material fact made by the Company or the Trust
contained in Section 2(a) of this Agreement (or any certificate
delivered by the Company or the Trust pursuant hereto Section
6(l) hereto) or the registration statement as originally filed or
the Registration Statement,
29
<PAGE> 31
any Preliminary Prospectus or the Prospectus, or in any amendment or
supplement thereto, (ii) upon any blue sky application or other document
executed by the Company or the Trust specifically for that purpose or based
upon written information furnished by the Company or the Trust filed
in any state or other jurisdiction in order to qualify any of the
Designated Preferred Securities under the securities laws thereof
(any such application, document or information being hereinafter
referred to as a "Blue Sky Application"), (iii) any omission or
alleged omission to state a material fact in the registration
statement as originally filed or the Registration Statement, any
Preliminary Prospectus or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application) required to
be stated therein or necessary to make the statements therein not
misleading, and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of
investigation and attorney fees), joint or several, arising out
of or based upon any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the
Prospectus, or in any amendment of supplement thereto, or arising
out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
(iv) the enforcement of this indemnification provision or the
contribution provisions of Section 7(d); and shall reimburse each
such indemnified party for any reasonable legal or other expenses
as incurred, but in no event less frequently than 30 days after
each invoice is submitted, incurred by them in connection with
investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage,
liability or action, notwithstanding the possibility that
payments for such expenses might later be held to be improper, in
which case such payments shall be promptly refunded; provided,
---------
however, that the Offerors shall not be liable in any such case
- -------
to the extent, but only to the extent, that any such losses,
claims, damages, liabilities and expenses arise out of or are
based upon any untrue statement or omission or allegation thereof
that has been made therein or omitted therefrom in reliance upon
and in conformity with information furnished in writing to the
Offerors through the you by or on behalf of any Underwriter
expressly for use therein beneath the heading "Underwriting;"
provided, that the indemnification contained in this
- --------
paragraph with respect to any Preliminary Prospectus shall not
inure to the benefit of any Underwriter (or of any person
controlling any Underwriter) to the extent any such losses,
claims, damages, liabilities or expenses directly results from
the fact that such Underwriter sold Designated Preferred
Securities to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the
Prospectus (as amended or supplemented if any amendments or
supplements thereto shall have been furnished to you in
sufficient time to distribute same with or prior to the written
confirmation of the sale involved), if required by law, and if
such loss, claim, damage, liability or expense would not have
arisen but for the failure to give or send such person such
document. The foregoing indemnity agreement is in addition to
any liability the Company or the Trust may otherwise have to any
such indemnified party.
(b) Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless each Offeror, each of its
directors, each of its officers who signed the Registration
Statement and each person, if any, who controls an Offeror within
the meaning of the 1933 Act, to the same extent as required by
the foregoing indemnity from the Company to each Underwriter, but
only with respect to information relating to such Underwriter
furnished in writing to an Offeror through such Underwriter by or
on behalf of it expressly for use in connection with the
registration statement as originally filed, the Registration
Statement, any
30
<PAGE> 32
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
beneath the heading "Underwriting" or in a Blue Sky Application. The
foregoing indemnity agreement is in addition to any liability which any
Underwriter may otherwise have to any such indemnified party.
(c) If any action or claim shall be brought or
asserted against any indemnified party or any person controlling
an indemnified party in respect of which indemnity may be sought
from the indemnifying party, such indemnified party or
controlling person shall promptly notify the indemnifying party
in writing, and the indemnifying party shall assume the defense
thereof, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all
expenses; provided, however, that the failure so to notify
-----------------
the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under
such paragraph, and further, shall only relieve it from liability
under such paragraph to the extent prejudiced thereby. Any
indemnified party or any such controlling person shall have the
right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified party or
such controlling person unless (i) the employment thereof has
been specifically authorized by the indemnifying party in
writing, (ii) the indemnifying party has failed to assume the
defense or to employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action
(including any impleaded parties) include both such indemnified
party or such controlling person and the indemnifying party and
such indemnified party or such controlling person shall have been
advised by such counsel that there may be one or more legal
defenses available to it that are different from or in addition
to those available to the indemnifying party (in which case, if
such indemnified party or controlling person notifies the
indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party or such
controlling person) it being understood, however, that the
indemnifying party shall not, in connection with any one such
action or separate but substantially similar or related actions
in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys at any
time and for all such indemnified party and controlling persons,
which firm shall be designated in writing by the indemnified
party (and, if such indemnified parties are Underwriters, by you,
as Representative). Each indemnified party and each controlling
person, as a condition of such indemnity, shall use reasonable
efforts to cooperate with the indemnifying party in the defense
of any such action or claim. The indemnifying party shall not be
liable for any settlement of any such action effected without its
written consent, but if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party and any such
controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
An indemnifying party shall not, without the prior
written consent of each indemnified party, settle, compromise or
consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnity
may be sought hereunder (whether or not such indemnified party or
any person who controls such indemnified party within the meaning
of the 1933 Act is a party to such claim, action, suit or
proceeding),
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<PAGE> 33
unless such settlement, compromise or consent includes a release of each such
indemnified party reasonably satisfactory to each such indemnified party and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding or unless the indemnifying party shall
confirm in a written agreement with each indemnified party, that
notwithstanding any federal, state or common law, such
settlement, compromise or consent shall not alter the right of
any indemnified party or controlling person to indemnification or
contribution as provided in this Agreement.
(d) If the indemnification provided for in this
Section 7 is unavailable or insufficient to hold harmless an
indemnified party under paragraphs (a), (b) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits
received by the Offerors on the one hand and the Underwriters on
the other from the offering of the Designated Preferred
Securities or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Offerors
on the one hand and the Underwriters on the other in connection
with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits
received by the Offerors on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Designated Preferred
Securities (before deducting expenses) received by the Offerors
bear to the total underwriting discounts, commissions and
compensation received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The
relative fault of the Offerors on the one hand and of the
Underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the
Offerors or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Offerors and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this paragraph (d) were determined by
pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities and expenses
referred to in the first sentence of this paragraph (d) shall be
deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
paragraph (d), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which
the Designated Preferred Securities underwritten by such
Underwriter and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriters
has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
32
<PAGE> 34
For purposes of this paragraph (d), each person who
controls an Underwriter within the meaning of the 1933 Act shall
have the same rights to contribution as such Underwriter, and
each person who controls an Offeror within the meaning of the
1933 Act, each officer and trustee of an Offeror who shall have
signed the Registration Statement and each director of an Offeror
shall have the same rights to contribution as the Offerors
subject in each case to the preceding sentence. The obligations
of the Offerors under this paragraph (d) shall be in addition to
any liability which the Offerors may otherwise have and the
obligations of the Underwriters under this paragraph (d) shall be
in addition to any liability that the Underwriters may otherwise
have.
(e) The indemnity and contribution agreements
contained in this Section 7 and the representations and
warranties of the Offerors set forth in this Agreement shall
remain operative and in full force and effect, regardless of
(i) any investigation made by or on behalf of any Underwriter or
any person controlling an Underwriter or by or on behalf of the
Offerors, or such directors, trustees or officers (or any person
controlling an Offeror, (ii) acceptance of any Designated
Preferred Securities and payment therefor hereunder and (iii) any
termination of this Agreement. A successor of any Underwriter or
of an Offeror, such directors, trustees or officers (or of any
person controlling an Underwriter or an Offeror) shall be
entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 7.
(f) The Company agrees to indemnify the Trust against
any and all losses, claims, damages or liabilities that may
become due from the Trust under this Section 7.
8. TERMINATION. You shall have the right to terminate
-----------
this Agreement at any time at or prior to the Closing Date or,
with respect to the Underwriters' obligation to purchase the
Option Preferred Securities, at any time at or prior to the
Option Closing Date, without liability on the part of the
Underwriters to the Offerors, if:
(a) Either Offeror shall have failed, refused, or been
unable to perform any agreement on its part to be performed under
this Agreement, or any of the conditions referred to in Section 6
shall not have been fulfilled, when and as required by this
Agreement;
(b) The Offerors or any of the Subsidiaries shall have
sustained any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree which in the judgment of the
Representative materially impairs the investment quality of the
Designated Preferred Securities;
(c) There has been since the respective dates as of
which information is given in the Registration Statement or the
Prospectus, any materially adverse change in, or any development
which is reasonably likely to have a material adverse effect on,
the condition (financial or otherwise), earnings, affairs,
business, prospects or results of operations of the Offerors and
the Subsidiaries on a consolidated basis, whether or not arising
in the ordinary course of business;
(d) There has occurred any outbreak of hostilities or
other calamity or crisis or material change in general economic,
political or financial conditions, or internal conditions, the
33
<PAGE> 35
effect of which on the financial markets of the United States is
such as to make it, in your reasonable judgment, impracticable to
market the Designated Preferred Securities or enforce contracts
for the sale of the Designated Preferred Securities;
(e) Trading generally on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market shall
have been suspended, or minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for
securities shall have been required, by any of said exchanges or
market system or by the Commission or any other governmental
authority;
(f) A banking moratorium shall have been declared by
either federal, Missouri, Illinois, Texas or California
authorities; or
(g) Any action shall have been taken by any government
in respect of its monetary affairs which, your reasonable
judgment, has a material adverse effect on the United States
securities markets.
If this Agreement shall be terminated pursuant to this
Section 8, the Offerors shall not then be under any liability to
the Underwriters except as provided in Sections 5 and 7 hereof.
9. DEFAULT OF UNDERWRITERS. If any Underwriter or
-----------------------
Underwriters shall default in its or their obligations to
purchase Designated Preferred Securities hereunder, the other
Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Designated
Preferred Securities which such defaulting Underwriter or
Underwriters agreed but failed to purchase; provided,
---------
however, that the non-defaulting Underwriters shall be under no
- -------
obligation to purchase such Designated Preferred Securities if
the aggregate number of Designated Preferred Securities to be
purchased by such non-defaulting Underwriters shall exceed 110%
of the aggregate underwriting commitments set forth in Schedule I
----------
hereto, and provided further, that no non-defaulting Underwriter
----------------
shall be obligated to purchase Designated Preferred Securities to the extent
that the number of such Designated Preferred Securities is more than 110% of
such Underwriter's underwriting commitment set forth in Schedule I hereto.
----------
In the event that the non-defaulting Underwriters are
not obligated under the above paragraph to purchase the
Designated Preferred Securities which the defaulting Underwriter
or Underwriters agreed but failed to purchase, the Representative
may in its discretion arrange for one or more of the Underwriters
or for another party or parties to purchase such Designated
Preferred Securities on the terms contained herein. If within
one business day after such default the Representative does not
arrange for the purchase of such Designated Preferred Securities,
then the Company shall be entitled to a further period of one
business day within which to procure another party or parties
satisfactory to the Representative to purchase such Designated
Preferred Securities on such terms.
In the event that the Representative or the Company do
not arrange for the purchase of any Designated Preferred
Securities to which a default relates as provided above, this
Agreement shall be terminated.
34
<PAGE> 36
If the remaining Underwriters or substituted
underwriters are required hereby or agree to take up all or a
part of the Designated Preferred Securities of a defaulting
Underwriter or Underwriters as provided in this Section 9, (i)
you shall have the right to postpone the Closing Date for a
period of not more than five full business days, in order to
effect any changes that, in the opinion of counsel for the
Underwriters or the Company, may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other
documents or agreements, and the Company agrees promptly to file
any amendments to the Registration Statement or supplements to
the Prospectus which, in its opinion, may thereby be made
necessary and (ii) the respective numbers of Designated Preferred
Securities to be purchased by the remaining Underwriters or
substituted underwriters shall be taken as the basis of their
underwriting obligation for all purposes of this Agreement.
Nothing herein contained shall relieve any defaulting Underwriter
of any liability it may have for damages occasioned by its
default hereunder. Any termination of this Agreement pursuant to
this Section 9 shall be without liability on the part of any non-
defaulting Underwriter or the Company, except for expenses to be
paid or reimbursed pursuant to Section 5 and except for the
provisions of Section 7.
10. EFFECTIVE DATE OF AGREEMENT. If the Registration
---------------------------
Statement is not effective at the time of execution of this
Agreement, this Agreement shall become effective on the Effective
Date at the time the Commission declares the Registration
Statement effective. The Company shall immediately notify the
Underwriters when the Registration Statement becomes effective.
If the Registration Statement is effective at the time
of execution of this Agreement, this Agreement shall become
effective at the earlier of 11:00 a.m. St. Louis time, on the
first full business day following the day on which this Agreement
is executed, or at such earlier time as the Representative shall
release the Designated Preferred Securities for initial public
offering. The Representative shall notify the Offerors
immediately after it has taken any action which causes this
Agreement to become effective.
Until such time as this Agreement shall have become
effective, it may be terminated by the Offerors, by notifying you
or by you, as Representative of the several Underwriters, by
notifying either Offeror, except that the provisions of Sections
5 and 7 shall at all times be effective.
11. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
-----------------------------------------------------
DELIVERY. The representations, warranties, indemnities,
- --------
agreements and other statements of the Offerors and their
officers and trustees set forth in or made pursuant to this
Agreement and the agreements of the Underwriters contained in
Section 7 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of
the Offerors or controlling persons of either Offeror, or by or
on behalf of the Underwriters or controlling persons of the
Underwriters or any termination or cancellation of this Agreement
and shall survive delivery of and payment for the Designated
Preferred Securities.
12. NOTICES. Except as otherwise provided in this
-------
Agreement, all notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if
delivered by hand, mailed by registered or certified mail, return
receipt requested, or transmitted by any standard form of
telecommunication and confirmed. Notices to either Offeror shall
be sent to 11901 Olive Boulevard, St. Louis, Missouri 63141,
Attention: Allen H. Blake (with a
35
<PAGE> 37
copy to Lewis, Rice & Fingersh, L.C., 500 North Broadway, Suite 2000, St.
Louis, Missouri 63102, Attention: Thomas C. Erb, Esq.; and notices to the
Underwriters shall be sent to Stifel, Nicolaus & Company, Incorporated, 500
North Broadway, Suite 1500, St. Louis, Missouri 63102, Attention:
Rick E. Maples (with a copy to Bryan Cave LLP, 211 North
Broadway, Suite 3600, St. Louis, Missouri 63102, Attention:
Frederick W. Scherrer, Esq.). In all dealings with the Company
under this Agreement, Stifel, Nicolaus & Company, Incorporated
shall act as representative of and on behalf of the several
Underwriters, and the Company shall be entitled to Act and rely
upon any statement, request, notice or agreement on behalf of the
Underwriters, made or given by Stifel, Nicolaus & Company,
Incorporated on behalf of the Underwriters, as if the same shall
have been made or given in writing by the Underwriters.
13. PARTIES. The Agreement herein set forth is made
-------
solely for the benefit of the Underwriters and the Offerors and,
to the extent expressed, directors, trustees and officers of the
Offerors, any person controlling the Offerors or the
Underwriters, and their respective successors and assigns. No
other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not
include any purchaser, in his status as such purchaser, from the
Underwriters of the Designated Preferred Securities.
14. GOVERNING LAW. This Agreement shall be governed by
-------------
the laws of the State of Missouri, without giving effect to the
choice of law or conflicts of law principles thereof.
15. COUNTERPARTS. This Agreement may be executed in
------------
one or more counterparts, and when a counterpart has been
executed by each party hereto all such counterparts taken
together shall constitute one and the same Agreement.
If the foregoing is in accordance with the your
understanding of our agreement, please sign and return to us a
counterpart hereof, whereupon this shall become a binding
agreement between the Company, the Trust and you in accordance
with its terms.
36
<PAGE> 38
Very truly yours,
FIRST BANKS, INC.
By:------------------------------
Name:
Title:
FIRST PREFERRED CAPITAL TRUST
By:------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of ----------- --, 1997.
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By:---------------------------
Name:
Title:
For itself and as Representative of the several Underwriters
named in Schedule I hereto.
37
<PAGE> 39
SCHEDULE I
----------
38
<PAGE> 40
EXHIBIT A
LIST OF SUBSIDIARIES
39
<PAGE> 41
2,400,000 Preferred Securities
First Preferred Capital Trust
----% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security
AGREEMENT AMONG UNDERWRITERS
----------------------------
------------, 1997
Stifel, Nicolaus & Company, Incorporated
As Representative of the Several Underwriters
500 North Broadway, Suite 1500
St. Louis, Missouri 63102
1. UNDERWRITING AGREEMENT. We understand that First
Banks, Inc., a Missouri corporation (the "Company") and its
financing subsidiary, First Preferred Capital Trust, a Delaware
business trust (the "Trust", and hereinafter together with the
Company, the "Offerors"), propose to enter into an underwriting
agreement in substantially the form attached (the "Underwriting
Agreement") with you and other prospective underwriters (including
us) (collectively, the "Underwriters") providing for the several
purchase by the Underwriters from the Trust 2,400,000 of the
Trust's ----% Cumulative Trust Preferred Securities with a
liquidation amount of $25.00 per Preferred Security upon the terms
stated in the Underwriting Agreement (such Preferred Securities are
herein referred to as the "Firm Preferred Securities"), in which we
will agree in accordance with the terms thereof to purchase the
number of Firm Preferred Securities set forth opposite our name in
Schedule II thereto. In addition, the Trust proposes to grant to
the Underwriters, upon the terms stated in the Underwriting
Agreement, the right to purchase up to an additional 360,000
Preferred Securities (the "Option Preferred Securities"), identical
to the Firm Preferred Securities, for the sole purpose of covering
over-allotments in the sale of the Firm Preferred Securities. The
Firm Preferred Securities and the Option Preferred Securities are
collectively referred to herein as the "Designated Preferred
Securities."
2. REGISTRATION STATEMENT AND PROSPECTUS. The
Designated Preferred Securities are more particularly described in
a registration statement on Form S-2 (Registration Nos. 333------
and 333-------01) filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Act"). Amendments to such registration statement have been or are
being filed, or a form of prospectus is being flied pursuant to
Rule 424(b) and Rule 430A under the Act, in which, with our consent
hereby confirmed, we have been named as one of the Underwriters of
the Designated Preferred Securities. A copy of the registration
statement as filed and a copy of each amendment as filed (excluding
exhibits) have heretofore been delivered to us. We confirm that we
have examined the registration statement, including amendments
thereto, relating to the Designated Preferred Securities, as filed
<PAGE> 42
with the Commission, that we are willing to accept the
responsibilities of an Underwriter under the Act in respect of the
registration statement, and we are willing to proceed with a public
offering of the Designated Preferred Securities in the manner
contemplated. The registration statement and the related
prospectus may be further amended, but no such amendment or change
shall release or affect our obligations hereunder or under the
Underwriting Agreement. As used herein, the terms "Registration
Statement" and "Prospectus" shall have the same meanings as specified
in the Underwriting Agreement.
3. AUTHORITY OF REPRESENTATIVE. We hereby authorize
you, acting on our behalf, as our representative (a) to complete,
execute, and deliver the Underwriting Agreement, to determine the
public offering price of the Designated Preferred Securities and
the underwriting discount with respect thereto and to make such
variations, if any, as in your judgment are appropriate and are not
material, provided that the respective amount of Designated
Preferred Securities set forth opposite our name in Schedule II
thereto shall not be increased without our consent, except as
provided herein, (b) to waive performance or satisfaction by the
Offerors of obligations or conditions included in the Underwriting
Agreement if in your judgment such waiver will not have a material
adverse effect upon the interests of the Underwriters, and (c) to
take such actions as in your discretion may be necessary or
advisable to carry out the Underwriting Agreement, this Agreement,
and the transactions for the accounts of the several Underwriters
contemplated thereby and hereby. We also authorize you to
determine all matters relating to the public advertisement of the
Designated Preferred Securities.
4. PUBLIC OFFERING. We authorize you, with respect to
any Designated Preferred Securities which we so agree to purchase,
to reserve for sale, and on our behalf to sell, to dealers selected
by you (including you or any of the other Underwriters, such
dealers so selected being hereinafter called "Selected Dealers") and
to others all or part of our Designated Preferred Securities as you
may determine. Reservations for sales to persons other than
Selected Dealers shall be as nearly as practicable in proportion to
the respective underwriting obligations of the Underwriters, unless
you agree to a smaller proportion at the request of an Underwriter.
Reservations for sales to Selected Dealers need not be in such
proportion. All sales of reserved Designated Preferred Securities
shall be as nearly as practicable in proportion to the respective
reservations as calculated from day to day.
In your discretion, from time to time, you may add to the
reserved Designated Preferred Securities any Designated Preferred
Securities retained by us remaining unsold, and you may upon our
request release to us any of our Designated Preferred Securities
reserved but not sold. Any Designated Preferred Securities so
released shall not thereafter be deemed to have been reserved.
Upon termination of this Agreement, or prior thereto at your
discretion, you shall deliver to our account any of our Designated
Preferred Securities reserved but not sold and delivered, except
that if the aggregate of all reserved but unsold and undelivered
Designated Preferred Securities is less than ------------
Designated Preferred Securities, you are authorized to sell such
Designated Preferred Securities for the accounts of the several
Underwriters at such price or prices as you may determine.
2
<PAGE> 43
Sales of reserved Designated Preferred Securities shall
be made to Selected Dealers at the public offering price less the
Selected Dealers' Concession pursuant to the Selected Dealer
Agreement in substantially the form attached hereto, and to others
at the public offering price. Underwriters and Selected Dealers
may reallow a concession to other dealers as set forth in the
Selected Dealer Agreement.
After advice from you that the Designated Preferred
Securities are released for sale to the public, we will offer to
the public in conformity with the terms of the offering set forth
in the Prospectus such of our Designated Preferred Securities as
you advise us are not reserved. We authorize you after the
Designated Preferred Securities are released for sale to the
public, in your discretion, to change the public offering price of
the Designated Preferred Securities and the concession, and to buy
Designated Preferred Securities for our account from Selected
Dealers at the public offering price less such amount not in excess
of the Selected Dealers' Concession as you may determine.
Sales of Designated Preferred Securities between
Underwriters may be made with your prior consent, or as you deem
advisable for blue sky purposes.
We agree that we will not sell to any accounts over which
we exercise discretionary authority any Designated Preferred
Securities which we have agreed to purchase under the Underwriting
Agreement.
5. ADDITIONAL PROVISIONS REGARDING SALES. You may, in
your discretion, charge our account with an amount equal to the
Selected Dealers' Concession in respect of each Designated
Preferred Security purchased under the Underwriting Agreement by
you and not sold by you for our account (and each Designated
Preferred Security which you believe has been substituted therefor)
which may be delivered against a purchase contract made by you for
our account prior to the later of (a) the termination of all of the
provisions referred to in Section 10 hereof or (b) the covering by
you of any short position created by you for our account, or in
lieu of such charge, require us to repurchase on demand at the
total cost thereof (including commissions), plus transfer taxes,
any such Designated Preferred Security so delivered.
6. PAYMENT AND DELIVERY. At or before 9:00 a.m., New
York City time, on the Closing Date (as defined in the Underwriting
Agreement) and on each Option Closing Date (as defined in the
Underwriting Agreement), we will deliver to you at your office at
500 North Broadway, Suite 1500, St. Louis, Missouri 63102,
Attention: Syndicate Department, a certified or bank cashiers'
check payable to your order, in clearing house funds, in the amount
equal to the initial offering price set forth in the Prospectus
less the Selected Dealers' Concession in respect of the number of
Firm Preferred Securities or Option Preferred Securities, as the
case may be, to be purchased by us pursuant to the Underwriting
Agreement. We authorize you for our account to make payment of the
purchase price for the Designated Preferred Securities to be
purchased by us against delivery to you of such Designated
Preferred Securities, and the difference between such price and the
amount of our check delivered to you therefor shall be credited to
our account. Unless we notify you at least three full business
days prior to such Closing Date to make other
3
<PAGE> 44
arrangements, you may, in your discretion, advise the Offerors to prepare our
certificates in our name. If you have not received our funds as requested,
you may in your discretion make such payment on our behalf, in which event we
will reimburse you promptly. Any such payment by you shall not relieve us
from any of our obligations hereunder or under the Underwriting Agreement.
We authorize you for our account to accept delivery of
our Designated Preferred Securities from the Trust and to hold such
of our Designated Preferred Securities as you have reserved for
sale to Selected Dealers and others and to deliver such Designated
Preferred Securities against such sales. You will deliver to us
our unreserved Designated Preferred Securities as promptly as
practicable.
Notwithstanding the foregoing provisions of this
Section 6, if you so notify us, payment for and delivery of our
Designated Preferred Securities may be made through the facilities
of The Depository Trust Company, if we are a member, unless we have
otherwise notified you prior to a date to be specified by you, or,
if we are not a member, settlement may be made through a
correspondent who is a member pursuant to instructions we may send
to you prior to such specified date.
As promptly as practicable after you receive payment for
reserved Designated Preferred Securities sold for our account, you
will remit to us the purchase price paid by us for such Designated
Preferred Securities and credit or debit our account with the
difference between the sale price and such purchase price.
7. AUTHORITY TO BORROW. In connection with the
transactions contemplated in the Underwriting Agreement or this
Agreement, we authorize you, in your discretion, to advance your
own funds for our account, charging current interest rates, to
arrange loans for our account and in connection therewith to
execute and deliver any notes or other instruments and hold or
pledge as security any of our Designated Preferred Securities or
any Preferred Securities of the Trust purchased for our account.
Any lender may rely upon your instructions in all matters relating
to any such loan.
Any of our Designated Preferred Securities and any
Preferred Securities of the Trust purchased for our account held
by you may from time to time be delivered to us for carrying
purposes, and any such securities will be delivered to you upon
demand.
8. STABILIZATION AND OTHER MATTERS. We authorize you
in your discretion to make purchases and sales of the Preferred
Securities of the Trust for our account in the open market or
otherwise, for long or short account, on such terms as you deem
advisable and in arranging sales to overallot. If you have
purchased Preferred Securities for stabilizing purposes prior to
the execution of this Agreement, such purchases shall be treated
as having been made pursuant to the foregoing authorization. We
also authorize you, either before or after the termination of the
offering provisions of this Agreement, to cover any short position
incurred pursuant to this Section on such terms as you deem
advisable. All such purchases and sales and
4
<PAGE> 45
over-allotments shall be made for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations. Our net commitment under this Section (excluding any
commitment incurred under the Underwriting Agreement upon exercise
of the right to purchase Option Preferred Securities) shall not,
at the end of any business day, exceed 15 percent of our maximum
underwriting obligation. We will on your demand take up and pay
for at cost any Preferred Securities so purchased or sold or over-
allotted for our account, and, if any other Underwriter defaults
in its corresponding obligation, we will assume our proportionate
share of such obligation without relieving the defaulting
Underwriter from liability. We will be obligated in respect of
purchases and sales made for our account hereunder whether or not
any proposed purchase of the Designated Preferred Securities from
the Trust is consummated. The existence of this provision is no
assurance that the price of the Designated Preferred Securities
will be stabilized or that, if stabilizing is commenced, it may not
be discontinued at any time.
We agree to advise you, from time to time upon your
request, during the term of this Agreement, of the number of
Designated Preferred Securities retained by us remaining unsold,
and will, upon your request, sell to you for the accounts of one
or more of the several Underwriters such number of such Designated
Preferred Securities as you may designate at such prices, not less
than the net price to Selected Dealers nor more than the public
offering price, as you may determine.
If you effect any stabilizing purchase pursuant to this
Section 8, you will notify us promptly of the date and time when
the first stabilizing purchase was effected and the date and time
when stabilizing was terminated. You will retain such information
as is required to be retained by you as "Manager" pursuant to Rule
17a-2 under the Securities Exchange Act of 1934, as amended (the
"1934 Act"). We agree that we will not effect any stabilizing
purchases without your express authorization, and, if any purchases
are effected, we agree to furnish to you not later than three
business days following the date upon which stabilization was
commenced such information as is required under Rule 17a-2(d).
With respect to the Underwriting Agreement, you are also
authorized in your discretion (a) to exercise the option therein as
to all or any part of the Option Preferred Securities, and to
terminate such option in whole or in part prior to its expiration,
(b) to postpone the Closing Date and the Option Closing Date
referred to in the Underwriting Agreement, and any other time or
date specified therein, (c) to exercise any right of cancellation
or termination, (d) to arrange for the purchase by other persons
(including yourselves or any other Underwriter) of any Designated
Preferred Securities not taken up by any defaulting Underwriter and
(e) to consent to such other changes in the Underwriting Agreement
as in your judgment do not materially adversely affect the
substance of our rights and obligations thereunder.
We further agree that (a) prior to the termination of
this Agreement we will not, directly or indirectly, bid for or
purchase any Designated Preferred Securities for our own account,
except as provided in this Agreement and in the Underwriting
Agreement, and (b) prior to the completion (as defined in Rule 10b-6
under the 1934 Act) of our participation in this
5
<PAGE> 46
distribution, we will otherwise comply with Rule 10b-6.
9. ALLOCATION OF EXPENSES AND SETTLEMENT. We authorize
you to charge our account with (a) all transfer taxes on Designated
Preferred Securities purchased by us pursuant to the Underwriting
Agreement and sold by you for our account, (b) Selected Dealers'
Concessions in connection with the purchase, marketing and sale of
the Designated Preferred Securities for our account, and (c) our
proportionate share (based upon our underwriting obligation) of all
other expenses incurred by you under this Agreement and in
connection with the purchase, carrying, sale and distribution of
the Designated Preferred Securities. Your determination of the
amount and allocation of such expenses shall be conclusive. In the
event of the default of any Underwriter in carrying out its
obligations hereunder, the expenses chargeable to such Underwriter
pursuant to this Agreement and not paid by it, as well as any
additional losses or expenses arising from such default, may be
proportionately charged by you against the other Underwriters not
so defaulting (including such other persons who purchase Designated
Preferred Securities upon a default by an Underwriter pursuant to
Section 11 hereof), without, however, relieving such defaulting
Underwriter from its liability therefor.
As soon as practicable after termination of this
Agreement, the accounts hereunder will be settled, but you may
reserve from distribution such amount as you deem necessary to
cover possible additional expenses. You may at any time make
partial distributions of credit balances or call for payment of
debit balances. Any of our funds in your hands may be held with
your general funds without accountability for interest.
Notwithstanding the termination of this Agreement or any
settlement, we will pay (a) our proportionate share (based on our
underwriting obligation) of all expenses and liabilities which may
be incurred by or for the accounts of the Underwriters, including
any liability based on the claim that the Underwriters constitute
an association, unincorporated business or other separate entity,
and of any expenses incurred by you or any other Underwriter with
your approval in contesting any such claim or liability, and (b)
any transfer taxes paid after such settlement on account of any
sale or transfer for our account.
10. TERMINATION. The offering provisions of this
Agreement shall terminate 30 days from the date hereof unless
extended by you. You may extend said provisions for a period or
periods not exceeding an additional 30 days in the aggregate,
provided that the Selected Dealer Agreements, if any, are similarly
extended. Whether extended or not, said provisions may be
terminated in whole or in part by notice from you.
11. DEFAULT BY UNDERWRITERS. Default by one or more
Underwriters in respect of their obligations hereunder or under the
Underwriting Agreement shall not release us from any of our
obligations or in any way affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from
such default. In case of such default by one or more Underwriters,
you are authorized to increase, pro rata with other non-defaulting
Underwriters, the number of Designated Preferred Securities which
we shall be obligated to purchase pursuant to the Underwriting
Agreement, provided that the aggregate amount of all such increases
for our account shall not exceed our pro rata share of -----------
Designated Preferred
6
<PAGE> 47
Securities; and you are further authorized to arrange, but shall not be
obligated to arrange, for the purchase by other persons, who may include
yourselves or other Underwriters, of all or a portion of any aggregate amount
not taken up. In the event any such arrangements are made, the respective
numbers of Designated Preferred Securities to be purchased by the
non-defaulting Underwriters and by any such other persons shall be
taken as the basis for the underwriting obligations under this
Agreement.
12. POSITION OF REPRESENTATIVE. Except as otherwise
specifically provided in this Agreement, you shall have full
authority to take such action as you may deem advisable in respect
of all matters pertaining to the Underwriting Agreement and this
Agreement and in connection with the purchase, carrying, sale, and
distribution of the Designated Preferred Securities (including
authority to terminate the Underwriting Agreement as provided
therein). You shall be under no liability to us for or in respect
of the value of the Designated Preferred Securities or the validity
or the form thereof, the Registration Statement, any preliminary
prospectus, the Prospectus, the Underwriting Agreement, or other
instruments executed by the Offerors, or others; or for or in
respect of the issuance, transfer, or delivery of the Designated
Preferred Securities; or for the performance by the Offerors, or
others of any agreement on its or their part; nor shall you be
liable under any of the provisions hereof or for any matters
connected herewith, except for your own want of good faith, for
obligations expressly assumed by you in this Agreement and for any
liabilities imposed upon you by the Act. No obligations on your
part shall be implied or inferred herefrom. Authority with respect
to matters to be determined by you, or by you and the Offerors,
pursuant to the Underwriting Agreement, shall survive the
termination of this Agreement.
In taking all actions hereunder, except in the
performance of your own obligations hereunder and under the
Underwriting Agreement, you shall act only as the representative
of each of the Underwriters. The commitments and liabilities of
each of the several Underwriters are several in accordance with
their respective purchase obligations and are not joint or joint
and several. Nothing contained herein shall constitute the
Underwriters partners or render any of them liable to make payments
otherwise than as herein provided. If for federal income tax
purposes the Underwriters should be deemed to constitute a
partnership, then each Underwriter elects to be excluded from the
application of Subchapter K, Chapter 1, Subtitle A, of the Internal
Revenue Code of 1986, as amended, and agrees not to take any
position inconsistent with such election. Each Underwriter
authorizes Stifel, Nicolaus & Company, Incorporated, in its
discretion, on behalf of such Underwriter, to execute such evidence
of such election as may be required by the Internal Revenue
Service.
13. COMPENSATION TO REPRESENTATIVE. As compensation for
your services in connection with the purchase of the Designated
Preferred Securities and the management of the public offering of
the Designated Preferred Securities, we agree to pay you and
authorize you to charge our account with an amount equal to
$-------------- per share of the Designated Preferred Securities
which we have agreed to purchase pursuant to the Underwriting
Agreement.
14. INDEMNIFICATION AND FUTURE CLAIMS. Each
Underwriter, including you,
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<PAGE> 48
agrees to indemnify, hold harmless and reimburse each other Underwriter and
each person, if any, who controls any other Underwriter within the meaning of
Section 15 of the Act, and any successor of any other Underwriter, to the
extent that, and upon the terms upon which, each Underwriter will be
obligated pursuant to the Underwriting Agreement to indemnify, hold
harmless and reimburse the Offerors, its directors, officers, and
controlling persons, therein specified.
In the event that at any time any person other than an
Underwriter asserts a claim against one or more of the Underwriters
or against you as representative of the Underwriters arising out of
an alleged untrue statement or omission in the Registration
Statement (or any amendment thereto) or in any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto) or relating to any transaction contemplated by this
Agreement, we authorize you to make such investigation, to retain
such counsel for the Underwriters and to take such action in the
defense of such claim as you may deem necessary or advisable. You
may settle such claim with the approval of a majority in interest
of the Underwriters. We will pay our proportionate share (based
upon our underwriting obligation) of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters)
in investigating and defending against such claim and our
proportionate share of the aggregate liability incurred by all
underwriters in respect of such claim (after deducting any
contribution or indemnification obtained pursuant to the
Underwriting Agreement, or otherwise, from persons other than
Underwriters), whether such liability is the result of a judgment
against one or more of the Underwriters or the result of any such
settlement. There shall be credited against any amount paid or
payable by us pursuant to this paragraph any loss, damage,
liability or expense which is incurred by us as a result of any
such claim asserted against us, and if such loss, claim, damage,
liability, or expense is incurred by us as a result of any such
claim against us, and if such loss, claim, damage, liability, or
expense is incurred by us subsequent to any payment by us pursuant
to this paragraph, appropriate provision shall be made to effect
such credit, by refund or otherwise. Any Underwriter may retain
separate counsel at its own expense. A claim against or liability
incurred by a person who controls an Underwriter shall be deemed to
have been made against or incurred by such Underwriter. In the
event of default by any Underwriter in respect of its obligations
under this Section, the non-defaulting Underwriters shall be
obligated to pay the full amount thereof in the proportions that
their respective underwriting obligations bear to the underwriting
obligations of all non-defaulting Underwriters, without relieving
such defaulting Underwriter of its liability hereunder. Our
agreements contained in this Section will remain in full force and
effect regardless of any investigation made by or on behalf of such
other Underwriter or controlling person and will survive the
delivery of and payment for the Designated Preferred Securities and
the termination of this Agreement and the similar agreements
entered into with the other Underwriters.
15. BLUE SKY AND OTHER MATTERS. You will not have any
responsibility with respect to the right of any Underwriter or
other person to sell the Designated Preferred Securities in any
jurisdiction notwithstanding any information you may furnish in
that connection. We authorize you to file a New York Further State
Notice, if required, and to make and carry out on our behalf any
agreements which you may deem necessary in order to procure
registration or
8
<PAGE> 49
qualification of any of the Designated Preferred Securities in any
jurisdiction, and we will at your request make such payments, and furnish to
you such information, as you may deem required by reason of any such
agreements.
We authorize you to file on behalf of the several
Underwriters with the National Association of Securities Dealers,
Inc. (the "NASD") such documents and information, if any, which are
available or have been furnished to you for filing pursuant to the
applicable rules, statements, and interpretations of the NASD.
16. TITLE TO DESIGNATED PREFERRED SECURITIES. The
Designated Preferred Securities purchased by the respective
Underwriters shall remain the property of such Underwriters until
sold and no title to any such Designated Preferred Securities shall
in any event pass to you by virtue of any of the provisions of this
Agreement.
17. CAPITAL REQUIREMENTS. We confirm that the
incurrence by us of our obligations under this Agreement and under
the Underwriting Agreement will not place us in violation of Rule
15c3-1 under the 1934 Act or of any applicable rules relating to
capital requirements of any securities exchange or association to
which we are subject.
18. LIABILITY FOR FUTURE CLAIMS. Neither any statement
by you of any credit or debit balance in our account nor any
reservation from distribution to cover possible additional expenses
relating to the Designated Preferred Securities will constitute any
representation by you as to the existence or nonexistence of
possible unforeseen expenses or liabilities of or charges against
the several Underwriters. Notwithstanding the distribution of any
net credit balance to us, we will be and remain liable for, and
will pay on demand, (a) our proportionate share (based upon our
underwriting obligation) of all expenses and liabilities which may
be incurred by or for the accounts of the Underwriters, including
any liability which may be incurred by the Underwriters or any of
them based on the claim that the Underwriters constitute an
association, unincorporated business, partnership, or any separate
entity, and (b) any transfer taxes paid after such settlement on
account of any sale or transfer for our account.
19. ACKNOWLEDGMENT OF REGISTRATION STATEMENT, ETC. We
hereby confirm that we have examined the Registration Statement
(including any amendments or supplements thereto) and Prospectus
relating to the Designated Preferred Securities filed with the
Commission, that we are willing to accept the responsibilities of
an underwriter thereunder and that we are willing to proceed as
therein contemplated. We confirm that we have authorized you to
advise the Offerors on our behalf (a) as to the statements to be
included in any preliminary prospectus and in the Prospectus
(including any supplement thereto) relating to the Designated
Preferred Securities under the heading "Underwriting," insofar as
they relate to us, and (b) that there is no information about us
required to be stated in said Registration Statement or said
preliminary prospectus or the Prospectus (including any supplement
thereto) other than as set forth in the Underwriters' Questionnaire
previously delivered by us to you and the Offerors. We understand
that the aforementioned documents are subject to further change and
that we will be
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<PAGE> 50
supplied with copies of any amendment or amendments to the Registration
Statement and of any amended Prospectus promptly, if and when received by you,
but the making of such changes and amendments will not release us or affect
our obligations hereunder or under the Underwriting Agreement.
20. NOTICES AND GOVERNING LAW. Any notice from you to
us shall be mailed, telephoned, or telegraphed to us at our address
as set forth in the Underwriters' Questionnaire. Any notice from
us to you shall be deemed to have been duly given if mailed,
telephoned or telegraphed to you at 500 North Broadway, Suite
1500, St. Louis, Missouri 63102, Attention: Syndicate Department.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Missouri.
21. OTHER PROVISIONS. We represent that we are actually
engaged in the investment banking or securities business and that
we are a member in good standing of the NASD or, if we are not such
a member, that we are a foreign dealer not eligible for membership
in the NASD and that we will not offer or sell any Designated
Preferred Securities in, or to persons who are nationals or
residents of, the United States of America. In making sales of
Designated Preferred Securities, if we are such a member, we agree
to comply with all applicable rules of the NASD, including, without
limitation, the NASD's Interpretation with respect to Free-Riding
and Withholding and Section 24 of Article III of the NASD's Rules
of Fair Practice, or if we are a foreign dealer, we agree to comply
with such Interpretation and Sections 8, 24 and 36 of such Article
as though we were such a member, and with Section 25 as that
Section applies to a non-member broker or dealer in a foreign
country. We confirm that you have heretofore delivered to us such
number of copies of the Prospectus as have been reasonably
requested by us, and we further confirm that we have complied and
will comply with Rule 15c2-8 under the 1934 Act concerning delivery
of each preliminary prospectus and the Prospectus, and that we will
furnish to persons who receive a confirmation of sale a copy of the
Prospectus filed pursuant to Rule 424(b) or Rule 424(c) under the
Act. We are aware of our statutory responsibilities under the Act,
and you are authorized on our behalf to so advise the Commission.
22. COUNTERPARTS. This Agreement may be signed in any
number of counterparts which, taken together, shall constitute one
and the same instrument, and you may confirm the execution of such
counterparts by facsimile signature.
-------------------------------------------------
As Attorney-in-Fact for each of the several
Underwriters named in Schedule II to the
Underwriting Agreement
10
<PAGE> 51
Confirmed as of the date first above written.
STIFEL, NICOLAUS & COMPANY, INCORPORATED
As Representative of the Several Underwriters
By: ----------------------------------------------------
Name:
Title:
11
<PAGE> 1
EXHIBIT 4.1
<PAGE> 2
==============================================================================
[FORM OF INDENTURE]
FIRST BANKS, INC.
AND
STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE
INDENTURE
---------------% SUBORDINATED DEBENTURES DUE 2027
DATED AS OF JANUARY -----, 1997.
==============================================================================
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . 1
Section 1.1. Definitions of Terms.. . . . . . . . . . . 1
ARTICLE II. ISSUE, DESCRIPTION, TERMS, CONDITIONS,
REGISTRATION AND EXCHANGE OF THE
DEBENTURES . . . . . . . . . . . . . . . . 8
Section 2.1. Designation and Principal Amount.. . . . . 8
Section 2.2. Maturity.. . . . . . . . . . . . . . . . . 8
Section 2.3. Form and Payment . . . . . . . . . . . . . 9
Section 2.4. [Intentionally Omitted]
Section 2.5. Interest . . . . . . . . . . . . . . . . . 11
Section 2.6. Execution and Authentications. . . . . . . 12
Section 2.7. Registration of Transfer and Exchange. . . 12
Section 2.8. Temporary Debentures . . . . . . . . . . . 13
Section 2.9. Mutilated, Destroyed, Lost or Stolen
Debentures . . . . . . . . . . . . . . . . 14
Section 2.10. Cancellation . . . . . . . . . . . . . . . 14
Section 2.11. Benefit of Indenture . . . . . . . . . . . 14
Section 2.12. Authentication Agent . . . . . . . . . . . 15
ARTICLE III. REDEMPTION OF DEBENTURES . . . . . . . . . 15
Section 3.1. Redemption . . . . . . . . . . . . . . . . 15
Section 3.2. Special Event Redemption . . . . . . . . . 15
Section 3.3. Optional Redemption by Company . . . . . . 16
Section 3.4. Notice of Redemption . . . . . . . . . . . 16
Section 3.5. Payment Upon Redemption. . . . . . . . . . 17
Section 3.6. No Sinking Fund. . . . . . . . . . . . . . 18
ARTICLE IV. EXTENSION OF INTEREST PAYMENT PERIOD . . . 18
Section 4.1. Extension of Interest Payment Period . . . 18
Section 4.2. Notice of Extension. . . . . . . . . . . . 18
Section 4.3. Limitation on Transactions . . . . . . . . 19
ARTICLE V. PARTICULAR COVENANTS OF THE COMPANY. . . . 19
Section 5.1. Payment of Principal and Interest. . . . . 19
Section 5.2. Maintenance of Agency. . . . . . . . . . . 19
Section 5.3. Paying Agents. . . . . . . . . . . . . . . 20
Section 5.4. Appointment to Fill Vacancy in Office
of Trustee . . . . . . . . . . . . . . . . 21
Section 5.5. Compliance with Consolidation
Provisions . . . . . . . . . . . . . . . . 21
Section 5.6. Limitation on Transactions . . . . . . . . 21
Section 5.7. Covenants as to the Trust. . . . . . . . . 21
Section 5.8. Covenants as to Purchases. . . . . . . . . 22
i
<PAGE> 4
ARTICLE VI. DEBENTUREHOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE. . . . . . . . 22
Section 6.1. Company to Furnish Trustee Names and
Addresses of Debentureholders. . . . . . . 22
Section 6.2. Preservation of Information
Communications with Debentureholders . . . 22
Section 6.3. Reports by the Company . . . . . . . . . . 22
Section 6.4. Reports by the Trustee . . . . . . . . . . 23
ARTICLE VII. REMEDIES OF THE TRUSTEE AND
DEBENTUREHOLDERS ON EVENT OF DEFAULT . . . 23
Section 7.1. Events of Default. . . . . . . . . . . . . 23
Section 7.2. Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . . . 25
Section 7.3. Application of Moneys Collected. . . . . . 26
Section 7.4. Limitation on Suits. . . . . . . . . . . . 26
Section 7.5. Rights and Remedies Cumulative; Delay
or Omission not Waiver . . . . . . . . . . 27
Section 7.6. Control by Debentureholders. . . . . . . . 27
Section 7.7. Undertaking to Pay Costs . . . . . . . . . 28
ARTICLE VIII. FORM OF DEBENTURE AND ORIGINAL ISSUE . . . 28
Section 8.1. Form of Debenture. . . . . . . . . . . . . 28
Section 8.2. Original Issue of Debentures . . . . . . . 28
ARTICLE IX. CONCERNING THE TRUSTEE . . . . . . . . . . 29
Section 9.1. Certain Duties and Responsibilities
Trustee. . . . . . . . . . . . . . . . . . 29
Section 9.2. Notice of Defaults . . . . . . . . . . . . 30
Section 9.3. Certain Rights of Trustee. . . . . . . . . 30
Section 9.4. Trustee Not Responsible for Recitals,
etc. . . . . . . . . . . . . . . . . . . . 31
Section 9.5. May Hold Debentures. . . . . . . . . . . . 31
Section 9.6. Moneys Held in Trust . . . . . . . . . . . 31
Section 9.7. Compensation and Reimbursement . . . . . . 32
Section 9.8. Reliance on Officers' Certificate. . . . . 32
Section 9.9. Disqualification: Conflicting
Interests. . . . . . . . . . . . . . . . . 32
Section 9.10. Corporate Trustee Required;
Eligibility. . . . . . . . . . . . . . . . 33
Section 9.11. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . . . . 33
Section 9.12. Acceptance of Appointment by Successor . . 34
Section 9.13. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . 35
Section 9.14. Preferential Collection of Claims
Against the Company. . . . . . . . . . . . 35
ARTICLE X. CONCERNING THE DEBENTUREHOLDERS. . . . . . 35
Section 10.1. Evidence of Action by Holders. . . . . . . 35
Section 10.2. Proof of Execution by Debentureholders . . 36
Section 10.3. Who May be Deemed Owners . . . . . . . . . 36
Section 10.4. Certain Debentures Owned by Company
Disregarded. . . . . . . . . . . . . . . . 36
Section 10.5. Actions Binding on Future
Debentureholders . . . . . . . . . . . . . 36
ii
<PAGE> 5
ARTICLE XI. SUPPLEMENTAL INDENTURES. . . . . . . . . . 37
Section 11.1. Supplemental Indentures Without the
Consent of Debentureholders. . . . . . . . 37
Section 11.2. Supplemental Indentures with Consent
of Debentureholders. . . . . . . . . . . . 38
Section 11.3. Effect of Supplemental Indentures. . . . . 38
Section 11.4. Debentures Affected by Supplemental
Indentures . . . . . . . . . . . . . . . . 38
Section 11.5. Execution of Supplemental Indentures . . . 38
ARTICLE XII. SUCCESSOR CORPORATION. . . . . . . . . . . 39
Section 12.1. Company May Consolidate, etc . . . . . . . 39
Section 12.2. Successor Corporation Substituted. . . . . 39
Section 12.3. Evidence of Consolidation, etc. to
Trustee. . . . . . . . . . . . . . . . . . 40
ARTICLE XIII. SATISFACTION AND DISCHARGE . . . . . . . . 40
Section 13.1. Satisfaction and Discharge of
Indenture. . . . . . . . . . . . . . . . . 40
Section 13.2. Discharge of Obligations . . . . . . . . . 41
Section 13.3. Deposited Moneys to be Held in Trust . . . 41
Section 13.4. Payment of Monies Held by Paying
Agents . . . . . . . . . . . . . . . . . . 41
Section 13.5. Repayment to Company . . . . . . . . . . . 41
ARTICLE XIV. IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS . . . 42
Section 14.1. No Recourse. . . . . . . . . . . . . . . . 42
ARTICLE XV. MISCELLANEOUS PROVISIONS . . . . . . . . . 42
Section 15.1. Effect on Successors and Assigns . . . . . 42
Section 15.2. Actions by Successor . . . . . . . . . . . 42
Section 15.3. Surrender of Company Powers. . . . . . . . 42
Section 15.4. Notices. . . . . . . . . . . . . . . . . . 43
Section 15.5. Governing Law. . . . . . . . . . . . . . . 43
Section 15.6. Treatment of Debentures as Debt. . . . . . 43
Section 15.7. Compliance Certificates and Opinions . . . 43
Section 15.8. Payments on Business Days. . . . . . . . . 43
Section 15.9. Conflict with Trust Indenture Act. . . . . 44
Section 15.10. Counterparts . . . . . . . . . . . . . . . 44
Section 15.11. Separability . . . . . . . . . . . . . . . 44
Section 15.12. Assignment . . . . . . . . . . . . . . . . 44
Section 15.13. Acknowledgment of Rights . . . . . . . . . 44
iii
<PAGE> 6
ARTICLE XVI. SUBORDINATION OF DEBENTURES. . . . . . . . 44
Section 16.1. Agreement to Subordinate . . . . . . . . . 45
Section 16.2. Default on Senior Debt, Subordinated
Debt or Additional Senior Obligations. . . 45
Section 16.3. Liquidation; Dissolution; Bankruptcy . . . 45
Section 16.4. Subrogation. . . . . . . . . . . . . . . . 46
Section 16.5. Trustee to Effectuate Subordination. . . . 47
Section 16.6. Notice by the Company. . . . . . . . . . . 47
Section 16.7. Rights of the Trustee; Holders of
Senior Indebtedness. . . . . . . . . . . . 48
Section 16.8. Subordination may not be Impaired. . . . . 48
</TABLE>
iv
<PAGE> 7
<TABLE>
CROSS-REFERENCE TABLE
<CAPTION>
Section of
Trust Indenture Act Section of
of 1939, as amended Indenture
- ------------------- ---------
<S> <C>
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.9
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.11
310(c) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.14
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.14
311(c) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.1
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2(c)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2(c)
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(a)
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(b)
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(b)
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(c)
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3(a)
314(b) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.7
314(d) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.7
314(f) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.3
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9.2
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1(b)
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.7
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.6
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4(b)
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .10.1(b)
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.2
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9
<FN>
Note: This Cross-Reference Table does not constitute part of this
Indenture and shall not affect the interpretation of any of its terms
or provisions.
</TABLE>
v
<PAGE> 8
INDENTURE
INDENTURE, dated as of January ---, 1997, between FIRST BANKS,
INC., a Missouri corporation (the "Company") and STATE STREET BANK AND
TRUST COMPANY, a banking corporation duly organized and existing under
the laws of the State of Massachusetts, as trustee (the "Trustee");
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the execution and delivery of this Indenture to
provide for the issuance of securities to be known as its --------%
Subordinated Debentures due 2027 (hereinafter referred to as the
"Debentures"), the form and substance of such Debentures and the
terms, provisions and conditions thereof to be set forth as
provided in this Indenture;
WHEREAS, First Preferred Capital Trust, a Delaware statutory
business trust (the "Trust"), has offered to the public
$---- million aggregate liquidation amount of its Preferred
Securities (as defined herein) and proposes to invest the proceeds
from such offering, together with the proceeds of the issuance and
sale by the Trust to the Company of $---- million aggregate
liquidation amount of its Common Securities (as defined herein), in
$---- million aggregate principal amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute
and deliver this Indenture; and
WHEREAS, all requirements necessary to make this Indenture a
valid instrument in accordance with its terms, and to make the
Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company,
have been performed, and the execution and delivery of this
Indenture have been duly authorized in all respects:
WHEREAS, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the
Company has duly authorized the execution of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been
done.
NOW, THEREFORE, in consideration of the premises and the
purchase of the Debentures by the holders thereof, it is mutually
covenanted and agreed as follows for the equal and ratable benefit
of the holders of the Debentures:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINITIONS OF TERMS.
The terms defined in this Section 1.1 (except as in this
Indenture otherwise expressly provided or unless the context
otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings
specified in this Section 1.1 and shall include the plural as well
as the singular. All other terms used in this Indenture that are
defined in the Trust Indenture Act, or that are by reference in the
Trust Indenture Act defined in the Securities Act (except as herein
otherwise expressly provided or unless the context otherwise
requires), shall have the meanings assigned to such terms in the
Trust Indenture Act and in the Securities Act as in force at the
date of the
<PAGE> 9
execution of this instrument. All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with Generally Accepted Accounting Principles.
"Accelerated Maturity Date" means if the Company elects to
accelerate the Maturity Date in accordance with Section 2.2(c), the
date selected by the Company which is prior to the Scheduled
Maturity Date, but is after March 31, 2002.
"Additional Interest" shall have the meaning set forth in
Section 2.5.
"Additional Senior Obligations" means all indebtedness of the
Company whether incurred on or prior to the date of this Indenture
or thereafter incurred, for claims in respect of derivative
products such as interest and foreign exchange rate contracts,
commodity contracts and similar arrangements; provided, however,
that Additional Senior Obligations does not include claims in
respect of Senior Debt or Subordinated Debt or obligations which,
by their terms, are expressly stated to be not superior in right of
payment to the Debentures or to rank pari passu in right of payment
with the Debentures. For purposes of this definition, "claim"
shall have the meaning assigned thereto in Section 101(4) of the
United States Bankruptcy Code of 1978, as amended.
"Administrative Trustees" shall have the meaning set forth in
the Trust Agreement.
"Affiliate" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding with
power to vote 10% or more of the outstanding voting securities or
other ownership interests of the specified Person; (b) any Person
10% or more of whose outstanding voting securities or other
ownership interests are directly or indirectly owned, controlled or
held with power to vote by the specified Person; (c) any Person
directly or indirectly controlling, controlled by, or under common
control with the specified Person; (d) a partnership in which the
specified Person is a general partner; (e) any officer or director
of the specified Person; and (f) if the specified Person is an
individual, any entity of which the specified Person is an officer,
director or general partner.
"Authenticating Agent" means an authenticating agent with
respect to the Debentures appointed by the Trustee pursuant to
Section 2.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company or any duly authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification.
"Business Day" means, with respect to the Debentures, any day
other than a Saturday or a Sunday or a day on which federal or
state banking institutions in the Borough of Manhattan, The City of
New York, are authorized or required by law, executive order or
regulation to close, or a day on which the Corporate Trust Office
of the Trustee or the Property Trustee is closed for business.
2
<PAGE> 10
"Certificate" means a certificate signed by the principal
executive officer, the principal financial officer, the principal
accounting officer, the treasurer or any vice president of the
Company. The Certificate need not comply with the provisions of
Section 15.7.
"Change in 1940 Act Law" shall have the meaning set forth in
the definition of "Investment Company Event."
"Commission" means the Securities and Exchange Commission.
"Common Securities" means undivided beneficial interests in
the assets of the Trust which rank pari passu with the Preferred
Securities; provided, however, that upon the occurrence of an Event
of Default, the rights of holders of Common Securities to payment
in respect of (i) distributions, and (ii) payments upon
liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Company" means First Banks, Inc., a corporation duly
organized and existing under the laws of the State of Missouri,
and, subject to the provisions of Article XII, shall also include
its successors and assigns.
"Compounded Interest" shall have the meaning set forth in
Section 4.1.
"Corporate Trust Office" means the office of the Trustee at
which, at any particular time, its corporate trust business shall
be principally administered, which office at the date hereof is
located at 2 International Place, 5th Floor, Boston, Massachusetts
02110, Attention: Corporate Trust Trustee.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Custodian" means any receiver, trustee, assignee, liquidator,
or similar official under any Bankruptcy Law.
"Debentures" shall have the meaning set forth in the Recitals
hereto.
"Debentureholder," "holder of Debentures," "registered
holder," or other similar term, means the Person or Persons in
whose name or names a particular Debenture shall be registered on
the books of the Company or the Trustee kept for that purpose in
accordance with the terms of this Indenture.
"Debenture Register" shall have the meaning set forth in
Section 2.7(b).
"Debt" means with respect to any Person, whether recourse is
to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed;
(ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including
obligations incurred in connection with the acquisition of
property, assets or businesses; (iii) every reimbursement
obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account
of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but
excluding trade accounts payable or accrued liabilities arising in
the ordinary course of business); (v) every capital lease
obligation of such Person; and (vi) and every obligation of the
type referred to in clauses (i) through (v) of another Person
3
<PAGE> 11
and all dividends of another Person the payment of which, in either
case, such Person has guaranteed or is responsible or liable,
directly or indirectly, as obligor or otherwise.
"Default" means any event, act or condition that with notice
or lapse of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in
Section 4.1.
"Dissolution Event" means that as a result of the occurrence
and continuation of a Special Event, the Trust is to be dissolved
in accordance with the Trust Agreement and the Debentures held by
the Property Trustee are to be distributed to the holders of the
Trust Securities issued by the Trust pro rata in accordance with
the Trust Agreement.
"Event of Default" means, with respect to the Debentures, any
event specified in Section 7.1, which has continued for the period
of time, if any, and after the giving of the notice, if any,
therein designated.
"Exchange Act," means the Securities Exchange Act of 1934, as
amended, as in effect at the date of execution of this instrument.
"Extended Interest Payment Period" shall have the meaning set
forth in Section 4.1.
"Extended Maturity Date" means if the Company elects to extend
the Maturity Date in accordance with Section 2.2(b), the date
selected by the Company which is after the Scheduled Maturity Date
but before March 31, 2046.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Generally Accepted Accounting Principles" means such
accounting principles as are generally accepted at the time of any
computation required hereunder.
"Governmental Obligations" means securities that are
(i) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged; or
(ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America,
the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America that, in
either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depositary receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act) as
custodian with respect to any such Governmental Obligation or a
specific payment of principal
4
<PAGE> 12
of or interest on any such Governmental Obligation held by such custodian for
the account of the holder of such depositary receipt; provided, however, that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt
from any amount received by the custodian in respect of the Governmental
Obligation or the specific payment of principal of or interest on the
Governmental Obligation evidenced by such depositary receipt.
"Herein," "hereof," and "hereunder," and other words of
similar import, refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into in accordance with the
terms hereof.
"Interest Payment Date," when used with respect to any
installment of interest on the Debentures, means the date specified
in the Debenture or in a Board Resolution or in an indenture
supplemental hereto with respect to the Debentures as the fixed
date on which an installment of interest with respect to the
Debentures is due and payable.
"Investment Company Act," means the Investment Company Act of
1940, as amended, as in effect at the date of execution of this
instrument.
"Investment Company Event" means the receipt by the Trust of
an Opinion of Counsel, rendered by a law firm having a recognized
national tax and securities law practice, to the effect that, as a
result of the occurrence of a change in law or regulation or a
change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust is or shall be
considered an "investment company" that is required to be
registered under the Investment Company Act, which Change in 1940
Act Law becomes effective on or after the date of original issuance
of the Preferred Securities under the Trust Agreement.
"Maturity Date" means the date on which the Debentures mature
and on which the principal shall be due and payable together with
all accrued and unpaid interest thereon including Compounded
Interest and Additional Interest, if any.
"Ministerial Action" shall have the meaning set forth in
Section 3.2.
"Officers' Certificate" means a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Controller or an Assistant Controller or the
Secretary or an Assistant Secretary of the Company that is
delivered to the Trustee in accordance with the terms hereof. Each
such certificate shall include the statements provided for in
Section 15.7, if and to the extent required by the provisions
thereof.
"Opinion of Counsel" means an opinion in writing of legal
counsel, who may be an employee of or counsel for the Company, that
is delivered to the Trustee in accordance with the terms hereof.
Each such opinion shall include the statements provided for in
Section 15.7, if and to the extent required by the provisions
thereof.
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"Outstanding," when used with reference to the Debentures,
means, subject to the provisions of Section 10.4, as of any
particular time, all Debentures theretofore authenticated and
delivered by the Trustee under this Indenture, except
(a) Debentures theretofore canceled by the Trustee or any paying
agent, or delivered to the Trustee or any paying agent for
cancellation or that have previously been canceled; (b) Debentures
or portions thereof for the payment or redemption of which moneys
or Governmental Obligations in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other
than the Company) or shall have been set aside and segregated in
trust by the Company (if the Company shall act as its own paying
agent); provided, however, that if such Debentures or portions of
such Debentures are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in Article III
provided, or provision satisfactory to the Trustee shall have been
made for giving such notice; and (c) Debentures in lieu of or in
substitution for which other Debentures shall have been
authenticated and delivered pursuant to the terms of Section 2.7.
"Person" means any individual, corporation, partnership,
joint-venture, joint-stock company, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Debenture" means every previous Debenture
evidencing all or a portion of the same debt as that evidenced by
such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section
2.9 in lieu of a lost, destroyed or stolen Debenture shall be
deemed to evidence the same debt as the lost, destroyed or stolen
Debenture.
"Preferred Securities" means undivided beneficial interests in
the assets of the Trust which rank pari passu with Common
Securities issued by the Trust; provided, however, that upon the
occurrence of an Event of Default, the rights of holders of Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise are subordinated to the
rights of holders of Preferred Securities.
"Preferred Securities Guarantee" means any guarantee that the
Company may enter into with the Trustee or other Persons that
operate directly or indirectly for the benefit of holders of
Preferred Securities.
"Property Trustee" has the meaning set forth in the Trust
Agreement.
"Responsible Officer" when used with respect to the Trustee
means the Chairman of the Board of Directors, the President, any
Vice President, the Secretary, the Treasurer, any trust officer,
any corporate trust officer or any other officer or assistant
officer of the Trustee customarily performing functions similar to
those performed by the Persons who at the time shall be such
officers, respectively, or to whom any corporate trust matter is
referred because of his or her knowledge of and familiarity with
the particular subject.
"Scheduled Maturity Date" means March 31, 2027.
"Securities Act," means the Securities Act of 1933, as
amended, as in effect at the date of execution of this instrument.
"Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not such claim for post-petition interest
is allowed in such proceeding), on Debt, whether
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incurred on or prior to the date of this Indenture or thereafter incurred,
unless, in the instrument creating or evidencing the same or pursuant to
which the same is outstanding, it is provided that such obligations
are not superior in right of payment to the Debentures or to other
Debt which is pari passu with, or subordinated to, the Debentures;
provided, however, that Senior Debt shall not be deemed to include
(i) any Debt of the Company which when incurred and without respect
to any election under section 1111(b) of the United States
Bankruptcy Code of 1978, as amended, was without recourse to the
Company; (ii) any Debt of the Company to any of its subsidiaries;
(iii) Debt to any employee of the Company; (iv) Debt which by its
terms is subordinated to trade accounts payable or accrued
liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the
holders of the Debentures as a result of the subordination
provisions of this Indenture would be greater than they otherwise
would have been as a result of any obligation of such holders to
pay amounts over to the obligees on such trade accounts payable or
accrued liabilities arising in the ordinary course of business as
a result of subordination provisions to which such Debt is subject;
and (v) Debt which constitutes Subordinated Debt.
"Senior Indebtedness" shall have the meaning set forth in
Section 16.2.
"Special Event" means a Tax Event or an Investment Company
Event.
"Subordinated Debt" means the principal of (and premium, if
any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization
relating to the Company whether or not such claim for post-petition
interest is allowed in such proceeding), on Debt, whether incurred
on or prior to the date of this Indenture or thereafter incurred,
which is by its terms expressly provided to be junior and
subordinate to other Debt of the Company (other than the
Debentures).
