SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
QCB BANCORP
(Name of the Issuer)
FIRST BANKS, INC.
CCB BANCORP, INC.
(Name of Person(s) Filing Statement)
Common Stock, no par value
(Title of Class of Securities)
(None)
(CUSIP Number of Class of Securities)
Allen H. Blake Thomas C. Erb, Esq.
Senior Vice President Lewis, Rice & Fingersh, L.C.
First Banks, Inc. 500 North Broadway, Suite 2000
11901 Olive Boulevard St. Louis, Missouri 63102
St. Louis, Missouri 63141 (314) 444-7600
(314) 995-8700
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an
information statement subject to Regulation 14A,
Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the
Securities Act of 1933.
c. [ ] A tender offer.
d. [X] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
Calculation of Filing Fee
Transaction Valuation: $100,416 Amount of Filing Fee: $20.83
*Based upon the acquisition of the 1,673,596 shares of QCB Bancorp that
are not held of record by CCB Bancorp, Inc., a wholly owned subsidiary
of First Banks, Inc., at a price per share of $0.06. [ ] Check box if
any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the
form or schedule and the date of its filing.
Amount Previously Paid:
Form or Registration No.:
Filing Party:
Date Filed:
<PAGE>
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The name of the issuer of the class of equity security which is the
subject of the Rule 13e-3 transaction is QCB Bancorp (the "Company"). The
address of the Company is 4201 Long Beach Boulevard, Long Beach, California
90807. The Company is the bank holding company parent and sole shareholder of
Queen City Bank, N.A., Long Beach, California ("Queen City Bank").
(b) The class of securities that is the subject of the Rule 13e-3
transaction is the Company's common stock, no par value per share ("Company
Common"). As of November 30, 1995, 49,673,596 shares of Company Common were
issued and outstanding, and there were 444 holders of record of Company Common
as of September 30, 1995.
(c) There is currently no established market for shares of Company
Common (excluding limited or sporadic quotations).
(d) The Company has paid no dividends with respect to shares of Company
Common during the past two years. The ability of the Company to pay dividends to
its shareholders is subject to the restrictions set forth in the California
Corporation Code (the "California Code"). The California Code provides that a
corporation may make a distribution to its shareholders if the corporation's
retained earnings equal at least the amount of the proposed distribution. The
California Code further provides that, in the event that sufficient retained
earnings are not available for the proposed distribution, a corporation may
nevertheless make a distribution to its shareholders if it meets two conditions,
which generally are as follows: (i) the corporation's assets equal at least 1
1/4 times its liabilities; and (ii) the corporation's current assets equal at
least its current liabilities or, if the average of the corporation's earnings
before taxes on income and before interest expense for the two preceding fiscal
years was less than the average of the corporation's interest expense for such
fiscal years, then the corporation's current assets equal at least 1 1/4 times
its current liabilities. As of December 31, 1994 and September 30, 1995, the
Company reported negative retained earnings and then did not meet these tests
and was not legally permitted to pay dividends. Upon conversion of the Debenture
(as defined below), the Company now has positive retained earnings and would
legally be permitted to pay a dividend to the extent of such retained earnings.
The Company was also unable to pay dividends because the source of
funds for such a dividend would have had to come from a dividend paid by Queen
City Bank to the Company. Queen City Bank has been restricted from paying any
dividends by an agreement with the OCC, although this restriction has recently
been lifted. In addition, the Company's and Queen City Bank's policy has been to
retain earnings and not to pay dividends. Further, as a bank holding company,
the Company is subject to the supervision and regulation of the Board of
Governors of the Federal Reserve System and the Federal Reserve Bank of San
Francisco (the "Reserve Bank"). Due to the marginal financial condition of Queen
City Bank, the Reserve Bank, by letter dated September 30, 1994, imposed a
number of restrictions on the activities and operations of the Company,
including, among other matters, prohibiting the Company from paying any
dividends or repurchasing any if its stock without prior Reserve Bank approval.
<PAGE>
(e) None of the Company, CCB Bancorp, Inc., Santa Ana, California
("CCB") (which owns approximately 96.6% of the issued and outstanding shares of
Company Common), or First Banks, Inc., St. Louis, Missouri ("First Banks")
(which is the sole shareholder of CCB) has made an underwritten public offering
of shares of Company Common for cash during the past three years which was
registered under the Securities Act of 1933 or exempt from registration
thereunder pursuant to Regulation A.
(f) Pursuant to a Debenture Purchase and Operating Agreement (the
"Debenture Agreement"), dated March 21, 1995, between First Banks and Company,
First Banks acquired, on July 21, 1995, from Company and subsequently
transferred to CCB, a debenture (the "Debenture") in the original principal
amount of $5,528,082. The Debenture, together with any accrued but unpaid
interest thereon, is convertible into shares of Company Common at any time in
the sole discretion of the holder thereof and at a conversion price based upon
the book value per share of Company Common. On November 30, 1995, CCB converted
$2.4 million of principal and accrued interest of the Debenture at a conversion
price of $0.05 per share, into 48.0 million shares of Company Common.
Item 2. Identity and Background.
(a) through (g) This statement is filed by First Banks, which is a
Missouri corporation, and CCB, which is a Delaware corporation. First Banks is a
registered bank and savings and loan holding company with subsidiary banks and
savings associations located in California, Illinois, Missouri and Texas. The
address of First Banks is 135 North Meramec Avenue, Clayton, Missouri 63105. The
controlling shareholders of First Banks are (i) Mary W. Dierberg and James F.
Dierberg, II, trustees under the living trust of James F. Dierberg, II, dated
July 24, 1989, (ii) Mary W. Dierberg and Michael James Dierberg, trustees under
the living trust of Michael James Dierberg, dated July 24, 1989, (iii) Mary W.
Dierberg and Ellen C. Dierberg, trustees under the living trust of Ellen C.
Dierberg, dated July 17, 1992, and (iv) James F. Dierberg, trustee of the James
F. Dierberg living trust, dated October 8, 1985. Mr. James F. Dierberg and Mrs.
Mary W. Dierberg are husband and wife, and Messrs. James F. Dierberg, II,
Michael James Dierberg and Miss Ellen C. Dierberg are their children (the
"Dierberg Family").
The directors and executive officers of First Banks are as follows:
James F. Dierberg Chairman of the Board of Directors, President and
Chief Executive Officer
Allen H. Blake Senior Vice President, Chief Financial Officer,
Secretary and Director
John A. Schreiber Senior Vice President, Chief Lending Officer
Thomas A. Bangert Vice President, Senior Operations Officer
Laurence J. Brost Vice President, Controller
Mark T. Turkcan Senior Vice President, Retail and Mortgage Banking
Donald W. Williams Senior Vice President, Chief Credit Officer
Donald Gunn, Jr. Director
George Markos Director
<PAGE>
CCB is a registered bank holding company that owns 100% of the issued
and outstanding common stock of First Bank & Trust, Santa Ana, California, a
California-chartered bank ("First Bank & Trust"), and approximately 96.6% of the
issued and outstanding common stock of the Company. The address of CCB is 2900
South Harbor Boulevard, Santa Ana, California 92704. All of the issued and
outstanding capital stock of CCB is owned by First Banks.
The directors and executive officers of CCB are as follows:
Donald W. William Chairman of the Board of Directors, Chief Executive
Officer, President
James F. Dierberg Director
Allen H. Bl Director, Secretary, Chief Financial Officer
Messr. Williams and Dierberg are Directors of the Company.
The information required by this Item 2 with respect to First Banks,
CCB, the Dierberg Family and each of the above-named persons is attached hereto
as Exhibit 2, and is incorporated herein by this reference. The information
disclosed in Exhibit 2 is included pursuant to General Instruction D to Schedule
13E-3.
Item 3. Past Contacts, Transactions or Negotiations.
On January 27, 1995, the Company and First Banks executed a letter of
intent under which First Banks agreed in principle to contribute $5,000,000 to
the Company in exchange for a convertible debenture to be issued by the Company.
The transaction was to take effect pursuant to a definitive agreement to be
negotiated between the parties, and, on March 21, 1995, First Banks and the
Company executed the Debenture Agreement. The transaction contemplated by the
Debenture Agreement was subject to a number of conditions, which included the
requirement that the Company obtain the approval of its shareholders and that
the parties obtain the prior regulatory approval of the Board of Governors of
the Federal Reserve System. On July 21, 1995, First Banks and the Company
consummated the transactions contemplated by the Debenture Agreement, and the
Company issued to First Banks the Debenture in the original principal amount of
$5,528,082. The additional $528,082 investment represented the amount of
principal and accrued interest outstanding on two debentures, issued by the
Company and held by Raymond Heady and David Goren, which were retired pursuant
to the Debenture Agreement. Messrs. Heady and Goren were directors of the
Company who resigned upon the closing of the transactions contemplated by the
Agreement.
The Debenture bears interest at 1 1/2% above the "Current Prime Rate"
(as defined below), adjusted quarterly, with a maximum rate of 10%. The "Current
Prime Rate" is defined as the rate published in the "Money Rates" table in the
Wall Street Journal as the base rate on corporate loans posted by at least 75%
of the nation's thirty largest banks. If multiple prime rates are quoted in the
table, the lowest prime rate will be the Current Prime Rate. In the event that
the prime rate is no longer published in the Money Rates table, then the Board
of Directors of Company will choose a substitute Current Prime Rate based upon
comparable information. Interest is payable when, in the sole discretion of
<PAGE>
Company's Board of Directors, Company has sufficient funds available to make
such payments, and the payments would comply with all applicable legal and
regulatory requirements. For the period beginning January 1, 1996, the interest
rate on the Debenture was 10%.
The Debenture is not registered or transferable by the holder without
the prior consent of Company, except for certain limited transfer rights to
affiliates of First Banks. On September 30, 1995, First Banks assigned the
Debenture to CCB.
The Debenture, together with any accrued but unpaid interest thereon,
is convertible into shares of Company Common at any time in the sole discretion
of its holder at a conversion price based upon the book value per share of the
Company Common. The initial conversion price of the Debenture was $1.10 per
share, based on the September 30, 1994 book value of Company of $2.03 per share.
This conversion price adjusts proportionately to the extent that the book value
of the Company Common declines below $2.03 per share. As of September 30, 1995,
the book value of Company was ($0.28) per share. In light of this negative book
value per share (which would have resulted, upon conversion of the Debenture, in
CCB effectively acquiring 100% of the Company Common and leaving the
pre-existing shareholders of the Company with no value in their shares) and
CCB's desire to convert a portion of the Debenture to Company Common, CCB and
Company agreed to execute an Amendment No. 1 to QCB Bancorp Debenture on
November 15, 1995 (collectively with the Debenture, the "Debenture") to set the
conversion price at $0.05 per share if and when the book value of the Company
Common was equal to $0.00 or less. The Findley Group, Anaheim, California ("The
Findley Group"), an independent consulting firm and investment banking company
specializing in the banking industry, rendered an opinion, a copy of which is
attached hereto as Exhibit 3, that a conversion price of $0.05 per share was
fair, from a financial point of view, to the holders of Company Common. On
November 30, 1995, CCB converted $2.4 million of the principal and accrued
interest on the Debenture into 48.0 million shares of Company Common, resulting
in CCB owning 96.6% of the issued and outstanding shares of Company Common.
