<PAGE>
As filed with the Securities and Exchange Commission on September 21, 1998
Registration No. ______
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICORP
California 6712 77-0164985
---------- ---------------- ----------
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code)
304 E. Main Street
Ventura, California, 93001
(805) 658-6633
(Address, including zip code and telephone number,
including area code, of registrant's principal office)
----------------------------------------------
Gerald J. Lukiewski
Chief Executive Officer
304 E. Main Street
Ventura, California, 93001
(805) 658-6633
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------------------------
copies to:
John F. Stuart, Esq. Loren P. Hansen, Esq.
Reitner & Stuart Knecht & Hansen
1730 K Street, N.W., Suite 1100 1301 Dove Street, Suite 900
Washington, D.C. 20006 Newport Beach, CA 92660
(202) 466-2818 (714) 851-8070
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
-------------------------------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box.
-------------------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Proposed Proposed
maximum maximum
Title of each offering aggregate Amount of
class of securities Amount to price per offering registration
to be registered be registered unit* price* fee
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$23.50 $9,870,000 $2,912
Common Stock, $1.00 par value, 420,000 shares
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for the purposes of calculating the registration fee and
calculated pursuant to Rule 457 (f) (1) and based on the average of the bid and
asked price.
-------------------------------------------------
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
<PAGE>
AMERICORP PROSPECTUS
Cross-reference sheet pursuant to item 501(b) of Regulation S-K
<TABLE>
<CAPTION>
Form S-4 Item
<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover page of
Prospectus................................ Outside front cover; facing page
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... AVAILABLE INFORMATION; TABLE
OF CONTENTS
3. Risk Factors, Ration of Earnings to Fixed
Charges and Other Information ............ RISK FACTORS
4. Terms of the Transactions................. SUMMARY; THE MERGER;
DESCRIPTION OF CIB AND
AMERICORP STOCK
5. Pro forma Financial Information........... UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
6. Material Contracts with the Company
Being Acquired............................ THE MERGER
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters................. *
8. Interests of Named Experts and Counsel... LEGAL MATTERS; EXPERTS
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
10. Information with Respect to S-3
Registrants.............................. *
11. Incorporation of Certain Information by
Reference................................ *
12. Information with Respect to S-2 or S-3
Registrants.............................. *
13. Incorporation of Certain Information by
Reference................................ *
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants........ BUSINESS OF AMERICORP
15. Information with Respect to S-3
Companies................................ *
2
<PAGE>
16. Information with Respect to S-2 or S-3
Companies................................ *
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies.......... BUSINESS OF CIB
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... SUMMARY;THE CIB MEETING; THE
AMERICORP MEETING;
INFORMATION CONCERNING
AMERICORP MEETING ONLY
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer.................. *
</TABLE>
* Not Applicable
3
<PAGE>
[CIB LETTERHEAD]
____________, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "CIB
Meeting") of Shareholders of Channel Islands Bank, a California banking
corporation ("CIB"), to be held on _______, ________ __, 1998, at _:__ p.m., at
which you will be asked to consider and vote on a proposal to approve the
principal terms of a proposed merger (the "Merger") pursuant to an amended
Agreement to Merge and Plan of Reorganization, dated as of July 7, 1998 and
amended on September 17, 1998 (the "Agreement"), by and between CIB, Americorp,
a California corporation (the "Americorp") and American Commercial Bank, a
California state-chartered bank ("ACB") and a wholly owned subsidiary of
Americorp, pursuant to which (i) CIB will merge with and into ACB and ACB will
continue as the surviving bank, and (ii) the shareholders of CIB will become
shareholders of Americorp in accordance with the exchange ratio in the Agreement
(the "Merger"). A copy of the Agreement is included with this Joint Proxy
Statement/Prospectus as Appendix A.
Based on the number of shares of CIB Common Stock outstanding as of the
record date for the CIB Meeting, the shares of Americorp Common Stock to be
issued to CIB shareholders pursuant to the Agreement will represent
approximately 38% of the shares of Americorp Common Stock outstanding following
the Merger. The enclosed Joint Proxy Statement/prospectus more fully describes
the proposed merger and related transactions, including information about CIB,
Americorp and ACB.
The Board of Directors of CIB has unanimously approved the Agreement
and has determined that the Merger is fair to, and in the best interests of,
holders of CIB Common Stock (the "CIB Shareholders"). In addition, the Findley
Group, as financial advisor to CIB, has delivered its opinion, dated July 7,
1998, to the Board of Directors of CIB that the Exchange Ratio is fair, from a
financial point of view, to the CIB Shareholders. Therefore, the Board of
Directors of CIB unanimously recommends that CIB Shareholders vote "FOR" the
approval of the principal terms of the Merger.
I urge you to consider carefully these important matters which are
described in the accompanying Joint Proxy Statement/Prospectus. The affirmative
vote of the holders of a majority of the CIB Common Stock entitled to vote at
the CIB Meeting is required for approval of the principal terms of the Merger.
Your failure to vote for approval of the principal terms of the Merger has the
same effect as a vote against the Merger. In order to ensure that your vote is
represented at the CIB Meeting, please indicate your choice on the enclosed
proxy form, date, sign and return it in the enclosed envelope. A prompt response
will be appreciated. If you attend the CIB Meeting you may revoke your proxy and
vote in person if you wish.
We hope that the Joint Proxy Statement/Prospectus will answer any
questions you may have concerning the Merger and the other items. If you have
any questions concerning the Joint Proxy
4
<PAGE>
Statement/Prospectus or the accompanying proxy or if you need any help in
voting your shares, please telephone Mr. Thomas E. Anthony or Mr. Allen
Partridge of CIB at (805) 487-6581.
YOU SHOULD NOT SEND IN YOUR CERTIFICATES OF CIB COMMON STOCK AT THIS
TIME. YOU WILL RECEIVE INSTRUCTIONS AT A LATER DATE REGARDING THE EXCHANGE OF
YOUR STOCK CERTIFICATES.
Your interest and participation are appreciated.
Sincerely,
[SIGNATURE]
Joseph L. Priske
Chairman of the Board
5
<PAGE>
[AMERICORP LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the
Shareholders of Americorp to be held on _________ __, 1998, at _________ PM at
the ____________________________________________________, California.
At this meeting you will be asked to consider and vote upon a proposal
to approve the principal terms of the amended Agreement to Merge and Plan of
Reorganization dated July 7, 1998 and amended on September 17, 1998 ("the
Agreement") by and among Americorp, American Commercial Bank, and Channel
Islands Bank pursuant to which (i) Channel Islands Bank will merge with and into
American Commercial Bank, with American Commercial Bank continuing as the
surviving bank, and (ii) the shareholders of Channel Islands Bank will become
shareholders of Americorp in accordance with the exchange ratio set forth in the
Agreement.
The enclosed Joint Proxy Statement/Prospectus more fully describes the
proposed merger and related transactions, including information about the
involved entities.
The Board of Directors of Americorp has carefully considered the terms
and conditions of the Agreement and the proposed merger with Channel Islands
Bank. THE BOARD OF DIRECTORS OF AMERICORP HAS CONCLUDED THAT THE MERGER IS IN
THE BEST INTEREST OF AMERICORP, AMERICAN COMMERCIAL BANK AND HOLDERS OF
AMERICORP COMMON STOCK, AND UNANIMOUSLY RECOMMENDS THAT AMERICORP SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE PRINCIPAL TERMS OF THE MERGER. California
Research, the Bank's financial advisor, has delivered to the Board of Directors
of Americorp its opinion that the terms of the exchange ratio are fair, from a
financial point of view, to Americorp's shareholders. A copy of this opinion is
attached as Appendix C to the Joint Proxy Statement/ Prospectus.
You will also be asked to vote upon a new stock option plan for
Americorp as provided for in the Agreement.
It is important that your shares be represented and voted at the
Special Meeting, regardless of the number of shares you own and whether or not
you plan to attend the Special Meeting. The affirmative vote of the holders of a
majority of Americorp's common stock entitled to vote at the Special Meeting is
required for approval of the principal terms of the Merger. Your failure to vote
for approval of the
6
<PAGE>
principal terms of the Merger has the same effect as a vote against the
Merger. Therefore, we urge you to sign, date and mail the enclosed proxy. If
you decide to attend the Special Meeting and wish to vote in person, you may
withdraw your proxy at that time.
We hope that the Joint Proxy Statement/ Prospectus will answer any
questions you may have concerning the Merger and the other items. If you have
any further questions please telephone Americorp at (805) 658-6633.
Sincerely,
Allen W. Jue
Chairman of the Board
7
<PAGE>
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
OF
CHANNEL ISLANDS BANK
TO BE HELD______________
_________________
TO THE SHAREHOLDERS OF CHANNEL ISLANDS BANK:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of
its Board of Directors, a Special Meeting of Shareholders of Channel Islands
Bank ("CIB") will be held on ________, ____________, 1998, at _____ California
Time in the ______, _________________, California, (the "CIB Meeting") for
the following purposes, as set forth in the attached Joint Proxy
Statement/Prospectus:
1. To consider and vote upon a proposal to approve the principal
terms of the amended Agreement to Merge and Plan of Reorganization dated as
of July 7, 1998, and amended on September 17, 1998, (the "Agreement") by
and among Channel Islands Bank ("CIB"), American Commercial Bank ( "ACB")
and its parent holding company, Americorp, and the transactions
contemplated thereby pursuant to which (i) CIB will merge with and into ACB
and ACB will continue as the surviving bank, and (ii) the shareholders of
CIB will become shareholders of Americorp in accordance with the exchange
ratio set forth in the Agreement (the "Merger"). A copy of the Agreement is
included in the Joint Proxy Statement/Prospectus as Appendix A.
2. To transact any other business which may properly come before
the CIB Meeting or any adjournments or postponements thereof.
Only those shareholders of record at the close of business on ____________,
1998 are entitled
8
<PAGE>
to notice of and to vote at the CIB Meeting or any adjournments or
postponements thereof (the "CIB Record Date"). The affirmative vote of a
majority of the outstanding shares of CIB's no par value common stock ("CIB
Stock") is required to approve the principal terms of the Merger and the
transactions contemplated thereby.
THE BOARD OF DIRECTORS OF CIB HAS UNANIMOUSLY APPROVED THE AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE TO APPROVE THE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AT THE CIB MEETING.
By order of the Board of Directors
__________________________________
Secretary
_____________, 1998
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU
PLAN TO ATTEND THE CIB MEETING IN PERSON. IF YOU DO ATTEND THE CIB MEETING, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON AT THAT TIME. YOU MAY REVOKE YOUR
PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE INDICATE ON THE PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING SO WE CAN PROVIDE ADEQUATE ACCOMMODATIONS.
9
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF
AMERICORP
TO BE HELD_____________________
_________________
TO THE SHAREHOLDERS OF AMERICORP:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its
Board of Directors, a Special Meeting of Shareholders of Americorp will be held
on _________, _______________, 1998, at _____ California Time in the __________,
_______________________, California, (the "Americorp Meeting") for the following
purposes, as set forth in the attached Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve the principal
terms of the amended Agreement to Merge and Plan of Reorganization dated as
of July 7, 1998, and amended on September 17, 1998, (the "Agreement") by
and among Channel Islands Bank ("CIB"), American Commercial Bank ( "ACB")
and its parent holding company, Americorp and the transactions contemplated
thereby pursuant to which (i) CIB will merge with and into ACB and ACB will
continue as the surviving bank, and (ii) the shareholders of CIB will
become shareholders of Americorp in accordance with the exchange ratio set
forth in the Agreement (the "Merger"). A copy of the Agreement is included
in the Joint Proxy Statement/Prospectus as Appendix A.
2. To consider and vote upon a proposal to adopt a new Stock
Option Plan in accordance with the Agreement. A copy of the stock option
plan is included in the Joint Proxy Statement/Prospectus as Appendix E.
3. To transact any other business which may properly come before
the Americorp Meeting or any adjournments or postponements thereof.
Only those shareholders of record at the close of business on ________,
1998 are entitled
10
<PAGE>
to notice of and to vote at the Americorp Meeting or any adjournments or
postponements thereof (the "Americorp Record Date"). The affirmative vote of
a majority of the outstanding shares of Americorp's $1.00 par value common
stock ("Americorp Stock") is required to approve the principal terms of the
Merger and the transactions contemplated thereby and to approve the new stock
option plan.
THE BOARD OF DIRECTORS OF AMERICORP HAS UNANIMOUSLY APPROVED THE
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AT THE AMERICORP MEETING.
By order of the Board of Directors
Lincoln E. Cryne
Secretary
________________, 1998
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU
PLAN TO ATTEND THE AMERICORP MEETING IN PERSON. IF YOU DO ATTEND THE AMERICORP
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON AT THAT TIME. YOU MAY
REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE INDICATE ON THE PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING SO WE CAN PROVIDE ADEQUATE ACCOMMODATIONS.
11
<PAGE>
CHANNEL ISLANDS BANK
AND
AMERICORP
JOINT PROXY STATEMENT
SPECIAL MEETINGS OF SHAREHOLDERS
AMERICORP
PROSPECTUS
This Joint Proxy Statement/Prospectus ("Joint Proxy
Statement/Prospectus") is being furnished to shareholders of CIB and Americorp,
in connection with the solicitation of proxies by the respective Boards of
Directors of such corporations for use at the CIB Meeting (including any
adjournments thereof) and the Americorp Meeting (including any adjournments
thereof) to be held on _____________, 1998 and _________________, 1998,
respectively.
This Joint Proxy Statement/Prospectus relates to the proposed Merger of
CIB with and into ACB and the other transactions contemplated by the Agreement.
At each Meeting, shareholders will consider and vote on a proposal to approve
the principal terms of the Agreement and the transactions contemplated thereby.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Americorp with respect to the shares of Americorp Stock issuable to holders of
CIB Stock pursuant to the Merger.