"Subsidiary" means, with respect to any Person, (i) any
corporation at least a majority of whose outstanding Voting Stock
shall at the time be owned, 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; (ii) any general partnership, joint
venture, trust or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be
owned by such Person, or by one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries; and (iii) any
limited partnership of which such Person or any of its Subsidiaries
is a general partner.
"Tax Event" means the receipt by the Trust of an Opinion of
Counsel, rendered by a law firm having a recognized national tax
and securities practice, to the effect that, as a result of any
amendment to, or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date
of issuance of the Preferred Securities under the Trust Agreement,
there is more than an insubstantial risk that (i) the Trust is, or
shall be within 90 days after the date of such Opinion of Counsel,
subject to United States federal income tax with respect to income
received or accrued on the Debentures; (ii) interest payable by the
Company on the Debentures is not, or within 90 days after the date
of such Opinion of Counsel, shall not be, deductible by the
Company, in whole or in part, for United States federal income tax
purposes; or (iii) the Trust is, or shall be within 90 days after
the date of such Opinion of Counsel, subject to more than a de
minimis amount of other taxes, duties, assessments or other
governmental charges. The Trust or the Company shall request and
receive such Opinion of Counsel with regard to such matters within a
reasonable period of time after the Trust or the Company shall have
become aware of the possible occurrence of any of the events described
in clauses (i) through (iii) above.
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"Trust" means First Preferred Capital Trust, a Delaware
statutory business trust.
"Trust Agreement" means the Amended and Restated Trust
Agreement, dated January --, 1997, of the Trust.
"Trustee" means State Street Bank and Trust Company and, subject
to the provisions of Article IX, shall also include its successors
and assigns, and, if at any time there is more than one Person acting
in such capacity hereunder, "Trustee" shall mean each such Person.
"Trust Indenture Act," means the Trust Indenture Act of 1939,
as amended, subject to the provisions of Sections 11.1, 11.2, and
12.1, as in effect at the date of execution of this instrument.
"Trust Securities" means the Common Securities and Preferred
Securities, collectively.
"Voting Stock," as applied to stock of any Person, means
shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary
voting power for the election of a majority of the directors (or
the equivalent) of such Person, other than shares, interests,
participations or other equivalents having such power only by
reason of the occurrence of a contingency.
ARTICLE II.
ISSUE, DESCRIPTION, TERMS, CONDITIONS
REGISTRATION AND EXCHANGE OF THE DEBENTURES
SECTION 2.1. DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized Debentures designated the "---%
Subordinated Debentures due 2027," limited in aggregate principal
amount to $---------- million, which amount shall be as set forth
in any written order of the Company for the authentication and
delivery of Debentures pursuant to Section 2.6.
SECTION 2.2. MATURITY.
(a) The Maturity Date shall be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to extend the Maturity Date
beyond the Scheduled Maturity Date in accordance
with Section 2.2(b), the Extended Maturity Date;
or
(iii) if the Company elects to accelerate the Maturity
Date to be a date prior to the Scheduled Maturity
Date in accordance with Section 2.2(c), the
Accelerated Maturity Date.
(b) the Company may at any time before the day which is 90
days before the Scheduled Maturity Date, elect to extend
the Maturity Date to the Extended Maturity Date, provided
that the Company has received the prior approval of the
Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve and further
provided that the following conditions in this Section 2.2(b)
are satisfied both at
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the date the Company gives notice in accordance with
Section 2.2(d) of its election to extend the Maturity
Date and at the Scheduled Maturity Date:
(i) the Company is not in bankruptcy, otherwise
insolvent or in liquidation;
(ii) the Company is not in default in the payment of
interest or principal on the Debentures;
(iii) the Trust is not in arrears on payments of
Distributions on the Trust Securities issued by
it and no deferred Distributions are accumulated;
and
(iv) the Company has a rating on its Senior Debt of
investment grade.
(c) the Company may at any time before the day which is 90
days before the Scheduled Maturity Date and after
March 31, 2002, elect to shorten the Maturity Date only once
to the Accelerated Maturity Date provided that the Company has
received the prior approval of the Federal Reserve if then
required under applicable capital guidelines or policies of
the Federal Reserve.
(d) if the Company elects to extend the Maturity Date in
accordance with Section 2.2(b), the Company shall give
notice to the registered holders of the Debentures, the
Property Trustee and the Trust of the extension of the
Maturity Date and the Extended Maturity Date at least 90
days and no more than 180 days before the Scheduled
Maturity Date.
(e) if the Company elects to accelerate the Maturity Date in
accordance with Section 2.2(c), the Company shall give
notice to the registered holders of the Debentures, the
Property Trustee and the Trust of the extension of the
Maturity Date and the Accelerated Maturity Date at least
90 days and no more than 180 days before the Accelerated
Maturity Date.
SECTION 2.3. FORM AND PAYMENT.
The Debentures shall be issued in fully registered certificated
form without interest coupons. Principal and interest on the Debentures
issued in certificated form shall be payable, the transfer of such
Debentures shall be registrable and such Debentures shall be
exchangeable for Debentures bearing identical terms and provisions at
the office or agency of the Trustee; provided, however, that payment of
interest may be made at the option of the Company by check mailed to the
holder at such address as shall appear in the Debenture Register or
by wire transfer to an account maintained by the holder as
specified in the Debenture Register, provided that the holder
provides proper transfer instructions by the regular record date.
Notwithstanding the foregoing, so long as the holder of any
Debentures is the Property Trustee, the payment of the principal of
and interest (including Compounded Interest and Additional
Interest, if any) on such Debentures held by the Property Trustee
shall be made at such place and to such account as may be
designated by the Property Trustee.
SECTION 2.4. [Intentionally Omitted]
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SECTION 2.5. INTEREST.
(a) Each Debenture shall bear interest at the rate of ---%
per annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on any
overdue principal and (to the extent that payment of such interest
is enforceable under applicable law) on any overdue installment of
interest at the Coupon Rate, compounded quarterly, payable (subject
to the provisions of Article IV) quarterly in arrears on March 31,
June 30, September 30, and December 31 of each year (each, an
"Interest Payment Date," commencing on March 31, 1997), to the Person in
whose name such Debenture or any Predecessor Debenture is registered, at
the close of business on the regular record date for such interest
installment, which shall be the fifteenth day of the last month
of the calendar quarter.
(b) The amount of interest payable for any period shall be
computed on the basis of a 360-day year of twelve 30-day months.
Except as provided in the following sentence, the amount of
interest payable for any period shorter than a full quarterly
period for which interest is computed, shall be computed on the
basis of the actual number of days elapsed in such a 30-day period.
In the event that any date on which interest is payable on the
Debentures is not a Business Day, then payment of interest payable
on such date shall be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same
force and effect as if made on the date such payment was originally
payable.
(c) If, at any time while the Property Trustee is the holder
of any Debentures, the Trust or the Property Trustee is required to
pay any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the
United States, or any other taxing authority, then, in any case,
the Company shall pay as additional interest ("Additional
Interest") on the Debentures held by the Property Trustee, such
additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after
paying such taxes, duties, assessments or other governmental
charges shall be equal to the amounts the Trust and the Property
Trustee would have received had no such taxes, duties, assessments
or other government charges been imposed.
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SECTION 2.6. EXECUTION AND AUTHENTICATIONS.
(a) The Debentures shall be signed on behalf of the Company
by its Chief Executive Officer, President or one of its Vice
Presidents, under its corporate seal attested by its Secretary or
one of its Assistant Secretaries. Signatures may be in the form of
a manual or facsimile signature. The Company may use the facsimile
signature of any Person who shall have been a Chief Executive
Officer, President or Vice President thereof, or of any Person who
shall have been a Secretary or Assistant Secretary thereof,
notwithstanding the fact that at the time the Debentures shall be
authenticated and delivered or disposed of such Person shall have
ceased to be the Chief Executive Officer, President or a Vice
President, or the Secretary or an Assistant Secretary, of the
Company. The seal of the Company may be in the form of a facsimile
of such seal and may be impressed, affixed, imprinted or otherwise
reproduced on the Debentures. The Debentures may contain such
notations, legends or endorsements required by law, stock exchange
rule or usage. Each Debenture shall be dated the date of its
authentication by the Trustee.
(b) A Debenture shall not be valid until authenticated
manually by an authorized signatory of the Trustee, or by an
Authenticating Agent. Such signature shall be conclusive evidence
that the Debenture so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits
of this Indenture.
(c) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debentures
executed by the Company to the Trustee for authentication, together
with a written order of the Company for the authentication and
delivery of such Debentures signed by its Chief Executive Officer,
President or any Vice President and its Treasurer or any Assistant
Treasurer, and the Trustee in accordance with such written order
shall authenticate and deliver such Debentures.
(d) In authenticating such Debentures and accepting the
additional responsibilities under this Indenture in relation to
such Debentures, the Trustee shall be entitled to receive, and
(subject to Section 9.1) shall be fully protected in relying upon,
an Opinion of Counsel stating that the form and terms thereof have
been established in conformity with the provisions of this
Indenture.
(e) The Trustee shall not be required to authenticate such
Debentures if the issue of such Debentures pursuant to this
Indenture shall affect the Trustee's own rights, duties or
immunities under the Debentures and this Indenture or otherwise in
a manner that is not reasonably acceptable to the Trustee.
SECTION 2.7. REGISTRATION OF TRANSFER AND EXCHANGE.
(a) Debentures may be exchanged upon presentation thereof at
the office or agency of the Company designated for such purpose in
the Borough of Manhattan, The City of New York, for other
Debentures and for a like aggregate principal amount, upon payment
of a sum sufficient to cover any tax or other governmental charge
in relation thereto, all as provided in this Section 2.7. In
respect of any Debentures so surrendered for exchange, the Company
shall execute, the Trustee shall authenticate and such office or
agency shall deliver in exchange therefor the Debenture or
Debentures that the Debentureholder making the exchange shall be
entitled to receive, bearing numbers not contemporaneously
outstanding.
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(b) The Company shall keep, or cause to be kept, at its
office or agency designated for such purpose in the Borough of
Manhattan, The City of New York, or such other location designated
by the Company a register or registers (herein referred to as the
"Debenture Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall register the
Debentures and the transfers of Debentures as in this Article II
provided and which at all reasonable times shall be open for
inspection by the Trustee. The registrar for the purpose of
registering Debentures and transfer of Debentures as herein
provided shall be appointed as authorized by Board Resolution (the
"Debenture Registrar"). Upon surrender for transfer of any
Debenture at the office or agency of the Company designated for
such purpose, the Company shall execute, the Trustee shall
authenticate and such office or agency shall deliver in the name of
the transferee or transferees a new Debenture or Debentures for a
like aggregate principal amount. All Debentures presented or
surrendered for exchange or registration of transfer, as provided
in this Section 2.7, shall be accompanied (if so required by the
Company or the Debenture Registrar) by a written instrument or
instruments of transfer, in form satisfactory to the Company or the
Debenture Registrar, duly executed by the registered holder or by
such holder's duly authorized attorney in writing.
(c) No service charge shall be made for any exchange or
registration of transfer of Debentures, or issue of new Debentures
in case of partial redemption, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
in relation thereto, other than exchanges pursuant to Section 2.8,
the second paragraph of Section 3.5 and Section 11.4 not involving
any transfer.
(d) The Company shall not be required (i) to issue, exchange
or register the transfer of any Debentures during a period
beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of less than all the Outstanding
Debentures and ending at the close of business on the day of such
mailing; nor (ii) to register the transfer of or exchange any
Debentures or portions thereof called for redemption.
SECTION 2.8. TEMPORARY DEBENTURES.
Pending the preparation of definitive Debentures, the Company
may execute, and the Trustee shall authenticate and deliver,
temporary Debentures (printed, lithographed, or typewritten). Such
temporary Debentures shall be substantially in the form of the
definitive Debentures in lieu of which they are issued, but with
such omissions, insertions and variations as may be appropriate for
temporary Debentures, all as may be determined by the Company.
Every temporary Debenture shall be executed by the Company and be
authenticated by the Trustee upon the same conditions and in
substantially the same manner, and with like effect, as the
definitive Debentures. Without unnecessary delay the Company shall
execute and shall furnish definitive Debentures and thereupon any
or all temporary Debentures may be surrendered in exchange therefor
(without charge to the holders), at the office or agency of the
Company designated for the purpose in the Borough of Manhattan, The
City of New York, and the Trustee shall authenticate and such
office or agency shall deliver in exchange for such temporary
Debentures an equal aggregate principal amount of definitive
Debentures, unless the Company advises the Trustee to the effect
that definitive Debentures need not be executed and furnished until
further notice from the Company. Until so exchanged, the temporary
Debentures shall be entitled to the same benefits under this
Indenture as definitive Debentures authenticated and delivered
hereunder.
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SECTION 2.9. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.
(a) In case any temporary or definitive Debenture shall
become mutilated or be destroyed, lost or stolen, the Company
(subject to the next succeeding sentence) shall execute, and upon
the Company's request the Trustee (subject as aforesaid) shall
authenticate and deliver, a new Debenture bearing a number not
contemporaneously outstanding, in exchange and substitution for the
mutilated Debenture, or in lieu of and in substitution for the
Debenture so destroyed, lost or stolen. In every case the
applicant for a substituted Debenture shall furnish to the Company
and the Trustee such security or indemnity as may be required by
them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to the
Company and the Trustee evidence to their satisfaction of the
destruction, loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee may authenticate any such
substituted Debenture and deliver the same upon the written request
or authorization of any officer of the Company. Upon the issuance
of any substituted Debenture, the Company may require the payment
of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected
therewith. In case any Debenture that has matured or is about to
mature shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of the same (without surrender thereof except
in the case of a mutilated Debenture) if the applicant for such
payment shall furnish to the Company and the Trustee such security
or indemnity as they may require to save them harmless, and, in
case of destruction, loss or theft, evidence to the satisfaction of
the Company and the Trustee of the destruction, loss or theft of
such Debenture and of the ownership thereof.
(b) Every replacement Debenture issued pursuant to the
provisions of this Section 2.9 shall constitute an additional
contractual obligation of the Company whether or not the mutilated,
destroyed, lost or stolen Debenture shall be found at any time, or
be enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all
other Debentures duly issued hereunder. All Debentures shall be
held and owned upon the express condition that the foregoing
provisions are exclusive with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Debentures, and shall
preclude (to the extent lawful) any and all other rights or
remedies, notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their
surrender.
SECTION 2.10. CANCELLATION.
All Debentures surrendered for the purpose of payment,
redemption, exchange or registration of transfer shall, if
surrendered to the Company or any paying agent, be delivered to the
Trustee for cancellation, or, if surrendered to the Trustee, shall
be canceled by it, and no Debentures shall be issued in lieu
thereof except as expressly required or permitted by any of the
provisions of this Indenture. On request of the Company at the
time of such surrender, the Trustee shall deliver to the Company
canceled Debentures held by the Trustee. In the absence of such
request the Trustee may dispose of canceled Debentures in
accordance with its standard procedures and deliver a certificate
of disposition to the Company. If the Company shall otherwise
acquire any of the Debentures, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness
represented by such Debentures unless and until the same are
delivered to the Trustee for cancellation.
SECTION 2.11. BENEFIT OF INDENTURE.
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Nothing in this Indenture or in the Debentures, express or
implied, shall give or be construed to give to any Person, other
than the parties hereto and the holders of the Debentures (and,
with respect to the provisions of Article XVI, the holders of
Senior Indebtedness) any legal or equitable right, remedy or claim
under or in respect of this Indenture, or under any covenant,
condition or provision herein contained; all such covenants,
conditions and provisions being for the sole benefit of the parties
hereto and of the holders of the Debentures (and, with respect to
the provisions of Article XVI, the holders of Senior Indebtedness).
SECTION 2.12. AUTHENTICATION AGENT.
(a) So long as any of the Debentures remain Outstanding there
may be an Authenticating Agent for any or all such Debentures,
which the Trustee shall have the right to appoint. Said
Authenticating Agent shall be authorized to act on behalf of the
Trustee to authenticate Debentures issued upon exchange, transfer
or partial redemption thereof, and Debentures so authenticated
shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. All references in this Indenture to the
authentication of Debentures by the Trustee shall be deemed to
include authentication by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall
be a corporation that has a combined capital and surplus, as most
recently reported or determined by it, sufficient under the laws of
any jurisdiction under which it is organized or in which it is
doing business to conduct a trust business, and that is otherwise
authorized under such laws to conduct such business and is subject
to supervision or examination by federal or state authorities. If
at any time any Authenticating Agent shall cease to be eligible in
accordance with these provisions, it shall resign immediately.
(b) Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company.
The Trustee may at any time (and upon request by the Company shall)
terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and to the
Company. Upon resignation, termination or cessation of eligibility
of any Authenticating Agent, the Trustee may appoint an eligible
successor Authenticating Agent acceptable to the Company. Any
successor Authenticating Agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and
duties of its predecessor hereunder as if originally named as an
Authenticating Agent pursuant hereto.
ARTICLE III.
REDEMPTION OF DEBENTURES
SECTION 3.1. REDEMPTION.
Subject to the Company having received prior approval of the
Federal Reserve, if then required under the applicable capital
guidelines or policies of the Federal Reserve, the Company may
redeem the Debentures issued hereunder on and after the dates set
forth in and in accordance with the terms of this Article III.
SECTION 3.2. SPECIAL EVENT REDEMPTION.
Subject to the Company having received the prior approval of
the Federal Reserve, if then required under the applicable capital
guidelines or policies of the Federal Reserve, if a Special Event has
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occurred and is continuing, then, notwithstanding Section 3.3(a) but subject
to Section 3.3(b), the Company shall have the right upon not less than 30 days
nor more than 60 days notice to the holders of the Debentures to redeem the
Debentures, in whole but not in part, for cash within 180 days following the
occurrence of such Special Event (the "180-Day Period") at a
redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest thereon to the date
of such redemption (the "Redemption Price"), provided that if at
the time there is available to the Company the opportunity to
eliminate, within the 180-Day Period, a Tax Event by taking some
ministerial action (a "Ministerial Action"), such as filing a form
or making an election, or pursuing some other similar reasonable
measure which has no adverse effect on the Company, the Trust or
the holders of the Trust Securities issued by the Trust, the
Company shall pursue such Ministerial Action in lieu of redemption,
and, provided further, that the Company shall have no right to
redeem the Debentures while the Trust is pursuing any Ministerial
Action pursuant to its obligations under the Trust Agreement. The
Redemption Price shall be paid prior to 12:00 noon, New York time,
on the date of such redemption or such earlier time as the Company
determines, provided that the Company shall deposit with the
Trustee an amount sufficient to pay the Redemption Price by 10:00
a.m., New York time, on the date such Redemption Price is to be
paid.
SECTION 3.3. OPTIONAL REDEMPTION BY COMPANY.
(a) Subject to the provisions of Section 3.3(b), except as
otherwise may be specified in this Indenture, the Company shall
have the right to redeem the Debentures, in whole or in part, from
time to time, on or after ---------, 2002, at a Redemption Price
equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest thereon to the date of such redemption.
Any redemption pursuant to this Section 3.3(a) shall be made upon
not less than 30 days nor more than 60 days notice to the holder of
the Debentures, at the Redemption Price. If the Debentures are
only partially redeemed pursuant to this Section 3.3, the
Debentures shall be redeemed pro rata or by lot or in such other
manner as the Trustee shall deem appropriate and fair in its
discretion. The Redemption Price shall be paid prior to 12:00 noon,
New York time, on the date of such redemption or at such earlier
time as the Company determines provided that the Company shall
deposit with the Trustee an amount sufficient to pay the Redemption
Price by 10:00 a.m., New York time, on the date such Redemption
Price is to be paid.
(b) If a partial redemption of the Debentures would result in
the delisting of the Preferred Securities issued by the Trust from
The Nasdaq Stock Market's National Market or any national
securities exchange or other organization on which the Preferred
Securities are then listed, the Company shall not be permitted to
effect such partial redemption and may only redeem the Debentures
in whole.
SECTION 3.4. NOTICE OF REDEMPTION.
(a) In case the Company shall desire to exercise such right
to redeem all or, as the case may be, a portion of the Debentures
in accordance with the right reserved so to do, the Company shall,
or shall cause the Trustee to upon receipt of 45 days' written
notice from the Company, give notice of such redemption to holders
of the Debentures to be redeemed by mailing, first class postage
prepaid, a notice of such redemption not less than 30 days and not
more than 60 days before the date fixed for redemption to such
holders at their last addresses as they shall appear upon the
Debenture Register unless a shorter period is specified in the
Debentures to be redeemed. Any notice that is mailed in the manner herein
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provided shall be conclusively presumed to have been duly
given, whether or not the registered holder receives the notice.
In any case, failure duly to give such notice to the holder of any
Debenture designated for redemption in whole or in part, or any
defect in the notice, shall not affect the validity of the
proceedings for the redemption of any other Debentures. In the
case of any redemption of Debentures prior to the expiration of any
restriction on such redemption provided in the terms of such
Debentures or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing
compliance with any such restriction. Each such notice of
redemption shall specify the date fixed for redemption and the
Redemption Price and shall state that payment of the Redemption
Price shall be made at the office or agency of the Company in the
Borough of Manhattan, The City of New York or at the Corporate
Trust Office, upon presentation and surrender of such Debentures,
that interest accrued to the date fixed for redemption shall be
paid as specified in said notice and that from and after said date
interest shall cease to accrue. If less than all the Debentures
are to be redeemed, the notice to the holders of the Debentures
shall specify the particular Debentures to be redeemed. If the
Debentures are to be redeemed in part only, the notice shall state
the portion of the principal amount thereof to be redeemed and
shall state that on and after the redemption date, upon surrender
of such Debenture, a new Debenture or Debentures in principal
amount equal to the unredeemed portion thereof shall be issued.
(b) If less than all the Debentures are to be redeemed, the
Company shall give the Trustee at least 45 days' notice in advance
of the date fixed for redemption as to the aggregate principal
amount of Debentures to be redeemed, and thereupon the Trustee
shall select, by lot or in such other manner as it shall deem
appropriate and fair in its discretion, the portion or portions
(equal to $25 or any integral multiple thereof) of the Debentures
to be redeemed and shall thereafter promptly notify the Company in
writing of the numbers of the Debentures to be redeemed, in whole
or in part. The Company may, if and whenever it shall so elect
pursuant to the terms hereof, by delivery of instructions signed on
its behalf by its President or any Vice President, instruct the
Trustee or any paying agent to call all or any part of the
Debentures for redemption and to give notice of redemption in the
manner set forth in this Section 3.4, such notice to be in the name
of the Company or its own name as the Trustee or such paying agent
may deem advisable. In any case in which notice of redemption is
to be given by the Trustee or any such paying agent, the Company
shall deliver or cause to be delivered to, or permit to remain
with, the Trustee or such paying agent, as the case may be, such
Debenture Register, transfer books or other records, or suitable
copies or extracts therefrom, sufficient to enable the Trustee or
such paying agent to give any notice by mail that may be required
under the provisions of this Section 3.4.
SECTION 3.5. PAYMENT UPON REDEMPTION.
(a) If the giving of notice of redemption shall have been
completed as above provided, the Debentures or portions of
Debentures to be redeemed specified in such notice shall become due
and payable on the date and at the place stated in such notice at
the applicable Redemption Price, and interest on such Debentures or
portions of Debentures shall cease to accrue on and after the date
fixed for redemption, unless the Company shall default in the
payment of such Redemption Price with respect to any such Debenture
or portion thereof. On presentation and surrender of such
Debentures on or after the date fixed for redemption at the place
of payment specified in the notice, said Debentures shall be paid
and redeemed at the Redemption Price (but if the date fixed for
redemption is an interest payment date, the interest installment
payable on such date shall be payable to the registered holder at
the close of business on the applicable record date pursuant to
Section 3.3).
(b) Upon presentation of any Debenture that is to be redeemed
in part only, the Company shall execute and the Trustee shall
authenticate and the office or agency where the Debenture is
presented shall
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deliver to the holder thereof, at the expense of the Company, a new Debenture
of authorized denomination in principal amount equal to the unredeemed portion
of the Debenture so presented.
SECTION 3.6. NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking
fund.
ARTICLE IV.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. EXTENSION OF INTEREST PAYMENT PERIOD.
So long as no Event of Default has occurred and is continuing,
the Company shall have the right, at any time and from time to time
during the term of the Debentures, to defer payments of interest by
extending the interest payment period of such Debentures for a
period not exceeding 20 consecutive quarters (the "Extended
Interest Payment Period"), during which Extended Interest Payment
Period no interest shall be due and payable; provided that no
Extended Interest Payment Period may extend beyond the Maturity
Date. Interest, the payment of which has been deferred because of
the extension of the interest payment period pursuant to this
Section 4.1, shall bear interest thereon at the Coupon Rate
compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the Extended
Interest Payment Period, the Company shall calculate (and deliver
such calculation to the Trustee) and pay all interest accrued and
unpaid on the Debentures, including any Additional Interest and
Compounded Interest (together, "Deferred Interest") that shall be
payable to the holders of the Debentures in whose names the
Debentures are registered in the Debenture Register on the first
record date after the end of the Extended Interest Payment Period.
Before the termination of any Extended Interest Payment Period, the
Company may further extend such period, provided that such period
together with all such further extensions thereof shall not exceed
20 consecutive quarters, or extend beyond the Maturity Date of the
Debentures. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Deferred Interest then due, the
Company may commence a new Extended Interest Payment Period,
subject to the foregoing requirements. No interest shall be due
and payable during an Extended Interest Payment Period, except at
the end thereof, but the Company may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment
Period.
SECTION 4.2. NOTICE OF EXTENSION.
(a) If the Property Trustee is the only registered holder of
the Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give written notice to the
Administrative Trustees, the Property Trustee and the Trustee of
its selection of such Extended Interest Payment Period one Business
Day before the earlier of (i) the next succeeding date on which
Distributions on the Trust Securities issued by the Trust are
payable; or (ii) the date the Trust is required to give notice of
the record date, or the date such Distributions are payable, to The
Nasdaq Stock Market's National Market or other applicable
self-regulatory organization or to holders of the Preferred
Securities issued by the Trust, but in any event at least one
Business Day before such record date.
(b) If the Property Trustee is not the only holder of the
Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give the holders of the
Debentures and the Trustee written notice of its selection of such
Extended Interest Payment Period at least one Business
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Day before the earlier of (i) the next succeeding Interest Payment Date; or
(ii) the date the Company is required to give notice of the record
or payment date of such interest payment to The Nasdaq Stock
Market's National Market or other applicable self-regulatory
organization or to holders of the Debentures.
(c) The quarter in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 4.2 shall be counted as one
of the 20 quarters permitted in the maximum Extended Interest
Payment Period permitted under Section 4.1.
SECTION 4.3. LIMITATION ON TRANSACTIONS.
If (i) the Company shall exercise its right to defer payment
of interest as provided in Section 4.1; or (ii) there shall have
occurred any Event of Default, then (a) the Company shall not
declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock (other than (i) as a result of
a reclassification of its capital stock for another class of its
capital stock; or (ii) the conversion of the Company's Class A
Convertible, Adjustable Rate Preferred Stock to the Company's
common stock, par value $250.00 per share); (b) the Company shall
not make any payment of interest, principal or premium, if any, or
repay, repurchase or redeem any debt securities issued by the
Company which rank pari passu with or junior to the Debentures;
provided, however, that notwithstanding the foregoing the Company
may make payments pursuant to its obligations under the Preferred
Securities Guarantee; and (c) the Company shall not redeem,
purchase or acquire less than all of the outstanding Debentures or
any of the Preferred Securities.
ARTICLE V.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.1. PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall duly and punctually pay or cause to be paid
the principal of and interest on the Debentures at the time and
place and in the manner provided herein.
SECTION 5.2. MAINTENANCE OF AGENCY.
So long as any of the Debentures remain Outstanding, the
Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, and at such other location or
locations as may be designated as provided in this Section 5.2,
where (i) Debentures may be presented for payment; (ii) Debentures
may be presented as hereinabove authorized for registration of
transfer and exchange; and (iii) notices and demands to or upon the
Company in respect of the Debentures and this Indenture may be
given or served, such designation to continue with respect to such
office or agency until the Company shall, by written notice signed
by its President or a Vice President and delivered to the Trustee,
designate some other office or agency for such purposes or any of
them. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all
such presentations, notices and demands. In addition to any such
office or agency, the Company may from time to time designate one
or more offices or agencies outside of the Borough of Manhattan,
The City of New York, where the Debentures may be presented for
registration or transfer and for exchange in the manner
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<PAGE> 26
provided herein, and the Company may from time to time rescind such
designation as the Company may deem desirable or expedient;
provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain any
such office or agency in the Borough of Manhattan, The City of New
York, for the purposes above mentioned. The Company shall give the
Trustee prompt written notice of any such designation or rescission
thereof.
SECTION 5.3. PAYING AGENTS.
(a) If the Company shall appoint one or more paying agents
for the Debentures, other than the Trustee, the Company shall cause
each such paying agent to execute and deliver to the Trustee an
instrument in which such agent shall agree with the Trustee,
subject to the provisions of this Section 5.3:
(i) that it shall hold all sums held by it as such agent
for the payment of the principal of or interest on the
Debentures (whether such sums have been paid to it by the
Company or by any other obligor of such Debentures) in trust
for the benefit of the Persons entitled thereto;
(ii) that it shall give the Trustee notice of any
failure by the Company (or by any other obligor of such
Debentures) to make any payment of the principal of or
interest on the Debentures when the same shall be due and
payable;
(iii) that it shall, at any time during the continuance
of any failure referred to in the preceding paragraph (a)(ii)
above, upon the written request of the Trustee, forthwith pay
to the Trustee all sums so held in trust by such paying agent;
and
(iv) that it shall perform all other duties of paying
agent as set forth in this Indenture.
(b) If the Company shall act as its own paying agent with
respect to the Debentures, it shall on or before each due date of
the principal of or interest on such Debentures, set aside,
segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay such principal or interest so
becoming due on Debentures until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and shall
promptly notify the Trustee of such action, or any failure (by it
or any other obligor on such Debentures) to take such action.
Whenever the Company shall have one or more paying agents for the
Debentures, it shall, prior to each due date of the principal of or
interest on any Debentures, deposit with the paying agent a sum
sufficient to pay the principal or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to
such principal or interest, and (unless such paying agent is the
Trustee) the Company shall promptly notify the Trustee of this
action or failure so to act.
(c) Notwithstanding anything in this Section 5.3 to the
contrary, (i) the agreement to hold sums in trust as provided in
this Section 5.3 is subject to the provisions of Section 13.3 and
13.4; and (ii) the Company may at any time, for the purpose of
obtaining the satisfaction and discharge of this Indenture or for
any other purpose, pay, or direct any paying agent to pay, to the
Trustee all sums held in trust by the Company or such paying agent,
such sums to be held by the Trustee upon the same terms and
conditions as those upon which such sums were held by the Company
or such paying agent; and, upon such payment by any paying agent to
the Trustee, such paying agent shall be released from all further
liability with respect to such money.
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SECTION 5.4. APPOINTMENT TO FILL VACANCY IN OFFICE OF TRUSTEE.
The Company, whenever necessary to avoid or fill a vacancy in
the office of Trustee, shall appoint, in the manner provided in
Section 9.10, a Trustee, so that there shall at all times be a
Trustee hereunder.
SECTION 5.5. COMPLIANCE WITH CONSOLIDATION PROVISIONS.
The Company shall not, while any of the Debentures remain
outstanding, consolidate with, or merge into, or merge into itself,
or sell or convey all or substantially all of its property to any
other company unless the provisions of Article XII hereof are
complied with.
SECTION 5.6. LIMITATION ON TRANSACTIONS.
If Debentures are issued to the Trust or a trustee of the
Trust in connection with the issuance of Trust Securities by the
Trust and (i) there shall have occurred any event that would
constitute an Event of Default; (ii) the Company shall be in
default with respect to its payment of any obligations under the
Preferred Securities Guarantee relating to the Trust; or (iii) the
Company shall have given notice of its election to defer payments
of interest on such Debentures by extending the interest payment
period as provided in this Indenture and such period, or any
extension thereof, shall be continuing, then (a) the Company shall
not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than
(i) as a result of a reclassification of its capital stock for
another class of its capital stock; or (ii) the conversion of the
Company's Class A Convertible, Adjustable Rate Preferred Stock to
the Company's common stock, par value $250.00 per share); (b) the
Company shall not make any payment of interest, principal or
premium, if any, or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to the
Debentures; provided, however, that the Company may make payments
pursuant to its obligations under the Preferred Securities
Guarantee; and (c) the Company shall not redeem, purchase or
acquire less than all of the outstanding Debentures or any of the
Preferred Securities.
SECTION 5.7. COVENANTS AS TO THE TRUST.
For so long as such Trust Securities of the Trust remain
outstanding, the Company shall (i) maintain 100% direct or indirect
ownership of the Common Securities of the Trust; provided, however,
that any permitted successor of the Company under this Indenture
may succeed to the Company's ownership of the Common Securities;
(ii) not voluntarily terminate, wind up or liquidate the Trust,
except upon prior approval of the Federal Reserve if then so
required under applicable capital guidelines or policies of the
Federal Reserve and use its reasonable efforts to cause the Trust
(a) to remain a business trust, except in connection with a
distribution of Debentures, the redemption of all of the Trust
Securities of the Trust or certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement; and (b) to
otherwise continue not to be treated as an association taxable as
a corporation or partnership for United States federal income tax
purposes; and (iii) use its reasonable efforts to cause each holder
of Trust Securities to be treated as owning an individual
beneficial interest in the Debentures. In connection with the
distribution of the Debentures to the holders of the Preferred
Securities issued by the Trust upon a Dissolution Event, the Company
shall use its best efforts to list such Debentures on The Nasdaq Stock
Market's National Market or on such other exchange as the Preferred
Securities are then listed.
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SECTION 5.8. COVENANTS AS TO PURCHASES.
Prior to March 31, 2002, the Company shall not purchase any
Debentures, in whole or in part, from the Trust.
ARTICLE VI.
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 6.1. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
DEBENTUREHOLDERS.
The Company shall furnish or cause to be furnished to the
Trustee (a) on a monthly basis on each regular record date (as
described in Section 2.5) a list, in such form as the Trustee may
reasonably require, of the names and addresses of the holders of
the Debentures as of such regular record date, provided that the
Company shall not be obligated to furnish or cause to furnish such
list at any time that the list shall not differ in any respect from
the most recent list furnished to the Trustee by the Company; and
(b) at such other times as the Trustee may request in writing
within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished; provided,
however, that, in either case, no such list need be furnished if
the Trustee shall be the Debenture Registrar.
SECTION 6.2. PRESERVATION OF INFORMATION COMMUNICATIONS WITH
DEBENTUREHOLDERS.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and
addresses of the holders of Debentures contained in the most recent
list furnished to it as provided in Section 6.1 and as to the names
and addresses of holders of Debentures received by the Trustee in
its capacity as registrar for the Debentures (if acting in such
capacity).
(b) The Trustee may destroy any list furnished to it as
provided in Section 6.1 upon receipt of a new list so furnished.
(c) Debentureholders may communicate as provided in Section
312(b) of the Trust Indenture Act with other Debentureholders with
respect to their rights under this Indenture or under the
Debentures.
SECTION 6.3. REPORTS BY THE COMPANY.
(a) The Company covenants and agrees to file with the
Trustee, within 15 days after the Company is required to file the
same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) that the Company may be
required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company is not
required to file information, documents or reports pursuant to
either of such sections, then to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed
from time to time by the Commission, such of the supplementary and
periodic information, documents and reports that may be required
pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations.
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(b) The Company covenants and agrees to file with the Trustee
and the Commission, in accordance with the rules and regulations
prescribed from to time by the Commission, such additional
information, documents and reports with respect to compliance by
the Company with the conditions and covenants provided for in this
Indenture as may be required from time to time by such rules and
regulations.
(c) The Company covenants and agrees to transmit by mail,
first class postage prepaid, or reputable over-night delivery
service that provides for evidence of receipt, to the
Debentureholders, as their names and addresses appear upon the
Debenture Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section 6.3 as may be required by
rules and regulations prescribed from time to time by the
Commission.
SECTION 6.4. REPORTS BY THE TRUSTEE.
(a) On or before July 15 in each year in which any of the
Debentures are Outstanding, the Trustee shall transmit by mail,
first class postage prepaid, to the Debentureholders, as their
names and addresses appear upon the Debenture Register, a brief
report dated as of the preceding May 15, if and to the extent
required under Section 313(a) of the Trust Indenture Act.
(b) The Trustee shall comply with Section 313(b) and 313(c)
of the Trust Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with the
Company, with each stock exchange upon which any Debentures are
listed (if so listed) and also with the Commission. The Company
agrees to notify the Trustee when any Debentures become listed on
any stock exchange.
ARTICLE VII.
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 7.1. EVENTS OF DEFAULT.
(a) Whenever used herein with respect to the Debentures,
"Event of Default" means any one or more of the following events
that has occurred and is continuing:
(i) the Company defaults in the payment of any
installment of interest upon any of the Debentures, as and
when the same shall become due and payable, and continuance of
such default for a period of 30 days; provided, however, that
a valid extension of an interest payment period by the Company
in accordance with the terms of this Indenture shall not
constitute a default in the payment of interest for this
purpose;
(ii) the Company defaults in the payment of the principal
on the Debentures as and when the same shall become due and
payable whether at maturity, upon redemption, by declaration
or otherwise; provided, however, that a valid extension of the
maturity of such Debentures in accordance with the terms of
this Indenture shall not constitute a default in the payment
of principal;
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(iii) the Company fails to observe or perform any other
of its covenants or agreements with respect to the Debentures
for a period of 90 days after the date on which written notice
of such failure, requiring the same to be remedied and stating
that such notice is a "Notice of Default" hereunder, shall
have been given to the Company by the Trustee, by registered
or certified mail, or to the Company and the Trustee by the
holders of at least 25% in principal amount of the Debentures
at the time Outstanding;
(iv) the Company pursuant to or within the meaning of any
Bankruptcy Law (i) commences a voluntary case; (ii) consents
to the entry of an order for relief against it in an
involuntary case; (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its
property; or (iv) makes a general assignment for the benefit
of its creditors;
(v) a court of competent jurisdiction enters an order
under any Bankruptcy Law that (i) is for relief against the
Company in an involuntary case; (ii) appoints a Custodian of
the Company for all or substantially all of its property; or
(iii) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 90 days; or
(vi) the Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its
existence except in connection with (i) the distribution of
Debentures to holders of Trust Securities in liquidation of
their interests in the Trust; (ii) the redemption of all of
the outstanding Trust Securities of the Trust; or
(iii) certain mergers, consolidations or amalgamations, each
as permitted by the Trust Agreement.
(b) In each and every such case, unless the principal of all
the Debentures shall have already become due and payable, either
the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debentures then Outstanding hereunder, by
notice in writing to the Company (and to the Trustee if given by
such Debentureholders) may declare the principal of all the
Debentures to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and
payable, notwithstanding anything contained in this Indenture or in
the Debentures.
(c) At any time after the principal of the Debentures shall
have been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained
or entered as hereinafter provided, the holders of a majority in
aggregate principal amount of the Debentures then Outstanding
hereunder, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(i) the Company has paid or deposited with the Trustee a sum
sufficient to pay all matured installments of interest upon all the
Debentures and the principal of any and all Debentures that shall
have become due otherwise than by acceleration (with interest upon
such principal, and upon overdue installments of interest, at the
rate per annum expressed in the Debentures to the date of such
payment or deposit) and the amount payable to the Trustee under
Section 9.6; and (ii) any and all Events of Default under this
Indenture, other than the nonpayment of principal on Debentures
that shall not have become due by their terms, shall have been
remedied or waived as provided in Section 7.6. No such rescission
and annulment shall extend to or shall affect any subsequent
default or impair any right consequent thereon.
(d) In case the Trustee shall have proceeded to enforce any
right with respect to Debentures under this Indenture and such
proceedings shall have been discontinued or abandoned because of
such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such
case the Company and the Trustee shall be restored respectively to
their former
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positions and rights hereunder, and all rights, remedies and powers of the
Company and the Trustee shall continue as though no such proceedings had been
taken.
SECTION 7.2. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
(a) The Company covenants that (1) in case it shall default
in the payment of any installment of interest on any of the
Debentures, and such default shall have continued for a period of
90 Business Days; or (2) in case it shall default in the payment of
the principal of any of the Debentures when the same shall have
become due and payable, whether upon maturity of the Debentures or
upon redemption or upon declaration or otherwise, then, upon demand
of the Trustee, the Company shall pay to the Trustee, for the
benefit of the holders of the Debentures, the whole amount that
then shall have been become due and payable on all such Debentures
for principal or interest, or both, as the case may be, with
interest upon the overdue principal and (if the Debentures are held
by the Trust or a trustee of the Trust, without duplication of any
other amounts paid by the Trust or trustee in respect thereof) upon
overdue installments of interest at the rate per annum expressed in
the Debentures; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection,
and the amount payable to the Trustee under Section 9.7.
(b) If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any
action or proceedings at law or in equity for the collection of the
sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon
the Debentures and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the property of the
Company or other obligor upon the Debentures, wherever situated.
(c) In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, readjustment, arrangement, composition
or judicial proceedings affecting the Company or the creditors or
property of either, the Trustee shall have power to intervene in
such proceedings and take any action therein that may be permitted
by the court and shall (except as may be otherwise provided by law)
be entitled to file such proofs of claim and other papers and
documents as may be necessary or advisable in order to have the
claims of the Trustee and of the holders of the Debentures allowed
for the entire amount due and payable by the Company under this
Indenture at the date of institution of such proceedings and for
any additional amount that may become due and payable by the
Company after such date, and to collect and receive any moneys or
other property payable or deliverable on any such claim, and to
distribute the same after the deduction of the amount payable to
the Trustee under Section 9.7; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized by
each of the holders of the Debentures to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the
making of such payments directly to such Debentureholders, to pay
to the Trustee any amount due it under Section 9.7.
(d) All rights of action and of asserting claims under this
Indenture, or under any of the terms established with respect to
Debentures, may be enforced by the Trustee without the possession
of any of such Debentures, or the production thereof at any trial
or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for payment to the Trustee of any amounts
due under Section 9.7, be for the ratable benefit of the holders of
the Debentures. In case of an Event of Default hereunder, the
Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to
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protect and enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of
the exercise of any power granted in this Indenture, or to enforce
any other legal or equitable right vested in the Trustee by this
Indenture or by law. Nothing contained herein shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Debentureholder any plan of reorganization,
arrangement, adjustment or composition affecting the Debentures or
the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Debentureholder in any such
proceeding.
SECTION 7.3. APPLICATION OF MONEYS COLLECTED.
Any moneys collected by the Trustee pursuant to this Article
VII with respect to the Debentures shall be applied in the
following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such moneys on account of principal or
interest, upon presentation of the Debentures, and notation thereon
the payment, if only partially paid, and upon surrender thereof if
fully paid:
FIRST: To the payment of costs and expenses of
collection and of all amounts payable to the Trustee under
Section 9.7;
SECOND: To the payment of all Senior Indebtedness of the
Company if and to the extent required by Article XVI; and
THIRD: To the payment of the amounts then due and unpaid
upon the Debentures for principal and interest, in respect of
which or for the benefit of which such money has been
collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such
Debentures for principal and interest, respectively.
SECTION 7.4. LIMITATION ON SUITS.
(a) No holder of any Debenture shall have any right by virtue
or by availing of any provision of this Indenture to institute any
suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless (i) such
holder previously shall have given to the Trustee written notice of
an Event of Default and of the continuance thereof with respect to
the Debentures specifying such Event of Default, as hereinbefore
provided; (ii) the holders of not less than 25% in aggregate
principal amount of the Debentures then Outstanding shall have made
written request upon the Trustee to institute such action, suit or
proceeding in its own name as trustee hereunder; (iii) such holder
or holders shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby; and (iv) the Trustee
for 60 days after its receipt of such notice, request and offer of
indemnity, shall have failed to institute any such action, suit or
proceeding; and (v) during such 60 day period, the holders of a
majority in principal amount of the Debentures do not give the
Trustee a direction inconsistent with the request.
(b) Notwithstanding anything contained herein to the contrary
or any other provisions of this Indenture, the right of any holder
of the Debentures to receive payment of the principal of and
interest on the Debentures, as therein provided, on or after the
respective due dates expressed in such Debenture (or in the case of
redemption, on the redemption date), or to institute suit for the
enforcement of any such payment on or after such respective dates
or redemption date, shall not be impaired or affected without
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the consent of such holder and by accepting a Debenture hereunder it is
expressly understood, intended and covenanted by the taker and
holder of every Debenture with every other such taker and holder
and the Trustee, that no one or more holders of Debentures shall
have any right in any manner whatsoever by virtue or by availing of
any provision of this Indenture to affect, disturb or prejudice the
rights of the holders of any other of such Debentures, or to obtain
or seek to obtain priority over or preference to any other such
holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common
benefit of all holders of Debentures. For the protection and
enforcement of the provisions of this Section 7.4, each and every
Debentureholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
SECTION 7.5. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION
NOT WAIVER.
(a) Except as otherwise provided in Section 2.9, all powers
and remedies given by this Article VII to the Trustee or to the
Debentureholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any other powers and remedies
available to the Trustee or the holders of the Debentures, by
judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to such Debentures.
(b) No delay or omission of the Trustee or of any holder of
any of the Debentures to exercise any right or power accruing upon
any Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a
waiver of any such default or on acquiescence therein; and, subject
to the provisions of Section 7.4, every power and remedy given by
this Article VII or by law to the Trustee or the Debentureholders
may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Debentureholders.
SECTION 7.6. CONTROL BY DEBENTUREHOLDERS.
The holders of a majority in aggregate principal amount of the
Debentures at the time Outstanding, determined in accordance with
Section 10.4, shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee;
provided, however, that such direction shall not be in conflict
with any rule of law or with this Indenture. Subject to the
provisions of Section 9.1, the Trustee shall have the right to
decline to follow any such direction if the Trustee in good faith
shall, by a Responsible Officer or Officers of the Trustee,
determine that the proceeding so directed would involve the Trustee
in personal liability. The holders of a majority in aggregate
principal amount of the Debentures at the time Outstanding affected
thereby, determined in accordance with Section 10.4, may on behalf
of the holders of all of the Debentures waive any past default in
the performance of any of the covenants contained herein and its
consequences, except (i) a default in the payment of the principal
of or interest on, any of the Debentures as and when the same shall
become due by the terms of such Debentures otherwise than by
acceleration (unless such default has been cured and a sum
sufficient to pay all matured installments of interest and
principal has been deposited with the Trustee (in accordance with
Section 7.1(c)); (ii) a default in the covenants contained in
Section 5.6; or (iii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the
holder of each Outstanding Debenture affected; provided, however,
that if the Debentures are held by the Trust or a trustee of the
Trust, such waiver or modification to such waiver shall not be
effective until the holders of a majority in liquidation preference
of Trust Securities of the Trust shall have consented to such
waiver or modification to such waiver; provided further, that if
the consent of the holder of each Outstanding
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Debenture is required, such waiver shall not be effective until each holder of
the Trust Securities of the Trust shall have consented to such
waiver. Upon any such waiver, the default covered thereby shall be
deemed to be cured for all purposes of this Indenture and the
Company, the Trustee and the holders of the Debentures shall be
restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 7.7. UNDERTAKING TO PAY COSTS.
All parties to this Indenture agree, and each holder of any
Debentures by such holder's acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken
or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such
suit, having due regard to the merits and good faith of the claims
or defenses made by such party litigant; but the provisions of this
Section 7.8 shall not apply to any suit instituted by the Trustee,
to any suit instituted by any Debentureholder, or group of
Debentureholders holding more than 10% in aggregate principal
amount of the Outstanding Debentures, or to any suit instituted by
any Debentureholder for the enforcement of the payment of the
principal of or interest on the Debentures, on or after the
respective due dates expressed in such Debenture or established
pursuant to this Indenture.
ARTICLE VIII.
FORM OF DEBENTURE AND ORIGINAL ISSUE
SECTION 8.1. FORM OF DEBENTURE.
The Debenture and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the forms
contained as Exhibit A attached hereto and incorporated herein by
reference.
SECTION 8.2. ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of
$------------------- may, upon execution of this Indenture, be
executed by the Company and delivered to the Trustee for
authentication, and the Trustee shall thereupon authenticate and
deliver said Debentures to or upon the written order of the
Company, signed by its Chairman, its Vice Chairman, its President,
or any Vice President and its Treasurer or an Assistant Treasurer,
without any further action by the Company.
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ARTICLE IX.
CONCERNING THE TRUSTEE
SECTION 9.1. CERTAIN DUTIES AND RESPONSIBILITIES TRUSTEE.
(a) The Trustee, prior to the occurrence of an Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform with respect to the Debentures
such duties and only such duties as are specifically set forth in
this Indenture, and no implied covenants shall be read into this
Indenture against the Trustee. In case an Event of Default has
occurred that has not been cured or waived, the Trustee shall
exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(b) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct,
except that:
(1) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default that
may have occurred:
(i) the duties and obligations of the Trustee
shall with respect to the Debentures be determined solely
by the express provisions of this Indenture, and the
Trustee shall not be liable with respect to the
Debentures except for the performance of such duties and
obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of
the Trustee, the Trustee may with respect to the
Debentures conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this
Indenture; but in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent
facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of not less than
a majority in principal amount of the Debentures at the time
Outstanding relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee under this Indenture with respect to the Debentures;
and
(4) none of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Indenture or
adequate indemnity against such risk is not reasonably assured
to it.
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SECTION 9.2. NOTICE OF DEFAULTS.
Within 90 days after actual knowledge by a Responsible Officer
of the Trustee of the occurrence of any default hereunder with
respect to the Securities, the Trustee shall transmit by mail to
all holders of the Debentures, as their names and addresses appear
in the Debenture Register, notice of such default, unless such
default shall have been cured or waived; provided, however, that,
except in the case default in the payment of the principal or
interest (including any Additional Interest) on any Debenture, the
Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust
committee of the directors and/or Responsible Officers of the
Trustee determines in good faith that the withholding of such
notice is in the interests of the holders of such Debentures; and
provided, further, that in the case of any default of the character
specified in section 7.1(a)(iii), no such notice to holders of
Debentures need be sent until at least 30 days after the occurrence
thereof. For the purposes of this Section 9.2, the term "default"
means any event which is, or after notice or lapse of time or both,
would become, an Event of Default with respect to the Debentures.
SECTION 9.3. CERTAIN RIGHTS OF TRUSTEE.
Except as otherwise provided in Section 9.1:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order,
approval, bond, security or other paper or document believed by it
to be genuine and to have been signed or presented by the proper
party or parties;
(b) Any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by a Board
Resolution or an instrument signed in the name of the Company by
the President or any Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer
thereof (unless other evidence in respect thereof is specifically
prescribed herein);
(c) The Trustee shall not be deemed to have knowledge of a
default or an Event of Default, other than an Event of Default
specified in Section 7.1(a)(i); or (ii), unless and until it
receives notification of such Event of Default from the Company or
by holders of at least 25% of the aggregate principal amount of the
Debentures at the time Outstanding;
(d) The Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action
taken or suffered or omitted hereunder in good faith and in
reliance thereon;
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Debentureholders,
pursuant to the provisions of this Indenture, unless such
Debentureholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (that has not been cured or
waived) to exercise with respect to the Debentures such of the
rights and powers vested in it by this Indenture, and to use the
same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his
own affairs;
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(f) The Trustee shall not be liable for any action taken or
omitted to be taken by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Indenture;
(g) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, security, or other papers or documents,
unless requested in writing so to do by the holders of not less
than a majority in principal amount of the Outstanding Debentures
(determined as provided in Section 10.4); provided, however, that
if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable
indemnity against such costs, expenses or liabilities as a
condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Company or, if paid by the
Trustee, shall be repaid by the Company upon demand; and
(h) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
SECTION 9.4. TRUSTEE NOT RESPONSIBLE FOR RECITALS, ETC.
(a) The Recitals contained herein and in the Debentures shall
be taken as the statements of the Company, and the Trustee assumes
no responsibility for the correctness of the same.
(b) The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Debentures.
(c) The Trustee shall not be accountable for the use or
application by the Company of any of the Debentures or of the
proceeds of such Debentures, or for the use or application of any
moneys paid over by the Trustee in accordance with any provision of
this Indenture, or for the use or application of any moneys
received by any paying agent other than the Trustee.
SECTION 9.5. MAY HOLD DEBENTURES.
The Trustee or any paying agent or registrar for the
Debentures, in its individual or any other capacity, may become the
owner or pledgee of Debentures with the same rights it would have
if it were not Trustee, paying agent or Debenture Registrar.
SECTION 9.6. MONEYS HELD IN TRUST.
Subject to the provisions of Section 13.5, all moneys received
by the Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for
interest on any moneys received by it hereunder except such as it
may agree with the Company to pay thereon.
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SECTION 9.7. COMPENSATION AND REIMBURSEMENT.
(a) The Company covenants and agrees to pay to the Trustee,
and the Trustee shall be entitled to, such reasonable compensation
(which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), as the Company
and the Trustee may from time to time agree in writing, for all
services rendered by it in the execution of the trusts hereby
created and in the exercise and performance of any of the powers
and duties hereunder of the Trustee, and, except as otherwise
expressly provided herein, the Company shall pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
of the provisions of this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel and
of all Persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence
or bad faith. The Company also covenants to indemnify the Trustee
(and its officers, agents, directors and employees) for, and to
hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on the part of the Trustee and
arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim of liability in the premises.
(b) The obligations of the Company under this Section 9.7 to
compensate and indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall constitute
additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Debentures upon all
property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the holders of particular
Debentures.
SECTION 9.8. RELIANCE ON OFFICERS' CERTIFICATE.
Except as otherwise provided in Section 9.1, whenever in the
administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering or omitting to take any
action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate
delivered to the Trustee and such certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted to
be taken by it under the provisions of this Indenture upon the
faith thereof.
SECTION 9.9. DISQUALIFICATION: CONFLICTING INTERESTS.
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act,
the Trustee and the Company shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
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SECTION 9.10. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee with respect to the
Debentures issued hereunder which shall at all times be a
corporation organized and doing business under the laws of the
United States of America or any State or Territory thereof or of
the District of Columbia, or a corporation or other Person
permitted to act as trustee by the Commission, authorized under
such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, and subject to
supervision or examination by federal, state, territorial, or
District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section 9.10, the combined capital
and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. The Company may not, nor may any Person
directly or indirectly controlling, controlled by, or under common
control with the Company, serve as Trustee. In case at any time
the Trustee shall cease to be eligible in accordance with the
provisions of this Section 9.10, the Trustee shall resign
immediately in the manner and with the effect specified in Section
9.11.
SECTION 9.11. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.
(a) The Trustee or any successor hereafter appointed, may at
any time resign by giving written notice thereof to the Company and
by transmitting notice of resignation by mail, first class postage
prepaid, to the Debentureholders, as their names and addresses
appear upon the Debenture Register. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee
with respect to Debentures by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which
instrument shall be delivered to the resigning Trustee and one copy
to the successor trustee. If no successor trustee shall have been
so appointed and have accepted appointment within 30 days after the
mailing of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of
a successor trustee with respect to Debentures, or any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months may, subject to the provisions
of Section 9.9, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice, if
any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any one of the following shall occur
(i) the Trustee shall fail to comply with the provisions
of Section 9.9 after written request therefor by the Company
or by any Debentureholder who has been a bona fide holder of
a Debenture or Debentures for at least six months; or
(ii) the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.10 and shall fail
to resign after written request therefor by the Company or by
any such Debentureholder; or
(iii) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or commence a
voluntary bankruptcy proceeding, or a receiver of the Trustee
or of its property shall be appointed or consented to, or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the
Company may remove the Trustee with respect to all Debentures
and appoint a successor trustee by written instrument, in
duplicate, executed by order
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of the Board of Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor
trustee, or, subject to the provisions of Section 9.9, unless the
Trustee's duty to resign is stayed as provided herein, any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months may, on behalf of that holder and all
others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor
trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount
of the Debentures at the time Outstanding may at any time remove
the Trustee by so notifying the Trustee and the Company and may
appoint a successor Trustee with the consent of the Company.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee with respect to the Debentures pursuant to
any of the provisions of this Section 9.11 shall become effective
upon acceptance of appointment by the successor trustee as provided
in Section 9.12.
(e) Any successor trustee appointed pursuant to this Section
9.11 may be appointed with respect to the Debentures, and at any
time there shall be only one Trustee with respect to the
Debentures.
SECTION 9.12. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor
trustee with respect to the Debentures, every successor trustee so
appointed shall execute, acknowledge and deliver to the Company and
to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on
the request of the Company or the successor trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor trustee all the rights,
powers, and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor trustee all property and
money held by such retiring Trustee hereunder.
(b) Upon request of any successor trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor trustee all such
rights, powers and trusts referred to in paragraph (a) of this
Section 9.12.
(c) No successor trustee shall accept its appointment unless
at the time of such acceptance such successor trustee shall be
qualified and eligible under this Article IX.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section 9.12, the Company shall transmit notice of
the succession of such trustee hereunder by mail, first class
postage prepaid, to the Debentureholders, as their names and
addresses appear upon the Debenture Register. If the Company fails
to transmit such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall
cause such notice to be transmitted at the expense of the Company.
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SECTION 9.13. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to the
corporate trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be
qualified under the provisions of Section 9.9 and eligible under
the provisions of Section 9.10, without the execution or filing of
any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. In case
any Debentures shall have been authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debentures so authenticated with the
same effect as if such successor Trustee had itself authenticated
such Debentures.
SECTION 9.14. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE
COMPANY.
The Trustee shall comply with Section 311(a) of the Trust
Indenture Act, excluding any creditor relationship described in
Section 311(b) of the Trust Indenture Act. A Trustee who has
resigned or been removed shall be subject to Section 311(a) of the
Trust Indenture Act to the extent included therein.
ARTICLE X.
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.1. EVIDENCE OF ACTION BY HOLDERS.
(a) Whenever in this Indenture it is provided that the
holders of a majority or specified percentage in aggregate
principal amount of the Debentures may take any action (including
the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that
at the time of taking any such action the holders of such majority
or specified percentage have joined therein may be evidenced by any
instrument or any number of instruments of similar tenor executed
by such holders of Debentures in Person or by agent or proxy
appointed in writing.
(b) If the Company shall solicit from the Debentureholders
any request, demand, authorization, direction, notice, consent,
waiver or other action, the Company may, at its option, as
evidenced by an Officers' Certificate, fix in advance a record date
for the determination of Debentureholders entitled to give such
request, demand, authorization, direction, notice, consent, waiver
or other action, but the Company shall have no obligation to do so.
If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action
may be given before or after the record date, but only the
Debentureholders of record at the close of business on the record
date shall be deemed to be Debentureholders for the purposes of
determining whether Debentureholders of the requisite proportion of
Outstanding Debentures have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Outstanding
Debentures shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such
Debentureholders on the record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
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SECTION 10.2. PROOF OF EXECUTION BY DEBENTUREHOLDERS.
Subject to the provisions of Section 9.1, proof of the
execution of any instrument by a Debentureholder (such proof shall
not require notarization) or his agent or proxy and proof of the
holding by any Person of any of the Debentures shall be sufficient
if made in the following manner:
(a) The fact and date of the execution by any such Person of
any instrument may be proved in any reasonable manner acceptable to
the Trustee.
(b) The ownership of Debentures shall be proved by the
Debenture Register of such Debentures or by a certificate of the
Debenture Registrar thereof.
(c) The Trustee may require such additional proof of any
matter referred to in this Section 10.2 as it shall deem necessary.
SECTION 10.3. WHO MAY BE DEEMED OWNERS.
Prior to the due presentment for registration of transfer of
any Debenture, the Company, the Trustee, any paying agent, any
Authenticating Agent and any Debenture Registrar may deem and treat
the Person in whose name such Debenture shall be registered upon
the books of the Company as the absolute owner of such Debenture
(whether or not such Debenture shall be overdue and notwithstanding
any notice of ownership or writing thereon made by anyone other
than the Debenture Registrar) for the purpose of receiving payment
of or on account of the principal of and interest on such Debenture
(subject to Section 2.3) and for all other purposes; and neither
the Company nor the Trustee nor any paying agent nor any
Authenticating Agent nor any Debenture Registrar shall be affected
by any notice to the contrary.
SECTION 10.4. CERTAIN DEBENTURES OWNED BY COMPANY DISREGARDED.
In determining whether the holders of the requisite aggregate
principal amount of Debentures have concurred in any direction,
consent or waiver under this Indenture, the Debentures that are
owned by the Company or any other obligor on the Debentures or by
any Person directly or indirectly controlling or controlled by or
under common control with the Company or any other obligor on the
Debentures shall be disregarded and deemed not to be Outstanding
for the purpose of any such determination, except that for the
purpose of determining whether the Trustee shall be protected in
relying on any such direction, consent or waiver, only Debentures
that the Trustee actually knows are so owned shall be so
disregarded. The Debentures so owned that have been pledged in
good faith may be regarded as Outstanding for the purposes of this
Section 10.4, if the pledgee shall establish to the satisfaction of
the Trustee the pledgee's right so to act with respect to such
Debentures and that the pledgee is not a Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In case
of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the Trustee.
SECTION 10.5. ACTIONS BINDING ON FUTURE DEBENTUREHOLDERS.
At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 10.1, of the taking of any action
by the holders of the majority or percentage in aggregate principal
amount of the Debentures specified in this Indenture in connection
with such action, any holder of a Debenture that is shown by the
evidence to be included in the Debentures the holders of which have
consented to such
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action may, by filing written notice with the Trustee, and upon proof of
holding as provided in Section 10.2, revoke such action so far as concerns
such Debenture. Except as aforesaid any such action taken by the holder of any
Debenture shall be conclusive and binding upon such holder and upon all
future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor, on registration of transfer thereof or
in place thereof, irrespective of whether or not any notation in
regard thereto is made upon such Debenture. Any action taken by
the holders of the majority or percentage in aggregate principal
amount of the Debentures specified in this Indenture in connection
with such action shall be conclusively binding upon the Company,
the Trustee and the holders of all the Debentures.
ARTICLE XI.
SUPPLEMENTAL INDENTURES
SECTION 11.1. SUPPLEMENTAL INDENTURES WITHOUT THE CONSENT OF
DEBENTUREHOLDERS.
In addition to any supplemental indenture otherwise authorized
by this Indenture, the Company and the Trustee may from time to
time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect), without the consent of the
Debentureholders, for one or more of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency herein,
in the Debentures;
(b) to comply with Article X;
(c) to provide for uncertificated Debentures in addition to
or in place of certificated Debentures;
(d) to add to the covenants of the Company for the benefit of
the holders of all or any of the Debentures or to surrender any
right or power herein conferred upon the Company;
(e) to add to, delete from, or revise the conditions,
limitations, and restrictions on the authorized amount, terms, or
purposes of issue, authentication, and delivery of Debentures, as
herein set forth;
(f) to make any change that does not adversely affect the
rights of any Debentureholder in any material respect;
(g) to provide for the issuance of and establish the form and
terms and conditions of the Debentures, to establish the form of
any certifications required to be furnished pursuant to the terms
of this Indenture or of the Debentures, or to add to the rights of
the holders of the Debentures; or
(h) qualify or maintain the qualification of this Indenture
under the Trust Indenture Act.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, and to make any
further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into any
such supplemental indenture that affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise. Any
supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the
consent of the holders of any of the Debentures at the time
Outstanding, notwithstanding any of the provisions of Section 11.2.
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SECTION 11.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF
DEBENTUREHOLDERS.
With the consent (evidenced as provided in Section 10.1) of
the holders of not less than a majority in aggregate principal
amount of the Debentures at the time Outstanding, the Company, when
authorized by Board Resolutions, and the Trustee may from time to
time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as then in effect) for the purpose of adding
any provisions to or changing in any manner or eliminating any of
the provisions of this Indenture or of any supplemental indenture
or of modifying in any manner not covered by Section 11.1 the
rights of the holders of the Debentures under this Indenture;
provided, however, that no such supplemental indenture shall
without the consent of the holders of each Debenture then
Outstanding and affected thereby, (i) extend the fixed maturity of
any Debentures, reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, without the
consent of the holder of each Debenture so affected; or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture; provided
further, that if the Debentures are held by the Trust or a trustee
of the Trust, such supplemental indenture shall not be effective
until the holders of a majority in liquidation preference of Trust
Securities of the Trust shall have consented to such supplemental
indenture; provided further, that if the consent of the holder of
each Outstanding Debenture is required, such supplemental indenture
shall not be effective until each holder of the Trust Securities of
the Trust shall have consented to such supplemental indenture. It
shall not be necessary for the consent of the Debentureholders
affected thereby under this Section 11.2 to approve the particular
form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance thereof.