None of the officers or directors of First Banks or CCB have acquired
any shares of Company Common since January 1, 1994, the commencement of the
second full fiscal year preceding the date of this Schedule except as follows:
(1) pursuant to a Stock Option Agreement, dated September 9, 1994, by and
between the Company and Fred D. Jensen, President and Chief Executive Officer,
the Company awarded Mr. Jensen options to purchase 30,000 shares of Company
Common at an exercise price of $1.00 per share; (2) pursuant to a Stock Option
Agreement, dated October 27, 1994, by and between the Company and Terrance M.
McCarthy, Executive Vice President and Senior Credit Officer, the Company
awarded Mr. Jensen options to purchase 25,000 shares of Company Common at an
exercise price of $1.22 per share; and (3) on May 12, 1995, Mr. Jensen acquired
1,000 shares of Company Common at a price of $1.00 per share for the purpose of
satisfying his obligation under federal banking law to own qualifying shares of
Company Common in connection with his service as a member of the board of
directors of Queen City Bank. Messrs. Jensen and McCarthy are now directors and
officers of First Bank & Trust in addition to their service to the Company.
The strike price of stock options is currently well in excess of the current
fair value of Company Common.
<PAGE>
Item 4. Terms of the Transaction.
At a meeting held on December 20, 1995, the Board of Directors of CCB
adopted resolutions pursuant to section 1110 of the California Corporations Code
(the "California Code") and section 253 of the General Corporation Law of
Delaware authorizing the "short-form" merger of the Company with and into CCB.
At a meeting also held on December 20, 1995, the Board of Directors of the
Company adopted similar resolutions approving the fairness of the consideration
to be received for each share of Company Common not owned by CCB. Pursuant to
these resolutions, the Company and CCB have entered into an Agreement and Plan
of Merger, dated December 20, 1995 (the "Merger Agreement") (a copy of which is
attached hereto as Exhibit 4), providing for the merger of the Company with and
into CCB.
Pursuant to the Merger Agreement and the corporate laws of California
and Delaware, the Company will merge with and into CCB (the "Merger"), with CCB
being the surviving entity of the Merger and the corporate identity and
existence of the Company, separate and apart from CCB, will cease on
consummation of the Merger. At the effective time of the Merger (the "Effective
Time") each share of Company Common issued and outstanding immediately prior to
the Effective Time and held of record by persons other than CCB will be
converted into the right to receive cash in the amount of $0.06 (the "Merger
Consideration"). At the Effective Time, all of the shares of Company Common, by
virtue of the Merger and without any action on the part of the holders thereof,
will no longer be outstanding and will be canceled and retired and will cease to
exist, and each holder, other than CCB, of any certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common (the "Certificates") will thereafter cease to have any rights
with respect to such shares, except the right of such holders to receive,
without interest, the Merger Consideration upon the surrender of such
Certificate or Certificates to Boatmen's Trust Company, St. Louis, Missouri,
which will act as the exchange agent (the "Exchange Agent") in the Merger.
The issued and outstanding shares of the capital stock of CCB will be unaffected
by the Merger.
Item 5. Plans or Proposals of the Issuer or Affiliate.
As described above, CCB has determined to cause the merger of the
Company with and into CCB, which will terminate the existence of the Company as
a separate entity and will, as an effect of the Merger, terminate the Company's
obligation to file reports under the Exchange Act. CCB has also determined to
cause the merger of Queen City Bank with and into First Bank & Trust (the "Bank
Merger"). The Bank Merger, however, will take place after the Merger of the
Company with and into CCB, provided the Bank Merger has received prior
regulatory approval from the FDIC and California Department of Banking.
Item 6. Source and Amounts of Funds or Other Consideration.
<PAGE>
CCB will finance the acquisition of the shares of Company Common not
already held by CCB through internal sources. No part of such funds is, or is
expected to be, directly or indirectly borrowed.
CCB anticipates that it will incur expenses of approximately $25,000 in
connection with the Merger, including legal fees of approximately $10,000,
appraisal fees of approximately $6,500 and printing and mailing fees of
approximately $4,000.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a) The objectives of CCB in causing the Merger are to (i) acquire the
entire equity interest in the Company and (ii) create operational efficiencies
and economies of scale by eliminating many of the duplicative administrative and
operational expenses associated with maintaining separate corporate and banking
entities. The Company has functioned in the past as the holding company for
Queen City Bank. This function now substantially duplicates the function of CCB
but provides no benefit to First Banks and CCB; it does, however, result in
certain costs that, in the absence of the minority shareholder interest, could
be eliminated. These costs include costs associated with staff, franchise tax,
audit expense and federal and state securities law compliance, as well as the
necessity of maintaining certain corporate procedures such as shareholder
meetings, separate year-end audits and communications with shareholders.
The Merger will also facilitate the Bank Merger by causing Queen City
Bank and First Bank & Trust to become wholly owned subsidiaries of CCB. The Bank
Merger will also create operational efficiencies and economies of scale by
eliminating many of the duplicative administrative and operational expenses
associated with maintaining separate banking entities. Queen City Bank and First
Bank & Trust operate in relatively close geographic proximity; by merging these
banks, CCB and First Bank & Trust expect to realize significant savings.
(b) and (c) CCB and the Company have determined that a statutory short
form merger would be the most efficient method of achieving the purposes
discussed above and that delaying the Merger beyond the first quarter of 1996
would substantially reduce the amount of cost savings that could otherwise be
realized. The parties considered alternative means to accomplish the purposes of
the Merger but do not believe that alternative structures would accomplish such
purposes in a timely and efficient manner. The primary alternatives considered
were a standard, "long-form" merger of the Company and CCB and a reverse stock
split. Each of theses alternatives is discussed briefly below.
Long-Form Merger. A standard, long-form merger under the California
Code would require the approval of the shareholders of the Company at a meeting
called for the purpose of considering such merger. As the long-form merger would
require the Company to undertake the expense of calling and holding the
shareholders' meeting to vote upon the merger and the results of the vote (in
light of CCB's ownership interest) would be a foregone conclusion, CCB and the
Company determined to pursue a short-form merger. As discussed in more detail
below, the right of the shareholders of the Company to dissent from the Merger
remains available notwithstanding the lack of a shareholder vote thereon.
Reverse Stock Split. In a reverse stock split, the interest of the
Company's minority shareholders would be acquired by CCB pursuant to an
amendment to the Company's Certificate of Incorporation to reduce the number of
issued and outstanding shares of Company Common such that all existing minority
shareholders of the Company would own less than one full share of Company
Common. CCB would then distribute cash for the resulting fractional share
interests. The necessary amendment to the Company's Certificate of Incorporation
<PAGE>
would require the approval of the Company's shareholders. As with the long-form
merger, the Company would be required to undertake the expense of calling and
holding the shareholders' meeting to vote upon the merger, and the results of
the vote (in light of CCB's ownership interest) would be a foregone conclusion.
The shareholders of the Company, however, would not have dissenters' rights. In
light of the expense of calling and holding the required shareholders' meeting
and the absence of any formalized procedure to be followed by shareholders who
may object to the reverse split, CCB and the Company determined not to undertake
a reverse stock split.
(d) As described above, upon consummation of the Merger, the corporate
identity and existence of the Company, separate and apart from CCB, will cease
on consummation of the Merger, and CCB will acquire the entire equity interest
in the Company and achieve the purposes of the Merger described above.
Accordingly, CCB will hold a 100% interest in the net book value and net
earnings (losses) of the Company, which as of September 30, 1995 were $(470,000)
and $(3,170,000), respectively, and as of December 31, 1995 were $2,207,000 and
$3,604,000, respectively. CCB estimates that, upon consummation of the Merger,
it will achieve savings within a range of approximately $200,000 to $400,000
annually.
Also as described above, upon consummation of the Merger, each share of
Company Common issued and outstanding immediately prior to the Effective Time
and held of record by persons other than CCB will be converted into the right to
receive the Merger Consideration. The following description of the federal
income tax consequences of the Merger is included solely for the general
information of the shareholders of the Company. The tax consequences for any
particular shareholder may be affected by matters not discussed herein, and
shareholders should consult their personal tax advisors in determining the
consequences of the application of state and local tax law.
The conversion of shares of Company Common into the right to receive
the Merger Consideration pursuant to the Merger will be a taxable transaction
for federal income tax purposes. Each holder of shares of Company Common will
recognize gain or loss upon the surrender of that shareholder's Company Common
equal to the difference, if any, between (i) the sum of the cash payment of
$0.06 per share received in exchange for the shares of Company Common and (ii)
that shareholder's tax basis in the shares of Company Common. Any gain or loss
will be treated as a capital gain or loss if the Company Common exchanged was
held as a capital asset in the hands of the shareholder. Holders of Company
Common are urged to consult their personal tax advisors as to the tax
consequences of the Merger under federal, state, local and any other applicable
laws.
The cash payments due to the holders of shares of Company Common upon
the exchange thereof pursuant to the Merger (other than certain exempt entities
and persons) will be subject to a backup withholding tax at the rate of 31%
under federal income tax law unless certain requirements are met. Generally, the
Exchange Agent will be required to deduct and withhold the tax on cash payments
due at the Effective Time if (i) the shareholder fails to furnish a taxpayer
identification number ("TIN" the TIN of an individual shareholder is his or her
Social Security number) to the Exchange Agent or fails to certify under penalty
of perjury that such TIN is correct; (ii) the Internal Revenue Service ("IRS")
notifies the Exchange Agent that the TIN furnished by the shareholder is
incorrect; (iii) the IRS notifies the Exchange Agent that the shareholder has
failed to report interest, dividends or original issue discount in the past; or
(iv) there has been a failure by the shareholder to certify under penalty of
perjury that such shareholder is not subject to the backup withholding tax. Any
amounts withheld by the Exchange Agent in collection of the backup withholding
tax will reduce the federal income tax liability of the shareholders from whom
such tax was withheld.
<PAGE>
Item 8. Fairness of the Transaction.
(a) The Company and CCB believe that the Merger is fair to shareholders
of the Company, and the boards of directors of each of CCB and the Company have
unanimously approved the Merger, with no member of any of the foregoing boards
dissenting or abstaining from voting on the Merger.
(b) To assist in determining the fair value of the 1,673,596 shares of
Company Common held by persons other than CCB, The Findley Group, at the request
of the Company and in connection with its services described in the response to
Item 3, above, valued the shares of Company Common not held by CCB at $0.06 per
share. A copy of the report which is summarized in the response to Item 9, is
attached hereto as Exhibit 8 without the exhibits or appendices thereto.
In addition to the conclusions contained in the opinion, the Board of
Directors of the Company reviewed certain additional factors, including the
historical and current market values of the shares of Company Common, the
historical and current book values of shares of Company Common (including the
market and book values of such shares in the absence of proceeds of the
Debenture purchase), and the extent to which the proceeds of the Debenture
purchase constituted the net worth of the Company and Queen City Bank and the
price paid for shares of Company Common by CCB upon partial conversion of the
Debenture. In this regard, the Company noted that there had been very few
transactions in shares of Company Common during the past year and that the book
value per share of Company Common as of September 30, 1995 (the most recent
quarter end prior to the partial conversion of the Debenture) was ($0.28).