This Joint Proxy Statement/Prospectus is dated _______________, 1998
and is first being mailed to shareholders of CIB and Americorp on or about
_____________, 1998.
THE SECURITIES OFFERED HEREBY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES EXCHANGE COMMISSION ("SEC"), THE CALIFORNIA COMMISSIONER OF FINANCIAL
INSTITUTIONS ("COMMISSIONER"), THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY STATE SECURITIES COMMISSIONER NOR HAS THE
12
<PAGE>
SEC, THE COMMISSIONER, THE FDIC OR ANY STATE COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
13
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION................................ 15
SUMMARY.............................................. 16
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION.... 29
COMPARATIVE PER SHARE DATA........................... 30
RISK FACTORS......................................... 32
THE CIB MEETING...................................... 37
THE AMERICORP MEETING................................ 39
THE MERGER........................................... 41
Background and Reasons for the Merger And
Management's Recommendation -- Americorp........ 41
Background and Reasons for the Merger
And Management's Recommendation -- CIB.......... 43
Americorp Fairness Opinion........................ 46
CIB Fairness Opinion.............................. 50
Exchange Ratio.................................... 54
Fractional Shares................................. 55
Effective Time of Merger.......................... 55
Management and Operations of Americorp
and ACB after the Merger........................ 56
Amendment to the Bylaws of Americorp.............. 56
Regulatory Approvals.............................. 57
Interests of Certain Persons in the
Merger.......................................... 57
Additional Agreements............................. 59
Certain Federal Income Tax
Consequences.................................... 59
Exchange Procedures............................... 60
Sales of Americorp Stock.......................... 61
Nasdaq Listing.................................... 61
Accounting Treatment.............................. 61
Conditions to the Merger.......................... 61
Nonsolicitation................................... 62
Expenses.......................................... 63
Treatment of Stock Options........................ 63
Termination....................................... 64
Covenants; Conduct of Business Prior to
Effective Time.................................. 64
Amendment and Waiver.............................. 66
Dissenting Shareholders' Rights................... 66
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS. 69
DESCRIPTION OF CIB AND AMERICORP STOCK............... 83
BUSINESS OF AMERICORP................................ 88
BUSINESS OF CIB...................................... 118
SUPERVISION AND REGULATION........................... 144
INFORMATION CONCERNING AMERICORP MEETING ONLY........ 154
LEGAL MATTERS........................................ 159
EXPERTS.............................................. 160
OTHER MATTERS........................................ 160
INDEX TO FINANCIAL STATEMENTS........................ F-1
AGREEMENT TO MERGE AND PLAN OF REORGANIZATION,
AS AMENDED...........................................Appendix A
CIB FAIRNESS OPINION.................................Appendix B
AMERICORP FAIRNESS OPINION...........................Appendix C
CHAPTER 13...........................................Appendix D
1998 STOCK OPTION PLAN...............................Appendix E
</TABLE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY CIB OR AMERICORP. THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF CIB OR AMERICORP SINCE THE DATE
HEREOF OR THAT THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF.
14
<PAGE>
AVAILABLE INFORMATION
Americorp was subject to the informational requirements of Section 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in accordance therewith, filed reports and other information with the SEC.
Such filing obligations were suspended since the number of record holders of
Americorp Stock was below 300. As results of the filing of this Registration
Statement (as hereinafter defined), Americorp will again become subject to
the informational requirements of Section 15(d) of the Exchange Act, and, in
accordance therewith, will file reports and other information with the SEC.
Additionally, Americorp may be required to register under Section 12 of the
Exchange Act as a result of the Merger, since the number of its holders of
record may exceed 500. All of reports, proxy statements and other information
when filed with the SEC can be inspected and copied at the public facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington D.C.
20549; 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the SEC at 450
Fifth Street, N.W. Washington D.C. 20549, at prescribed rates. The SEC
maintains a website at http://ww.sec.gov that will also contain such reports
and other information concerning Americorp which will have to file
information electronically with the SEC.
This Joint Proxy Statement/Prospectus constitutes a part of a
registration statement on Form S-4 (together with all amendments and
exhibits, the "Registration Statement") filed by Americorp with the SEC under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the shares of Americorp Stock to be issued in the Merger. This Joint Proxy
Statement/Prospectus does not contain all of the information included in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Statements contained herein concerning
the provisions of any document do not purport to be complete and, in each
instance, are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the SEC. Each such statement is subject to and qualified in its entirety
by such reference. Reference is made to such Registration Statement and to
the exhibits relating thereto for further information with respect to
Americorp and the securities offered hereby. Copies of all or any part of the
Registration Statement, including exhibits thereto, may be obtained, upon
payment of the prescribed fees, or inspected at the offices of the SEC as set
forth above.
15
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN
ALL RESPECTS BY THE MORE DETAILED INFORMATION INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS AND THE APPENDICES HERETO. ALL INFORMATION CONCERNING
CIB INCLUDED HEREIN HAS BEEN FURNISHED BY CIB AND ALL INFORMATION CONCERNING
AMERICORP AND ACB INCLUDED HEREIN HAS BEEN FURNISHED BY THEM. NEITHER CIB NOR
AMERICORP WARRANTS THE ACCURACY OR COMPLETENESS OF INFORMATION RELATING TO
THE OTHER PARTY.
CIB, AMERICORP AND ACB ARE REFERRED TO HEREIN JOINTLY AS THE "PARTIES"
AND EACH OF THEM A "PARTY." UNLESS THE CONTEXT REQUIRES OTHERWISE, THE TERM
"AMERICORP" ALSO INCLUDES "ACB."
THE PARTIES
CIB. CIB is a California state-chartered bank headquartered in Oxnard,
California, which commenced operations in September, 1985. At June 30, 1998,
CIB had total assets of $86.9 million, deposits of $79.3 million, and
shareholders' equity of $7.4 million. CIB, which currently operates three
banking offices, has its headquarters located at 300 Esplanade Drive, Oxnard,
California. Its telephone number is (805) 487-6581. See "BUSINESS OF CIB."
AMERICORP. Americorp is a California corporation and is registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended.
Americorp operates ACB which is its wholly-owned subsidiary. At June 30,
1998, Americorp had total consolidated assets of $139.8 million, consolidated
deposits of $125 million, and consolidated shareholders' equity of $11.9
million. Americorp is headquartered at 304 E. Main Street, Ventura,
California 93001. Its telephone number is (805) 658-6633. See "BUSINESS OF
AMERICORP."
ACB. ACB is a California state-chartered bank headquartered in Ventura,
California, which commenced operations in September 1973. ACB, which
currently operates four banking offices, has its headquarters at 304 E. Main
Street, Ventura, California 93001. Its telephone number is (805) 658-6633.
See "BUSINESS OF AMERICORP."
THE MEETINGS
CIB. The CIB Meeting will be held on ___________, _________ __, 1998 at
____ _. m. California time, at _____________ in Oxnard, California. CIB
shareholders will consider and vote on a proposal to approve the principal
terms of the Agreement and the transactions contemplated thereby. Only
holders of record of CIB Stock at the close of business on the CIB Record
Date, _________ __, 1998, will be entitled to vote at the CIB Meeting. At
such date, there were outstanding and entitled to vote ___________ shares of
CIB Stock. Each share of CIB Stock is entitled to one vote. See "THE CIB
MEETING."
16
<PAGE>
AMERICORP. The Americorp Meeting will be held on December 15,1998 at 4:00p.
m. California time, at 300 S. Mills Road in Ventura, California. Americorp
shareholders will consider and vote on (i) a proposal to approve the principal
terms of the Agreement and the transactions contemplated thereby, and (ii) a
proposal to adopt a new Stock Option Plan in accordance with the Agreement. Only
holders of record of Americorp Stock at the close of business on the Americorp
Record Date, _________ __, 1998, will be entitled to vote at the Americorp
Meeting. At such date, there were outstanding and entitled to vote ______ shares
of Americorp Stock. Each share of Americorp Stock is entitled to one vote. See
"THE AMERICORP MEETING."
THE MERGER
GENERAL Pursuant to the terms of the Agreement, (i) CIB will merge with
and into ACB and ACB will continue as the surviving bank, and (ii) the
shareholders of CIB will become shareholders of Americorp in accordance with
the exchange ratio set forth in the Agreement, all subject to the terms and
conditions specified in the Agreement. See "THE MERGER."
EXCHANGE RATIO The issued and outstanding shares of Americorp Stock at
the effective time of the Merger (the "Effective Time") will remain
outstanding (other than shares as to which statutory dissenters' rights are
perfected).
Other than shares as to which statutory dissenters' rights are
perfected, each share of CIB Stock issued and outstanding immediately prior
to the Effective Time will automatically, without any action on the part of
the holder thereof, be canceled and converted, at the Effective Time, into
the right to receive a number of shares of Americorp Stock as determined by
the exchange ratio established in the Agreement (the "Exchange Ratio").
The Exchange Ratio (i.e. the number of shares of Americorp Stock into
which a share of CIB Stock will be converted) will be computed by dividing
the CIB Book Value Per Share by the Americorp Book Value Per Share. Book
Value Per Share for the respective Parties will be determined as of the month
end preceding the Effective Time by dividing such Party's aggregate book
value by its number of shares outstanding on such date. "Aggregate Book
Value" is a Party's stockholders' equity on such date determined in
accordance with generally accepted accounting principles except (A) as
otherwise provided in the Agreement, (B) such amount will not be reduced by
Merger related expenses, and (C) the allowance for loan and lease losses
shall be increased by any impairment in the allowance.
The exact amount of the Exchange Ratio is dependent, in part, upon
future results and therefore, presently cannot be determined. By way of
illustration only, if the respective Book Values Per Share had been
determined on June 30, 1998 and without any adjustment as permitted in the
Agreement, Americorp's Book Value Per Share would have been $20.02, CIB's
Book Value Per Share would have been $13.96 and the Exchange Ratio would have
been 0.6973 shares of Americorp Stock for each share of CIB Stock. THE ACTUAL
EXCHANGE RATIO MAY BE HIGHER OR LOWER THAN THE PRECEDING PRO FORMA
ILLUSTRATION. See "THE MERGER - Exchange Ratio."
17
<PAGE>
FRACTIONAL SHARES No fractional shares of Americorp Stock will be issued
in the Merger. In lieu thereof, each holder of CIB Stock who would otherwise
be entitled to receive a fractional share will receive an amount in cash
equal to the product (calculated to the nearest ten thousandth) obtained by
multiplying (a) the Americorp Book Value Per Share times (b) the fraction of
the shares of Americorp Stock to which such holder would otherwise be
entitled.
VOTE REQUIRED FOR THE MERGER
Approval of the principal terms of Agreement and the transactions
contemplated thereby requires the affirmative vote of not less than a
majority of the votes entitled to be cast by the holders of both CIB Stock
and Americorp Stock at their respective Meetings.
As of the CIB Record Date, CIB's directors and executive officers and
their affiliates held approximately _____% of the outstanding CIB Stock
entitled to vote at the CIB Meeting. Each of the directors of CIB has agreed
to vote his or her respective shares of CIB Stock in favor of approval of the
principal terms of the Agreement and the transactions contemplated thereby.
As of the Americorp Record Date, Americorp's directors and executive
officers and their affiliates held approximately _____% of the outstanding
Americorp Stock entitled to vote at the Americorp Meeting. Each of the
directors of Americorp has agreed to vote his or her respective shares of
Americorp Stock in favor of approval of the principal terms of the Agreement
and the transactions contemplated thereby.
RECOMMENDATION OF CIB'S AND AMERICORP'S BOARDS OF DIRECTORS
The Boards of Directors of both CIB and Americorp (each by a unanimous
vote) approved the Agreement and the related transactions. The respective
Boards believe the Merger is fair to, and in the best interest of, their
respective institutions and shareholders. Each Board of Directors recommends
to their respective shareholders a vote FOR approval of the principal terms
of the Agreement and the matters contemplated thereby.
The conclusions of the Parties are based on a number of factors,
including the respective fairness opinions of their investment banking firms,
the expected increase in the market liquidity of a shareholder's investment
and the tax-free nature of the Merger. It is also anticipated that the Merger
will provide the potential for the combined companies to benefit from revenue
enhancement opportunities, including increased ability to serve the
marketplace and cross-sell products and services; increased loan and fee
income by providing higher lending limits; increased opportunities to expand
the loan portfolio; and increased opportunities to create more efficiencies,
thereby reducing overall operating costs to the combined companies. See "THE
MERGER - Background and Reasons for the Merger and Management's
Recommendation - CIB, - Background and Reasons for the Merger and
Management's Recommendation - Americorp."
CIB FAIRNESS OPINION
18
<PAGE>
CIB has received a written fairness opinion dated as of July 7, 1998
from the Findley Group ("Findley") that the consideration to be received in
the Merger is fair, from a financial point of view, to the shareholders of
CIB. The Findley opinion is attached to this Joint Proxy Statement/Prospectus
as Appendix B. See "THE MERGER - CIB Fairness Opinion."
AMERICORP FAIRNESS OPINION
Americorp has received a written fairness opinion dated as of August 12,
1998 from the firm of California Research ("Cal.Research") that the
consideration to be received in the Merger is fair, from a financial point of
view, to the shareholders of Americorp. The Cal.Research opinion is attached
to this Joint Proxy Statement/Prospectus as Appendix C. See "THE MERGER -
Americorp Fairness Opinion."
MANAGEMENT AND OPERATIONS OF AMERICORP AND ACB AFTER THE MERGER
At the Effective Time, CIB will be merged with and into ACB and its
separate corporate existence will terminate.
The number of directors of Americorp at the Effective Time will be
increased to nine and Allen W. Jue, Robert J. Lagomarsino, Gerald J.