SECTION 11.3. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture pursuant to
the provisions of this Article XI, this Indenture shall be and be
deemed to be modified and amended in accordance therewith and the
respective rights, limitations of rights, obligations, duties and
immunities under this Indenture of the Trustee, the Company and the
holders of Debentures shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 11.4. DEBENTURES AFFECTED BY SUPPLEMENTAL INDENTURES.
Debentures affected by a supplemental indenture, authenticated
and delivered after the execution of such supplemental indenture
pursuant to the provisions of this Article XI, may bear a notation
in form approved by the Company, provided such form meets the
requirements of any exchange upon which the Debentures may be
listed, as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Debentures so
modified as to conform, in the opinion of the Board of Directors of
the Company, to any modification of this Indenture contained in any
such supplemental indenture may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the
Debentures then Outstanding.
SECTION 11.5. EXECUTION OF SUPPLEMENTAL INDENTURES.
(a) Upon the request of the Company, accompanied by their
Board Resolutions authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of
evidence of the
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consent of Debentureholders required to consent thereto as aforesaid, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion but shall not be obligated to enter
into such supplemental indenture. The Trustee, subject to the
provisions of Sections 9.1, may receive an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed
pursuant to this Article XI is authorized or permitted by, and
conforms to, the terms of this Article XI and that it is proper for
the Trustee under the provisions of this Article XI to join in the
execution thereof.
(b) Promptly after the execution by the Company and the
Trustee of any supplemental indenture pursuant to the provisions of
this Section 11.5, the Trustee shall transmit by mail, first class
postage prepaid, a notice, setting forth in general terms the
substance of such supplemental indenture, to the Debentureholders
as their names and addresses appear upon the Debenture Register.
Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture.
ARTICLE XII.
SUCCESSOR CORPORATION
SECTION 12.1. COMPANY MAY CONSOLIDATE, ETC.
Nothing contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company
with or into any other corporation or corporations (whether or not
affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company, as the case may be,
or its successor or successors shall be a party or parties, or
shall prevent any sale, conveyance, transfer or other disposition
of the property of the Company, as the case may be, or its
successor or successors as an entirety, or substantially as an
entirety, to any other corporation (whether or not affiliated with
the Company, as the case may be, or its successor or successors)
authorized to acquire and operate the same; provided, however, the
Company hereby covenants and agrees that, (i) upon any such
consolidation, merger, sale, conveyance, transfer or other
disposition, the due and punctual payment, in the case of the
Company, of the principal of and interest on all of the Debentures,
according to their tenor and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to
be kept or performed by the Company as the case may be, shall be
expressly assumed, by supplemental indenture (which shall conform
to the provisions of the Trust Indenture Act, as then in effect)
satisfactory in form to the Trustee executed and delivered to the
Trustee by the entity formed by such consolidation, or into which
the Company, as the case may be, shall have been merged, or by the
entity which shall have acquired such property; (ii) in case the
Company consolidates with or merges into another Person or conveys
or transfers its properties and assets substantially then as an
entirety to any Person, the successor Person is organized under the
laws of the United States or any state or the District of Columbia;
and (iii) immediately after giving effect thereto, an Event of
Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be
continuing.
SECTION 12.2. SUCCESSOR CORPORATION SUBSTITUTED.
(a) In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition and upon the assumption
by the successor corporation, by supplemental indenture, executed
and delivered to
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the Trustee and satisfactory in form to the Trustee, of, in the case of the
Company, the due and punctual payment of the principal of and interest on all
of the Debentures Outstanding and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the
Company, as the case may be, such successor corporation shall
succeed to and be substituted for the Company, with the same effect
as if it had been named as the Company herein, and thereupon the
predecessor corporation shall be relieved of all obligations and
covenants under this Indenture and the Debentures.
(b) In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition such changes in
phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
(c) Nothing contained in this Indenture or in any of the
Debentures shall prevent the Company from merging into itself or
acquiring by purchase or otherwise all or any part of the property
of any other Person (whether or not affiliated with the Company).
SECTION 12.3. EVIDENCE OF CONSOLIDATION, ETC. TO TRUSTEE.
The Trustee, subject to the provisions of Section 9.1, may
receive an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or other
disposition, and any such assumption, comply with the provisions of
this Article XII.
ARTICLE XIII.
SATISFACTION AND DISCHARGE
SECTION 13.1. SATISFACTION AND DISCHARGE OF INDENTURE.
If at any time: (a) the Company shall have delivered to the
Trustee for cancellation all Debentures theretofore authenticated
(other than any Debentures that shall have been destroyed, lost or
stolen and that shall have been replaced or paid as provided in
Section 2.9) and Debentures for whose payment money or Governmental
Obligations have theretofore been deposited in trust or segregated
and held in trust by the Company (and thereupon repaid to the
Company or discharged from such trust, as provided in Section
13.5); or (b) all such Debentures not theretofore delivered to the
Trustee for cancellation shall have become due and payable, or are
by their terms to become due and payable within one year or are to
be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption,
and the Company shall deposit or cause to be deposited with the
Trustee as trust funds the entire amount in moneys or Governmental
Obligations sufficient or a combination thereof, sufficient in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered
to the Trustee, to pay at maturity or upon redemption all
Debentures not theretofore delivered to the Trustee for
cancellation, including principal and interest due or to become due
to such date of maturity or date fixed for redemption, as the case
may be, and if the Company shall also pay or cause to be paid all
other sums payable hereunder by the Company; then this Indenture
shall thereupon cease to be of further effect except for the
provisions of Sections 2.3, 2.7, 2.9, 5.1, 5.2, 5.3 and 9.10, that
shall survive until the date of maturity or redemption date, as the
case may be, and Sections 9.6 and 13.5, that shall survive to such
date and thereafter, and the Trustee, on demand of the Company and
at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this
Indenture.
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SECTION 13.2. DISCHARGE OF OBLIGATIONS.
If at any time all Debentures not heretofore delivered to the
Trustee for cancellation or that have not become due and payable as
described in Section 13.1 shall have been paid by the Company by
depositing irrevocably with the Trustee as trust funds moneys or an
amount of Governmental Obligations sufficient to pay at maturity or
upon redemption all Debentures not theretofore delivered to the
Trustee for cancellation, including principal and interest due or
to become due to such date of maturity or date fixed for
redemption, as the case may be, and if the Company shall also pay
or cause to be paid all other sums payable hereunder by the
Company, then after the date such moneys or Governmental
Obligations, as the case may be, are deposited with the Trustee,
the obligations of the Company under this Indenture shall cease to
be of further effect except for the provisions of Sections 2.3,
2.7, 2.9, 5.1, 5.2, 5.3, 9.6, 9.10 and 13.5 hereof that shall
survive until such Debentures shall mature and be paid.
Thereafter, Sections 9.6 and 13.5 shall survive.
SECTION 13.3. DEPOSITED MONEYS TO BE HELD IN TRUST.
All monies or Governmental Obligations deposited with the
Trustee pursuant to Sections 13.1 or 13.2 shall be held in trust
and shall be available for payment as due, either directly or
through any paying agent (including the Company acting as its own
paying agent), to the holders of the Debentures for the payment or
redemption of which such moneys or Governmental Obligations have
been deposited with the Trustee.
SECTION 13.4. PAYMENT OF MONIES HELD BY PAYING AGENTS.
In connection with the satisfaction and discharge of this
Indenture, all moneys or Governmental Obligations then held by any
paying agent under the provisions of this Indenture shall, upon
demand of the Company, be paid to the Trustee and thereupon such
paying agent shall be released from all further liability with
respect to such moneys or Governmental Obligations.
SECTION 13.5. REPAYMENT TO COMPANY.
Any monies or Governmental Obligations deposited with any
paying agent or the Trustee, or then held by the Company in trust,
for payment of principal of or interest on the Debentures that are
not applied but remain unclaimed by the holders of such Debentures
for at least two years after the date upon which the principal of
or interest on such Debentures shall have respectively become due
and payable, shall be repaid to the Company, as the case may be, on
May 31 of each year or (if then held by the Company) shall be
discharged from such trust; and thereupon the paying agent and the
Trustee shall be released from all further liability with respect
to such moneys or Governmental Obligations, and the holder of any
of the Debentures entitled to receive such payment shall
thereafter, as an unsecured general creditor, look only to the
Company for the payment thereof.
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ARTICLE XIV.
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 14.1. NO RECOURSE.
No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of the Debentures, or for any claim
based thereon or otherwise in respect thereof, shall be had against
any incorporator, stockholder, officer or director, past, present
or future as such, of the Company or of any predecessor or
successor corporation, either directly or through the Company or
any such predecessor or successor corporation, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be incurred by,
the incorporators, stockholders, officers or directors as such, of
the Company or of any predecessor or successor corporation, or any
of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Debentures
or implied therefrom; and that any and all such personal liability
of every name and nature, either at common law or in equity or by
constitution or statute, of, and any and all such rights and claims
against, every such incorporator, stockholder, officer or director
as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the Debentures
or implied therefrom, are hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this
Indenture and the issuance of such Debentures.
ARTICLE XV.
MISCELLANEOUS PROVISIONS
SECTION 15.1. EFFECT ON SUCCESSORS AND ASSIGNS.
All the covenants, stipulations, promises and agreements in
this Indenture contained by or on behalf of the Company shall bind
their respective successors and assigns, whether so expressed or
not.
SECTION 15.2. ACTIONS BY SUCCESSOR.
Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board,
committee or officer of the Company shall and may be done and
performed with like force and effect by the corresponding board,
committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
SECTION 15.3. SURRENDER OF COMPANY POWERS.
The Company by instrument in writing executed by appropriate
authority of its Board of Directors and delivered to the Trustee
may surrender any of the powers reserved to the Company, and
thereupon such power so surrendered shall terminate both as to the
Company, as the case may be, and as to any successor corporation.
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SECTION 15.4. NOTICES.
Except as otherwise expressly provided herein any notice or
demand that by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the holders of
Debentures to or on the Company may be given or served by being
deposited first class postage prepaid in a post-office letterbox
addressed (until another address is filed in writing by the Company
with the Trustee), as follows: c/o First Banks, Inc., 11901 Olive
Blvd., St. Louis, Missouri 63141, Attention: Allen H. Blake,
Executive Vice President. Any notice, election, request or demand
by the Company or any Debentureholder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all
purposes, if given or made in writing at the Corporate Trust Office
of the Trustee.
SECTION 15.5. GOVERNING LAW.
This Indenture and each Debenture shall be deemed to be a
contract made under the internal laws of the State of Missouri and
for all purposes shall be construed in accordance with the laws of
said State.
SECTION 15.6. TREATMENT OF DEBENTURES AS DEBT.
It is intended that the Debentures shall be treated as
indebtedness and not as equity for federal income tax purposes.
The provisions of this Indenture shall be interpreted to further
this intention.
SECTION 15.7. COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent provided for in
this Indenture relating to the proposed action have been complied
with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by
any provision of this Indenture relating to such particular
application or demand, no additional certificate or opinion need be
furnished.
(b) Each certificate or opinion of the Company provided for
in this Indenture and delivered to the Trustee with respect to
compliance with a condition or covenant in this Indenture shall
include (1) a statement that the Person making such certificate or
opinion has read such covenant or condition; (2) a brief statement
as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or
opinion are based; (3) a statement that, in the opinion of such
Person, he has made such examination or investigation as, in the
opinion of such Person, is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition
has been complied with; and (4) a statement as to whether or not,
in the opinion of such Person, such condition or covenant has been
complied with.
SECTION 15.8. PAYMENTS ON BUSINESS DAYS.
In any case where the date of maturity of interest or
principal of any Debenture or the date of redemption of any
Debenture shall not be a Business Day, then payment of interest or
principal may (subject to Section 2.5) be made on the next
succeeding Business Day with the same force and effect as if made
on the nominal date of maturity or redemption, and no interest
shall accrue for the period after such nominal date.
42
<PAGE> 50
SECTION 15.9. CONFLICT WITH TRUST INDENTURE ACT.
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 15.10. COUNTERPARTS.
This Indenture may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
SECTION 15.11. SEPARABILITY.
In case any one or more of the provisions contained in this
Indenture or in the Debentures shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provisions of this Indenture or of the Debentures, but this
Indenture and the Debentures shall be construed as if such invalid
or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 15.12. ASSIGNMENT.
The Company shall have the right at all times to assign any of
its respective rights or obligations under this Indenture to a
direct or indirect wholly owned Subsidiary of the Company, provided
that, in the event of any such assignment, the Company shall remain
liable for all such obligations. Subject to the foregoing, this
Indenture is binding upon and inures to the benefit of the parties
thereto and their respective successors and assigns. This
Indenture may not otherwise be assigned by the parties thereto.
SECTION 15.13. ACKNOWLEDGMENT OF RIGHTS.
The Company acknowledges that, with respect to any Debentures
held by the Trust or a trustee of the Trust, if the Property
Trustee fails to enforce its rights under this Indenture as the
holder of the Debentures held as the assets of the Trust, any
holder of Preferred Securities may institute legal proceedings
directly against the Company to enforce such Property Trustee's
rights under this Indenture without first instituting any legal
proceedings against such Property Trustee or any other person or
entity. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal on the
Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), the
Company acknowledges that a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such
holder of the principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder on or after the respective due
date specified in the Debentures.
43
<PAGE> 51
ARTICLE XVI.
SUBORDINATION OF DEBENTURES
SECTION 16.1. AGREEMENT TO SUBORDINATE.
The Company covenants and agrees, and each holder of
Debentures issued hereunder by such holder's acceptance thereof
likewise covenants and agrees, that all Debentures shall be issued
subject to the provisions of this Article XVI; and each holder of
a Debenture, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such
provisions. The payment by the Company of the principal of and
interest on all Debentures issued hereunder shall, to the extent
and in the manner hereinafter set forth, be subordinated and junior
in right of payment to the prior payment in full of all Senior
Debt, Subordinated Debt and Additional Senior Obligations
(collectively, "Senior Indebtedness") to the extent provided
herein, whether outstanding at the date of this Indenture or
thereafter incurred. No provision of this Article XVI shall
prevent the occurrence of any default or Event of Default
hereunder.
SECTION 16.2. DEFAULT ON SENIOR DEBT, SUBORDINATED DEBT OR
ADDITIONAL SENIOR OBLIGATIONS.
In the event and during the continuation of any default by the
Company in the payment of principal, premium, interest or any other
payment due on any Senior Indebtedness of the Company, or in the
event that the maturity of any Senior Indebtedness of the Company
has been accelerated because of a default, then, in either case, no
payment shall be made by the Company with respect to the principal
(including redemption payments) of or interest on the Debentures.
In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee when such payment is prohibited by the
preceding sentence of this Section 16.2, such payment shall be held
in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been
issued, as their respective interests may appear, but only to the
extent that the holders of the Senior Indebtedness (or their
representative or representatives or a trustee) notify the Trustee
in writing within 90 days of such payment of the amounts then due
and owing on the Senior Indebtedness and only the amounts specified
in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness.
SECTION 16.3. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment by the Company or distribution of assets
of the Company of any kind or character, whether in cash, property
or securities, to creditors upon any dissolution or winding-up or
liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts due upon all Senior Indebtedness of the
Company shall first be paid in full, or payment thereof provided
for in money in accordance with its terms, before any payment is
made by the Company on account of the principal or interest on the
Debentures; and upon any such dissolution or winding-up or
liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of
the Debentures or the Trustee would be entitled to receive from the
Company, except for the provisions of this Article XVI, shall be
paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or
distribution, or by the holders of the Debentures or by the Trustee
under this Indenture if received by them or it, directly to the
holders of Senior Indebtedness of the Company (pro rata to such
holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the
44
<PAGE> 52
Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their
respective interests may appear, to the extent necessary to pay
such Senior Indebtedness in full, in money or money's worth, after
giving effect to any concurrent payment or distribution to or for
the holders of such Senior Indebtedness, before any payment or
distribution is made to the holders of Debentures or to the
Trustee.
(b) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, prohibited by
the foregoing, shall be received by the Trustee before all Senior
Indebtedness of the Company is paid in full, or provision is made
for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of such Senior
Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any
instruments evidencing such Senior Indebtedness may have been
issued, and their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior
Indebtedness of the Company, as the case may be, remaining unpaid
to the extent necessary to pay such Senior Indebtedness in full in
money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of the
holders of such Senior Indebtedness.
(c) For purposes of this Article XVI, the words "cash,
property or securities" shall not be deemed to include shares of
stock of the Company as reorganized or readjusted, or securities of
the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article XVI
with respect to the Debentures to the payment of all Senior
Indebtedness of the Company, as the case may be, that may at the
time be outstanding, provided that (i) such Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such
reorganization or readjustment; and (ii) the rights of the holders
of such Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company
into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation
upon the terms and conditions provided for in Article XII shall not
be deemed a dissolution, winding-up, liquidation or reorganization
for the purposes of this Section 16.3 if such other corporation
shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article XII.
Nothing in Section 16.2 or in this Section 16.3 shall apply to
claims of, or payments to, the Trustee under or pursuant to
Section 9.7.
SECTION 16.4. SUBROGATION.
(a) Subject to the payment in full of all Senior Indebtedness
of the Company, the rights of the holders of the Debentures shall
be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property
or securities of the Company, as the case may be, applicable to
such Senior Indebtedness until the principal of and interest on the
Debentures shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such
Senior Indebtedness of any cash, property or securities to which
the holders of the Debentures or the Trustee would be entitled
except for the provisions of this Article XVI, and no payment over
pursuant to the provisions of this Article XVI to or for the
benefit of the holders of such Senior Indebtedness by holders of
the Debentures or the Trustee, shall, as between the Company, its
creditors other than holders of Senior Indebtedness of the Company,
and the holders of the Debentures, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is
understood that the provisions of
45
<PAGE> 53
this Article XVI are and are intended solely for the purposes of defining the
relative rights of the holders of the Debentures, on the one hand, and the
holders of such Senior Indebtedness on the other hand.
(b) Nothing contained in this Article XVI or elsewhere in
this Indenture or in the Debentures is intended to or shall impair,
as between the Company, its creditors (other than the holders of
Senior Indebtedness of the Company), and the holders of the
Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Debentures the
principal of and interest on the Debentures as and when the same
shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the holders of
the Debentures and creditors of the Company, as the case may be,
other than the holders of Senior Indebtedness of the Company, as
the case may be, nor shall anything herein or therein prevent the
Trustee or the holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XVI of
the holders of such Senior Indebtedness in respect of cash,
property or securities of the Company, as the case may be, received
upon the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Company
referred to in this Article XVI, the Trustee, subject to the
provisions of Article IX, and the holders of the Debentures shall
be entitled to conclusively rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment or
distribution, delivered to the Trustee or to the holders of the
Debentures, for the purposes of ascertaining the Persons entitled
to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, as the case may
be, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto
or to this Article XVI.
SECTION 16.5. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each holder of Debentures by such holder's acceptance thereof
authorizes and directs the Trustee on such holder's behalf to take
such action as may be necessary or appropriate to effectuate the
subordination provided in this Article XVI and appoints the Trustee
such holder's attorney-in-fact for any and all such purposes.
SECTION 16.6. NOTICE BY THE COMPANY.
(a) The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the Company
that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the provisions
of this Article XVI. Notwithstanding the provisions of this
Article XVI or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment of monies to or by
the Trustee in respect of the Debentures pursuant to the provisions
of this Article XVI, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company
or a holder or holders of Senior Indebtedness or from any trustee
therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Section 9.1, shall be
entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the
notice provided for in this Section 16.6 at least two Business Days
prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Debenture), then,
anything herein contained
46
<PAGE> 54
to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for
which they were received, and shall not be affected by any notice to the
contrary that may be received by it within two Business Days prior to such
date.
(b) The Trustee, subject to the provisions of Section 9.1,
shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of
Senior Indebtedness of the Company (or a trustee on behalf of such
holder) to establish that such notice has been given by a holder of
such Senior Indebtedness or a trustee on behalf of any such holder
or holders. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any
Person as a holder of such Senior Indebtedness to participate in
any payment or distribution pursuant to this Article XVI, the
Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution
and any other facts pertinent to the rights of such Person under
this Article XVI, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such
payment.
SECTION 16.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR
INDEBTEDNESS.
(a) The Trustee in its individual capacity shall be entitled
to all the rights set forth in this Article XVI in respect of any
Senior Indebtedness at any time held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such
holder. The Trustee's right to compensation and reimbursement of
expenses as set forth in Section 9.7 shall not be subject to the
subordination provisions of the Article XVI.
(b) With respect to the holders of Senior Indebtedness of the
Company, the Trustee undertakes to perform or to observe only such
of its covenants and obligations as are specifically set forth in
this Article XVI, and no implied covenants or obligations with
respect to the holders of such Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of such Senior
Indebtedness and, subject to the provisions of Section 9.1, the
Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to holders of
Debentures, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by
virtue of this Article XVI or otherwise.
SECTION 16.8. SUBORDINATION MAY NOT BE IMPAIRED.
(a) No right of any present or future holder of any Senior
Indebtedness of the Company to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with.
(b) Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness of the
Company may, at any time and from time to time, without the consent
of or notice to the Trustee or the holders of the Debentures,
without incurring responsibility to the holders of the Debentures
and without impairing or releasing the subordination provided in
this Article XVI or the obligations hereunder of the holders of the
Debentures to the holders of such Senior Indebtedness, do any
47
<PAGE> 55
one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner
such Senior Indebtedness or any instrument evidencing the same or
any agreement under which such Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness;
(iii) release any Person liable in any manner for the collection of
such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year
first above written.
FIRST BANKS, INC.
By: -------------------------------
Name: -----------------------------
Title: ----------------------------
Attest:
- ----------------------------
STATE STREET BANK AND TRUST COMPANY, as trustee
By:---------------------------------
Name: -----------------------------
Title: ----------------------------
Attest:
- ----------------------------
48
<PAGE> 56
STATE OF MISSOURI )
) ss:
COUNTY OF ST. LOUIS )
On this ------- day of -------------------------------,
199---, before me appeared ------------------------------, to me
personally known, who, being by me duly sworn, did say that he is
the ---------------------------- of FIRST BANKS, INC., and that the
seal affixed to said instrument is the corporate seal of said
corporation, and that said instrument was signed and sealed in
behalf of said corporation by authority of its board of directors
and said ------------------------------, acknowledged said
instrument to be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed
my official seal at my office in said county and state the day and
year last above written.
------------------------------------------
Notary Public
[seal] My term expires: -----------------
STATE OF MASSACHUSETTS )
) ss:
CITY OF ------------ )
On this ------- day of -------------------------------,
199---, before me appeared ------------------------------, to me
personally known, who, being by me duly sworn, did say that he is
the ---------------------------- of STATE STREET BANK AND TRUST
COMPANY, and that the seal affixed to said instrument is the corporate
seal of said corporation, and that said instrument was signed and sealed
in behalf of said corporation by authority of its board of directors
and said ------------------------------, acknowledged said
instrument to be the free act and deed of said corporation.
In testimony whereof I have hereunto set my hand and affixed
my official seal at my office in said county and state the day and
year last above written.
-------------------------------
Notary Public
[seal] My term expires: --------------
49
<PAGE> 57
EXHIBIT A
(FORM OF FACE OF DEBENTURE)
No. ----------------------------- $ ------------------------
CUSIP No. ------------------------
FIRST BANKS, INC.
---% SUBORDINATED DEBENTURE
DUE MARCH 31, 2027
First Banks, Inc., a Missouri corporation (the "Company,"
which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to
pay to, -------------- or registered assigns, the principal sum of
- ------------- Dollars ($-----------) on ---------, 2027 (the
"Stated Maturity"), and to pay interest on said principal sum from
- ------------, 1997, or from the most recent interest payment date
(each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, quarterly (subject to deferral as
set forth herein) in arrears on March 31, June 30, September 30 and
December 31 of each year commencing March 31, 1997, at the rate of ---%
per annum until the principal hereof shall have become due and payable,
and on any overdue principal and (without duplication on any overdue
installment of interest at the same rate per annum compounded quarterly.
The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which interest is payable on this Debenture is
not a business day, then payment of interest payable on such date shall
be made on the next succeeding day that is a business day (and without
any interest or other payment in respect of any such delay), except
that, if such business day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding business day, in each
case with the same force and effect as if made on such date. The
interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date shall, as provided in
the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Debentures, as defined in said
Indenture) is registered at the close of business on the regular
record date for such interest installment, which shall be the close
of business on the business day next preceding such Interest
Payment Date unless otherwise provided in the Indenture. Any such
interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered holders on such
regular record date and may be paid to the Person in whose name
this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on a special record date to be
fixed by the Trustee for the payment of such defaulted interest,
notice whereof shall be given to the registered holders of the
Debentures not less than 10 days prior to such special record date,
or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which the Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the
Indenture. The principal of and the interest on this Debenture
shall be payable
Exhibit A-1
<PAGE> 58
at the office or agency of the Trustee maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is
legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed
to the registered holder at such address as shall appear in the Debenture
Register. Notwithstanding the foregoing, so long as the holder of this
Debenture is the Property Trustee, the payment of the principal of and
interest on this Debenture shall be made at such place and to such account as
may be designated by the Trustee.
The Stated Maturity may be shortened at any time by the
Company to any date not earlier than -----------------, 2002,
subject to the Company having received prior approval of the
Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. Such date may also
be extended at any time at the election of the Company for one or
more periods, but in no event to a date later than
- ------------------------, 2046, subject to certain limitations
described in the Indenture.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of
payment to the prior payment in full of all Senior Indebtedness,
and this Debenture is issued subject to the provisions of the
Indenture with respect thereto. Each holder of this Debenture, by
accepting the same, (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee on his or her
behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided; and (c)
appoints the Trustee his or her attorney-in-fact for any and all
such purposes. Each holder hereof, by his or her acceptance
hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by
each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon
said provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory
for any purpose until the Certificate of Authentication hereon
shall have been signed by or on behalf of the Trustee.
The provisions of this Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes
have the same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed.
Dated ----------------------
FIRST BANKS, INC.
By: -------------------------------
Name: -----------------------------
Title: ----------------------------
Attest:
By: -----------------------------
Name: --------------------------
Title: -------------------------
Exhibit A-2
<PAGE> 59
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the
within-mentioned Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY, ---------------------------------------
as Trustee or Authentication Agent
By ----------------------------------- By ----------------------------
Authorized Signatory
Exhibit A-3
<PAGE> 60
[FORM OF REVERSE OF DEBENTURE]
--------------% SUBORDINATED DEBENTURE
(CONTINUED)
This Debenture is one of the subordinated debentures of the
Company (herein sometimes referred to as the "Debentures"),
specified in the Indenture, all issued or to be issued under and
pursuant to an Indenture dated as of January ---, 1997 (the
"Indenture") duly executed and delivered between the Company and
State Street Bank and Trust Company, as Trustee (the "Trustee"), to
which Indenture reference is hereby made for a description of the
rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the
Debentures. The Debentures are limited in aggregate principal
amount as specified in the Indenture.
Because of the occurrence and continuation of a Special Event,
in certain circumstances, this Debenture may become due and payable
at the principal amount together with any interest accrued thereon
(the "Redemption Price"). The Redemption Price shall be paid prior
to 12:00 noon, Eastern Standard Time, time, on the date of such
redemption or at such earlier time as the Company determines. The
Company shall have the right to redeem this Debenture at the option
of the Company, without premium or penalty, in whole or in part at
any time on or after --------, 2002 (an "Optional Redemption"), or
at any time in certain circumstances upon the occurrence of a
Special Event, at a Redemption Price equal to 100% of the principal
amount plus any accrued but unpaid interest, to the date of such
redemption. Any redemption pursuant to this paragraph shall be
made upon not less than 30 days nor more than 60 days notice, at
the Redemption Price. If the Debentures are only partially
redeemed by the Company pursuant to an Optional Redemption, the
Debentures shall be redeemed pro rata or by lot or by any other
method utilized by the Trustee.
In the event of redemption of this Debenture in part only, a
new Debenture or Debentures for the unredeemed portion hereof shall
be issued in the name of the holder hereof upon the cancellation
hereof.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal of all of the
Debentures may be declared, and upon such declaration shall become,
due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a
majority in aggregate principal amount of the Debentures at the
time outstanding, as defined in the Indenture, to execute
supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of
the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the holders of the Debentures; provided,
however, that no such supplemental indenture shall (i) extend the
fixed maturity of the Debentures except as provided in the
Indenture, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, without the
consent of the holder of each Debenture so affected; or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are
required to consent to any such supplemental indenture, without the
consent of the holders of each Debenture then outstanding and
affected thereby. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding, on behalf of all of the holders of the
Debentures, to waive any past default in the performance of any of the
Exhibit A-4
<PAGE> 61
covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or interest on any of the Debentures. Any such consent or waiver
by the registered holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all
future holders and owners of this Debenture and of any Debenture issued in
exchange herefor or in place hereof (whether by registration of transfer or
not any notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal and interest on this Debenture at the time and place and
at the rate and in the money herein prescribed.
The Company shall have the right at any time during the term
of the Debentures and from time to time to extend the interest
payment period of such Debentures for up to 20 consecutive quarters
(each, an "Extended Interest Payment Period"), at the end of which
period the Company shall pay all interest then accrued and unpaid
(together with interest thereon at the rate specified for the
Debentures to the extent that payment of such interest is
enforceable under applicable law). Before the termination of any
such Extended Interest Payment Period, the Company may further
extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further
extensions thereof shall not exceed 20 consecutive quarters. At
the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid interest and any
additional amounts then due, the Company may commence a new
Extended Interest Payment Period.
As provided in the Indenture and subject to certain
limitations therein set forth, this Debenture is transferable by
the registered holder hereof on the Debenture Register of the
Company, upon surrender of this Debenture for registration of
transfer at the office or agency of the Trustee accompanied by a
written instrument or instruments of transfer in form satisfactory
to the Company or the Trustee duly executed by the registered
holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations
and for the same aggregate principal amount shall be issued to the
designated transferee or transferees. No service charge shall be
made for any such transfer, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and the
Debenture Registrar may deem and treat the registered holder hereof
as the absolute owner hereof (whether or not this Debenture shall
be overdue and notwithstanding any notice of ownership or writing
hereon made by anyone other than the Debenture Registrar) for the
purpose of receiving payment of or on account of the principal
hereof and interest due hereon and for all other purposes, and
neither the Company nor the Trustee nor any paying agent nor any
Debentures Registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of
or the interest on this Debenture, or for any claim based hereon,
or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or
director, past, present or future, as such, of the Company or of
any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.
Exhibit A-5
<PAGE> 62
The Debentures are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof.
All terms used in this Debenture that are defined in the
Indenture shall have the meanings assigned to them in the
Indenture.
Exhibit A-6
<PAGE> 1
EXHIBIT 4.3
<PAGE> 2
CERTIFICATE OF TRUST
OF
FIRST PREFERRED CAPITAL TRUST
THIS CERTIFICATE OF TRUST OF FIRST PREFERRED CAPITAL TRUST
(the "Trust"), dated as of December 12, 1996, is being duly
executed and filed by WILMINGTON TRUST COMPANY, a Delaware banking
corporation, JAMES F. DIERBERG, ALLEN H. BLAKE and LAURENCE J.
BROST, each an individual, as trustees, to form a business trust
under the Delaware Business Trust Act (12 Del. C. Section 3801 et
seq.).
1. NAME. The name of the business trust formed hereby is FIRST
PREFERRED CAPITAL TRUST.
2. DELAWARE TRUSTEE. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington
Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
on December 16, 1996.
IN WITNESS WHEREOF, the undersigned, being the sole trustees
of the Trust, has executed this Certificate of Trust as of the date
first above written.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ Emmett R. Harmon
----------------------------
Name: Emmett R. Harmon
Title: Vice President
/s/ James F. Dierberg
-------------------------------
JAMES F. DIERBERG
as Trustee
/s/ Allen H. Blake
-------------------------------
ALLEN H. BLAKE
as Trustee
/s/ Laurence J. Brost
-------------------------------
LAURENCE J. BROST
as Trustee
<PAGE> 1
EXHIBIT 4.4
<PAGE> 2
TRUST AGREEMENT
This TRUST AGREEMENT, dated as of December 12, 1996 (this
"Trust Agreement"), among (i) First Banks, Inc., a Missouri
corporation (the "Depositor"), (ii) Wilmington Trust Company, a
Delaware banking corporation, as trustee, and (iii) James F.
Dierberg, Allen H. Blake and Laurence J. Brost, each an individual,
as trustees (each of such trustees in (ii) and (iii) a "Trustee"
and collectively, the "Trustees"). The Depositor and the Trustees
hereby agree as follows:
1. The trust created hereby (the "Trust") shall be known as
"First Preferred Capital Trust" in which name the Trustees, or the
Depositor to the extent provided herein, may engage in the
transactions contemplated hereby, make and execute contracts, and
sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets
over the Trustees the sum of $10.00. The Trustees hereby
acknowledge receipt of such amount in trust from the Depositor,
which amount shall constitute the initial trust estate. The
Trustees hereby declare that they will hold the trust estate in
trust for the Depositor. It is the intention of the parties hereto
that the Trust created hereby constitute a business trust under
Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section
3801, et seq. (the "Business Trust Act"), and that this document
constitutes the governing instrument of the Trust. The Trustees
are hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in
accordance with the provisions of the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended
and restated Trust Agreement, satisfactory to each such party and
substantially in the form included as an exhibit to the 1933 Act
Registration Statement (as defined below), to provide for the
contemplated operation of the Trust created hereby and the issuance
of the Preferred Securities and Common Securities referred to
therein. Prior to the execution and delivery of such amended and
restated Trust Agreement, the Trustees shall not have any duty or
obligation hereunder or with respect to the trust estate, except as
otherwise required by applicable law or as may be necessary to
obtain prior to such execution and delivery of any licenses,
consents or approvals required by applicable law or otherwise.
4. The Depositor and the Trustees hereby authorize and
direct the Depositor, as the sponsor of the Trust, (i) to file with
the Securities and Exchange Commission (the "Commission") and
execute, in each case on behalf of the Trust, (a) the Registration
Statement on Form S-2 (the "1933 Act Registration Statement"),
including any pre-effective or post-effective amendments to the
1933 Act Registration Statement, relating to the registration under
the Securities Act of 1933, as amended, of the Preferred Securities
of the Trust and possibly certain other securities and (b) a
Registration Statement on Form 8-A (the "1934 Act Registration
Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Preferred
Securities of the Trust under the Securities Exchange Act of 1934,
as amended; (ii) to file with The Nasdaq Stock Market's National
Market or a national stock exchange (each, an "Exchange") and
execute on behalf of the Trust one or more listing applications and
all other applications, statements, certificates, agreements and
other instruments as shall be necessary or desirable to cause the
Preferred Securities to be listed on any of the Exchanges; (iii) to
file and execute on behalf of the Trust such applications, reports,
surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under
the securities or blue sky laws of such jurisdictions as the
Depositor, on behalf of the Trust, may deem necessary or desirable;
and (iv) to execute on behalf of the Trust that certain
Underwriting Agreement relating to the Preferred Securities, among
the Trust, the Depositor and the several Underwriters named
therein, substantially in the form included as an exhibit to the
1933 Act Registration Statement. In the event that any filing
<PAGE> 3
referred to in clauses (i), (ii) and (iii) above is required by the
rules and regulations of the Commission, an Exchange or state
securities or blue sky laws, to be executed on behalf of the Trust
by one or more of the Trustees, each of the Trustees, in its or his
capacity as a Trustee of the Trust, is hereby authorized and, to
the extent so required, directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it
being understood that Wilmington Trust Company in its capacity as
a Trustee of the Trust shall not be required to join in any such
filing or execute on behalf of the Trust any such document unless
required by the rules and regulations of the Commission, the
Exchange or state securities or blue sky laws. In connection with
the filings referred to above, the Depositor and James F. Dierberg,
Allen H. Blake and Laurence J. Brost, each as Trustees and not in
their individual capacities, hereby constitutes and appoints James
F. Dierberg, Allen H. Blake and Laurence J. Brost, and each of
them, as its true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for the Depositor or
such Trustee or in the Depositor's or such Trustees' name, place
and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act
Registration Statement and the 1934 Act Registration Statement and
to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Commission, the Exchange and
administrators of the state securities or blue sky laws, granting
unto said attorneys-in-fact and agents full power and authority to
do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and
purposes as the Depositor or such Trustee might or could to in
person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their respective substitute or
substitutes, shall do or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more
counterparts.
6. The number of Trustees initially shall be four and
thereafter the number of Trustees shall be such number as shall be
fixed from time to time by a written instrument signed by the
Depositor which may increase or decrease the number of Trustees;
provided, however, that to the extent required by the Business
Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of
Delaware and otherwise meets the requirements of applicable
Delaware law. Subject to the foregoing, the Depositor is entitled
to appoint or remove without cause any Trustee at any time. The
Trustees may resign upon 30 days' prior notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware (without
regard to conflict of laws of principles).
[Signature Pages On Next Page]
2
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above
written.
FIRST BANKS, INC.
as Depositor
By: /s/ James F. Dierberg
-------------------------------------------------
Name: James F. Dierberg
Title: Chairman of the Board, President and
Chief Executive Officer
WILMINGTON TRUST COMPANY
as Trustee
By: /s/
Name:-----------------------------------------------
Title:----------------------------------------------
/s/ James F. Dierberg
----------------------------------------------------
JAMES F. DIERBERG
as Trustee
/s/ Allen H. Blake
----------------------------------------------------
ALLEN H. BLAKE
as Trustee
/s/ Laurence J. Brost
----------------------------------------------------
LAURENCE J. BROST
as Trustee
3
<PAGE> 1
EXHIBIT 4.5
<PAGE> 2
==============================================================================
FIRST PREFERRED CAPITAL TRUST
AMENDED AND RESTATED
TRUST AGREEMENT
AMONG
FIRST BANKS, INC., AS DEPOSITOR
STATE STREET BANK AND TRUST COMPANY, AS PROPERTY TRUSTEE
WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE,
AND
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN
DATED AS OF JANUARY --------, 1997
==============================================================================
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINED TERMS . . . . . . . . . . . . . . . 1
Section 101. Definitions . . . . . . . . . . . . . . . . 1
ARTICLE II ESTABLISHMENT OF THE TRUST. . . . . . . . . 9
Section 201. Name. . . . . . . . . . . . . . . . . . . . 9
Section 202. Office of the Delaware Trustee; Principal
Place of Business . . . . . . . . . . . . . 10
Section 203. Initial Contribution of Trust Property;
Organizational Expenses . . . . . . . . . . 10
Section 204. Issuance of the Preferred Securities. . . . 10
Section 205. Issuance of the Common Securities;
Subscription and Purchase of
Debentures. . . . . . . . . . . . . . . . . 10
Section 206. Declaration of Trust. . . . . . . . . . . . 11
Section 207. Authorization to Enter into Certain
Transactions. . . . . . . . . . . . . . . . 11
Section 208. Assets of Trust . . . . . . . . . . . . . . 14
Section 209. Title to Trust Property . . . . . . . . . . 14
ARTICLE III PAYMENT ACCOUNT . . . . . . . . . . . . . . 14
Section 301. Payment Account . . . . . . . . . . . . . . 14
ARTICLE IV DISTRIBUTIONS; REDEMPTION . . . . . . . . . 15
Section 401. Distributions . . . . . . . . . . . . . . . 15
Section 402. Redemption. . . . . . . . . . . . . . . . . 16
Section 403. Subordination of Common Securities. . . . . 17
Section 404. Payment Procedures. . . . . . . . . . . . . 18
Section 405. Tax Returns and Reports . . . . . . . . . . 18
Section 406. Payment of Taxes, Duties, etc. of the
Trust . . . . . . . . . . . . . . . . . . . 18
Section 407. Payments Under Indenture. . . . . . . . . . 18
ARTICLE V TRUST SECURITIES CERTIFICATES . . . . . . . 19
Section 501. Initial Ownership . . . . . . . . . . . . . 19
Section 502. The Trust Securities Certificates . . . . . 19
Section 503. Execution and Delivery of Trust
Securities Certificates . . . . . . . . . . 19
Section 504. Registration of Transfer and Exchange of
Preferred Securities Certificates . . . . . 19
Section 505. Mutilated, Destroyed, Lost or Stolen
Trust Securities Certificates . . . . . . . 20
Section 506. Persons Deemed Securityholders. . . . . . . 21
Section 507. Access to List of Securityholders' Names
and Addresses . . . . . . . . . . . . . . . 21
Section 508. Maintenance of Office or Agency . . . . . . 21
Section 509. Appointment of Paying Agent . . . . . . . . 21
Section 510. Ownership of Common Securities by
Depositor . . . . . . . . . . . . . . . . . 22
Section 511. Preferred Securities Certificates . . . . . 22
Section 512. [Intentionally Omitted]
Section 513. [Intentionally Omitted]
Section 514. Rights of Securityholders . . . . . . . . . 23
i
<PAGE> 4
ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS;
VOTING. . . . . . . . . . . . . . . . . . . 24
Section 601. Limitations on Voting Rights. . . . . . . . 24
Section 602. Notice of Meetings. . . . . . . . . . . . . 25
Section 603. Meetings of Preferred Securityholders . . . 25
Section 604. Voting Rights . . . . . . . . . . . . . . . 26
Section 605. Proxies, etc. . . . . . . . . . . . . . . . 26
Section 606. Securityholder Action by Written
Consent . . . . . . . . . . . . . . . . . . 26
Section 607. Record Date for Voting and Other
Purposes. . . . . . . . . . . . . . . . . . 26
Section 608. Acts of Securityholders . . . . . . . . . . 26
Section 609. Inspection of Records . . . . . . . . . . . 27
ARTICLE VII REPRESENTATIONS AND WARRANTIES. . . . . . . 27
Section 701. Representations and Warranties of the
Bank and the Property Trustee . . . . . . . 27
Section 702. Representations and Warranties of the
Delaware Bank and the Delaware Trustee. . . 28
Section 703. Representations and Warranties of
Depositor . . . . . . . . . . . . . . . . . 29
ARTICLE VIII TRUSTEES. . . . . . . . . . . . . . . . . . 30
Section 801. Certain Duties and Responsibilities . . . . 30
Section 802. Certain Notices . . . . . . . . . . . . . . 31
Section 803. Certain Rights of Property Trustee. . . . . 31
Section 804. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . . 33
Section 805. May Hold Securities . . . . . . . . . . . . 33
Section 806. Compensation; Indemnity; Fees . . . . . . . 33
Section 807. Corporate Property Trustee Required;
Eligibility of Trustees . . . . . . . . . . 34
Section 808. Conflicting Interests . . . . . . . . . . . 35
Section 809. Co-Trustees and Separate Trustee. . . . . . 35
Section 810. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . . 36
Section 811. Acceptance of Appointment by Successor. . . 37
Section 812. Merger, Conversion, Consolidation or
Succession to Business. . . . . . . . . . . 38
Section 813. Preferential Collection of Claims Against
Depositor or Trust. . . . . . . . . . . . . 38
Section 814. Reports by Property Trustee . . . . . . . . 38
Section 815. Reports to the Property Trustee . . . . . . 38
Section 816. Evidence of Compliance with Conditions
Precedent . . . . . . . . . . . . . . . . . 39
Section 817. Number of Trustees. . . . . . . . . . . . . 39
Section 818. Delegation of Power . . . . . . . . . . . . 39
Section 819. Voting. . . . . . . . . . . . . . . . . . . 39
ARTICLE IX TERMINATION, LIQUIDATION AND MERGER . . . . 40
Section 901. Termination Upon Expiration Date. . . . . . 40
Section 902. Early Termination . . . . . . . . . . . . . 40
Section 903. Termination . . . . . . . . . . . . . . . . 40
Section 904. Liquidation . . . . . . . . . . . . . . . . 40
Section 905. Mergers, Consolidations, Amalgamations or
Replacements of the Trust . . . . . . . . . 42
ii
<PAGE> 5
ARTICLE X MISCELLANEOUS PROVISIONS. . . . . . . . . . 42
Section 1001. Limitation of Rights of Securityholders . . 42
Section 1002. Amendment . . . . . . . . . . . . . . . . . 43
Section 1003. Separability. . . . . . . . . . . . . . . . 44
Section 1004. Governing law . . . . . . . . . . . . . . . 44
Section 1005. Payments Due on Non-Business Day. . . . . . 44
Section 1006. Successors. . . . . . . . . . . . . . . . . 44
Section 1007. Headings. . . . . . . . . . . . . . . . . . 44
Section 1008. Reports, Notices and Demands. . . . . . . . 44
Section 1009. Agreement Not to Petition . . . . . . . . . 45
Section 1010. Trust Indenture Act; Conflict with Trust
Indenture Act . . . . . . . . . . . . . . . 45
Section 1011. Acceptance of Terms of Trust Agreement,
Guarantee and Indenture . . . . . . . . . . 46
Exhibit A Certificate of Trust
Exhibit B Form of Certificate Depository Agreement
Exhibit C Form of Common Securities Certificate
Exhibit D Form of Expense Agreement
Exhibit E Form of Preferred Securities Certificate
</TABLE>
iii
<PAGE> 6
<TABLE>
CROSS-REFERENCE TABLE
<CAPTION>
Section of Section of Amended
Trust Indenture Act and Restated
of 1939, as amended Trust Agreement
- ------------------- ---------------
<S> <C>
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . .807
310(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . .807
310(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . .807
310(a)(4). . . . . . . . . . . . . . . . . . . . . . . . 207(a)(ii)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .808
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .813
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .813
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .507
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .507
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .507
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 814(a)
313(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . 814(b)
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 814(b)
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1008
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 814(c)
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .815
314(b) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . .816
314(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . .816
314(c)(3). . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(d) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
314(e) 101, 816
315(a) . . . . . . . . . . . . . . . . . . . . . . . 801(a), 803(a)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . .802, 1008
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 801(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 801, 803
316(a)(2). . . . . . . . . . . . . . . . . . . . . . Not Applicable
316(b) . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .607
317(a)(1). . . . . . . . . . . . . . . . . . . . . . Not Applicable
317(a)(2). . . . . . . . . . . . . . . . . . . . . . Not Applicable
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .509
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1010
<FN>
Note: This Cross-Reference Table does not constitute part of
this Agreement and shall not affect any interpretation
of any of its terms or provisions.
</TABLE>
iv
<PAGE> 7
AMENDED AND RESTATED TRUST AGREEMENT
AMENDED AND RESTATED TRUST AGREEMENT, dated as of January
- ----, 1997, among (i) FIRST BANKS, INC., a Missouri corporation
(including any successors or assigns, the "Depositor"),
(ii) STATE STREET BANK AND TRUST COMPANY, a banking corporation duly
organized and existing under the laws of the State of Massachusetts, as
property trustee (the "Property Trustee" and, in its separate corporate
capacity and not in its capacity as Property Trustee, the "Bank"),
(iii) WILMINGTON TRUST COMPANY, a Delaware banking corporation duly
organized and existing under the laws of the State of Delaware, as
Delaware trustee (the "Delaware Trustee," and, in its separate
corporate capacity and not in its capacity as Delaware Trustee, the
"Delaware Bank") (iv) JAMES F. DIERBERG, an individual, ALLEN H.
BLAKE, an individual, and LAURENCE J. BROST, an individual, each of
whose address is c/o First Banks, Inc., 11901 Olive Boulevard, St. Louis,
Missouri 63141 (each an "Administrative Trustee" and collectively the
"Administrative Trustees") (the Property Trustee, the Delaware Trustee
and the Administrative Trustees referred to collectively as the
"Trustees"), and (v) the several Holders (as hereinafter defined).
RECITALS
WHEREAS, the Depositor, the Delaware Trustee, and James F.
Dierberg, Allen H. Blake and Laurence J. Brost, each as an
Administrative Trustee, have heretofore duly declared and
established a business trust pursuant to the Delaware Business
Trust Act by the entering into of that certain Trust Agreement,
dated as of December 12, 1996 (the "Original Trust Agreement"), and
by the execution and filing by the Delaware Trustee, the Depositor
and the Administrative Trustees with the Secretary of State of the
State of Delaware of the Certificate of Trust, filed on December
13, 1996, the form of which is attached as Exhibit A; and
WHEREAS, the Depositor, the Delaware Trustee, the Property
Trustee and the Administrative Trustees desire to amend and restate
the Original Trust Agreement in its entirety as set forth herein to
provide for, among other things, (i) the issuance of the Common
Securities (as defined herein) by the Trust (as defined herein) to
the Depositor; (ii) the issuance and sale of the Preferred
Securities (as defined herein) by the Trust pursuant to the
Underwriting Agreement (as defined herein); (iii) the acquisition
by the Trust from the Depositor of all of the right, title and
interest in the Debentures (as defined herein); and (iv) the
appointment of the Trustees;
NOW THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, each party, for the benefit of the other parties and
for the benefit of the Securityholders (as defined herein), hereby
amends and restates the Original Trust Agreement in its entirety
and agrees as follows:
ARTICLE I
DEFINED TERMS
SECTION 101. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article I have the meanings
assigned to them in this Article I and include the plural as well
as the singular;
<PAGE> 8
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to
an "Article" or a "Section" refers to an Article or a Section, as
the case may be, of this Trust Agreement; and
(d) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Trust Agreement as a whole
and not to any particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 608.
"Additional Amount" means, with respect to Trust Securities of
a given Liquidation Amount and/or a given period, the amount of
additional interest accrued on interest in arrears and paid by the
Depositor on a Like Amount of Debentures for such period.
"Additional Interest" has the meaning specified in Section 1.1
of the Indenture.
"Administrative Trustee" means each of James F. Dierberg,
Allen H. Blake and Laurence J. Brost, solely in his capacity as
Administrative Trustee of the Trust formed and continued hereunder
and not in his individual capacity, or such Administrative
Trustee's successor in interest in such capacity, or any successor
trustee appointed as herein provided.
"Affiliate" means, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding with
power to vote 10% or more of the outstanding voting securities or
other ownership interests of the specified Person, any Person 10%
or more of whose outstanding voting securities or other ownership
interests are directly or indirectly owned, controlled or held with
power to vote by the specified Person; (c) any Person directly or
indirectly controlling, controlled by, or under common control with
the specified Person; (d) a partnership in which the specified
Person is a general partner; (e) any officer or director of the
specified Person; and (f) if the specified Person is an individual,
any entity of which the specified Person is an officer, director or
general partner.
"Bank" has the meaning specified in the Preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(a) the entry of a decree or order by a court having
jurisdiction in the premises adjudging such Person a bankrupt or
insolvent, or approving as properly filed a petition seeking
liquidation or reorganization of or in respect of such Person under
the United States Bankruptcy Code of 1978, as amended, or any other
similar applicable federal or state law, and the continuance of any
such decree or order unvacated and unstayed for a period of
90 days; or the commencement of an involuntary case under the
United States Bankruptcy Code of 1978, as amended, in respect of
such Person, which shall continue undismissed for a period of
90 days or entry of an order for relief in such case; or the entry
of a decree or order of a court having jurisdiction in the premises
for the appointment on the ground of insolvency or bankruptcy of a
receiver, custodian, liquidator, trustee or assignee in bankruptcy
or insolvency of such Person or of its property, or for the winding
up or liquidation of its affairs, and such decree or order shall
have remained in force unvacated and unstayed for a period of
90 days; or
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(b) the institution by such Person of proceedings to be
adjudicated a voluntary bankrupt, or the consent by such Person to
the filing of a bankruptcy proceeding against it, or the filing by
such Person of a petition or answer or consent seeking liquidation
or reorganization under the United States Bankruptcy Code of 1978,
as amended, or other similar applicable Federal or State law, or
the consent by such Person to the filing of any such petition or to
the appointment on the ground of insolvency or bankruptcy of a
receiver or custodian or liquidator or trustee or assignee in
bankruptcy or insolvency of such Person or of its property, or
shall make a general assignment for the benefit of creditors.
"Bankruptcy Laws" has the meaning specified in Section 1009.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Depositor to have
been duly adopted by the Depositor's Board of Directors, or such
committee of the Board of Directors or officers of the Depositor to
which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such
certification, and delivered to the appropriate Trustee.
"Business Day" means a day other than a Saturday or Sunday, a
day on which banking institutions in The City of New York are
authorized or required by law, executive order or regulation to
remain closed, or a day on which the Property Trustee's Corporate
Trust Office or the Corporate Trust Office of the Debenture Trustee
is closed for business.
"Certificate of Trust" means the certificate of trust filed
with the Secretary of State of the State of Delaware with respect
to the Trust, as amended or restated from time to time.
"Change in 1940 Act Law" shall have the meaning set forth in
the definition of "Investment Company Event."
"Closing Date" means the date of execution and delivery of
this Trust Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or,
if at any time after the execution of this instrument such
Commission
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is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Security" means an undivided beneficial interest in
the assets of the Trust, having a Liquidation Amount of $25 and
having the rights provided therefor in this Trust Agreement,
including the right to receive Distributions and a Liquidation
Distribution as provided herein.
"Common Securities Certificate" means a certificate evidencing
ownership of Common Securities, substantially in the form attached
as Exhibit C.
"Corporate Trust Office" means the office at which, at any
particular time, the corporate trust business of the Property
Trustee or the Debenture Trustee, as the case may be, shall be
principally administered, which office at the date hereof, in each
such case, is located at 2 International Place, 5th Floor, Boston,
Massachusetts 02110, Attention: Corporate Trust Trustee.
"Debenture Event of Default" means an "Event of Default" as
defined in Section 7.1 of the Indenture.
"Debenture Redemption Date" means, with respect to any
Debentures to be redeemed under the Indenture, the date fixed for
redemption under the Indenture.
"Debenture Tax Event" means a "Tax Event" as specified in
Section 1.1 of the Indenture.
"Debenture Trustee" means State Street Bank and Trust Company,
a banking corporation company organized under the laws of the State of
Massachusetts and any successor thereto, as trustee under the Indenture.
"Debentures" means the $---------- aggregate principal amount
of the Depositor's ----% Subordinated Debentures due 2027, issued
pursuant to the Indenture.
"Definitive Preferred Securities Certificates" means the
Preferred Securities Certificates issued in certificated, fully
registered form as provided in Section 513.
"Delaware Bank" has the meaning specified in the Preamble to
this Trust Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Delaware Code Sections 3801 et seq. as it may
be amended from time to time.
"Delaware Trustee" means the commercial bank or trust company
identified as the "Delaware Trustee" in the Preamble to this Trust
Agreement solely in its capacity as Delaware Trustee of the Trust
formed and continued hereunder and not in its individual capacity,
or its successor in interest in such capacity, or any successor
trustee appointed as herein provided.
"Depositor" has the meaning specified in the Preamble to this
Trust Agreement.
"Distribution Date" has the meaning specified in
Section 401(a).
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"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 401.
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(a) the occurrence of a Debenture Event of Default; or
(b) default by the Trust or the Property Trustee in the
payment of any Distribution when it becomes due and payable, and
continuation of such default for a period of 30 days; or
(c) default by the Trust or the Property Trustee in the
payment of any Redemption Price of any Trust Security when it
becomes due and payable; or
(d) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Trustees in this Trust
Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause
(b) or (c), above) and continuation of such default or breach for
a period of 60 days after there has been given, by registered or
certified mail, to the defaulting Trustee or Trustees by the
Holders of at least 25% in aggregate liquidation preference of the
Outstanding Preferred Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the
Property Trustee and the failure by the Depositor to appoint a
successor Property Trustee within 60 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expense Agreement" means the Agreement as to Expenses and
Liabilities between the Depositor and the Trust, substantially in
the form attached as Exhibit D, as amended from time to time.
"Expiration Date" has the meaning specified in Section 901.
"Extended Interest Payment Period" has the meaning specified
in Section 4.1 of the Indenture.
"Guarantee" means the Preferred Securities Guarantee Agreement
executed and delivered by the Depositor and Boatmen's Trust
Company, as trustee, contemporaneously with the execution and
delivery of this Trust Agreement, for the benefit of the holders of
the Preferred Securities, as amended from time to time.
"Indenture" means the Indenture, dated as of January ----,
1997, between the Depositor and the Debenture Trustee, as trustee,
as amended or supplemented from time to time.
"Investment Company Act," means the Investment Company Act of
1940, as amended, as in effect at the date of execution of this
instrument.
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"Investment Company Event" means the receipt by the Trust of
an Opinion of Counsel, rendered by a law firm having a recognized
national tax and securities law practice, to the effect that, as a
result of the occurrence of a change in law or regulation or a
change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), the Trust is or shall be
considered an "investment company" that is required to be
registered under the Investment Company Act, which Change in 1940
Act Law becomes effective on or after the date of original issuance
of the Preferred Securities under this Trust Agreement.
"Lien" means any lien, pledge, charge, encumbrance, mortgage,
deed of trust, adverse ownership interest, hypothecation,
assignment, security interest or preference, priority or other
security agreement or preferential arrangement of any kind or
nature whatsoever.
"Like Amount" means (a) with respect to a redemption of Trust
Securities, Trust Securities having a Liquidation Amount equal to
the principal amount of Debentures to be contemporaneously redeemed
in accordance with the Indenture and the proceeds of which shall be
used to pay the Redemption Price of such Trust Securities; and
(b) with respect to a distribution of Debentures to Holders of
Trust Securities in connection with a termination or liquidation of
the Trust, Debentures having a principal amount equal to the
Liquidation Amount of the Trust Securities of the Holder to whom
such Debentures are distributed. Each Debenture distributed pursuant
to clause (6) above shall carry with it accumulated interest in an
amount equal to the accumulated and unpaid interest then due on
such Debentures.
"Liquidation Amount" means the stated amount of $25 per Trust
Security.
"Liquidation Date" means the date on which Debentures are to
be distributed to Holders of Trust Securities in connection with a
termination and liquidation of the Trust pursuant to
Section 904(a).
"Liquidation Distribution" has the meaning specified in
Section 904(d).
"Officers' Certificate" means a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Controller or an Assistant Controller or the
Secretary or an Assistant Secretary, of the Depositor, and
delivered to the appropriate Trustee. One of the officers signing
an Officers' Certificate given pursuant to Section 816 shall be the
principal executive, financial or accounting officer of the
Depositor. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Trust
Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
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"Opinion of Counsel" means an opinion in writing of legal
counsel, who may be counsel for the Trust, the Property Trustee,
the Delaware Trustee or the Depositor, but not an employee of any
thereof, and who shall be reasonably acceptable to the Property
Trustee.
"Original Trust Agreement" has the meaning specified in the
Recitals to this Trust Agreement.
"Outstanding", when used with respect to Preferred Securities,
means, as of the date of determination, all Preferred Securities
theretofore executed and delivered under this Trust Agreement,
except:
(a) Preferred securities theretofore canceled by the Property
Trustee or delivered to the Property Trustee for cancellation;
(b) Preferred Securities for whose payment or redemption
money in the necessary amount has been theretofore deposited with
the Property Trustee or any Paying Agent for the Holders of such
Preferred Securities; provided that, if such Preferred Securities
are to be redeemed, notice of such redemption has been duly given
pursuant to this Trust Agreement; and
(c) Preferred Securities which have been paid or in exchange
for or in lieu of which other Preferred Securities have been
executed and delivered pursuant to Sections 504, 505, 511 and 513;
provided, however, that in determining whether the Holders of the
requisite Liquidation Amount of the Outstanding Preferred
Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Preferred
Securities owned by the Depositor, any Trustee or any Affiliate of
the Depositor or any Trustee shall be disregarded and deemed not to
be Outstanding, except that (a) in determining whether any Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Preferred
Securities that such Trustee knows to be so owned shall be so
disregarded; and (b) the foregoing shall not apply at any time when
all of the outstanding Preferred Securities are owned by the
Depositor, one or more of the Trustees and/or any such Affiliate.
Preferred Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Administrative Trustees the pledgee's right so
to the Depositor or any Affiliate of the Depositor.
"Paying Agent" means any paying agent or co-paying agent
appointed pursuant to Section 509 and shall initially be the Bank.
"Payment Account" means a segregated non-interest-bearing
corporate trust account maintained by the Property Trustee with the
Bank in its trust department for the benefit of the Securityholders
in which all amounts paid in respect of the Debentures shall be
held and from which the Property Trustee shall make payments to the
Securityholders in accordance with Sections 401 and 402.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company or corporation,
unincorporated organization or government or any agency or
political subdivision thereof.
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"Preferred Security" means an undivided beneficial interest in
the assets of the Trust, having a Liquidation Amount of $25 and
having the rights provided therefor in this Trust Agreement,
including the right to receive Distributions and a Liquidation
Distribution as provided herein.
"Preferred Securities Certificate", means a certificate
evidencing ownership of Preferred Securities, substantially in the
form attached as Exhibit E.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee," in the Preamble to this Trust
Agreement solely in its capacity as Property Trustee of the Trust
heretofore formed and continued hereunder and not in its individual
capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as herein provided.
"Redemption Date" means, with respect to any Trust Security to
be redeemed, the date fixed for such redemption by or pursuant to
this Trust Agreement; provided that each Debenture Redemption Date
and the stated maturity of the Debentures shall be a Redemption
Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security,
the Liquidation Amount of such Trust Security, plus accumulated and
unpaid Distributions to the Redemption Date, paid by the Depositor upon
the concurrent redemption of a Like Amount of Debentures, allocated on
a pro rata basis (based on Liquidation Amounts) among the Trust
Securities.
"Relevant Trustee" shall have the meaning specified in Section
810.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 504.
"Securityholder" or "Holder" means a Person in whose name a
Trust Security or Securities is registered in the Securities
Register; any such Person is a beneficial owner within the meaning
of the Delaware Business Trust Act.
"Trust" means the Delaware business trust created and
continued hereby and identified on the cover page to this Trust
Agreement.
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<PAGE> 15
"Trust Agreement" means this Amended and Restated Trust
Agreement, as the same may be modified, amended or supplemented in
accordance with the applicable provisions hereof, including all
exhibits hereto, including, for all purposes of this Trust
Agreement and any such modification, amendment or supplement, the
provisions of the Trust Indenture Act that are deemed to be a part
of and govern this Trust Agreement and any such modification,
amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, as in force at the date as of which this instrument was
executed; provided, however, that in the event the Trust Indenture
Act of 1939, as amended, is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures; (b) the rights of
the Property Trustee under the Guarantee; (c) any cash on deposit
in, or owing to, the Payment Account; and (d) all proceeds and
rights in respect of the foregoing and any other property and
assets for the time being held or deemed to be held by the Property
Trustee pursuant to the trusts of this Trust Agreement.
"Trust Security" means any one of the Common Securities or the
Preferred Securities.
"Trust Securities Certificate" means any one of the Common
Securities Certificates or the Preferred Securities Certificates.
"Trustees" means, collectively, the Property Trustee, the
Delaware Trustee and the Administrative Trustees.
"Underwriting Agreement" means the Underwriting Agreement,
dated as of January ---, 1997, among the Trust, the Depositor and
the Underwriters named therein.
ARTICLE II
ESTABLISHMENT OF THE TRUST
SECTION 201. NAME.
The Trust created and continued hereby shall be known as
"First Preferred Capital Trust," as such name may be modified from
time to time by the Administrative Trustees following written
notice to the Holders of Trust Securities and the other Trustees,
in which name the Trustees may engage in the transactions
contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 202. OFFICE OF THE DELAWARE TRUSTEE; PRINCIPAL PLACE
OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware
is c/o Wilmington Trust Company, Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, or such other address in the State
of Delaware as the Delaware Trustee may designate by written notice
to the Securityholders and the Depositor. The principal executive
office of the Trust is c/o First Banks, Inc., 135 North Meramec
Avenue, St. Louis, Missouri 63105.
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SECTION 203. INITIAL CONTRIBUTION OF TRUST PROPERTY;
ORGANIZATIONAL EXPENSES.
The Trustees acknowledge receipt in trust from the Depositor
in connection with the Original Trust Agreement of the sum of $10,
which constituted the initial Trust Property. The Depositor shall
pay organizational expenses of the Trust as they arise or shall,
upon request of any Trustee, promptly reimburse such Trustee for
any such expenses paid by such Trustee. The Depositor shall make
no claim upon the Trust Property for the payment of such expenses.
SECTION 204. ISSUANCE OF THE PREFERRED SECURITIES.
On January ---, 1997, the Depositor and an Administrative
Trustee, on behalf of the Trust and pursuant to the Original Trust
Agreement, executed and delivered the Underwriting Agreement.