The Company also noted, in light of the negative book value of shares
of Company Common, that the calculation of the conversion price per share
contained in the Debenture as originally issued by the Company would effectively
give CCB the ability to convert the Debenture into 100% of Company Common,
leaving the public shareholders of the Company with no value for their shares
and that CCB had offered to mitigate this effect by setting the conversion price
at $0.05 per share if the book value per share of Company Common is less than
$0.00. The Company also considered the financial condition, businesses and
prospects for the Company and CCB and the anticipated cost savings and operating
efficiencies available to the combined institution upon completion of the
Merger.
In reaching its determination as to the fairness of the Merger, the
Board of Directors of the Company did not assign any relative or specific
weights to the foregoing factors, and individual directors may have given
differing weights to different factors.
(c) Section 1110 of the California Code expressly authorizes
"short-form" mergers of one corporation with another corporation (or a
subsidiary thereof) that controls at least 90% of the stock of the first
corporation. Under such circumstances, the merger may be effected pursuant to a
resolution of the board of directors of the parent corporation and without a
vote of the shareholders of either corporation, however, the minority
shareholders of the Company are afforded dissenters' rights. CCB also notes that
the shareholders of the Company approved the Debenture Agreement and the
issuance of the Debenture thereunder at the Company's 1995 Annual Meeting of
Shareholders (the "Shareholders' Meeting"), which was held on May 23, 1995. The
proxy solicitation materials provided to shareholders in connection with the
Shareholders' Meeting disclosed that (i) if First Banks became the owner of more
than 90% of the Company Common, First Banks would be able to effect a short form
merger of the Company, under section 1110 of the California Code, without the
<PAGE>
approval of the minority shareholders of the Company and (ii) the shareholders
of the Company at the time of the Shareholders' Meeting may not have another
opportunity to vote upon the issue of whether the Company should be acquired.
(d) The decision to retain The Findley Group to prepare a report
concerning the fairness of the Merger was made unanimously by the members of the
Board of Directors of the Company who are not employees of the Company or
affiliates of First Banks or CCB (the "Independent Directors").
(e) A majority of Independent Directors voted to approve the Merger at
the meeting of the Board of Directors of the Company on December 20, 1995.
(f) First Banks and CCB believe that no firm offers for a merger or
other extraordinary transactions with respect to the Company have been made
(other than the Merger) in the past 18 months.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) and (b) The Independent Directors retained The Findley Group to
provide an opinion as to the fairness to the Company's shareholders, from a
financial point of view, of establishing the conversion price of the Debenture
at $0.05 per share and, in connection therewith, to provide a valuation to the
shares of Company Common not held by CCB. No limitations were imposed by First
Banks, CCB or the Company, or any of their affiliates, with respect to the
opinion to be rendered, although The Findley Group was not authorized to solicit
other potential purchasers for the Company or Queen City Bank. For The Findley
Group's services to the Company, the Company has agreed to pay The Findley Group
a fee of $6,500.
The Findley Group's principals and affiliated companies have been
banking consultants in California since 1956. The sole shareholder and
Co-Director of The Findley Group, Gary Steven Findley, is a registered
investment advisor with the Commission and the California Department of
Corporations and a practicing attorney specializing in the representation of
banking institutions. Mr. Findley also edits The Findley Reports and the
California Banking Newsletter and Directors' Compass, a newsletter covering
mergers and acquisitions of California financial institutions. The Findley Group
and its affiliates have been a principal source for fairness opinions in
California banking transactions, having provided, in the past five years, stock
valuation opinions and consulting services in over 30 banking transactions
involving mergers, acquisitions and changes in control. No principal,
staff-member, or any affiliate of The Findley Group currently owns any shares
beneficially or of record of Company Common, nor are such persons affiliated in
any way with the Company.
The following summary of the Findley Group's report is qualified in its
entirety by reference to the full text of the report which is attached
as Exhibit 8.
The basic data supporting the opinions of the Findley Group are as of
September 30, 1995, supported with financial and operating information for Queen
City Bank and the Company as of October 31, 1995. The Findley Group also
reviewed the Debenture Agreement, recent securities and bank regulatory filings
made by the Company and Queen City Bank, reports of examination of the Bank and
the Company prepared by the Office of the Comptroller of the Currency and the
Federal Reserve Bank of San Francisco, respectively, and certain other
materials. In addition, The Findley Group personnel have had conversations with
members of the senior management of the Company and Queen City Bank. The Findley
Group also reviewed Queen City Bank's outstanding loans and other assets, the
status of any other bank regulatory criticisms of Queen City Bank's operations
and internal controls, and all other factors that could inhibit or restrict
<PAGE>
Queen City Bank in its operations or performance that would be relevant to The
Findley Group's analysis and valuation.
In its opinion, The Findley Group observed that certain factors that
influenced the pricing of bank stock, including the recent increase in the
failure of banking institutions operating in California, the authority of
federal bank regulatory agencies to influence and affect bank operations, and
the increase in costs associated in complying with federal banking laws. The
Findley Group also considered the nature of the business of the Company and
Queen City Bank, the financial history of Queen City Bank, local and general
economic factors, regulatory restraints and handicaps imposed by federal banking
regulators, the current and future marketability of the Company's stock, and the
securities market marketing histories and experience of comparable banks, bank
holding companies and banking institutions.
In reaching its conclusion as to the value of the shares of Company
Common held by unaffiliated shareholders of the Company, The Findley Group first
determined, in light of the Company's position as essentially a shell company
whose only significant asset was the capital stock of Queen City Bank, the
reasonable market value of Queen City Bank as a whole. The Findley Group
employed three basic approaches to determine the acquisition value of Queen City
Bank: premium on deposits, multiple of equity return and multiple of book value.
Premium on Deposits. The premium on deposits approach treats the
approximate market value of the assets and deposit liabilities as added or
deducted value factors to Queen City Bank's capital accounts. This factor is
unique to banking and is primarily identified with a liquidation value. The
Findley Group's conclusion, using the premium on deposits approach, concluded
that the acquisition value of Queen City Bank would be approximately $6,748,000.
Multiple of Equity Return. As the Company and Queen City Bank have
experienced a negative return on equity over the past several years, The Findley
Group concluded that the multiple of equity return approach could not be used as
part of a valuation of Queen City Bank.
Multiple of Book Value. The multiple of book value approach is based
upon the purchase prices and multiples of book values of comparable transactions
recently consummated or in the process of consummation. Recent bank acquisitions
in California reviewed by The Findley Group indicated that the average multiple
of book value for banks was approximately 1.46 and the median was approximately
1.40. The Findley Group determined that a multiple factor of 1.45 would be a
fair representation of the current values of sound, healthy and profitable
banks.
In light of Queen City Bank's troubled financial condition, however,
The Findley Group also reviewed the stock acquisition prices paid for California
banks with loan and operating problems and determined that such prices varied
between 0.33 and 1.10 as a multiple of book value. After comparing acquisitions
of comparable banks with classified assets of over 100% of shareholder equity
and loan loss reserves and a listing of market value to book value for financial
institutions with similar operating problems as the Company and Queen City Bank,
The Findley Group concluded that Queen City Bank, absent the significant capital
infusion resulting from the issuance of the Debenture, would have no earnings
potential and would be a candidate for receivership and a complete loss of the
Company's shareholders equity and that a multiple of book value factor of 1.10
<PAGE>
for Queen City Bank would be applicable and reasonable due to its condition.
Using this approach, The Findley Group determined that the acquisition value of
Queen City Bank as of September 30, 1995 would be $6,501,000.
Based upon the evaluation of the three methods of valuation described
above, The Findley Group concluded that the valuation of the entirety of Queen
City Bank would be approximately $6,700,000. After taking into account the fact
that the Queen City Bank is the only significant asset of the Company and the
extent of the Company's liabilities separate from those liabilities of Queen
City Bank, The Findley Group concluded that the value of the Company's
shareholders equity is $2,865,000 and that the value of the shares held by the
unaffiliated shareholders of the Company would be 3.347% of such amount (i.e.,
the approximate pro rata interest of such shareholders relative to CCB's
approximate 96.6% interest), or approximately $96,000 or $0.06 per share after
the payment of all liabilities.
(c) A copy of the report of The Findley Group is available for
inspection and copying at the principal executive office of the Company, 4201
Long Beach Boulevard, Long Beach, California, and at the principal executive
office of CCB Bancorp, 2900 South Harbor Boulevard, Santa Ana, California,
during regular business hours by any interested shareholder of the Company or a
representative of such a shareholder who has been so designated in writing.
Item 10. Interest in Securities of the Issuer.
(a) CCB owns of record 48,000,000 shares of Company Common,
representing approximately 96.6% of the issued and outstanding shares of such
stock. In addition, CCB continues to hold the unconverted portion of the
Debenture, with a principal amount of $3,329,516.43, and First Banks holds
additional debentures acquired from certain directors of Company (the "Director
Debentures"), with a principal amount of $500,000 and accrued but unpaid
interest of approximately $46,164. The Director Debentures were issued by
Company in December 1994 and are convertible into Company Common at a price
based upon the book value per share of Company Common. Company does not have a
sufficient number of authorized but unissued shares of Company Common Stock to
permit the conversion of a material amount of the remaining, unconverted portion
of the Debenture or of the Director Debentures.
(b) All transactions in the shares of the Company Common effected
by First Banks and CCB during the past 60 days are described in the responses
to Item 1(f), above.
Item 11. Contracts, Arrangements or Understandings With Respect to the Issuer's
Securities.
Other than as described in this transaction statement and the
remaining, unconverted principal amount of the Debenture and the accrued but
unpaid interest thereon, there is no contract, arrangement, understanding or
relationship (whether or not legally enforceable) in connection with the Merger
between First Banks or CCB, any of the directors or executive officers or
shareholders of First Banks or CCB and any other person with respect to any
securities of the Company.
<PAGE>
Item 12. Present Intention and Recommendation of Certain Persons With Regard to
the Transaction.
(a) As the transaction discussed herein will be a merger pursuant to
the corporation laws of the States of California and Delaware, all of the shares
of Company Common held by persons other than CCB will be converted into the
right to receive cash in the amount of $0.06 per share. First Banks and CCB do
not anticipate that any of the directors or any executive officer, director or
affiliate of the Company will dissent from the Merger.
(b) The Board of Directors of the Company, including a majority of the
Independent Directors, have approved the Merger.
Item 13. Other Provisions of the Transaction.
(a) Under the California Code, holders of shares of Company Common have
the right to dissent from the Merger and obtain payment of the value of their
shares of Company Common. If any such shareholder wishes to do so, he or she
must make a written demand for purchase of his or her shares in cash that is
received by the Company or its transfer agent within 30 days after the mailing
of a notice of the Merger required under the California Code. The demand must
include a statement of the price which claimed to be the fair market value of
the shares of Company Common, and certificates for such shares must be delivered
to the Company or its transfer agent within the same 30 day period so that the
certificate may be stamped as representing dissenting shares and returned to the
shareholder. If the Company and the shareholder do not agree on the price per
share of Company Common, the shareholder must file suit in the appropriate
California superior court for a determination of the price. In certain cases,
the corporation can be required to pay the shareholder's attorneys and appraiser
fees. Such suit must be filed within 6 months after the mailing of the notice
described above. If the Company and the shareholder agree on a price or if a
price is fixed by the court, the shareholder must surrender his or her share
certificate in order to receive payment for such shares.