Lukiewski, E. Thomas Martin, Harry L. Maynard (all of whom are from Americorp
and ACB), Michael T. Hribar, Edward F. Paul, Joseph L. Priske and Jacqueline
S. Pruner (all of whom are from CIB) will serve as the Board of Directors of
Americorp and ACB after the Merger until their successors have been chosen
and qualified in accordance with applicable law. Messrs. Jue, Lagomarsino,
Paul and Priske will serve as the executive committee of Americorp and ACB
after the Merger. After the Merger, the principal officers of Americorp and
ACB will be Allen W. Jue (the current chairman of Americorp/ACB), who will
serve as chairman of the board, Joseph L. Priske (the current chairman of
CIB), who will serve as Vice Chairman, and Gerald J. Lukiewski (the current
president and chief executive officer of Americorp/ACB) who will serve as
president and chief executive officer. Thomas E. Anthony (the current Senior
Vice President/Chief Lending Officer of CIB), Allen R. Partridge (the current
Senior Vice President/Chief Financial Officer of CIB) and Mary Martha Stewart
(the current Senior Vice President/Chief Operating Officer of ACB) will serve
as the Chief Lending Officer, Chief Financial Officer and Chief Operating
Officer, respectively, of ACB after the Merger. Joseph L. Priske will also
serve as chairman of ACB's loan committee.
The Articles of Incorporation and Bylaws of Americorp (except as
otherwise noted above) will continue to govern the business and affairs of
Americorp after the Merger until amended or repealed in accordance with
applicable law. The Articles of Incorporation and Bylaws of ACB will continue
to govern the business and affairs of ACB after the Merger until amended or
repealed in accordance with applicable law except the head office of ACB will
be relocated to the current head office location of CIB. See "THE MERGER -
Management and Operations of Americorp and ACB After the Merger."
EFFECTIVE TIME OF THE MERGER
19
<PAGE>
The Effective Time shall occur on the day that the Agreement of Merger
(which is Exhibit A to the Agreement) is filed with the California Department
of Financial Institutions ("DFI") after having been previously filed with the
California Secretary of State ("Secretary") with the DFI's approval endorsed
thereon in accordance with the provisions of the California Financial Code.
The Effective Time shall occur following the last to occur of (i) receipt of
all necessary regulatory approvals with the expiration of any applicable
regulatory waiting periods and (ii) satisfaction of the other conditions
precedent set forth in the Agreement. See "THE MERGER - Conditions to the
Merger."
It is anticipated that the Effective Time will occur sometime during the
fourth quarter of 1998 or early in 1999. In no event shall the Effective Time
be later than March 31, 1999 unless a later date is agreed to by the Parties.
CONDITIONS TO THE MERGER
The respective obligations of CIB and Americorp to consummate the Merger
are subject to a number of conditions precedent, including, among others, (i)
the receipt of required regulatory approvals, (ii) the approval by the
shareholders of all Parties of the principal terms of the Agreement and the
transaction contemplated thereby by the vote required under applicable law at
the respective Meetings, (iii) the receipt of fairness opinions by the
Parties that the terms of the Merger are fair from a financial point of view,
(iv) the receipt of an opinion that the Merger and the other transactions
contemplated by the Agreement will qualify for pooling of interest accounting
treatment, (v) the receipt of an opinion in connection with certain tax
aspects of the Merger, and (vi) certain other conditions customary in
transactions of this nature. See "THE MERGER - Conditions to the Merger."
REGULATORY APPROVALS
The consummation of the Merger is subject to various conditions,
including, among others, receipt of the prior approvals of the DFI and the
Federal Deposit Insurance Corporation (the "FDIC").
The Agreement provides that the obligations of the Parties to consummate
the Merger are conditioned upon all regulatory approvals having been granted
by March 31, 1999 without the imposition of conditions which, in the opinion
of Americorp would materially adversely effect the financial condition or
operations of any Party or otherwise would be burdensome.
Applications for regulatory review and approval of the Merger and the
related transactions have been filed. There can be no assurance that the DFI
and the FDIC will approve or take other required action with respect to the
Merger and the related transactions or as to the date of such approvals or
action. See "THE MERGER - Regulatory Approvals."
WAIVER AND AMENDMENT
Prior to the Effective Time, any condition to the Agreement may be
waived by the Party entitled to the benefit of such provision. In addition, the
Agreement may be amended at any time upon the written
20
<PAGE>
agreement of the Parties' respective Boards of Directors without action by
their respective shareholders to the extent permitted by law. See "THE MERGER
- - Amendment and Waiver."
TERMINATION
The Agreement may be terminated at any time prior to the Effective Time
(i) by mutual consent of CIB and Americorp in writing; (ii) by CIB or
Americorp if any material breach or default by the other Party is not cured
within 20 business days after notice thereof; (iii) by CIB or Americorp if
any governmental or regulatory consent is not obtained by March 31, 1999 or
if any governmental or regulatory authority denies or refuses to grant any
approval, consent or authorization required to be obtained to consummate the
transactions contemplated by the Agreement unless, within 20 business days
after such denial or refusal, all parties agree to resubmit the application
to the regulatory authority that has denied or refused to grant the approval,
consent or qualification requested; (iv) by Americorp if any of the
conditions to its performance of the Agreement shall not have been met, or by
CIB if any of the conditions to its performance of the Agreement shall not
have been met, by March 31, 1999, or such earlier time as it becomes apparent
that such conditions shall not be met; or (v) if a Party shall have failed to
act or refrained from doing any act, in certain circumstances, relating to a
Competing Transaction (as hereinafter defined). See "THE MERGER -
Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As a condition to the Merger, each of the directors of the respective
Parties has entered into an agreement whereby each has agreed to (i) vote his
or her shares of Stock in favor of approving the principal terms of the
Agreement and the transactions contemplated thereby, (ii) recommend, subject
to his or her fiduciary duty, to the Party's shareholders to vote in favor of
the Agreement, (iii) not dispose, subject to certain exceptions, of his or
her shares of Stock, and (iv) cooperate fully with the other Parties in
connection with the Merger. See "THE MERGER - Interests of Certain Persons in
the Merger."
Messrs. Hribar, Paul and Priske and Ms. Pruner will be added as
directors of Americorp and ACB at the Effective Time. Messrs. Paul and Priske
will also serve on the executive committee of Americorp and ACB. Mr. Priske,
the current Chairman of CIB, will be elected as Vice Chairman of Americorp
and ACB and will be chairman of ACB's loan committee.
The officers and employees of CIB at the Effective Time will become
officers and employees of ACB subject to the policies of ACB, will be
entitled to participate in all employee benefits and benefit programs of ACB
on the same basis as similarly situated employees of ACB and will be credited
for eligibility, participation and vesting purposes with their respective
years of past service with CIB.
Pursuant to the Agreement, a committee has been established to
determine, among other things, a personnel, salary and benefits structure for
ACB after the Merger and to fix the amount of severance to be paid to
officers and employees of the parties displaced by the Merger. The committee
is composed of
21
<PAGE>
Gerald J. Lukiewski (on behalf of Americorp) and Joseph L. Priske and
Jacqueline Pruner (on behalf of CIB). The amount of severance benefits has
not yet been determined by the committee.
ACB has also agreed to honor certain employment agreements for CIB's
Senior Lending Officer and Chief Financial Officer. For a description of such
agreements, see "BUSINESS OF CIB - Executive Compensation." Messrs. Anthony
and Partridge will become the Chief Lending Officer and the Chief Financial
Officer of ACB after the Merger.
In connection with the three current directors of CIB and the two
current directors of Americorp who will resign at the time of the Merger, it
is anticipated that ACB will enter into consulting agreements with such
persons in order for them to continue to provide services and guidance to
Americorp and ACB after the Merger. It is anticipated that Catherine S. Wood
and Lincoln E. Cryne, (directors of Americorp and ACB) will receive aggregate
payments of $33,000 and $68,000 respectively, pursuant to their consulting
agreements and that Fred G. Buenger, William Burke and Glenn C. Farr
(directors of CIB) will receive $33,000, $33,000 and $4,500, respectively,
pursuant to their consulting agreements. See "THE MERGER - Interests of
Certain Persons in the Merger."
Subject to the receipt of any required consents, a new stock option plan
will be adopted by Americorp in order for each person who is an officer or
employee of CIB and who will continue with ACB after the Merger, and for each
director of CIB, who does not exercise his stock option to have the right to
receive a substitute stock option from Americorp on a fully vested basis.
CIB's directors' and officers' liability insurance will have its
discovery period extended for 36 months with respect to all matters arising
from facts or events which occurred before the Effective Time for which CIB
would have had an obligation to indemnify its directors and officers.
ADDITIONAL AGREEMENTS
In addition to the directors agreements described in "Interests of
Certain Persons in the Merger," the directors and certain other affiliates of
each of the Parties have entered into agreements restricting such persons'
ability to sell shares of Stock which such person has acquired or may acquire
in connection with the Merger except in accordance with such agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Parties have received an opinion from Vavrinek Trine Day & Co.
("Vavrinek") to the effect that the Merger will qualify for non-recognition
of gain or loss so that none of CIB, Americorp or ACB will recognize gain or
loss for federal income tax purposes as a result of the Merger. Such opinion
also concludes that the shareholders of CIB and Americorp will not recognize
gain or loss in the Merger except to the extent of any cash received in lieu
of fractional shares by CIB shareholders, or, in the case of shareholders of
CIB and Americorp, to the extent of any cash received pursuant to the
exercise of statutory dissenters' rights. For a more complete description of
the federal income tax consequences of the Merger,
22
<PAGE>
see "THE MERGER - Certain Federal Income Tax Consequences." DUE TO THE
INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE MERGER, IT IS RECOMMENDED
THAT CIB AND AMERICORP SHAREHOLDERS CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE TAX CONSEQUENCES OF THE MERGER.
ACCOUNTING TREATMENT
The Parties anticipate that the Merger will be treated as a pooling of
interests for accounting purposes. Prior to the Effective Time and as a
condition precedent to the closing, the respective accounting firms of the
Parties will confirm in writing the accounting treatment of the Merger as a
pooling of interest. See "THE MERGER - Accounting Treatment."
DISSENTERS' RIGHTS
Pursuant to the provisions of the California Financial Code,
shareholders of CIB and Americorp will be entitled to exercise dissenters'
rights in connection with the Merger.
A holder of stock who, not later than 30 days after the date on which
the Party of which he or she is a shareholder delivers the notice of approval
of the Merger by the Party's shareholders, delivers to such Party a written
demand for dissenters' rights, who does not vote in favor of the approval of
the principal terms of the Agreement and who complies with all other
applicable requirements of Chapter 13 of the California General Corporation
Law, will have the right to receive payment in cash of the "fair market
value" of such holder's shares of Stock. The Americorp Board of Directors has
determined that the "fair market value" of one share of Americorp Stock for
this purpose is $32.00, which was the closing bid price for Americorp Stock
on July 6, 1998, the day before the public announcement of the Merger. Based
upon the opinion of the Findley Group, the CIB Board of Directors has
determined that the "fair market value" of one share of CIB Stock for this
purpose is $19.50. See "THE MERGER - Dissenting Shareholders' Rights" for a
further discussion of dissenters' rights. The Chapter 13 of the California
General Corporation Law is included in Appendix D to his Joint Proxy
Statement/Prospectus.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, shareholders of record
of outstanding shares of CIB Stock will receive by mail a letter of
transmittal which is to be used to exchange their CIB Stock for a new
certificate representing the appropriate number of shares of Americorp Stock,
together with checks for payment of cash in lieu of fractional shares. No
dividends or other distributions that are declared on Americorp Stock will be
paid to persons otherwise entitled to receive the same until the old
certificates have been surrendered in exchange for new certificates, but upon
such surrender, such dividends or other distributions, from and after the
Effective Time, will be paid to such persons in accordance with the terms of
Americorp Stock. No interest will be paid to the CIB shareholders on the cash
or the value of the Americorp Stock into which their shares of CIB Stock will
be exchanged. See "THE MERGER - Exchange Procedures."
23
<PAGE>
CIB SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
MARKETS AND MARKET PRICES
AMERICORP
The Americorp Stock is not listed on any stock exchange or with Nasdaq.
Trading in the Stock has not been extensive and such trades which have
occurred would not constitute an active trading market. As of June 30, 1998,
there were approximately 250 shareholders of Americorp.
The management of Americorp is aware of one securities dealer who
maintains an inventory and makes a market in Americorp Stock - Maguire
Investments, Santa Maria, California. The following quarterly summary of
market activity is furnished by Maguire Investments. These quotes do not
necessarily include retail markups, markdowns or commissions and may not
necessarily represent actual transactions. Additionally, there may have been
transactions at prices other than those shown below:
<TABLE>
<CAPTION>
QUARTER BID ASKED
---------- ----- -----
<S> <C> <C>
First '96 27.00 28.00
Second '96 27.00 28.00
Third '96 28.00 29.00
Fourth '96 28.00 29.00
First '97 28.00 29.00
Second '97 28.00 29.00
Third '97 28.50 29.50
Fourth '97 31.00 32.00
First '98 31.00 32.00
Second '98 31.00 32.00
</TABLE>
On July 6, 1998, the last trading day before the announcement of the
Merger, the closing bid price for a share of Americorp Stock was $32.00.
Americorp has paid 59 consecutive quarterly cash dividends to its
shareholders. Americorp is currently paying quarterly cash dividends of $0.21
per share and has paid at such rate since July 1995. For a discussion of the
dividend policy of Americorp after the Merger, see "Risk Factors - Dividend
Policy".
24
<PAGE>
CIB
The CIB Stock is not listed on any national stock exchange or with
Nasdaq. Trading in the stock has not been extensive and such trades which
have occurred would not constitute an active trading market. As of June 30,
1998, there were approximately 185 shareholders. The management of CIB is
aware of one securities dealer who maintains an inventory and makes a market
in CIB Stock -Maguire Investments, Santa Maria, California.
The following quarterly summary of market activity is furnished by
Maguire Investments, Inc. These quotes do not necessarily include retail
markups, markdowns, or commissions and may not necessarily represent actual
transactions. Additionally, there may have been transactions at prices other
than those shown below:
<TABLE>
<CAPTION>
LOW HIGH
------- ------
<S> <C> <C>
1st Quarter 1996 $10.375 $11.75
2nd Quarter 1996 $11.50 $12.00
3rd Quarter 1996 $12.00 $13.00
4th Quarter 1996 $12.875 $13.00
1st Quarter 1997 $13.00 $13.50
2nd Quarter 1997 $13.50 $13.50
3rd Quarter 1997 $14.725 $15.50
4th Quarter 1997 $15.50 $17.00
1st Quarter 1998 $17.00 $18.50
2nd Quarter 1998 $18.50 $19.50
</TABLE>
Since May 1995, CIB has consistently declared and paid a semi-annual
cash dividend equal to $.10 per
25
<PAGE>
share to the shareholders of CIB. In 1998, CIB has paid two cash dividends
each equal to $.10 per share. As part of the Agreement with Americorp and
ACB, CIB is limited to paying semi-annual cash dividends payable in
accordance with past practice not to exceed $.10 per share per semi-annual
period.