Contemporaneously with the execution and delivery of this Trust
Agreement, an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver in accordance
with the Underwriting Agreement, Preferred Securities Certificates,
registered in the name of the Persons entitled thereto,
in an aggregate amount of --------------- Preferred
Securities having an aggregate Liquidation Amount of $----------
against receipt of the aggregate purchase price of such Preferred
Securities of $----------, which amount such Administrative Trustee
shall promptly deliver to the Property Trustee. If the
underwriters exercise their Option and there is an Option Closing
Date (as such terms are defined in the Underwriting Agreement),
then an Administrative Trustee, on behalf of the Trust, shall
execute in accordance with Section 502 and deliver in accordance
with the Underwriting Agreement, Preferred Securities Certificates,
registered in the name of the Persons entitled thereto,
in an aggregate amount of up to ----------- Preferred
Securities having an aggregate Liquidation Amount of up to
$---------- against receipt of the aggregate purchase price of such
Preferred Securities of $-----------, which amount such
Administrative Trustee shall promptly deliver to the Property
Trustee.
SECTION 205. ISSUANCE OF THE COMMON SECURITIES; SUBSCRIPTION
AND PURCHASE OF DEBENTURES.
(a) Contemporaneously with the execution and delivery of this
Trust Agreement, an Administrative Trustee, on behalf of the Trust,
shall execute in accordance with Section 502 and deliver to the
Depositor, Common Securities Certificates, registered in the name
of the Depositor, in an aggregate amount of Common Securities
having an aggregate Liquidation Amount of $---------- against
payment by the Depositor of such amount. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall
subscribe to and purchase from the Depositor Debentures, registered
in the name of the Property Trustee on behalf of the Trust and
having an aggregate principal amount equal to $----------, and, in
satisfaction of the purchase price for such Debentures, the
Property Trustee, on behalf of the Trust, shall deliver to the
Depositor the sum of $----------.
(b) If the underwriters exercise the Option and there is an
Option Closing Date, then an Administrative Trustee, on behalf of
the Trust, shall execute in accordance with Section 502 and deliver
to the Depositor, Common Securities Certificates, registered in the
name of the Depositor, in an aggregate amount of Common Securities
having an aggregate Liquidation Amount of up to $---------- against
payment by the Depositor of such amount. Contemporaneously
therewith, an Administrative Trustee, on behalf of the Trust, shall
subscribe to and purchase from the Depositor, Debentures,
registered in the name of the Trust and having an aggregate
principal amount of up to $----------, and, in satisfaction of the
purchase price of such Debentures, the Property Trustee, on behalf
of the Trust, shall deliver to the Depositor the amount received
from one of the Administrative Trustees pursuant to
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<PAGE> 17
the last sentence of Section 204 (being the sum of the amounts delivered to
the Property Trustee pursuant to (i) the third sentence of Section
204; and (ii) the first sentence of this Section 205(b)).
SECTION 206. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Trust Securities and use the proceeds from such sale
to acquire the Debentures; and (b) to engage in those activities
necessary, convenient or incidental thereto. The Depositor hereby
appoints the Trustees as trustees of the Trust, to have all the
rights, powers and duties to the extent set forth herein, and the
Trustees hereby accept such appointment. The Property Trustee
hereby declares that it shall hold the Trust Property in trust upon
and subject to the conditions set forth herein for the benefit of
the Securityholders. The Administrative Trustees shall have all
rights, powers and duties set forth herein and in accordance with
applicable law with respect to accomplishing the purposes of the
Trust. The Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative
Trustees set forth herein. The Delaware Trustee shall be one of
the Trustees of the Trust for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Delaware
Business Trust Act.
SECTION 207. AUTHORIZATION TO ENTER INTO CERTAIN
TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in
accordance with the terms of this Trust Agreement. Subject to the
limitations set forth in paragraph (b) of this Section 207 and
Article VIII, and in accordance with the following provisions (i)
and (ii), the Administrative Trustees shall have the authority to
enter into all transactions and agreements determined by the
Administrative Trustees to be appropriate in exercising the
authority, express or implied, otherwise granted to the
Administrative Trustees under this Trust Agreement, and to perform
all acts in furtherance thereof, including without limitation, the
following:
(i) As among the Trustees, each Administrative
Trustee, acting singly or jointly, shall have the power and
authority to act on behalf of the Trust with respect to the
following matters:
(A) the issuance and sale of the Trust
Securities;
(B) to cause the Trust to enter into, and to
execute, deliver and perform on behalf of the Trust, the Expense
Agreement and such other agreements or documents as may be necessary or
desirable in connection with the purposes and function of the Trust;
(C) assisting in the registration of the
Preferred Securities under the Securities Act of 1933, as amended,
and under state securities or blue sky laws, and the qualification
of this Trust Agreement as a trust indenture under the Trust
Indenture Act;
(D) assisting in the listing of the Preferred
Securities upon The Nasdaq Stock Market's National Market or such
securities exchange or exchanges as shall be determined by the
Depositor and the registration of the Preferred Securities under
the Exchange Act, and the preparation and filing of all periodic
and other reports and other documents pursuant to the foregoing;
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(E) the sending of notices (other than notices
of default) and other information regarding the Trust Securities
and the Debentures to the Securityholders in accordance with this
Trust Agreement;
(F) the appointment of a Paying Agent,
authenticating agent and Securities Registrar in accordance with
this Trust Agreement;
(G) to the extent provided in this Trust
Agreement, the winding up of the affairs of and liquidation of the
Trust and the preparation, execution and filing of the certificate
of cancellation with the Secretary of State of the State of
Delaware;
(H) to take all action that may be necessary
or appropriate for the preservation and the continuation of the
Trust's valid existence, rights, franchises and privileges as a
statutory business trust under the laws of the State of Delaware
and of each other jurisdiction in which such existence is necessary
to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which
the Trust was created; and
(I) the taking of any action incidental to the
foregoing as the Administrative Trustees may from time to time
determine is necessary or advisable to give effect to the terms of
this Trust Agreement for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholder).
(ii) As among the Trustees, the Property Trustee shall
have the power, duty and authority to act on behalf of the Trust
with respect to the following matters:
(A) the establishment of the Payment Account;
(B) the receipt of the Debentures;
(C) the collection of interest, principal and
any other payments made in respect of the Debentures in the Payment
Account;
(D) the distribution of amounts owed to the
Securityholders in respect of the Trust Securities in accordance
with the terms of this Trust Agreement;
(E) the exercise of all of the rights, powers
and privileges of a holder of the Debentures;
(F) the sending of notices of default and
other information regarding the Trust Securities and the Debentures
to the Securityholders in accordance with this Trust Agreement;
(G) the distribution of the Trust Property in
accordance with the terms of this Trust Agreement;
(H) to the extent provided in this Trust
Agreement, the winding up of the affairs of and liquidation of the
Trust;
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(I) after an Event of Default, the taking of
any action incidental to the foregoing as the Property Trustee may
from time to time determine is necessary or advisable to give
effect to the terms of this Trust Agreement and protect and
conserve the Trust Property for the benefit of the Securityholders
(without consideration of the effect of any such action on any
particular Securityholder);
(J) registering transfers of the Trust
Securities in accordance with this Trust Agreement; and
(K) except as otherwise provided in this
Section 207(a)(ii), the Property Trustee shall have none of the
duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 207(a)(i).
(b) So long as this Trust Agreement remains in effect, the
Trust (or the Trustees acting on behalf of the Trust) shall not
undertake any business, activities or transaction except as
expressly provided herein or contemplated hereby. In particular,
the Trustees shall not (i) acquire any investments or engage in any
activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise
dispose of any of the Trust Property or interests therein,
including to Securityholders, except as expressly provided herein;
(iii) take any action that would cause the Trust to fail or cease
to qualify as a "grantor trust" for United States federal income
tax purposes; (iv) incur any indebtedness for borrowed money or
issue any other debt; or (v) take or consent to any action that
would result in the placement of a Lien on any of the Trust
Property. The Administrative Trustees shall defend all claims and
demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the
Securityholders in their capacity as Securityholders.
(c) In connection with the issue and sale of the Preferred
Securities, the Depositor shall have the right and responsibility
to assist the Trust with respect to, or effect on behalf of the
Trust, the following (and any actions taken by the Depositor in
furtherance of the following prior to the date of this Trust
Agreement are hereby ratified and confirmed in all respects):
(i) the preparation and filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on the appropriate form in relation to the
Preferred Securities and the Debentures, including any amendments
thereto;
(ii) the determination of the states in which to take
appropriate action to qualify or, register for sale all or part of
the Preferred Securities and to do any and all such acts, other
than actions which must be taken by or on behalf of the Trust, and
advise the Trustees of actions they must take on behalf of the
Trust, and prepare for execution and filing any documents to be
executed and filed by the Trust or on behalf of the Trust, as the
Depositor deems necessary or advisable in order to comply with the
applicable laws of any such States;
(iii) the preparation for filing by the Trust and
execution on behalf of the Trust of an application to The Nasdaq
Stock Market's National Market or a national stock exchange or
other organizations for listing upon notice of issuance of any
Preferred Securities and to file or cause an Administrative Trustee
to file thereafter with such exchange or organization such
notifications and documents as may be necessary from time to time;
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(iv) the preparation for filing by the Trust with the
Commission and the execution on behalf of the Trust of a
registration statement on Form 8-A relating to the registration of
the Preferred Securities under Section 12(b) or 12(g) of the
Exchange Act, including any amendments thereto;
(v) the negotiation of the terms of, and the execution
and delivery of, the Underwriting Agreement providing for the sale
of the Preferred Securities; and
(vi) the taking of any other actions necessary or
desirable to carry out any of the foregoing activities.
(d) Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the
affairs of the Trust and to operate the Trust so that the Trust
shall not be deemed to be an "investment company" required to be
registered under the Investment Company Act, shall be classified as
a "grantor trust" and not as an association taxable as a
corporation for United States federal income tax purposes and so
that the Debentures shall be treated as indebtedness of the
Depositor for United States federal income tax purposes. In this
connection, subject to Section 1002, the Depositor and the
Administrative Trustees are authorized to take any action, not
inconsistent with applicable law or this Trust Agreement, that each
of the Depositor and the Administrative Trustees determines in
their discretion to be necessary or desirable for such purposes.
SECTION 208. ASSETS OF TRUST.
The assets of the Trust shall consist of the Trust Property.
SECTION 209. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times
in the Property Trustee (in its capacity as such) and shall be held
and administered by the Property Trustee for the benefit of the
Securityholders in accordance with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 301. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee
shall establish the Payment Account. The Property Trustee and any
agent of the Property Trustee shall have exclusive control and sole
right of withdrawal with respect to the Payment Account for the
purpose of making deposits and withdrawals from the Payment Account
in accordance with this Trust Agreement. All monies and other
property deposited or held from time to time in the Payment Account
shall be held by the Property Trustee in the Payment Account for
the exclusive benefit of the Securityholders and for distribution
as herein provided, including (and subject to) any priority of
payments provided for herein.
(b) The Property Trustee shall deposit in the Payment
Account, promptly upon receipt, all payments of principal of or
interest on, and any other payments or proceeds with respect to,
the Debentures. Amounts held in the Payment Account shall not be
invested by the Property Trustee pending distribution thereof.
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ARTICLE IV
DISTRIBUTIONS; REDEMPTION
SECTION 401. DISTRIBUTIONS.
(a) Distributions on the Trust Securities shall be
cumulative, and shall accumulate whether or not there are funds of
the Trust available for the payment of Distributions.
Distributions shall accumulate from ----------, 1997, and, except
during any Extended Interest Payment Period with respect to the
Debentures, shall be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing on
March 31, 1997. If any date on which a Distribution is otherwise
payable on the Trust Securities is not a Business Day, then the
payment of such Distribution shall be made on the next succeeding
day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business
Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
date (each date on which distributions are payable in accordance
with this Section 401(a), a "Distribution Date").
(b) The Trust Securities represent undivided beneficial
interests in the Trust Property, and, as a practical matter, the
Distributions on the Trust Securities shall be payable at a rate of
- ----% per annum of the Liquidation Amount of the Trust Securities.
The amount of Distributions payable for any full period shall be
computed on the basis of a 360-day year of twelve 30-day months.
The amount of Distributions for any partial period shall be
computed on the basis of the number of days elapsed in a 360-day
year of twelve 30 day months. During any Extended Interest Payment
Period with respect to the Debentures, Distributions on the
Preferred Securities shall be deferred for a period equal to the
Extended Interest Payment Period. The amount of Distributions
payable for any period shall include the Additional Amounts, if
any.
(c) Distributions on the Trust Securities shall be made by
the Property Trustee solely from the Payment Account and shall be
payable on each Distribution Date only to the extent that the Trust
has funds then on hand and immediately available in the Payment
Account for the payment of such Distributions.
(d) Distributions on the Trust Securities with respect to a
Distribution Date shall be payable to the Holders thereof as they
appear on the Securities Register for the Trust Securities on the
relevant record date, which shall be 15th day of the month in which
the Distribution is payable.
SECTION 402. REDEMPTION.
(a) On each Debenture Redemption Date and on the stated
maturity of the Debentures, the Trust shall be required to redeem
a Like Amount of Trust Securities at the Redemption Price.
(b) Notice of redemption shall be given by the Property
Trustee by first-class mail, postage prepaid, mailed not less than
30 nor more than 60 days prior to the Redemption Date to each
Holder of Trust Securities to be redeemed, at such Holder's address
appearing in the Securities Register. The
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Property Trustee shall have no responsibility for the accuracy of any CUSIP
number contained in such notice. All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities
are to be redeemed, the identification and the aggregate
Liquidation Amount of the particular Trust Securities to be
redeemed; and
(v) that, on the Redemption Date, the Redemption Price
shall become due and payable upon each such Trust Security to be
redeemed and that Distributions thereon shall cease to accumulate
on and after said date.
(c) The Trust Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the proceeds from
the contemporaneous redemption of Debentures. Redemptions of the
Trust Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that the Trust
has immediately available funds then on hand and available in the
Payment Account for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in
respect of any Preferred Securities, then, by 12:00 noon, New York
City time, on the Redemption Date, subject to Section 402(c), the
Property Trustee shall deposit with the Paying Agent funds
sufficient to pay the applicable Redemption Price and shall give
the Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof upon surrender of their
Preferred Securities Certificates. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any
Trust Securities called for redemption shall be payable to the
Holders of such Trust Securities as they appear on the Register for
the Trust Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such
deposit, all rights of Securityholders holding Trust Securities so
called for redemption shall cease, except the right of such
Securityholders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but
without interest, and such Securities shall cease to be
Outstanding. In the event that any date on which any Redemption
Price is payable is not a Business Day, then payment of the
Redemption Price payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment shall be
made on the immediately preceding Business Day, in each case, with
the same force and effect as if made on such date. In the event
that payment of the Redemption Price in respect of any Trust
Securities called for redemption is improperly withheld or refused
and not paid either by the Trust or by the Depositor pursuant to
the Guarantee, Distributions on such Trust Securities shall
continue to accumulate, at the then applicable rate, from the
Redemption Date originally established by the Trust for such Trust
Securities to the date such Redemption
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Price is actually paid, in which case the actual payment date shall be the
date fixed for redemption for purposes of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities
shall be made to the record holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record
date, which shall be the date 15 days prior to the relevant Redemption
Date.
(f) Subject to Section 403(a), if less than all the
Outstanding Trust Securities are to be redeemed on a Redemption
Date, then the aggregate Liquidation Amount of Trust Securities to
be redeemed shall be allocated on a pro rata basis (based on
Liquidation Amounts) among the Common Securities and the Preferred
Securities. The particular Preferred Securities to be redeemed
shall be selected not more than 60 days prior to the Redemption
Date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method
(including, without limitation, by lot) as the Property Trustee
shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to $25 or an integral
multiple of $25 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $25. The
Property Trustee shall promptly notify the Securities Registrar in
writing of the Preferred Securities selected for redemption and, in
the case of any Preferred Securities selected for partial
redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of this Trust Agreement, unless the context otherwise
requires, all provisions relating to the redemption of Preferred
Securities shall relate, in the case of any Preferred Securities
redeemed or to be redeemed only in part, to the portion of the
Liquidation Amount of Preferred Securities which has been or is to
be redeemed.
SECTION 403. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts,
if applicable) on, and the Redemption Price of, the Trust
Securities, as applicable, shall be made, subject to
Section 402(f), pro rata among the Common Securities and the
Preferred Securities based on the Liquidation Amount of the Trust
Securities; provided, however, that if on any Distribution Date or
Redemption Date any Event of Default resulting from a Debenture
Event of Default shall have occurred and be continuing, no payment
of any Distribution (including Additional Amounts, if applicable)
on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other
acquisition of Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid Distributions (including
Additional Amounts, if applicable) on all Outstanding Preferred
Securities for all Distribution periods terminating on or prior
thereto, or in the case of payment of the Redemption Price the full
amount of such Redemption Price on all Outstanding Preferred
Securities then called for redemption, shall have been made or
provided for, and all funds immediately available to the Property
Trustee shall first be applied to the payment in full in cash of
all Distributions (including Additional Amounts, if applicable) on,
or the Redemption Price of, Preferred Securities then due and
payable.
(b) In the case of the occurrence of any Event of Default
resulting from a Debenture Event of Default, the Holder of Common
Securities shall be deemed to have waived any right to act with
respect to any such Event of Default under this Trust Agreement
until the effect of all such Events of Default with respect to the
Preferred Securities shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust
Agreement with respect to the Preferred Securities shall have been
so cured, waived or otherwise eliminated, the Property Trustee
shall act solely on behalf of
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the Holders of the Preferred Securities and not the Holder of the Common
Securities, and only the Holders of the Preferred Securities shall have the
right to direct the Property Trustee to act on their behalf.
SECTION 404. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if
applicable) in respect of the Preferred Securities shall be made by
check mailed to the address of the Person entitled thereto as such
address shall appear on the Securities Register. Payments in respect
of the Common Securities shall be made in such manner as shall be
mutually agreed between the Property Trustee and the Common Securityholder.
SECTION 405. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be
prepared), at the Depositor's expense, and file all United States
federal, state and local tax and information returns and reports
required to be filed by or in respect of the Trust. In this
regard, the Administrative Trustees shall (a) prepare and file (or
cause to be prepared and filed) the appropriate Internal Revenue
Service Form required to be filed in respect of the Trust in each
taxable year of the Trust; and (b) prepare and furnish (or cause to
be prepared and furnished) to each Securityholder the appropriate
Internal Revenue Service form required to be furnished to such
Securityholder or the information required to be provided on such
form. The Administrative Trustees shall provide the Depositor with
a copy of all such returns and reports promptly after such filing
or furnishing. The Property Trustee shall comply with United
States federal withholding and backup withholding tax laws and
information reporting requirements with respect to any payments to
Securityholders under the Trust Securities.
SECTION 406. PAYMENT OF TAXES, DUTIES, ETC. OF THE TRUST.
Upon receipt under the Debentures of Additional Interest (as
defined in Section 1.1 of the Indenture), the Property Trustee, at
the direction of an Administrative Trustee or the Depositor, shall
promptly pay any taxes, duties or governmental charges of
whatsoever nature (other than withholding taxes) imposed on the
Trust by the United States or any other taxing authority.
SECTION 407. PAYMENTS UNDER INDENTURE.
Any amount payable hereunder to any Holder of Preferred
Securities shall be reduced by the amount of any corresponding
payment such Holder has directly received under the Indenture
pursuant to Section 514(b) or (c) hereof.
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ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 501. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the
Depositor pursuant to Section 203 and until the issuance of the
Trust Securities, and at any time during which no Trust Securities
are outstanding, the Depositor shall be the sole beneficial owner
of the Trust.
SECTION 502. THE TRUST SECURITIES CERTIFICATES.
The Preferred Securities Certificates shall be issued in
minimum denominations of $25 Liquidation Amount and integral
multiples of $25 in excess thereof, and the Common Securities
Certificates shall be issued in denominations of $25 Liquidation
Amount and integral multiples thereof. The Trust Securities
Certificates shall be executed on behalf of the Trust by manual
signature of at least one Administrative Trustee. Trust Securities
Certificates bearing the manual signatures of individuals who were,
at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the delivery of such Trust
Securities Certificates or did not hold such offices at the date of
delivery of such Trust Securities Certificates. A transferee of a
Trust Securities Certificate shall become a Securityholder, and
shall be entitled to the rights and subject to the obligations of
a Securityholder hereunder, upon due registration of such Trust
Securities Certificate in such transferee's name pursuant to
Sections 504, 511 and 513.
SECTION 503. EXECUTION AND DELIVERY OF TRUST SECURITIES
CERTIFICATES.
On the Closing Date and on the date on which the Underwriter
exercises the option, as applicable (the "Option Closing Date"),
the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in
Sections 204 and 205, to be executed on behalf of the Trust by at
least one of the Administrative Trustees and delivered to or upon
the written order of the Depositor, signed by its Chief Executive
Officer, President, any Vice President, the Treasurer or any
Assistant Treasurer without further corporate action by the
Depositor, in authorized denominations.
SECTION 504. REGISTRATION OF TRANSFER AND EXCHANGE OF
PREFERRED SECURITIES CERTIFICATES.
(a) The Depositor shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 508, a register or
registers for the purpose of registering Trust Securities
Certificates and transfers and exchanges of Preferred Securities
Certificates (herein referred to as the "Securities Register") in
which the registrar designated by the Depositor (the "Securities
Registrar"), subject to such reasonable regulations as it may
prescribe, shall provide for the registration of Preferred
Securities Certificates and Common Securities Certificates (subject
to Section 510 in the case of the Common Securities Certificates)
and registration of transfers and exchanges of Preferred Securities
Certificates as herein provided. The Property Trustee shall be the
initial Securities Registrar.
(b) Upon surrender for registration of transfer of any
Preferred Securities Certificate at the office or agency maintained
pursuant to Section 508, the Administrative Trustees or any one of
them shall execute and deliver, in the name of the designated
transferee or transferees, one or more new Preferred Securities
Certificates in authorized denominations of a like aggregate
Liquidation Amount dated the date
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of execution by such Administrative Trustee or Trustees. The Securities
Registrar shall not be required to register the transfer of any Preferred
Securities that have been called for redemption. At the option of
a Holder, Preferred Securities Certificates may be exchanged for
other Preferred Securities Certificates in authorized denominations
of the same class and of a like aggregate Liquidation Amount upon
surrender of the Preferred Securities Certificates to be exchanged
at the office or agency maintained pursuant to Section 508.
(c) Every Preferred Securities Certificate presented or
surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in form
satisfactory to the Property Trustee and the Securities Registrar
duly executed by the Holder or his attorney duly authorized in
writing. Each Preferred Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and
subsequently disposed of by the Property Trustee in accordance with
its customary practice. The Trust shall not be required to
(i) issue, register the transfer of, or exchange any Preferred
Securities during a period beginning at the opening of business
15 calendar days before the date of mailing of a notice of
redemption of any Preferred Securities called for redemption and
ending at the close of business on the day of such mailing; or
(ii) register the transfer of or exchange any Preferred Securities
so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed
in part.
(d) No service charge shall be made for any registration of
transfer or exchange of Preferred Securities Certificates, but the
Securities Registrar may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Preferred Securities
Certificates.
SECTION 505. MUTILATED, DESTROYED, LOST OR STOLEN TRUST
SECURITIES CERTIFICATES.
If (a) any mutilated Trust Securities certificate shall be
surrendered to the Securities Registrar, or if the Securities
Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Trust Securities Certificate; and
(b) there shall be delivered to the Securities Registrar and the
Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence
of notice that such Trust Securities Certificate shall have been
acquired by a bona fide purchaser, the Administrative Trustees, or
any one of them, on behalf of the Trust shall execute and make
available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities Certificate,
a new Trust Securities Certificate of like class, tenor and
denomination. In connection with the issuance of any new Trust
Securities Certificate under this Section 505, the Administrative
Trustees or the Securities Registrar may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Trust
Securities Certificate issued pursuant to this Section 505 shall
constitute conclusive evidence of an undivided beneficial interest
in the assets of the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Trust Securities Certificate shall be
found at any time.
SECTION 506. PERSONS DEEMED SECURITYHOLDERS.
The Trustees, the Paying Agent and the Securities Registrar
shall treat the Person in whose name any Trust Securities
Certificate shall be registered in the Securities Register as the
owner of such Trust Securities Certificate for the purpose of
receiving Distributions and for all other purposes whatsoever, and
neither the Trustees nor the Securities Registrar shall be bound by
any notice to the contrary.
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SECTION 507. ACCESS TO LIST OF SECURITYHOLDERS' NAMES AND
ADDRESSES.
At any time when the Property Trustee is not also acting as
the Securities Registrar, the Administrative Trustees or the
Depositor shall furnish or cause to be furnished to the Property
Trustee (a) semi-annually on or before January 15 and July 15 in
each year, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the
Securityholders as of the most recent record date; and (b) promptly
after receipt by any Administrative Trustee or the Depositor of a
request therefor from the Property Trustee in order to enable the
Property Trustee to discharge its obligations under this Trust
Agreement, in each case to the extent such information is in the
possession or control of the Administrative Trustees or the
Depositor and is not identical to a previously supplied list or has
not otherwise been received by the Property Trustee in its capacity
as Securities Registrar. The rights of Securityholders to
communicate with other Securityholders with respect to their rights
under this Trust Agreement or under the Trust Securities, and the
corresponding rights of the Trustee shall be as provided in the
Trust Indenture Act. Each Holder, by receiving and holding a Trust
Securities Certificate, and each owner shall be deemed to have
agreed not to hold the Depositor, the Property Trustee or the
Administrative Trustees accountable by reason of the disclosure of
its name and address, regardless of the source from which such
information was derived.
SECTION 508. MAINTENANCE OF OFFICE OR AGENCY.
The Administrative Trustees shall maintain in The City of New
York, an office or offices or agency or agencies where Preferred
Securities Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the
Trustees in respect of the Trust Securities Certificates may be
served. The Administrative Trustees initially designate the
principal corporate trust office of the Property Trustee,
2 International Place, 5th Floor, Boston, Massachusetts 02110,
as the principal corporate trust office for such purposes. The
Administrative Trustees shall give prompt written notice to the
Depositor and to the Securityholders of any change in the location of
the Securities Register or any such office or agency.
SECTION 509. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall make Distributions to Securityholders
from the Payment Account and shall report the amounts of such
Distributions to the Property Trustee and the Administrative
Trustees. Any Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making
the Distributions referred to above. The Administrative Trustees
may revoke such power and remove the Paying Agent if such Trustees
determine in their sole discretion that the Paying Agent shall have
failed to perform its obligations under this Trust Agreement in any
material respect. The Paying Agent shall initially be the Property
Trustee, and any co-paying agent chosen by the Property Trustee,
and acceptable to the Administrative Trustees and the Depositor.
Any Person acting as Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Administrative
Trustees, the Property Trustee and the Depositor. In the event
that the Property Trustee shall no longer be the Paying Agent or a
successor Paying Agent shall resign or its authority to act be
revoked, the Administrative Trustees shall appoint a successor that
is acceptable to the Property Trustee and the Depositor to act as
Paying Agent (which shall be a bank or trust company). The
Administrative Trustees shall cause such successor Paying Agent or
any additional Paying Agent appointed by the Administrative
Trustees to execute and deliver to the Trustees an instrument in
which such successor Paying Agent or additional Paying Agent shall
agree with the Trustees that as Paying Agent, such successor Paying
Agent or additional Paying Agent shall hold all sums, if any, held
by it for payment to the Securityholders in
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trust for the benefit of the Securityholders entitled thereto until such sums
shall be paid to such Securityholders. The Paying Agent shall return all
unclaimed funds to the Property Trustee and, upon removal of a
Paying Agent, such Paying Agent shall also return all funds in its
possession to the Property Trustee. The provisions of
Sections 801, 803 and 806 shall apply to the Property Trustee also
in its role as Paying Agent, for so long as the Property Trustee
shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent
unless the context requires otherwise.
SECTION 510. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain
beneficial and record ownership of the Common Securities. To the
fullest extent permitted by law, any attempted transfer of the
Common Securities (other than a transfer in connection with a
merger or consolidation of the Depositor into another corporation
pursuant to Section 12.1 of the Indenture) shall be void. The
Administrative Trustees shall cause each Common Securities
Certificate issued to the Depositor to contain a legend stating
"THIS CERTIFICATE IS NOT TRANSFERABLE".
SECTION 511. PREFERRED SECURITIES CERTIFICATES
(a) Each owner shall receive a Preferred Securities Certificate
representing such owner's interest in such Preferred Securities. Upon
the issuance of Definitive Preferred Securities Certificates, the
Trustees shall recognize the record holders of the Definitive Preferred
Securities Certificates as Securityholders. The Definitive Preferred
Securities Certificates shall be printed, lithographed or engraved or
may be produced in any other manner as is reasonably acceptable to the
Administrative Trustees, as evidenced by the execution thereof by the
Administrative Trustees or any one of them.
(b) A Single Common Securities Certificate representing the
Common Securities shall be issued to the Depositor in the form of a
definitive Common Securities Certificate.
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SECTION 512. [Intentionally Omitted]
SECTION 513. [Intentionally Omitted]
SECTION 514. RIGHTS OF SECURITYHOLDERS.
(a) The legal title to the Trust Property is vested
exclusively in the Property Trustee (in its capacity as such) in
accordance with Section 209, and the Securityholders shall not have
any right or title therein other than the undivided beneficial
interest in the assets of the Trust conferred by their Trust
Securities and they shall have no right to call for any partition
or division of property, profits or rights of the Trust except as
described below. The Trust Securities shall be personal property
giving only the rights specifically set forth therein and in this
Trust Agreement. The Trust Securities shall have no preemptive or
similar rights. When issued and delivered to Holders of the
Preferred Securities against payment of the purchase price
therefor, the Preferred Securities shall be fully paid and
nonassessable interests in the Trust. The Holders of the Preferred
Securities, in their capacities as such, shall be entitled to the
same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General
Corporation Law of the State of Delaware.
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(b) For so long as any Preferred Securities remain
Outstanding, if, upon a Debenture Event of Default, the Debenture
Trustee fails or the holders of not less than 25% in principal
amount of the outstanding Debentures fail to declare the principal
of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred
Securities then Outstanding shall have such right by a notice in
writing to the Depositor and the Debenture Trustee; and upon any
such declaration such principal amount of and the accrued interest
on all of the Debentures shall become immediately due and payable,
provided that the payment of principal and interest on such
Debentures shall remain subordinated to the extent provided in the
Indenture.
(c) For so long as any Preferred Securities remain
outstanding, if, upon a Debenture Event of Default arising from the
failure to pay interest or principal on the Debentures, the Holders
of any Preferred Securities then Outstanding shall, to the fullest
extent permitted by law, have the right to directly institute
proceedings for enforcement of payment to such Holders of principal
of or interest on the Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such Holders.
ARTICLE VI
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
SECTION 601. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 601, in Sections 514,
810 and 1002 and in the Indenture and as otherwise required by law,
no Holder of Preferred Securities shall have any right to vote or
in any manner otherwise control the administration, operation and
management of the Trust or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of
the Trust Securities Certificates, be construed so as to constitute
the Securityholders from time to time as partners or members of an
association.
(b) So long as any Debentures are held by the Property
Trustee, the Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the
Debenture Trustee, or executing any trust or power conferred on the
Debenture Trustee with respect to such Debentures; (ii) waive any
past default which is waivable under Article VII of the Indenture;
(iii) exercise any right to rescind or annul a declaration that the
principal of all the Debentures shall be due and payable; or
(iv) consent to any amendment, modification or termination of the
Indenture or the Debentures, where such consent shall be required,
without, in each case, obtaining the prior approval of the Holders
of at least a majority in Liquidation Amount of all Outstanding
Preferred Securities; provided, however, that where a consent under
the Indenture would require the consent of each Holder of
Outstanding Debentures affected thereby, no such consent shall be
given by the Property Trustee without the prior written consent of
each holder of Preferred Securities. The Trustees shall not revoke
any action previously authorized or approved by a vote of the
Holders of the Outstanding Preferred Securities, except by a
subsequent vote of the Holders of the Outstanding Preferred
Securities. The Property Trustee shall notify each Holder of the
Outstanding Preferred Securities of any notice of default received
from the Debenture Trustee with respect to the Debentures. In
addition to obtaining the foregoing approvals of the Holders of the
Preferred Securities, prior to taking any of the foregoing actions,
the Trustees shall, at the expense of the Depositor, obtain an
Opinion of Counsel experienced in such matters to the effect that
the Trust shall continue to be classified as a grantor trust and
not as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
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(c) If any proposed amendment to the Trust Agreement provides
for, or the Trustees otherwise propose to effect, (i) any action
that would adversely affect in any material respect the powers,
preferences or special rights of the Preferred Securities, whether
by way of amendment to the Trust Agreement or otherwise; or
(ii) the dissolution, winding-up or termination of the Trust, other
than pursuant to the terms of this Trust Agreement, then the
Holders of Outstanding Preferred Securities as a class shall be
entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of the
Holders of at least a majority in Liquidation Amount of the
Outstanding Preferred Securities. No amendment to this Trust
Agreement may be made if, as a result of such amendment, the Trust
would cease to be classified as a grantor trust or would be
classified as an association taxable as a corporation for United
States federal income tax purposes.
SECTION 602. NOTICE OF MEETINGS.
Notice of all meetings of the Preferred Securityholders,
stating the time, place and purpose of the meeting, shall be given
by the Property Trustee pursuant to Section 1008 to each Preferred
Securityholder of record, at his registered address, at least
15 days and not more than 90 days before the meeting. At any such
meeting, any business properly before the meeting may be so
considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
SECTION 603. MEETINGS OF PREFERRED SECURITYHOLDERS.
(a) No annual meeting of Securityholders is required to be
held. The Administrative Trustees, however, shall call a meeting
of Securityholders to vote on any matter in respect of which
Preferred Securityholders are entitled to vote upon the written
request of the Preferred Securityholders of 25% of the Outstanding
Preferred Securities (based upon their aggregate Liquidation
Amount) and the Administrative Trustees or the Property Trustee
may, at any time in their discretion, call a meeting of Preferred
Securityholders to vote on any matters as to which the Preferred
Securityholders are entitled to vote.
(b) Preferred Securityholders of record of 50% of the
Outstanding Preferred Securities (based upon their aggregate
Liquidation Amount), present in person or by proxy, shall
constitute a quorum at any meeting of Securityholders.
(c) If a quorum is present at a meeting, an affirmative vote
by the Preferred Securityholders of record present, in person or by
proxy, holding more than a majority of the Preferred Securities
(based upon their aggregate Liquidation Amount) held by the
Preferred Securityholders of record present, either in person or by
proxy, at such meeting shall constitute the action of the
Securityholders, unless this Trust Agreement requires a greater
number of affirmative votes.
SECTION 604. VOTING RIGHTS.
Securityholders shall be entitled to one vote for each $25 of
Liquidation Amount represented by their Trust Securities in respect
of any matter as to which such Securityholders are entitled to
vote.
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SECTION 605. PROXIES, ETC.
At any meeting of Securityholders, any Securityholder entitled
to vote thereat may vote by proxy, provided that no proxy, shall be
voted at any meeting unless it shall have been placed on file with
the Administrative Trustees, or with such other officer or agent of
the Trust as the Administrative Trustees may direct, for
verification prior to the time at which such vote shall be taken.
When Trust Securities are held jointly by several persons, any one
of them may vote at any meeting in person or by proxy in respect of
such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Trust
Securities. A proxy purporting to be executed by or on behalf of
a Securityholder shall be deemed valid unless challenged at or
prior to its exercise, and, the burden of proving invalidity shall
rest on the challenger. No proxy shall be valid more than three
years after its date of execution.
SECTION 606. SECURITYHOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Securityholders at a meeting
may be taken without a meeting if Securityholders holding more than
a majority of all Outstanding Trust Securities (based upon their
aggregate Liquidation Amount) entitled to vote in respect of such
action (or such larger proportion thereof as shall be required by
any express provision of this Trust Agreement) shall consent to the
action in writing (based upon their aggregate Liquidation Amount).
SECTION 607. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Securityholders who are
entitled to notice of and to vote at any meeting or by written
consent, or to participate in any Distribution on the Trust
Securities in respect of which a record date is not otherwise
provided for in this Trust Agreement, or for the purpose of any
other action, the Administrative Trustees may from time to time fix
a date, not more than 90 days prior to the date of any meeting of
Securityholders or the payment of Distribution or other action, as
the case may be, as a record date for the determination of the
identity of the Securityholders of record for such purposes.
SECTION 608. ACTS OF SECURITYHOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Trust
Agreement to be given, made or taken by Securityholders may be embodied
in and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by an agent duly
appointed in writing; and, except as otherwise expressly provided
herein, such action shall become effective when such instrument or
instruments are delivered to an Administrative Trustee. Such instrument
or instruments (and the action embodied therein and evidenced thereby)
are herein sometimes referred to as the "Act" of the Securityholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Trust Agreement and (subject to Section 801)
conclusive in favor of the Trustees, if made in the manner provided in
this Section 608.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a
witness of such execution or by a certificate of a notary public or
other
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officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is
by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other
manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by
the Securities Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Securityholder of any Trust
Security shall bind every future Securityholder of the same Trust
Security and the Securityholder of every Trust Security issued upon
the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be
done by the Trustees or the Trust in reliance thereon, whether or
not notation of such action is made upon such Trust Security.
(e) Without limiting the foregoing, a Securityholder entitled
hereunder to take any action hereunder with regard to any
particular Trust Security may do so with regard to all or any part
of the Liquidation Amount of such Trust Security or by one or more
duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such liquidation
amount.
(f) A Securityholder may institute a legal proceeding
directly against the Depositor under the Guarantee to enforce its
rights under the Guarantee without first instituting a legal
proceeding against the Guarantee Trustee (as defined in the
Guarantee), the Trust or any Person.
SECTION 609. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the
Property Trustee, the records of the Trust shall be open to
inspection and copying by Securityholders and their authorized
representatives during normal business hours for any purpose
reasonably related to such Securityholder's interest as a
Securityholder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 701. REPRESENTATIONS AND WARRANTIES OF THE BANK AND
THE PROPERTY TRUSTEE.
The Bank and the Property Trustee, each severally on behalf of
and as to itself, as of the date hereof, and each Successor
Property Trustee at the time of the Successor Property Trustee's
acceptance of its appointment as Property Trustee hereunder (the
term "Bank" being used to refer to such Successor Property Trustee
in its separate corporate capacity) hereby represents and warrants
(as applicable) for the benefit of the Depositor and the
Securityholders that:
(a) the Bank is a banking corporation duly organized, validly
existing and in good standing under the laws of the State of
Massachusetts;
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(b) the Bank has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this
Trust Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed
and delivered by the Property Trustee and constitutes the valid and
legally binding agreement of the Property Trustee enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Property
Trustee of this Trust Agreement has been duly authorized by all
necessary corporate or other action on the part of the Property
Trustee and does not require any approval of stockholders of the
Bank and such execution, delivery and performance shall not
(i) violate the Bank's charter or by-laws; (ii) violate any
provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of,
any Lien on any properties included in the Trust Property pursuant
to the provisions of, any indenture, mortgage, credit agreement,
license or other agreement or instrument to which the Property
Trustee or the Bank is a party or by which it is bound; or
(iii) violate any law, governmental rule or regulation of the
United States or the State of Massachusetts, as the case may be,
governing the banking or trust powers of the Bank or the Property
Trustee (as appropriate in context) or any order, judgment or
decree applicable to the Property Trustee or the Bank;
(e) neither the authorization, execution or delivery by the
Property Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Property Trustee contemplated herein
or therein requires the consent or approval of, the giving of
notice to, the registration with or the taking of any other action
with respect to any governmental authority or agency under any
existing federal law governing the banking or trust powers of the
Bank or the Property Trustee, as the case may be, under the laws of
the United States or the State of Massachusetts; and
(f) there are no proceedings pending or, to the best of the
Property Trustee's knowledge, threatened against or affecting the
Bank or the Property Trustee in any court or before any
governmental authority, agency or arbitration board or tribunal
which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and
authority of the Property Trustee to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
SECTION 702. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE
BANK AND THE DELAWARE TRUSTEE.
The Delaware Bank and the Delaware Trustee, each severally on
behalf of and as to itself, as of the date hereof, and each
Successor Delaware Trustee at the time of the Successor Delaware
Trustee's acceptance of appointment as Delaware Trustee hereunder
(the term "Delaware Bank" being used to refer to such Successor
Delaware Trustee in its separate corporate capacity), hereby
represents and warrants (as applicable) for the benefit of the
Depositor and the Securityholders that:
(a) the Delaware Bank is a Delaware banking corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware;
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(b) the Delaware Bank has full corporate power, authority and
legal right to execute, deliver and perform its obligations under
this Trust Agreement and has taken all necessary action to
authorize the execution, delivery and performance by it of this
Trust Agreement;
(c) this Trust Agreement has been duly authorized, executed
and delivered by the Delaware Trustee and constitutes the valid and
legally binding agreement of the Delaware Trustee enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles;
(d) the execution, delivery and performance by the Delaware
Trustee of this Trust Agreement has been duly authorized by all
necessary corporate or other action on the part of the Delaware
Trustee and does not require any approval of stockholders of the
Delaware Bank and such execution, delivery and performance shall
not (i) violate the Delaware Bank's charter or by-laws;
(ii) violate any provision of, or constitute, with or without
notice or lapse of time, a default under, or result in the creation
or imposition of, any Lien on any properties included in the Trust
Property pursuant to the provisions of, any indenture, mortgage,
credit agreement, license or other agreement or instrument to which
the Delaware Bank or the Delaware Trustee is a party or by which it
is bound; or (iii) violate any law, governmental rule or regulation
of the United States or the State of Delaware, as the case may be,
governing the banking or trust powers of the Delaware Bank or the
Delaware Trustee (as appropriate in context) or any order, judgment
or decree applicable to the Delaware Bank or the Delaware Trustee;
(e) neither the authorization, execution or delivery by the
Delaware Trustee of this Trust Agreement nor the consummation of
any of the transactions by the Delaware Trustee contemplated herein
or therein requires the consent or approval of, the giving of
notice to, the registration with or the taking of any other action
with respect to any governmental authority or agency under any
existing federal law governing the banking or trust powers of the
Delaware Bank or the Delaware Trustee, as the case may be, under
the laws of the United States or the State of Delaware; and
(f) there are no proceedings pending or, to the best of the
Delaware Trustee's knowledge, threatened against or affecting the
Delaware Bank or the Delaware Trustee in any court or before any
governmental authority, agency or arbitration board or tribunal
which, individually or in the aggregate, would materially and
adversely affect the Trust or would question the right, power and
authority of the Delaware Trustee to enter into or perform its
obligations as one of the Trustees under this Trust Agreement.
SECTION 703. REPRESENTATIONS AND WARRANTIES OF DEPOSITOR.
The Depositor hereby represents and warrants for the benefit
of the Securityholders that:
(a) the Trust Securities Certificates issued on the Closing
Date or the Option Closing Date, if applicable, on behalf of the
Trust have been duly authorized and, shall have been, duly and
validly executed, issued and delivered by the Administrative
Trustees pursuant to the terms and provisions of, and in accordance
with the requirements of, this Trust Agreement and the
Securityholders shall be, as of such date, entitled to the benefits
of this Trust Agreement; and
(b) there are no taxes, fees or other governmental charges
payable by the Trust (or the Trustees on behalf of the Trust) under
the laws of the State of Delaware or any political subdivision
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thereof in connection with the execution, delivery and performance
by the Bank, the Property Trustee or the Delaware Trustee, as the
case may be, of this Trust Agreement.
ARTICLE VIII
TRUSTEES
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be
as provided by this Trust Agreement and, in the case of the
Property Trustee, by the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Trust Agreement shall require the
Trustees to expend or risk their own funds or otherwise incur any
financial liability in the performance of any of their duties
hereunder, or in the exercise of any of their rights or powers, if
they shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. No Administrative Trustee nor the
Delaware Trustee shall be liable for its act or omissions hereunder
except as a result of its own gross negligence or willful
misconduct. The Property Trustee's liability shall be determined
under the Trust Indenture Act. Whether or not therein expressly so
provided, every provision of this Trust Agreement relating to the
conduct or affecting the liability of or affording protection to
the Trustees shall be subject to the provisions of this Section
801. To the extent that, at law or in equity, the Delaware Trustee
or an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the
Securityholders, the Delaware Trustee or such Administrative
Trustee shall not be liable to the Trust or to any Securityholder
for such Trustee's good faith reliance on the provisions of this
Trust Agreement. The provisions of this Trust Agreement, to the
extent that they restrict the duties and liabilities of the
Delaware Trustee or the Administrative Trustees otherwise existing
at law or in equity, are agreed by the Depositor and the
Securityholders to replace such other duties and liabilities of the
Delaware Trustee and the Administrative Trustees, as the case may
be.
(b) All payments made by the Property Trustee or a Paying
Agent in respect of the Trust Securities shall be made only from
the revenue and proceeds from the Trust Property and only to the
extent that there shall be sufficient revenue or proceeds from the
Trust Property to enable the Property Trustee or a Paying Agent to
make payments in accordance with the terms hereof. With respect to
the relationship of each Securityholder and the Trustee, each
Securityholder, by its acceptance of a Trust Security, agrees that
it shall look solely to the revenue and proceeds from the Trust
Property to the extent legally available for distribution to it as
herein provided and that the Trustees are not personally liable to
it for any amount distributable in respect of any Trust Security or
for any other liability in respect of any Trust Security. This
Section 801(b) does not limit the liability of the Trustees
expressly set forth elsewhere in this Trust Agreement or, in the
case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed
to relieve the Property Trustee from liability for its own
negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) the Property Trustee shall not be liable for any
error of judgment made in good faith by an authorized officer of
the Property Trustee, unless it shall be proved that the Property
Trustee was negligent in ascertaining the pertinent facts;
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(ii) the Property Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less
than a majority in Liquidation Amount of the Trust Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this Trust
Agreement;
(iii) the Property Trustee's sole duty with respect to
the custody, safe keeping and physical preservation of the
Debentures and the Payment Account shall be to deal with such
Property in a similar manner as the Property Trustee deals with
similar property for its own account, subject to the protections
and limitations on liability afforded to the Property Trustee under
this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise
agree with the Depositor and money held by the Property Trustee
need not be segregated from other funds held by it except in
relation to the Payment Account maintained by the Property Trustee
pursuant to Section 301 and except to the extent otherwise required
by law; and
(v) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the
Depositor with their respective duties under this Trust Agreement,
nor shall the Property Trustee be liable for the negligence,
default or misconduct of the Administrative Trustees or the
Depositor.
SECTION 802. CERTAIN NOTICES.
(a) Within 5 Business Days after the occurrence of any Event
of Default actually known to the Property Trustee, the Property
Trustee shall transmit, in the manner and to the extent provided in
Section 1008, notice of such Event of Default to the
Securityholders, the Administrative Trustees and the Depositor,
unless such Event of Default shall have been cured or waived. For
purposes of this Section 802 the term "Event of Default" means any
event that is, or after notice or lapse of time or both would
become, an Event of Default.
(b) The Administrative Trustees shall transmit, to the
Securityholders in the manner and to the extent provided in
Section 1008, notice of the Depositor's election to begin or
further extend an Extended Interest Payment Period on the
Debentures (unless such election shall have been revoked) within
the time specified for transmitting such notice to the holders of
the Debentures pursuant to the Indenture as originally executed.
SECTION 803. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 801:
(a) the Property Trustee may rely and shall be protected in
acting or refraining from acting in good faith upon any resolution,
Opinion of Counsel, certificate, written representation of a Holder
or transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
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(b) if (i) in performing its duties under this Trust
Agreement the Property Trustee is required to decide between
alternative courses of action; or (ii) in construing any of the
provisions of this Trust Agreement the Property Trustee finds the
same ambiguous or inconsistent with other provisions contained
herein; or (iii) the Property Trustee is unsure of the application
of any provision of this Trust Agreement, then, except as to any
matter as to which the Preferred Securityholders are entitled to
vote under the terms of this Trust Agreement, the Property Trustee
shall deliver a notice to the Depositor requesting written
instructions of the Depositor as to the course of action to be
taken and the Property Trustee shall take such action, or refrain
from taking such action, as the Property Trustee shall be
instructed in writing to take, or to refrain from taking, by the
Depositor; provided, however, that if the Property Trustee does not
receive such instructions of the Depositor within 10 Business Days
after it has delivered such notice, or such reasonably shorter
period of time set forth in such notice (which to the extent
practicable shall not be less than 2 Business Days), it may, but
shall be under no duty to, take or refrain from taking such action
not inconsistent with this Trust Agreement as it shall deem
advisable and in the best interests of the Securityholders, in
which event the Property Trustee shall have no liability except for
its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Depositor or the
Administrative Trustees contemplated by this Trust Agreement shall
be sufficiently evidenced by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement,
the Property Trustee shall deem it desirable that a matter be
established before undertaking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officer's Certificate
which, upon receipt of such request, shall be promptly delivered by
the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement, any filing under tax or
securities laws or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its
choice (which counsel may be counsel to the Depositor or any of its
Affiliates) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon and, in accordance with such advice, such counsel
may be counsel to the Depositor or any of its Affiliates, and may
include any of its employees; the Property Trustee shall have the
right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Trust
Agreement at the request or direction of any of the Securityholders
pursuant to this Trust Agreement, unless such Securityholders shall
have offered to the Property Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, debenture, note or other
evidence of indebtedness or other paper or document, unless
requested in writing to do so by one or more Securityholders, but
the Property Trustee may make such further inquiry or investigation
into such facts or matters as it may see fit;
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(i) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or
by or through its agents or attorneys, provided that the Property
Trustee shall be responsible for its own negligence or recklessness
with respect to selection of any agent or attorney appointed by it
hereunder;
(j) whenever in the administration of this Trust Agreement
the Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or
taking any other action hereunder the Property Trustee (i) may
request instructions from the Holders of the Trust Securities which
instructions may only be given by the Holders of the same
proportion in Liquidation Amount of the Trust Securities as would
be entitled to direct the Property Trustee under the terms of the
Trust Securities in respect of such remedy, right or action;
(ii) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received; and (iii) shall
be protected in acting in accordance with such instructions; and
(k) except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation
to take any action that is discretionary under the provisions of
this Trust Agreement. No provision of this Trust Agreement shall
be deemed to impose any duty or obligation on the Property Trustee
to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it, in any jurisdiction in which
it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power,
duty or obligation. No permissive power or authority available to
the Property Trustee shall be construed to be a duty.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.
The Recitals contained herein and in the Trust Securities
Certificates shall be taken as the statements of the Trust, and the
Trustees do not assume any responsibility for their correctness.
The Trustees shall not be accountable for the use or application by
the Depositor of the proceeds of the Debentures.
SECTION 805. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in
its individual or any other capacity, may become the owner or
pledgee of Trust Securities and, subject to Sections 808 and 813
and except as provided in the definition of the term "Outstanding"
in Article I, may otherwise deal with the Trust with the same
rights it would have if it were not a Trustee or such other agent.
SECTION 806. COMPENSATION; INDEMNITY; FEES.
The Depositor agrees:
(a) to pay to the Trustees from time to time reasonable
compensation for all services rendered by them hereunder (which
compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustees upon request for all reasonable expenses,
disbursements and advances incurred or made by the Trustees in
accordance with any provision of this Trust Agreement (including
the reasonable compensation and the expenses and
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disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to such Trustee's negligence,
bad faith or willful misconduct (or, in the case of the Administrative
Trustees or the Delaware Trustee, any such expense, disbursement or
advance as may be attributable to its, his or her gross negligence,
bad faith or willful misconduct); and
(c) to indemnify each of the Trustees or any predecessor
Trustee for, and to hold the Trustees harmless against, any loss,
damage, claims, liability, penalty or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this Trust
Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except any
such expense, disbursement or advance as may be attributable to
such Trustee's negligence, bad faith or willful misconduct (or,
in the case of the Administrative Trustees or the Delaware Trustee,
any such expense, disbursement or advance as may be attributable to
its, his or her gross negligence, bad faith or willful misconduct).
No Trustee may claim any Lien or charge on any Trust Property
as a result of any amount due pursuant to this Section 806.
SECTION 807. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY
OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder
with respect to the Trust Securities. The Property Trustee shall
be a Person that is eligible pursuant to the Trust Indenture Act to
act as such and has a combined capital and surplus of at least
$50,000,000. If any such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this
Section 807, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time
the Property Trustee with respect to the Trust Securities shall
cease to be eligible in accordance with the provisions of this
Section 807, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article VIII.
(b) There shall at all times be one or more Administrative
Trustees hereunder with respect to the Trust Securities. Each
Administrative Trustee shall be either a natural person who is at
least 21 years of age or a legal entity that shall act through one
or more persons authorized to bind that entity.
(c) There shall at all times be a Delaware Trustee with
respect to the Trust Securities. The Delaware Trustee shall either
be (i) a natural person who is at least 21 years of age and a
resident of the State of Delaware; or (ii) a legal entity with its
principal place of business in the State of Delaware and that
otherwise meets the requirements of applicable Delaware law that
shall act through one or more persons authorized to bind such
entity.
SECTION 808. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the
Property Trustee shall either eliminate such interest or resign, to
the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Trust Agreement.
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SECTION 809. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be
continuing, at any time or times, for the purpose of meeting the
legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust Property may at the
time be located, the Depositor shall have power to appoint, and
upon the written request of the Property Trustee, the Depositor
shall for such purpose join with the Property Trustee in the
execution, delivery and performance of all instruments and
agreements necessary or proper to appoint, one or more Persons
approved by the Property Trustee either to act as co-trustee,
jointly with the Property Trustee, of all or any part of such Trust
Property, or to the extent required by law to act as separate
trustee of any such property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in
such Person or Persons in the capacity aforesaid, any property,
title, right or power deemed necessary or desirable, subject to the
other provisions of this Section 809. If the Depositor does not
join in such appointment within 15 days after the receipt by it of
a request so to do, or in case a Debenture Event of Default has
occurred and is continuing, the Property Trustee alone shall have
power to make such appointment. Any co-trustee or separate trustee
appointed pursuant to this Section 809 shall either be (i) a
natural person who is at least 21 years of age and a resident of
the United States; or (ii) a legal entity with its principal place
of business in the United States that shall act through one or more
persons authorized to bind such entity.
(b) Should any written instrument from the Depositor be
required by any co-trustee or separate trustee so appointed for
more fully confirming to such co-trustee or separate trustee such
property, title, right, or power, any and all such instruments
shall, on request, be executed, acknowledged, and delivered by the
Depositor.
(c) Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to
the following terms, namely:
(i) The Trust Securities shall be executed and
delivered and all rights, powers, duties and obligations hereunder
in respect of the custody of securities, cash and other personal
property held by, or required to be deposited or pledged with, the
Trustees specified hereunder, shall be exercised, solely by such
Trustees and not by such co-trustee or separate trustee.
(ii) The rights, powers, duties and obligations hereby
conferred or imposed upon the Property Trustee in respect of any
property covered by such appointment shall be conferred or imposed
upon and exercised or performed by the Property Trustee or by the
Property Trustee and such co-trustee or separate trustee jointly,
as shall be provided in the instrument appointing such co-trustee
or separate trustee, except to the extent that under any law of any
jurisdiction in which any particular act is to be performed, the
Property Trustee shall be incompetent or unqualified to perform
such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or
separate trustee.
(iii) The Property Trustee at any time, by an instrument
in writing executed by it, with the written concurrence of the
Depositor, may accept the resignation of or remove any co-trustee
or separate trustee appointed under this Section 809, and, in case
a Debenture Event of Default has occurred and is continuing, the
Property Trustee shall have the power to accept the resignation of,
or remove, any such co-trustee or separate trustee without the
concurrence of the Depositor. Upon the written request of the
Property Trustee, the Depositor shall join with the Property
Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or
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removal. A successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section 809.
(iv) No co-trustee or separate trustee hereunder shall
be personally liable by reason of any act or omission of the
Property Trustee or any other trustee hereunder.
(v) The Property Trustee shall not be liable by reason
of any act of a co-trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property
Trustee shall be deemed to have been delivered to each such
co-trustee and separate trustee.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant
Trustee") and no appointment of a successor Trustee pursuant to
this Article VIII shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the
applicable requirements of Section 811.
(b) Subject to the immediately preceding paragraph, the
Relevant Trustee may resign at any time with respect to the Trust
Securities by giving written notice thereof to the Securityholders.
If the instrument of acceptance by the successor Trustee required
by Section 811 shall not have been delivered to the Relevant
Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of
the Depositor, any court of competent jurisdiction for the
appointment of a successor Relevant Trustee with respect to the
Trust Securities.
(c) Unless a Debenture Event of Default shall have occurred
and be continuing, any Trustee may be removed at any time by Act of
the Common Securityholder. If a Debenture Event of Default shall
have occurred and be continuing, the Property Trustee or the
Delaware Trustee, or both of them, may be removed at such time by
Act of the Holders of a majority in Liquidation Amount of the
Preferred Securities, delivered to the Relevant Trustee (in its
individual capacity and on behalf of the Trust). An Administrative
Trustee may be removed by the Common Securityholder at any time.
(d) If any Trustee shall resign, be removed or become
incapable of acting as Trustee, or if a vacancy shall occur in the
office of any Trustee for any cause, at a time when no Debenture
Event of Default shall have occurred and be continuing, the Common
Securityholder, by Act of the Common Securityholder delivered to
the retiring Trustee, shall promptly appoint a successor Trustee or
Trustees with respect to the Trust Securities and the Trust, and
the successor Trustee shall comply with the applicable requirements
of Section 811. If the Property Trustee or the Delaware Trustee
shall resign, be removed or become incapable of continuing to act
as the Property Trustee or the Delaware Trustee, as the case may
be, at a time when a Debenture Event of Default shall have occurred
and is continuing, the Preferred Securityholders, by Act of the
Securityholders of a majority in Liquidation Amount of the
Preferred Securities then Outstanding delivered to the retiring
Relevant Trustee, shall promptly appoint a successor Relevant
Trustee or Trustees with respect to the Trust Securities and the
Trust, and such successor Trustee shall comply with the applicable
requirements of Section 811. If an Administrative Trustee shall
resign, be removed or become incapable of acting as Administrative
Trustee, at a time when a Debenture Event of Default shall have
occurred and be continuing, the Common Securityholder, by Act of
the Common Securityholder delivered to an Administrative Trustee,
shall promptly appoint a successor Administrative Trustee or
Administrative Trustees with respect to the Trust Securities and
the Trust, and
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such successor Administrative Trustee or Administrative Trustees shall comply
with the applicable requirements of Section 811. If no successor Relevant
Trustee with respect to the Trust Securities shall have been so appointed by
the Common Securityholder or the Preferred Securityholders and accepted
appointment in the manner required by Section 811, any
Securityholder who has been a Securityholder of Trust Securities on
behalf of himself and all others similarly situated may petition a
court of competent jurisdiction for the appointment Trustee with
respect to the Trust Securities.
(e) The Property Trustee shall give notice of each
resignation and each removal of a Trustee and each appointment of
a successor Trustee to all Securityholders in the manner provided
in Section 1008 and shall give notice to the Depositor. Each
notice shall include the name of the successor Relevant Trustee and
the address of its Corporate Trust office if it is the Property
Trustee.
(f) Notwithstanding the foregoing or any other provision of
this Trust Agreement, in the event any Administrative Trustee or a
Delaware Trustee who is a natural person dies or becomes, in the
opinion of the Depositor, incompetent or incapacitated, the vacancy
created by such death, incompetence or incapacity may be filled by
(a) the unanimous act of remaining Administrative Trustees if there
are at least two of them; or (b) otherwise by the Depositor (with
the successor in each case being a Person who satisfies the
eligibility requirement for Administrative Trustees set forth in
Section 807).
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor
Relevant Trustee with respect to the Trust Securities and the
Trust, the retiring Relevant Trustee and each successor Relevant
Trustee with respect to the Trust Securities shall execute and
deliver an instrument hereto wherein each successor Relevant
Trustee shall accept such appointment and which shall contain such
provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the
rights, powers, trusts and duties of the retiring Relevant Trustee
with respect to the Trust Securities and the Trust and upon the
execution and delivery of such instrument the resignation or
removal of the retiring Relevant Trustee shall become effective to
the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the
retiring Relevant Trustee with respect to the Trust Securities and
the Trust; but, on request of the Trust or any successor Relevant
Trustee such retiring Relevant Trustee shall duly assign, transfer
and deliver to such successor Relevant Trustee all Trust Property,
all proceeds thereof and money held by such retiring Relevant
Trustee hereunder with respect to the Trust Securities and the
Trust.
(b) Upon request of any such successor Relevant Trustee, the
Trust shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Relevant
Trustee all such rights, powers and trusts referred to in the
immediately preceding paragraph, as the case may be.
(c) No successor Relevant Trustee shall accept its
appointment unless at the time of such acceptance such successor
Relevant Trustee shall be qualified and eligible under this Article
VIII.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS.
Any Person into which the Property Trustee, the Delaware
Trustee or any Administrative Trustee may be merged or converted or
with which it may be consolidated, or any Person resulting from any
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merger, conversion or consolidation to which such Relevant Trustee
shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of such Relevant
Trustee, shall be the successor of such Relevant Trustee hereunder,
provided such Person shall be otherwise qualified and eligible
under this Article VIII, without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
DEPOSITOR OR TRUST.
If and when the Property Trustee or the Delaware Trustee shall
be or become a creditor of the Depositor or the Trust (or any other
obligor upon the Debentures or the Trust Securities), the Property
Trustee or the Delaware Trustee, as the case may be, shall be
subject to and shall take all actions necessary in order to comply
with the provisions of the Trust Indenture Act regarding the
collection of claims against the Depositor or Trust (or any such
other obligor).
SECTION 814. REPORTS BY PROPERTY TRUSTEE.
(a) Not later than July 15 of each year commencing with
July 15, 1997, the Property Trustee shall transmit to all
Securityholders in accordance with Section 1008, and to the
Depositor, a brief report dated as of such December 31 with respect
to:
(i) its eligibility under Section 807 or, in lieu
thereof, if to the best of its knowledge it has continued to be
eligible under said Section, a written statement to such effect;
and
(ii) any change in the property and funds in its
possession as Property Trustee since the date of its last report
and any action taken by the Property Trustee in the performance of
its duties hereunder which it has not previously reported and which
in its opinion materially affects the Trust Securities.
(b) In addition the Property Trustee shall transmit to
Securityholders such reports concerning the Property Trustee and
its actions under this Trust Agreement as may be required pursuant
to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with The
Nasdaq Stock Market's National Market, and each national securities
exchange or other organization upon which the Trust Securities are
listed, and also with the Commission and the Depositor.
SECTION 815. REPORTS TO THE PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such documents, reports
and information as required by Section 314 of the Trust Indenture
Act (if any) and the compliance certificate required by
Section 314(a) of the Trust Indenture Act in the form, in the
manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 816. EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT.
Each of the Depositor and the Administrative Trustees on
behalf of the Trust shall provide to the Property Trustee such
evidence of compliance with any conditions precedent, if any,
provided for in this
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Trust Agreement that relate to any of the matters set forth in Section 314(c)
of the Trust Indenture Act. Any certificate or opinion required to be given by
an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be
given in the form of an Officers' Certificate.
SECTION 817. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five, provided that the
Holder of all of the Common Securities by written instrument may
increase or decrease the number of Administrative Trustees. The
Property Trustee and the Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the
number of Administrative Trustees is not reduced pursuant to
Section 817(a), or if the number of Trustees is increased pursuant
to Section 817(a), a vacancy shall occur. The vacancy shall be
filled with a Trustee appointed in accordance with Section 810.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul the Trust. Whenever a vacancy in the number
of Administrative Trustees shall occur, until such vacancy is
filled by the appointment of an Administrative Trustee in
accordance with Section 810, the Administrative Trustees in office,
regardless of their number (and notwithstanding any other provision
of this Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed
upon the Administrative Trustees by this Trust Agreement.
SECTION 818. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural
person over the age of 21 his or her power for the purpose of
executing any documents contemplated in Section 207(a); and
(b) The Administrative Trustees shall have power to delegate
from time to time to such of their number or to the Depositor the
doing of such things and the execution of such instruments either
in the name of the Trust or the names of the Administrative
Trustees or otherwise as the Administrative Trustees may deem
expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set
forth herein.
SECTION 819. VOTING.
Except as otherwise provided in this Trust Agreement, the
consent or approval of the Administrative Trustees shall require
consent or approval by not less than a majority of the
Administrative Trustees, unless there are only two, in which case
both must consent.
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ARTICLE IX
TERMINATION, LIQUIDATION AND MERGER
SECTION 901. TERMINATION UPON EXPIRATION DATE.
Unless earlier dissolved, the Trust shall automatically
dissolve on March 31, 2051 (the "Expiration Date") subject to
distribution of the Trust Property in accordance with Section 904.
SECTION 902. EARLY TERMINATION.