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF
THE PROVISIONS OF THE CALIFORNIA CORPORATIONS CODE RELATING TO THE RIGHTS OF
DISSENTING SHAREHOLDERS OF QCB BANCORP, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE EXCERPTS FROM THE CALIFORNIA CORPORATIONS CODE ATTACHED HERETO
AS EXHIBIT 13.
(b) First Banks and CCB have not made any arrangement to allow
unaffiliated shareholders to obtain access to corporate files of the Company or
to obtain counsel or appraisal services at the expense of First Banks, CCB or
the Company.
(c) The Merger does not contemplate the exchange of debt securities for
equity securities of the Company.
<PAGE>
Item 14. Financial Information.
(a) The Company's audited financial statements for the fiscal years
ended December 31, 1994 and December 31, 1993 are incorporated herein by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994. The Company's unaudited balance sheets and comparative
year-to-date income statements and statements of cash flows and related earnings
per share amounts for the period ended September 30, 1995 are incorporated
herein by reference to the Company's Quarterly report on Form 10-Q for the
period ended September 30, 1995. The foregoing filings of the Company are
incorporated herein by reference pursuant to General Instruction D to Schedule
13 E-3..
The Company has incurred a net loss of $3.6 million and $3.4 million
for the years ended December 31, 1995 and 1994, respectively, and $3.2 million
and $2.3 million for the nine months ended September 30, 1995 and 1994,
respectively. The fixed charges, consisting of interest expense, was $308,000
and $173,000 for the year ended December 31, 1995 and for the nine months ended
September 30, 1995, respectively. The fixed charges are not significant in
comparison to the net losses incurred for those same periods. Accordingly, the
ratio of earnings (loss) to fixed charges has not been provided as it is not
meaningful.
The book value per share as of December 31, 1994 was $1.21 and as of
September 30, 1995 was $(0.28).
(b) As the Company will be the disappearing entity in the Merger, pro
forma data disclosing the effect of the Merger on its balance sheet, statement
of income, earnings per share amounts, ratio of earnings to fixed charges and
book value per share is not provided.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) No officer, employee, class of employees or corporate asset of the
Company has been or is proposed to be employed, availed of or utilized by First
Banks, CCB or the Company in connection with the Merger. Messrs. Fred D. Jensen
and Terrance M. McCarthy, both of whom are executive officers of the Company and
Queen City Bank, have been appointed officers and members of the Board of
Directors of First Bank and Trust.
(b) No persons shall be employed, retained or compensated by First
Banks or CCB, or by any person on behalf of First Banks or CCB, to make
solicitations or recommendations in connection with the Merger.
<PAGE>
Item 16. Additional Information.
On July 31, 1995, First Banks filed with the Commission a statement on
Schedule 13D reporting consummation of the transactions contemplated by the
Debenture Agreement and First Banks' acquisition of the Debenture. On December
8, 1995, First Banks filed with the Commission an Amendment No. 1 to such
Schedule 13D to report the conversion of a portion of the Debenture. The Company
files periodic reports and other information with the Commission pursuant to the
Securities Exchange Act of 1934 relating to its business, financial statements
and other matters. This statement and the exhibits thereto, First Banks'
statement on Schedule 13D, the Amendment No. 1 to Schedule 13D and the exhibits
thereto, as well as reports and other information of the Company may be
inspected at the Commission's office at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and the Commission's Regional Office in New
York (Suite 1300, 7 World Trade Center, New York, New York 10048), and copies of
such material can be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at proscribed
rates.
Item 17. Material to be Filed as Exhibits.
Exhibit No. Description
2 Identity and Background of First Banks, Inc., CCB Bancorp, Inc.and
Affiliates
3 Opinion of The Findley Group on the Conversion Price of the Debenture
4 Agreement and Plan of Merger
8 Opinion of the Findley Group on the Value of Shares of the QCB
Bancorp Common Stock
13 Chapter 13, California Corporations Code
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
FIRST BANKS, INC.
By: /s/Laurence J. Brost
Name: Laurence J. Brost
Title: Vice President/Controller
Date: February 2, 1996
CCB BANCORP, INC.
By: /s/Allen H. Blake
Name: Allen H. Blake
Title: Chief Financial Officer
Date: February 2, 1996
<PAGE>
Exhibit Index
Exhibit No. Description Page
2 Identity and Background of First Banks, Inc., 18
CCB Bancorp, Inc. and Affiliates
3 Opinion of The Findley Group on the Conversion 27
Price of the Debenture
4 Agreement and Plan of Merger 29
8 Opinion of the Findley Group on the Value of 38
Shares of the QCB Bancorp Common Stock
13 Chapter 13, California Corporations Code 51
<PAGE>
EXHIBIT 2
FIRST BANKS, INC.
State or Other Place of Organization: Missouri
Principal Business: Bank Holding Company
Address of Principal Business: 135 North Meramec,
Clayton, Missouri 63105
Address of Principal Office: 135 North Meramec,
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
CCB BANCORP, INC.
State or Other Place of Organization: Delaware
Principal Business: Bank Holding Company
Address of Principal Business: 2900 South Harbor Boulevard
Santa Ana, California 92704
Address of Principal Office: 2900 South Harbor Boulevard
Santa Ana, California 92704
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
<PAGE>
JAMES F. DIERBERG (Chief Executive Officer, President and Chairman of the Board
of Directors of First Banks, Inc.)
Residence or Business Address: 39 Glen Eagles Drive
St. Louis, Missouri 63124
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
James F. Dierberg is the Chairman of the Board and Chief Executive
Officer of the Company; positions he has held since 1988. He has been a Director
of the Company since 1979. Mr. Dierberg was President of the Company from 1979
until February 1992, and he was re-appointed President in April 1994. Mr.
Dierberg was appointed Chairman of the Board, President and Chief Executive
Officer of BancTEXAS in September 1994. In addition, Mr. Dierberg has served in
various capacities with other bank holding companies and banks owned or
controlled by him or members of his family since 1957.
MARY W.DIERBERG (Co-Trustee under the living trust of James F.Dierberg, II,
dated July 24, 1989, the living trust of Michael James Dierberg, dated
July 24, 1989, and the living trust of Ellen C. Dierberg, dated July 17, 1992)
Residence or Business Address: 39 Glen Eagles Drive
St. Louis, Missouri 63124
Principal Occupation or Employment: Housewife
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
<PAGE>
JAMES F.DIERBERG, II (Co-Trustee under the living trust of James F.Dierberg,II,
dated July 24, 1989)
Residence or Business Address: 62 Sheridan, Apartment #3
San Francisco, California 94102
Principal Occupation or Employment: Consumer Loan Officer
Name of Employer: First Bank & Trust
Principal Business: Commercial Bank
Address: 1333 N. California Blvd.
--------
Walnut Creek, CA 94596
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
MICHAEL JAMES DIERBERG (Co-Trustee under the living trust of Michael James
Dierberg, dated July 24, 1989)
Residence or Business Address: 39 Glen Eagles Drive
St. Louis, Missouri 63124
Principal Occupation or Employment: Student
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
<PAGE>
ELLEN C. DIERBERG (Co-Trustee under the living trust of Ellen C. Dierberg,
dated July 17, 1992)
Residence or Business Address: 39 Glen Eagles Drive
St. Louis, Missouri 63124
Principal Occupation or Employment: Student
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
ALLEN H. BLAKE (Senior Vice President, Chief Financial Officer, Secretary and
Director of First Banks, Inc.)
Residence or Business Address: 2345 Kettington Road
Chesterfield, MO 63017
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 None
- -------------------------------------
Citizenship: U.S.A.
Allen H. Blake has been a Senior Vice President of the Company since
February 1992. Mr. Blake joined the Company as Vice President and Chief
Financial Officer in 1984 and in 1988 he was appointed Secretary and a Director
of the Company. In addition, Mr. Blake has served as Chief
Financial Officer, Secretary and Director of BancTEXAS since September 1994.
<PAGE>
JOHN A.SCHREIBER (Senior Vice President, Chief Lending Officer, of First Banks,
Inc.)
Residence or Business Address: 11747 Parkshire
St. Louis, Missouri 63126
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
John A. Schreiber is Senior Vice President and Chief Lending Officer of
the Company and President and a Director of First Bank-Missouri, positions he
assumed in September 1992. In May 1994, he became Chairman of First
Bank-Missouri. Mr. Schreiber also serves as Executive Vice President and
director of First Bank FSB. He was previously Senior Vice President at
Mercantile Bank of St. Louis, N.A., a position he had held since 1989, where he
was responsible for commercial lending and operating services to St. Louis-based
companies. From 1988 to 1989, Mr. Schreiber was a Vice President of Commercial
Loans at The Boatmen's National Bank of St. Louis which had acquired Centerre
Bank, N.A., in 1988 where Mr. Schreiber had served in various positions since
1974.
<PAGE>
THOMAS A. BANGERT (Vice President, Senior Operations Officer, of First Banks,
Inc.)
Residence or Business Address: 12575 Conway Road
St. Louis, Missouri 63141
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
Thomas A. Bangert is Vice President, Bank Operations of the Company,
and Executive Vice President and Director of First Bank-Missouri, positions he
assumed on January 1, 1990. He is also the President and a Director of
FirstServ, a position he has held since that company's incorporation in February
1992. He was previously Senior Vice President-Operations for Mercantile
Bancorporation, Inc., St. Louis, Missouri, where he was employed for 29 years.
LAURENCE J. BROST (Vice President, Controller of First Banks, Inc.)
Residence or Business Address: 2028 Fairway Bend
Chesterfield, Missouri 63017
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
<PAGE>
Laurence J. Brost is Vice President and Controller of the Company, a
position he assumed in 1990, and Vice President, Secretary and Director of First
Bank FSB where he had been employed as Vice President and Chief Financial
Officer since 1987.
MARK T. TURKCAN (Senior Vice President, Retail and Mortgage Banking of First
Banks, Inc.)
Residence or Business Address: 711 Bent Brook Road
- -----------------------------
St. Louis, Missouri 63122
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Yea None
- -------------------------------------
Citizenship: U.S.A.
Mark T. Turkcan is Senior Vice President, Retail and Mortgage Banking
of the Company, President and Chairman and Chief Executive Officer of First Bank
FSB and President of First Bank Mortgage, where he has been employed in various
executive capacities since 1985. Mr. Turkcan is also a Director of first
Bank-Missouri and a Director of BancTEXAS, a position he has held since
September 1994.
<PAGE>
DONALD W. WILLIAMS (Senior Vice President, Chief Credit Officer of First Banks,
Inc.)
Residence or Business Address: 18 Huntleigh Downs
St. Louis, Missouri 63131
Principal Occupation or Employment: Financial services
Name of Employer: First Banks, Inc.
Principal Business: Bank holding company
Address: 135 North Meramec,
-------
Clayton, Missouri 63105
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
Donald D. Williams is a Senior Vice President and Chief Credit Officer
of the Company and First Banks-Illinois, and a Senior Vice President and
Director of each of First Bank-Missouri and First Bank FSB, positions he assumed
in March 1993. He was previously Senior Vice President at Mercantile Bank of St.
Louis, N.A., a position he had held since 1989, where he was responsible for
credit approval.
DONALD GUNN, JR. (Director of First Banks, Inc.)
Residence or Business Address: 11901 Olive Blvd.