SUMMARY HISTORICAL FINANCIAL DATA
The following summarizes historical financial data for CIB for the five
years ended December 31, 1997 and for the periods ended June 30, 1998 and
1997. The data should be read in conjunction with the consolidated financial
statements, related notes, and other financial information included elsewhere
in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
(amounts in thousands) (unaudited)
For the period
ended
June 30, Year Ended December 31,
-------------------- --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income 3,604 3,285 $ 6,826 $ 6,328 $ 5,218 $ 4,713 $ 4,780
Interest Expense (1,006) (883) (1,879) (1,853) (1,332) (1,049) (1,122)
Net Interest Income 2,598 2,402 4,947 4,475 3,886 3,664 3,658
(Provision)/Credit for Loan and Lease Losses (58) (105) (370) (697) 58 125 (1,321)
Other Income 452 354 1,149 707 637 540 612
Other Expenses (2,418) (2,061) (4,350) (3,924) (3,548) (3,626) (3,839)
------- ------- ------- ------- ------- ------- -------
Income/(Loss) Before Taxes 574 590 1,376 561 1,033 703 (890)
Income Taxes (236) (248) (576) (235) (433) (295) 302
------- ------- ------- ------- ------- ------- -------
$ $ $ $ $ $ $
Net Income/(Loss) 338 342 800 326 600 408 (588)
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Earnings/(Loss) Per Share of Common Stock
Basic $ 0.64 $ 0.74 $ 1.74 $ 0.71 $ 1.31 $ 0.89 $ (1.29)
Diluted $ 0.60 $ 0.68 $ 1.60 $ 0.66 $ 1.21 $ 0.86 $ (1.22)
Weighted Average Number of Shares
Basic 530 461 461 457 457 457 457
Diluted 564 507 500 492 497 475 483
Book Value $ 13.96 $ 12.87 $13.69 $12.25 $11.75 $ 10.27 $ 9.81
Balance Sheet Summary:
Total Assets 86,926 80,743 89,040 74,600 66,023 56,217 58,460
Total Deposits 79,286 74,611 81,827 68,763 60,422 51,444 53,944
Loans Held for Sale 1,580 1,535 1,726 1,557 1,959 965 689
Total Loans 58,291 50,722 51,547 50,578 42,443 31,927 31,722
Allowance for Loan Losses (930) (778) (918) (723) (732) (981) (1,154)
Total Shareholders' Equity 7,441 5,934 6,556 5,596 5,368 4,692 4,484
SELECTED RATIOS:
26
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 0.8% 0.9% 1.0% 0.4% 1.0% 0.7% -1.0%
Return on average equity 9.5% 11.7% 13.3% 5.9% 11.7% 8.9% -13.4%
Average shareholders' equity to average
assets 8.2% 7.6% 7.5% 7.2% 8.4% 7.7% 7.5%
Average net loans to average deposits 68.8% 70.1% 67.6% 64.8% 65.3% 57.5% 59.7%
Net Interest Margin 6.8% 7.1% 6.9% 6.7% 7.2% 7.0% 7.2%
Allowance for Loan Losses to Total Loans 1.6% 1.5% 1.8% 1.4% 1.7% 3.1% 3.6%
Tier 1 Capital to Risk-Weighted Assets 10.4% 10.3% 10.3% 9.9% 11.2% 12.8% 11.8%
Total Capital to Risk-Weighted Assets 11.6% 11.5% 11.6% 11.8% 12.4% 14.1% 13.1%
</TABLE>
AMERICORP
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data with respect to
Americorp's consolidated statement of financial position for the years ended
December 31, 1997 and 1996 and its consolidated statements of income for the
years ended December 31, 1997, 1996 and 1995 have been derived from the
audited consolidated financial statements of Amercorp appearing elsewhere in
this Joint Proxy Statement. This information should be read in conjunction
with such consolidated financial statements and the notes thereto. The
summary consolidated financial data with respect to Americorp's consolidated
statement of financial position as of December 31, 1995, 1994 and 1993 and
its consolidated statements of income for the years ended December 31, 1994
and 1993 have been derived from the audited consolidated financial statements
of Americorp, which are not presented herein. The summary consolidated
financial data with respect to Americorp's consolidated statement of
financial position as of June 30, 1998 and 1997 and its consolidated
statements of income for the periods ended June 30, 1998 and 1997 have been
derived from unaudited consolidated financial statements of Americorp, which
appear elsewhere in this Joint Proxy Statement/Prospectus. This information
should be read in conjunction with such consolidated financial statements and
the notes thereto.
<TABLE>
<CAPTION>
Six months
ended
June 30, December 31,
--------------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------------------- -------------------------------------------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income $ 5,238 $ 4,701 $ 9,749 $ 8,792 $ 8,539 $ 7,537 $ 7,008
Interest Expense 1,427 1,338 2,747 2,740 2,520 2,016 2,372
------------------ --------------------------------------------------
Net Interest Income 3,811 3,363 7,002 6,052 6,019 5,521 4,636
Provision for Loan and Lease Losses 265 260 410 1,046 554 294 493
------------------ --------------------------------------------------
Net Interest Income after Provision
for Loan and Lease Losses 3,546 3,103 6,592 5,006 5,465 5,227 4,143
Non-interest Income 672 607 1,571 1,248 1,384 1,850 1,349
Non-interest Expense 3,450 2,988 6,664 6,014 5,678 5,770 4,741
------------------ --------------------------------------------------
Income before income taxes 768 722 1,499 240 1,171 1,307 751
Provision for income taxes 207 211 396 37 226 279 38
------------------ --------------------------------------------------
------------------ --------------------------------------------------
Net Income 561 511 1,103 203 945 1,028 713
------------------ --------------------------------------------------
------------------ --------------------------------------------------
27
<PAGE>
Per share:
Earnings per Common Share $ 0.95 $ 0.89 $ 1.91 $ 0.35 $ 1.67 $ 1.82 $ 1.28
Earnings per Common Share - diluted $ 0.84 $ 0.77 $ 1.66 $ 0.31 $ 1.41 $ 1.63 $ 1.26
Average number of common shares used
in E.P.S. calculation 590 576 578 572 567 566 558
Average number of common equivalent
shares used in E.P.S. calculation 667 664 666 660 669 630 567
Cash Dividends $ 0.42 $ 0.42 $ 0.84 $ 0.84 $ 0.82 $ 0.80 $ 0.70
Shares outstanding at end of each
period 594,518 575,665 585,518 575,665 567,490 567,211 562,808
Cash and due from Banks $ 19,417 $ 13,523 $ 11,462 $ 10,542 $ 9,824 $ 7,511 $ 5,600
Securites and Fed Funds Sold 31,517 31,767 31,013 43,659 40,265 37,432 45,391
Loans, net 83,074 73,114 83,397 64,943 59,222 55,580 54,192
Other assets 5,815 8,240 8,340 7,936 8,985 8,456 6,378
------------------ --------------------------------------------------
Total Assets $139,824 $126,643 $134,212 $127,080 $118,296 $108,979 $111,561
------------------ --------------------------------------------------
------------------ --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six months
ended
June 30, December 31,
------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------------ --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits 37,741 31,528 36,521 30,626 26,565 21,998 16,979
Interest-bearing deposits 87,234 82,154 83,447 83,658 78,977 75,682 84,214
Other Liabilities 2,949 2,243 2,893 2,324 2,155 1,853 924
Shareholders' Equity 11,901 10,718 11,351 10,472 10,599 9,446 9,444
------------------ --------------------------------------------------
Total Liabilities and Shareholders'
Equity $139,824 $126,643 $134,212 $127,080 $118,296 $108,979 $111,561
------------------ --------------------------------------------------
------------------ --------------------------------------------------
Asset Quality:
Non-accrual loans 1,836 1,591 1,891 150 190 178 199
Loans past due 90 days or more 47 1 497 982 8 296
Other real estate owned 91 123 91 479 812 603
------------------ --------------------------------------------------
Total nonperforming assets 1,836 1,729 2,015 738 1,651 998 1,098
Financial Ratios (annualized)
Return on assets 0.84% 0.76% 0.87% 0.17% 0.87% 0.92% 0.65%
Return on equity 9.89% 9.00% 10.53% 1.92% 10.00% 10.89% 7.88%
Net interest margin 6.68% 6.36% 6.44% 5.96% 6.23% 5.73% 4.86%
Net loan losses (recoveries)to
avg. loans 0.22% 0.19% 0.23% 1.38% 0.61% 0.32% 0.21%
</TABLE>
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<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma combined financial
information for the six month period ended June 30, 1998 and for the years
ended December 31, 1997, 1996 and 1995 have been prepared to reflect the
effects of the Merger on the historical results of Americorp. The unaudited
pro forma combined statements of financial position have been prepared as if
the Merger occured on December 31, 1997. The unaudited pro forma combined
statements of income have been prepared as if the Merger occurred on January
1, 1995. The pro forma financial information set forth below is unaudited and
not necessarily indicative of the results that will occur in the future.
Weighted average shares outstanding of the pro forma combined institution are
based on a .7000 to 1.0000 Exchange Ratio which approximates the Exchange
Ratio if it was computed based upon the Americorp and CIB Book Values Per
Share at June 30, 1998 and without taking into account any adjustments as
permitted by the Agreement.
<TABLE>
<CAPTION>
Year Ended
Six Months Ended -------------------------------------------------------
June 30, 1998 December 31, 1997 December 31, 1996 December 31, 1995
---------------- ----------------- ----------------- -----------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Results of Operations:
Interest Income $8,842 $16,575 $15,120 $13,757
Interest Expense $2,433 $ 4,626 $ 4,593 $ 3,852
Net Interest Income $6,409 $11,949 $10,527 $ 9,905
Provision for Loan Losses $ 323 $ 780 $ 1,743 $ 496
Net Interest Income after Provision for Loan
Losses $6,086 $11,169 $ 8,784 $ 9,409
Non-interest Income $1,124 $ 2,719 $ 1,955 $ 2,107
Non-interest Expense $5,868 $11,013 $ 9,938 $ 9,313
Net Income $ 900 $ 1,903 $ 529 $ 1,545
Net Income Per Share - Basic $ 0.94 $ 2.11 $ 0.59 $ 1.74
Net Income Per Share - Diluted $ 0.85 $ 1.87 $ 0.53 $ 1.52
Weighted Average Share Outstanding - Basic 961 901 892 887
Weighted Average Share Outstanding - Diluted 1,062 1,016 1,004 1017
</TABLE>
Balance at Period End:
<TABLE>
<S> <C> <C>
Total Assets $226,750 $223,252
Total Loans, net $138,855 $132,300
Total Deposits $204,260 $201,795
Total Shareholders' Equity $ 18,966 $ 17,531
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C>
Selected Statistics:
Return on Average Total Assets 0.41% 0.92%
Return on Average Common Shareholders' Equity 4.80% 11.33%
Average Equity to Average Total Assets 8.46% 8.09%
Regulatory Capital Ratios:
Leverage Ratio 8.70% 8.52%
Tier 1 Risk Based Capital Ratio 10.67% 10.19%
Total Risk Based Capital Ratio 11.79% 11.24%
</TABLE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical and pro forma combined
per share financial information for Americorp and CIB Stocks. The pro forma
data do not purport to be indicative of the results of future operations or
the results that would have occurred had the transaction been consummated at
the beginning of the period presented. The information presented herein
should be read in conjunction with the historical financial information of
Americorp and CIB included elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
Americorp Channel Islands Pro Forma
Historical Historical Combined(2)
---------- --------------- ---------
<S> <C> <C> <C>
Per Common Share
- ----------------
NET INCOME
For the six month period ended June 30, 1998
Basic $ 0.95 $ 0.64 $ 0.94
Primary $ 0.84 $ 0.60 $ 0.85
For the year ended December 31,
1997 - Basic $ 1.91 $ 1.74 $ 2.11
- Primary $ 1.66 $ 1.60 $ 1.87
1996 - Basic $ 0.35 $ 0.71 $ 0.59
- Primary $ 0.31 $ 0.66 $ 0.53
1995 - Basic $ 1.67 $ 1.31 $ 1.74
- Primary $ 1.41 $ 1.21 $ 1.52
CASH DIVIDENDS (1)
For the six month period ended June 30, 1998 $ 0.42 $ 0.11 $ 0.31
For the year ended December 31,
1997 $ 0.84 $ 0.19 $ 0.64
1996 $ 0.84 $ 0.20 $ 0.64
1995 $ 0.82 $ 0.20 $ 0.63
BOOK VALUE
As of June 30, 1998 $20.02 $13.96 $19.66
As of December 31, 1997 $19.39 $13.69 $19.11
As of December 31, 1996 $18.19 $12.25 $17.59
</TABLE>
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<PAGE>
(1) The pro forma combined cash dividend represents aggregated
historical Americorp and CIB cash dividends divided by the basic pro
forma combined weighted average shares outstanding for each year
presented. The pro forma combined cash dividends presented are not
necessarily indicative of the dividends that may have been declared and
paid had the transaction been effective for all periods presented.
(2) Pro forma amounts represent the equivalent net income and book value
per share for the periods indicated based on historical performance of
Americorp and CIB, assuming that the transaction had been effective for
all periods presented. For purposes of calculating the pro forma
combined per share data, the Merger Exchange Ratio of .7000 shares of
Americorp Stock for each share of CIB Stock was used. The Exchange Ratio
could be higher or lower than .7000 to 1.0000.