The first to occur of any of the following events is an "Early
Termination Event:"
(a) the occurrence of a Bankruptcy Event in respect of, or
the dissolution or liquidation of, the Depositor;
(b) delivery of written direction to the Property Trustee by
the Depositor at any time (which direction is wholly optional and
within the discretion of the Depositor) to dissolve the Trust and
distribute the Debentures to Securityholders in exchange for the
Preferred Securities in accordance with Section 904;
(c) the redemption of all of the Preferred Securities in
connection with the redemption of all of the Debentures; and
(d) an order for dissolution of the Trust shall have been
entered by a court of competent jurisdiction.
SECTION 903. TERMINATION.
The respective obligations and responsibilities of the
Trustees and the Trust created and continued hereby shall terminate
upon the latest to occur of the following: (a) the distribution by
the Property Trustee to Securityholders upon the liquidation of the
Trust pursuant to Section 904, or upon the redemption of all of the
Trust Securities pursuant to Section 402, of all amounts required
to be distributed hereunder upon the final payment of the Trust
Securities; (b) the payment of any expenses owed by the Trust;
(c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax
reporting obligations with respect to the Trust or the
Securityholders; and (d) the filing of a Certificate of
Cancellation by the Administrative Trustee under the Business Trust
Act.
SECTION 904. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a),
(b), or (d) of Section 902 occurs or upon the Expiration Date, the
Trust shall be liquidated by the Trustees as expeditiously as the
Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided
by applicable law, to each Securityholder a Like Amount of
Debentures, subject to Section 904(d). Notice of liquidation shall
be given by the Property Trustee by first-class mail, postage
prepaid, mailed not later than 30 nor more than 60 days prior to
the Liquidation Date to each Holder of Trust Securities at such
Holder's address appearing in the Securities Register. All notices
of liquidation shall:
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(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date,
the Trust Securities shall no longer be deemed to be Outstanding
and any Trust Securities Certificates not surrendered for exchange
shall be deemed to represent a Like Amount of Debentures; and
(iii) provide such information with respect to the
mechanics by which Holders may exchange Trust Securities
Certificates for Debentures, or, if Section 904(d) applies, receive
a Liquidation Distribution, as the Administrative Trustees or the
Property Trustee shall deem appropriate.
(b) Except where Section 902(c) or 904(d) applies, in order
to effect the liquidation of the Trust and distribution of the
Debentures to Securityholders, the Property Trustee shall establish
a record date for such distribution (which shall be not more than
45 days prior to the Liquidation Date) and, either itself acting as
exchange agent or through the appointment of a separate exchange
agent, shall establish such procedures as it shall deem appropriate
to effect the distribution of Debentures in exchange for the
Outstanding Trust Securities Certificates.
(c) Except where Section 902(c) or 904(d) applies, after the
Liquidation Date, (i) the Trust Securities shall no longer be
deemed to be outstanding; (ii) certificates representing a Like Amount
of Debentures shall be issued to holders of Trust Securities
Certificates upon surrender of such certificates to the Administrative
Trustees or their agent for exchange; (iii) the Depositor shall use its
reasonable efforts to have the Debentures listed on The Nasdaq Stock
Market's National Market or on such other securities exchange or other
organization as the Preferred Securities are then listed or traded; (iv)
any Trust Securities Certificates not so surrendered for exchange shall
be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last
Distribution Date on which a Distribution was made on such Trust
Securities Certificates until such certificates are so surrendered
(and until such certificates are so surrendered, no payments of
interest or principal shall be made to holders of Trust Securities
Certificates with respect to such Debentures); and (v) all rights
of Securityholders holding Trust Securities shall cease, except the
right of such Securityholders to receive Debentures upon surrender
of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions
of this Section 904, whether because of an order for dissolution
entered by a court of competent jurisdiction or otherwise,
distribution of the Debentures in the manner provided herein is
determined by the Property Trustee not to be practical, the Trust
Property shall be liquidated, and the Trust shall be dissolved,
wound-up or terminated, by the Property Trustee in such manner as
the Property Trustee determines. In such event, on the date of the
dissolution, winding-up or other termination of the Trust,
Securityholders shall be entitled to receive out of the assets of
the Trust available for distribution to Securityholders, after
satisfaction of liabilities to creditors of the Trust as provided
by applicable law, an amount equal to the Liquidation Amount per
Trust Security plus accumulated and unpaid Distributions thereon to
the date of payment (such amount being the "Liquidation
Distribution"). If, upon any such dissolution, winding-up or
termination, the Liquidation Distribution can be paid only in part
because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then, subject to the next
succeeding sentence, the amounts payable by the Trust on the Trust
Securities shall be paid on a pro rata basis (based upon
Liquidation Amounts). The holder of the Common Securities shall be
entitled to receive Liquidation Distributions upon any such
dissolution, winding-up or termination pro rata (determined as
aforesaid) with
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Holders of Preferred Securities, except that, if a Debenture Event of Default
has occurred and is continuing, the Preferred Securities shall have a priority
over the Common Securities.
SECTION 905. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR
REPLACEMENTS OF THE TRUST.
The Trust may not merge with or into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other
Person, except pursuant to this Section 905. At the request of the
Depositor, with the consent of the Administrative Trustees and
without the consent of the holders of the Preferred Securities, the
Property Trustee or the Delaware Trustee, the Trust may merge with
or into, consolidate, amalgamate, be replaced by or convey,
transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any state;
provided, that (i) such successor entity either (a) expressly
assumes all of the obligations of the Trust with respect to the
Preferred Securities; or (b) substitutes for the Preferred
Securities other securities having substantially the same terms as
the Preferred Securities (the "Successor Securities") so long as the
Successor Securities rank the same as the Preferred Securities rank
in priority with respect to distributions and payments upon
liquidation, redemption and otherwise; (ii) the Depositor expressly
appoints a trustee of such successor entity possessing
substantially the same powers and duties as the Property Trustee as
the holder of the Debentures; (iii) the Successor Securities are
listed or traded, or any Successor Securities shall be listed or
traded upon notification of issuance, on any national securities
exchange or other organization on which the Preferred Securities
are then listed, if any; (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor
Securities) in any material respect; (v) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Depositor has received an Opinion of Counsel to the
effect that (a) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the
Preferred Securities (including any Successor Securities) in any
material respect; and (b) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity shall be required to register
as an "investment company" under the Investment Company Act; and
(vi) the Depositor owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor
entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the
Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an
entirety to any other Person or permit any other Person to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the
Trust or the successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 1001. LIMITATION OF RIGHTS OF SECURITYHOLDERS.
The death or incapacity of any Person having an interest,
beneficial or otherwise, in Trust Securities shall not operate to
terminate this Trust Agreement, nor entitle the legal
representatives or heirs of such Person or any Securityholder for
such Person, to claim an accounting, take any action or bring
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any proceeding in any court for a partition or winding-up of the
arrangements contemplated hereby, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
SECTION 1002. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by
the Trustees and the Depositor, without the consent of any
Securityholders, (i) as provided in Section 811 with respect to
acceptance of appointment by a successor Trustee; (ii) to cure any
ambiguity, correct or supplement any provision herein or therein
which may be inconsistent with any other provision herein or
therein, or to make any other provisions with respect to matters or
questions arising under this Trust Agreement, that shall not be
inconsistent with the other provisions of this Trust Agreement; or
(iii) to modify, eliminate or add to any provisions of this Trust
Agreement to such extent as shall be necessary to ensure that the
Trust shall be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities
are outstanding or to ensure that the Trust shall not be required
to register as an "investment company" under the Investment Company
Act; provided, however, that in the case of clause (ii), such
action shall not adversely affect in any material respect the
interests of any Securityholder, and any amendments of this Trust
Agreement shall become effective when notice thereof is given to
the Securityholders.
(b) Except as provided in Section 601(c) or Section 1002(c)
hereof, any provision of this Trust Agreement may be amended by the
Trustees and the Depositor (i) with the consent of Trust
Securityholders representing not less than a majority (based upon
Liquidation Amounts) of the Trust Securities then Outstanding; and
(ii) upon receipt by the Trustees of an Opinion of Counsel to the
effect that such amendment or the exercise of any power granted to
the Trustees in accordance with such amendment shall not affect the
Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from status of an "investment
company" under the Investment Company Act.
(c) In addition to and notwithstanding any other provision in
this Trust Agreement, without the consent of each affected
Securityholder (such consent being obtained in accordance with
Section 603 or 606 hereof), this Trust Agreement may not be amended
to (i) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities
as of a specified date; or (ii) restrict the right of a
Securityholder to institute suit for the enforcement of any such
payment on or after such date; notwithstanding any other provision
herein, without the unanimous consent of the Securityholders (such
consent being obtained in accordance with Section 603 or 606
hereof), this paragraph (c) of this Section 1002 may not be
amended.
(d) Notwithstanding any other provisions of this Trust
Agreement, no Trustee shall enter into or consent to any amendment
to this Trust Agreement which would cause the Trust to fail or
cease to qualify for the exemption from status of an "investment
company" under the Investment Company Act or to fail or cease to be
classified as a grantor trust for United States federal income tax
purposes.
(e) Notwithstanding anything in this Trust Agreement to the
contrary, without the consent of the Depositor, this Trust
Agreement may not be amended in a manner which imposes any
additional obligation on the Depositor.
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(f) In the event that any amendment to this Trust Agreement
is made, the Administrative Trustees shall promptly provide to the
Depositor a copy of such amendment.
(g) Neither the Property Trustee nor the Delaware Trustee
shall be required to enter into any amendment to this Trust
Agreement which affects its own rights, duties or immunities under
this Trust Agreement. The Property Trustee shall be entitled to
receive an Opinion of Counsel and an Officers' Certificate stating
that any amendment to this Trust Agreement is in compliance with
this Trust Agreement.
SECTION 1003. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust
Securities Certificates shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1004. GOVERNING LAW.
THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF
THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO
THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
(WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES).
SECTION 1005. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall
be a day that is not a Business Day, then such payment need not be
made on such date but may be made on the next succeeding day which
is a Business Day (except as otherwise provided in Sections 401(a)
and 402(d)), with the same force and effect as though made on the
date fixed for such payment, and no distribution shall accumulate
thereon for the period after such date.
SECTION 1006. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to
the benefit of any successor to the Depositor, the Trust or the
Relevant Trustee(s), including any successor by operation of law.
Except in connection with a consolidation, merger or sale involving
the Depositor that is permitted under Article XII of the Indenture
and pursuant to which the assignee agrees in writing to perform the
Depositor's obligations hereunder, the Depositor shall not assign
its obligations hereunder.
SECTION 1007. HEADINGS.
The Article and Section headings are for convenience only and
shall not affect the construction of this Trust Agreement.
SECTION 1008. REPORTS, NOTICES AND DEMANDS.
Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be
given or served to or upon any Securityholder or the Depositor
44
<PAGE> 51
may be given or served in writing by deposit thereof, first-class
postage prepaid, in the United States mail, hand delivery or
facsimile transmission, in each case, addressed, (a) in the case of
a Preferred Securityholder, to such Preferred Securityholder as
such Securityholder's name and address may appear on the Securities
Register; and (b) in the case of the Common Securityholder or the
Depositor, to First Banks, Inc., 11901 Olive Boulevard, St. Louis,
Missouri 63141, Attention: Chief Financial Officer, facsimile no.:
(314) 567-3490. Any notice to Preferred Securityholders shall also
be given to such owners as have, within two years preceding the
giving of such notice, filed their names and addresses with the
Property Trustee for that purpose. Such notice, demand or other
communication to or upon a Securityholder shall be deemed to have
been sufficiently given or made, for all purposes, upon hand
delivery, mailing or transmission.
Any notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be
given or served to or upon the Trust, the Property Trustee or the
Administrative Trustees shall be given in writing addressed (until
another address is published by the Trust) as follows: (a) with
respect to the Property Trustee to State Street Bank and
Trust Company, 2 International Place, 5th Floor, Boston, Massachusetts
02110, Attention: Corporate Trust Trustee; (b) with respect to the
Delaware Trustee, to Wilmington Trust Company, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration; and (c) with respect to the
Administrative Trustees, to them at the address above for notices to the
Depositor, marked "Attention: Administrative Trustees of First
Preferred Capital Trust." Such notice, demand or other
communication to or upon the Trust or the Property Trustee shall be
deemed to have been sufficiently given or made only upon actual
receipt of the writing by the Trust or the Property Trustee.
SECTION 1009. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit
of the Securityholders that, until at least one year and 1 day
after the Trust has been terminated in accordance with Article IX,
they shall not file, or join in the filing of, a petition against
the Trust under any bankruptcy, insolvency, reorganization or other
similar law (including, without limitation, the United States
Bankruptcy Code of 1978, as amended) (collectively, "Bankruptcy
Laws") or otherwise join in the commencement of any proceeding
against the Trust under any Bankruptcy Law. In the event the
Depositor takes action in violation of this Section 1009, the
Property Trustee agrees, for the benefit of Securityholders, that
at the expense of the Depositor (which expense shall be paid prior
to the filing), it shall file an answer with the bankruptcy court
or otherwise properly contest the filing of such petition by the
Depositor against the Trust or the commencement of such action and
raise the defense that the Depositor has agreed in writing not to
take such action and should be stopped and precluded therefrom.
The provisions of this Section 1009 shall survive the termination
of this Trust Agreement.
SECTION 1010. TRUST INDENTURE ACT; CONFLICT WITH TRUST
INDENTURE ACT.
(a) This Trust Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Trust
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) The Property Trustee shall be the only Trustee which is
a trustee for the purposes of the Trust Indenture Act.
45
<PAGE> 52
(c) If any provision hereof limits, qualifies or conflicts
with another provision hereof which is required to be included in
this Trust Agreement by any of the provisions of the Trust
Indenture Act, such required provision shall control. If any
provision of this Trust Agreement modifies or excludes any
provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this
Trust Agreement as so modified or to be excluded, as the case may
be.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Securities as equity
securities representing undivided beneficial interests in the
assets of the Trust.
SECTION 1011. ACCEPTANCE OF TERMS OF TRUST AGREEMENT,
GUARANTEE AND INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST
THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL
OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT,
SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER
AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY
OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND
AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE
GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF
THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND
PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND
EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH
OTHERS.
FIRST BANKS, INC.
By:--------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Property Trustee
By:--------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Delaware Trustee
By:--------------------------------------
Name:
Title:
46
<PAGE> 53
----------------------------------------------------
James F. Dierberg, as Administrative Trustee
----------------------------------------------------
Allen H. Blake, as Administrative Trustee
----------------------------------------------------
Laurence J. Brost, as Administrative Trustee
47
<PAGE> 54
EXHIBIT A
CERTIFICATE OF TRUST
OF
FIRST PREFERRED CAPITAL TRUST
THIS CERTIFICATE OF TRUST OF FIRST PREFERRED CAPITAL TRUST
(the "Trust"), dated as of December 12, 1996, is being duly
executed and filed by WILMINGTON TRUST COMPANY, a Delaware banking
corporation, JAMES F. DIERBERG, ALLEN H. BLAKE and LAURENCE J.
BROST, each an individual, as trustees, to form a business trust
under the Delaware Business Trust Act (12 Del. C. Section 3801 et
seq.).
1. NAME. The name of the business trust formed hereby is FIRST
PREFERRED CAPITAL TRUST.
2. DELAWARE TRUSTEE. The name and business address of the
trustee of the Trust in the State of Delaware is Wilmington
Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective
on December 16, 1996.
IN WITNESS WHEREOF, the undersigned, being the sole trustees
of the Trust, has executed this Certificate of Trust as of the date
first above written.
WILMINGTON TRUST COMPANY,
as trustee
By:--------------------------------------
Name:------------------------------------
Title:-----------------------------------
-----------------------------------------
JAMES F. DIERBERG
as Trustee
-----------------------------------------
ALLEN H. BLAKE
as Trustee
-----------------------------------------
LAURENCE J. BROST
as Trustee
A-1
<PAGE> 55
EXHIBIT B
[Intentionally Omitted]
B-1
<PAGE> 56
EXHIBIT C
THIS CERTIFICATE IS NOT TRANSFERABLE
CERTIFICATE NUMBER ------ NUMBER OF COMMON SECURITIES
CERTIFICATE EVIDENCING COMMON SECURITIES
OF
FIRST PREFERRED CAPITAL TRUST
COMMON SECURITIES
(LIQUIDATION AMOUNT $25 PER COMMON SECURITY)
FIRST PREFERRED CAPITAL TRUST, a statutory business trust
created under the laws of the State of Delaware (the "Trust"),
hereby certifies that FIRST BANKS, INC. (the "Holder") is the
registered owner of ------------------------- (-------) common
securities of the Trust representing undivided beneficial interests
in the assets of the Trust and designated the -----% Common
Securities (liquidation amount $25 per Common Security) (the
"Common Securities"). In accordance with Section 510 of the Trust
Agreement (as defined below), the Common Securities are not
transferable and any attempted transfer hereof shall be void. The
designations, rights, privileges, restrictions, preferences, and
other terms and provisions of the Common Securities are set forth
in, and this certificate and the Common Securities represented
hereby are issued and shall in all respects be subject to the terms
and provisions of, the Amended and Restated Trust Agreement of the
Trust dated as of January ---, 1997, as the same may be amended
from time to time (the "Trust Agreement"), including the
designation of the terms of the Common Securities as set forth
therein. The Trust shall furnish a copy of the Trust Agreement to
the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receive of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the
Trust has executed this certificate this ---- day of January, 1997.
FIRST PREFERRED CAPITAL TRUST
By ------------------------------------
Name:
Title:
C-1
<PAGE> 57
EXHIBIT D
AGREEMENT AS TO EXPENSES AND LIABILITIES
AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement")
dated as of January ---, 1997, between FIRST BANKS, INC., a
Missouri corporation ("First Banks"), and FIRST PREFERRED CAPITAL
TRUST, a Delaware business trust (the "Trust").
RECITALS
WHEREAS, the Trust intends to issue its common securities (the
"Common Securities") to, and receive Debentures from, First Banks
and to issue and sell First Preferred Capital Trust -----%
Cumulative Trust Preferred Securities (the "Preferred Securities")
with such powers, preferences and special rights and restrictions
as are set forth in the Amended and Restated Trust Agreement of the
Trust dated as of January --, 1997, as the same may be amended from
time to time (the "Trust Agreement");
WHEREAS, First Banks shall directly or indirectly own all of
the Common Securities of the Trust and shall issue the Debentures;
NOW, THEREFORE, in consideration of the purchase by each
holder of the Preferred Securities, which purchase First Banks
hereby agrees shall benefit First Banks and which purchase First
Banks acknowledges shall be made in reliance upon the execution and
delivery of this Agreement, First Banks, including in its capacity
as holder of the Common Securities, and the Trust hereby agree as
follows:
ARTICLE I
SECTION 1.1. GUARANTEE BY FIRST BANKS.
Subject to the terms and conditions hereof, First Banks,
including in its capacity as holder of the Common Securities,
hereby irrevocably and unconditionally guarantees to each person or
entity to whom the Trust is now or hereafter becomes indebted or
liable (the "Beneficiaries") the full payment when and as due, of
any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any costs,
expenses or liabilities of the Trust other than obligations of the
Trust to pay to holders of any Preferred Securities or other
similar interests in the Trust the amounts due such holders
pursuant to the terms of the Preferred Securities or such other
similar interests, as the case may be. This Agreement is intended
to be for the benefit of, and to be enforceable by, all such
Beneficiaries, whether or not such Beneficiaries have received
notice hereof.
SECTION 1.2. TERM OF AGREEMENT.
This Agreement shall terminate and be of no further force and
effect upon the later of (a) the date on which full payment has
been made of all amounts payable to all holders of all the
Preferred Securities (whether upon redemption, liquidation,
exchange or otherwise); and (b) the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement
shall continue to be effective or shall be reinstated, as the case
may be, if at any time any holder of Preferred Securities or any
Beneficiary must restore payment of any sums paid under the
Preferred Securities, under any obligation, under the
D-1
<PAGE> 58
Preferred Securities Guarantee Agreement dated the date hereof by First Banks
and State Street Bank and Trust Company as guarantee trustee, or under this
Agreement for any reason whatsoever. This Agreement is continuing,
irrevocable, unconditional and absolute.
SECTION 1.3. WAIVER OF NOTICE.
First Banks hereby waives notice of acceptance of this
Agreement and of any obligation to which it applies or may apply,
and First Banks hereby waives presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 1.4. NO IMPAIRMENT.
The obligations, covenants, agreements and duties of First
Banks under this Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the
following:
(a) the extension of time for the payment by the Trust of all
or any portion of the obligations or for the performance of any
other obligation under, arising out of, or in connection with, the
obligations;
(b) any failure, omission, delay or lack of diligence on the
part of the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with
respect to the obligations or any action on the part of the Trust
granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement composition or readjustment of debt of, or other
similar proceedings affecting, the Trust or any of the assets of
the Trust.
There shall be no obligation of the Beneficiaries to give notice
to, or obtain the consent of, First Banks with respect to the
happening of any of the foregoing.
SECTION 1.5. ENFORCEMENT.
A Beneficiary may enforce this Agreement directly against
First Banks, and First Banks waives any right or remedy to require
that any action be brought against the Trust or any other person or
entity before proceeding against First Banks.
ARTICLE II
SECTION 2.1. BINDING EFFECT.
All guarantees and agreements contained in this Agreement
shall bind the successors, assigns, receivers, trustees and
representatives of First Banks and shall inure to the benefit of
the Beneficiaries.
D-2
<PAGE> 59
SECTION 2.2. AMENDMENT.
So long as there remains any Beneficiary or any Preferred
Securities of any series are outstanding, this Agreement shall not
be modified or amended in any manner adverse to such Beneficiary or
to the holders of the Preferred Securities.
SECTION 2.3. NOTICES.
Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by
delivering the same by facsimile transmission (confirmed by mail),
telex, or by registered or certified mail, addressed as follows
(and if so given, shall be deemed given when mailed or upon receipt
of an answerback, if sent by telex):
First Preferred Capital Trust
c/o First Banks, Inc.
11901 Olive Boulevard
St. Louis, MO 63141
Facsimile No.: (314) 567-3490
Attention: Chief Financial Officer
First Banks, Inc.
11901 Olive Boulevard
St. Louis, MO 63141
Facsimile No.: (314) 567-3490
Attention: Chief Financial Officer
SECTION 2.4. This agreement shall be governed by and
construed and interpreted in accordance with the laws of the State
of Missouri (without regard to conflict of laws principles).
THIS AGREEMENT is executed as of the day and year first above
written.
FIRST BANKS, INC.
By:--------------------------------------
Name:
Title:
FIRST PREFERRED CAPITAL TRUST
By:--------------------------------------
Name:
Title: Administrative Trustee
D-3
<PAGE> 60
EXHIBIT E
Certificate Number Number of Preferred Securities
P-
CUSIP NO.
Certificate Evidencing Preferred Securities
of
First Preferred Capital Trust
% Cumulative Trust Preferred Securities
(liquidation amount $25 per Preferred Security)
FIRST PREFERRED CAPITAL TRUST, a statutory business trust created
under the laws of the State of Delaware (the "Trust"), hereby
certifies that ---------------- (the "Holder") is the registered
owner of ----- preferred securities of the Trust representing
undivided beneficial interests in the assets of the Trust and
designated the ----------% Cumulative Trust Preferred Securities
(liquidation amount $25 per Preferred Security) (the "Preferred
Securities"). The Preferred Securities are transferable on the
books and records of the Trust, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer as provided in Section 504 of the Trust
Agreement. The designations, rights, privileges, restrictions,
preferences, and other terms and provisions of the Preferred
Securities are set forth in, and this certificate and the Preferred
Securities represented hereby are issued and shall in all respects
be subject to the terms and provisions of, the Amended and Restated
Trust Agreement of the Trust dated as of January --, 1997, as the
same may be amended from time to time (the "Trust Agreement"),
including the designation of the terms of Preferred Securities as
set forth therein. The Holder is entitled to the benefits of the
Preferred Securities Guarantee Agreement entered into by First
Banks, Inc., a Missouri corporation, and State Street Bank and Trust
Company, as guarantee trustee,
E-1
<PAGE> 61
dated as of January ---, 1997 (the "Guarantee"), to the extent provided
therein. The Trust shall furnish a copy of the Trust Agreement and the
Guarantee to the Holder without charge upon written request to the Trust at
its principal place of business or registered office.
Upon receive of this certificate, the Holder is bound by the
Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, one of the Administrative Trustees of the
Trust has executed this certificate this ---- day of January, 1997.
FIRST PREFERRED CAPITAL TRUST
By ------------------------------------
Name:
Title:
E-2
<PAGE> 1
EXHIBIT 4.7
<PAGE> 2
==============================================================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
FIRST BANKS, INC.
AND
STATE STREET BANK AND TRUST COMPANY
JANUARY --, 1997
==============================================================================
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page No.
<S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . 1
Section 1.1. Definitions and Interpretation. . . . . . . . 1
ARTICLE II TRUST INDENTURE ACT. . . . . . . . . . . . . . 4
Section 2.1. Trust Indenture Act; Application. . . . . . . 4
Section 2.2. Lists of Holders of Securities. . . . . . . . 4
Section 2.3. Reports by the Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . . . 4
Section 2.4. Periodic Reports to Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . . . 5
Section 2.5. Evidence of Compliance with Conditions
Precedent . . . . . . . . . . . . . . . . . . 5
Section 2.6. Events of Default; Waiver . . . . . . . . . . 5
Section 2.7. Event of Default; Notice. . . . . . . . . . . 5
Section 2.8. Conflicting Interests . . . . . . . . . . . . 5
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED
GUARANTEE TRUSTEE. . . . . . . . . . . . . . . 6
Section 3.1. Powers and Duties of the Preferred
Guarantee Trustee . . . . . . . . . . . . . . 6
Section 3.2. Certain Rights of Preferred Guarantee
Trustee . . . . . . . . . . . . . . . . . . . 7
Section 3.3. Not Responsible for Recitals or Issuance
of Guarantee. . . . . . . . . . . . . . . . . 9
ARTICLE IV PREFERRED GUARANTEE TRUSTEE. . . . . . . . . . 9
Section 4.1. Preferred Guarantee Trustee; Eligibility. . . 9
Section 4.2. Appointment, Removal and Resignation of
Preferred Guarantee Trustees. . . . . . . . . 9
ARTICLE V GUARANTEE. . . . . . . . . . . . . . . . . . . 10
Section 5.1. Guarantee . . . . . . . . . . . . . . . . . . 10
Section 5.2. Waiver of Notice and Demand . . . . . . . . . 10
Section 5.3. Obligations not Affected. . . . . . . . . . . 10
Section 5.4. Rights of Holders . . . . . . . . . . . . . . 11
Section 5.5. Guarantee of Payment. . . . . . . . . . . . . 12
Section 5.6. Subrogation.. . . . . . . . . . . . . . . . . 12
Section 5.7. Independent Obligations . . . . . . . . . . . 12
ARTICLE VI LIMITATION OF TRANSACTIONS;
SUBORDINATION. . . . . . . . . . . . . . . . . 12
Section 6.1. Limitation of Transactions. . . . . . . . . . 12
Section 6.2 Ranking . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII TERMINATION. . . . . . . . . . . . . . . . . . 13
Section 7.1. Termination.. . . . . . . . . . . . . . . . . 13
ARTICLE VIII INDEMNIFICATION. . . . . . . . . . . . . . . . 13
Section 8.1. Exculpation . . . . . . . . . . . . . . . . . 13
Section 8.2. Indemnification . . . . . . . . . . . . . . . 13
i
<PAGE> 4
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . 14
Section 9.1. Successors and Assigns. . . . . . . . . . . . 14
Section 9.2. Amendments. . . . . . . . . . . . . . . . . . 14
Section 9.3. Notices.. . . . . . . . . . . . . . . . . . . 14
Section 9.4. Benefit . . . . . . . . . . . . . . . . . . . 15
Section 9.5. Governing Law.. . . . . . . . . . . . . . . . 15
</TABLE>
ii
<PAGE> 5
<TABLE>
CROSS REFERENCE TABLE
<CAPTION>
Section of Trust Section of
Indenture Act of Guarantee
1939, as amended Agreement
---------------- ---------
<S> <C>
310(a) 4.1(a)
310(b) 4.1(c), 2.8
310(c) Not Applicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1, 2.5, 3.2
314(f) 2.1, 3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1, 2.6, 5.4
316(b) 5.3
317(a) 3.1
317(b) Not Applicable
318(a) 2.1(a)
318(b) 2.1
318(c) 2.1(b)
</TABLE>
Note: This Cross-Reference Table does not
constitute part of this Agreement and shall not
affect the interpretation of any of its terms or
provisions.
iii
<PAGE> 6
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred
Securities Guarantee"), dated as of January ---, 1997, is executed
and delivered by FIRST BANKS, INC., a Missouri corporation (the
"Guarantor"), and STATE STREET BANK AND TRUST COMPANY, a banking
corporation organized and existing under the laws of the State
of Massachusetts, as trustee (the "Preferred Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of First Preferred Capital
Trust, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement
(the "Trust Agreement"), dated as of January --, 1997, among the
trustees of the Trust named therein, the Guarantor, as depositor, and
the holders from time to time of undivided beneficial interests in
the assets of the Trust, the Trust is issuing on the date hereof
- ------------------ preferred securities, having an aggregate
liquidation amount of $-----------------------, designated the
- --------% Cumulative Trust Preferred Securities (the "Preferred
Securities");
WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and
unconditionally to agree, to the extent set forth in this Preferred
Securities Guarantee, to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and
delivers this Preferred Securities Guarantee for the benefit of the
Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context
otherwise requires:
(a) capitalized terms used in this Preferred Securities
Guarantee but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) terms defined in the Trust Agreement as at the date of
execution of this Preferred Securities Guarantee have the same
meaning when used in this Preferred Securities Guarantee;
(c) a term defined anywhere in this Preferred Securities
Guarantee has the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or
"this Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from time
to time;
<PAGE> 7
(e) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of this
Preferred Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Preferred Securities Guarantee, unless
otherwise defined in this Preferred Securities Guarantee or unless
the context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in
Rule 405 of the Securities Act of 1933, as amended, or any
successor rule thereunder.
"Business Day" means any day other than a day on which federal
or state banking institutions in New York, New York are authorized
or required by law, executive order or regulation to close or a day
on which the Corporate Trust Office of the Preferred Guarantee
Trustee is closed for business.
"Corporate Trust Office" means the office of the Preferred
Guarantee Trustee at which the corporate trust business of the
Preferred Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of
this Agreement is located at 2 International Place, 5th Floor, Boston,
Massachusetts 02110, Attention: Corporate Trust Trustee.
"Covered Person" means any Holder or beneficial owner of
Preferred Securities.
"Debentures" means the ------------% Subordinated Debentures
due March 31, 2027, of the Debenture Issuer held by the Property Trustee of
the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of
its payment or other obligations under this Preferred Securities
Guarantee.
"Guarantor" means First Banks, Inc., a Missouri corporation.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred
Securities, to the extent not paid or made by the Trust: (i) any
accrued and unpaid Distributions (as defined in the Trust
Agreement) that are required to be paid on such Preferred
Securities, to the extent the Trust shall have funds available
therefor, (ii) the redemption price, including all accrued and
unpaid Distributions to the date of redemption (the "Redemption
Price"), to the extent the Trust has funds available therefor, with
respect to any Preferred Securities called for redemption by the
Trust, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection
with the distribution of Debentures to the Holders in exchange for
Preferred Securities as provided in the Trust Agreement), the
lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid Distributions on the Preferred Securities to the
date of payment, to the extent the Trust shall have funds available
therefor (the "Liquidation Distribution"), and (b) the amount of
assets of the Trust remaining available for distribution to Holders
in liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and
records of the Trust, of any Preferred Securities; provided,
however, that, in determining whether the holders of the requisite
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percentage of Preferred Securities have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee,
any Affiliate of the Preferred Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Preferred
Guarantee Trustee.
"Indenture" means the Indenture dated as of January ---, 1997,
among the Debenture Issuer and State Street Bank and Trust Company,
as trustee, and any indenture supplemental thereto pursuant to which
certain subordinated debt securities of the Debenture Issuer are to be
issued to the Property Trustee of the Trust.
"Liquidation Distribution" has the meaning provided therefor
in the definition of Guarantee Payments.
"Majority in liquidation amount of the Preferred Securities"
means the holders of more than 50% of the liquidation amount
(including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all
of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two authorized officers of such Person. Any
Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Preferred Securities
Guarantee shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definition
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated
association, or government or any agency or political subdivision
thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means State Street Bank and Trust
Company, until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the terms of
this Preferred Securities Guarantee and thereafter means each such
Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the
definition of Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred
Guarantee Trustee, any officer within the Corporate Trust Office of
the Preferred Guarantee Trustee, including any vice-president, any
assistant
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vice-president, any assistant secretary, the treasurer, any
assistant treasurer or other officer of the Corporate Trust
Office of the Preferred Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the
particular subject.
"Successor Preferred Guarantee Trustee" means a successor
Preferred Guarantee Trustee possessing the qualifications to act as
Preferred Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1. TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part
of this Preferred Securities Guarantee and shall, to the extent
applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture
Act, such imposed duties shall control.
SECTION 2.2. LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee
Trustee with a list, in such form as the Preferred Guarantee
Trustee may reasonably require, of the names and addresses of the
Holders of the Preferred Securities ("List of Holders") as of such
date, (i) within 1 Business Day after January 1 and June 30 of each
year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date
no more than 15 days before such List of Holders is given to the
Preferred Guarantee Trustee; provided, that the Guarantor shall not
be obligated to provide such List of Holders at any time the List
of Holders does not differ from the most recent List of Holders
given to the Preferred Guarantee Trustee by the Guarantor. The
Preferred Guarantee Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the
Trust Indenture Act.
SECTION 2.3. REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
On or before July 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Preferred Securities
such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313
of the Trust Indenture Act. The Preferred Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
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SECTION 2.4. PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee
such documents, reports and information as required by Section 314
(if any) and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times
required by Section 314 of the Trust Indenture Act.
SECTION 2.5. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee
such evidence of compliance with any conditions precedent, if any,
provided for in this Preferred Securities Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by
an officer pursuant to Section 314(c)(1) may be given in the form
of an Officers' Certificate.
SECTION 2.6. EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 2.7. EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days
after the occurrence of an Event of Default, transmit by mail,
first class postage prepaid, to the Holders of the Preferred
Securities, notices of all Events of Default actually known to a
Responsible Officer of the Preferred Guarantee Trustee, unless such
defaults have been cured before the giving of such notice;
provided, that the Preferred Guarantee Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer
of the Preferred Guarantee Trustee in good faith determines that
the withholding of such notice is in the interests of the Holders
of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Preferred
Guarantee Trustee shall have received written notice, or of which
a Responsible Officer of the Preferred Guarantee Trustee charged
with the administration of the Trust Agreement shall have obtained
actual knowledge.
SECTION 2.8. CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically
described in this Preferred Securities Guarantee for the purposes
of clause (i) of the first proviso contained in Section 310(b) of
the Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1. POWERS AND DUTIES OF THE PREFERRED GUARANTEE TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the
Preferred Guarantee Trustee for the benefit of the Holders of the
Preferred Securities, and the Preferred Guarantee Trustee shall not
transfer this Preferred Securities Guarantee to any Person except
a Holder of Preferred Securities exercising his or her rights
pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee
of its appointment to act as Successor Preferred Guarantee Trustee.
The right, title and interest of the Preferred Guarantee Trustee
shall automatically vest in any Successor Preferred Guarantee
Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred
Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Preferred Guarantee Trustee has occurred and is
continuing, the Preferred Guarantee Trustee shall enforce this
Preferred Securities Guarantee for the benefit of the Holders of
the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of
any Event of Default and after the curing of all Events of Default
that may have occurred, shall undertake to perform only such duties
as are specifically set forth in this Preferred Securities
Guarantee, and no implied covenants shall be read into this
Preferred Securities Guarantee against the Preferred Guarantee
Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.6) and is actually known
to a Responsible Officer of the Preferred Guarantee Trustee, the
Preferred Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Preferred Securities Guarantee, and use
the same degree of care and skill in its exercise thereof, as a
prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall
be construed to relieve the Preferred Guarantee Trustee from
liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the
Preferred Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Preferred Securities Guarantee, and no implied
covenants or obligations shall be read into this Preferred
Securities Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Preferred Guarantee
Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to
be furnished to the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee shall be under a duty to
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examine the same to determine whether or not they conform to the requirements
of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be
proved that the Preferred Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in
good faith in accordance with the direction of the Holders of not
less than a Majority in liquidation amount of the Preferred
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee
Trustee, or exercising any trust or power conferred upon the
Preferred Guarantee Trustee under this Preferred Securities
Guarantee; and
(iv) no provision of this Preferred Securities Guarantee
shall require the Preferred Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of
this Preferred Securities Guarantee or indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against such risk
or liability is not reasonably assured to it.
SECTION 3.2. CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from
acting upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated
by this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt
of such request, shall be promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty
to see to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof);
(v) the Preferred Guarantee Trustee may consult with
counsel, and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and
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protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of
its Affiliates and may include any of its employees. The Preferred
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of
any Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses
of the Preferred Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Preferred Guarantee Trustee;
provided that, nothing contained in this Section 3.2(a)(vi) shall
be taken to relieve the Preferred Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Preferred Securities
Guarantee;
(vii) the Preferred Guarantee Trustee shall not be bound
to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it
may see fit;
(viii) the Preferred Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians or
attorneys, and the Preferred Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Preferred Guarantee Trustee
or its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee Trustee or
its agents alone shall be sufficient and effective to perform any
such action. No third party shall be required to inquire as to the
authority of the Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Preferred
Securities Guarantee, both of which shall be conclusively evidenced
by the Preferred Guarantee Trustee's or its agent's taking such
action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any
remedy or right or taking any other action hereunder, the Preferred
Guarantee Trustee (i) may request instructions from the Holders of
a Majority in liquidation amount of the Preferred Securities,
(ii) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (iii) shall
be protected in conclusively relying on or acting in accordance
with such instructions.
(b) No provision of this Preferred Securities Guarantee shall
be deemed to impose any duty or obligation on the Preferred
Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or
to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Preferred Guarantee
Trustee shall be construed to be a duty.
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SECTION 3.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The
Preferred Guarantee Trustee makes no representation as to the
validity or sufficiency of this Preferred Securities Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under
the laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, and subject
to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Preferred
Guarantee Trustee shall immediately resign in the manner and with
the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of
the Trust Indenture Act, the Preferred Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of
Section 310(b) of the Trust Indenture Act.
SECTION 4.2. APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED
GUARANTEE TRUSTEES.
(a) Subject to Section 4.2(b), the Preferred Guarantee
Trustee may be appointed or removed without cause at any time by
the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor
Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall
hold office until a Successor Preferred Guarantee Trustee shall
have been appointed or until its removal or resignation. The
Preferred
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Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument in writing
executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a
Successor Preferred Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such
Successor Preferred Guarantee Trustee and delivered to the
Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have
been appointed and accepted appointment as provided in this
Section 4.2 within 60 days after delivery to the Guarantor of an
instrument of resignation, the resigning Preferred Guarantee
Trustee may petition any court of competent jurisdiction for
appointment of a Successor Preferred Guarantee Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Guarantee
Trustee.
(f) Upon termination of this Preferred Securities Guarantee
or removal or resignation of the Preferred Guarantee Trustee
pursuant to this Section 4.2, the Guarantor shall pay to the
Preferred Guarantee Trustee all amounts accrued to the date of such
termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1. GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Trust), as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust may
have or assert. The Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts
by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2. WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this
Preferred Securities Guarantee and of any liability to which it
applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Trust or any other Person
before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3. OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the
Guarantor under this Preferred Securities Guarantee shall in no way
be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or
implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Trust;
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(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the
Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection
with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation
Distribution or other sum payable that results from the extension
of any interest payment period on the Debentures or any extension
of the maturity date of the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the
Trust granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other
similar proceedings affecting, the Trust or any of the assets of
the Trust;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) any failure or omission to receive any regulatory
approval or consent required in connection with the Preferred
Securities (or the common equity securities issued by the Trust),
including the failure to receive any approval of the Board of
Governors of the Federal Reserve System required for the redemption
of the Preferred Securities;
(g) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(h) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a
guarantor, it being the intent of this Section 5.3 that the
obligations of the Guarantor hereunder shall be absolute and
unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening
of any of the foregoing.
SECTION 5.4. RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and
place of conducting of any proceeding for any remedy available to
the Preferred Guarantee Trustee in respect of this Preferred
Securities Guarantee or exercising any trust or power conferred
upon the Preferred Guarantee Trustee under this Preferred
Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce its rights
under this Preferred Securities Guarantee, without first
instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other Person.
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SECTION 5.5. GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of
payment and not of collection.
SECTION 5.6. SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of
the Holders of Preferred Securities against the Trust in respect of
any amounts paid to such Holders by the Guarantor under this
Preferred Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of
payment under this Preferred Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this
Preferred Securities Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 5.7. INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Trust with respect to the
Preferred Securities, and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments
pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1. LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if
there shall have occurred an Event of Default under this Preferred
Securities Guarantee, an Event of Default under the Trust Agreement
or during an Extended Interest Payment Period (as defined in the
Indenture), then (a) the Guarantor shall not declare or pay any
dividend on, make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to,
any of its capital stock (other than (i) the redemption of all or
any part of the Guarantor's Class C 9.00% Increasing Rate,
Redeemable, Cumulative Preferred Stock, or (ii) as a result of a
reclassification of its capital stock for another class of its
capital stock, or (iii) the conversion of the Guarantor's Class A
Convertible, Adjustable Rate Preferred Stock to the Guarantor's
common stock, par value $250.00 per share) and (b) the Guarantor
shall not make any payment of interest or principal on or repay,
repurchase or redeem any debt securities issued by the Guarantor
which rank pari passu with or junior to the Debentures.
SECTION 6.2 RANKING.
This Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate
and junior in right of payment to all other liabilities of the
Guarantor, (ii) pari passu with the most senior preferred
securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by
the Guarantor in respect of any
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preferred securities or preference stock of any Affiliate of the Guarantor,
and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION.
This Preferred Securities Guarantee shall terminate upon
(i) full payment of the Redemption Price of all Preferred
Securities, (ii) upon full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Trust,
or (iii) upon distribution of the Debentures to the Holders of the
Preferred Securities. Notwithstanding the foregoing, this
Preferred Securities Guarantee shall continue to be effective or
shall be reinstated, as the case may be, if at any time any Holder
of Preferred Securities must restore payment of any sums paid under
the Preferred Securities or under this Preferred Securities
Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered
Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Indemnified Person in good
faith in accordance with this Preferred Securities Guarantee and in
a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified
Person by this Preferred Securities Guarantee or by law, except
that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the
Guarantor by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by
or on behalf of the Guarantor, including information, opinions,
reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which Distributions to Holders
of Preferred Securities might properly be paid.
SECTION 8.2. INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any loss,
liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of
its powers
13
<PAGE> 19
or duties hereunder. The obligation to indemnify as set
forth in this Section 8.2 shall survive the termination of this
Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred
Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to
the benefit of the Holders of the Preferred Securities then
outstanding.
SECTION 9.2. AMENDMENTS.
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Preferred Securities Guarantee may
only be amended with the prior approval of the Holders of at least
a Majority in liquidation amount of the Preferred Securities. The
provisions of Article VI of the Trust Agreement with respect to
meetings of Holders of the Preferred Securities apply to the giving
of such approval.
SECTION 9.3. NOTICES.
All notices provided for in this Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered
or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the
Preferred Guarantee Trustee's mailing address set forth below (or
such other address as the Preferred Guarantee Trustee may give
notice of to the Holders of the Preferred Securities):
State Street Bank and Trust Company
2 International Place, 5th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Trustee
(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may
give notice of to the Holders of the Preferred Securities):
First Banks, Inc.
135 North Meramec Avenue
St. Louis, Missouri 63105
Attention: Mr. James F. Dierberg
Chairman, President and
Chief Executive Officer
(c) If given to any Holder of Preferred Securities, at the
address set forth on the books and records of the Trust.
14
<PAGE> 20
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by
first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a
changed address of which no notice was given, such notice or other
document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
SECTION 9.4. BENEFIT.
This Preferred Securities Guarantee is solely for the benefit
of the Holders of the Preferred Securities and, subject to
Section 3.1(a), is not separately transferable from the Preferred
Securities.
SECTION 9.5. GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF MISSOURI.
This Preferred Securities Guarantee is executed as of the day
and year first above written.
FIRST BANKS, INC.,
as Guarantor
By:---------------------------------
Name:-------------------------------
Title:------------------------------
STATE STREET BANK AND TRUST COMPANY,
as Preferred Guarantee Trustee
By:---------------------------------
Name:-------------------------------
Title:------------------------------
15
<PAGE> 1
EXHIBIT 5.1
<PAGE> 2
[Letterhead of Lewis, Rice & Fingersh]
December 20, 1996
First Banks, Inc.
135 North Meramec Ave.
St. Louis, Missouri 63105
Attention: Board of Directors
First Preferred Capital Trust
c/o First Banks, Inc.
135 North Meramec Ave.
St. Louis, Missouri 63105
Attention: Administrative Trustees
Gentlemen:
We have acted as counsel to First Banks, Inc., a Missouri
corporation (the "Company"), and First Preferred Capital Trust, a
Delaware statutory business trust ("First Capital"), in connection
with the preparation of a Registration Statement on Form S-2 (the
"Registration Statement") to be filed by the Company and First
Capital with the Securities and Exchange Commission (the "SEC") for
the purpose of registering under the Securities Act of 1933, as
amended, preferred securities (the "Preferred Securities") of First
Capital, subordinated debentures (the "Subordinated Debentures") of
the Company and the guarantee of the Company with respect to the
Preferred Securities (the "Guarantee").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of
(i) the certificate of trust (the "Certificate of Trust") filed by
First Capital with the Secretary of State of the State of Delaware
on December 13, 1996; (ii) the Trust Agreement, dated as of
December 12, 1996, with respect to First Capital; (iii) the form
of the Amended and Restated Trust Agreement with respect to First
Capital; (iv) the form of the Preferred Securities of First
Capital; (v) the form of the Guarantee between the Company and
State Street Bank and Trust Company, as trustee; (vi) the form of
the Subordinated Debentures; and (vii) the form of the indenture
(the "Indenture"), between the Company and State Street Bank and
Trust Company, as trustee, in each case in the form filed as an
exhibit to the Registration Statement. We have also examined
originals or copies, certified, or otherwise identified to our
satisfaction, of such other documents, certificates, and records as
we have deemed necessary or appropriate as a basis for the opinions
set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us
as copies and the authenticity of the originals of such copies. In
examining documents executed by parties other than the Company or
First Capital, we have assumed that such parties had the power,
corporate or otherwise, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all
requisite action, corporate or otherwise, and execution and
delivery by such parties of such documents and that, except as set
forth in paragraphs (1) and (2) below, such documents constitute
valid and binding obligations of such parties. In addition, we
have assumed that the Amended and Restated Trust Agreement of First
Capital, the Preferred Securities of First Capital, the Guarantee,
the Subordinated Debentures and the Indenture, when executed, will
be executed in substantially the form reviewed by us. As to any
facts material to the
<PAGE> 3
opinions expressed herein which were not independently established or
verified, we have relied upon oral or written statements and representations
of officers, trustees, and other representatives of the Company, First
Capital, and others.
We are members of the bar of the states of Missouri and
Illinois, and we express no opinion as to the laws of any other
jurisdiction.
Based upon and subject to the foregoing and to other
qualifications and limitations set forth herein, we are of the
opinion that:
1. After the Indenture has been duly executed and delivered,
the Subordinated Debentures, when duly executed, delivered,
authenticated and issued in accordance with the Indenture and
delivered and paid for as contemplated by the Registration
Statement, will be valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, except to the extent
that enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now
or hereafter in effect relating to creditors' rights generally, and
(ii) general principles of equity regardless of whether
enforceability is considered in a proceeding at law or in equity.
2. The Guarantee, when duly executed and delivered by the
parties hereto, will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except to the extent that enforcement thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium, or other
similar laws now or hereafter in effect relating to creditors'
rights generally, and (ii) general principles of equity regardless
of whether enforceability is considered in a proceeding at law or
in equity.
We hereby consent to the reference to us under the caption
"Validity of Securities" in the Prospectus forming a part of the
Registration Statement and to the inclusion of this legal opinion
as an Exhibit to the Registration Statement.
Very truly yours,
LEWIS, RICE & FINGERSH, L.C.
/s/ Lewis, Rice & Fingersh, L.C.
<PAGE> 1
EXHIBIT 5.2
<PAGE> 2
DECEMBER 20, 1996
First Preferred Capital Trust
c/o First Banks, Inc.
11901 Olive Boulevard
St. Louis, Missouri 63141
Re: First Preferred Capital Trust
-----------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for First Preferred
Capital Trust, a Delaware business trust (the "Trust"), in
connection with the matters set forth herein. At your request,
this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of
originals or copies of the following:
(a) The Certificate of Trust of the Trust, dated December 12,
1996 (the "Certificate"), as filed in the office of the Secretary
of State of the State of Delaware (the "Secretary of State") on
December 13, 1996;
(b) The Trust Agreement of the Trust, dated as of December
12, 1996, among First Banks, Inc., a Missouri corporation (the
"Company"), and the trustees of the Trust named therein;
(c) The Registration Statement (the "Registration Statement")
on Form S-2, including a prospectus (the "Prospectus") relating to
the ---% Preferred Securities of the Trust representing preferred
undivided beneficial interests in the Trust (each, a "Preferred
Security" and collectively, the "Preferred Securities"), as filed
by the Company and the Trust as set forth therein with the
Securities and Exchange Commission on December ---, 1996;
(d) A form of Amended and Restated Trust Agreement of the
Trust, to be entered into among the Company, the trustees of the
Trust named therein, and the holders, from time to time, of
undivided beneficial interests in the Trust (the "Trust
Agreement"), attached as an exhibit to the Registration Statement;
and
(e) A Certificate of Good Standing for the Trust, dated
December ---, 1996, obtained from the Secretary of State.
<PAGE> 3
First Preferred Capital Trust
December 20, 1996
Page 2
Initially capitalized terms used herein and not otherwise
defined are used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed above, and we have
assumed that there exists no provision in any document that we have
not reviewed that bears upon or is inconsistent with the opinions
stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth
therein and the additional matters recited or assumed herein, all
of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic
originals, (ii) the conformity with the originals of all documents
submitted to us as copies or forms, and (iii) the genuineness of
all signatures.
For purposes of this opinion, we have assumed (i) that the
Trust Agreement constitutes the entire agreement among the parties
thereto with respect to the subject matter thereof, including with
respect to the creation, operation and termination of the Trust,
and that the Trust Agreement and the Certificate are in full force
and effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due creation or due organization
or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the
laws of the jurisdiction governing its creation, organization or
formation, (iii) the legal capacity of natural persons who are
parties to the documents examined by us, (iv) that each of the
parties to the documents examined by us has the power and authority
to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all
parties thereto of all documents examined by us, (vi) the receipt
by each Person to whom a Preferred Security is to be issued by the
Trust (collectively, the "Preferred Security Holders") of a
Preferred Security Certificate for such Preferred Security and the
payment for the Preferred Security acquired by it, in accordance
with the Trust Agreement and the Prospectus, and (vii) that the
Preferred Securities are issued and sold to the Preferred Security
Holders in accordance with the Trust Agreement and the Prospectus.
We have not participated in the preparation of the Registration
Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we
have not considered and express no opinion on the laws of any other
jurisdiction, including federal laws and rules and regulations
relating thereto. Our opinions are rendered only with respect to
Delaware laws and rules, regulations and order thereunder which are
currently in effect.
<PAGE> 4
First Preferred Capital Trust
December 20, 1996
Page 3
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have
considered necessary or appropriate, and subject to the
assumptions, qualifications, limitations and exceptions set forth
herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing
in good standing as a business trust under the Delaware Business
Trust Act, 12 Del. C. Sec. 3801, et seq.
------- -- ----
2. The Preferred Securities will represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully
paid and nonassessable undivided beneficial interests in the assets
of the Trust.
3. The Preferred Security Holders, as beneficial owners of
the Trust, will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for
profit organized under the General Corporation Law of the State of
Delaware. We note that the Preferred Security Holders may be
obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration
Statement. In addition, we hereby consent to the use of our name
under the heading "Validity of Securities" in the Prospectus. In
giving the foregoing consents, we do not thereby admit that we come
within the category of Persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior written
consent, this opinion may not be furnished or quoted to, or relied
upon by, and other Person for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
EAM
<PAGE> 1
EXHIBIT 8.1
<PAGE> 2
[Letterhead of Lewis, Rice & Fingersh]
December 20, 1996
First Banks, Inc.
11901 Olive Boulevard
St. Louis, MO 63141
RE: FIRST PREFERRED CAPITAL TRUST
Ladies and Gentlemen:
We have acted as tax counsel to First Banks, Inc., a Missouri
corporation (the "Company"), and to First Preferred Capital Trust,
a statutory business trust created under the laws of Delaware (the
"Trust"), in connection with the proposed issuance of (i) Preferred
Securities (the "Preferred Securities") of the Trust pursuant to
the terms of the Amended and Restated Trust Agreement between the
Company and State Street Bank and Trust Company, as trustee (the
"Trust Agreement"), to be offered in an underwritten public
offering, (ii) Subordinated Debentures (the "Debentures") of the
Company pursuant to the terms of an indenture from the Company to
State Street Bank and Trust Company, as trustee (the "Indenture"),
to be sold by the Company to the Trust, and (iii) the Preferred
Securities Guarantee Agreement of the Company with respect to the
Preferred Securities (the "Guarantee") between the Company and
State Street Bank and Trust Company, as trustee. The Preferred
Securities and the Debentures are to be issued as contemplated by
the registration statement on Form S-2 (the "Registration
Statement") to be filed by the Company and the Trust to register
the issuance of the Preferred Securities, the Debentures and the
Guarantee under the Securities Act of 1933, as amended (the "Act").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of documents, corporate records and
other instruments as we have deemed necessary or appropriate for
purposes of this opinion including (i) the Registration Statement,
(ii) the Form of Indenture attached as an exhibit to the
Registration Statement, (iii) the Form of the Debentures attached
as an exhibit to the Registration Statement (iv) the Form of Trust
Agreement attached as an exhibit to the Registration Statement,
(v) the Form of Guarantee attached as an exhibit to the
Registration Statement, and (vi) the Form of Preferred Security
Certificate attached as an exhibit to the Registration Statement
(collectively the "Documents"). In such examination, we have
assumed the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, the
authenticity of the originals of such latter documents, the
genuineness of all signatures and the correctness of all
representations made therein. We have further assumed that there
are no agreements or understandings contemplated therein other than
those contained in the Documents.
Based upon the foregoing, and assuming (i) the final Documents
will be substantially identical to the forms attached as exhibits to
the Registration Statement, and (ii) full compliance with all the
terms of the final Documents we are of the opinion that the
statements contained in the preliminary prospectus constituting
part of the Registration Statement under the caption "Certain
Federal Income Tax Consequences," insofar as such statements
constitute matters of law or legal conclusions, as qualified
therein, constitute an accurate description, in general terms, of
the indicated United States federal income tax consequences to such
holders.
<PAGE> 3
The opinion expressed above is based on existing provisions of
the Internal Revenue Code of 1986, as amended (the "Code"),
existing Treasury regulations, published interpretations of the
Code and such Treasury regulations by the Internal Revenue Service,
and existing court decisions, any of which could be changed at any
time. Any such changes may or may not be retroactively applied.
We note that there is no authority directly on point dealing with
securities such as the Preferred Securities or of transactions of
the type described herein. Further, you should be aware that
opinions of counsel are not binding on the Internal Revenue Service
or the courts. We express no opinion as to any matters not
specifically covered by the foregoing opinions or as to the effect
on the matters covered by this opinion of the laws of any other
jurisdiction. Additionally, we undertake no obligation to update
this opinion in the event there is either a change in the legal
authorities, in the facts (including the taking of any action by
any party to any of the transactions described in the Documents
relating to such transactions) or in the Documents on which this
opinion is based, or an inaccuracy in any of the representations or
warranties upon which we have relied in rendering this opinion.
This letter is not being delivered for the benefit of, nor may
it be relied upon by, the holders of the Debentures, the Guarantee
or the Preferred Securities or any other party to which it is not
specifically addressed or on which reliance is not expressly
permitted hereby.
We hereby consent to the filing of this opinion as Exhibit to
the Registration Statement and to reference to our firm under the
caption "Certain Federal Income Tax Consequences" and "Validity of
Securities" in the preliminary prospectus constituting a part of
the Registration Statement.
Very truly yours,
Lewis, Rice & Fingersh, L.C
/s/ Lewis, Rice & Fingersh, L.C.
<PAGE> 1
EXHIBIT 10.6
<PAGE> 2
$90,000,000
SECURED CREDIT AGREEMENT
------------------------
($50,000,000 TERM LOAN)
($40,000,000 REVOLVING LOAN)
DATED AS OF JULY 18, 1996
AMONG
FIRST BANKS, INC.
AND
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
HARRIS TRUST AND SAVINGS BANK
THE FROST NATIONAL BANK
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
AND
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS,
AS AGENT
<PAGE> 3
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS 1
Section 1.01. Defined Terms 1
Section 1.02. Accounting Terms 8
ARTICLE II.
AMOUNT AND TERMS OF TERM LOANS 8
Section 2.01. Term Loans 8
Section 2.02. Manner of Disbursement 8
Section 2.03. Interest on Term Loans 8
Section 2.04. Notice of Interest Rate Selection 9
Section 2.05. Repayment of Term Loans; Application of Payments 11
Section 2.06. Optional Prepayment 11
Section 2.07. Term Notes 11
Section 2.08. Method of Payment 12
Section 2.09. Use of Term Loan Proceeds 12
Section 2.10. Advances and Payments 12
Section 2.11. Reimbursement 12
Section 2.12. No Renewal Option 13
ARTICLE III.
AMOUNT AND TERMS OF REVOLVING LOAN AND LETTERS OF CREDIT 13
Section 3.01. Commitments 13
Section 3.02. Revolving Credit 13
Section 3.03. Termination or Reduction of Revolving Loan Commitment 13
Section 3.04. Interest on Revolving Loans. 14
Section 3.05. Notice and Manner of Borrowing 14
Section 3.06. Revolving Notes 16
Section 3.07. Method of Payment 17
Section 3.08. Use of Proceeds 17
Section 3.09. Zero Balance 17
Section 3.10. Advances and Payment 17
Section 3.11. Revolving Loan Commitment Fee 18
Section 3.12. Reimbursement 18
Section 3.13. Agreement to Issue Letters of Credit 18
Section 3.14. Letter of Credit Requests 19
Section 3.15. Letter of Credit Participation 20
Section 3.16. Agreement to Repay Letter of Credit Drawings 21
Section 3.17. Notice of Letter of Credit Outstandings. 23
Section 3.18. Deemed Disbursements; Cash Collateralization 23
Section 3.19. Failure of Any Bank to Make Revolving Loans or
Participate in Letters of Credit 23
Section 3.20. Letter of Credit Fees 24
Section 3.21. Banks Not Required to Extend Credit 25
ARTICLE IV.
CONDITIONS PRECEDENT 25
Section 4.01. Conditions Precedent to the Term Loans and Initial Revolving Loans 25
i
<PAGE> 4
Section 4.02. Conditions Precedent to All Revolving Loans 26
ARTICLE V.
REPRESENTATIONS AND WARRANTIES 27
Section 5.01. Incorporation, Good Standing, and Due Qualification 27
Section 5.02. Corporate Power and Authority 27
Section 5.03. Legally Enforceable Agreement 28
Section 5.04. Financial Statements; Financial Condition 28
Section 5.05. Other Agreements 28
Section 5.06. Litigation 28
Section 5.07. Ownership of Subsidiaries 29
Section 5.08. ERISA 29
Section 5.09. Taxes 29
ARTICLE VI.
AFFIRMATIVE COVENANTS 29
Section 6.01. Maintenance of Existence 29
Section 6.02. Maintenance of Records 30
Section 6.03. Maintenance of Subsidiaries 30
Section 6.04. Compliance With Laws 30
Section 6.05. Right of Inspection 30
Section 6.06. Reporting Requirements 30
Section 6.07. Operations 32
Section 6.08. Additional Collateral 32
ARTICLE VII.
NEGATIVE COVENANTS 32
Section 7.01. Liens 32
Section 7.02. Mergers, Etc 32
Section 7.03. Indebtedness 33
Section 7.04. Dividends 33
Section 7.05. Stock Issue; Additional Issue of Stock of Subsidiary 33
Section 7.07. Loans 34
Section 7.08. Continuation of Business 34
ARTICLE VIII.
FINANCIAL COVENANTS 35
Section 8.01. Tier I Leverage Ratio 35
Section 8.02. Tier I Leverage Ratio of Subsidiaries 35
Section 8.03. Tier I Risk Based Capital Ratio 35
Section 8.04. Total Risk Based Capital Ratio 35
Section 8.05. Loan Loss Reserve 36
Section 8.06. Net Income to Average Total Assets 36
Section 8.07. Non-Performing Assets 36
ARTICLE IX.
EVENTS OF DEFAULT 36
Section 9.01. Events of Default 36
ARTICLE X.
AUTHORITY AND RESPONSIBILITIES OF AGENT 39
Section 10.01. Grant of Authority 39
Section 10.02. Action upon Indemnification Instructions 39
ii
<PAGE> 5
Section 10.03. Reports; Responsibility of the Agent; Disclaimer 39
Section 10.04. Correction of Errors 40
Section 10.05. Expenses; Indemnification 40
Section 10.06. Rights as Bank 41
Section 10.07. Representation of Each Bank 41
Section 10.08. Rights to Resign; Appointment of a Successor Agent 41
Section 10.09. Notice of Default 42
Section 10.10. Agent Compensation 42
ARTICLE XI.
MISCELLANEOUS 42
Section 11.01. Capital Adequacy Reimbursement 42
Section 11.02. Amendments, Etc 43
Section 11.03. Notices, Etc 43
Section 11.04. No Waiver; Remedies 43
Section 11.05. Successors and Assigns 43
Section 11.06. Costs and Expenses 44
Section 11.07. Right of Setoff 44
Section 11.08. Sharing of Setoffs 44
Section 11.09. Governing Law; Jurisdiction and Venue 45
Section 11.10. Severability of Provisions 45
Section 11.11. Counterparts 45
Section 11.12. Headings 45
Section 11.13. Oral Agreements 45
EXHIBIT A
TERM LOAN COMMITMENT AMOUNTS 47
EXHIBIT B
TERM NOTE 48
EXHIBIT C
NOTICE OF INTEREST RATE SELECTION 50
EXHIBIT D
REVOLVING LOAN COMMITMENT AMOUNTS 51
EXHIBIT E
REVOLVING CREDIT NOTE 52
EXHIBIT F
NOTICE OF BORROWING 54
EXHIBIT G
PLEDGE AGREEMENT 55
iii
<PAGE> 6
EXHIBIT G-1
SUBSIDIARY PLEDGE AGREEMENT 61
EXHIBIT H
CERTIFICATE OF COMPLIANCE 67
EXHIBIT I
FORM OF LETTER OF CREDIT 72
EXHIBIT J
LETTER OF CREDIT REQUEST 75
EXHIBIT K
FORM OF BORROWER'S COUNSEL OPINION 77
EXHIBIT L
PLEDGED SUBSIDIARIES 83
EXHIBIT M
LIST OF AFFILIATES 84
EXHIBIT N
IDENTIFICATION OF FINANCIAL STATEMENTS 85
EXHIBIT O
OWNERSHIP OF SUBSIDIARIES 86
EXHIBIT P
LIST OF ADDRESSES 88
SCHEDULE 3.13
OUTSTANDING LETTERS OF CREDIT 90
SCHEDULE 5.05
OTHER AGREEMENTS 91
SCHEDULE 5.06
iv
<PAGE> 7
LITIGATION 92
SCHEDULE 5.08
PLAN TERMINATIONS 93
SCHEDULE 9.01(10)
REGULATORY ACTIONS 94
</TABLE>
v
<PAGE> 8
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT dated as of July 18, 1996, is
entered into by and among FIRST BANKS, INC., a Missouri corporation
("Borrower"), and THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, a national
--------
banking association, AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, a
national banking association, HARRIS TRUST AND SAVINGS BANK, an Illinois
state banking corporation, THE FROST NATIONAL BANK, a national banking
association, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national
banking association (each individually a "Bank" and collectively the
"Banks"), and THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, a national banking
association, as Agent.