St. Louis, Missouri 63141
Principal Occupation or Employment: Attorney
Name of Employer: Gunn & Gunn
Principal Business: Law Firm
Address: 11901 Olive Blvd.
-------
St. Louis, Missouri 63141
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
<PAGE>
Donald Gunn, Jr. was elected a Director of the Company in December
1992. Mr. Gunn is a practicing attorney and has been a shareholder in the
law firm of Gunn & Gunn, P.C. during the past five years.
GEORGE MARKOS (Director of First Banks, Inc.)
Residence or Business Address: 1595 North Central Expressway
Richardson, Texas 75080
Principal Occupation or Employment: President
Name of Employer: Profit Management Systems
Principal Business: Financial Consultants
Address: 1595 North Central Expressway
Richardson, Texas 75080
Criminal Proceedings During Last 5 Years: None
Civil Proceedings During Last 5 Years: None
- -------------------------------------
Citizenship: U.S.A.
George J. Markos was elected a Director of the Company in December
1992. Mr. Markos is a management consultant providing services primarily to
banks, savings and loans and related businesses, including the Company and has
performed such services during the past five years.
<PAGE>
November 28, 1995
Board of Directors
QCB Bancorp
4201 Long Beach Boulevard
Suite 101
Long Beach, California 90807
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of Common Stock, no par value per
share (the "Shares"), of QCB Bancorp (the "Company") of the conversion of
debentures of the Company issued to First Bank's Inc., St. Louis, Missouri
("FBI"). On March 21, 1995, the company entered into the Debenture Purchase and
Operating Agreement with FBI (the "Agreement") and the Form of Debenture, as
attached as an Exhibit to the Agreement. On July 21, 1995, the Company issued a
debenture, convertible into common stock of the Company, to FBI in the amount of
$5,528,082.20 (the "FBI Debenture") as permitted under the Agreement. FBI has
transferred the FBI Debenture to its wholly owned subsidiary, CCB Bancorp, Inc.
("CCB"). As of September 30, the FBI Debenture has a balance of principal and
interest of $5,635,614.76. Proceeds from the sale of the FBI Debenture were used
by the Company to recapitalize its wholly owned subsidiary, Queen City Bank,
N.A. (the "Bank"). It is proposed that the FBI Debenture be converted to common
stock of the Company at a conversion value of $0.05 per share.
The Findley Group, as part of its investment banking business, is continually
engaged in the valuation of banking institutions and their securities in
connection with mergers and acquisition, negotiated underwritings, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as an advisor in connection with certain
limited aspects of the Company's operation.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Form of Debenture; Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company for the five years ended December 31, 1994;
certain interim reports to stockholders of the Company, Quarterly Reports on
Form 10-Q of the Company; quarterly call reports for the Bank up through
September 30, 1995; certain other communications from the Company to its
stockholders; reports of examinations by regulatory agencies; external audits
and examinations; and certain internal financial analyses and forecasts for the
Company and the Bank prepared by its management. We also have held discussions
with members of the senior managements of the Company and the Bank regarding the
past and current business operations, financial condition and future prospects
of their respective companies. In addition, we have reviewed the reported price
and trading activity for the Company, reviewed the financial terms of certain
recent business combinations in the banking industry and performed such other
studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts, including, without limitation, projections
regarding underperforming and nonperforming assets and net charge-offs, have
been reasonably prepared on a basis reflecting the best currently available
judgments and estimates of the Company and the Bank and that such forecasts will
be realized in the amounts and at the times contemplated thereby. We are not
experts in the evaluation of loan and lease portfolios for the purposes of
assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for the Company and the
Bank are in the aggregate adequate to cover all such losses. In addition, we
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and have not furnished with any such evaluation or appraisal.
Since September 30, 1994, there has been a significant reduction in the
Company's book value due to loan losses, provisions to loan loss reserves,
continued operating losses and realignment of Bank's operations. Such losses
have been to such a degree that the consolidated book value of the Company is
($470,000). Theoretically, the Company is insolvent without the conversion of
the FBI Debenture.
<PAGE>
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be relied upon by any other person or used
for any other purpose without our prior written consent. This letter does not
constitute a recommendation to the Board of Directors.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion a conversion price of $0.05 per share for
the FBI Debenture is fair, from a financial point of view, to the holders of
Shares.
Respectfully,
THE FINDLEY GROUP
Gary Steven Findley
Co-Director
GSF:sjs
<PAGE>
AGREEMENT AND PLAN OF MERGER
of
QCB BANCORP
with and into
CCB BANCORP, INC.
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made as of
December 20, 1995, by and between QCB BANCORP ("QCB"), a California corporation,
and CCB BANCORP, INC. ("CCB"), a Delaware corporation.
In consideration of the premises and the mutual terms and provisions
set forth in this Agreement, the parties agree as follows.
Section 1.
Pursuant to the terms and conditions of this Agreement and the
corporate laws of the states of California and Delaware, QCB shall merge with
and into CCB (the "Merger"). CCB shall be the surviving entity of such Merger
(the "Resulting Corporation"). QCB shall be the merging corporation under the
Merger and its corporate identity and existence, separate and apart from CCB,
shall cease on consummation of the Merger.
Section 2.
The name of the Resulting Corporation shall be "CCB Bancorp, Inc."
Section 3.
At the Effective Time (as defined in Section 8), the Articles of
Incorporation of the Resulting Corporation shall read in its entirety as does
the Articles of Incorporation of CCB as of the Effective Time, and the Bylaws of
CCB as in effect as of the Effective Time shall be the Bylaws of the Resulting
Corporation.
Section 4.
The business of the Resulting Corporation shall be that of a
corporation organized under the laws of the State of Delaware.
Section 5.
The board of directors of CCB as of the Effective Time shall serve as
the board of directors of the Resulting Corporation until the next annual
meeting or until such time as their successors have been elected and have
qualified.
<PAGE>
Section 6.
At the Effective Time, the Resulting Corporation shall be considered
the same business and corporate entity as each of QCB and CCB (collectively, the
"Constituent Corporations") and thereupon and thereafter all the property,
rights, privileges, powers and franchises of each of the Constituent
Corporations shall vest in the Resulting Corporation, and the Resulting
Corporation shall be subject to and be deemed to have assumed all of the debts,
liabilities, obligations and duties of the Constituent Corporations and shall
have succeeded to all of their relationships, fiduciary or otherwise, as fully
and to the same extent as if such property, rights, privileges, powers,
franchises, debts, liabilities, obligations, duties and relationships had been
originally acquired, incurred or entered into by the Resulting Corporation. In
addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Time, shall be considered a reference to the Resulting Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceedings to which either of the Constituent
Corporations is a party shall not be deemed to have been abated and shall have
the same force and effect as if the Merger had not occurred; or the Resulting
Corporation may be substituted as a party to such action or proceedings, and any
judgment, order or decree may be rendered for or against it that might have been
rendered for or against either of the Constituent Corporations as if the Merger
had not occurred.
Section 7.
(a) At the Effective Time (as defined below), each share of common
stock, no par value, of QCB ("QCB Common") issued and outstanding immediately
prior to the Effective Time and held of record by persons other than CCB shall
be converted into the right to receive cash in the amount of $0.06 (the "Merger
Consideration").
(b) At the Effective Time, all of the shares of QCB Common, by virtue
of the Merger and without any action on the part of the holders thereof, shall
no longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder, other than CCB, of any certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of QCB
Common (the "Certificates") shall thereafter cease to have any rights with
respect to such shares, except the right of such holders to receive, without
interest, the Merger Consideration upon the surrender of such Certificate or
Certificates in accordance with Section 9.
(c) At the Effective Time, each share of QCB Common, if any, held in
the treasury of QCB or by any direct or indirect subsidiary of QCB (other than
shares held in trust accounts for the benefit of others or in other fiduciary,
nominee or similar capacities) immediately prior to the Effective Time shall be
canceled.
<PAGE>
(d)(1) Each share of common stock, $1.25 par value per share, of CCB
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and shall be unaffected by the Merger.
(2) Each share of Series A preferred stock, $1.00 par value per share,
of CCB issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and shall be unaffected by the Merger.
(3) Each share of Series B preferred stock, $1.00 par value per share,
of CCB issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and shall be unaffected by the Merger.
(e) If holders of QCB Common are entitled to dissent from the Agreement
and Merger and demand payment of fair market value of their shares under the
corporate law of the State of California (the "California Law"), any issued and
outstanding shares of QCB Common held by a dissenting holder shall not be
converted as described in this Section 1.05 but from and after the Effective
Time shall represent only the right to receive such consideration as may be
determined to be due to such dissenting holder pursuant to the California Law;
provided, however, that each share of QCB Common outstanding immediately prior
to the Effective Time and held by a dissenting holder who shall, after the
Effective Time, withdraw his demand for appraisal or lose his right of appraisal
shall have only such rights as are provided under the California Law.
Section 8.
The Merger shall be effective upon the filing of all documents required
to be filed with the secretaries of state of the states of California and
Delaware (including, but not limited to, the Certificate of Ownership and Plan
of Merger substantially in the form attached hereto as Exhibit A to be filed
with the Secretary of State of the State of California).
Section 9.
(a) Boatmen's Trust Company, St. Louis, Missouri, shall act as Exchange
Agent in the Merger (the "Exchange Agent").
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each record holder of any Certificate or
Certificates whose shares were converted into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Exchange Agent may reasonably
specify) (each such letter, the "Merger Letter of Transmittal") and instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender to the Exchange Agent of a Certificate,
together with a Merger Letter of Transmittal duly executed and any other
required documents, the holder of such Certificate shall be entitled to receive
in exchange therefor solely the Merger Consideration. No interest on the Merger
<PAGE>
Consideration issuable upon the surrender of the Certificates shall be paid or
accrued for the benefit of holders of Certificates. If the Merger Consideration
is to be issued to a person other than a person in whose name a surrendered
Certificate is registered, it shall be a condition of issuance that the
surrendered Certificate shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such issuance shall pay to the
Exchange Agent any required transfer or other taxes or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(c) At any time following six months after the Effective Time, CCB
shall be entitled to terminate the Exchange Agent relationship, and thereafter
holders of Certificates shall be entitled to look only to CCB (subject to
abandoned property, escheat or other similar laws) with respect to the Merger
Consideration issuable upon surrender of their Certificates.
<PAGE>
Section 10.
The Merger provided for herein is subject to receipt of all required
corporate and regulatory approvals.
IN WITNESS WHEREOF, QCB and CCB have caused this Merger Agreement to
be executed in multiple copies by their duly authorized officers as of the date
first above written.
QCB BANCORP
By: /s/Fred D. Jensen
Fred D. Jensen
President
By: /s/Clement W. Morin
Clement W. Morin
Secretary
CCB BANCORP, INC.
By: /s/Donald W. Williams
Donald W. Williams
President
By: /s/Allen H. Blake
Allen H. Blake
Secretary
<PAGE>
EXHIBIT A
CERTIFICATE OF OWNERSHIP
OF
QCB BANCORP
We, Donald W. Williams, President, and Allen H. Blake, Secretary, of
CCB Bancorp, Inc., a corporation duly organized and existing under the laws of
the State of Delaware and qualified to do business under the laws of the State
of California ("CCB"), do hereby certify:
1. That we are the President and the Secretary, respectively, of CCB.
2. QCB Bancorp, a California corporation ("QCB"), is a subsidiary of
CCB.