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<PAGE>
RISK FACTORS
IN DECIDING HOW TO VOTE THEIR SHARES AT THE MEETINGS, HOLDERS OF SHARES
OF CIB STOCK AND HOLDERS OF SHARES OF AMERICORP STOCK SHOULD CAREFULLY CONSIDER
THE FOLLOWING FACTORS, IN ADDITION TO THE INFORMATION AND OTHER MATTERS SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
FORWARD LOOKING STATEMENTS MAY NOT PROVE ACCURATE
Certain statements contained in this Joint Proxy Statement/Prospectus,
including, without limitation, statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import, constitute
"forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of CIB or
Americorp to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions in those areas in which CIB or Americorp operate; demographic
changes; competition; fluctuations in interest rates; changes in business
strategy or development plans; changes in governmental regulation; credit
quality; the availability of capital to fund the expansion of CIB's or
Americorp's business; and other factors referenced in this Joint Proxy
Statement/Prospectus, including, without limitation, under the captions
"SUMMARY," "RISK FACTORS" "BUSINESS OF CIB," and "BUSINESS OF AMERICORP."
Given these uncertainties, shareholders are cautioned not to place undue
reliance on such forward-looking statements. CIB and Americorp disclaim any
obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
RISK FACTORS RELATING TO THE MERGER
PROSPECTS OF ACB AND AMERICORP AFTER THE MERGER AND ABILITY TO INTEGRATE
OPERATIONS. The earnings, financial condition and prospects of ACB and
Americorp after the Merger will depend in part on ACB's ability to
successfully integrate the operations and management of CIB and to continue
to implement its own business plan. There can be no assurance that ACB will
be able to effectively and profitably integrate the operations and management
of CIB, or that ACB will be able to continue to profitably implement its own
business plan. In addition, there can be no assurance that ACB will be able
to fully realize the potential revenue enhancement expected as a result of
the Merger. Further, although the CIB Board and the Americorp Board do
anticipate cost savings as a result of the Merger to be significant (as
compared to potential revenue enhancement as a result of the Merger), there
can be no assurance that ACB will be able to fully realize any of the
potential cost savings expected. Finally, there can be no assurance that any
cost savings which are realized will not be offset by losses in revenues or
other charges to earnings.
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<PAGE>
PERFORMANCE OF COMBINED LOAN PORTFOLIOS. ACB's performance and prospects
after the Merger also will be dependent to a significant extent on the
performance of the combined loan portfolios of ACB and CIB and ultimately on
the financial condition of ACB's and CIB's borrowers and other customers. The
existing loan portfolios of ACB and CIB differ to some extent in the types of
borrowers, industries and credits represented. In addition, there are
differences in the documentation, classifications, credit ratings and
management of the portfolios. As a result, ACB's overall loan portfolio after
the Merger will have a different risk profile than the loan portfolio of
either ACB or CIB before the Merger. The performance of the combined loan
portfolio will be adversely affected if any of such factors is worse than
currently anticipated. In addition, to the extent that present customers are
not retained by the surviving bank or additional expenses are incurred in
retaining them, there could be adverse effects on future results of
operations of ACB following the Merger. Realization of improvement in
profitability is dependent, in part, on the extent to which the revenues of
Americorp and ACB are maintained and enhanced.
MARKET PRICE OF AMERICORP STOCK AFTER THE MERGER. The number of shares
of Americorp Stock which will be issued to CIB shareholders in the Merger is
determined by the respective book values per share of Americorp Stock and CIB
Stock. No assurance can be given how the market price of Americorp Stock on
or after consummation of the Merger will react to the Exchange Ratio.
LIMITED MARKET FOR AMERICORP STOCK. There is currently only a limited
trading market for the CIB and Americorp Stocks. While an application for
listing Americorp Stock on Nasdaq will be considered during the first year of
combined operations, there can be no assurance that such an application will
be filed or the Americorp Stock actually listed on Nasdaq. Additionally,
there can be no assurance that an active trading market for Americorp Stock
will develop as a result of the Merger or otherwise, or if developed, will
continue, or that shareholders of Americorp will be able to resell their
securities or otherwise liquidate their investment without considerable
delay, if at all, or considerable impact on the sale's price.
DIVIDEND POLICY. Americorp has paid 59 consecutive quarterly cash
dividends to its shareholders. Americorp is currently paying quarterly cash
dividends of $0.21 per share. The dividend policy of Americorp is not
expected to be changed as a result of the Merger; however, no assurances can
be given that such policy may not change. Moreover, declarations or payments
of dividends by the Board of Directors of Americorp after the Merger will
depend upon a number of factors, including capital requirements, regulatory
limitations, Americorp's and ACB's financial condition and results of
operations, tax considerations and general economic conditions. No assurance
can be given that any dividends will be declared or, if declared, what the
amount of dividends or their type (cash, stock or both) will be or whether
such dividends, once declared, will continue.
YEAR 2000 RISKS AND PREPAREDNESS. Many existing computer programs use
only two digits to identify a year in a data field. These programs were
designed and developed without considering the impact of the upcoming change
in the century. If not corrected, many computer applications could fail or
create erroneous results by or at the Year 2000 or possibly earlier. The Year
2000 issue affects Americorp in that the financial services business is
highly dependent on computer applications in a variety
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<PAGE>
of ways, including the following (i) Americorp relies on computer systems in
almost all aspects of its business, including the processing of deposits,
loans and other services and products offered to customers, the failure of
which in connection with the Year 2000 could cause systemic disruptions and
failures in the products and services offered by Americorp, (ii) other banks,
clearing houses and vendors whose products and services Americorp uses are at
risk of systemic disruptions and potential failures in the event that such
entities have not adequately addressed their Year 2000 issues prior to the
Year 2000, (iii) the creditworthiness of borrowers of Americorp might be
diminished by significant disruptions of their business as a result of their
own or others' failure to address adequately the Year 2000 issues prior to
the Year 2000, and (iv) federal banking agencies have issued interagency
guidance on the business-wide risk posed to financial institutions by the
year 2000 problem pursuant to which the federal banking agencies may take
supervisory action against financial institutions that fail to address
appropriately Year 2000 issues prior to the Year 2000, including formal and
informal enforcement actions, denial of applications to the federal banking
agencies, civil money penalties and a reduction in the management component
rating of the institution's composite rating. Year 2000 issues are not
anticipated to have an effect on the processing of the regulatory
applications for the Merger in as much as Americorp believes that it is
satisfying regulatory requirements related to Year 2000 issues.
In order to address the Year 2000 issues facing Americorp, Americorp
Management has initiated a program to prepare Americorp's computer systems
and applications for the Year 2000 (the "Year 2000 Plan"). The primary focus
of the Year 2000 Plan is to convert to the target systems identified and
believed to be Year 2000 compliant. Americorp expects to incur internal staff
costs as well as consulting and other expenses related to infrastructure and
facilities enhancements necessary to prepare for conversion and Year 2000
system preparations, testing and conversion of primary system applications
and hardware is expected to cost approximately $100,000, to be expended
during fiscal years 1998 and 1999.
As a part of the Year 2000 Plan, Americorp is not only undertaking the
infrastructure and facilities enhancement and testing necessary to ensure
that Americorp is adequately prepared for the Year 2000, but Americorp is
also communicating with its vendors upon whose services Americorp relies to
ensure Year 2000 compliance. Pursuant to the Year 2000 Plan, Americorp
expects to substantially complete testing of its mission-critical systems and
the computer-related interactive vendor systems by December 31, 1998 and to
complete all testing by June 1999. In addition, as part of the credit review
process, Americorp is communicating with its major borrowers in an effort to
ensure that such borrowers have taken appropriate steps to address their Year
2000 issues and will not be materially affected by any Year 2000 problems.
Americorp is communicating with its deposit customers as well. Americorp is
also preparing contingency plans to protect Americorp in the event that
Americorp is unable to attain Year 2000 compliance in certain applications
according to the Year 2000 Plan.
Although Americorp believes that its Year 2000 Plan and other steps
being taken are adequate to ensure that it will not be materially affected by
the Year 2000 problem, there can be no assurance that the Year 2000 Plan and
Americorp's other year 2000 remedial and contingency plans will fully protect
Americorp from the risks associated with the Year 2000. The analysis of, and
preparation for, the Year 2000 and related problems necessarily rely on a
variety of assumptions about future events and there can
34
<PAGE>
be no assurance that Americorp Management has accurately predicted such
future events or that the remedial and contingency plans of Americorp will
adequately address such future events. In the event that the business of
Americorp, of vendors of Americorp or of customers of Americorp is disrupted
as a result of the Year 2000 problem, such disruption could have a material
adverse effect on Americorp.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION Shares of Americorp Stock
eligible for future sale could have a dilutive effect on the market for
Americorp Stock and could adversely affect market prices. As of the Americorp
Record Date, the Articles of Incorporation of Americorp authorize 2,500,000
shares of Americorp Stock, of which _______ shares were outstanding, and
_________ additional shares of Americorp Stock are anticipated to be issued
in the Merger to CIB Shareholders, assuming (i) no shares of CIB Stock
reserved for issuance on the Americorp Record Date are issued on or prior to
the Effective Time, (ii) the estimated Exchange Ratio is .7000, (iii) the CIB
Book Value Per Share is $13.96, (iv) Americorp Book Value Per Share is
$20.02, (v) no Dissenters' Rights are perfected by CIB or Americorp
Shareholders, and (vi) no cash is paid in lieu of fractional shares. Pursuant
to its stock option plans, Americorp had outstanding options to purchase an
additional _____ shares of Americorp Stock on the Americorp Record Date with
exercise prices of between $____ and $____.
Americorp may pursue acquisitions of other financial institutions from
time to time where such acquisitions are believed by Americorp to enhance
shareholder value or satisfy other strategic objectives, although there are
no specific pending or contemplated acquisitions at present. Such
acquisitions, if any, could be accomplished by the issuance of additional
shares of Americorp Stock or other securities convertible into or exercisable
for Americorp Stock.
The Americorp Articles authorize the issuance of 2,500,000 shares of
Americorp Stock. The shares of Americorp Stock were authorized in an amount
greater than that to be issued to provide Americorp's Board of Directors with
as much flexibility as possible to effect, among other transactions,
financings, acquisitions, stock dividends, stock splits and the exercise of
employee stock options. However, these additional authorized shares may also
be used by the Board of Directors consistent with its fiduciary duty to deter
future attempts to gain control of Americorp.
There can be no assurance as to the market value of Americorp Stock
after the Merger, which market value may be affected by the dilutive effects
of the matters described above, if any, and other factors.
RISK FACTORS RELATING TO THE INDUSTRY
INTEREST RATE RISK. Banking companies' earnings depend largely on the
relationship between the cost of funds, primarily deposits, and the yield on
earning assets. This relationship, known as the interest rate spread, is
subject to fluctuation and is affected by economic and competitive factors
which influence interest rates, the volume and mix of interest-earning assets
and interest-bearing liabilities, and the level of nonperforming assets.
Fluctuations in interest rates affect the demand of customers for CIB's and
ACB's products and services. CIB and ACB are subject to interest rate risk to
the degree that their interest-bearing
35
<PAGE>
liabilities reprice or mature more slowly or more rapidly or on a different
basis than their interest-earning assets. Given CIB's and ACB's current
volume and mix of interest-bearing liabilities and interest-earning assets,
CIB's and ACB's interest rate spread could be expected to increase during
times of rising interest rates and, conversely, to decline during times of
falling interest rates. Therefore, significant fluctuations in interest rates
may have an adverse effect on ACB's results of operations.
ECONOMIC CONDITIONS AND GEOGRAPHIC CONCENTRATION. The operations of CIB
and Americorp are located in Ventura County. As a result of this geographic
concentration, CIB's and Americorp's results depend largely upon economic
conditions in this area. A deterioration in economic conditions in this
market area could have a material adverse impact on the quality of CIB's and
Americorp's loan portfolio and the demand for their products and services
and, accordingly, their respective results of operations.
GOVERNMENT REGULATION AND MONETARY POLICY. The banking industry is
subject to extensive federal and state supervision and regulation. Such
regulation limits the manner in which CIB, ACB and Americorp conduct their
respective businesses, undertake new investments and activities and obtain
financing. This regulation is designed primarily for the protection of the
deposit insurance funds and consumers, and not to benefit holders of CIB's or
Americorp's Stocks. Financial institution regulation has been the subject of
significant legislation in recent years, and may be the subject of further
significant legislation in the future, none of which is in the control of CIB
or Americorp. Significant new laws or changes in, or repeal of, existing laws
may cause CIB's or Americorp's results to differ materially. Further, federal
monetary policy, particularly as implemented through the Federal Reserve
System, significantly affects credit conditions for financial institutions,
primarily through open market operations in United States government
securities, the discount rate for bank borrowings and bank reserve
requirements. Any material change in these conditions would be likely to have
a material impact on CIB's and Americorp's respective results of operations.
COMPETITION. The banking and financial services business in California
generally, and in CIB's and Americorp's market area specifically, is highly
competitive. The increasingly competitive environment is a result primarily
of changes in regulation, changes in technology and product delivery systems
and the accelerating pace of consolidation among financial services
providers. ACB and CIB compete for loans, deposits and customers for
financial services with other commercial banks, savings and loan
associations, securities and brokerage companies, mortgage companies,
insurance companies, finance companies, money market funds, credit unions and
other nonbank financial service providers. Many of these competitors are much
larger in total assets and capitalization, have greater access to capital
markets and offer a broader array of financial services than ACB or CIB.
There can be no assurance that ACB will be able to compete effectively in its
markets, and the results of operations of ACB and Americorp could be
adversely affected if circumstances affecting the nature or level of
competition change.
CREDIT QUALITY. A significant source of risk for financial institutions
such as ACB and CIB arises from the possibility that losses will be sustained
because borrowers, guarantors and related parties may fail to perform in
accordance with the terms of their loans. CIB and ACB have adopted
underwriting and
36
<PAGE>
credit monitoring procedures and credit policies, including the establishment
and review of the allowance for credit losses, that each company's respective
management believes are appropriate to minimize this risk by assessing the
likelihood of nonperformance, tracking loan performance and diversifying the
respective credit portfolios. Such policies and procedures, however, may not
prevent unexpected losses that could materially adversely affect the results
of operations.