W I T N E S S E T H T H A T :
WHEREAS, Borrower has requested that the Banks severally make a
term loan to Borrower in the aggregate amount of Fifty Million Dollars
($50,000,000) (as the same may be renewed, extended, amended, rearranged,
restructured, refinanced, replaced or otherwise modified from time to time,
including without limitation, modifications to interest rates or other
payment terms, the "Term Loan"); and
---------
WHEREAS, Borrower has requested that the Banks severally make
available to Borrower a revolving credit and letter of credit facility in
the aggregate amount of Forty Million Dollars ($40,000,000) (as the same may
be renewed, extended, amended, rearranged, restructured, refinanced,
replaced or otherwise modified from time to time, including without
limitation, modifications to interest rates or other payment terms, the
"Revolving Loan"); and
--------------
WHEREAS, the Banks are willing severally to provide such loan
and facility to the Borrower, subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
Section I.01. Defined Terms. As used in this Agreement, the
-------------
following terms have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa):
"Affiliate" means any Person (1) which directly or indirectly
---------
controls, or is controlled by, or is under common control with, the Borrower
or any Subsidiary; (2) which directly or indirectly beneficially owns or
holds (i) five percent (5%) or more of any class of voting stock of Borrower
or any Subsidiary, except any class of voting stock of First Banks America,
Inc., or (ii) five percent (5%) or more of all voting stock of First Banks
America, Inc., or (3) five percent (5%) or more of the voting stock of which
is directly or indirectly beneficially owned or held by Borrower or any
Subsidiary. The term "Control" for the purposes of this Agreement means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise. For the purposes
of the foregoing definition, a shareholder of Borrower
1
<PAGE> 9
shall not be deemed to be directly or indirectly controlling or controlled by
the Borrower or a subsidiary, provided the person in question will not receive
any proceeds from the Loans.
"Agent" means The Boatmen's National Bank of St. Louis, acting
-----
in its capacity as Agent pursuant to Article X hereof and any duly appointed
successor.
"Agreement" means this Secured Credit Agreement, as amended,
---------
supplemented or modified from time to time.
"Agreement and Plan of Reorganization" has the meaning assigned
------------------------------------
to such term in Section 3.13(1).
"Bank" or "Banks" has the meaning assigned to such term in the
---- -----
preamble to this Agreement.
"Borrower" has the meaning assigned to such term in the preamble
--------
of this Agreement.
"Business Day" means any day other than a Saturday, Sunday, or
------------
other day on which commercial banks are authorized or required to close
under the laws of the States of Missouri, Illinois, Texas or California.
"Call Report" has the meaning assigned to such term in Section
-----------
6.06(4).
"Certificate" has the meaning assigned to such term in Section
-----------
3.05.
"Collateral" means all property which is subject or is to be
----------
subject to the Liens granted by the Pledge Agreement and/or the Subsidiary
Pledge Agreements.
"Commitment" means the collective several commitments of the
----------
Banks in the aggregate original principal amount of $90,000,000, or when
used with reference to a particular Bank, the portion of the collective
several commitments allocated to such Bank, (i) to make loans to the
Borrower pursuant to Section 2.01, in an amount equal to the amount stated
in Exhibit A, and (ii) to make loans to the Borrower pursuant to Section
---------
3.01 and to participate in Letters of Credit pursuant to Section 3.15 in an
amount equal to the amount stated in Exhibit D, as such amount may be
---------
reduced from time to time pursuant to Section 3.03 hereof.
"Corporate Base Rate" means the rate of interest announced by
-------------------
The Boatmen's National Bank of St. Louis (or its successor) from time to
time as its Corporate Base Rate, which rate is not intended or represented
to be the lowest rate of interest charged by such Bank to its borrowers.
"Default" means any of the events specified in Section 9.01,
-------
whether or not any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"Drawing" has the meaning assigned to such term in Section 3.15.
-------
"Equity Capital" for any Person, for any period, means the
--------------
amount set forth on the most recent report on form FRY-9C filed by Borrower
with the Board of Governors of the Federal Reserve System (or any successor
report) applicable to such period as "Total Equity Capital."
2
<PAGE> 10
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Eurodollar Rate" means, for the applicable Interest Period, if
---------------
any, an interest rate per annum equal to the rate per annum (rounded upward
to the nearest whole multiple of 1/16 of 1% per annum, if such average is
not such a multiple) at which deposits in United States Dollars are offered
or available to banks in the London interbank market at 11:00 A.M. (London
time) two (2) Business Days before the first day of such Interest Period as
reported on Telerate Screen page 3750 for a period equal to such Interest
Period for the amount of the subject Eurodollar Rate Loan. The Eurodollar
Rate for each respective Interest Period, if any, shall be determined by the
Agent two (2) Business Days before the first day of such Interest Period.
"Event of Default" means any of the events specified in Section
----------------
9.01, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Federal Funds Rate" means, for any day, the rate per annum
------------------
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates of overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if such day is not
a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the
next succeeding Business Day, and (ii) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day shall
be the average rate quoted to the Agent on such day on such transactions as
determined by the Agent.
"GAAP" means generally accepted accounting principles in the
----
United States as in effect from time to time, including such principles as
are utilized in the preparation of Call Reports and other regulatory reports
required to be filed by Borrower and its Subsidiaries.
"Gain on Sale of Securities" for any Person, for any period,
--------------------------
means the amount set forth on the most recent report on form FRY-9C filed by
Borrower with the Board of Governors of the Federal Reserve System (or any
successor report) applicable to such period as "Realized gains (losses) on
held-to-maturity securities" and "Realized gains (losses) on available
for-sale securities."
"Interest Period" means the period commencing on the date of
---------------
making or conversion to or continuation of a Loan to the Eurodollar Rate.
The Borrower shall have the option to select a one month, two month, or
three month Interest Period; provided, however, that whenever the last day
-------- -------
of any Interest Period would otherwise occur on a day other than a Business
Day, the last day of such Interest Period shall be extended to occur on the
next succeeding Business Day; provided, however, that if such extension
would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur
on the next preceding Business Day. Notwithstanding the foregoing, the
Borrower may not select an Interest Period: (i) if after giving effect
thereto the Borrower will be unable to make a principal payment scheduled to
be made during such Interest Period without paying part of the Loan accruing
at the Eurodollar Rate on a date other than the last day of the Interest
Period applicable thereto; or (ii) which ends after the Term Loan Maturity
Date (with respect to Term Loans) or the Revolving Credit Termination Date
(with respect to Revolving Loans). For purposes
3
<PAGE> 11
of determining an Interest Period, a month means a period starting on one day
in a calendar month and ending on a numerically corresponding day in the next
calendar month, provided, however, if an Interest Period begins on the last
-----------------
day of a month or if there is no numerically corresponding day in the month in
which an Interest Period is to end, then such Interest Period shall end on the
last Business Day of such month.
"L/C Coverage Requirement" means, with respect to each Letter of
------------------------
Credit, the sum of 100% of the Stated Amount of such Letter of Credit plus
the amount of Letter of Credit Fees and other fees expected to become
payable to the Agent and the Banks in respect thereof during the life of
such Letter of Credit which have not theretofore been paid.
"Letter of Credit" has the meaning assigned to such term in
----------------
Section 3.13.
"Letter of Credit Fee" has the meaning assigned to such in
--------------------
Section 3.20.
"Letter of Credit Fee Payment Date" has the meaning assigned to
---------------------------------
such term in Section 3.20.
"Letter of Credit Outstandings" means, at any time, without
-----------------------------
duplication, the sum of (a) the aggregate Stated Amount of all outstanding
Letters of Credit, and (b) the aggregate amount of all Unpaid Drawings.
"Letter of Credit Participation" has the meaning assigned to
------------------------------
such term in Section 3.15.
"Letter of Credit Request" has the meaning assigned to such term
------------------------
in Section 3.14.
"Lien" means any mortgage, deed of trust, pledge, security
----
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement
or preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction to evidence any of the foregoing).
"Loan Loss Reserve" for any Person, for any period, means the
-----------------
amount set forth on the most recent report on form FRY-9C filed by Borrower
with the Board of Governors of the Federal Reserve System (or any successor
report) applicable to such period as "Allowance for loan and lease losses."
"Loan Document(s)" means this Agreement, the Notes, the Pledge
----------------
Agreement, the Subsidiary Pledge Agreements and any and all letter of credit
applications completed by the Borrower pursuant to Section 3.14 hereof.
"Loans" means the Revolving Loans and the Term Loan.
-----
"Majority" has the meaning assigned to such term in Section
--------
10.01.
"Multiemployer Plan" means a Plan described in Section
------------------
4001(a)(3) of ERISA which covers employees of a Borrower or any ERISA
Affiliate.
4
<PAGE> 12
"Net Income" for any period means the amount set forth on the
----------
report on form FRY-9C filed by Borrower with the Board of Governors of the
Federal Reserve System or any successor report applicable to such period as
"Net Income."
"Non-performing Assets" for any Person, for any period, means
---------------------
the sum of the amounts set forth on the most recent report on form FRY-9C
filed by Borrower with the Board of Governors of the Federal Reserve System
(or any successor report) applicable to such period as loans "past due 90
days or more and still accruing," "non-accrual," and "other real estate
owned."
"Notes" means the Revolving Notes and Term Notes.
-----
"Notice of Borrowing" has the meaning assigned to such term in
-------------------
Section 3.05.
"Notice of Interest Rate Selection" has the meaning assigned to
---------------------------------
such in Section 2.04.
"PBGC" means the Pension Benefit Guaranty Corporation or any
----
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other juridical entity of whatever
nature.
"Plan" means any employee benefit or other plan established,
----
maintained, or to which contributions have been made by the Borrower or any
ERISA Affiliate.
"Pledge Agreement" means the collateral pledge agreement in the
----------------
form of Exhibit G, pledging to the Agent for the ratable benefit of the
---------
Banks all of the stock of the Pledged Subsidiaries (exclusive of directors'
qualifying shares of stock) and certain stock acquired after the date of
this Agreement.
"Pledged Subsidiaries" means the Subsidiaries listed on Exhibit L
-------------------- ---------
attached hereto.
"Primary Capital" for any Person, for any period and without
---------------
duplication, means the sum of Equity Capital plus the Loan Loss Reserve of
such Person.
"Prohibited Transaction" means any transaction set forth in
----------------------
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954,
as amended from time to time.
"Repayment Tranche" has the meaning assigned to such term in
-----------------
Section 2.04.
"Reportable Event" means any of the events set forth in Section
----------------
4043 of ERISA.
"Revolving Credit Termination Date" means July 11, 1997.
---------------------------------
"Revolving Loans" has the meaning assigned to such term in
---------------
Section 3.02.
"Revolving Loan Limit" has the meaning assigned to such term in
--------------------
Section 3.02.
"Revolving Loan Commitment" means, as to each Bank, the maximum
-------------------------
amount which such Bank shall be obligated to loan to Borrower as a Revolving
Loan pursuant to Section 3.02 hereof.
5
<PAGE> 13
"Revolving Loan Commitment Fee" has the meaning assigned to such
-----------------------------
term in Section 3.11.
"Revolving Notes" has the meaning assigned to such term in
---------------
Section 3.06.
"St. Charles Letter of Credit" has the meaning assigned to such
----------------------------
term in Section 3.13(1).
"Stated Amount" means, with respect to each Letter of Credit,
-------------
the maximum amount available to be drawn thereunder, determined without
regard to whether any conditions to drawing then could be met.
"Subsidiary" means, as to Borrower, any corporation of which
----------
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which corporation is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by a
Borrower or a Subsidiary of Borrower.
"Subsidiary Pledge Agreements" means the collateral pledge
----------------------------
agreements (subsidiary) in the form of Exhibit G-1, pledging to the Agent
-----------
for the ratable benefit of the Banks all of the stock of the Subsidiary
listed on the Subdiary Pledge Agreement Exhibit A attached thereto
(exclusive of directors' qualifying shares of stock) and certain stock
acquired after the date of this Agreement.
"Term Loans" has the meaning assigned to such term in Section
----------
2.01.
"Term Loan Commitment" means, as to each Bank, the amount which
--------------------
such Bank shall be obligated to loan to Borrower as a Term Loan pursuant to
Section 2.01 hereof.
"Term Loan Maturity Date" means July 12, 2000.
-----------------------
"Term Notes" has the meaning assigned to such term in Section
----------
2.07.
"Tier I Leverage Ratio" means the ratio, expressed as a
---------------------
percentage, of regulatory "core" capital (Tier I) to assets, all as defined
and determined from time to time by applicable bank regulatory authorities.
"Tier I Risk Based Capital Ratio" means the ratio of regulatory
-------------------------------
"core" capital (Tier I) to weighted-risk assets and off-balance sheet items,
all as defined and determined from time to time by applicable bank
regulatory authorities.
"Total Assets" for any Person, for any period, means the amount
------------
set forth on the most recent report on form FRY-9C filed by Borrower with
the Board of Governors of the Federal Reserve System (or any successor
report) applicable to such period as "Total Assets."
"Total Loans" means, at any time, the amount set forth on the
-----------
most recent report on form FRY-9C filed by Borrower with the Board of
Governors of the Federal Reserve System (or any successor report) as the
total of "Loans and Leases, net of unearned income."
6
<PAGE> 14
"Total Risk Based Capital Ratio" of any Person means, at any
------------------------------
time, the ratio of regulatory "core" capital (Tier I) and supplementary
capital elements (Tier II) to weighted-risk assets and off-balance sheet
items, all as defined and determined from time by applicable bank regulatory
authorities.
"Unpaid Drawings" means as of any date, the aggregate of all
---------------
payments made by the Agent under any Letter of Credit which have not been
reimbursed by the Borrower pursuant to Section 3.16.
"Watch List" means a summary of loans or other assets of
----------
Borrower and each Pledged Subsidiary which have been adversely classified or
placed on a "watch list" by Borrower or a Pledged Subsidiary, as the case
may be, for the purpose of adverse classification of loans.
Section I.02. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in the preparation of the financial statements
and reports referred to in Section 6.06, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such
principles.
ARTICLE II.
AMOUNT AND TERMS OF TERM LOANS
------------------------------
Section II.01. Term Loans.
----------
(1) Each Bank, severally and not jointly, shall, upon the
terms and subject to the conditions of this Agreement (including, without
limitation, the terms and conditions of Article IV hereof), lend to the
Borrower the proceeds of a term loan, in the amounts equal to each Bank's
Term Loan Commitment as set forth opposite such Bank's name in Exhibit A
---------
(collectively the "Term Loan").
---------
(2) The aggregate principal amount of the Term Loans shall be
Fifty Million Dollars ($50,000,000) and shall be made severally by the Banks
in accordance with their respective Term Loan Commitments.
(3) The Term Loans will bear interest in accordance with the
terms of Section 2.03.
(4) The failure of any Bank to make a Term Loan shall not
relieve any other Bank of its obligation to make a Term Loan pursuant to the
terms and conditions of this Agreement.
Section II.02. Manner of Disbursement. The Term Loans shall
----------------------
be disbursed, in full, on the date hereof.
Section II.03. Interest on Term Loans. The Borrower shall
----------------------
pay interest on the outstanding and unpaid principal amount of the Term
Loans from the date hereof until they shall be due (at maturity, whether by
reason of acceleration or otherwise) at the following intervals and at the
following rates per annum:
(1) Corporate Base Rate. When accruing interest at the
-------------------
Corporate Base Rate, a fluctuating rate per annum equal to the Corporate
Base Rate in effect from time to time. Any change in the interest rate
resulting from a change in the Corporate Base Rate shall become effective as
of the opening of business on the day on which such change in the Corporate
Base
7
<PAGE> 15
Rate shall become effective. Interest shall be calculated on the basis
of the actual number of days elapsed over a year of 360 days. Interest
shall be paid in immediately available funds on or before 12:00 Noon (St.
Louis time) on the first day of each calendar month beginning August 1,
1996, and on the Term Loan Maturity Date. In the event of receipt of funds
after 12:00 Noon (St. Louis time) on the date of payment, the funds shall be
deemed to be received on the next Business Day, and the accrual of interest
shall be calculated accordingly;
(2) Eurodollar Rate. When accruing interest at the Eurodollar
---------------
Rate, a rate per annum equal at all times during the applicable Interest
Period to the sum of the Eurodollar Rate for such Interest Period plus one
and one-half percent (1.5%) per annum. Interest shall be calculated on the
basis of the actual number of days elapsed over a year of 360 days.
Interest shall be paid in immediately available funds on or before 12:00
Noon (St. Louis time) on the first day of each calendar month beginning
August 1, 1996, and on the Term Loan Maturity Date. In the event of receipt
of funds after 12:00 Noon (St. Louis time) on the date of payment, the funds
shall be deemed to be received on the next Business Day, and the accrual of
interest will be calculated accordingly;
provided, however, that, from and after the occurrence of an Event of
- -------- -------
Default and unless and until such Event of Default is waived, the Borrower
shall pay interest on the unpaid principal amount of the Term Loan at a rate
per annum equal at all times to four percent (4%) per annum above the
interest rate otherwise in effect from time to time, such interest being
payable on demand. The Agent shall give prompt notice to the Borrower and
the Banks of the applicable interest rate determined by the Agent for
purposes of this Section 2.03
Section II.04. Notice of Interest Rate Selection.
---------------------------------
(1) Except as otherwise provided herein, the Term Loan shall
bear interest at the Corporate Base Rate. Subject to the terms and
conditions of this Agreement, Borrower shall have the option to have
interest on the Term Loan accrue at the Eurodollar Rate or at the Corporate
Base Rate; provided, however, that the Borrower shall, at the end of an
-------- -------
Interest Period, have the option to have interest on a portion of the Term
Loan in an amount equal to the next principal payment then scheduled to be
made hereunder (the "Repayment Tranche") accrue at the Corporate Base Rate
-----------------
and have interest on the remaining portion of the Term Loan accrue at the
Eurodollar Rate. The Borrower shall give the Agent (who shall promptly
notify the Banks) telephonic notice (followed immediately by written or
telex notice) of any election by Borrower to change the interest rate
applicable to the Term Loan or to select a new Interest Period in the event
the Term Loan is then accruing interest at the Eurodollar Rate. Such notice
of interest rate selection (a "Notice of Interest Rate Selection") shall be
---------------------------------
substantially in the form of Exhibit C hereto. At least three (3) Business
---------
Days before (i) the date on which Borrower desires to convert the interest
rate applicable to the Term Loan from the Corporate Base Rate to the
Eurodollar Rate or (ii) the end of the then current Interest Period, the
Borrower shall give the Agent (who shall promptly notify the Banks) a Notice
of Interest Rate Selection specifying the new Interest Period; if no such
notice is given (or, if Borrower is not entitled to deliver such notice
pursuant to the terms hereof), the Term Loan shall bear interest at the
Corporate Base Rate from and after the expiration of such Interest Period.
The Borrower shall have no right to effect the conversion of the applicable
interest rate from the Eurodollar Rate to the Corporate Base Rate other than
as of the end of an Interest Period. All notices given under this Section
2.04 shall be irrevocable and binding on the Borrower and telephonic notices
shall be given not later than 11:00 A.M. (St. Louis time) on the day which
is not later than the number of Business Days specified above for such
notice. If a Default or Event of Default exists hereunder, the Borrower
shall not have the right to request a Eurodollar Rate of interest, and in
the event the Term Loan is then accruing at the Eurodollar Rate, the then
current interest rate (if after the occurrence of an Event of Default) shall
be revised to be the Eurodollar
8
<PAGE> 16
Rate plus five and one-half percent (5.5%) (as set forth in Section 2.03) and
at the end of the then current Interest Period the Term Loan, if then accruing
at the Eurodollar Rate and such Default or Event of Default is then
continuing, shall immediately and automatically and without the necessity of
any further action by the Borrower, the Banks, or the Agent, accrue at the
Corporate Base Rate (plus four percent (4%) if after the occurrence of an
Event of Default) in the same principal amount, and any costs and expenses
incurred by virtue of such conversion (including without limitation the costs
and expenses identified in Section 11.06(2)) shall be promptly paid by
Borrower to the Agent on the demand of the Agent and the outstanding principal
balance of the Term Loan shall thereafter accrue at the Corporate Base Rate
(plus four percent (4%) if after the occurrence of an Event of Default).
(2) Anything in subsection (1) above to the contrary
notwithstanding,
(a) if the Agent shall notify the Borrower that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other governmental
authority asserts that it is unlawful, for the Agent or any of the Banks to
perform its obligations hereunder, the right of Borrower to continue or
convert the Term Loan to the Eurodollar Rate shall be suspended until the
Agent shall notify the Borrower that the circumstances causing such
suspension no longer exist, and the outstanding portion of the Term Loan
accruing at the Eurodollar Rate shall immediately and automatically upon the
sending of such notice and without the necessity of any further action by
the Borrower, the Banks, or the Agent accrue at the Corporate Base Rate in
the same principal amount, and any costs and expenses incurred by virtue of
such conversion (including without limitation the costs and expenses
identified in Section 11.06(2)) shall be promptly paid by Borrower to the
Agent on the demand of the Agent; and
(b) if the Agent is unable, after reasonable efforts,
due to prevailing market conditions, to provide timely information for the
determination of the Eurodollar Rate, or is otherwise unable to determine
the Eurodollar Rate at any time, the right of the Borrower to select,
continue or convert the Term Loan to the Eurodollar Rate shall be suspended
until the Agent shall notify Borrower that the circumstances causing such
suspension no longer exist, and the outstanding principal balance of the
Term Loan shall accrue at the Corporate Base Rate.
Section II.05. Repayment of Term Loans; Application of
---------------------------------------
Payments. The Term Loans in the aggregate shall be due and payable and
- --------
shall be repaid by the Borrower as follows:
(1) Beginning August 1, 1996, and on the 1st day of each
November, February, May and August thereafter until May 1, 2000, Borrower
shall pay quarterly installments of principal in the amount of Two Million
Five Hundred Thousand Dollars ($2,500,000) each;
(2) On the Term Loan Maturity Date, Borrower shall pay all
unpaid principal and accrued and unpaid interest under the Term Loan.
9
<PAGE> 17
Section II.06. Optional Prepayment.
-------------------
(1) If the outstanding balance of the Revolving Notes
hereunder is zero ($00.00), the Borrower, upon five (5) Business Days prior
written notice to the Agent, may prepay the Term Loan in whole or in part,
without premium or penalty, by paying the principal amount to be prepaid
together with accrued and unpaid interest thereon to the date of prepayment;
provided, however, that from time to time, including such times when the
- -------- -------
outstanding balance of the Revolving Notes is greater than zero ($0.00), the
Borrower, upon five (5) Business Days prior written notice to the Agent, may
prepay the Repayment Tranche in whole, but not in part, without premium or
penalty, by paying the principal amount to be prepaid together with accrued
and unpaid interest thereon to the date of prepayment. If Borrower prepays
the Term Loan, or a portion thereof, which is accruing at the Eurodollar
Rate, the Borrower shall compensate the Agent for the account of the Banks
in accordance with Section 11.06(2).
(2) Each notice of prepayment shall specify the date and
amount of such prepayment and that it relates to the Term Loan. Any notice
of prepayment shall be irrevocable. The Agent shall promptly notify the
Banks of its receipt of such notice of prepayment. Each partial prepayment
of the Term Loan (other than prepayments of the Repayment Tranche) shall be
in an aggregate principal amount which is the lesser of (i) the then
outstanding principal balance of the Term Loan, or (ii) Five Hundred
Thousand Dollars ($500,000) and integral multiples of Fifty Thousand Dollars
($50,000) in excess thereof, and shall be applied to the reduction of
principal in the inverse order of maturity. Each prepayment of the
Repayment Tranche shall be in the aggregate principal amount of the
Repayment Tranche and shall be applied to the reduction of principal in the
forward order of maturity.
(3) Amounts prepaid pursuant to this Section 2.06 may not be
reborrowed.
Section II.07. Term Notes. The Term Loan made by each Bank
----------
and the Borrower's obligation to repay such Term Loan shall be evidenced by,
and be payable with interest in accordance with the terms of this Agreement
and a term note of the Borrower payable to the order of that Bank
(collectively, the "Term Notes"). Each Term Note shall (i) be dated the
----------
date hereof, (ii) be in the original principal amount equal to that Bank's
Term Loan Commitment as set forth opposite such Bank's name in Exhibit A,
---------
and (iii) be executed by a duly authorized officer of the Borrower. Each
Bank's Term Note shall be in substantially the form of Exhibit B.
---------
Section II.08. Method of Payment. Borrower shall make each
-----------------
payment under the Term Notes (including prepayments) not later than 12:00
Noon (St. Louis time) on the date when due in lawful money of the United
States to the Agent by wire transfer of federal funds. Upon receipt of such
payment the Agent shall immediately remit to each Bank by wire transfer of
federal funds the amount of the payment received which is due each Bank
under the Term Note held by each Bank or otherwise under this Agreement. In
the event of receipt of funds after 12:00 Noon (St. Louis time) on the date
of payment, the funds shall be deemed to be received on the next Business
Day and the accrual of interest will be calculated accordingly. Whenever
any payment to be made under this Agreement or under the Term Notes shall be
stated to be due on a day which is not a Business Day, the amount of such
payment shall be made on the next succeeding Business Day, the amount of
such payment, in such case, to include all interest and fees accrued to the
date of actual payment.
Section II.09. Use of Term Loan Proceeds. The proceeds of
-------------------------
the Term Loan hereunder shall be used by Borrower to refinance existing
acquisition debt of Borrower. The Borrower will not use any part of such
proceeds for the purposes of: (i) paying dividends on or other distributions
with respect to the capital stock of Borrower; or (ii) purchasing or
carrying any
10
<PAGE> 18
margin stock within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System or to extend credit to others for the purpose of
purchasing of carrying any such margin stock.
Section II.10. Advances and Payments. The Term Loans shall
---------------------
be made by each of the Banks concurrently. Each payment and prepayment of
the Term Loan and the Term Notes made to the Agent for the account of the
Banks shall be made pro rata on the basis of each Bank's Term Loan
Commitment as set forth in Exhibit A.
---------
Section II.11. Reimbursement.
-------------
Whenever any Bank shall sustain or incur any losses or
out-of-pocket expenses in connection with:
(1) the failure by the Borrower to pay the principal amount of
the Term Loan when due (whether at maturity, by reason of
acceleration, notice of prepayment/termination by Borrower or
otherwise);
(2) the repayment of overdue amounts of the Term Loan; or
(3) the acceleration of the maturity date of the Term Notes by
reason of the occurrence of an Event of Default,
the Borrower shall pay to the Agent, upon its demand and for the
account of the Banks, an amount certified in writing by the Agent as
the amount required to reimburse the Banks and the Agent for all
reasonable losses and out-of-pocket expenses claimed. All
determinations, estimates, assumptions, allocations and the like
required for the determination thereof shall be made by the Agent in
good faith and the Agent's determination thereof shall be final and
binding and conclusive upon the Borrower in the absence of manifest
error.
Section II.12. No Renewal Option. This Agreement may not be
-----------------
extended in relation to the Term Loan made pursuant to this Article
II, irrespective of whether this Agreement shall be extended in
relation to the Revolving Loans pursuant to Article III, except upon
the mutual written consent of the Borrower and each Bank.
ARTICLE III.
AMOUNT AND TERMS OF REVOLVING LOAN AND LETTERS OF CREDIT
--------------------------------------------------------
Section III.01. Commitments. Subject to the terms and
-----------
conditions of this Agreement (including, without limitation, the terms and
conditions of Article IV hereof), the Banks severally and not jointly agree
----------
from time to time on any Business Day during the period from the date of
this Agreement to the Revolving Credit Termination Date to:
(1) make Loans to the Borrower as set forth in Section 3.02
and subject to the terms and conditions of this Agreement; and
(2) issue for the account of the Borrower (in the case of the
Agent) or participate in (in the case of all other Banks) Letters
of Credit as set forth in Sections 3.13 and 3.15 and subject to the
terms and conditions of this Agreement.
11
<PAGE> 19
Section III.02. Revolving Credit. The Banks, severally and
----------------
not jointly, shall, upon the terms and conditions of this Agreement, make
loans (collectively, the "Revolving Loans") to the Borrower from time to
---------------
time during the period from the date hereof up to but not including the
Revolving Credit Termination Date in individual amounts not to exceed each
Bank's Revolving Loan Commitment as set forth opposite such Bank's name in
Exhibit D, the aggregate principal amount of which at any time shall not
- ---------
exceed Forty Million Dollars ($40,000,000) (the "Revolving Loan Limit") .
--------------------
Any amounts advanced and repaid by Borrower shall be treated as prepayments
and shall be eligible for reborrowing by Borrower in the absence of a
Default or an Event of Default, subject to the terms and conditions of this
Agreement.
Section III.03. Termination or Reduction of Revolving Loan
------------------------------------------
Commitment. The Borrower shall have the right, upon at least fifteen (15)
- ----------
Business Days' notice to the Agent, to terminate in whole or reduce in part
the unused portion of the Revolving Loan Commitment. Any such reduction by
Borrower of the Revolving Loan Commitment shall result in a pro rata
reduction of each Bank's Revolving Loan Commitment.
Section III.04. Interest on Revolving Loans. The Borrower
---------------------------
shall pay interest on the outstanding and unpaid principal amount of the
Revolving Loans made under this Agreement at the following intervals and at
the following rates per annum:
(1) Corporate Base Rate. If such Revolving Loan is accruing
-------------------
at the Corporate Base Rate, a fluctuating rate per annum equal to the
Corporate Base Rate in effect from time to time. Any change in the
interest rate resulting from a change in the Corporate Base Rate shall
become effective as of the opening of business on the day on which such
change in the Corporate Base Rate shall become effective. Interest shall
be calculated on the basis of the actual number of days elapsed over a
year of 360 days. Interest shall be paid in the immediately available
funds on or before 12:00 Noon (St. Louis time) on the first day of each
calendar month beginning August 1, 1996, and on the Revolving Credit
Termination Date. In the event of receipt of funds after 12:00 Noon (St.
Louis time) on the date of payment, the funds shall be deemed to be
received on the next Business Day, and the accrual of interest will be
calculated accordingly;
(2) Eurodollar Rate. If such Revolving Loan is accruing at the
---------------
Eurodollar Rate, a rate per annum equal at all times during the applicable
Interest Period for such Revolving Loan to the sum of the Eurodollar Rate
for such Interest Period plus one and one-quarter percent (1.25%) per
annum, payable on the first day of each calendar month and on the
Revolving Credit Termination Date. Interest shall be calculated on the
basis of the actual number of days elapsed over a year of 360 days.
Interest shall be paid in the immediately available funds on or before
12:00 Noon (St. Louis time) on the first day of each calendar month
beginning August 1, 1996 and on the Revolving Credit Termination Date. In
the event of receipt of funds after 12:00 Noon (St. Louis time) on the
date of payment, the funds shall be deemed to be received on the next
Business Day, and the accrual of interest will be calculated accordingly;
provided, however, that, from and after the occurrence of an Event of
-------- -------
Default and unless and until such Event of Default is waived, the Borrower
shall pay interest on the unpaid principal amount of the Revolving Loan at
a rate per annum equal at all times to four percent (4%) per annum above
the interest rate otherwise in effect from time to time with respect to
each Revolving Loan then outstanding, such interest being payable on
demand. The Agent shall give prompt notice to the Borrower and the Banks
of the applicable interest rate determined by the Agent for purposes of
this Section 3.04.
12
<PAGE> 20
Section III.05. Notice and Manner of Borrowing.
------------------------------
(1) The Borrower shall give the Agent (who shall promptly
notify the Banks) telephonic notice (followed immediately by written or
telex notice) of any request for a Revolving Loan under this Agreement at
least five (5) Business Days before each Revolving Loan, specifying (i) the
date, purpose and amount thereof, and (ii) the interest rate applicable to
such Revolving Loan. Such notice of borrowing (a "Notice of Borrowing")
-------------------
shall be substantially in the form of Exhibit F hereto. Each such request
---------
shall be accompanied by a Compliance Certificate (the "Certificate") in the
-----------
form of Exhibit H hereto. At least three (3) Business Days before the end
---------
of each Interest Period, the Borrower shall give the Agent (who shall
promptly notify the Banks) a Notice of Borrowing with respect to the
relevant Revolving Loan accruing at the Eurodollar Rate specifying the new
Interest Period or, in the event that the relevant Revolving Loan is to
accrue at the Corporate Base Rate, specifying the same. In the event that
in any Notice of Borrowing hereunder the interest rate of the Revolving Loan
to be advanced is not specified (or if Borrower is not entitled to request a
Eurodollar Rate loan pursuant to the terms hereof), the Revolving Loan to be
advanced shall accrue at the Corporate Base Rate. Each Revolving Loan shall
be in an amount of at least One Million Dollars ($1,000,000) and integral
multiples of One Hundred Thousand Dollars ($100,000) in excess thereof or,
if less, the unused amount of the Revolving Loan Commitment. Not later than
2:00 P.M. (St. Louis time) on the date of such Revolving Loan and upon
fulfillment of the applicable conditions set forth herein, the Banks via the
Agent will make such Revolving Loan available to the Borrower in immediately
available funds by wire transfer of federal funds to the Borrower. Upon the
request (in writing) of the Borrower, the Agent and the Banks shall use
their reasonable best efforts to make such Revolving Loans available to the
Borrower prior to 2:00 P.M. (St. Louis time), provided, however, neither the
-------- -------
Agent nor the Banks shall have any liability to the Borrower or any other
Person for any failure to provide such funds prior to 2:00 P.M. (St. Louis
time) pursuant to such request. All notices given under this Section 3.04
shall be irrevocable, and telephonic notices shall be given not later than
11:00 A.M. (St. Louis time) on the day which is not later than the number of
Business Days specified above for such notice. If a Default or Event of
Default exists hereunder, the Borrower shall not have the right to request a
Eurodollar Rate of interest, the then current interest rate with respect to
Revolving Loans then accruing at the Eurodollar Rate (if after the
occurrence of an Event of Default) shall be revised to be the Eurodollar
Rate plus five and one-quarter percent (5.25%) (as set forth in Section
3.04), and at the end of an Interest Period if such Default or Event of
Default still exists, a Revolving Loan accruing at the Eurodollar Rate shall
immediately and automatically, and without necessity of any further act by
the Borrower, the Banks or the Agent be refinanced by a Revolving Loan
accruing at the Corporate Base Rate (plus four percent (4%) if after the
occurrence of an Event of Default) in the same principal amount, and any
costs and expenses incurred by virtue of such refinancing (including without
limitation the costs and expenses identified in Section 11.06(2)) shall be
promptly paid by Borrower to the Agent on the demand of the Agent, and all
the Revolving Loans shall thereafter accrue at the Corporate Base Rate (plus
four percent (4%) if after the occurrence of an Event of Default).
(2) Anything in subsection (1) above to the contrary
notwithstanding,
(a) if the Agent shall notify the Borrower that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other governmental
authority asserts that it is unlawful, for the Agent or any of the Banks to
perform its obligations hereunder with respect to the making of a Revolving
Loan accruing at the Eurodollar Rate or to fund or maintain a Revolving Loan
at the Eurodollar Rate hereunder, the right of the Borrower to select,
continue or convert a Revolving Loan to the Eurodollar Rate shall be
suspended until the Agent shall notify the Borrower that the circumstances
causing such
13
<PAGE> 21
suspension no longer exist, and the outstanding Revolving Loans accruing at
the Eurodollar Rate shall immediately and automatically upon the sending of
such notice and without the necessity of any further act by the Borrower, the
Banks or the Agent be refinanced by Revolving Loans in the same principal
amount, and any costs and expenses incurred by virtue of such refinancing
(including without limitation the costs and expenses identified in Section
11.06(2)) shall be promptly paid by Borrower to the Agent on the demand of the
Agent and all of the Revolving Loans shall thereafter accrue at the Corporate
Base Rate;
(b) if the Agent is unable, after reasonable efforts,
due to prevailing market conditions, to provide timely information for the
determination of the Eurodollar Rate, or is otherwise unable to determine
the Eurodollar Rate at any time, the right of the Borrower to select,
continue or convert a Revolving Loan to the Eurodollar Rate shall be
suspended until the Agent shall notify Borrower that the circumstances
causing such suspension no longer exist, and the requested Revolving Loan
shall accrue at the Corporate Base Rate; and
(c) if, at any time, five (5) or more Revolving Loans
are accruing at an interest rate based upon the Eurodollar Rate with
Interest Periods ending on different days, Borrower shall not have the right
to select the Eurodollar Rate as the interest rate applicable to any new
Revolving Loan or convert the interest rate applicable to an existing
Revolving Loan from the Corporate Base Rate to the Eurodollar Rate.
(3) The Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of a Notice of Borrowing which specifies a
request for a Eurodollar Rate of interest, the Borrower shall indemnify the
Agent and the Banks against any loss, reasonable costs or expense incurred
by the Agent and/or the Banks as a result of any failure to fulfill on or
before the date specified in the Notice of Borrowing as the date of the
Revolving Loan the applicable conditions set forth in Article IV, including,
without limitation, any loss (including loss of anticipated profits), cost
or expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by the Agent and/or the Banks to fund the Eurodollar
Rate of interest when such Revolving Loan, as a result of such failure, is
not made on such date.
Section III.06. Revolving Notes. The Revolving Loan made by
---------------
each Bank and the Borrower's obligation to repay such Revolving Loan shall
be evidenced by, and be payable with interest in accordance with the terms
of, this Agreement and a revolving note of the Borrower payable to the order
of that Bank (collectively, the "Revolving Notes"). Each Revolving Note
---------------
shall (i) be dated the date hereof, (ii) be in the original principal amount
equal to that Bank's Revolving Loan Commitment as set forth opposite such
Bank's name in Exhibit D, and (iii) be executed by duly authorized officers
---------
of the Borrower. Each Bank's Revolving Note shall be in substantially the
form of Exhibit E. The failure of any Bank to make a Revolving Loan shall
---------
not relieve any other Bank of its obligation to make a Revolving Loan
pursuant to the terms and conditions of this Agreement. When used in this
Agreement, the term "Revolving Note" or "Revolving Notes" shall include any
extensions, modifications, renewals, refundings, replacements or
restatements thereof.
Section III.07. Method of Payment. Borrower shall make each
-----------------
payment under this Agreement and under the Revolving Notes not later than
12:00 Noon (St. Louis time) on the date when due in lawful money of the
United States to the Agent by wire transfer of federal funds. Upon receipt
of such payment the Agent shall immediately remit to each Bank by wire
transfer of federal funds the amount of the payment received which is due
each Bank under the Revolving Note held by each Bank or otherwise under this
Agreement. In the event of receipt of funds after 12:00 Noon (St. Louis
time) on the date of payment, the funds shall be deemed to be received on
the next Business Day and the accrual of interest will be calculated
accordingly. Whenever any payment to be made under this Agreement or under
a Revolving Note shall be stated to be due on a
14
<PAGE> 22
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day, the amount of such payment, in such case, to include
all interest or fees accrued to the date of actual payment.
Section III.08. Use of Proceeds. The proceeds of the
---------------
Revolving Loans hereunder shall be used by Borrower to finance the
acquisition by Borrower of banks and thrift institutions and their holding
companies, including, without limitation, the refinancing of existing
indebtedness of the Borrower incurred in connection with prior bank and bank
holding company acquisitions. The Borrower will not, directly or
indirectly, use any part of the proceeds of the Revolving Loans for the
purpose of: (i) paying dividends on or other distributions with respect to
capital stock of Borrower; (ii) paying interest on outstanding debt of
Borrower; or (iii) purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
Section III.09. Zero Balance. The Banks and the Borrower
------------
acknowledge that the outstanding balance of the Revolving Notes may be zero
($00.00) from time to time, and that prior to the Revolving Credit
Termination Date such fact shall not mean the Revolving Loan Commitment and
the availability of the Revolving Loans have been terminated.
Section III.10. Advances and Payment. The Revolving Loans
--------------------
shall be made by each of the Banks concurrently. Each payment and
prepayment of the Revolving Loans made to the Agent for the account of the
Banks shall be made pro rata on the basis of each Bank's Revolving Loan
Commitment as set forth in Exhibit D. If the Borrower prepays any Revolving
---------
Loan or a portion thereof which is accruing at the Eurodollar Rate, the
Borrower shall compensate the Banks in accordance with Section 11.06(2).
Any such prepayment shall be made upon at least three (3) Business Days'
notice to the Agent stating the proposed date and aggregate principal amount
of the prepayment, and if such notice is given, the Borrower shall prepay
such principal amount of the Revolving Loan together with accrued interest
to the date of such prepayment on the principal amount prepaid; provided,
--------
however, that each partial prepayment shall be in an aggregate principal
- -------
amount of not less than One Hundred Thousand Dollars ($100,000) and integral
multiples of Fifty Thousand Dollars ($50,000) in excess thereof, and
provided further, that a partial prepayment shall not reduce the principal
- ----------------
balance of each Revolving Loan below the minimum levels prescribed in
Section 3.05. In the event more than one Revolving Loan accruing at the
Eurodollar Rate is outstanding at the time of any such prepayment, the
Borrower shall have the right to specify which such Revolving Loan is to be
prepaid by the Borrower.
Section III.11. Revolving Loan Commitment Fee. Borrower shall
-----------------------------
pay to Agent for the account of the Banks on a pro-rata basis, within twenty
(20) days from the date of the Agent's invoice therefor, a Revolving Loan
Commitment Fee (the "Revolving Loan Commitment Fee") at the rate of
-----------------------------
one-eighth of one percent (0.125%) per annum on the average daily unused
portion of the Revolving Loan Commitment. The Revolving Loan Commitment Fee
shall be payable quarterly in arrears commencing on November 1, 1996 (which
payment shall include the period commencing on the date hereof), February 1,
1997, May 1, 1997 and on the Revolving Credit Termination Date. The
Revolving Loan Commitment Fee shall be computed on the basis of a year
deemed to consist of 360 days and paid for the actual number of days
elapsed. The amount of Revolving Loans outstanding from time to time and
the amount of Letter of Credit Outstandings from time to time are considered
uses of the Revolving Loan Commitment.
Section III.12. Reimbursement.
-------------
15
<PAGE> 23
Whenever any Bank shall sustain or incur any losses or
out-of-pocket expenses in connection with:
(1) the failure by the Borrower to pay the principal amount of
any Revolving Loan when due (whether at maturity, by reason of acceleration,
notice of prepayment/termination by Borrower or otherwise);
(2) the repayment of overdue amounts of any Revolving Loan;
(3) the acceleration of the maturity date of any Revolving
Note by reason of the occurrence of an Event of Default; or
(4) the failure by Borrower to make any payment to the Agent
with respect to any Letter of Credit when due;
the Borrower shall pay to the Agent, upon its demand and for the account of
the Banks, an amount certified in writing by the Agent as the amount
required to reimburse the Banks for all reasonable losses and out-of-pocket
expenses claimed. All determinations, estimates, assumptions, allocations
and the like required for the determination thereof shall be made by the
Agent in good faith and the Agent's determination thereof shall be final and
binding and conclusive upon the Borrower in the absence of manifest error.
Section III.13. Agreement to Issue Letters of Credit.
------------------------------------
(1) From and including the date hereof to but excluding the
Revolving Credit Termination Date, the Banks severally agree, on the terms
and conditions set forth in this Agreement, that the Borrower from time to
time may request that the Agent issue for the account of the Borrower and in
support of certain obligations of the Borrower to the former shareholders of
St. Charles Federal Bancshares, Inc. arising out of that certain Agreement
and Plan of Reorganization dated March 28, 1994 (the "Agreement and Plan of
---------------------
Reorganization") by and among the Borrower, St. Charles Federal Bancshares
- --------------
Inc. and St. Charles Acquisition Company, on an offering and as available
basis, one or more irrevocable standby letters of credit (each a "Letter of
---------
Credit") in substantially the form attached hereto as Exhibit I and in an
- ------
aggregate Stated Amount not to exceed $1,136,777.28.
For purposes of this Agreement, those currently outstanding letters of
credit described on Schedule 3.13 hereof shall be deemed to be Letters of
-------------
Credit requested by the Borrower under the terms hereof.
(2) The Agent hereby agrees that during the period from and
including the date hereof to but excluding the Revolving Credit Termination
Date, it will, following receipt by the Agent of a Letter of Credit Request,
subject to Article IV hereof, issue Letters of Credit (in substantially the
form attached hereto as Exhibit I), provided that the Agent shall not be
---------
under any obligation to issue any Letter of Credit if at the time of such
issuance:
(a) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or restrain the
Agent from issuing such Letter of Credit or any requirement of law
applicable to the Agent or any request or directive (whether or not having
the force of law) from any governmental authority with jurisdiction over the
Agent shall prohibit, or request that the Agent refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular or
shall impose upon the Agent with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which the Agent is not
otherwise
16
<PAGE> 24
compensated) not in effect on the date hereof, or any unreimbursed loss, cost
or expense which was not applicable, in effect or known to the Agent as of the
date hereof and which the Agent deems material to it;
(b) the Agent shall have received notice from any Bank
prior to the issuance of such Letter of Credit of the type described in the
last sentence of Section 3.14(2);
(c) after giving effect to such issuance, the sum of the
aggregate amount of Revolving Loans outstanding plus the amount of Letter of
Credit Outstandings would exceed the aggregate amount of the Revolving Loan
Commitment; or
(d) the Agent shall have received notice of a default by
any party under the Agreement and Plan of Reorganization.
Section III.14. Letter of Credit Requests.
-------------------------
(1) Whenever the Borrower wishes a Letter of Credit to be
issued for its account, it shall give the Agent (who shall promptly notify
the Banks) at least ten (10) Business Days' prior written request therefor.
Each such request shall include all of the information required by Exhibit J
---------
and shall be in writing and executed by the Borrower and shall include a
completed letter of credit application on the form customarily used by the
Agent for similar transactions (each, a "Letter of Credit Request").
------------------------
(2) The making of each Letter of Credit Request shall be
deemed to be a representation and warranty by the Borrower that such Letter
of Credit may be issued in accordance with, and will not violate the
requirements of, Section 3.13 and that each of the applicable conditions
specified in Article IV has been satisfied. Unless the Agent receives a
notice from any Bank prior to its issuance of a Letter of Credit that one or
more of the applicable conditions specified in Article IV are not then
satisfied, or that the issuance of such Letter of Credit would violate
Section 3.13, the Agent may issue the requested Letter of Credit for the
account of the Borrower in accordance with its customary practices.
Section III.15. Letter of Credit Participation.
------------------------------
(1) Immediately upon the issuance by the Agent of any Letter
of Credit (or any amendment with respect to a previously issued Letter of
Credit) pursuant to this Article III and without further action, the Agent
shall be deemed to have sold and transferred to each Bank, and each Bank
shall be deemed irrevocably and unconditionally to have purchased and
received from the Agent, pro rata on the basis of each Bank's Revolving Loan
Commitment as set forth in Exhibit D, without recourse or warranty, an
---------
undivided interest and participation in such Letter of Credit of the Agent,
any substitute letter of credit with respect thereto, each drawing made
thereunder (each a "Drawing") and the obligations of the Borrower under this
-------
Agreement with respect thereto, and any security therefor (a "Letter of
---------
Credit Participation").
- --------------------
(2) In determining whether to make a payment under any Letter
of Credit, the Agent shall have no obligation to the Banks other than to
confirm that the documents required to be delivered under such Letter of
Credit appear to have been delivered and to comply on their face with the
terms and conditions of such Letter of Credit. No action taken or omitted
to be taken by the Agent in good faith under or in connection with any
Letter of Credit, shall result in liability of the Agent to any Bank in the
absence of gross negligence or willful misconduct by the Agent.
17
<PAGE> 25
(3) In the event that the Borrower shall not reimburse in full
pursuant to Section 3.16 any amount paid by the Agent, the Agent shall
notify each Bank and each Bank shall promptly and unconditionally pay to the
Agent for the account of the Agent, the amount of such Bank's ratable share
of such unreimbursed payment pro rata on the basis of each Bank's Revolving
Loan Commitment as set forth in Exhibit D in dollars and in same day funds.
---------
If the Agent so notifies any Bank prior to 12:00 Noon (St. Louis time) on
any Business Day, such Bank shall make available to the Agent such Bank's
proportionate ratable share of the amount of such payment on such Business
Day in same day funds. If and to the extent any such Bank shall not make
such amount available to the Agent on a timely basis, such Bank agrees to
pay to the Agent, forthwith on demand such amount (together with interest
thereon for each day from such date until the date such amount is paid to
the Agent at the Federal Funds Rate). The failure of any Bank to make
available to the Agent its ratable share of any payment under any Letter of
Credit shall not relieve any other Bank of its obligations hereunder;
provided, however, that no Bank shall be responsible for the failure of any
- -------- -------
other Bank to make available to the Agent such other Bank's ratable share of
any such payment.
(4) Whenever the Agent receives any payment, by or on behalf
of the Borrower, of or in connection with a reimbursement obligation for
which the Agent received payments from the Banks pursuant to clause (3)
above, the Agent shall pay to each Bank which paid its ratable share
thereof, in dollars and in same day funds, an amount equal to such Bank's
ratable share. If and to the extent the Agent shall not make such amount
available to the Bank on a timely basis, the Agent agrees to pay to such
Bank forthwith on demand, such amount together with interest thereon (for
each day from such date until the date such amount is paid to such Bank, at
the Federal Funds Rate).
(5) The obligations of the Banks to make payments to the Agent
with respect to Letters of Credit shall be irrevocable and not subject to
any qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including, without limitation, any of the following circumstances:
(a) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(b) the existence of any claim, setoff, defense or other
right which the Borrower may have at any time against a beneficiary named in
a Letter of Credit, any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), any Bank, or any other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including
any underlying transaction between the Borrower and the beneficiary named in
any such Letter of Credit);
(c) any draft, certificate or any other document
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(d) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
or
(e) the occurrence of any Default or Event of Default.
18
<PAGE> 26
Section III.16. Agreement to Repay Letter of Credit Drawings.
--------------------------------------------
(1) The Agent shall notify the Borrower of any payment made by
the Agent under any Letter of Credit issued by it. The Borrower hereby
agrees to reimburse the Agent, by making payment in immediately available
funds to the Agent, for any payment made by the Agent under any Letter of
Credit issued by it (each such amount so paid until reimbursed, an "Unpaid
------
Drawing") immediately after, and in any event on the date of, such payment,
- -------
with interest on the amount so paid by the Agent, to the extent not reimbursed
prior to 12:00 Noon (St. Louis time) on the date of such payment, from and
including the date paid to but excluding the date reimbursement is
made as provided above, at a rate per annum which shall be the Corporate
Base Rate in effect from time to time (4.0% in excess of the Corporate Base
Rate in effect from time to time if not reimbursed by 12:00 Noon (St. Louis
time) on the fifth (5th) Business Day following any such payment), such
interest to be payable on demand. The failure by the Borrower to pay an
Unpaid Drawing on or prior to the fifth (5th) Business Day following the
date on which notice of such Drawing was provided to the Borrower by the
Agent shall constitute an Event of Default.
(2) Borrower hereby indemnifies and holds the Agent and the
Banks harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever, which the Agent or any Bank may
incur (or which may be claimed against the Agent or any Bank by any Person
or entity whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter of
Credit exclusive of the gross misconduct or wilful failure of the Agent or
any Bank (except when prohibited by law) to pay under any Letter of Credit
after presentation by the beneficiary thereof of a request complying with
the terms and conditions of the relevant Letter of Credit. Borrower assumes
all risks of the acts or omissions of any beneficiary of any Letter of
Credit and neither the Agent nor any Bank (nor any officer or director of
the Agent or any Bank) shall be liable or responsible for (a) the use which
may be made of any Letter of Credit or for any acts or omissions of any
beneficiary in connection therewith, (b) the validity, sufficiency or
genuineness of documents or of any endorsement thereon presented in
connection with any Letter of Credit, even if such documents or endorsements
should in fact prove to be in any or all respects invalid, fraudulent or
forged, or (c) payment in good faith by the Agent against presentation of
documents which do not comply with the terms of the relevant Letter of
Credit, including any failure of any documents to bear any reference or
adequate reference to the relevant Letter of Credit. In furtherance and not
in limitation of the foregoing, the Agent in making payment under a Letter
of Credit may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice
or information to the contrary. The Borrower's obligations under this
Section 3.16 to reimburse the Agent with respect to drawings under the
Letters of Credit (including, in each case, interest thereon) shall be
absolute, unconditional and irrevocable and shall be satisfied strictly in
accordance with the terms of this Agreement under all circumstances
whatsoever, including, without limitation, the following:
(a) any lack of validity or enforceability of a Letter
of Credit; or
(b) any amendment or waiver or any consent to departure
from the terms of a Letter of Credit or any other agreement or instrument
relating thereto; or
(c) the existence of any claim, setoff, defense or right
which the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any persons or entities for whom any
such beneficiary or any such transferee may be acting), the Agent or any
Bank or any other person or entity, whether in connection with this
Agreement or any unrelated transaction; or
19
<PAGE> 27
(d) any statement or any other document presented under
a Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever; or
(e) payment by the Agent under a Letter of Credit
against presentation of a request which on its face appears to be in
accordance with the terms of the same.
Section III.17. Notice of Letter of Credit Outstandings.
---------------------------------------
Within twenty (20) days of (i) each issuance of a Letter of Credit
hereunder, or (ii) each drawing under, termination of, or other change in
the amount of, a Letter of Credit outstanding hereunder, the Agent shall
notify the Borrower and the Banks, in accordance with Section 11.03 hereof,
of the Letter of Credit Outstandings in respect of Letters of Credit issued
by it by delivering to the Borrower and the Banks a Letter of Credit usage
status report setting forth a list of each Letter of Credit, and the balance
of Letter of Credit Outstandings.
Section III.18. Deemed Disbursements; Cash Collateralization.
--------------------------------------------
(1) Upon the occurrence and during the continuation of an
Event of Default, then:
(a) automatically in the case of an Event of Default
described in Section 9.01(5), and at the election of the Majority in the
case of any other Event of Default described in Section 9.01, an amount
equal to that portion of the Letter of Credit Outstandings attributable to
the then aggregate amount which is undrawn and available under all
outstanding Letters of Credit shall, without demand upon or notice to the
Borrower, be deemed to have been paid or disbursed by the Agent
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(b) upon notification by the Agent to the Borrower of
its obligations under this Section 3.18, the Borrower shall be immediately
obligated to reimburse the Agent for the amount deemed to have been so paid
or disbursed by the Agent.
Any amounts so payable by the Borrower pursuant to this Section 3.18(1)
shall be deposited in cash with the Agent and held as collateral security
for the obligations of Borrower in connection with any Letter of Credit. At
such time when the Event of Default shall have been cured or waived, the
Agent shall return to the Borrower all amounts then on deposit with the
Agent pursuant to this Section 3.18(1) net of any amounts applied to the
payment of any Drawings.
(2) If on the Revolving Credit Termination Date any Letter of
Credit shall be outstanding, then the Borrower shall, at the Borrower's
election, either (i) immediately deposit cash with the Agent in an amount
equal to the L/C Coverage Requirement, which cash shall be held by the Agent
as collateral security for the obligations of Borrower in connection with
any Letter of Credit, or (ii) cause a letter of credit to be issued in favor
of the Agent as beneficiary in an amount equal to the L/C Coverage
Requirement for each such Letter of Credit, in such form and substance and
issued by such bank as may be acceptable to the Agent in its sole
discretion.
Section III.19. Failure of Any Bank to Make Revolving Loans or
---------------------------------------------
Participate in Letters of Credit. Should any Bank default in (i) making a
- --------------------------------
Revolving Loan, or (ii) participating in a Letter of Credit required to be
made or participated in by the terms of this Agreement, the other Banks
shall not be released from their several obligations to make Revolving Loans
and/or participate in Letters of Credit as agreed hereunder, and, in the
event such defaulting Bank is the Agent, the other Banks shall forthwith
appoint one of themselves to act as Agent. However, such
20
<PAGE> 28
default shall not obligate any of the Banks to increase their Revolving Loan
Commitment hereunder. As liquidated damages for such default, Borrower shall
be released from all liability to pay such defaulting Bank any accrued or
future fees under Sections 3.05, 3.11 and 3.20 and this Agreement as to such
defaulting Bank shall thereupon be terminated until such default is cured,
except only to the extent and for the protection of Revolving Loans and
participation in Letters of Credit theretofore made or incurred by such
defaulting Bank which remain outstanding.
Section III.20. Letter of Credit Fees.
---------------------
(1) The Borrower agrees to pay to the Agent in respect of each
Letter of Credit issued for the account of the Borrower (including, without
limitation, the Letters of Credit described on Schedule 3.13 hereof), a fee
-------------
(the "Letter of Credit Fee"), for the period from and including the date of
--------------------
issuance of such Letter of Credit to and including the date of termination
thereof: (a) in respect of each Letter of Credit issued hereunder, computed
at a rate of 1.25% per annum on the Stated Amount of such Letter of Credit;
and (b) in respect of the Letters of Credit described on Schedule 3.13
hereof and any extension, renewal or reissuance thereof, computed at a rate
of 1.50% per annum on the Stated Amount of such Letters of Credit. Letter
of Credit Fees shall be due and payable quarterly in advance on the date of
issuance of such Letter of Credit and on the last day of each September,
December, March and June thereafter until the date of termination thereof
(each, other than the date of issuance, a "Letter of Credit Fee Payment
----------------------------
Date"), on the basis of the then Stated Amount of such Letter of Credit and
- ----
on the date of termination thereof. The Letter of Credit Fee payable on the
date of issuance of a Letter of Credit shall be in an amount equal to the
Letter of Credit Fee applicable to such Letter of Credit on the basis of the
then Stated Amount for the period from the date of issuance of such Letter
of Credit to the next occurring Letter of Credit Fee Payment Date. In the
event subsequent occurrences reduce the amount or duration of the Banks'
liability under a Letter of Credit below the amount or duration used in
making the above calculations, the Agent and each Bank will credit to
Borrower, on the next to occur of a Letter of Credit Fee Payment Date or the
Revolving Credit Termination Date, the appropriate portion of the Letter of
Credit Fee received by such party if the amount refundable by such Bank or
the Agent exceeds $100. With respect to Letter of Credit Fees paid to the
Agent, a portion of such fees in an amount equal to 1.0% per annum (1.25%
per annum in respect of Letters of Credit described on Schedule 3.13 hereof
and any extension, renewal or reissuance thereof) on the Stated Amount of
such Letter of Credit, and any interest paid by the Borrower to the Agent
pursuant to Section 3.16(1) hereof, shall be deemed to be paid by the
Borrower to the Agent for the account of the Banks, to be distributed by the
Agent to the Banks pro rata on the basis of each Bank's Revolving Loan
Commitment as set forth in Exhibit D. The remaining balance of such Letter
---------
of Credit Fees shall be retained by the Agent. The Letter of Credit Fees
shall be computed on the basis of a year deemed to consist of 360 days and
paid for the actual number of days elapsed.
(2) The Borrower hereby agrees to pay on demand to the Agent
an issuance fee with respect to each Letter of Credit in the amount of
Seventy-Five Dollars ($75). The Borrower further agrees to pay on demand to
the Agent a negotiation fee with respect to each drawing or request for a
drawing under a Letter of Credit in the amount of One Hundred Dollars
($100). Any payments made to the Agent pursuant to this Section 3.20(2)
shall be retained by the Agent.
All fees payable by the Borrower under this Section 3.20 shall be paid by
the Borrower to the Agent within twenty (20) days from the date of the
Agent's invoice therefor.
Section III.21. Banks Not Required to Extend Credit. No Bank
-----------------------------------
shall be required to make any Revolving Loan or issue or participate in any
Letter of Credit if, after giving effect thereto, the then aggregate
outstanding principal amount of all Revolving Loans plus the then
21
<PAGE> 29
aggregate amount of all Letter of Credit Outstandings relative to all Banks
would exceed $40,000,000, as such amount may be reduced from time to time
pursuant to Section 3.03, or such Bank would exceed its Revolving Loan
Commitment (after giving effect to all Revolving Loans, whether or not funded
by any particular Bank, as if each Bank had funded its respective Revolving
Loans in accordance with the terms of this Agreement).
ARTICLE IV.
CONDITIONS PRECEDENT
--------------------
Section IV.01. Conditions Precedent to the Term Loans and
------------------------------------------
Initial Revolving Loans. The obligation of each Bank to make its Term Loan
- -----------------------
and initial Revolving Loan to the Borrower and the obligation of the Agent
to issue the initial Letters of Credit are subject to the conditions
precedent that the Agent, on behalf of the Banks, shall have received, on or
before the date hereof, each of the following:
(1) Notes. The Term Notes and Revolving Notes duly executed
-----
by the Borrower;
(2) Pledge Agreement. The Pledge Agreement, duly executed by
----------------
the Borrower, together with (a) acknowledgment copies of the financing
statements (Form UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Agent, desirable to
perfect the security interest created by the Pledge Agreement, and (b) stock
powers or powers of attorney which are necessary or appropriate for the
security interest of the Agent in the Collateral;
(3) Subsidiary Pledge Agreements. Each of the Subsidiary
----------------------------
Pledge Agreements, duly executed by CCB Bancorp, Inc. and River Valley
Holdings, Inc., together with (a) acknowledgment copies of the financing
statements (Form UCC-1) duly filed under the Uniform Commercial Code of all
jurisdictions necessary or, in the opinion of the Agent, desirable to
perfect the security interest created by each of the Subsidiary Pledge
Agreements, and (b) stock powers or powers of attorney which are necessary
or appropriate for the security interest of the Agent in the Collateral;
(4) Evidence of all Corporate Action by the Borrower and
----------------------------------------------------
Subsidiaries. Certified (as of the date of this Agreement) copies of all
- ------------
corporate action taken by the Borrower and the Subsidiaries which are
parties to the Subsidiary Pledge Agreements, including resolutions of the
Board of Directors of Borrower and the Subsidiaries which are parties to the
Subsidiary Pledge Agreements, authorizing the execution, delivery, and
performance of all Loan Documents to which Borrower and/or such Subsidiaries
is a party and each other document to be delivered by Borrower and/or such
Subsidiaries pursuant to this Agreement;
(5) Incumbency Certificates of the Borrower. A certificate
---------------------------------------
dated as of the date of this Agreement of the Secretary of Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign the Loan Documents and each other document to be
delivered by the Borrower under this Agreement;
(6) Opinion of Counsel for the Borrower. A favorable opinion
-----------------------------------
of counsel for the Borrower, in substantially the form of Exhibit K, and as
---------
to such other matters as the Agent may reasonably request;
22
<PAGE> 30
(7) Form U-1. Federal Reserve Form U-1 Purpose Statement,
--------
executed by Borrower;
(8) Share Certificates. Delivery to Agent of the original
------------------
stock certificates for all of the issued and outstanding shares of stock of
each Pledged Subsidiary (exclusive of directors' qualifying shares),
together with stock powers;
(9) Corporate Existence. Certificates and certified copies of
-------------------
charters and articles of incorporation demonstrating the due organization
and current good standing of Borrower and each Pledged Subsidiary and
certified copies of the Bylaws of Borrower and each Pledged Subsidiary;
(10) Watch List. The current Watch List;
----------
(11) Additional Documentation. Such other approvals, opinions
------------------------
or documents as the Agent may reasonably request; and
(12) Termination of Existing Secured Credit Agreement. The
------------------------------------------------
existing Secured Credit Agreement dated as of July 14, 1995 among the
Borrower, the Agent and the banks named as parties thereto shall, concurrent
with the funding of the Term Loans, be refinanced in its entirety and all
funding costs (including any additional losses, costs or expenses incurred
by such banks as a result of such refinancing occurring on other than the
last day of an interest period) payable by Borrower under such Agreement
shall have been paid in full.
Section IV.02. Conditions Precedent to All Revolving Loans.
-------------------------------------------
The obligation of each Bank to make each Revolving Loan (including the
initial Revolving Loans) shall be subject to the further conditions
precedent that on the date of each such Revolving Loan:
(1) The Agent shall have received the Notice of Borrowing
which shall specify whether the requested Revolving Loan shall accrue at the
Eurodollar Rate or Corporate Base Rate;
(2) No Default or Event of Default has occurred and is
continuing, or would result from such Revolving Loan.
(3) The following statements shall be true and the Agent on
behalf of the Banks shall have received a Certificate in substantially the
form of Exhibit H attached, signed by at least two of the chief executive
---------
officer, the chief financial officer, the president, the chief accounting
officer and the chief credit officer of Borrower and dated the date of the
Notice of Borrowing requesting such Revolving Loan, containing the
confirmations of compliance with certain of the financial covenants as
herein provided, and stating that:
(a) The representations and warranties contained in
Article V of this Agreement are correct on and as of such date;
(b) No Default or Event of Default has occurred and is
continuing, or would result from such Revolving Loan;
(c) Attached is an accurate listing of all of the
Affiliates of Borrower; and
(d) The use of the proceeds of the requested Revolving
Loan will be as indicated in the Notice of Borrowing.