3. Immediately prior to the consummation of the merger of QCB with
and into CCB pursuant to Section 1110 of the California Corporations
Code, CCB is the owner of 96.63% of the outstanding shares of QCB
common stock.
4. Attached hereto as Exhibit A and set forth as a Plan of Merger,
are the principal terms of the Agreement of Merger by and between
QCB and CCB.
5. On December 20, 1995, each of the Boards of Directors of QCB and CCB
duly ratified and approved the Agreement and Plan of Merger.
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed at _____________, on ___________ ____, 1996.
---------------------------
Donald W. Williams, President
-----------------------------
Allen H. Blake, Secretary
<PAGE>
Exhibit A
PLAN OF MERGER
BETWEEN
CCB BANCORP, INC.
AND
QCB BANCORP
* * * * * *
THIS PLAN OF MERGER ("Plan") provides for the merger of QCB Bancorp, a
California corporation ("merging corporation"), with and into CCB Bancorp, Inc.,
a Delaware corporation qualified to do business in California ("surviving
corporation"). The Plan of Merger, which has been approved by each of the boards
of directors of the constituent corporations, is implemented pursuant to that
certain Agreement and Plan of Merger by and between the surviving corporation
and the merging corporation, dated as of December 20, 1995, and Section 1110 of
the California Corporations Code.
The terms of the Plan are as set forth below:
FIRST: The merging corporation shall be merged with and into the
surviving corporation.
SECOND: The Articles of Incorporation of the surviving corporation are
not to be amended by virtue of the merger provided for in this
Agreement.
THIRD: The terms and conditions of the merger are as follows:
Upon the merger becoming effective, the separate existence of the
merging corporation shall cease and all the property, rights, privileges,
franchises, patents, trade-marks, licenses, registrations and other assets of
every kind and description of the merged corporation shall be transferred to,
vested in and devolve into the surviving corporation without further act or deed
and all property, rights, and every other interest of the surviving corporation
and the merged corporation, shall be as effectively the property of the
surviving corporation as they were of the surviving corporation and the merged
corporation respectively. The merged corporation shall, from time to time, as
and when requested by the surviving corporation or by its successors or assigns,
to execute and deliver or cause to be executed and delivered all such deeds and
instruments and to take or cause to be taken such further or other action as the
surviving corporation may deem necessary or desirable in order to vest in and
confirm to the surviving corporation title to and possession of any property of
the merged corporation acquired or to be acquired by reason of or as a result of
the merger herein provided for and otherwise to carry out the intent and
purposes hereof and the proper officers and directors of the merged corporation
and the proper officers and directors of the surviving corporation are fully
authorized in the name of the merged corporation or otherwise to take any and
all such action.
<PAGE>
All rights of creditors and all liens upon the property of either of
said corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the merged corporation shall thenceforth attach to the surviving
corporation and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
FOURTH: The effective date of this Merger shall be the day of , 1996
(the "Effective Date"), immediately upon filing the Certificate of Ownership and
this Plan of Merger with the Office of the Secretary of State of California.
At the Effective Date,
(a) Each share of common stock, no par value, of the merging
corporation ("merging corporation common") issued and
outstanding immediately prior to the Effective Date and held
of record by persons other than surviving corporation shall be
converted into the right to receive cash in the amount of
$0.06 (the "Merger Consideration").
(b) All of the shares of merging corporation common, by virtue of
the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled
and retired and shall cease to exist, and each holder, other
than the surviving corporation, of any certificate or
certificates which immediately prior to the Effective Date
represented outstanding shares of merging corporation common
(the "Certificates") shall thereafter cease to have any rights
with respect to such shares, except the right of such holders
to receive, without interest, the Merger Consideration upon
the surrender of such Certificate or Certificates in
accordance with Section 9.
(c) Each share of merging corporation common, if any, held in the
treasury of merging corporation or by any direct or indirect
subsidiary of merging corporation (other than shares held in
trust accounts for the benefit of others or in other
fiduciary, nominee or similar capacities) immediately prior to
the Effective Date shall be canceled.
(d) (1) Each share of common stock, $1.25 par value per share, of
surviving corporation issued and outstanding immediately prior
to the Effective Date shall remain issued and outstanding and
shall be unaffected by the Merger.
(2) Each share of Series A preferred stock, $1.00 par value
per share, of surviving corporation issued and outstanding
immediately prior to the Effective Date shall remain issued
and outstanding and shall be unaffected by the Merger.
<PAGE>
(3) Each share of Series B preferred stock, $1.00 par value
per share, of surviving corporation issued and outstanding
immediately prior to the Effective Date shall remain issued
and outstanding and shall be unaffected by the Merger.
(e) If holders of merging corporation common are entitled to
dissent from Merger and demand payment of fair market value of
their shares, any issued and outstanding shares of merging
corporation common held by a dissenting holder shall not be
converted as described herein but from and after the Effective
Date shall represent only the right to receive such
consideration as may be determined to be due to such
dissenting holder pursuant to the applicable law; provided,
however, that each share of merging corporation common
outstanding immediately prior to the Effective Date and held
by a dissenting holder who shall, after the Effective Date,
withdraw his demand for appraisal or lose his right of
appraisal shall have only such rights as are provided under
such law.
<PAGE>
November 29, 1995
The Board of Directors
QCB Bancorp/Queen City Bank, N.A.
4201 Long Beach Boulevard, Suite 101
Long Beach, California 90807
Attn: Mr. Fred D. Jensen
President/Chief Executive Officer
Dear Directors:
The Findley Group ("TFG") has been requested by the Board of Directors
of QCB Bancorp, Long Beach, California (the "Company") and its wholly owned
subsidiary, Queen City Bank, N.A., Long Beach, California ("Bank") to provide
our professional opinion as to the fair value of 1,673,596 shares of Common
Stock, no par value per share (the "Shares"), of the Company. The Shares
represent approximately 3.347 percent of the Company shares outstanding after
the partial conversion of a debenture of the Company issued to First Banks,
Inc., St. Louis, Missouri ("FBI"). On March 21, 1995 the Company entered into
the Debenture Purchase and Operating Agreement with FBI (the "Agreement") and
the Form of Debenture, attached as an Exhibit to the Agreement. On July 21,
1995, the Company issued a debenture, convertible into common stock of the
Company to FBI in the amount of $5,528,082.20 (the "FBI Debenture") as permitted
under the Agreement. FBI transferred the FBI Debenture to its wholly owned
subsidiary, CCB Bancorp, Inc. ("CCB"). As of September 30, the FBI Debentures
has a balance of principal and interest of $5,635,614.76. Approximately $2.4
million of the FBI Debenture shall be converted to common stock of the Company
at a conversion value of $0.05 per share representing approximately 48,326,000
shares. It is contemplated that after the partial conversion of the FBI
Debenture, the Company shall be merged with and into CCB and Bank shall be
merged with and into CCB's wholly owned subsidiary First Bank & Trust.
This report is the basis upon which TFG's opinion is given. TFG, as
part of its investment banking business, is continually engaged in the valuation
of banking institutions and their securities in connection with mergers and
acquisition, negotiated underwritings, private placements and valuations for
estate, corporate and other purposes. We are familiar with the Company having
acted as an advisor in connection with certain limited aspects of the Company's
operation. The qualifications of TFG have been previously provided to the Board
of Directors.
It is understood that the valuation and fair price opinion of TFG is
for purposes of providing the Company with a basis of determining the value of
the Shares after the partial conversion of the FBI Debenture. The original
proceeds of the FBI Debenture were used to provide necessary capital support for
the Company and Bank to allow for a necessary reorientation and redirection of
Bank and to assist Bank in complying with the terms and conditions of a Formal
<PAGE>
Agreement presently existing between Bank and the Office of the Comptroller of
the Currency ("OCC").
Since September 30, 1994, there has been a significant reduction in the
Company's book value due to loan losses, provisions to loan loss reserves,
continued operating losses and realignment of Bank's operations. Such losses
have been to such a degree that the consolidated book value of the Company was
approximately $(470,000) as of September 30, 1995. Theoretically, the Company is
insolvent without the conversion of the FBI Debenture.
This report covers our analysis and conclusions regarding our
assignment. The basic data supporting the opinions of TFG are as of September
30, 1995, supported with recent financial and operating information for Bank and
the Company as of October 31, 1995. The transaction represented by the Agreement
was entered into following the closing in December, 1994 of the sale of a total
of $1,000,000 in debentures by the Company to four outside directors of the
Company and Bank (the "Director Debentures"). TFG issued a separate opinion
dated October 17, 1994 regarding the Director Debentures. Half of the Director
Debentures have recently been repaid in full by the Company, with the remaining
half being acquired by FBI. As of September 30, 1995, the total debentures
outstanding owned by FBI were approximately $6.028 million.
To prepare this report TFG reviewed the following documents provided by
Senior Management of the Company and Bank:
-- The Debenture Purchase and Operating Agreement dated
March 21, 1995, and all Exhibits thereto;
-- December 31, 1994 Annual Report of the Company;
-- December 31, 1994 SEC Form 10K;
-- September 30, 1995 and June 30, 1995 SEC Forms 10Q for the
Company;
-- December 31, 1994 and September 30, 1995 Call Reports for
Bank; October 31, 1995 General Ledger for Bank;
-- October, 1995 Board packet for the Company and Bank;
-- List of all Watchlist assets;
-- Description of all facility and building leases;
-- List of all pending and threatened litigation;
-- Most recent examination of Bank by the OCC;
-- Most recent examination of the Company by the Federal Reserve
Bank of San Francisco;
<PAGE>
-- Recent correspondence between Bank and the OCC;
-- September 1, 1992 Formal Agreement between Bank and the OCC;
-- 1994 and 1995 Quarterly Compliance Reports issued by Bank to
the OCC as required under the Formal Agreement;
-- A list of all arrangements between Directors and Officers of
Bank;
-- Loan Delinquency, Classified/Certified Assets, Nonaccrual,
Charge-off and OREO Reports through September 30, 1995;
-- Proxy materials distributed to shareholders of the Company for
the 1995 Annual Meeting of Shareholders; and
-- Recent minutes of Board of Directors meetings of the Company
and Bank.
In addition, TFG personnel visited the Long Beach Head Office of Bank
and has had conversations with members of Senior Management concerning the
current financial status of the Company and Bank. As of the date of this report,
the Company had 1,673,596 shares of common stock outstanding. However, the
Company will issue a minimum of 48,326,000 shares of common stock to FBI as part
of the conversion of the FBI Debentures at $0.05 per share. There are no shares
of preferred stock outstanding. While the Company has a stock option plan for
key officers and directors, the exercise price of options granted under the
stock option plan are in excess of current market value and the option plans are
not considered relevant to this valuation report.
Bank is a wholly owned subsidiary of the Company and it is not intended
that any shares of Bank be issued to any persons or entities other than to
the Company.
While shares of the Company are traded over the counter, there has been
very little activity concerning shares of the Company common stock. The two
listed market makers for the Company common stock are Smith, Barney and J.
Alexander Securities. In discussions with the market makers during the week of
November 27, 1995 concerning the Company common stock activity, both market
makers reflected that there is virtually no activity in the Company common stock
and the shares were considered to have no value due to the perceived insolvency
of the Company without the conversion of the FBI Debenture.