THE CIB MEETING
DATE, TIME AND PLACE
The CIB Meeting will be held on _________, ________, 1998 at
________________, located at __________________, Oxnard, California ________,
at ______ __.m., California time, and any adjournment or adjournments thereof.
PURPOSE
The only specific purpose of the CIB Meeting is to consider and vote
upon a proposal to approve the principal terms of the Agreement and the
transactions contemplated thereby. The shareholders of CIB will also consider
and vote upon such other matters as may be properly brought before the CIB
Meeting.
RECORD DATE
The CIB Board has fixed the close of business on _________, 1998, as the
CIB Record Date for the determination of shareholders entitled to notice of,
and to vote at, the CIB Meeting. Accordingly, only holders of record of
shares of CIB Stock at the close of business on the CIB Record Date will be
entitled to vote at the CIB Meeting and any adjournment thereof. As of CIB
Record Date, there were _____________ shares of CIB Stock outstanding, held
by approximately ___________ shareholders of record.
PROXIES AND REVOCABILITY OF PROXIES
A proxy card for voting at the CIB Meeting is enclosed with the copy of
this Joint Proxy Statement/Prospectus being mailed to CIB shareholders. (A
separate proxy card for Americorp shareholders voting at the Americorp
Meeting is being provided to Americorp shareholders. See "THE AMERICORP
MEETING-Proxies and Revocability of Proxies."). When a proxy card is
returned, properly signed and dated, the shares represented thereby will be
voted in accordance with the instructions on the proxy card. If a shareholder
does not attend the CIB Meeting and does not return the signed proxy card,
such holder's shares will not be voted and this will have the effect of a
vote "AGAINST" the matter to be voted on at the CIB Meeting. Shareholders are
urged to mark the box on the proxy card to indicate how the shares
represented by the proxy card are to be voted. If a shareholder returns a
signed proxy card
37
<PAGE>
but does not indicate how his or her shares are to be voted, such shares will
be voted "FOR" the proposal. The proxy card also confers discretionary
authority on the individual appointed by the CIB Board named on the proxy
card to vote the shares represented thereby on any other matter that is
properly presented for action at the CIB Meeting. A shareholder who has given
a proxy may revoke it at any time prior to its exercise at the CIB Meeting by
delivering an instrument of revocation to the secretary of CIB, by duly
executing and submitting a proxy card bearing a later date, or by appearing
at the CIB Meeting and voting in person. The mere presence at the CIB Meeting
of the person who has given a proxy will not revoke such proxy. In addition,
brokers who hold shares of CIB Stock as nominees will not have discretionary
authorization to vote such shares on any of the matters to be voted thereon
in the absence of instructions from the beneficial owners.
COSTS OF SOLICITATIONS OF PROXIES
CIB will bear its own costs in connection with this solicitation. It is
contemplated that proxies will be solicited principally through the mails,
but directors, officers and regular employees of CIB may solicit proxies (for
no additional compensation) by personal interview, telephone, telex,
telegram, facsimile or similar means of communication. Although there is no
formal agreement to do so, CIB may reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding these proxy materials to their principals.
OUTSTANDING SECURITIES; QUORUM
As of the CIB Record Date, there were issued and outstanding
____________ shares of CIB Stock. The presence, either in person or by
properly executed proxies, of the holders of a majority of the outstanding
shares of CIB Stock is necessary to constitute a quorum at the CIB Meeting.
Abstentions will be counted for purposes of establishing a quorum.
VOTE REQUIRED
CIB shareholders are entitled to one vote at the CIB Meeting for each
share of CIB Stock held of record by them on the CIB Record Date. The
proposal concerning approval of the Agreement and the transactions
contemplated thereby requires the affirmative vote of a majority of the
outstanding shares entitled to vote.
As of the CIB Record Date, directors and executive officers of CIB
beneficially owned an aggregate of __________ shares of CIB Stock (not
including shares issuable upon exercise of stock options), or approximately
______% of those outstanding as of the CIB Record Date. Abstentions and
broker non-votes with respect to the proposal concerning approval of the
Agreement and the transaction contemplated thereby will have the same effect
as a vote "AGAINST" the proposal.
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<PAGE>
THE AMERICORP MEETING
DATE, TIME AND PLACE
The Americorp Meeting will be held on _________, ________, 1998 at
________________, located at __________________, Ventura, California
________, at ______ __.m., California time, and any adjournment or
adjournments thereof.
PURPOSE
One purpose of the Americorp Meeting is to consider and vote upon a
proposal to approve the principal terms of the Agreement and the transactions
contemplated thereby. The shareholders of Americorp will also consider and
vote upon a proposal to approve a new stock option plan in connection with
the Merger and such other matters as may be properly brought before the
Americorp Meeting.
RECORD DATE
The Americorp Board has fixed the close of business on _________,
1998, as the Americorp Record Date for the determination of shareholders
entitled to notice of, and to vote at, the Americorp Meeting. Accordingly,
only holders of record of shares of Americorp Stock at the close of business
on the Americorp Record Date will be entitled to vote at the Americorp
Meeting and any adjournment thereof. As of Americorp Record Date, there were
_____________ shares of Americorp Stock outstanding, held by approximately
250 shareholders of record.
PROXIES AND REVOCABILITY OF PROXIES
A proxy card for voting at the Americorp Meeting is enclosed with the
copy of this Joint Proxy Statement/Prospectus being mailed to Americorp
shareholders. (A separate proxy card for CIB shareholders voting at the CIB
Meeting is being provided to CIB shareholders. See THE CIB MEETING--Proxies and
Revocability of Proxies."). When a proxy card is returned, properly signed and
dated, the shares represented thereby will be voted in accordance with the
instructions on the proxy card. If a shareholder does not attend the Americorp
Meeting and does not return the signed proxy card, such holder's shares will not
be voted and this will have the effect of a vote "AGAINST" the matters to be
voted on at the Americorp Meeting. Shareholders are urged to mark the box on the
proxy card to indicate how the shares represented by the proxy card are to be
voted. If a shareholder returns a signed proxy card but does not indicate how
his or her shares are to be voted, such shares will be voted "FOR" the
proposals. The proxy card also confers discretionary authority on the individual
appointed by the Americorp Board named on the proxy card to vote the shares
represented thereby on any other matter that is properly presented for action at
the Americorp Meeting. A shareholder who has given a proxy may revoke it at any
time prior to its exercise at the Americorp Meeting by delivering an instrument
of revocation to the secretary of Americorp, by duly executing and submitting a
proxy card bearing a later date, or by appearing at the
39
<PAGE>
Americorp Meeting and voting in person. The mere presence at the Americorp
Meeting of the person who has given a proxy will not revoke such proxy. In
addition, brokers who hold shares of Americorp Stock as nominees will not
have discretionary authorization to vote such shares on any of the matters to
be voted thereon in the absence of instructions from the beneficial owners.
COSTS OF SOLICITATIONS OF PROXIES
Americorp will bear its own costs in connection with this solicitation.
It is contemplated that proxies will be solicited principally through the mails,
but directors, officers and regular employees of Americorp may solicit proxies
(for no additional compensation) by personal interview, telephone, telex,
telegram, facsimile or similar means of communication. Although there is no
formal agreement to do so, Americorp may reimburse banks, brokerage houses and
other custodians, nominees and fiduciaries for their reasonable expenses in
forwarding these proxy materials to their principals.
OUTSTANDING SECURITIES; QUORUM
As of the Americorp Record Date, there were issued and outstanding
____________ shares of Americorp Stock. The presence, either in person or by
properly executed proxies, of the holders of a majority of the outstanding
shares of Americorp Stock is necessary to constitute a quorum at the Americorp
Meeting. Abstentions will be counted for purposes of establishing a quorum.
VOTE REQUIRED
Americorp shareholders are entitled to one vote at the Americorp
Meeting for each share of Americorp Stock held of record by them on the
Americorp Record Date. The proposal concerning approval of the Agreement and
the transactions contemplated thereby requires the affirmative vote of a
majority of the outstanding shares entitled to vote. The proposal relating to
a new stock option plan requires the affirmative vote of a majority of the
outstanding shares entitled to vote.
As of the Americorp Record Date, directors and executive officers of
Americorp beneficially owned an aggregate of __________ shares of Americorp
Stock (not including shares issuable upon exercise of stock options), or
approximately ______% of those outstanding as of the Americorp Record Date.
Abstentions and broker non-votes with respect to the proposals concerning
approval of the Agreement and the transaction contemplated thereby and the
new stock option plan will have the same effect as a vote "AGAINST" the
proposals.
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THE MERGER
The Agreement provides for, among other things, (i) the merger of CIB
with and into ACB with ACB as the surviving bank, and (ii) the shareholders of
CIB becoming shareholders of Americorp in accordance with the Exchange Ratio,
all subject to the terms and conditions specified in the Agreement.
Certain provisions of the Agreement are summarized below. This summary
does not purport to be complete and is qualified in its entirety by reference to
the complete text of the Agreement, which is reprinted as Appendix A to this
Joint Proxy Statement/Prospectus and is incorporated herein by reference.
Shareholders of CIB and Americorp are urged to read the Agreement in its
entirety.
BACKGROUND AND REASONS FOR THE MERGER AND MANAGEMENT'S RECOMMENDATION--
AMERICORP
The Board of Directors of Americorp began to consider the possibility
of a "merger of equals" with or acquisition of another financial institution
during March, 1998. In the current financial services environment, a merger or
acquisition would support Americorp's strategic objective of remaining a
preeminent independent financial services provider in Ventura County, while
strengthening management, growth opportunities and profitability. Furthermore,
it is believed that ACB, as a larger independent bank, will be able to compete
with major banks in the communities served, providing superior products and
services to the marketplace.
Discussions concerning the possibility of a business combination among
the Parties began during late March and early April of 1998 with a series of
meetings between various directors of the institutions. These meetings resulted
in the chairmen of Americorp and CIB meeting on April 9, 1998 to discuss various
issues relating to the combination. The discussions between the two chairmen
continued on through April and May. On May 14, 1998, a confidentiality agreement
was signed to facilitate mutual due diligence and transfers of information. Both
Parties conducted due diligence during various periods in May and June.
In late May and early June, Americorp held discussions with
Cal.Research relating to their engagement to render a fairness opinion in
connection with the transaction. Counsel was also authorized to commence
drafting of the Agreement and a first draft of the Agreement was delivered to
CIB on or about June 6. Negotiation of the transaction continued through various
drafts of the Agreement and were principally conducted through a series of
meetings between the chairmen of the Parties during mid and late June. On July
2, both chairmen met along with President Lukiewski and Ms. Pruner to resolve
remaining issues.
At a meeting on the morning of July 7, 1998, the Boards of Directors of
Americorp and ACB met to discuss further the Agreement and the Merger. At such
meeting, the Board received the oral opinion of Cal.Research which was later
confirmed in writing that the combination was fair from a financial point of
view to the Americorp shareholders and counsel reviewed the terms of the
Agreement and the transactions contemplated thereby. The Board unanimously
approved the Agreement and the transaction
41
<PAGE>
contemplated thereby at such meeting.
The Agreement was signed during the afternoon of July 7, 1998.
It is important to Americorp's Board of Directors to continue to offer
local management and ongoing support to the communities ACB has served since its
founding. That same philosophy is shared by CIB and, as a result of that
conviction provides a great opportunity to combine the two institutions. CIB
possesses an excellent customer and deposit base in Oxnard which compliments
ACB's existing customer and deposit base and provides the combined organization
a more competitive share of the market in Ventura County.
The Board and management of Americorp also anticipate that the Merger
will provide the potential to benefit from revenue enhancement opportunities.
These opportunities result from, among other factors: (1) the enhanced ability
to better serve the marketplace; (2) the ability to cross-sell a wider variety
of banking products and services; (3) the ability to generate increased loan and
fee income by providing higher lending limits; (4) the potential to increase
overall market share in the communities served; (5) the opportunity to increase
the loan portfolio; and (6) the ability to create more efficiencies, thereby
reducing overall operating costs to both institutions. Additionally, the Board
of Directors also considered that the larger size of the surviving bank, along
with Americorp's intention to explore listing the Americorp Stock on Nasdaq
would increase shareholder liquidity.
In reaching its conclusion, Americorp's Board of Directors considered
information and advice from several specialists including Cal.Research and legal
advisors. After consideration of the financial performance, business operations,
capital levels, and asset quality of the institutions, it was decided to pursue
a combination of the Parties.
The Board of Directors of Americorp believes that the terms of the
Merger are fair to and in the best interests of Americorp and its shareholders.
In addition to the considerations already described, in unanimously approving
the Agreement, the Board of Directors considered a number of factors, including
the following, without assigning any specific or relative weights to the
factors:
(i) The Board of Directors believes that the Exchange Ratio
provided for in the Agreement represents fair consideration. In addition,
Cal.Research concluded that the terms of the Merger are fair to the
stockholders of Americorp from a financial point of view.
(ii) It is anticipated that the Merger will increase the liquidity
of the stock by expanding the size of the shareholder base.
(iii) It is expected that the Merger will result in better
opportunities to lend to a more diverse customer base.
(iv) The Merger is expected to result in a strong, deep management
team that will allow
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<PAGE>
Americorp to address more effectively changes in technology, regulation,
competition, products and services.
(v) The capital of the combined institutions will provide an
excellent opportunity to expand and leverage the overall expense structure of
the combined institutions.
Accordingly, Americorp's Board of Directors has approved the Agreement
and the transactions contemplated thereby and recommends approval of the same by
the shareholders of Americorp.
BACKGROUND AND REASONS FOR THE MERGER AND MANAGEMENT'S RECOMMENDATION--
CIB
Channel Islands Bank is proud of its community bank roots, and its
banking philosophy is deeply steeped in the independent bank tradition of
customer service and community involvement. CIB conducts general banking
operations in Camarillo and Oxnard, Ventura County, California. In serving
individuals, small businesses and mid-market corporations, CIB historically
has focused on a community-based approach to banking.