23
<PAGE> 31
(4) The Agent shall have received such other approvals,
information or documents as the Agent may reasonably request, in form and
substance satisfactory to the Agent.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Banks that:
Section V.01. Incorporation, Good Standing, and Due
-------------------------------------
Qualification. Borrower is a corporation duly incorporated, validly
- -------------
existing and in good standing under the laws of the State of Missouri and is
in good standing in all states and jurisdictions wherein it owns property or
does business requiring such qualification as a foreign corporation.
Borrower is a "bank holding company" as that term is defined in the federal
Bank Holding Company Act of 1956, as amended, 12 U.S.C. ' 1841 et seq., and
-------
as such, Borrower has received all necessary approvals from and has filed
all necessary reports with the Board of Governors of the Federal Reserve
System. The list of Affiliates of Borrower as shown on Exhibit M attached
---------
is as of the date hereof true and accurate. Each Subsidiary of the Borrower
is a bank, savings bank, bank holding company or Missouri corporation duly
organized and in good standing under the laws of its respective jurisdiction
of organization.
Section V.02. Corporate Power and Authority. The execution,
-----------------------------
delivery and performance by the Borrower of the Loan Documents as provided
for herein are within the corporate powers of Borrower, have been duly
authorized by all necessary corporate action and require no action by or in
respect to, or filing with any governmental body, agency or official. The
execution, delivery and performance by Borrower of the Loan Documents do not
conflict with, or result in a material breach of the terms, conditions or
provisions of or constitute a default under or result in any violation of,
and Borrower is not now in default under or in violation of the terms of its
Articles of Incorporation or Bylaws or any rule, regulation, order, writ,
judgment or decree of any court or government agency or instrumentality, or
any agreement or instrument to which Borrower or any of its Subsidiaries is
a party or by which it or they are bound or to which it or they are subject.
To the extent that First Commercial Bancorp, Inc. or First Commercial Bank
is not in compliance with certain financial covenants under a memorandum of
understanding, order or other matter applicable to either or both of such
Subsidiaries, such default has been disclosed to the Agent and the
applicable regulatory agency and does not materially adversely affect the
business or operations of either or both of such Subsidiaries on an
individual basis or of the Borrower and the Subsidiaries on a consolidated
basis.
Section V.03. Legally Enforceable Agreement. This Agreement
-----------------------------
has been duly executed and delivered and constitutes a legal, valid and
binding agreement of the Borrower enforceable in accordance with its terms,
and the other Loan Documents, when executed and delivered in accordance with
this Agreement, will constitute a legal, valid and binding obligation of the
Borrower, enforceable in accordance with their terms. The Subsidiary Pledge
Agreements and the other Loan Documents to which the any Subsidiary is a
party, when executed and delivered in accordance with this Agreement, will
constitute legal, valid and binding obligations of the Subsidiary,
enforceable in accordance with their terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency or other similar laws
affecting creditors' rights generally.
Section V.04. Financial Statements; Financial Condition.
-----------------------------------------
The financial information furnished by Borrower representing the financial
condition of Borrower or any Subsidiary, such information being identified
in Exhibit N attached, is true and correct as of the
---------
24
<PAGE> 32
date furnished and there has been no material adverse change in the financial
condition, operations or business of any of them since the date of such
financial information.
Section V.05. Other Agreements. Except for those matters
----------------
disclosed on Schedule 5.05 attached, Borrower is not a party to any
-------------
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument or subject to any charter or corporate restriction which could
have a material adverse effect on its business, properties, assets,
operations, or condition, financial or otherwise, or on its ability to carry
out its obligations under the Loan Documents. Borrower and all Subsidiaries
are not in default in any respect in the performance, observance, or
fulfillment of any of the obligations, covenants, or conditions contained in
any agreement or instrument material to their respective business to which
each is a party.
Section V.06. Litigation. Except for those matters
----------
disclosed on Schedule 5.06 attached, there is no pending or, to the best of
-------------
Borrower's knowledge, threatened action or proceeding against or affecting
Borrower or any Subsidiary before any court, governmental agency, or
arbitrator, which may, in any one case or in the aggregate, materially
affect the financial condition, operations, properties, or business of
Borrower or any Subsidiary, or the ability of Borrower to perform its
obligations under this Agreement or the Loan Documents.
Section V.07. Ownership of Subsidiaries. The ownership of
-------------------------
each Subsidiary is as shown on Exhibit O attached. Upon the extension of
---------
the Term Loan and the initial Revolving Loans, all shares of common stock of
each Subsidiary owned by Borrower will be free and clear of all liens,
claims and encumbrances, except as to Pledged Subsidiaries the security
interests under the Pledge Agreement and the Subsidiary Pledge Agreements as
provided for herein, and except for the pledge of the First Commercial Bank
common stock to Borrower to secure convertible debentures issued by First
Commercial Bancorp, Inc. in an amount not exceed $6,500,000.
Section V.08. ERISA. Borrower and each Subsidiary are in
-----
compliance in all material respects with all applicable provisions of ERISA.
Neither a Reportable Event nor a Prohibited Transaction has occurred and is
continuing with respect to any Plan; except as provided on Schedule 5.08
-------------
attached, no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated; no circumstances exist which constitute grounds under
Section 4042 of ERISA entitling the PBGC to institute proceedings to
terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; neither Borrower nor any Subsidiary has
completely or partially withdrawn under Sections 4201 or 4204 of ERISA from
a Multiemployer Plan; Borrower and each Subsidiary have met minimum funding
requirements under ERISA with respect to their respective Plans and the
present fair market value of all Plan assets exceeds the present value of
all vested benefits under each Plan, as determined on the most recent
valuation date of the Plan and in accordance with the provisions of ERISA
and the regulations thereunder for calculating potential liability to the
PBGC or the Plan under Title IV of ERISA; Borrower and all Subsidiaries have
incurred no liability to the PBGC under ERISA.
Section V.09. Taxes. Borrower and each Subsidiary have
-----
filed (or received extensions of the time to file) and will in the ordinary
course of business file all tax returns (federal, state, and local) required
to be filed and have paid and will pay all taxes, assessments, and
governmental charges and levies shown thereon to be due, including interest
and penalties, provided, however, that nothing herein will prevent the
-------- -------
contest in good faith of any assessment or imposition of any tax as long as
an adverse determination will have no material adverse impact upon Borrower
or the Pledged Subsidiaries.
25
<PAGE> 33
ARTICLE VI.
AFFIRMATIVE COVENANTS
---------------------
So long as any portion of the indebtedness evidenced by the
Notes shall remain unpaid, or the Banks shall have any Commitment under this
Agreement, or any Letter of Credit shall remain outstanding, or any Unpaid
Drawings shall remain unreimbursed by the Borrower, Borrower and each
Pledged Subsidiary will:
Section VI.01. Maintenance of Existence. Preserve and
------------------------
maintain its corporate existence and good standing in the jurisdiction of
its incorporation, and qualify and remain qualified as a foreign corporation
in each jurisdiction in which such qualification is required.
Section VI.02. Maintenance of Records. Keep adequate records
----------------------
and books of account, in which complete entries will be made in accordance
with GAAP consistently applied, reflecting all financial transactions.
Section VI.03. Maintenance of Subsidiaries. Maintain and
---------------------------
keep each Subsidiary in good standing with the jurisdiction of its
organization, except to the extent a Subsidiary dissolves or ceases to exist
pursuant to a transaction permitted by the terms of Section 7.02.
Section VI.04. Compliance With Laws. Comply in all respects,
--------------------
and cause compliance on behalf of each Subsidiary, with all applicable laws,
rules, regulations, and orders, except, with respect to First Commercial
Bancorp, Inc. and First Commercial Bank, any noncompliance with financial
covenants under a memorandum of understanding, order or other matter
applicable to either or both of such Subsidiaries (which noncompliance shall
be disclosed by the Borrower to the Agent in writing) which shall not cause
any material adverse action by the applicable regulatory authority and could
not have a material adverse effect upon the business or operations of either
or both of such Subsidiaries on an individual basis or of the Borrower and
the Subsidiaries on a consolidated basis. Compliance shall include, without
limitation, paying before the same become delinquent all taxes, assessments,
and governmental charges imposed upon it or upon its property.
Section VI.05. Right of Inspection. At any time during
-------------------
normal business hours and from time to time, upon at least one (1) Business
Day's advance notice, permit the Agent and any Bank or any agent or
representative thereof to examine and make copies of and abstracts from the
records and books of account of and visit the properties of, Borrower and
each Subsidiary, and to discuss the affairs, finances, and accounts of
Borrower and each Subsidiary, with any of its or their officers and
directors and with the Borrower's independent accountants, provided,
--------
however, that with respect to the loans of Borrower or a Pledged Subsidiary,
- -------
the Agent and any Bank may review and make copies of summaries of the Watch
List prepared on a quarterly basis and loan audit reports; review of
specific loan accounts and loan review reports may be requested by the Agent
or any Bank, whereupon Borrower and Agent or the Bank shall within ten (10)
days agree as to the number of such accounts and reports that are reasonable
and appropriate to review, and provided further, that upon and during the
----------------
existence of an Event of Default hereunder, there shall be no restrictions
or conditions on the scope of the review, inspection and reproduction rights
of Agent and the Banks concerning the loans of Borrower or a Pledged
Subsidiary.
26
<PAGE> 34
Section VI.06. Reporting Requirements. Furnish to the Agent:
----------------------
(1) Quarterly Financial Statements. As soon as practicable,
------------------------------
or in any event within forty-five (45) days after the end of each fiscal
quarter of Borrower (a) parent only and consolidated balance sheets of
Borrower and its Subsidiaries as of the end of such fiscal quarter and (b)
parent only and consolidated statements of income and earnings retained in
the business of Borrower and its Subsidiaries for such fiscal quarter, all
of which shall be prepared in accordance with GAAP and certified by the
chief financial officer or chief accounting officer of Borrower.
(2) Annual Financial Statements. As soon as practicable, or
---------------------------
in any event within ninety (90) days after the close of each fiscal year of
Borrower (a) parent only and consolidated balance sheets of Borrower and its
subsidiaries at year end and (b) parent only and consolidated statements of
income and earnings retained in the business of Borrower and its
Subsidiaries including consolidated and parent only statements of cash flow
for such fiscal year, all of which shall include comparative statements for
the preceding year and shall be prepared in accordance with GAAP as
interpreted by Borrower's independent certified public accountants and
consistently applied, and shall be certified by, and accompanied by an
unqualified audit opinion of a firm of certified public accountants
acceptable to Agent; provided, however, that the opinion may be limited to
-------- -------
the consolidated statements of Borrower.
(3) Reports. Within forty-five (45) days after such report is
-------
filed and to the extent not prohibited by law, copies of all reports filed
by Borrower (on a consolidated and parent only basis), First Commercial
Bancorp, Inc. and/or First Banks America, Inc. (on a consolidated and parent
only basis) with the Board of Governors of the Federal Reserve System or any
Federal Reserve Bank, the Federal Deposit Insurance Corporation ("FDIC"),
Securities and Exchange Commission ("SEC"), or other bank or thrift
regulatory agency; within forty-five (45) days after the end of each fiscal
quarter of Borrower, a list of all such reports. Irrespective of the
foregoing procedures for the request for copies of reports, Borrower shall
submit to the Agent, within forty-five (45) days from the date of submission
to the SEC, copies of the following SEC reports with respect to the
Borrower, First Commercial Bancorp, Inc. and/or First Banks America, Inc.:
10-K, 10-Q, and 8-K. Borrower shall also submit (or cause to be submitted)
to the Agent, within fifteen (15) days from the date of such agreement,
copies of any and all agreements entered into by Borrower or any of
Borrower's Subsidiaries with the Board of Governors of the Federal Reserve
System, any Federal Reserve Bank, the FDIC, the SEC, or other bank or thrift
regulatory agency.
(4) Subsidiary Reports. Copies of all Quarterly Reports of
------------------
Condition and Income ("Call Report"), certified as required by law, filed by
-----------
each Subsidiary with the FDIC or any other governmental or regulatory
agency, within forty-five (45) days from the date any such Call Report is
submitted to such agency, and, to the extent permitted by law, copies of all
examination reports and supervisory comment letters pertaining to each
Subsidiary.
(5) Examination; Litigation. Promptly after the commencement
-----------------------
thereof, notice of all suits and proceedings before any court or
governmental department, commission, board, or agency affecting Borrower or
any Subsidiary which, if determined adversely, could have a material adverse
effect on the financial condition, properties or operations of Borrower or
any Subsidiary; promptly after the receipt thereof, notice of any report or
comment letter from any regulatory authority of Borrower or any Subsidiary,
or from the independent auditors of Borrower, which requires any action of a
material adverse nature by Borrower or any Subsidiary.
(6) Compliance Certificate. Within forty-five (45) days after
----------------------
the end of each fiscal quarter of Borrower, a Compliance Certificate signed
by at least two of the chief executive
27
<PAGE> 35
officer, the chief financial officer, the president, the chief accounting
officer and the chief credit officer of the Borrower, substantially in the
form of Exhibit H attached hereto.
---------
(7) Watch List; Reports. Within forty-five (45) days after
-------------------
the end of each fiscal quarter of Borrower, a Watch List, together with a
list of examinations or examination reports issued or conducted by
regulatory authorities of Borrower or a Pledged Subsidiary during said
fiscal quarter.
(8) Other Information. Such other information and reports
-----------------
regarding the financial condition, operations or regulatory affairs of
Borrower or any Subsidiary as Agent or a Bank may from time to time
reasonably request.
Section VI.07. Operations. Operate and maintain its business
----------
and property, and those of its Subsidiaries, in the ordinary course in a
prudent manner consistent with sound banking practices and in such a manner
that the performance by Borrower of its obligations hereunder are not
jeopardized or impaired.
Section VI.08. Additional Collateral. Pursuant to the Pledge
---------------------
Agreement and/or the Subsidiary Pledge Agreements, pledge and deliver to
Agent shares of stock of (i) a bank, thrift institution, bank holding
company or savings holding company hereafter acquired by Borrower or any
Pledged Subsidiary (other than as may be acquired by First Banks America,
Inc. or First Commercial Bancorp, Inc.) with all or a portion of such shares
having been acquired with the proceeds of a Loan (or the consideration for
which is supplemented or supported, directly or indirectly, by a Letter of
Credit), or (ii) a bank, thrift institution, bank holding company or savings
holding company which becomes a Subsidiary (other than as may be acquired by
First Banks America, Inc. or First Commercial Bancorp, Inc.).
ARTICLE VII.
NEGATIVE COVENANTS
------------------
So long as any portion of the indebtedness evidenced by the
Notes shall remain unpaid, any Bank shall have any Commitment under this
Agreement, or any Letter of Credit shall remain outstanding, or any Unpaid
Drawing shall remain unreimbursed by the Borrower, Borrower will not,
without the prior written consent of the Agent, which consent shall not be
unreasonably withheld:
Section VII.01. Liens. Create, incur, assume, or suffer to
-----
exist, any Lien, or permit any Subsidiary (other than First Banks America,
Inc. and First Commercial Bancorp, Inc.) to create, incur, assume, or suffer
to exist, any lien, upon or with respect to any of the Collateral or any
capital stock held by any Subsidiary, except in favor of the Agent.
Section VII.02. Mergers, Etc. Merge or consolidate with any
------------
Person having Total Assets in excess of $250,000,000 or which is subject to
a regulatory action or proceeding or any cease and desist order which
relates in any material adverse way to the management, financial condition,
or operations of such Person, or permit the merger or consolidation of any
Subsidiary with any Person having Total Assets in excess of $250,000,000 or
which is subject to a regulatory action or proceeding or any cease and
desist order which relates in any material adverse way to the management,
financial condition, or operations of such Person, or sell, assign, lease,
or otherwise dispose of (whether in one transaction or in a series of
transactions) any Subsidiary or all or substantially all of its other
assets, or permit the sale, assignment, lease, or other disposition of any
Subsidiary, or the sale of all or substantially all of the assets of any
Subsidiary (whether now
28
<PAGE> 36
owned or hereafter acquired), to any Person; provided, however, that the
-------- -------
pledge of the First Commercial Bank common stock to Borrower to secure
convertible debentures issued by First Commercial Bancorp, Inc. in an amount
not to exceed $6,500,000 is permitted, and provided further, that nothing in
----------------
this Section 7.02 shall prevent mergers or sale of assets as between two
entities that are Pledged Subsidiaries (other than River Valley Holdings,
Inc.). Notwithstanding the foregoing, River Valley Holdings, Inc. will not,
without the prior written consent of the Agent, merge with or into any Person
other than the Borrower or sell, assign, lease, or otherwise dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of its assets to any Person other than the Borrower.
Section VII.03. Indebtedness. Incur, create, assume or allow
------------
to exist, nor permit any Subsidiary to incur, create, assume or allow to
exist, any indebtedness, whether contingent or absolute, except
indebtedness: (i) evidenced by the Notes or the reimbursement obligations
with respect to the Letters of Credit; (ii) evidenced by certain unsecured
notes issued by Borrower relating to the acquisition of Southside
Bancshares, Inc. common stock and in an aggregate principal amount not to
exceed $272,000; (iii) evidenced by certain notes to the former shareholders
of St. Charles Federal Bancshares, Inc. in an aggregate principal amount not
to exceed $1,136,777.28; (iv) evidenced by certain debentures payable to
Borrower issued by First Commercial Bancorp, Inc. in an amount not to exceed
$6,500,000; (v) relating to certain reimbursement obligations of CCB
Bancorp, Inc. with respect to certain loans to CCB Bancorp, Inc. in an
amount not to exceed $13,500,000; (vi) relating to certain reimbursement
obligations of First Banks America, Inc. with respect to certain loans to
First Banks America, Inc. in an amount not to exceed $13,000,000; (vii)
arising out of accrued expenses or payables in the ordinary course of
business; (viii) of accrued taxes not yet payable; (ix) for any other
purpose (other than by or on behalf of River Valley Holdings, Inc.) not to
exceed in the aggregate the amount of $2,500,000;
Section VII.04. Dividends. Pay or declare any dividends on
---------
the common stock of Borrower; pay or declare any dividends upon the
preferred stock of Borrower designated as Class A or Class B preferred stock
in the financial statements of Borrower if a Default or an Event of Default
exists or if, after giving effect thereto, a Default or Event of Default
would exist.
Section VII.05. Stock Issue; Additional Issue of Stock of
----------------------------------------
Subsidiary. Create any new class or amend the terms of any existing class
- ----------
of stock of Borrower, or issue any shares of stock of any class of Borrower,
the terms of which have not been approved by Agent for the account of the
Banks; issue or permit any Subsidiary to issue any additional shares of
stock of any class or any capital notes or other long-term debt instruments,
or create any new class of stock or amend the terms of any existing class of
stock.
Section VII.06. Stock Redemption. Redeem, purchase or retire
----------------
any shares of any existing class of stock of Borrower or any capital notes
of Borrower or permit any Subsidiary to redeem, purchase or retire any
shares of any existing class of stock of such Subsidiary or any capital
notes of such Subsidiary; provided, however, that as long as no Event of
-------- -------
Default shall have occurred and be continuing, with respect to Subsidiaries
which are not wholly owned by the Borrower, such Subsidiary(ies) may redeem,
purchase or retire shares of any existing class of stock of such Subsidiary.
Section VII.07. Loans. Loan money or extend credit to, or
-----
become a surety or guarantor for, or permit any Pledged Subsidiary to do
likewise, the benefit of any Affiliate or any Subsidiary or any executive
officer or shareholder of any Affiliate or any Subsidiary; provided,
--------
however, that Borrower and the Pledged Subsidiaries (other than River Valley
- -------
Holdings, Inc.) may extend credit to executive officers or shareholders of
any Affiliate or
29
<PAGE> 37
Subsidiary (other than River Valley Holdings, Inc.) if the loan or extension
of credit complies in all respects with applicable law and regulations, and
provided further, that the following items of current indebtedness are
- ----------------
permitted: (i) loans to Subsidiaries (other than River Valley Holdings, Inc.)
for the purpose of acquiring and holding OREO properties, (ii) loans for
operating purposes to Hermanhoff Winery, Inc., in an aggregate amount not to
exceed $500,000 at any one time, (iii) loans for operating purposes to Tidal
Insurance, Ltd., in an aggregate amount not to exceed $250,000 at any one
time, (iv) the purchase by Borrower of convertible debentures issued by First
Commercial Bancorp, Inc. in an amount not to exceed $6,500,000, (v) loans to
CCB Bancorp for the purpose of purchasing a $5,000,000 debenture issued by QCB
Bancorp and for acquiring La Cumbre Savings Bank, fsb, in an amount not to
exceed $13,500,000 at any one time, (vi) loans to First Banks America, Inc.
for the purpose of acquiring Sunrise Bancorp in an amount not to exceed
$13,000,000 at any one time, and (vii) loans to Firstserv, Inc. (an Affiliate
formed for the purpose of providing data processing services and mortgage loan
processing services to Pledged Subsidiaries) and to First Securities of
America (an Affiliate formed for the purpose of engaging in permitted
insurance activities) in an aggregate amount not to exceed $1,000,000 at any
one time.
Section VII.08. Continuation of Business. Substantially
------------------------
change, nor permit any of its Subsidiaries to change substantially, the
nature of the respective businesses in which they are now engaged, nor
engage in, nor permit any Subsidiary to engage in, any line of business if,
as a result thereof, the business of the Borrower and its Subsidiaries,
taken as a whole, would not be predominately the banking or thrift business
(and activities deemed closely related to banking and/or the thrift business
by applicable regulatory authorities) as currently constituted as of the
date hereof.
ARTICLE VIII.
FINANCIAL COVENANTS
-------------------
So long as any portion of the indebtedness evidenced by the
Notes shall remain unpaid or any Bank shall have any Commitment under this
Agreement, or any Letter of Credit shall remain outstanding, or any Unpaid
Drawing shall remain unreimbursed by the Borrower, Borrower and the Pledged
Subsidiaries (other than River Valley Holdings, Inc.) will comply with each
of the following covenants:
Section VIII.01. Tier I Leverage Ratio. Borrower and
---------------------
Subsidiaries, on a consolidated basis, shall maintain a minimum Tier I
Leverage Ratio at the end of each quarterly accounting period of not less
than 5.0% or such greater amount as may be required to be considered "well
capitalized" by applicable regulatory authorities from time to time.
Section VIII.02. Tier I Leverage Ratio of Subsidiaries. Each
-------------------------------------
Subsidiary of Borrower which is a bank holding company (other than First
Commercial Bancorp, Inc.), on a consolidated basis, shall maintain a minimum
Tier I Leverage Ratio at the end of each quarterly accounting period of not
less than 5.0% or such greater amount as may be required to be considered
"well capitalized" by applicable regulatory authorities from time to time,
and First Commercial Bancorp, Inc., on a consolidated basis, shall maintain
a minimum Tier I Leverage Ratio at the end of each quarterly accounting
period of not less than 1.5%. Each Subsidiary of Borrower engaged in
banking shall maintain a minimum Tier I Leverage Ratio at the end of each
quarterly accounting period of not less than 5.0% or such greater amount as
may be required to be considered "well capitalized" by applicable regulatory
authorities from time to time.
Section VIII.03. Tier I Risk Based Capital Ratio. Each
-------------------------------
Subsidiary of Borrower which is bank holding company (other than First
Commercial Bancorp, Inc.), on a
30
<PAGE> 38
consolidated basis, shall maintain a minimum Tier I Risk Based Capital Ratio
at the end of each quarterly accounting period of not less than 6.0% or such
greater amount as may be required to be considered "well capitalized" by
applicable regulatory authorities from time to time, and First Commercial
Bancorp, Inc., on a consolidated basis, shall maintain a minimum Tier I Risk
Based Capital Ratio at the end of each quarterly accounting period of not less
than 2.4%. Each Subsidiary of Borrower engaged in banking shall maintain a
minimum Tier I Risk Based Capital Ratio at the end of each quarterly
accounting period of not less than 6.0% or such greater amount as may be
required to be considered "well capitalized" by applicable regulatory
authorities from time to time.
Section VIII.04. Total Risk Based Capital Ratio. Each
------------------------------
Subsidiary of Borrower which is a bank holding company (other than First
Commercial Bancorp, Inc.), on a consolidated basis, shall maintain a minimum
Total Risk Based Capital Ratio at the end of each quarterly accounting
period of not less than 10.0% or such greater amount as may be required to
be considered "well capitalized" by applicable regulatory authorities from
time to time, and First Commercial Bancorp, Inc., on a consolidated basis,
shall maintain a minimum Total Risk Based Capital Ratio at the end of each
quarterly accounting period of not less than 3.7%. Each Subsidiary of
Borrower engaged in banking, other than BancTEXAS, N.A., shall maintain a
minimum Total Risk Based Capital Ratio at the end of each quarterly
accounting period of not less than 10.0% or such greater amount as may be
required to be considered "well capitalized" by applicable regulatory
authorities from time to time. BancTEXAS, N.A. shall maintain a minimum
Total Risk Based Capital Ratio at the end of each quarterly accounting
period of not less than 8.0% or such greater amount as may be required to be
considered "adequately capitalized" by applicable regulatory authorities
from time to time.
Section VIII.05. Loan Loss Reserve. Borrower and Subsidiaries,
-----------------
on a consolidated basis, shall maintain a minimum Loan Loss Reserve,
expressed as a percentage of Total Loans, for each quarterly accounting
period of 1.25% or such greater amount as may be required by regulatory
authorities or prudent banking standards from time to time.
Section VIII.06. Net Income to Average Total Assets. The
----------------------------------
Borrower and Subsidiaries, on a consolidated basis, shall maintain a ratio,
expressed as a percentage, of Net Income less Gain on Sale of Securities and
other extraordinary and/or non-recurring items (as determined in accordance
with GAAP) to Average Total Assets of not less than 0.65% for the 1996
fiscal year of Borrower, and not less than 0.70% for each fiscal year of
Borrower thereafter.
Section VIII.07. Non-Performing Assets. Borrower and
---------------------
Subsidiaries, on a consolidated basis, shall have Non-performing Assets, in
the aggregate, of not more than 25% of Primary Capital.
ARTICLE IX.
EVENTS OF DEFAULT
-----------------
Section IX.01. Events of Default. If any of the following
-----------------
events ("Events of Default") shall occur:
(1) Borrower shall fail to pay (a) the principal of, or
interest on, a Note, or (b) any reimbursement obligation in respect of
Letters of Credit, within five (5) calendar days of the applicable due date;
31
<PAGE> 39
(2) Borrower shall fail to pay any fees or any other amount
payable hereunder when due and such failure shall remain unremedied for ten
(10) consecutive calendar days after notice of such failure shall have been
given to the Borrower by the Agent;
(3) Any representation or warranty made or deemed made by the
Borrower or any Subsidiary in this Agreement, the Pledge Agreement, the
Subsidiary Pledge Agreements, or which is contained in any certificate,
document, opinion, or financial or other statement furnished at any time
under or in connection with any Loan Document, shall be reasonably
determined by the Agent to have been incorrect in any material respect on or
as of the date made or deemed made and such default remains unremedied for
thirty (30) consecutive calendar days after notice thereof shall have been
given to the Borrower by the Agent;
(4) (a) Borrower shall fail to perform or observe any term,
covenant, or agreement contained in any Loan Document (other than as
contained in Article VIII hereof and other than as contained in a Note) on
its part to be performed or observed, and such failure shall remain
unremedied for thirty (30) consecutive calendar days after notice thereof
shall have been given to the Borrower by the Agent, provided, however, that
-------- -------
in the event two or more such notices are required to be given in any
consecutive six month period, Agent at its option need not give such notice,
and there shall not be any period for the cure of such failure with respect
to such second or succeeding failure, or (b) Borrower shall fail to perform
or observe any term, covenant, or agreement contained in Article VIII hereof
or in a Note;
(5) Borrower or any Subsidiary (a) shall generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts
as such debts become due; or (b) shall make an assignment for the benefits
of creditors, petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or a substantial part of its assets;
or (c) shall commence any proceedings under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or
statute of any jurisdiction, whether now or hereafter in effect; or (d)
shall have any such petition or application filed or any such proceeding
commenced against it, in which an order for relief is entered or
adjudication or appointment is made and which remains undismissed for a
period of thirty (30) calendar days or more; or (e) by any act or omission
shall indicate its consent to, approval of, or acquiescence in any such
petition, application, or proceeding, or order for relief, or the
appointment of a custodian, receiver, or trustee for all or any substantial
part of its properties; or (f) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of thirty
(30) calendar days or more;
(6) One or more judgments, decrees, or orders for the payment
of money in excess of One Million Dollars ($1,000,000) in the aggregate
shall be rendered against Borrower or any Subsidiary, and such judgments,
decrees, or orders shall continue unsatisfied and in effect for a period of
thirty (30) consecutive calendar days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal;
(7) Any of the Pledge Agreement and/or the Subsidiary Pledge
Agreements shall at any time after its execution and delivery and for any
reason (other than by the action of the Agent) cease (a) to create a valid
and perfected Lien in and to the property purported to be subject thereto,
of the priority represented therein, or (b) to be in full force and effect
or shall be declared null and void, or the validity or enforceability
thereof shall be contested by Borrower or any Subsidiary, or Borrower or any
Subsidiary, as applicable, shall deny or disclaim further liability or
obligation thereunder, or Borrower or any Subsidiary shall fail to perform
any of its obligations thereunder, and solely with respect to performance of
obligations by the Borrower or any Subsidiary, as applicable, under the
Pledge Agreement and/or the Subsidiary Pledge Agreements, such default
remains unremedied for thirty (30) consecutive calendar days after notice
thereof shall
32
<PAGE> 40
have been given to the Borrower by the Agent (the other events described in
this Section 9.01(7) shall become Events of Default immediately upon
occurrence without notice to the Borrower);
(8) Any of the following events occur or exist with respect to
Borrower or any Subsidiary: (a) any Prohibited Transaction involving any
Plan; (b) any Reportable Event with Respect to any Plan; (c) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or
the termination of any Plan; (d) any event or circumstance that might
constitute grounds entitling the PBGC to institute proceedings under Section
4042 of ERISA for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such
proceedings; (e) complete or partial withdrawal under Section 4201 or 4204
of ERISA from a Multiemployer Plan or the reorganization, insolvency or
termination of any Multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, could in
the opinion of the Agent subject the Borrower or any Subsidiary to any tax,
penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or
otherwise (or any combination thereof) which in the aggregate exceed or may
exceed Two Hundred Fifty Thousand Dollars ($250,000);
(9) If James F. Dierberg and/or Mary W. Dierberg (together
with any trust or partnership or other entity over which he or she has
voting control) cease to own in the aggregate at least 51% of the voting
shares of stock of First Banks, Inc.;
(10) Except for those matters disclosed on Schedule 9.01(10),
-----------------
if any regulatory action or proceeding shall be commenced, or any cease and
desist order shall be entered into, between any state or federal regulatory
authority and Borrower or any Subsidiary which relates in any material
adverse way to the management or operations of Borrower or any Subsidiary;
(11) A default or an event of default exists or is declared
under the terms of any indebtedness or other material agreements of the
Borrower or any Subsidiary which continues beyond any applicable notice and
cure period;
(12) The Borrower shall fail to have positive Net Income for
any two consecutive fiscal quarters; or
(13) The Majority (as hereinafter defined) shall have
determined in good faith (which determination shall be conclusive) that (a)
a material adverse change has occurred in the assets, business, operations,
properties or condition, financial or otherwise, of the Borrower, or (b) the
Banks' security interest in the Collateral or in any material portion
thereof has been adversely affected or impaired, or the value of the
Collateral to the Banks relative to the amount of outstanding obligations
hereunder has been diminished to a material extent, or (c) the prospect of
payment or performance of any obligation or agreement of the Borrower
hereunder or under any of the Loan Documents is materially impaired, and the
condition giving rise to such determination does not constitute an Event of
Default under any of the other subsections of this Section 9.01;
then, in any such event Agent shall at the request of the Majority (as
hereinafter defined) declare the Banks' obligations to make Revolving Loans
or issue Letters of Credit to be terminated, whereupon the same shall
forthwith terminate and declare the outstanding Notes, all interest thereon,
and all other amounts payable under this Agreement to be forthwith due and
payable in full, whereupon the Notes, all such interest, and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Borrower; provided, that in the case of any of the
--------
Events of Default specified in subsection (5) above, without any notice to
the Borrower or any other act by the Agent or the Banks, the Banks'
obligations to make Revolving Loans and issue Letters of
33
<PAGE> 41
Credit shall be automatically terminated and the Notes, all interest thereon,
and all other amounts payable under this Agreement shall be forthwith due and
payable in full, without presentment, demand, protest, or further notice of
any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE X.
AUTHORITY AND RESPONSIBILITIES OF AGENT
---------------------------------------
Section X.01. Grant of Authority. Each of the Banks hereby
------------------
irrevocably appoints and authorizes The Boatmen's National Bank of St.
Louis, as the Agent under this Agreement and each other Loan Document, on
its behalf, to take such action and exercise such powers under this
Agreement and each other Loan Document as are specifically delegated to the
Agent by the terms thereof, together with such other powers as are
reasonably incidental thereto. The Agent shall have no duty to exercise any
right or power or remedy hereunder or to take any affirmative action
hereunder unless directed to do so by the Majority (as hereafter defined).
For purposes of this Agreement, the term "Majority" shall mean the Banks
--------
holding at least sixty-six percent (66%) in dollar amount of the Commitment.
Section X.02. Action upon Indemnification Instructions. The
----------------------------------------
Agent shall in all cases be fully justified and protected in acting or
continuing, failing or refusing to take any action hereunder or under any
other Loan Document upon the written instructions signed by the Majority,
and such instructions and any action taken or any failure to act pursuant
hereto shall be binding on all of the Banks, all holders of the Notes and
their respective successors and assigns.
Section X.03. Reports; Responsibility of the Agent;
-------------------------------------
Disclaimer. Promptly upon the receipt thereof from the Borrower, Agent
- ----------
shall photocopy and forward to each Bank each report, statement and other
written information received by Agent pursuant to the terms of Section 6.06
of this Agreement. Neither the Agent nor any of its respective directors,
officers, agents, employees, attorneys-in-fact or affiliates shall be liable
for any action taken or omitted to be taken under or in connection with this
Agreement or any other Loan Document, except for its or their willful
misconduct or gross negligence. Without limiting the generality of the
foregoing, the Agent:
(1) shall not be responsible to any Bank for any statement,
representation or warranty made by any Bank other than Agent or any officer
thereof under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby;
(2) shall not be responsible for the due execution,
effectiveness, validity, enforceability or sufficiency of this Agreement,
the Notes, the Pledge Agreement, the Subsidiary Pledge Agreements or any
other document or instrument furnished pursuant hereto or in connection
herewith;
(3) shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Loan Document on the part of the Borrower or any
Subsidiary or as to the business, operation, property, assets or condition
(financial or otherwise) of the Borrower or its Subsidiaries;
(4) shall be entitled to rely upon any writing, statement,
notice or any telegraph, telex, teletype or telecopy message or any
telephone conversation believed by it to be genuine and correct and, in the
case of any writing, to have been signed or sent by the proper person;
34
<PAGE> 42
(5) may consult with counsel and independent accountants and
other experts selected by the Agent and shall be fully protected in any
action taken or omitted to be taken in accordance with the advice of such
counsel, independent accountants or other experts;
(6) may employ agents and attorneys-in-fact and shall not be
liable for the default, negligence or misconduct of any such selected by the
Agent with reasonable care;
(7) may treat the payee of a Note as the holder thereof until
it receives written notice of the assignment or transfer thereof signed by
such payee and in form satisfactory to the Agent. Any request, authority or
consent of any person who at such time is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of
such Note or Note issued in exchange therefor; and
(8) shall have no liability or responsibility to Borrower for
any failure on the part of any Bank to comply with an obligation on its part
to be performed under this Agreement.
Section X.04. Correction of Errors. If the Agent shall pay
--------------------
any amount to any Bank pursuant hereto in the belief or expectation that a
related payment has been or will be received or collected from the Borrower
in connection with any Loan and such related payment is not actually
received or collected by the Agent then such Bank will promptly, on demand
by the Agent, return such amount to the Agent, together with interest
thereon at the federal funds rate for overnight deposits.
Section X.05. Expenses; Indemnification. To the extent that
-------------------------
the Borrower fails to do so, each Bank, and each subsequent holder of a Note
by its acceptance thereof, agrees to reimburse the Agent upon demand in
proportion to the unpaid principal amount of its Notes, or if no Notes are
at the time outstanding in proportion to the Commitments, and to indemnify
and hold the Agent and its directors, officers, employees and agents in
their respective capacities harmless in such proportion against any and all
losses, liabilities, damages, demand, judgment, claim, counterclaim,
set-off, cost, disbursement or expenses of any kind whatsoever (including
reasonable attorney's fees and expenses) incurred by or asserted against the
Agent or its directors, officers, employees and agents under or in
connection with any of the foregoing arising out of or in connection with
this Agreement, the Notes or any other Loan Documents, the transactions
contemplated hereunder, the enforcement, collection or realization of any
thereof or any action taken or omitted by the Agent, provided that no Bank
shall be liable for any portion of the foregoing incurred by the Agent as a
result of its willful misconduct or gross negligence. The agreements in
this Section 10.05 shall survive the payment of the Loans, or any other
amounts payable hereunder or under the Notes and the termination of the
Commitments.
Section X.06. Rights as Bank. With respect to its Loans and
--------------
the Notes issued to it, the Agent shall have the same rights and powers
hereunder as any Bank and may exercise the same as though it were not the
Agent, and the term "Bank" or "Banks" shall include the Agent in its
---- -----
individual capacity. The Agent and any of its affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking or
trust business with, the Borrower and any affiliates as if it were not the
Agent and may accept fees and other consideration from the Borrower for
services in connection with this Agreement and otherwise without having to
account for the same to the Banks.
Section X.07. Representation of Each Bank. Each Bank
---------------------------
expressly acknowledges that the Agent has not made any representations or
warranties to it and that no action taken or hereafter taken by the Agent
shall be deemed to constitute a representation or warranty by the Agent to
any other Bank. Each Bank represents and warrants to the Agent that it has
made and
35
<PAGE> 43
will continue to make its own independent investigation of the condition
(financial and otherwise) and affairs of the Borrower and the Subsidiaries in
connection with this Agreement and the Notes without reliance on the Agent or
on any information or documents prepared by the Agent. Except for notices,
reports and other documents expressly required to be furnished to the Banks by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Bank or any of its respective officers, directors, employees,
agents, attorneys-in-fact or affiliates any other information or documentation
pertaining to Borrower, the Subsidiaries, or their financial affairs.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or otherwise exist against the Agent.
Section X.08. Rights to Resign; Appointment of a Successor
--------------------------------------------
Agent. The Agent may resign as such at any time upon thirty (30) calendar
- -----
days' notice to the Borrower and the Banks. In such event, the Majority
shall appoint a successor Agent which shall be an incorporated bank or trust
company, provided, however, that if there is no Default or Event of Default
-------- -------
at the time of such appointment and provided further the successor Agent is
to be a bank other than Harris Trust and Savings Bank, Norwest Bank
Minnesota, National Association, American National Bank and Trust Company of
Chicago, or The Frost National Bank, the Agent shall send to Borrower a list
of at least three (3) banks which are satisfactory to the Majority to serve
as the successor Agent, whereupon the Borrower shall have three (3) Business
Days in which to select which bank on the list is to be the successor Agent.
In the event of the failure of the Borrower to select a bank from the list,
then the right of selection granted to the Borrower hereunder shall forever
lapse. If no successor shall have been so appointed and accepted such
appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation or the Majority's removal of the retiring Agent, then
the retiring Agent may, on behalf of the Banks, appoint a successor, which
shall be a Bank, or, if no such Bank accepts such appointment, which shall
be a bank or trust company with an office (or an affiliate with an office)
in St. Louis, Missouri, having a combined capital and surplus of not less
than One Hundred Million Dollars ($100,000,000). Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation or removal hereunder as Agent, the provisions of this
Article X shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
Section X.09. Notice of Default. The Agent shall not be
-----------------
deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Agent has received notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and, in the case of any Default or Event of Default other than those
described in Section 9.01 of this Agreement, stating that such notice is a
"notice of default". The Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Majority,
provided that unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.
Section X.10. Agent Compensation. For its services as Agent
------------------
hereunder, Borrower shall pay to Agent on the date of this Agreement and on
each anniversary date thereof, certain compensation as heretofore agreed
between Agent and Borrower.
36
<PAGE> 44
ARTICLE XI.
MISCELLANEOUS
-------------
Section XI.01. Capital Adequacy Reimbursement. If after the
------------------------------
date hereof, the Agent shall be advised that or shall determine that with
respect to any of the Banks the adoption or the taking effect of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency or compliance
by the Banks with any request or directive regarding capital adequacy
(whether or nor having the force of law) of any such authority, central bank
or comparable authority, has or would have the effect of reducing the rate
of return on or increasing the cost of maintaining all of the Banks' capital
as a direct consequence of their obligations hereunder (taking into
consideration the Banks' policies with respect to capital adequacy) then
from time to time, within fifteen (15) calendar days after demand by Agent,
Borrower shall pay to Agent such additional amount or amounts as will
compensate the Banks for such reduction or increase. A certificate of the
Agent claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive
and binding in the absence of manifest error.
Section XI.02. Amendments, Etc. Except as expressly provided
---------------
in Article VII hereof, no amendment, modification, termination, or waiver of
any provision of any Loan Document, nor consent to any departure by the
Borrower from any Loan Document, shall in any event be effective unless the
same shall be in writing and signed by the Agent and a Majority of the
Banks, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
--------
however, that no such amendment, modification, termination or waiver of any
- -------
provision of any Loan Document shall: (a) postpone the stated maturity of
principal of, or interest on, any of the Loans or the reimbursement
obligations with respect to the Letters of Credit, or reduce the principal
amount of, the rate of interest on, or the fees in connection with this
Agreement; (b) increase the maximum amount of the Revolving Loan Commitment
or the Revolving Loan Commitment of any Bank; (c) change the percentages
required for action by the Banks under this Section 11.02 or by the Majority
under this Agreement; or (d) release or subordinate any Liens in favor of
the Agent on any of the Collateral, except as otherwise expressly provided
herein. The consent of all of the Banks is required to effect any
amendment, modification or waiver of the provisions of this Agreement and of
each Loan Document which provisions are of a type described in clauses (a),
(b), (c) or (d) of this Section 11.02. The consent of the Borrower will not
be required to effect any amendment, modification or waiver of the
provisions of Article X of this Agreement.
Section XI.03. Notices, Etc. All notices and other
------------
communications provided for under this Agreement and under the other Loan
Documents shall be in writing (including facsimile communication) and
mailed, sent by facsimile machine or delivered, to the parties at the
addresses set forth on Exhibit P attached or, as to each party, at such
---------
other address as shall be designated by such party in a written notice to
the other party complying as to delivery with the terms of this Section
11.03. All such notices and communications shall, when mailed, be effective
when deposited in the mails respectively addressed as aforesaid, except that
notices to the Agent and the Banks pursuant to the provisions of Article II
and Article III shall not be effective until received by the Agent and such
Banks.
Section XI.04. No Waiver; Remedies. No failure on the part
-------------------
of the Agent or any Bank to exercise, and no delay in exercising, any right,
power, or remedy under any Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under any Loan
Document preclude any other or further exercise thereof or the exercise of any
37
<PAGE> 45
other right. The remedies provided in the Loan Documents are cumulative
and not exclusive of any remedies provided by law.
Section XI.05. Successors and Assigns. This Agreement shall
----------------------
be binding upon and inure to the benefit of the Borrower and the Banks and
their respective successors and assigns, except that Borrower may not assign
or transfer any of its rights under any Loan Document to which Borrower is a
party without the prior written consent of the Banks, and a Bank may not
sell, assign or participate all or any portion of its Notes (other than a
sale, assignment, or participation to an affiliate bank) without the prior
written consents of Borrower and Agent.
Section XI.06. Costs and Expenses.
------------------
(1) The Borrower agrees to pay to Agent and the Banks on
demand, all costs and expenses, if any, incurred by Agent and the Banks in
connection with any modification of this Agreement and with the modification
or enforcement of any of the Loan Documents, including, without limitation,
the reasonable fees and expenses of counsel for the Agent (with respect to
modifications and enforcement) and the Banks (with respect to enforcement
only) with respect thereto and with respect to advising the Agent and the
Banks as to its respective rights and responsibilities under any of the Loan
Documents.
(2) If any payment or prepayment of principal with respect to
any Loans accruing at the Eurodollar Rate Loan is made by the Borrower other
than on the last day of the Interest Period for such Loans, and such payment
is permitted pursuant to Sections 2.06, 2.10 or 3.10, or is made as a result
of an acceleration of the maturity of the Notes pursuant to Section 9.01 or
for any other reason, the Borrower shall, upon demand by the Agent on behalf
of the Banks, pay the Agent for the account of the Banks any amounts
required to compensate the Banks for any additional losses, costs or
expenses which they may reasonably incur as a result of such payment,
including, without limitation, any loss (including loss of anticipated
profits), costs or expenses incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by the Banks to fund or
maintain such Loan.
Section XI.07. Right of Setoff. Upon the occurrence and
---------------
during the continuance of any Event of Default, each Bank is hereby
authorized at any time and from time to time, without notice to the Borrower
(any such notice being expressly waived by the Borrower), to set off and
apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by a
Bank to or for the credit or the account of Borrower against any and all of
the obligations of the Borrower now or hereafter existing under this
Agreement, the Notes or any other Loan Document, irrespective of whether or
not the Agent shall have made any demand under this Agreement or the Notes
or such other Loan Document and although such obligations may be unmatured.
Each Bank agrees promptly to notify the Borrower after any such setoff and
application, provided that the failure to give such notice shall not affect
the validity of such setoff and application. The rights under this Section
11.07 are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Banks may have.
Section XI.08. Sharing of Setoffs. Each Bank agrees that if
------------------
it shall, by exercising any right of setoff receive payment of a proportion
of the aggregate amount of principal and interest due with respect to any of
the Notes held by it (or any other obligations of Borrower hereunder to such
Bank) which is greater than the proportion received by any other Bank in
respect of the aggregate amount of principal and interest due with respect
to any of the Notes held by such other Bank (or any other obligations of
Borrower hereunder to such Bank), the Bank receiving such proportionately
greater payment shall purchase such participations in the Notes held by the
38
<PAGE> 46
other Banks (or any other obligations of Borrower hereunder to the other
Banks) and such other adjustments shall be made, as may be required so that
all such payments of principal and interest on the Notes (or other
obligations of Borrower hereunder to the Banks) shall be shared by the Banks
pro rata, provided that if any such non-pro rata payment is thereafter
recovered or otherwise set aside such purchase of participations shall be
rescinded (without interest).
Section XI.09. Governing Law; Jurisdiction and Venue. This
-------------------------------------
Agreement and the other Loan Documents shall be governed by, and construed
in accordance with, the laws of the State of Missouri. The Borrower hereby
consents to the jurisdiction of the Circuit Court of the County of St.
Louis, Missouri, and the United States District Court for the Eastern
District of Missouri, as well as to the jurisdiction of all courts from
which an appeal may be taken from any such courts, for the purpose of any
suit, action or other proceeding arising out of any of its obligations
arising hereunder or with respect to the transactions contemplated hereby,
and expressly waives any and all objections it may have as to venue in any
such courts and agrees that any proceeding initiated in another court which
relates to such matters may be, at the option of the Agent, transferred to
any of such courts.
Section XI.10. Severability of Provisions. Any provision of
--------------------------
any Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions of such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section XI.11. Counterparts. This Agreement may be executed
------------
in any number of counterparts and by different parties to this Agreement in
separate counterparts, each which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section XI.12. Headings. Article and Section headings in the
--------
Loan Documents are included in such Loan Documents for the convenience of
reference only and shall not constitute a part of the applicable Loan
Documents for any other purpose.
Section XI.13. Oral Agreements. ORAL AGREEMENTS OR
---------------
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT
ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (CREDITORS) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
39
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FIRST BANKS, INC.
By: /s/
---------------------------------------
Name:-------------------------------------
Title:------------------------------------
THE BOATMEN'S NATIONAL BANK
OF ST. LOUIS, as Agent and as a Bank
By: /s/
---------------------------------------
Name:-------------------------------------
Title:------------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/
---------------------------------------
Name:-------------------------------------
Title:------------------------------------
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/
---------------------------------------
Name:-------------------------------------
Title:------------------------------------
THE FROST NATIONAL BANK
By: /s/
---------------------------------------
Name:-------------------------------------
Title:------------------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By: /s/
---------------------------------------
Name:-------------------------------------
<PAGE> 48
<TABLE>
EXHIBIT A
---------
TERM LOAN COMMITMENT AMOUNTS
----------------------------
<CAPTION>
Bank Amount of Commitment
---- --------------------
<S> <C>
The Boatmen's National Bank of St. Louis $16,666,668
American National Bank and Trust Company of Chicago $11,111,111
Harris Trust and Savings Bank $8,333,333
Norwest Bank Minnesota, National Association $8,333,333
The Frost National Bank $5,555,555
$50,000,000
</TABLE>
<PAGE> 49
EXHIBIT B
--------
TERM NOTE
---------
$------------ St. Louis, Missouri
July 18, 1996
FOR VALUE RECEIVED, the undersigned, First Banks, Inc., a
Missouri corporation, promises to pay to the order of -----------------
("Payee") at the offices of the Agent at One Boatmen's Plaza, 800 Market
Street, St. Louis, Missouri 63101, the principal sum of ---------------
($------) or such lesser amount as may be outstanding hereunder.
The Borrower promises to pay principal and interest from the
date hereof in the amounts, at the rates and at the time or times which
shall be determined in accordance with the provisions of that certain
Secured Credit Agreement of even date herewith, by and between the Borrower,
the Payee and other banks (the "Credit Agreement").
The entire unpaid principal balance hereunder and all accrued
and unpaid interest hereon shall be due and payable on July 12, 2000.
Interest shall be calculated on the basis of the actual number of days
elapsed over a year of 360 days.
If any payment due on this Note is payable on a day which is not
a Business Day (as defined in the Credit Agreement) then such payment will
be made on the next Business Day, the amount of such payment, in such case,
to include all interest accrued to the date of actual payment.
This Note is one of the "Term Notes" referred to in the certain
Credit Agreement is secured as provided therein and is entitled to all of
the benefits thereof. In accordance with the terms of the Credit Agreement,
the Agent as defined thereunder may declare the unpaid balance of the
principal and accrued interest to be immediately due and payable upon the
occurrence of an Event of Default as defined in the Credit Agreement,
whereupon the unpaid principal and accrued interest then owing hereon shall
be and become immediately due and payable, and interest shall accrue at a
rate per annum equal to four percent (4%) in excess of the then otherwise
applicable rate of interest as determined in accordance with Sections 2.03
and 2.04 of the Credit Agreement.
The privilege of prepayment of all or a portion of the
indebtedness evidenced by this Note is as provided in the Credit Agreement.
If this Note shall not be paid at maturity, whether upon the
exercise of acceleration or otherwise, and shall be placed in the hands of
an attorney for collection or in connection with insolvency or bankruptcy
proceedings, the undersigned hereby promises to pay the reasonable fees and
expenses of such attorney in addition to the full amount due hereon, whether
or not litigation shall be commenced.
Demand for payment, protest and notice of dishonor are hereby
waived by all who are or shall become parties to this instrument.
FIRST BANKS, INC.
By:---------------------------------
Name:-------------------------------
Title:------------------------------
<PAGE> 50
EXHIBIT C
---------
NOTICE OF INTEREST RATE SELECTION
TO: The Boatmen's National Bank of St. Louis
FROM: First Banks, Inc.
DATE: -------------------, 199--
This Notice of Interest Rate Selection is being submitted
pursuant to the terms of the Secured Credit Agreement dated as of July 18,
1996 ("Credit Agreement"), as the same may be thereafter amended from time
to time, among First Banks, Inc. and the banks named therein (for whom The
Boatmen's National Bank of St. Louis is acting as Agent).
(1) The Business Day on which the Interest Period shall commence:
---------------
(2) The current aggregate outstanding balance of the Term Loan as of the
date hereof is: ---------------
(3) Borrower requests that the Term Loan (other than the Repayment
Tranche, if applicable) accrue interest at the Eurodollar Rate.
(4) The Interest Period requested hereunder (or the new Interest Period
for an expiring Interest Period) is ---------- months. (One,
two, or three month Interest Periods are available). Such
Interest Period will expire on ----------, ----.
(5) Borrower requests that the Repayment Tranche in the amount of
$2,500,000 accrue interest at the Corporate Base Rate.
FIRST BANKS, INC.
By:-----------------------------------------
Name:---------------------------------
Title:--------------------------------
<PAGE> 51
<TABLE>
EXHIBIT D
---------
REVOLVING LOAN COMMITMENT AMOUNTS
---------------------------------
<CAPTION>
Bank Amount of Commitment
---- -------------------
<S> <C>
The Boatmen's National Bank of St. Louis $13,333,332
American National Bank and Trust Company of Chicago $8,888,889
Harris Trust and Savings Bank $6,666,667
Norwest Bank Minnesota, National Association $6,666,667
The Frost National Bank $4,444,445
$40,000,000
</TABLE>
<PAGE> 52
EXHIBIT E
---------
REVOLVING CREDIT NOTE
---------------------
$----------------- St. Louis, Missouri
July 18, 1996
FOR VALUE RECEIVED, the undersigned, First Banks, Inc., a
Missouri corporation ("Borrower"), promises to pay to the order of
- --------------- ("Payee") at the offices of the Agent at One Boatmen's
Plaza, 800 Market Street, St. Louis, Missouri 63101, the principal sum of
- -------------- Dollars ($-------------) or such lesser amount as may be
outstanding hereunder.
The Borrower promises to pay interest from the date hereof on
the unpaid principal balance outstanding from time to time prior to maturity
at the rates and at the time or times which shall be determined in
accordance with the provisions of that certain Secured Credit Agreement of
even date herewith, by and between the Borrower, the Payee and other banks
(the "Credit Agreement").
The entire unpaid principal balance hereunder and all accrued
and unpaid interest hereon shall be due and payable on July 11, 1997.
Interest shall be calculated on the basis of the actual number of days
elapsed over a year of 360 days.
If any payment due on this Note is payable on a day which is not
a Business Day (as defined in the Credit Agreement), then such payment will
be made on the next Business Day, the amount of such payment, in such case,
to include all interest accrued to the date of actual payment.
This Note is one of the "Revolving Notes" referred to in the
Credit Agreement, is secured as provided therein, and is entitled to all of
the benefits thereof. In accordance with the terms of the Credit Agreement,
the Agent (as defined thereunder) may declare the unpaid balance of the
principal and accrued interest to be immediately due and payable upon the
occurrence of an Event of Default as defined in the Credit Agreement,
whereupon the unpaid principal and accrued interest then owing hereon shall
be and become immediately due and payable, and interest shall accrue at a
rate per annum equal to four percent (4%) in excess of the then otherwise
applicable rate of interest as determined in accordance with Sections 3.04
and 3.05 of the Credit Agreement.
If this Note shall not be paid at maturity, whether upon the
exercise of acceleration or otherwise, and shall be placed in the hands of
an attorney for collection or in connection with insolvency or bankruptcy
proceedings, the Borrower hereby promises to pay the reasonable fees and
expenses of such attorney in addition to the full amount due hereon, whether
or not litigation shall be commenced.
Demand for payment, protest and notice of dishonor are hereby
waived by all who are or shall become parties to this instrument.
FIRST BANKS, INC.
By:---------------------------------
Name:-------------------------------
Title:------------------------------
<PAGE> 53
EXHIBIT F
---------
NOTICE OF BORROWING
-------------------
TO: The Boatmen's National Bank of St. Louis, as Agent
FROM: First Banks, Inc.
DATE:-------------------, 199-
This Notice of Borrowing is being submitted pursuant to the
terms of the Secured Credit Agreement dated as of July 18, 1996 ("Credit
Agreement"), as the same may be thereafter amended from time to time, among
First Banks, Inc. and the banks named therein (for whom The Boatmen's
National Bank of St. Louis is acting as Agent).
(1) The Business Day of the proposed principal
advance under the Credit Agreement is: --
(2) The principal advance under the Credit Agreement will be a [Base Rate
Loan] [Eurodollar Rate Loan].
(3) The Interest Period for the Eurodollar Rate Loan requested hereunder )or
the new Interest Period for an expiring Interest Period) is ---- months.
(4) The current aggregate outstanding balance of the Revolving Loans and
the current aggregate Letter of Credit Outstandings as of the
date hereof is: $--
(5) The principal advance being requested is (must be
at least the unused portion of the Revolving Loan Commitment
of $40,000,000 or $1,000,000, whichever is less): $--
(6) The use of the proceeds for the Loan requested hereby will be for
---------------------------.
(7) Unused portion of the Revolving Loan Commitment
upon advance of funds requested by this Notice
($40,000,000 - #4 - #5): $--
FIRST BANKS, INC.
By:----------------------------------
Name:--------------------------
Title:-------------------------
<PAGE> 54
EXHIBIT G
---------
PLEDGE AGREEMENT
----------------
In consideration of and as collateral security for the payment
of any and all present and future indebtedness, obligations and liabilities
of FIRST BANKS, INC., a Missouri corporation ("Pledgor") under or pursuant
to that certain Secured Credit Agreement of even date herewith (together
with any extensions, renewals, amendments or modifications thereof, the
"Credit Agreement") among Pledgor and The Boatmen's National Bank of St.
Louis ("Boatmen's"), Norwest Bank Minnesota, National Association, Harris
Trust and Savings Bank, American National Bank and Trust Company of Chicago
and The Frost National Bank (collectively the "Banks"), all such
indebtedness, obligations and liabilities, whether direct or indirect,
liquidated or unliquidated, absolute or contingent, now existing or
hereafter arising, individual, joint, or joint and several (collectively,
the "Liabilities"), Pledgor hereby pledges to Boatmen's as agent for and for
the ratable benefit of the Banks (as agent for the Banks, Boatmen's is
referred to hereinafter as "Pledgee") and grants the Pledgee a continuing
security interest in the capital stock of certain Subsidiaries of Pledgor,
as described on Exhibit A attached hereto and incorporated herein (together
---------
with any additional stock described in Section 4 hereof, collectively, the
"Stock"), together with all substitutions therefor and dividends (as limited
herein), new shares or warrants, liquidating distributions and other rights,
and proceeds or distributions of any nature associated therewith, all of
which Pledgor hereby represents and warrants that it owns (or, for purposes
of Section 4, will own) free of liens or claims of any kind, with fully
marketable title thereto, and has (or will have) the right to so pledge.
Pledgor agrees that said Stock, together with the proceeds
thereof (hereinafter collectively called the "Collateral," such term as used
herein including any underlying security for any note or other evidence of a
monetary obligation pledged hereunder) shall constitute security for any and
all of the Liabilities and may be held, in accordance with the terms and
provisions of this Agreement, for the payment thereof for such periods and
applied thereto at such times and in such order as the Pledgee from time to
time may deem appropriate, whether or not the Liabilities for which the same
are held or applied are in existence at the time of delivery of this
Agreement or the Collateral and whether or not such Liabilities are
contingent, unliquidated or unmatured.
Pledgor further agrees that:
1. Pledgor will keep the Collateral free from all other
security interests, liens or encumbrances except those security interests,
liens or encumbrances now or hereafter granted to the Pledgee. Pledgor will
procure, execute, endorse and deliver all documents which the Pledgee may
reasonably require to protect, enforce or otherwise effectuate the Pledgee's
rights in the Collateral and Pledgor hereby grants to the Pledgee an
irrevocable power of attorney, with full power of substitution, to so act in
Pledgor's name if Pledgor fails to do so.
2. The Pledgee may collect the Collateral or any part thereof
at any time except with respect to dividends, which shall be collected by
Pledgee only in accordance with Paragraph 3 hereof. For such purpose the
Pledgee may take, in its own name or in the name of Pledgor, any action
which Pledgor might take including suit against any obligor on any note or
other monetary obligation constituting part of the Collateral and collection
of or foreclosure upon any underlying security, and such action may be taken
without first foreclosing under this Agreement on the obligations secured by
such underlying security. The Pledgee shall have no obligation, however, to
pursue or preserve remedies against any party primarily or secondarily
liable as an obligor on the Collateral or otherwise to take action which
Pledgor might have taken as regards the Collateral or any underlying
security therefor.
<PAGE> 55
3. Pledgee shall have the continuing right to retain all or
any part of the Collateral so long as any Liability remains in existence (or
the Banks shall have any Commitment under the Credit Agreement), even though
the same may be unliquidated, unmatured or contingent. Upon maturity of any
of the Liabilities or the occurrence of an Event of Default under the Credit
Agreement or hereunder, the Pledgee may cause any of the Collateral to be
transferred to its own name or to the name of its nominee (and this shall be
full authority to any transfer agent, registrar or the like to make such
transfer). No such action shall be deemed a retention of the Collateral in
satisfaction of any Liability unless written notice so stating shall be
given to the Pledgor. The Pledgee shall have the sole right to determine
whether any call or option to surrender, exchange, redeem, convert or
otherwise change or alter the form of the Collateral shall be exercised if
the interest of Pledgee is or may be affected thereby. The Pledgee shall be
under no obligation to initiate any such action unless requested in writing
by the Pledgor. All dividends, new shares or warrants, liquidating
distributions and other rights, proceeds and payments or distributions of
any nature received by Pledgor in respect of the Collateral will be
delivered to the Pledgee in kind and the Pledgee may take such action as is
necessary to assure its direct receipt thereof, provided however that, prior
to the occurrence of an Event of Default under the Credit Agreement or
hereunder, Pledgor shall be permitted to retain permitted ordinary dividends
and interest paid in cash and shall retain the right to vote with respect to
the Collateral.
4. In the event that Pledgor, after the date hereof, acquires
all or any portion of the stock of any bank, bank holding company, thrift
institution or savings holding company (i) with the proceeds of a Loan under
the Credit Agreement (or the consideration for which is supplemented or
supported, directly or indirectly, by a Letter of Credit) or (ii) which is
or by virtue of such acquisition becomes a Subsidiary as defined in the
Credit Agreement (other than as may be acquired by First Banks America, Inc.
or First Commercial Bancorp, Inc.), Pledgor promptly shall (A) grant to
Pledgee a security interest in such stock as additional security for the
Liabilities, (B) deliver to Pledgee the certificates representing such
stock, along with fully-executed stock powers therefor, and (C) take such
other action and execute and deliver such other documents to Pledgee as
Pledgee reasonably may require in connection therewith.
5. The following severally shall be considered events of
default for purposes of this Agreement: (a) if any representation, warranty
or statement of fact made by Pledgor hereunder shall prove to be false or
misleading in any material respect, and such default remains unremedied for
thirty (30) consecutive calendar days after notice thereof shall have been
given to Pledgor by the Pledgee, (b) an Event of Default occurs under the
Credit Agreement, or (c) seizure of any of the Collateral or sale or
encumbrance thereof or the failure to pay any tax thereon when due (except
any tax contested in good faith for which reserves for payment satisfactory
to Pledgee have been provided by the Pledgor).
6. Upon maturity of any of the Liabilities (by acceleration
or otherwise) or the occurrence of an event of default hereunder, the
Pledgee may resort to the Collateral at such times and in such order as it
elects and may apply the Collateral to the Liabilities in like manner and
without regard to whether application is made to an obligation of the owner
of the Collateral so applied. If any of the Collateral is owned by someone
other than Pledgor, the Pledgee may elect to apply such Collateral in any
proportion to obligations of the owner or owners to the Pledgee without
regard to the Liabilities. In addition, the Pledgee shall have all rights
of a secured party under the Missouri Uniform Commercial Code and shall
apply the proceeds of collection, disposition or other realization on the
Collateral to reasonable attorneys' fees and legal expenses incurred by the
Pledgee in connection therewith and in the collection of any Liabilities and
representation of the Pledgee in proceedings of any nature under the
Bankruptcy Code, and thereafter as required by law. If notice of intended
disposition is required by law, such notice, if mailed, shall be deemed
reasonably and properly given if mailed to the address of Pledgor appearing
on the records of the Pledgee at least five (5) Business Days (as defined in
the Credit Agreement) before the time of such disposition. The Pledgee
shall have the right to proceed
<PAGE> 56
against the Collateral or not as the Pledgee may deem proper or as directed by
the Majority (as defined in the Credit Agreement), and the Pledgee shall have
the right to collect dividends, interest and such like profits from the
Collateral whether or not it proceeds against the Collateral. If, in the
opinion of the Pledgee, any Collateral cannot be disposed of in a commercially
reasonable manner without registration under applicable securities laws,
Pledgor will take or cause to be taken such action as is necessary to effect
proper registration. If Pledgor shall refuse to take such action, the Pledgee
without any obligation to do so, may take such action as it deems warranted
to attempt to effect compliance with any applicable law. Any cost, fee or
expense incurred by the Pledgee in connection with such efforts or in
enforcing Pledgor's covenants hereunder will be considered a cost incurred
in disposition of the Collateral.