The market makers for the Company common stock reflect very little
activity concerning the Company common stock over the past year.
A copy of the Company's September 30, 1995 Form 10Q, as filed with the
Securities and Exchange Commission, is attached as Appendix I. Appendix II
<PAGE>
contains the April 27, 1995 Proxy Statement describing the transaction. In
reviewing the financial statements for the Company, the Company's primary asset
is the Company's equity investment in Bank. Therefore, to determine the fair
value of the Company common stock, this report will focus on the fair value of
the Company's wholly owned subsidiary, Bank.
Bank began business in Long Beach, California on September 26, 1983 as
a wholly owned subsidiary of the Company with initial capital of $5 million.
During the late 1980's, Bank achieved relative success within its market place
primarily identified with SBA lending and commercial banking services. In
addition to its head office located at 4201 Long Beach Boulevard, Long Beach,
California, Bank has established two branch offices. The first office also
located in Long Beach in the downtown portion of Long Beach at 100 West
Broadway, Long Beach, California. Bank has also established a branch office in
Fountain Valley at 1820 Brookhurst Street, Fountain Valley, California.
While Bank achieved some profitability in 1991 and 1992, the years 1993
and 1994 and the first nine months of 1995 resulted in a significant loss, as
Bank was required to make significant provisions to loan loss reserves. In late
1991, Bank was examined by the OCC which identified several deficiencies in Bank
operation and noted that Bank was operating in an unsatisfactory manner. This
resulted in the Board of Directors of Bank entering into a Formal Agreement with
the OCC dated September 1, 1992. Over the last two years, Bank has struggled in
its operations and in mid-1994 a Senior Management change took place whereby Mr.
Fred D. Jensen was appointed President and Chief Executive Officer.
<TABLE>
<CAPTION>
The financial growth and development of Bank since inception is as
follows:
<S> <C> <C> <C> <C>
Total
Total Total Equity Net
Assets Deposits Capital Income
(000) (000) (000) 000)
------ ------ ------ -----
September 30, 1995 58,166 52,243 5,645(2) (3,000)
December 31, 1994 67,234 62,921 3,910(1) (3,382)
December 31, 1993 87,700 79,608 6,226 (1,036)
December 31, 1992 103,871 92,210 7,329 788
December 31, 1991 101,775 93,628 6,605 595
December 31, 1990 78,790 71,487 6,077 1,212
December 31, 1989 70,432 64,513 4,867 1,062
December 31, 1988 55,535 51,087 3,845 343
<PAGE>
December 31, 1987 56,598 52,761 3,449 (3,635)
December 31, 1986 53,932 47,778 5,546 306
December 31, 1985 43,325 37,605 5,279 410
December 31, 1984 24,696 19,540 4,879 182
December 31, 1983 14,263 9,496 4,697 (154)
</TABLE>
- --------------------------
(1) Reflects $1,000,000 in new capital added December, 1994
(2) Reflects $5,000,000 in new capital added in July, 1995
The Findley Reports analysis of Bank performance based upon the
december 31, 1994 Call Report information is shown as Exhibit A. TFG's Bank
Development Model of Bank's 1995 performance based upon the December 31, 1994
and September 30, 1995 Call Reports is shown as Exhibit B.
Our investigation analysis of Bank included a probe of Bank's
outstanding loans and other assets, the status of any other bank regulatory
criticisms of Bank's operations and internal controls and all other factors that
could inhibit or restrict Bank in its future operations or performance and would
be relevant to our analysis and valuation assignment.
As previously stated, Bank entered into a Formal Agreement with the OCC
on September 1, 1992. The Formal Agreement was the result of deterioration
experienced by Bank in loan quality, management, operations and earnings. While
Bank over the past two years has made some headway in resolving the criticisms
that were the basis of the Formal Agreement, recent deterioration in the economy
of Southern California, increases in noninterest expenses for Bank, significant
required provisions to loan loss reserves and loss of marketing focus have
resulted in Bank experiencing significant losses and reductions to capital. Bank
is now in compliance with several elements of the Formal Agreement, inclusive of
the capital requirements of a 9% Tier 1 capital to risk weighted assets and 6%
Tier 1 capital to adjusted total assets (leverage capital ratio). Bank's present
leverage capital ratio is now well in excess of the level acceptable to the OCC
pursuant to the Formal Agreement.
On September 30, 1995, Bank's identified problem assets, which included
special mention assets, totalled some $6.3 million. Recently, this level has
been reduced further with Bank's classified assets (substandard, doubtful, and
loss) at less than one hundred percent of Bank's shareholder equity, which is
still above the acceptable level for regulatory agencies as well as health peer
banks. Delinquent loans as of September 30, 1995 as compared to December 31,
1994 and 1993 are as follows:
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31
-------------- ----------- ----- ----------------
(Dollars in Thousands) 1995 1994 1993
<S> <C> <C> <C>
------------- ---------------- ----------------
30 to 89 Days Past Due $ 702 $ 706 $2,742
90 Days or More Past Due 0 20 900
Nonaccruals 2,055 5,610 2,562
------------- --------------- -------------
Total $2,757 $6,336 $6,204
Percent of Total Loans 8.00% 13.94% 10.28%
Other Real Estate Owned $ 618 $2,358 $2,548
</TABLE>
From reviewing the financial information of Bank, Bank has recently
experienced significant improvement in its operation, which is primarily
attributable to the significant capital infusion.
Our principal assignment is to determine the fair value of the Shares.
We arrive at this valuation by first determining the reasonable market value of
Bank as a whole entity and then adjust accordingly.
There are three basic approaches that we use to determine acquisition
values of banks operating in the State of California. They are: Premium on
Deposits, Multiple of Equity Return and Multiple of Book Value.
Premium on Deposits
The first approach treats the approximate market value of the assets
and deposit liabilities as added or deducted factors to the bank's capital
accounts. This factor is unique to banking and is primarily identified with the
liquidation value.
In Schedule 1, our determination using the Premium on Deposits approach
is shown. This approach shows that the acquisition value of Bank to be
approximately $6,748,000. In essence this value is also thought of as the
approximate liquidation value; however, in liquidation there may likely be some
additional write-offs because of interest factor pricings and current market
conditions concerning the sale of loan portfolios.
Multiple of Equity Return
The second approach is the Multiple of Equity Return. In this approach,
when dealing with mature institutions, we use the previous years' equity return.
The current multiple of equity return ratio for the acquisition of sound and
profitable banking institutions is approximately 11 to 12 times equity return.
However, the Company and Bank have not had a positive equity return for a couple
of years. Consequently, this approach cannot be used as part of the valuation of
Bank's common stock.
<PAGE>
Multiple of Book Value
The last approach used involves a Multiple of Book Value. This approach
is based upon the purchase prices and multiples of book values of relevant cases
recently consummated or in the process of consummation.
Schedule 2 shows a listing of recent relevant bank acquisition cases in
California. The average for banks is approximately 1.46 and the median
approximately 1.40. In our opinion, the multiple factor of 1.45 is a fair
representation of the current values of sound, healthy and profitable banks.
However, Bank is a problem bank. The records of The Findley Reports
indicates that stock acquisition prices paid for the few California banks with
loan and operating problems has varied between 0.33 and 1.10 in terms of
multiple of book value. The lower figure reflects recapitalization efforts where
existing shareholders continued as shareholders after the capital infusion. The
most recent transactions for whole bank acquisition set forth in Schedule 2
which are below book value reflect banks with classified assets of over one
hundred percent of shareholder equity and loan loss reserves. Schedule 3 shows a
listing of market value to book value for financial institutions with similar
operating problems as the Company and Bank. Absent the significant capital
infusion, Bank has no earnings potential and would have been a candidate for
FDIC receivership and a complete loss of the Company's shareholder equity. In
reviewing Bank's shareholder equity and recent improvements in condition, it is
our opinion that a multiple of book value factor of 1.10 for Bank is applicable
and reasonable due to the condition of Bank.
Using this approach, the acquisition value on September 30, 1995, is as
follows:
$5,910,000 X 1.10 = $6,501,000
- --------------------
(1) Based upon GAAP book value
The following is a summary of the respective values:
Premium on Deposits $6,748,000
Equity Return Multiple Not Applicable
Book Value Multiple $6,501,000
<PAGE>
In our opinion, the fair value of Bank on September 30, 1995 and as of
the date of this report, based upon the total market value of all of shares
would be $6,700,000.
Based upon the evaluation of the three methods of valuation, the
valuation of the entire Bank is approximately $6,700,000. Bank is primarily the
only asset of the Company and the Shares represent 3.347 percent of the Company
after partial conversion. However, the company does have liabilities which are
estimated at $3.876 million after the partial conversion of the FBI Debenture.
Based upon the value of Bank, the value of the Company's shareholder equity is
$2,865,000. The Shares have a value of approximately $96,000 or $0.0573 per
share. With careful consideration the fair value of the Shares should be rounded
up to or $0.06 per share cash after the payment of all liabilities.
Those factors which influence the pricing of banking stock include the
uncertainties of the future banking regulatory environment and the continued
economic difficulties in the State of California, plus several other factors
that currently have a depressing influence on bank acquisition values. These
factors include but are not limited to:
(i) The recent increase in the failure of banking institutions
operating in the State of California;
(ii) the enactment of the Federal Deposit Insurance Corporation
Improvement Act of 1991 which entrusted the federal banking authorities
with significantly greater powers to influence and affect bank
operations;
(iii) the Federal Reserve Board and federal regulatory attitudes
toward the acquisition of commercial banking institutions by foreign
banking organizations;
(iv) the increase in costs associated in compliance with federal
banking laws; and
(v) increase in capital requirements by all bank regulatory
agencies.
In arriving at our professional opinion of the fair conversion price of
the Company's common stock, we have considered additional factors inclusive of:
(i) the nature of the business of the Company and Bank;
(ii) the financial history of Bank;
(iii) the economic factors, both locally and in general, that are
impacting the Company and Bank in terms of future financial and
investment success inclusive of Bank's future earnings and dividend
paying capacities;
(iv) the regulatory restraints and handicaps that are impacting
the Company and Bank and their future integrity and viability;
(v) the current and likely future marketability of the Company's
common shares; and
(vi) the securities marketing histories and experience of
comparable banks, bank holding companies, and banking situations.
No principles, staff or affiliates of The Findley Group current
beneficially any shares of the Company's common stock.
It has been a pleasure to be of service. We are available to discuss
this report and our valuations as desired.
Respectfully submitted,
THE FINDLEY GROUP
By:/s/ Gary Steven Findley
Gary Steven Findley
Co-Director
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 1
- --------------------------------------------------------------------------------
PREMIUM ON DEPOSIT APPROACH
<TABLE>
<CAPTION>
QUEEN CITY BANK, N.A.