From time to time in 1997 and 1998, CIB had meetings and discussions
with a number of institutions with respect to potential acquisitions and
business combinations. The institutions that discussed certain business
combinations with CIB were only those institutions that focused on the
community-based approach to banking and were located in markets that would
provide CIB with both strategic and synergistic benefits. One of the
institutions that CIB had such discussions with was Americorp and ACB.
After several informal discussions, both CIB and Americorp began to
realize that in order to compete more effectively with the larger financial
institutions resulting from the various consolidations and mergers in the
industry locally, both institutions needed to increase in size, and both CIB
and Americorp saw the advantages of a potential business combination. At the
same time, each recognized the opportunity to build a larger regional,
independent financial institution in the Ventura County market.
In the second quarter of 1998, the principals of CIB and Americorp met
several times to preliminarily discuss the possible synergies between the
companies. CIB and Americorp thereafter continued to discuss a possible
combination of the companies. In June, 1998, Americorp presented a proposal to
CIB that provided for a financial structure of a tax-free exchange of stock to
be accounted for on a pooling-of-interest basis, and such proposal was described
to the CIB Board on June 1, 1998. At meetings over the following several weeks,
the principals of CIB and Americorp further discussed a proposed merger of CIB
and Americorp. At the June 18, 1998 meeting of the CIB Board, Mr. Priske
described the operations of Americorp and ACB, the proposed merger terms and
plans for CIB's offices and staff following the proposed merger. The CIB Board
considered this information and then authorized Mr. Priske to proceed to
negotiate a tentative merger agreement between CIB and Americorp. The CIB Board
also authorized management to select appropriate legal counsel and financial
advisor to advise it
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<PAGE>
on the strategic alternatives available to CIB. Thereafter, CIB retained
Knecht & Hansen as its legal advisor and the Findley Companies ("Findley") as
its financial advisor to issue a fairness opinion in connection with CIB's
consideration of the merger proposal from Americorp.
Following continued negotiations between the representatives of CIB and
Americorp, on July 7, 1998, the CIB Board deliberated at length concerning the
transaction and to review the Agreement and related documents, its strategic
alternatives, the competitive banking environment in California, the prospects
for CIB if it remained independent and the results of the due diligence review
of Americorp and ACB performed by CIB management, legal counsel and accountants
conducted in June and early July, 1998. At this meeting, Findley discussed with
the CIB Board its analysis of the Merger and delivered to the CIB Board its
opinion that the consideration to be received in the Merger was fair to the CIB
shareholders from a financial point of view (see "CIB Fairness Opinion").
Thereafter, the CIB Board approved, and authorized the execution of, the
Agreement.
The CIB Board unanimously approved the Merger at its Board of Directors
meeting on July 7, 1998. The CIB Board believes that the terms of the Merger are
fair to, and in the best interests of, CIB and its shareholders and recommends
that the shareholders of CIB vote FOR approval of the Merger.
In reaching its conclusion, the CIB Board considered information
provided at meetings of its Board of Directors in June 1998 and July 1998,
including, among other things, (i) information concerning the financial
performance and condition, business operations, capital levels, asset quality,
loan portfolio breakdown, due diligence review of the loan portfolio, material
contracts, contingent liabilities of Americorp and ACB, and prospects of
Americorp and ACB; (ii) the structure of the transaction, including the fact
that the CIB shareholders would receive approximately 40% of the common equity
of Americorp on a fully diluted basis; (iii) the fact that Mr. Priske would
serve as Vice Chairman of the Board of Directors of Americorp and ACB, that the
Board of Directors of Americorp and ACB would be comprised of four directors
from CIB, the total number of directors of Americorp and ACB would total nine;
(iv) the terms of the Merger Agreement and other documents to be executed in
connection with the Merger, including the covenant of Americorp in the Agreement
allowing CIB to pay semi-annual dividends to the shareholders of CIB; (v) the
presentation of Findley and the opinion of Findley that the Merger is fair to
the shareholders of CIB from a financial point of view; (vi) the results of its
due diligence examination of Americorp and ACB; (vii) the terms of other recent
comparable combinations of banks and bank holding companies; (viii) the CIB
Board's review with its legal and financial advisors of alternatives to the
Merger, the range of possible values to CIB shareholders obtainable through
implementation of alternatives and the timing and likelihood of the same; (ix)
the current and prospective economic environment and regulatory and competitive
burdens and constraints facing community banks; (x) the pro forma financial
statements of the combined companies and the capitalization of the combined
companies; (xi) the CIB Board's review with its legal and financial advisors of
potential merger targets; (xii) the compatibility of CIB with Americorp and ACB
and the complementary lines of business; (xiii) the geographic distribution of
Americorp and ACB offices vis-a-vis CIB's strategic plan; (xiv) the advantages
of being part of a larger entity, including the potential for operating
efficiencies, the effect of a higher lending limit on CIB's customers and
prospective customers, and the generally higher trading multiples
44
<PAGE>
of larger financial institutions; (xv) the business strategies, the strength
and depth of management of the combined entity and the extent of their
interest in continuing CIB's significant business relationships in Ventura
county; (xvi) the ability of a larger institution to compete in the banking
environment and to leverage overhead costs; (xvii) the effect of the Merger
on existing shareholders, employees, officers and customers of CIB; (xviii)
the current and prospective economic environment and regulatory and
competitive burdens and constraints facing commercial banks; (xix)
information concerning the ability of CIB and ACB to achieve operating
efficiencies; (xx) the impact on the communities served by CIB and ACB in the
Merger, and the increased ability to serve the communities through the larger
branch network; (xxi) the unprecedented consolidation currently underway in
the banking industry and increased competition from larger independent banks
in California; (xxii) the value of the consideration offered by Americorp
compared to the value of the consideration offered in other acquisitions of
financial institutions in California in 1996, 1997 and 1998 and the prospects
for enhanced value of the combined entity in the future; (xxiii) the tax-free
nature of Americorp offer; (xxiv) the intention of the parties that Americorp
Stock may be listed on Nasdaq in one year of the consummation of the
Agreement and the future liquidity of Americorp Stock; and (xxv) the
prospects and valuation of CIB on a stand alone basis and on the basis of
alternative stand alone strategies, such as dividends, share repurchases,
restructurings and growth through acquisitions.
The managements of CIB and Americorp saw opportunities for increased
operating efficiencies. In particular, the managements believe that cost savings
can be achieved as a result of economies of scale, the combination of executive
management and elimination of certain central staff, the consolidation of data
processing and operations activities and the elimination of duplicative
administrative functions. There can be no assurance that Americorp and ACB will
be able to realize fully the increased operating efficiencies or that such
operating efficiencies will be realized in a timely manner.
Managements of CIB and Americorp believe that each complements each
other both in their community-based approach to banking and in terms of
geographic service areas. Consequently, CIB and Americorp believe that by
combining forces, CIB and Americorp will be able to more effectively compete and
successfully to take advantage of banking opportunities in the Southern
California market.
The foregoing discussion of the information and factors considered by
the CIB Board is not intended to be exhaustive, but constitutes the material
factors considered by the CIB Board. In reaching its determination to approve
and recommend the principal terms of the Merger, the CIB Board did not assign
relative or specific weights to the foregoing factors and individual directors
may have weighed such factors differently.
FOR THE REASONS SET FORTH ABOVE, THE CIB BOARD HAS UNANIMOUSLY APPROVED
THE AGREEMENT AS IN THE BEST INTEREST OF CIB AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT THE CIB SHAREHOLDERS APPROVE THE PRINCIPAL TERMS OF
THE MERGER.
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<PAGE>
AMERICORP FAIRNESS OPINION
Americorp retained Cal.Research to render a fairness opinion in
connection with the proposed merger among CIB, ACB and Americorp.
Cal.Research has rendered a written opinion (the "Opinion") to Americorp's
Board of Directors to the effect that the Exchange Ratio as defined in
section 1.1 of the Agreement, which definition includes certain possible
adjustments, is fair to the holders of Americorp Stock from a financial point
of view. No limitations were imposed by the Americorp Board of Directors upon
Cal.Research with respect to the investigations made or procedures followed
in rendering the Opinion.
THE TEXT OF THE OPINION OF CAL.RESEARCH, DATED AS OF AUGUST 12, 1998
WHICH SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON
THE REVIEW UNDERTAKEN BY CAL.RESEARCH, IS ATTACHED HERETO AS APPENDIX C.
AMERICORP SHAREHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. IN
FURNISHING SUCH OPINION, CAL.RESEARCH DOES NOT ADMIT THAT IT IS AN EXPERT
WITH RESPECT TO THE REGISTRATION STATEMENT OF WHICH THIS JOINT PROXY
STATEMENT/PROSPECTUS IS A PART WITHIN THE MEANING OF THE TERM "EXPERTS" AS
USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER NOR DOES IT ADMIT THAT ITS OPINION CONSTITUTES A REPORT OR
VALUATION WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT. THE SUMMARY
OF THE PROCEDURES AND ANALYSIS PERFORMED, AND ASSUMPTIONS USED BY
CAL.RESEARCH SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE TEXT OF SUCH OPINION. CAL.RESEARCH'S
OPINION IS DIRECTED TO THE AMERICORP BOARD OF DIRECTORS AND IS DIRECTED ONLY
TO THE CONSIDERATION TO BE PAID BY AMERICORP IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY AMERICORP SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE AMERICORP MEETING.
In rendering our opinion, Cal. Research has relied upon and assumed the
accuracy, completeness and fairness of all of the financial and other
information that was available to us from public sources and that was provided
to us by Americorp and CIB. Cal. Research has not assumed any responsibility for
independently verifying such information nor undertaken an independent
evaluation or appraisal of any of the assets or liabilities of the Company or
been furnished with any such evaluation or appraisal.
Cal. Research has, among other things:
(1) Reviewed the Agreement by and among ACB, Americorp and
CIB;
(2) Reviewed certain publicly available business and financial
information on the banks of Ventura County;
(3) Reviewed certain other companies that Cal. Research
considered relevant and compared them to ACB and CIB from a
financial point of view.
(4) Reviewed call reports to the banking regulators for
Americorp and CIB for the periods ending December 31, 1995,
December 3l, 1996, December 31, 1997, and March 31, 1998. Cal.
Research has also reviewed the Annual Reports to shareholders
for the
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years 1995, 1996, and 1997 for each company;
(5) For each company Cal. Research has also reviewed
information pertaining to classified or criticized loans,
premises, lease terms of office facilities, internal financial
reports, litigation reports, summaries of stock options, stock
prices for the last four quarters, and other data provided us
by the senior management personnel of each institution. Cal.
Research also reviewed a pro-forma analysis of both banks as
provided by ACB's President/CEO.
(6) Considered the financial terms of companies involved in
comparable business consolidations.
Set forth below is a brief summary of the analysis performed by Cal. Research
in reaching its opinion. Cal. Research assumed for purposes of its opinion
that the Merger will be accounted for as a pooling of interests transaction
under generally accepted accounting principles. An exchange ratio of 0.6338
shares of Americorp's stock for each share of CIB stock at time of closing,
the level at which CIB shares would be exchanged if the Effective Time (as
defined in the Agreement) were the same as the date of the opinion was
assumed. The Exchange Ratio was developed pursuant to extensive negotiations
between Americorp and CIB.
1. PRO-FORMA MERGER AND CONTRIBUTION ANALYSIS
Cal. Research analyzed the changes in the earnings, book value and
dividends attributable to one share of Americorp stock before the Merger to
those attributable to a share of stock resulting from the merger.
The analysis assumed a dividend pay-out ratio of 40% to 45% of
earnings as is consistent with Americorp's recent historical experience.
The analysis assumes that merger-related operating cost savings to be fully
realized during 1998 and each year thereafter and assumes the merger is
completed by the end of 1998. Merger-related costs were assumed to be
charged off during 1998.
The impact on ACB of volatility in CIB's earnings was shown by
calculating pro-forma results assuming CIB's earnings were as projected as
well as 125% of projections. Also, pro-forma results assuming 125% of
projected cost savings were realized and projections assuming 75% of
projected cost savings were realized were made for the post-merger bank.
The projected merger cost savings approximate 6.4% of the combined
institutions' projected non-interest expense. This ratio is in line with
other mergers reviewed by Cal. Research.
Pro-forma merger analyses assuming stated earnings projections and
the Merger-related cost savings projected by ACB were made. CIB's earnings
volatility was considered by calculating projected earnings as well as 125%
of projections. Also, 75% of projected earnings were taken into account.
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<PAGE>
Cal. Research analyzed the changes in earnings, book value and
dividends for the years 1999, 2000 and 2001 and included various
combinations of stand-alone and pro-forma projected earnings and cost
savings volatility assumptions as described previously.
Results showed that for 1999, on a stand-alone basis, earnings for
ACB were $1.82 per share and for the Surviving Bank would be $2.33 per
share. Assuming 75% merger cost savings, the Surviving Bank would earn
$2.14 per share for 1999. Assuming 125% merger cost savings, the Surviving
Bank would earn $2.53 per share for 1999.
Results for 2000 range from $2.02 per share to $2.92 to $3.31 per
share.
Results for 2001 range from $2.22 per share to $3.55 per share.
2. ANALYSIS OF OTHER MERGER TRANSACTIONS
Cal. Research reviewed the results of 18 merger and acquisition
transactions made throughout California during 1996 and 1997. Assets for
acquired institutions were over $100 million but less than $500 million.
The median price/tangible book ratio for these transactions was 1.90 times
book while the median price/earnings ratio was 17.55 times.
A review of 71 independent banks in the Hoefer & Arnett Banking
Universe revealed the median price/earnings ratio to be 16.98 times and the
median price/tangible book value ratio to be 2.16 times. These ratios were
used in the following cash flow analysis.
3. DISCOUNTED CASH FLOW ANALYSIS
Cal. Research undertook a cash flow analysis in order to compare
the present value if Americorp remained independent through 2001 or was
acquired in 2001 by another institution. The results produced in the
analysis did not purport to be indicative of actual values or expected
values of Americorp. Rather, the values obtained through the discounted
cash flow analysis analyzed the effect of possible earnings volatility and
potential Merger-related operating cost savings volatility. Various levels
of earnings for ACB and CIB were examined.