7. The Pledgee's rights hereunder shall continue unimpaired
notwithstanding foreclosure or other disposition of any part of the
Collateral, the availability of additional Collateral, any release of or
substitution for any of the Collateral, any act or omission impairing the
Pledgee's lien on the Collateral or the lien of any underlying security
constituting part of the Collateral, including failure to perfect the same,
any extension (including extension of time for payment), renewal,
substitution, alteration, compromise, settlement, surrender, release or
other such agreement or action modifying or varying the terms of or
otherwise affecting any of the Liabilities or any part of the Collateral,
including any act or omission releasing any party primarily or secondarily
liable on the Collateral or on any Liability. No failure by Pledgee to
exercise or delay in exercising any of its rights hereunder shall constitute
a waiver thereof and no single or partial exercise of any right shall
preclude the further exercise thereof or the exercise of any other right.
All rights of the Pledgee hereunder or under any instrument or other
agreement binding on Pledgor are cumulative and not in substitution of any
other rights at law or equity with respect to the Collateral or the
collection of the Liabilities. All such rights may be exercised from time
to time. Pledgor hereby waives notice of any and all actions, forebearances
and omissions of any rights contemplated by this paragraph and consents to
be bound thereby as effectively as if Pledgor had agreed thereto in
advance. Upon the termination of the Credit Agreement and the liquidation
and payment of the liabilities in full, this Agreement shall terminate and
the Collateral will be returned forthwith to the Pledgor.
8. The Pledgee shall have no obligation to act in accordance
with any communication by Pledgor or any other party obligated on the
Liabilities or interested in the Collateral, as endorser, guarantor, surety
or otherwise, concerning the liquidation of all or any part of the
Collateral if it shall be the opinion of the Pledgee in the exercise of its
reasonable judgment that the value of the Collateral upon liquidation may be
insufficient to discharge the Liabilities in full. The Pledgee shall in no
event be bound by or obligated to act upon any such communication unless the
same shall be in writing and shall include explicit instructions as to the
disposition requested.
9. Any notice required or permitted hereunder shall be deemed
given if sent in the manner and at the addresses as provided in the Credit
Agreement.
10. To the extent required by law for purposes of providing
qualifying shares of stock to members of the board of directors of the bank
institutions owned by Pledgor, Pledgee agrees to release such number of
qualifying shares from the lien of this Agreement. To effect such release,
Pledgee will deliver the certificate for the shares of stock of the subject
banking institution to the Pledgor on a trust receipt basis and with the
obligation of Pledgor to return the reissued certificate to Pledgee within
forty-eight (48) hours of the delivery to Pledgor. At the request of
Pledgee, Pledgor agrees to cause such members of the board of directors to
pledge such qualifying shares to Pledgee for the benefit of the Banks as
additional collateral for the Liabilities. Any such qualifying shares
shall, upon issuance, contain an appropriate legend describing the
restrictions and covenants set forth in this Agreement.
<PAGE> 57
11. This agreement shall be construed in accordance with and
governed by Missouri law.
12. Pledgor warrants and represents to Pledgee that the shares
of stock of each institution as listed on Exhibit A on the date hereof
---------
represent all of the outstanding shares of stock of each respective
institution (except for directors' qualifying shares and except with respect
to First Banks America, Inc., First Bank FSB and First Commercial Bancorp,
Inc.). Pledgor represents and warrants that (i) the shares of stock of
First Banks America, Inc. as listed on Exhibit A on the date hereof
---------
represent all of the outstanding shares of Class B common stock issued by
such institution and such shares have ordinary voting power to elect a
majority of the board of directors of First Banks America, Inc., (ii) the
shares of stock of First Commercial Bancorp, Inc. as listed on Exhibit A on
---------
the date hereof represent approximately 61% of the outstanding shares of
stock issued by such institution and such shares have ordinary voting power
to elect a majority of the board of directors of First Commercial Bancorp,
Inc., and (iii) the shares of stock of First Bank FSB as listed on Exhibit B
---------
on the date hereof represent approximately 64% of the outstanding shares of
stock issued by such institution and such shares have ordinary voting power
to elect a majority of the board of directors of First Bank FSB.
Dated at St. Louis, Missouri, as of this 18th day of July, 1996.
FIRST BANKS, INC.
By:---------------------------------
Name:-------------------------------
Title:------------------------------
<PAGE> 58
PLEDGE AGREEMENT EXHIBIT A
LIST OF COLLATERAL
------------------
9,994 shares of the common stock of First Bank (Creve Coeur, Missouri) [n/o
First Banks, Inc.]
400,000 shares of the common stock of First Bank (O'Fallon, Illinois) [n/o
First Banks, Inc.]
96,254 shares of the common stock of First Bank FSB [n/o First Banks, Inc.]
2,500,000 shares of the Class B Common Stock of First Banks America, Inc.
[n/o First Banks, Inc.]
10,000 shares of the common stock of River Valley Holdings, Inc. [n/o First
Banks, Inc.]
100 shares of the common stock of St. Charles Federal Savings and Loan
Association [n/o First Banks, Inc.]
457 shares of the common stock of CCB Bancorp, Inc. [n/o First Banks, Inc.]
3,100 shares of the Series A Preferred Stock of CCB Bancorp, Inc. [n/o First
Banks, Inc.]
1,000 shares of the Series B Preferred Stock of CCB Bancorp, Inc. [n/o First
Banks, Inc.]
65,000,000 shares of the common stock of First Commercial Bancorp, Inc. [n/o
First Banks, Inc.]
<PAGE> 59
EXHIBIT G-1
-----------
SUBSIDIARY PLEDGE AGREEMENT
---------------------------
In consideration of and as collateral security for the payment
of any and all present and future indebtedness, obligations and liabilities
of First Banks, Inc., a Missouri corporation ("Borrower"), whether direct or
indirect, liquidated or unliquidated, absolute or contingent, now existing
or hereafter arising, under or pursuant to that certain Secured Credit
Agreement of even date herewith (together with any extensions, renewals,
amendments or modifications thereof, the "Credit Agreement") among Borrower
and The Boatmen's National Bank of St. Louis ("Boatmen's"), Norwest Bank
Minnesota, National Association, Harris Trust and Savings Bank, American
National Bank and Trust Company of Chicago and The Frost National Bank
(collectively the "Banks"), all such indebtedness, obligations and
liabilities, whether direct or indirect, liquidated or unliquidated,
absolute or contingent, now existing or hereafter arising, individual,
joint, or joint and several (collectively, the "Liabilities"), and in
consideration of the benefit conferred upon Pledgor (as defined below) as a
result of Boatmen's willingness to enter into the Credit Agreement,
- -------------------------- ("Pledgor"), a subsidiary of Borrower, hereby
pledges to Boatmen's as agent for and for the ratable benefit of the Banks
(as agent of the Banks, Boatmen's is referred to hereafter as "Pledgee") and
grants Pledgee a continuing security interest in the capital stock of a
Subsidiary as described on Exhibit A attached hereto and incorporated herein
---------
(together with any additional stock described in Section 4 hereof,
collectively, the "Stock"), together with all substitutions therefor and
dividends, new shares or warrants, liquidating distributions and other
rights, and proceeds or distributions of any nature associated therewith,
all of which Pledgor hereby represents and warrants that it owns (or, for
purposes of Section 4, will own) free of liens or claims of any kind, with
fully marketable title thereto, and has (or shall have) the right to so
pledge.
Pledgor agrees that said Stock, together with the proceeds
thereof (hereinafter collectively called the "Collateral," such term as used
herein shall include any underlying security for any note or other evidence
of a monetary obligation pledged hereunder) shall constitute security for
any and all of the Liabilities and may be held, in accordance with the terms
and provisions of this Agreement, for the payment thereof for such periods
and applied thereto at such times and in such order as the Pledgee from time
to time may deem appropriate, whether or not the Liabilities for which the
same are held or applied are in existence at the time of delivery of this
Agreement or the Collateral and whether or not such Liabilities are
contingent, unliquidated or unmatured.
Pledgor further agrees that:
1. Pledgor will keep the Collateral free from all other
security interests, liens or encumbrances except those security interests,
liens or encumbrances now or hereafter granted to the Pledgee. Pledgor will
procure, execute, endorse and deliver all documents which the Pledgee may
reasonably require to protect, enforce or otherwise effectuate the Pledgee's
rights in the Collateral and Pledgor hereby grants to the Pledgee an
irrevocable power of attorney, with full power of substitution, to so act in
Pledgor's name with respect to the Collateral if Pledgor fails to do so.
2. Except as otherwise expressly provided under Paragraph 3
hereof, the Pledgee may collect and receive distributions relating to the
Collateral or any part thereof at any time. For such purpose the Pledgee
may take, in its own name or in the name of Pledgor, any action which
Pledgor might take. The Pledgee shall have no obligation, however, to
pursue or preserve remedies with respect to the Collateral or otherwise to
take action which Pledgor might have taken as regards the Collateral.
<PAGE> 60
3. Pledgee shall have the continuing right to retain all or
any part of the Collateral so long as any Liability remains in existence (or
the Banks shall have any Commitment under the Credit Agreement), even though
the same may be unliquidated, unmatured or contingent. Upon maturity of any
of the Liabilities or the occurrence of an Event of Default under the Credit
Agreement or hereunder, the Pledgee may cause any of the Collateral to be
transferred to its own name or to the name of its nominee (and this shall be
full authority to any transfer agent, registrar or the like to make such
transfer). No such action shall be deemed a retention of the Collateral in
satisfaction of any Liability unless written notice so stating shall be
given to the Pledgor. The Pledgee shall have the sole right to determine
whether any call or option to surrender, exchange, redeem, convert or
otherwise change or alter the form of the Collateral shall be exercised if
the interest of Pledgee is or may be affected thereby. The Pledgee shall be
under no obligation to initiate any such action unless requested in writing
by the Pledgor. All dividends, new shares or warrants, liquidating
distributions and other rights, proceeds and payments or distributions of
any nature received by Pledgor in respect of the Collateral will be
delivered to the Pledgee in kind and the Pledgee may take such action as is
necessary to assure its direct receipt thereof, provided however that, prior
to the occurrence of an Event of Default under the Credit Agreement or
hereunder, Pledgor shall be permitted to retain permitted ordinary dividends
and interest paid in cash and shall retain the right to vote with respect to
the Collateral.
4. In the event that Pledgor, after the date hereof, acquires
stock of any bank, bank holding company, thrift institution or savings
holding company which is or by virtue of such acquisition becomes a
Subsidiary as defined in the Credit Agreement, Pledgor promptly shall (i)
grant to Pledgee a security interest in such stock as additional security
for the Liabilities, (ii) deliver to Pledgee the certificates representing
such stock, along with fully-executed stock powers therefor, and (iii) take
such other action and execute and deliver such other documents to Pledgee as
Pledgee reasonably may require in connection therewith.
5. The following severally shall be considered events of
default for purposes of this Agreement: (a) if any representation, warranty
or statement of fact made by Pledgor hereunder shall prove to be false or
misleading in any material respect, and such default remains unremedied for
thirty (30) consecutive calendar days after notice thereof shall have been
given to Pledgor by the Pledgee, (b) Pledgor's failure to perform any of its
obligations hereunder, and such failure remains unremedied for thirty (30)
consecutive calendar days after notice thereof shall have been given to
Pledgor by the Pledgee, (c) an Event of Default occurs under the Credit
Agreement, or (d) seizure of any of the Collateral or sale or encumbrance
thereof or the failure to pay any tax thereon when due (except any tax
contested in good faith for which reserves for payment satisfactory to
Pledgee have been provided by the Pledgor).
6. Upon maturity of any of the Liabilities (by acceleration
or otherwise) or the occurrence of an event of default hereunder, the
Pledgee may resort to the Collateral at such times and in such order as it
elects and may apply the Collateral to the Liabilities in like manner and
without regard to whether application is made to an obligation of the owner
of the Collateral so applied. If any of the Collateral is owned by someone
other than Pledgor, the Pledgee may elect to apply such Collateral in any
proportion to obligations of the owner or owners to the Pledgee without
regard to the Liabilities. In addition, the Pledgee shall have all rights
of a secured party under the Missouri Uniform Commercial Code and shall
apply the proceeds of collection, disposition or other realization on the
Collateral to reasonable attorneys' fees and legal expenses incurred by the
Pledgee in connection therewith and in the collection of any Liabilities and
representation of the Pledgee in proceedings of any nature under the
Bankruptcy Code, and thereafter as required by law. If notice of intended
disposition is required by law, such notice, if mailed, shall be deemed
reasonably and properly given if mailed to the address of Pledgor appearing
on the records of the Pledgee at least five (5) Business Days (as defined in
the Credit Agreement) before the time of such disposition. The Pledgee
shall have the right to proceed against the Collateral or not as the Pledgee
may deem proper or as directed by the Majority (as
<PAGE> 61
defined in the Credit Agreement), and the Pledgee shall have the right to
collect dividends, interest and such like profits from the Collateral whether
or not it proceeds against the Collateral. If, in the opinion of the Pledgee,
any Collateral cannot be disposed of in a commercially reasonable manner
without registration under applicable securities laws, Pledgor will take or
cause to be taken such action as is necessary to effect proper registration.
If Pledgor shall refuse to take such action, the Pledgee at its election, but
without any obligation to do so, may take such action as it deems warranted
to attempt to effect compliance with any applicable law. Any cost, fee or
expense incurred by the Pledgee in connection with such efforts or in
enforcing Pledgor's covenants hereunder will be considered a cost incurred
in disposition of the Collateral.
7. The Pledgee's rights hereunder shall continue unimpaired
notwithstanding foreclosure or other disposition of any part of the
Collateral, the availability of additional Collateral, any release of or
substitution for any of the Collateral, any act or omission impairing the
Pledgee's lien on the Collateral or the lien of any underlying security
constituting part of the Collateral, including failure to perfect the same,
any extension (including extension of time for payment), renewal,
substitution, alteration, compromise, settlement, surrender, release or
other such agreement or action modifying or varying the terms of or
otherwise affecting any of the Liabilities or any part of the Collateral,
including any act or omission releasing any party primarily or secondarily
liable on the Collateral or on any Liability. No failure by Pledgee to
exercise or delay in exercising any of its rights hereunder shall constitute
a waiver thereof and no single or partial exercise of any right shall
preclude the further exercise thereof or the exercise of any other right.
All rights of the Pledgee hereunder or under any instrument or other
agreement binding on Pledgor are cumulative and not in substitution of any
other rights at law or equity with respect to the Collateral or the
collection of the Liabilities. All such rights may be exercised from time
to time. Pledgor hereby waives notice of any and all actions, forbearances
and omissions of any rights contemplated by this paragraph and consents to
be bound thereby as effectively as if Pledgor had agreed thereto in advance.
Upon the termination of the Credit Agreement and the liquidation and payment
of the Liabilities in full, this Agreement shall terminate and the
Collateral will be returned forthwith to the Pledgor.
8. The Pledgee shall have no obligation to act in accordance
with any communication by Pledgor or any other party obligated on the
Liabilities or interested in the Collateral, as endorser, guarantor, surety
or otherwise, concerning the liquidation of all or any part of the
Collateral if it shall be the opinion of the Pledgee in the exercise of its
reasonable judgment that the value of the Collateral upon liquidation may be
insufficient to discharge the Liabilities in full. The Pledgee shall in no
event be bound by or obligated to act upon any such communication unless the
same shall be in writing and shall include explicit instructions as to the
disposition requested.
9. Pledgor agrees that it will not (a) sell or otherwise
dispose of, or grant any option with respect to, any of the Collateral or
(b) create, incur, assume or suffer to exist any Lien upon or with respect
to any of the Collateral except in favor of the Pledgee.
10. Any notice required or permitted hereunder shall be deemed
given if sent in the manner as provided in the Credit Agreement and (i) if
to Pledgee, directed to the address of Boatmen's as provided in the Credit
Agreement and (ii) if to Pledgor, directed to the address of Borrower as
provided in the Credit Agreement.
11. To the extent required by law for purposes of providing
qualifying shares of stock to members of the board of directors of the bank
institutions owned by Pledgor, Pledgee agrees to release such number of
qualifying shares from the lien of this Agreement. To effect such release,
Pledgee will deliver the certificate for the shares of stock of the subject
banking institution to the Pledgor on a trust receipt basis and with the
obligation of Pledgor to return the reissued certificate to Pledgee within
forty-eight (48) hours of the delivery to Pledgor. At the request of
<PAGE> 62
Pledgee, Pledgor agrees to cause such members of the board of directors to
pledge such qualifying shares to Pledgee for the benefit of the Banks as
additional collateral for the Liabilities. Any such qualifying shares
shall, upon issuance, contain an appropriate legend describing the
restrictions and covenants set forth in this Agreement.
12. Pledgor acknowledges that Pledgee's willingness to enter
into the Credit Agreement will directly facilitate Borrower's ability to
provide financial support and/or other services for Pledgor's benefit, and
that Pledgee would be unwilling to enter into the Credit Agreement but for
execution and delivery of this Agreement.
13. This agreement shall be construed in accordance with and
governed by Missouri law.
14. Pledgor warrants and represents to Pledgee that the shares
of stock of the institution listed on Exhibit A on the date hereof represent
all of the outstanding shares of stock of such institution (except for
directors' qualifying shares).
[The remainder of this page is intentionally left blank.]
<PAGE> 63
Dated at St. Louis, Missouri, as of this 18th day of July, 1996.
------------------------------------------
By:---------------------------------------
Name:-------------------------------------
Title:------------------------------------
<PAGE> 64
EXHIBIT A TO SUBSIDIARY PLEDGE AGREEMENT
----------------------------------------
LIST OF COLLATERAL
<PAGE> 65
EXHIBIT H
---------
CERTIFICATE OF COMPLIANCE
-------------------------
This Certificate of Compliance is being submitted on this ------
day of ---------------, ------, for the quarter ending on the ------ day of
- ---------------, ------, pursuant to the terms of the Secured Credit
Agreement dated as of July 18, 1996 ("Credit Agreement"), as the same may be
thereafter amended from time to time, among First Banks, Inc. and the banks
named therein (for whom The Boatmen's National Bank of St. Louis is acting
as Agent).
The undersigned officers of First Banks, Inc., and First Banks, Inc.
jointly and severally certify to the Banks that as of the date hereof:
A. The representations and warranties contained in Article V of the
Credit Agreement are correct as of the date hereof;
B. No Default or Event of Default has occurred and is continuing,
[or would result upon [the making of the Loan] [giving effect to the
Letter of Credit] requested by the accompanying [Notice of
Borrowing] [Letter of Credit Request]];
C. Attached is an accurate listing of the current Affiliates of
First Banks, Inc.;
D. The compliance with the covenants contained in Article VIII of
the Credit Agreement is supported by the following:
8.01. Tier I Leverage Ratio
----------------------
<TABLE>
<CAPTION>
(1) (2) Minimum
Tier I Total Ratio of Ratio
Capital Assets (1) to (2) Permitted
------- ------ ---------- ---------
<S> <C> <C> <C> <C>
First Banks, Inc. (consolidated) - - - 5.0%
----
</TABLE>
<PAGE> 66
8.02. Tier I Leverage Ratio of Subsidiaries
-------------------------------------
<TABLE>
<CAPTION>
(1) (2) Minimum
Tier I Total Ratio of Ratio
Subsidiary Capital Assets (1) to (2) Permitted
- ---------- ------- ------ ---------- ---------
<S> <C> <C> <C> <C>
First Bank, Creve Coeur, MO - - - 5.0%
----
First Bank (O'Fallon, Illinois) - - - 5.0%
----
First Bank FSB - - - 5.0%
----
First Banks America, Inc. (consolidated) - - - 5.0%
----
BancTEXAS, N.A. - - - 5.0%
----
St. Charles Federal Savings and Loan Association - - - 5.0%
----
CCB Bancorp, Inc. - - - 5.0%
----
First Bank & Trust - - - 5.0%
----
First Commercial Bancorp, Inc. (consolidated) - - - 1.5%
----
First Commercial Bank - - - 5.0%
----
</TABLE>
<PAGE> 67
8.03. Tier I Risk Based Capital Ratio
-------------------------------
<TABLE>
<CAPTION>
(2)
Weighted
Risk
Assets and
Off-
(1) Balance Ratio of Minimum
Tier I Sheet (1) to Ratio
Capital Items (2) Permitted
------- ----- --- ---------
<S> <C> <C> <C> <C>
First Bank, Creve Coeur, MO ------- ------- - 6.0%
----
First Bank (O'Fallon, Illinois) ------- ------- - 6.0%
----
First Bank FSB ------- ------- - 6.0%
----
First Banks America, Inc. (consolidated) ------- ------- - 6.0%
----
BancTEXAS, N.A. ------- ------- - 6.0%
----
St. Charles Federal Savings and Loan Association ------- ------- - 6.0%
----
CCB Bancorp, Inc. ------- ------- - 6.0%
----
First Bank & Trust - - - 6.0%
----
First Commercial Bancorp, Inc. (consolidated) - - - 2.4%
----
First Commercial Bank - - - 6.0%
----
</TABLE>
8.04. Total Risk Based Capital Ratio
------------------------------
<TABLE>
<CAPTION>
(2)
Weighted
Risk
Assets and
Off-
(1) Balance Ratio of Minimum
Tier I Sheet (1) to Ratio
Capital Items (2) Permitted
------- ----- --- ---------
<S> <C> <C> <C> <C>
First Bank, Creve Coeur, MO ------- ------- - 10.0%
-----
First Bank (O'Fallon, Illinois) ------- ------- - 10.0%
-----
First Bank FSB ------- ------- - 10.0%
-----
First Banks America, Inc. (consolidated) ------- ------- - 10.0%
-----
BancTEXAS, N.A. ------- ------- - 8.0%
-----
St. Charles Federal Savings and Loan Association ------- ------- - 10.0%
-----
CCB Bancorp, Inc. ------- ------- - 10.0%
<PAGE> 68
First Bank & Trust ------- ------- - 10.0%
-----
First Commercial Bancorp, Inc. (consolidated) ------- ------- - 3.7%
-----
First Commercial Bank ------- ------- - 10.0%
-----
</TABLE>
8.05 Loan Loss Reserve
-----------------
<TABLE>
<CAPTION>
(1) Ratio of
Loan (2) (1) to Minimum
Loss Total -- Ratio
Reserve Loans (2) Permitted
------- ----- --- ---------
<S> <C> <C> <C> <C>
First Banks, Inc. (consolidated) ------- ------- - 1.25%
-----
</TABLE>
8.06 Net Income to Average Total Assets
----------------------------------
<TABLE>
<CAPTION>
(1)
Net Income
less Gain on
Sale of
Securities
and other
extra-
ordinary (2) Ratio of
and/or non- Average (1) to Minimum
recurring Total -- Ratio
items Assets (2) Permitted
----- ------ --- ---------
<S> <C> <C> <C> <C>
First Banks, Inc. (consolidated) ------- ------- - 0.65%
(1996 Fiscal Year) -----
First Banks, Inc. (consolidated) ------- ------- - 0.70%
(1997 Fiscal Year and thereafter) -----
</TABLE>
8.07 Non-Performing Assets
---------------------
<TABLE>
<CAPTION>
(1) Ratio of
Non- (2) (1) to Minimum
Performing Primary -- Ratio
Assets Capital (2) Permitted
------ ------- --- ---------
<S> <C> <C> <C> <C>
First Banks, Inc. (consolidated) ------- ------- - 25%
---
</TABLE>
E. [For borrowing and letters of credit issuance only] The use of
proceeds of the requested Loan will be as indicated in the
accompanying Notice of Borrowing. [or] The purpose of the Letter
of Credit will be as described in Section 3.13 of the Credit
Agreement.
<PAGE> 69
Signed as of the day and year first above written.
FIRST BANKS, INC.
(at least two signatures required)
By:----------------------------------
Chief Executive Officer/ President
By:----------------------------------
Chief Financial Officer
By:----------------------------------
Vice President - Chief Accounting Officer
By:--------------------------------
Chief Credit Officer
<PAGE> 70
EXHIBIT I
---------
FORM OF LETTER OF CREDIT
--------------------
IRREVOCABLE LETTER OF CREDIT NO. ----------
BENEFICIARY:
[BENEFICIARY NAME]
[BENEFICIARY ADDRESS]
[CITY, STATE ZIP]
DEAR -------------:
WE HEREBY ESTABLISH IN YOUR FAVOR, UPON THE APPLICATION OF AND
FOR THE ACCOUNT OF FIRST BANKS, INC., 135 MERAMEC AVENUE, ST. LOUIS,
MISSOURI 63105 ("FIRST BANKS"), OUR IRREVOCABLE STANDBY LETTER OF CREDIT
NUMBER ------- (THE "LETTER OF CREDIT") IN THE AMOUNT OF $--------------
(THE "AVAILABLE BALANCE"), SUBJECT TO REDUCTION AS HEREINAFTER SET FORTH.
FOR INFORMATION ONLY: THIS LETTER OF CREDIT IS ISSUED WITH
RESPECT TO THE ISSUANCE TO YOU OF A PROMISSORY NOTE BY FIRST BANKS PURSUANT
TO THE AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG FIRST BANKS, ST.
CHARLES FEDERAL BANCSHARES INC. AND ST. CHARLES ACQUISITION COMPANY, DATED
AS OF MARCH 28, 1994.
THIS LETTER OF CREDIT WILL BE REDUCED WITHOUT AMENDMENT OR
FURTHER NOTIFICATION TO THE BENEFICIARY IN ACCORDANCE WITH THE FOLLOWING
SCHEDULE:
DATE OF REDUCTION AMOUNT OF REDUCTION AVAILABLE BALANCE
- ----------------- ------------------- -----------------
FEBRUARY 17, 1997 $0
------------------- ----
SUBJECT TO THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, AN
AMOUNT NOT TO EXCEED THE AVAILABLE BALANCE HEREUNDER SHALL BE MADE AVAILABLE
UPON PRESENTATION TO US OF YOUR SIGHT DRAFT(S) DRAWN ON THE BOATMEN'S
NATIONAL BANK OF ST. LOUIS, ST. LOUIS, MISSOURI, IRREVOCABLE LETTER OF
CREDIT NO. --------, ACCOMPANIED BY THE FOLLOWING DOCUMENTS:
(i) YOUR SIGNED STATEMENT THAT "THIS DRAFT REPRESENTS THE
AMOUNT OF A PRINCIPAL AND INTEREST PAYMENT DUE (BY ACCELERATION OR
OTHERWISE) ON THE PROMISSORY NOTES DATED NOVEMBER 30, 1994 EXECUTED BY FIRST
BANKS, INC. TO THE ORDER OF CERTAIN PERSONS WHO ELECTED TO RECEIVE SUCH
NOTES IN CONNECTION WITH THE ACQUISITION OF
<PAGE> 71
ST. CHARLES FEDERAL BANCSHARES INC. BY FIRST BANKS, INC. THIS AMOUNT IS
UNPAID AFTER THE EXPIRATION OF ALL APPLICABLE CURE PERIODS, ALTHOUGH JUSTLY
DUE AND OWING."; AND
(ii) THIS ORIGINAL LETTER OF CREDIT AND AMENDMENTS, IF ANY.
THE DRAFT(S) DRAWN UNDER THIS LETTER OF CREDIT MUST BE DRAWN AND
PRESENTED TO OUR OFFICE AT ONE BOATMEN'S PLAZA, 800 MARKET STREET, ST.
LOUIS, MISSOURI 63101, ATTENTION: LETTER OF CREDIT DEPARTMENT (OR SUCH
OTHER OFFICE, DEPARTMENT OR ADDRESS DESIGNATED IN WRITING BY US TO YOU AT
YOUR ADDRESS SHOWN ABOVE OR AT SUCH OTHER ADDRESS AS YOU SHALL ADVISE US OF
IN WRITING).
FAILURE TO DRAW FOR A PARTICULAR INSTALLMENT SHALL NOT AFFECT
YOUR RIGHT TO DRAW FOR FUTURE INSTALLMENTS.
WE HEREBY AGREE THAT ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE
WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED BY US UPON
DELIVERY OF THE CERTIFICATE(S) AND DOCUMENTS AS SPECIFIED ABOVE AND IF
PRESENTED AT OUR AFORESAID OFFICE ON OR BEFORE THE EXPIRATION DATE (AS
DEFINED BELOW).
THIS LETTER OF CREDIT IS EFFECTIVE IMMEDIATELY AND EXPIRES ON
THE EARLIER OF (I) FEBRUARY 17, 1997, (II) WHEN YOU HAVE DRAWN AND WE HAVE
PAID TO YOU THE AVAILABLE BALANCE OF THIS LETTER OF CREDIT, (III) THE DAY ON
WHICH THE AVAILABLE BALANCE OF THIS LETTER OF CREDIT IS REDUCED TO $0.00
PURSUANT TO THE TERMS HEREOF, OR (IV) THE DAY ON WHICH THIS LETTER OF CREDIT
IS SURRENDERED TO US FOR CANCELLATION.
THIS LETTER OF CREDIT IS TRANSFERRABLE ON ONE OR MORE OCCASIONS,
SUBJECT TO THE PAYMENT OF OUR USUAL TRANSFER COMMISSION ACCOMPANIED BY YOUR
INSTRUCTIONS IN A FORM SATISFACTORY TO US. TRANSFER FORM INSTRUCTION WILL
BE FURNISHED UPON REQUEST.
THIS LETTER OF CREDIT SHALL BE GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF MISSOURI, BUT SUBJECT, HOWEVER, TO THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION 500, EXCLUSIVE, HOWEVER, OF ARTICLE 41 THEREOF.
VERY TRULY YOURS,
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
BY:------------------------------------
AUTHORIZED OFFICER
<PAGE> 72
EXHIBIT J
---------
LETTER OF CREDIT REQUEST
No. --------<F1>------------ Dated --------, 199-- <F2>
---- ----
To: The Boatmen's National Bank of St. Louis, in its capacity as the Agent
under the Secured Credit Agreement, dated as of July 18, 1996 (as amended,
modified or supplemented from time to time, the "Agreement"), among FIRST
BANKS, INC., a Missouri corporation, (the "Borrower"), THE BOATMEN'S
NATIONAL BANK OF ST. LOUIS, NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
HARRIS TRUST AND SAVINGS BANK, AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO and THE FROST NATIONAL BANK
Dear Sirs:
We hereby request that you issue a Letter of Credit on
- ----------<F3>--------- (the "Date of Issuance") in the aggregate stated
----
amount of --------<F4>-------.
----
For purposes of this Letter of Credit Request, unless otherwise
defined, all capitalized terms used herein which are defined in the
Agreement shall have the respective meanings provided therein.
The beneficiary of the requested Letter of Credit will be
- --------<F5>-------, and such Letter of Credit will be in support of --------
----
<F6>------ and will have a stated termination date of --------<F7>-------.
- ---- ----
[FN]
- --------------------------------------------------
<F1> Letter of Credit Request Number.
- ----
<F2> Date of Letter of Credit Request (at least two Business Days prior to
- ---- the Date of Issuance).
<F3> Date of Issuance.
- ----
<F4> Aggregate initial stated amount of Letter of Credit.
- ----
<F5> Insert name and address of beneficiary.
- ----
<F6> Insert description of supported obligations and name of agreement to
- ---- which it relates.
<F7> Insert last date upon which drafts may be presented.
- ----
<PAGE> 73
Copies of all documentation with respect to the supported
transaction are attached hereto.
FIRST BANKS, INC.
By:---------------------------------
Name:
Title:
<PAGE> 74
EXHIBIT K
---------
FORM OF BORROWER'S COUNSEL OPINION
----------------------------------
July 18, 1996
The Boatmen's National Bank Harris Trust and
of St. Louis Savings Bank
One Boatmen's Plaza 111 W. Monroe
St. Louis, Missouri 63101 Chicago, Illinois 60603
Norwest Bank Minnesota, National Association American National Bank and Trust
100 East Wisconsin Avenue Company of Chicago
Milwaukee, Wisconsin 63202-4101 33 North LaSalle Street
Chicago, Illinois 60690
The Frost National Bank
100 West Houston Street
San Antonio, Texas 78205
Re: The Boatmen's National Bank of St. Louis - $90,000,000
Secured Credit Agreement with First Banks, Inc.
---------------------------------------
Ladies and Gentlemen:
We have acted as counsel for First Banks, Inc., a Missouri
corporation, (the "Borrower") and as counsel to First Bank (Creve Coeur,
Missouri), a Missouri state banking corporation ("FB-Creve Coeur"), First
Bank (O'Fallon, Illinois), an Illinois state banking corporation
("FB-Illinois"), First Bank FSB, a federal savings bank ("FB-FSB"), First
Banks America, Inc., a Delaware corporation ("FB-America"), River Valley
Holdings, Inc., an Illinois bank holding company ("River Valley"), St. Charles
Federal Savings and Loan Association, a federal savings and loan association
("St. Charles"), CCB Bancorp, Inc., a Delaware corporation ("CCB"), First Bank
& Trust ("FB&T"), a California state banking corporation, and First Commercial
Bancorp, Inc., a Delaware corporation ("FCB") (FB-Creve Coeur, FB-Illinois,
FB-FSB, FB-America, River Valley, St. Charles, CCB, FB&T, and FCB are
sometimes individually referred to herein as a "Pledged Subsidiary" and
sometimes collectively referred to herein as the "Pledged Subsidiaries") in
connection with the above-referenced loan (the "Loan"). This opinion is
being furnished to you as required by Section 4.01(5) of the Secured Credit
Agreement executed on this date by the Borrower and The Boatmen's National
Bank of St. Louis ("Boatmen's"), Norwest Bank Minnesota, National
Association, Harris Trust and Savings Bank, American National Bank and Trust
Company of Chicago, and The Frost National Bank (collectively, the "Banks").
Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in that certain Secured Credit Agreement dated as of July
18, 1996 among the Borrower and the Banks (the "Credit Agreement").
In connection with the preparation of this opinion, we have
reviewed the following instruments and documents executed by the respective
parties thereto (the "Loan Documents"):
<PAGE> 75
1. Each of the Notes, dated July 18, 1996, in the aggregate
maximum principal face amount of $90,000,000 executed by the Borrower as
maker and payable to the order of the Banks as set forth in Sections 2.07
and 3.06 of the Credit Agreement;
2. The Credit Agreement;
3. Pledge Agreement dated July 18, 1996 executed by the
Borrower, as Pledgor, to Boatmen's, as agent for the Banks, as Pledgee;
4. Subsidiary Pledge Agreements dated July 18, 1996 executed
by CCB Bancorp, Inc. and River Valley Holdings, Inc., as Pledgors, to
Boatmen's, as agent for the Banks, as Pledgee;
5. The certificates representing the shares of capital stock
of the Pledged Subsidiaries; and
6. Irrevocable Stock Powers executed by the Pledgor.
In our capacity as counsel for the Borrower and the Pledged
Subsidiaries, we have examined originals or copies of such other documents,
records and other instruments as we have deemed necessary or appropriate for
the purposes of this opinion, including, without limitation, the following:
A. Articles of Incorporation and Bylaws of the Borrower;
B. Resolutions adopted by the Board of Directors of the
Borrower; and
C. Articles of Association or Articles of Incorporation, as
the case may be, and Bylaws of each of the Pledged Subsidiaries.
In rendering this opinion, we have assumed the genuineness of
all signatures on documents, statements and certificates reviewed by us, the
accuracy and authenticity of all documents, statements and certificates
reviewed by us, and the conformity to authentic original documents of all
documents, statements and certificates submitted to us as certified,
conformed and photostatic copies.
In those instances in which our opinion is rendered "to the best
of our knowledge", it is intended to indicate that during the course of our
representation, no information has come to the attention of those attorneys
within our firm who have performed legal services in connection with the
representation described in this letter that would give us actual knowledge
of the inaccuracy of such statement; and unless otherwise specified herein,
is not based upon any independent investigation to determine the accuracy of
such statement, and no inference as to our knowledge should be drawn from
the fact of our representation of the Borrower or the Pledged Subsidiaries.
We have no knowledge of any factual information which has led us
to conclude that the documents and certificates we have examined contain any
untrue statement of a material fact.
68
<PAGE> 76
Based upon the foregoing, and subject to the qualifications set
forth herein, we are of the opinion under existing law as of the date
hereof, that:
(i) The Borrower is a duly organized and validly existing
corporation, in good standing under the laws of the State of Missouri and
has the corporate power and authority to execute, deliver and perform the
Loan Documents and to own its properties and carry on its business as now
being conducted, and is a duly registered bank holding company in good
standing under the Bank Holding Company Act of 1956, as amended.
2. FB-Creve Coeur is duly organized and validly existing and
is in good standing as a state bank under the laws of the State of Missouri;
FB-Illinois is duly organized and validly existing and is in good standing
as a state bank under the laws of the State of Illinois; FB-FSB is duly
organized and validly existing as a federal savings bank under the laws of
the United States; FB-America is duly organized and validly existing and is
in good standing as a bank holding company under the laws of the State of
Delaware; River Valley is duly organized and validly existing and is in good
standing as a bank holding company under the laws of the State of Delaware;
St. Charles is a duly organized and validly existing and is in good standing
as a federal savings and loan association under the laws of the United
States; CCB is duly organized and validly existing and is in good standing
as a corporation under the laws of the State of Delaware; FB&T is duly
organized and validly existing and is in good standing as a state bank under
the laws of the State of California, and FCB is duly organized and validly
existing and is in good standing as a corporation under the laws of the
State of Delaware.
3. The Pledged Subsidiaries have the corporate power and
adequate corporate authority to own their property and to carry on their
businesses as now conducted.
4. The Loan Documents have each been duly authorized,
executed and delivered by the Borrower and constitute the legal, valid and
binding obligations of the Borrower enforceable in accordance with their
respective terms, subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally, and subject to general
principles of equity (including the exercise of judicial discretion in
accordance with such principles), regardless of whether such enforceability
is considered in a proceeding at law or in equity. Notwithstanding anything
contained in this letter to the contrary, this firm is providing no opinion
as to the enforceability of Section 9.01(13) of the Credit Agreement.
5. No consent or approval of or registration with any
federal, state or local government or regulatory authority is required in
connection with the Loan or the execution and delivery of the Loan
Documents. Neither (i) the execution and delivery by the Borrower of the
Loan Documents, (ii) the consummation of the transactions contemplated
thereby, nor (iii) the
69
<PAGE> 77
compliance by the Borrower with any of the provisions thereof, will conflict
with or result in a violation or breach of the material terms or provisions
of, or constitute a default under the Borrower's Articles of Incorporation or
Bylaws or any rule, regulation, order, writ, judgment or decree of which we
have knowledge of any court or government agency or instrumentality, or any
agreement or instrument of which we have knowledge and to which the Borrower
is a party or with respect to which the Borrower is bound and which would
materially adversely affect the Borrower's ability to perform its obligations
under the Loan Documents.
6. To the best of our knowledge, limited to reasonable
inquiry of the officers of the Borrower, there are no actions, suits or
proceedings pending or threatened, affecting the Borrower or any of its
subsidiaries or affiliates, at law or in equity, before or by any federal,
state, local or other governmental department, commission, board, bureau,
agency or authorities, the result of which would materially and adversely
affect the Borrower's ability to perform under the Loan Documents or which
would have a material adverse affect upon the Borrower or such subsidiary or
affiliate.
7. To the best of our knowledge, limited to reasonable
inquiry of the officers of the Borrower, there exists no default by the
Borrower or any Pledged Subsidiary with respect to any order, writ,
injunction, or other decree by a court or any other governmental department,
commission, board, bureau, agency or instrumentality.
8. The capital stock of each of the Pledged Subsidiaries
listed on Exhibit L to the Credit Agreement has been duly authorized
---------
and validly issued and is fully paid and nonassessable (except with regard
to First Bank & Trust) and free of preemptive rights, and, to the best of
our knowledge, limited to reasonable inquiry of the officers of the
Borrower, is owned by the Borrower free and clear of all liens, claims and
encumbrances, except for the security interest created under the Pledge
Agreement and the Subsidiary Pledge Agreements to Boatmen's as agent for the
Banks.
9. Upon delivery of the stock together with executed stock
powers, of each Pledged Subsidiary to the Agent, the Agent, for the benefit
of the Banks, will have a perfected first priority security interest in the
stock of each Pledged Subsidiary pursuant to the Pledge Agreement and the
Subsidiary Pledge Agreements.
10. To the best of our knowledge, limited to reasonable
inquiry of the officers of the Borrower, with respect to the Borrower and
each Pledged Subsidiary, except for the matters disclosed on Schedule
9.01(10) to the Credit Agreement there are no existing orders, agreements or
memoranda from any bank regulatory authority with respect to regulatory
violations or compliance requirements.
The opinions expressed herein are limited to the applicable laws
of the United States and the States of Missouri and Illinois and no opinion
is expressed with respect to the laws of any
70
<PAGE> 78
other jurisdiction or state with respect to the effect of any such laws on the
matters dealt with herein.
As to various questions of fact material to these opinions, we
have relied upon the truth of various representations and warranties of the
Borrower contained in the Loan Documents and upon such representations and
certificates of officers of the Borrower and the Pledged Subsidiaries as are
provided on Exhibit A attached hereto.
This opinion is provided solely for the purpose of complying
with the requirements of the Loan Documents and, without our prior written
consent, may not be relied upon by any person, firm or entity whatsoever
other than each of the Banks and its or their respective successors and
assigns.
Very truly yours,
71
<PAGE> 79
EXHIBIT L
---------
PLEDGED SUBSIDIARIES
--------------------
First Bank (Creve Coeur, Missouri)
First Bank (O'Fallon, Illinois)
First Bank FSB
First Banks America, Inc.
River Valley Holdings, Inc.
St. Charles Federal Savings and Loan Association
CCB Bancorp, Inc.
First Commercial Bancorp, Inc.
First Bank & Trust
72
<PAGE> 80
EXHIBIT M
---------
LIST OF AFFILIATES
------------------
Hermanhoff Winery, Inc.
Tidal Insurance, Ltd.
First Securities of America, Inc.
First Services, L.P.
Southside Bancshares, Inc.
First Brokerage, L.P.
Investors of America, Limited Partnership
73
<PAGE> 81
EXHIBIT N
---------
IDENTIFICATION
OF
FINANCIAL STATEMENTS
--------------------
(1) Audited consolidated financial statements for First Banks, Inc. and
subsidiaries for the fiscal years ending December 1994 and 1995.
(2) Audited consolidated financial statements for First Banks America,
Inc. and subsidiaries for the fiscal years ending December 1994 and 1995.
(3) Audited consolidated financial statements for First Commercial
Bancorp, Inc. and subsidiaries for the fiscal years ending December 1994 and
1995.
(4) Unaudited consolidated financial statements for First Banks, Inc. and
its subsidiaries, both prepared by Borrower, for the period ending March 31,
1996.
(5) Unaudited consolidated financial statements for First Banks America,
Inc. and its subsidiaries, both prepared by Borrower, for the period ending
March 31, 1996.
(6) Unaudited consolidated financial statements for First Commercial
Bancorp, Inc. and its subsidiaries, both prepared by Borrower, for the
period ending March 31, 1996.
74
<PAGE> 82
EXHIBIT O
---------
OWNERSHIP OF SUBSIDIARIES
--------------------------
FIRST BANK-ILLINOIS
400,000 Shares Owned/Controlled By First Banks, Inc. (100%)
FIRST BANK (MISSOURI)
9,994 Shares Owned/Controlled By First Banks, Inc. Plus 6 Directors
Qualifying Shares (100%)
RIVER VALLEY HOLDINGS, INC.
10,000 Shares Owned/Controlled by First Banks, Inc. (100%)
FIRST BANK FSB
96,254 Common Shares Owned/Controlled by First Banks, Inc. (63.66%)
54,946 Common Shares Owned/Controlled by River Valley Holdings, Inc.
(36.34%)
ST. CHARLES FEDERAL SAVINGS AND LOAN ASSOCIATION
100 Shares Owned/Controlled by First Banks, Inc. (100%)
FIRSTSERV, INC.
30,000 Shares Owned/Controlled by First Banks, Inc. (100%)
FIRST BANKS AMERICA, INC.
2,500,000 Class B Shares Owned/Controlled by First Banks, Inc. (66.20% of
total voting)
SUNDOWNER CORPORATION
10,000 Common Shares Owned/Controlled by First Banks America, Inc. (100%)
BANKTEXAS, N.A.
2,049,000 Common Shares Owned/Controlled by Sundowner Corporation (100%)
FIRST COMMERCIAL BANCORP, INC.
65,000,000 Common Shares Owned/Controlled by First Banks, Inc. (61.45%)
40,775,428 Common Shares Publicly Held (38.55%)
FIRST COMMERCIAL BANK
117,908,667 Common Shares Owned/Controlled by First Commercial
Bancorp, Inc. (100%)
750,000 Preferred Shares Owned/Controlled by First Commercial Bancorp,
Inc. (100%)
CCB BANCORP, INC.
457 Common Shares Owned/Controlled by First Banks, Inc. (100%)
3,100 Shares Series A Preferred 8% Non Cumulative Redeemable
Owned/Controlled by First Banks, Inc. (100%)
1,000 Shares Series B Preferred 8% Non Cumulative Redeemable
Owned/Controlled by First Banks, Inc. (100%)
75
<PAGE> 83
FIRST BANK & TRUST
4,700,796 Shares Owned/Controlled by CCB Bancorp, Inc. (100%)
76
<PAGE> 84
EXHIBIT P
---------
LIST OF ADDRESSES
-----------------
If to the Borrower: First Banks, Inc.
11901 Olive Blvd.
Creve Coeur, MO 63141
Attention: Allen H. Blake
Chief Financial Officer
with a copy to (for notice requirements under Article IX hereof only):
Greensfelder, Hemker & Gale, P.C.
2000 Equitable Building
10 South Broadway
St. Louis, Missouri 63102
Attention: Sheldon K. Stock, Esq.
If to The Boatmen's National
Bank of St. Louis: 800 Market Street
P.O. Box 236
St. Louis, MO 63166
Attention: David C. Buettner
If to Harris Trust
and Savings Bank: 111 W. Monroe
Chicago, Illinois 60603
Attention: Patrick Horne
If to American National
Bank and Trust Company
of Chicago: 33 North LaSalle St.
Chicago, Illinois 60690
Attention: Lynn Lavender
If to The Frost National
Bank: 350 Bryan Tower
2001 Bryan Street
Dallas, Texas 75201
Attention: Jerry L. Crutsinger
Vice President
Correspondent Banking
If to Norwest Bank
Minnesota, National
Association: 100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4101
Attention: Alfonso Buscemi
77
<PAGE> 85
SCHEDULE 3.13
OUTSTANDING LETTERS OF CREDIT
-----------------------------
(see attached schedule)
78
<PAGE> 86
SCHEDULE 5.05
OTHER AGREEMENTS
----------------
NONE
79
<PAGE> 87
SCHEDULE 5.06
LITIGATION
----------
80
<PAGE> 88
SCHEDULE 5.08
PLAN TERMINATIONS
-----------------
1. As of December 31, 1993 the First Banks, Inc. Money Purchase Pension
Plan was terminated and replaced effective April 1, 1994 with the First
Banks, Inc. '401K Profit Sharing Plan.
2. Effective March 31, 1994, Heritage National Bank was merged into First
Bank (Creve Coeur, Missouri). Heritage National Bank maintained an Employee
Stock Ownership Plan which, incidental to the First Banks/Heritage National
Bank merger, has been terminated.
81
<PAGE> 89
SCHEDULE 9.01(10)
REGULATORY ACTIONS
------------------
The Cease and Desist Order between the Federal Deposit Insurance Corporation
and First Commercial Bank, dated August 17, 1992.
The State Banking Order issued by the State of California, State Banking
Department, Superintendent of Banks to First Commercial Bank, dated August
27, 1992, as amended.
The Memorandum of Understanding between the Federal Reserve Bank of San
Francisco and First Commercial Bancorp, Inc., dated October 17, 1994.
The Memorandum of Understanding between the Federal Reserve Bank of San
Francisco and Sunrise Bancorp, dated September 2, 1994.
The Capital Impairment Order issued by the State of California, State
Banking Department, Superintendent of Banks to First Commercial Bank, dated
March 15, 1996.
The Capital Impairment Order issued by the State of California, State
Banking Department, Superintendent of Banks to First Commercial Bank, dated
June 12, 1996.
82
<PAGE> 1
EXHIBIT 11.1
<PAGE> 2
<TABLE>
FIRST BANKS, INC.
Calculation of Earnings per Share
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Average shares outstanding:
Class C preferred stock 2,199,672 2,200,000 2,200,000 2,200,000 2,200,000 643,169 0
Class A preferred stock 641,082 641,082 641,082 641,082 672,589 741,082 741,082
Class B preferred stock 160,505 160,505 160,505 160,505 160,505 160,505 160,505
Common Stock 23,661 23,661 23,661 23,661 23,498 23,144 23,144
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income 11,438,682 19,594,539 24,471,000 24,032,480 23,194,344 19,016,044 16,708,099
Preferred stock dividends:
Class C preferred stock<F*> (3,712,501) (3,712,501) (4,950,000) (4,950,000) (4,950,000) (1,457,500) --
Class A preferred stock (512,866) (512,866) (769,000) (768,298) (799,299) (889,298) (889,298)
Class B preferred stock (11,235) (11,235) (16,853) (16,853) (16,853) (16,853) (17,178)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income available to common
stockholders 7,202,080 15,357,937 18,735,147 18,297,329 17,428,192 16,652,393 15,801,623
========== ========== ========== ========== ========== ========== ==========
PRIMARY EARNINGS PER SHARE 304.39 649.08 791.82 773.31 741.69 719.51 682.75
========== ========== ========== ========== ========== ========== ==========
Fully diluted earnings per share:
Dividends per share:
Class C preferred stock 1.6878 1.6875 2.2500 2.2500 2.2500 0.6625 0.0000
Class A preferred stock 0.8000 0.8000 1.1995 1.1984 1.1884 1.2000 1.2000
Class B preferred stock 0.0700 0.0700 0.1050 0.1050 0.1050 0.1050 0.1070
Class A preferred stock outstanding 641,082 641,082 641,082 641,082 641,082 741,082 741,082
========== ========== ========== ========== ========== ========== ==========
Book value/share of common stock,
beginning of year 7,038.7385 6,307.8434 6,307.8434 5,654.0721 4,680.7741 4,146.6471 3,463.8783
Dilution of common equity upon
exercise of options and warrants
of subsidiary bank (24.8765) (39.4200) (46.1530) (44.6700) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
7,013.8620 6,286.4234 6,261.6904 5,609.4021 4,680.7741 4,146.6471 3,463.8738
========== ========== ========== ========== ========== ========== ==========
Common stock issuable upon conversion 1,828 2,045 2,048 2,286 2,739 3,574 4,279
Shares of common stock outstanding 23,661 23,661 23,661 23,661 23,661 23,144 23,144
---------- ---------- ---------- ---------- ---------- ---------- ----------
25,489 25,706 25,709 25,947 26,400 26,718 27,423
========== ========== ========== ========== ========== ========== ==========
Net income 11,438,682 19,594,539 24,471,000 24,032,480 23,194,344 19,016,044 16,708,099
Class C preferred dividends<F*> (3,712,501) (3,712,501) (4,950,000) (4,950,000) (4,950,000) (1,457,500) --
Class B preferred dividends (11,235) (11,235) (16,853) (16,853) (16,853) (16,853) (17,178)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fully-diluted net income 7,714,946 15,870,803 19,504,147 19,065,627 18,227,491 17,541,691 16,690,921
========== ========== ========== ========== ========== ========== ==========
FULLY-DILUTED EARNINGS PER SHARE 302.68 617.39 758.66 734.80 690.43 656.54 608.65
====== ====== ====== ====== ====== ====== ======
<FN>
<F*>Includes Accumulated dividends of 412,500 for 1992
</TABLE>
<PAGE> 1
EXHIBIT 12.1
<PAGE> 2
<TABLE>
Ratio-Fixed Ch.
First Banks
Ratio of Earnings to Fixed Charges
September 30, 1996
<CAPTION>
Nine months
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income before tax and
minority interest 16,215 28,193 34,156 35,807 34,020 28,540 25,851
Add back:
Interest:
With deposits 106,580 106,350 144,945 70,670 58,058 79,529 106,848
Without deposits 13,077 23,338 28,883 6,581 972 4,239 4,630
Rent expense 3,200 2,257 3,174 1,079 1,000 1,303 1,652
Earnings base:
Without deposits 32,492 53,788 66,213 43,467 35,992 34,082 32,133
With deposits 125,995 136,800 182,275 107,556 93,078 109,372 134,351
Preferred stock dividends 4,237 4,237 5,736 5,735 5,766 1,951 906
Rent expense 3,200 2,257 3,174 1,079 1,000 1,303 1,652
Interest:
Deposits included 106,580 106,350 144,945 70,670 58,058 79,529 106,848
Deposits excluded 13,077 23,338 28,883 6,581 972 4,239 4,630
Fixed charges:
Including interest on deposits 114,017 112,844 153,855 77,484 64,824 82,783 109,406
Excluding interest on deposits 20,514 29,832 37,793 13,395 7,738 7,493 7,188
Ratio:
Including interest on deposits 1.11% 1.21% 1.18% 1.39% 1.44% 1.32% 1.23%
Excluding interest on deposits 1.58% 1.80% 1.75% 3.25% 4.65% 4.55% 4.47%
</TABLE>
<PAGE> 1
EXHIBIT 16.1
<PAGE> 2
December 20, 1996
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
Sir:
We have read the section entitled "Experts" included in Registration Statement
No. ______________ to be filed with the Securities and Exchange Commission by
First Banks, Inc. and are in agreement with the statements contained therein.
Very truly yours,
ARTHUR ANDERSEN LLP
By
Patrick M. Mathiesen
PMM/SECLTR4
Copy to Mr. Larry Brost
First Banks, Inc.
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First Banks, Inc.:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
December 20, 1996
<PAGE> 3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
First Commercial Bancorp, Inc.:
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
December 20, 1996
<PAGE> 1
EXHIBIT 23.2
<PAGE> 2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part
of this registration statement.
/s/ Arthur Andersen LLP
San Francisco, California
December 20, 1996
<PAGE> 1
EXHIBIT 25.1
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) --
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
---------------------
FIRST BANKS, INC.
-----------------
(Exact name of obligor as specified in its charter)
MISSOURI 43-1175538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 North Meramec Avenue
St. Louis, MO 63105
(314) 854-4600
(Address of principal executive offices) (Zip Code)
--------------------
% SUBORDINATED DEBENTURES DUE 2027
(Title of indenture securities)
<PAGE> 3
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY
TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Boston Corporation.
(See note on page 6.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW
IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF
ASSOCIATION.
A copy of a Statement from the Commissioner of Banks
of Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as Exhibit 2
to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE
DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE> 4
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE
OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED
BY SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility and
Qualification which relates to matters peculiarly within the knowledge of
the obligor or any underwriter for the obligor, the trustee has relied upon
information furnished to it by the obligor and the underwriters, and the
trustee disclaims responsibility for the accuracy or completeness of such
information.
The answer furnished to Item 2. of this statement will be amended,
if necessary, to reflect any facts which differ from those stated and which
would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts,
has duly caused this statement of eligibility and qualification to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City
of Boston and The Commonwealth of Massachusetts, on the 19TH DAY OF
DECEMBER, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Paul D. Allen
--------------------------------------
PAUL D. ALLEN
VICE PRESIDENT
2
<PAGE> 5
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed issuance
by FIRST BANKS, INC. of its SUBORDINATED DEBENTURES DUE 2027, we hereby
consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Paul D. Allen
-------------------------------------
PAUL D. ALLEN
VICE PRESIDENT
DATED: DECEMBER 19, 1996
3
<PAGE> 6
<TABLE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business June 30, 1996, published in accordance with a call made by the
-------------
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner
of Banks under General Laws, Chapter 172, Section 22(a).
<CAPTION>
Thousands of
Dollars
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................................ 1,787,130
Interest-bearing balances..................................................................... 7,756,486
Securities 8,430,910
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary........................................................... 4,090,665
Loans and lease financing receivables:
Loans and leases, net of unearned income.................... 4,426,059
Allowance for loan and lease losses......................... 70,088
Loans and leases, net of unearned income and allowances....................................... 4,355,971
Assets held in trading accounts................................................................... 880,647
Premises and fixed assets......................................................................... 367,731
Other real estate owned........................................................................... 1,067
Investments in unconsolidated subsidiaries........................................................ 65,772
Customers' liability to this bank on acceptances outstanding...................................... 33,530
Intangible assets................................................................................. 68,505
Other assets...................................................................................... 1,002,465
----------
Total assets...................................................................................... 28,840,879
==========
LIABILITIES
Deposits:
In domestic offices........................................................................... 7,531,683
Noninterest-bearing..................................... 5,387,924
Interest-bearing........................................ 2,143,759
In foreign offices and Edge subsidiary........................................................ 12,050,265
Noninterest-bearing..................................... 46,768
Interest-bearing........................................ 12,003,497
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary........................................................... 5,337,231
Demand notes issued to the U.S. Treasury and Trading Liabilities.................................. 871,847
Other borrowed money.............................................................................. 794,349
Bank's liability on acceptances executed and outstanding.......................................... 33,530
Other liabilities................................................................................. 665,616
----------
Total liabilities................................................................................. 27,284,521
----------
EQUITY CAPITAL
Common stock...................................................................................... 29,931
Surplus........................................................................................... 276,915
Undivided profits................................................................................. 1,247,942
Cumulative foreign currency translation adjustments............................................... 1,570
----------
Total equity capital.............................................................................. 1,556,358
----------
Total liabilities and equity capital.............................................................. 28,840,879
==========
</TABLE>
4
<PAGE> 7
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<PAGE> 1
EXHIBIT 25.2
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) --
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
---------------------
FIRST BANKS, INC.
-----------------
(Exact name of obligor as specified in its charter)
MISSOURI 43-1175538
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 North Meramec Avenue
St. Louis, MO 63105
(314) 854-4600
(Address of principal executive offices) (Zip Code)
--------------------
GUARANTEE
(Title of indenture securities)
<PAGE> 3
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY
TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Boston Corporation.
(See note on page 6.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW
IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission
as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as Exhibit 2
to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN
THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated
herein by reference thereto.
1
<PAGE> 4
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE
OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED
BY SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility and
Qualification which relates to matters peculiarly within the knowledge of
the obligor or any underwriter for the obligor, the trustee has relied upon
information furnished to it by the obligor and the underwriters, and the
trustee disclaims responsibility for the accuracy or completeness of such
information.
The answer furnished to Item 2. of this statement will be amended,
if necessary, to reflect any facts which differ from those stated and which
would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts,
has duly caused this statement of eligibility and qualification to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City
of Boston and The Commonwealth of Massachusetts, on the 19TH DAY OF
DECEMBER, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Paul D. Allen
------------------------------------
PAUL D. ALLEN
VICE PRESIDENT
2
<PAGE> 5
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed issuance
by FIRST BANKS, INC. of its GUARANTEE, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Paul D. Allen
-------------------------------------
PAUL D. ALLEN
VICE PRESIDENT
DATED: DECEMBER 19, 1996
3
<PAGE> 6
<TABLE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business June 30, 1996, published in accordance with a call made by the
-------------
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner
of Banks under General Laws, Chapter 172, Section 22(a).
<CAPTION>
Thousands of
Dollars
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................................ 1,787,130
Interest-bearing balances..................................................................... 7,756,486
Securities 8,430,910
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary........................................................... 4,090,665
Loans and lease financing receivables:
Loans and leases, net of unearned income.................... 4,426,059
Allowance for loan and lease losses......................... 70,088
Loans and leases, net of unearned income and allowances....................................... 4,355,971
Assets held in trading accounts................................................................... 880,647
Premises and fixed assets......................................................................... 367,731
Other real estate owned........................................................................... 1,067
Investments in unconsolidated subsidiaries........................................................ 65,772
Customers' liability to this bank on acceptances outstanding...................................... 33,530
Intangible assets................................................................................. 68,505
Other assets...................................................................................... 1,002,465
----------
Total assets...................................................................................... 28,840,879
==========
LIABILITIES
Deposits:
In domestic offices........................................................................... 7,531,683
Noninterest-bearing..................................... 5,387,924
Interest-bearing........................................ 2,143,759
In foreign offices and Edge subsidiary........................................................ 12,050,265
Noninterest-bearing..................................... 46,768
Interest-bearing........................................ 12,003,497
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary........................................................... 5,337,231
Demand notes issued to the U.S. Treasury and Trading Liabilities.................................. 871,847
Other borrowed money.............................................................................. 794,349
Bank's liability on acceptances executed and outstanding.......................................... 33,530
Other liabilities................................................................................. 665,616
----------
Total liabilities................................................................................. 27,284,521
----------
EQUITY CAPITAL
Common stock...................................................................................... 29,931
Surplus........................................................................................... 276,915
Undivided profits................................................................................. 1,247,942
Cumulative foreign currency translation adjustments............................................... 1,570
----------
Total equity capital.............................................................................. 1,556,358
----------
Total liabilities and equity capital.............................................................. 28,840,879
==========
</TABLE>
4
<PAGE> 7
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<PAGE> 1
EXHIBIT 25.3
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) --
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
---------------------
FIRST PREFERRED CAPITAL TRUST
-----------------------------
(Exact name of obligor as specified in its charter)
DELAWARE XX-XXXXXXX
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 North Meramec Avenue
St. Louis, MO 63105
(314) 854-4600
(Address of principal executive offices) (Zip Code)
--------------------
PREFERRED SECURITIES
(Title of indenture securities)
<PAGE> 3
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY
TO WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Boston Corporation.
(See note on page 6.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW
IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE
DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 4
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE
OBLIGOR IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED
BY SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility and
Qualification which relates to matters peculiarly within the knowledge of
the obligor or any underwriter for the obligor, the trustee has relied upon
information furnished to it by the obligor and the underwriters, and the
trustee disclaims responsibility for the accuracy or completeness of such
information.
The answer furnished to Item 2. of this statement will be amended,
if necessary, to reflect any facts which differ from those stated and which
would have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts,
has duly caused this statement of eligibility and qualification to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the City
of Boston and The Commonwealth of Massachusetts, on the 19TH DAY OF
DECEMBER, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Paul D. Allen
------------------------------------
PAUL D. ALLEN
VICE PRESIDENT
2
<PAGE> 5
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the proposed issuance
by FIRST PREFERRED CAPITAL TRUST of its PREFERRED SECURITIES, we hereby
consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Paul D. Allen
-------------------------------------
PAUL D. ALLEN
VICE PRESIDENT
DATED: DECEMBER 19, 1996
3
<PAGE> 6
<TABLE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business June 30, 1996, published in accordance with a call made by the
-------------
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner
of Banks under General Laws, Chapter 172, Section 22(a).
<CAPTION>
Thousands of
Dollars
<S> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin............................................ 1,787,130
Interest-bearing balances..................................................................... 7,756,486
Securities 8,430,910
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary........................................................... 4,090,665
Loans and lease financing receivables:
Loans and leases, net of unearned income.................... 4,426,059
Allowance for loan and lease losses......................... 70,088
Loans and leases, net of unearned income and allowances....................................... 4,355,971
Assets held in trading accounts................................................................... 880,647
Premises and fixed assets......................................................................... 367,731
Other real estate owned........................................................................... 1,067
Investments in unconsolidated subsidiaries........................................................ 65,772
Customers' liability to this bank on acceptances outstanding...................................... 33,530
Intangible assets................................................................................. 68,505
Other assets...................................................................................... 1,002,465
----------
Total assets...................................................................................... 28,840,879
==========
LIABILITIES
Deposits:
In domestic offices........................................................................... 7,531,683
Noninterest-bearing..................................... 5,387,924
Interest-bearing........................................ 2,143,759
In foreign offices and Edge subsidiary........................................................ 12,050,265
Noninterest-bearing..................................... 46,768
Interest-bearing........................................ 12,003,497
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary........................................................... 5,337,231
Demand notes issued to the U.S. Treasury and Trading Liabilities.................................. 871,847
Other borrowed money.............................................................................. 794,349
Bank's liability on acceptances executed and outstanding.......................................... 33,530
Other liabilities................................................................................. 665,616
----------
Total liabilities................................................................................. 27,284,521
----------
EQUITY CAPITAL
Common stock...................................................................................... 29,931
Surplus........................................................................................... 276,915
Undivided profits................................................................................. 1,247,942
Cumulative foreign currency translation adjustments............................................... 1,570
----------
Total equity capital.............................................................................. 1,556,358
----------
Total liabilities and equity capital.............................................................. 28,840,879
==========
</TABLE>
4
<PAGE> 7
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