September 30, 1995
(Dollars in Thousands)
Statement
Value Adjustments
<S> <C> <C>
----------- -------------
ASSETS:
Cash & Due from Banks $ 4,384 $ (40) (4)
Securities (Inc. CDs and FFSs) 16,375 (265) (1)
Loans (Net) 35,977 (950) (2)
Fixed Assets (Premises) 312
Real Estate Owned 618 (85) (3)
Other Assets 765
-----------
Total Assets $ 58,431
===========
LIABILITIES:
Demand Deposits - IPC $ 18,858 (5%) $ 943 (7)
Savings Deposit - Regular, Now & MM 17,214 (3%) 516 (7)
Time Deposits - IPC 15,921 (1%) 159 (7)
Public 280 (0%) 0
------------
Total Deposits 52,243
============
Borrowed Funds $ 0
Other Liabilities 278
-----------
Total Liabilities $ 52,521
===========
CAPITAL:
Common Stock, Preferred Stock & Surplus $ 12,543 (6,000) (5)
Undivided Profits (6,633) -----------
----------
Total Equity Capital(6) 5,910
--------------
Total Liabilities & Capital $ 58,431
</TABLE>
==============
NET VALUE ADDED OR SUBTRACTED $ (5,722)
------------
- ----------------------------------------
(1) To reflect market value adjustments for securities portfolio already
contained in figures.
(2) To adjust on the basis of review of classified, delinquent, nonaccrual,
OREO and average loan pool sale of 95 percent.
(3) To allow for marketing costs and a $25,000 additional adjustment taken
on OREO after September 30, 1995.
(4) Reflects expected additional expenses relating to existing litigation
and operational issues over next few months.
(5) Subtracts $6,000,000 in new stock raised pursuant to Director and FBI
Debentures.
(6) Based upon Regulatory Accounting Procedures and not reflective of FASB
115 adjustments.
(7) Premiums on deposit.
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE #2
- -------------------------------------------------------------------------------
CALIFORNIA BANK ACQUISITION/MERGERS (ARMS-LENGTH)
<TABLE>
<CAPTION>
1994 TO PRESENT
Pertinent Ratios
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Multiple of Price Over
Type of Multiple of Prev. Year Bk. as % of Date
Bank Acquired City Consid. Bk. Val Eq. Req. TT Deposits Closed
- --------------------------------- -------------- ------- ---------- --------- ----------- ----------
*First State Bank of the Oaks Thousand Oaks, CA Cash 1.74 0.00 7.53% 01/13/94
*San Diego Trust & Savings Bank San Diego, CA Stock(1) 2.54 28.81 11.54% 03/18/94
*Pacific Western Bank San Jose, CA Stock(1) 1.52 39.22 4.36% 03/30/94
*MBC Corporation Modesto, CA Stock(1) 1.70 18.93 5.92% 03/31/94
*Western Industrial Natl. Bank South El Monte, CA Cash 1.50 15.42 16.45% 06/24/94
*County National Bank Redding, CA Stock(1) 1.60 23.11 10.58% 07/21/94
*Bank of Anaheim, N.A. Anaheim, CA Cash 1.40 12.82 3.42% 09/16/94
Golden Gate Bank San Francisco, CA Cash 1.00 0.00 0.00% 06/20/94
Bank of Hayward Hayward, CA Cash/Stock 1.00 0.00 0.00% 07/29/94
*Western National Bank San Mateo, CA Stock 1.36 28.85 5.83% 10/07/94
*California Business Bank, N.A. San Jose, CA Stock 1.48 14.22 5.68% 09/30/94
United American Bank Westminster, CA Cash 1.23 0.00 2.19% 10/14/94
*Codding bank Rohnert Park, CA Cash 1.25 0.00 3.05% 11/15/94
*Bank One Fresno, N.A. Fresno, CA Cash 1.36 12.85 4.49% 12/02/94
*Mineral King National Ba Visalia, CA Stock(1) 2.89 18.23 14.3% 12/16/94
Sacramento First NBank Sacramento, CA Cash/Stock 0.76 30.66 0.00% 01/20/95
*Bank of Livermore Livermore, CA Stock(1) 1.70 31.53 7.08% 01/31/95
*Pacific Valley National Bank Modesto, CA Stock(1) 2.12 13.80 11.69% 01/31/95
*Bank of A. Levy Ventura, CA Stock(1) 1.72 12.30 7.19% 01/31/95
National Bank of Long Beach Long Beach, CA Cash 0.84 0.00 6.95% 04/03/95
Commercial Center Bank Santa Ana, CA Cash 0.74 0.00 0.00% 03/17/95
Overland Bank Temecula, CA Stock 0.82 0.00 0.00% 03/31/95
Huntington National Bank Huntington Beach,CA Cash 0.89 0.00 0.00% 04/28/95
*University Bank & Trust Co. Palo Alto, CA Stock(1) 1.89 13.50 7.95% 03/31/95
Capital Bank Sacramento Sacramento, CA Stock(1) 1.35 29.19 3.04% 05/31/95
Novato National Bank Novato, CA Stock(1) 1.28 75.03 3.50% 07/17/95
Centennial Bank Hayward, CA Cash 1.48 10.95 5.32% 06/30/95
Central Coast National Bank Arroyo Grande, CA Stock 1.00 -- -- 07/07/95
*Bank of Encino Encino, CA Cash 1.10 19.08 1.23% 07/14/95
*Golden Oak Bank Oakhurst, CA Stock(1) 2.68 10.19 8.80% 08/25/95
Templeton National Bank Templeton, CA Stock(1) 1.63 18.81 8.94% 09/11/95
*Grossmont Bank La Mesa, CA Cash 1.25 9.98 2.33% 09/29/95
AVERAGE 1.46 15.22 4.16%
MEDIAN 1.40 12.85 4.36%
AVERAGE FOR COMPARABLE BANKS 1.72 16.68 7.24%
</TABLE>
<PAGE>
(1) Based upon market value of acquiror stock at closing. Each acquiror
was trading in excess of 1.3 times book value at closing.
Source: The Findley Reports
<PAGE>
SCHEDULE 3
<TABLE>
<CAPTION>
MARKET VALUE/BOOK VALUE COMPARISON
SELECTED COMMERCIAL BANKS
Second Quarter 1995
<S> <C> <C>
1994
Institution Price/Book Value Net Income
- -------------------------------------- ----------------- -----------
American West Bank, N.A., Encino 71.7% (31)
Borrego Springs Bank, Borrego Springs 32.9% 0
Bank of Southern California, San Diego 56.8% (2,429)
Burlingame Bancorp, Burlingame 86.8% 316
First Commercial Bancorp, Sacramento 64.7% (15,048)
Marathon Bancorp, Los Angeles 69.5% (746)
PNB Financial, Newport Beach 91.3% (1,307)
Republic Bank, Torrance 29.3% (2,969)
Santa Fe National Bank, Santa Fe Springs 53.5% (68)
Sterling West Bancorp, Los Angeles 44.9% (2,980)
Sunrise Bancorp, Sacramento 76.9% (2,918)
West Coast Bancorp, Irvine 62.5% (1,468)
-------------------
Average 62.5%
</TABLE>
<PAGE>
CHAPTER 13. DISSENTERS' RIGHTS
1300 REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS. - (a) If the approval of the
outstanding shares (Section 152) of a corporation is required for a
reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of
Section 1201, each shareholder of the corporation entitled to vote on the
transaction and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation in which the
shareholder holds shares to purchase for cash at their fair market value the
shares owned by the shareholder which are dissenting shares as defined in
subdivision (b). The fair market value shall be determined as of the day before
the first announcement of the terms of the proposed reorganization or short-form
merger, excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock split, or share
dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and Section
1301, 1302, 1303 and 1304; provided, however, that this provision does not apply
to any shares with respect to which there exists any restriction or transfer
imposed by the corporation or by any law or regulation; and provided, further,
that this provision does not apply to any class of shares described in
subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective date
of a short-form merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the approval
required by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section
1301.
(4) Which the dissenting shareholder has submitted for endorsement,
in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of
record.
1301 NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS. - (a) If, in the case of a reorganization, any
shareholders of a corporation have a right under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require
the corporation to purchase their shares for cash, such corporation shall mail
to each such shareholder a notice of the approval of the reorganization by its
<PAGE>
outstanding shares (Section 152) within 10 days after the date of such approval,
accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a
statement of the price determined by the corporation to represent the fair
market value of the dissenting shares, and a brief description of the procedure
to be followed if the shareholder desires to exercise the shareholder's right
under such sections. The statement of price constitutes an offer by the
corporation to purchase at the price stated any dissenting shares as defined in
subdivision (b) of Section 1300, unless they lose their status as dissenting
shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
1302 SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES. - Within 30 days after the date on which notice of the approval by
the outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder demands
that the corporation purchase. Upon subsequent transfers of the dissenting
shares on the books of the corporation the new certificates, initial transaction
statement, and other written statements issued therefor shall bear a like
statement, together with the name of the original dissenting holder of the
shares.
1303 PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR
MARKET VALUE; FILING; TIME OF PAYMENT. - (a) If the corporation and the
shareholder agree that the shares are dissenting shares and agree upon the price
of the shares, the dissenting shareholder is entitled to the agreed price with
interest thereon at the legal rate on judgments from the date of the agreement.
Any agreements fixing the fair market value of any dissenting shares as between
the corporation and the holders thereof shall be filed with the secretary of the
corporation.
<PAGE>
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
1304 ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES;
APPOINTMENT OF APPRAISERS. - (a) If the corporation denies that the shares are
dissenting shares, or the corporation and the shareholder fail to agree upon the
fair market value of the shares, then the shareholder demanding purchase of such
shares as dissenting shares or any interested corporation, within six months
after the date on which notice of the approval by the outstanding shares
(Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed
to the shareholder, but not thereafter, may file a complaint in the superior
court of the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or
be joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305 REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS - (a) If the court appoints an appraiser or
appraisers, they shall proceed forthwith to determine the fair market value per
share. Within the time fixed by the court, the appraisers, or a majority of
them, shall make and file a report in the office of the clerk of the court.
Thereupon, on the motion of any party, the report shall be submitted to the
court and considered on such evidence as the court considers relevant. If the
court finds the report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
<PAGE>
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
1306 PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST -
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
1307 DIVIDENDS ON DISSENTING SHARES - Cash dividends declared and paid
by the corporation upon the dissenting shares after the date of approval of the
reorganization by the outstanding shares (Section 152) and prior to payment for
the shares by the corporation shall be credited against the total amount to be
paid by the corporation therefor.
1308 RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT - Except as expressly limited in this chapter, holders of
dissenting shares continue to have all the rights and privileges incident to
their shares, until the fair market value of their shares is agreed upon or
determined. A dissenting shareholder may not withdraw a demand for payment
unless the corporation consents thereto.
1309 TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS -
Dissenting shares lose their status as dissenting shares and the holders thereof
cease to be dissenting shareholders and cease to be entitled to require the
corporation to purchase their shares upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310 SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL - If litigation is instituted to test the
sufficiency or regularity of the votes of the shareholders in authorizing a
reorganization, any proceedings under Sections 1304 and 1305 shall be suspended
until final determination of such litigation.
1311 EXEMPT SHARES - This chapter, except Section 1312, does not apply
to classes of shares whose terms and provisions specifically set forth the
amount to be paid in respect to such shares in the event of a reorganization or
merger.
1312 RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS - (a) No
shareholder of a corporation who has a right under this chapter to demand
payment of cash for the shares held by the shareholder shall have any right at
law or in equity to attack the validity of the reorganization or short-form
merger, or to have the reorganization or short-form merger set aside or
rescinded, except in an action to test whether the number of shares required to
authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
<PAGE>
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short- form merger set aside or rescinded, (1) a party to a
reorganization or short- form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