Cases examined were: ACB on a Stand-Alone basis, CIB on a
Stand-Alone basis, ACB and CIB on a Combined Basis, a Combined Bank
Assuming 75% of Projected Operating Cost Savings Were Realized, Combined
Bank Assuming 125% of Projected Cost Savings Were Realized and Combined
Bank Assuming ACB had made only 75% of Projections but CIB made 125% of
Projections.
The Discount Rates ranged from 8.0% to 12.0% over a three-year
period. A Terminal Price multiple, applied to Year 2000 estimated earnings
per share was the California median in the Fourth
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Quarter of 1997, or 16.98 times earnings. Lower levels of price-to-earnings
per share multiples would reflect an estimated future trading range of
Americorp, while higher levels of price-to-earnings multiples are more
indicative of a future sale of the stock of Americorp to a larger financial
institution.
For the ACB Stand-Alone Analysis, the cash flows were comprised of
dividends projected for the years 1999, 2000 and 2001 plus the Terminal
Value of Americorp stock at year-end 2001 (calculated by applying the
assumed terminal price to earnings ratio (16.98 times) to projected ACB
earnings per share.
For the combined bank analysis the cash flows were projected
pro-forma dividends in years 1999, 2000 and 2001 plus the Terminal Value
of the pro-forma combined entity's stock at year-end 2001.
Cal. Research also calculated the present values that would be
realized if 75% of the Projected Savings due to the merger were realized.
Also, the analysis was done to review results if 125% of projected
operating savings were obtained as well.
Stand-Alone present values per share for Americorp ranged from
$39.66 to $39.88 per share while pro-forma combined present values ranged
from $59.48 to $59.77 per share and from $62.95 to $63.26 per share if 125%
of projected cost savings were realized.
In comparison to these values the actual price per share traded
over the counter for Americorp was approximately $32.50 at December 31,
1997.
The results of these analyses do not purport to be indicative of
actual or expected values per share of Americorp stock. Rather, these
analyses are intended as a valuation technique, which relies on numerous
assumptions, including asset and earnings growth rates, dividend pay-out
rates, terminal values and a discount rate. A higher level of projected ACB
earnings raised the resulting present value for a given level of Channel
Islands' earnings on a pro-forma combined basis.
COMPARABLE COMPANY ANALYSES
Cal. Research examined recent historical data on Americorp and CIB
based upon data from their 1995, 1996 and 1997 Annual Reports to
Shareholders and subsequent quarterly data. Certain statistics were
compared to data for a peer group of California banks using publicly
available data contained in the Hoefer & Arnett Banking universe, 1997
Fourth Quarter. The Universe includes 71 California banking institutions
(neither CIB nor ACB are included in this group). Comparisons were made for
the period ending December 31, 1997. Also, a data base of 66 California
independent banks compiled by Sutro & Co. was reviewed for comparative
purposes.
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DECEMBER 31, 1997
(X000)
<TABLE>
<CAPTION>
INDEX
ACB CIB MEDIAN
<S> <C> <C> <C>
TOTAL ASSETS $133,769 $88,890 $233,622
MARKET CAPITALIZATION (1) 22,174 11,298 44,853
PRICE TO EQUITY PER SHARE 1.68x 1.52x 2.16x
PRICE TO LATEST 12 MOS. EARNINGS 17.0x 11.8x 16.98x
TANGIBLE EQUITY TO ASSETS 8.24% 7.58% 9.10%
NONPERFORMING ASSETS TO TOTAL ASSETS (2) 1.51% 0.26% 0.68%
LOAN LOSS RESERVE TO NON-PERFORMING LOANS 54% 1,146% 211.0%
RETURN ON ASSETS 0.81% 0.99% 1.37%
RETURN ON EQUITY 9.76% 13.36% 15.47%
EFFICIENCY RATIO (3) 75.65% 71.33% 65.04%
</TABLE>
Cal. Research is a banking consulting firm engaged in the valuation of
businesses and securities, including financial institutions, in connection
with mergers and acquisitions. It also provides other consulting services to
the financial services industries. Cal. Research has not previously provided
investment banking or consulting services to ACB or CIB.
The fee or any portion of it to be earned by Cal. Research is not
contingent upon the conclusions reached in this opinion.
CIB FAIRNESS OPINION
CIB has retained The Findley Group ("Findley") to act as its
financial advisor in connection with the Merger pursuant to an engagement
letter dated May 26, 1998 (the "Engagement Letter"). Findley has rendered to
the Board of Directors of CIB its written opinion dated July 7, 1998, as
affirmed on _________, 1998, pursuant to the terms of the Agreement that,
subject to the assumptions and limitations set forth therein, the Exchange
Ratio is fair, from a financial perspective, to CIB shareholders. A copy of
the opinion dated July 7, 1998 of Findley is attached as Appendix B to this
Joint Proxy Statement/Prospectus and should be read in its entirety. The
following summary is qualified in its entirety by reference to the full text
of the opinion. This opinion is addressed to the Board of Directors of CIB
and does not constitute a recommendation to any shareholder of CIB as to how
such shareholder should vote at the CIB Meeting.
- ---------------------
1) Based on December 31, 1997 market price.
2) Non-performing assets are loans 90 days past due and still accruing and
non-accrual and other real estate owned.
3) Efficiency ratio is non-interest expense as a percent of total revenues.
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In connection with its Fairness Opinion, Findley, among other things:
(a) reviewed certain publicly available financial and other data with respect to
CIB and Americorp, including the consolidated financial statements for recent
years and interim periods to March 31, 1998, the March 31, 1998 Call Reports for
CIB and ACB and certain other relevant financial and operating data relating to
CIB and Americorp made available to Findley from published sources and from the
internal records of CIB and Americorp; (b) reviewed the Agreement; (c) reviewed
certain historical market prices and trading volumes of CIB and Americorp Stock;
(d) compared CIB and Americorp from a financial point of view with certain other
companies that Findley deemed to be relevant; (e) considered the financial
terms, to the extent publicly available, of selected recent business
combinations of companies that Findley deemed to be comparable, in whole or in
part, to the Merger; (f) reviewed and discussed with representatives of the
management of CIB certain information of a business and financial nature
regarding CIB and Americorp furnished to Findley by CIB and Americorp, including
financial forecasts and related assumptions of CIB and Americorp; (g) made
inquiries regarding and discussed the Merger and the Agreement and other matters
related thereto with CIB's counsel; (h) reviewed litigation reports for both
CIB and Americorp; and (i) performed such other analyses and examinations as
Findley deemed appropriate.
CONTRIBUTION ANALYSIS. Findley analyzed the contribution of each CIB
and Americorp to, among other things, common equity and net income of the pro
forma combined companies for the period ending December 31, 1997, adjusted
through March 30, 1998. This analysis showed, among other things, that based on
pro forma combined balance sheets and income statements for CIB and Americorp as
of December 31, 1997, adjusted through March 30, 1998, CIB would have
contributed 39.9% of the deposits, 38.7 percent of the shareholder equity of the
combined companies (before costs savings and revenue enhancements), 40.4 percent
of gross income, 42.7 percent of net income for 1997 and 37.4 percent of 1998
estimated net income. Based upon the stock consideration to be paid in the
merger as provided in the Agreement, the CIB shareholders would own
approximately 38.7% of the combined companies on March 30, 1998 and are
estimated to own in excess of such percentage at Closing based upon the Exchange
Ratio.
DISCOUNTED CASH FLOW ANALYSIS. Findley examined the results of a
discounted cash flow analysis designed to compare the Exchange Ratio with the
present value, under certain assumptions, that would be attained if CIB remained
independent through 2001, at which time CIB was acquired by a larger financial
institution. The cash flows for the combined companies assumed that the Exchange
Ratio equals 0.69282 shares of Americorp for each share of CIB. The results
produced in the analyses did not purport to be indicative of actual values or
expected values of CIB or the combined companies at such future date. All cases
were analyzed assuming realization of operating cost savings, estimated by the
parties, in the amounts and time periods forecasted by the parties.
The discount rates used ranged from 10% to 14%. For the CIB stand alone
analysis, the terminal price multiples applied to the 2001 estimated earnings
per share ranged from 12.0 to 20.0. The lower levels of the price to earnings
values multiples range reflected an estimated future trading range of CIB or the
combined companies, while the higher levels of the price to earnings value
multiples range were more indicative of a future sale of CIB or the combined
companies to a larger financial institution.
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For the CIB stand alone analysis, the cash flows were comprised of the
projected stand alone dividends of $0.20 per share in years 1998 through 2001
plus the terminal value of CIB Stock at the year-end 2001 (calculated by
applying each one of the assumed terminal price to earnings value multiples as
stated above to the 2001 projected CIB earnings per share). A similar analysis
was done for Americorp using a cash dividend rate of $0.84 per share and for the
combined companies. The discount rates described above were then applied to
these cash flows to obtain the present values per share of CIB Stock.
Under a most likely scenario, the Findley analysis assumed that
projected earnings, among other things, would be achieved; that projected
operating cost savings are a minimum of $400,000 realized (for the combined
companies case) a present value discount rate of 12% and a terminal price to
earnings value multiple of 20.0. Assuming CIB remains independent through
2001 and is then acquired by a larger financial institution, a holder of one
share of CIB Stock today would receive cash flows with a present value of
$26.19. Assuming the Merger is consummated and that combined companies remain
independent through 2001 and is then acquired by a larger financial
institution, a holder of one share of CIB Stock today would receive cash
flows with a present value of at least $32.60.
ANALYSIS OF SELECTED BANK MERGER TRANSACTIONS. Findley reviewed the
consideration paid in recently completed transactions whereby certain banks were
acquired. Specifically, Findley reviewed 71 transactions involving acquisitions
of selected banks in California completed since January 1, 1996 (the "California
Acquisitions"). For each bank acquired in such transactions, Findley compiled
figures illustrating, among other things, the ratio of the premium (I.E.,
purchase price in excess of book value) to deposits, purchase price to book
value, and purchase price to previous year's earnings.
The figures for all banks acquired in the California Acquisitions
produced: (a) a median percentage of premium to deposits of 6.50%; (b) a median
ratio of purchase price to book value of 1.63; and (c) a median ratio of
purchase price to previous year's earnings of 17.10. The figures for 10 banks
acquired in California since 1996 that were approached on a merger of equals
basis produced: (a) a median percentage of premium to deposits of 6.57%; (b) a
median ratio of purchase price to book value of 1.49; and (c) a median ratio of
purchase price to previous year's earnings of 16.37.
In comparison, assuming that the Exchange Ratio to be paid in the
Merger equals $22.86 per share (using a value for Americorp of $33.00 per share)
recent trades for Americorp stock have been $34.00 per share, Findley determined
that the Exchange Ratio in the Merger represented a percentage of premium to
deposits of 6.17%, a ratio of purchase price to book value of 1.68 and a ratio
of purchase price to 1997 earnings of 15.23.
No other company or transaction used in the above analysis as a
comparison is identical to CIB, Americorp or the Merger. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of the companies to which Americorp, CIB
and the Merger are being compared.
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COMPARABLE COMPANY ANALYSIS. Using public and other available
information, Findley compared certain financial ratios of CIB and Americorp
(including the ratio of net income to average total assets ["return on average
assets"], the ratio of net income to average total equity ["return on average
equity"], the ratio of average equity to average assets and certain credit
ratios for the year ended December 31, 1997 and the interim period ending March
30, 1998) to a peer group consisting of 20 selected banks located in California.
No company used in the analysis is identical to CIB or Americorp/ACB. The
analysis necessarily involved complex considerations and judgments concerning
differences in financial and operating characteristics of the companies. The
results of this analysis indicated that CIB performed slightly ahead of peer
group level on the basis of profitability in 1997 and Americorp/ACB performed
slightly below peer group levels on the basis of profitability in 1997. CIB's
return on average assets and return on average equity for 1997 were above peer
group levels, inclusive of its interest spread factors (interest earned on
assets minus interest paid on liabilities). CIB's performance in 1997,
continuing through March 31, 1998, showed better than peer group levels
concerning non-performing assets. CIB's non-interest expense, inclusive of
payroll expense, quarters expense and other related non-interest expenses were
higher than peer group level. Americorp/ACB return on average assets, return on
average equity for 1997 was slightly below peer group levels. In addition,
delinquent loans and non-performing loans were higher than peer group levels.
Under the terms of the Merger, which requires a proportionate representation on
the Board of Directors of outside Directors of Americorp/ACB after consummation
of the transaction, the combined entity will be on an average with peer group
performance with regard to return on average assets, return on average equity
and other non-performing asset figures. Under the transaction, the Exchange
Ratio is based upon the book value per share of CIB and Americorp on the
Determination Date, taking into consideration fully funded loan loss reserves
and other appropriate reserves and expenses that are required for this
transaction.
The foregoing summarizes the material portions of Findley's report, but
does not purport to be a complete description of the presentation by Findley to
CIB's Board of Directors or of the analyses performed by Findley. The
preparation of a fairness opinion is not necessarily susceptible to partial
analysis or summary description. Findley believes that its analyses and the
summary set forth above must be considered as a whole and that selecting a
portion of its analyses and of the factors considered, without considering all
analyses and factors would create an incomplete view of the process underlying
the analyses set forth in its presentation to the CIB Board of Directors.
In performing its analyses, Findley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Americorp or CIB. The
analyses performed by Findley are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Findley's analysis of the fairness, from a financial standpoint, of the Merger
to CIB's shareholders and were provided to the CIB Board of Directors in
connection with the delivery of Findley's opinion. The analyses do not purport
to be appraisals or to reflect the prices at which any securities may trade at
the present time or at any time in the future. Findley used in its analyses
various projections of future performance prepared by the management of CIB. The
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projections are based on numerous variables and assumptions which are
inherently unpredictable and must be considered not certain of occurrence as
projected. Accordingly, actual results could vary significantly from those
set forth in such projections.
In rendering its Fairness Opinion, Findley relied upon and assumed
without independent verification the accuracy and completeness of all of the
financial and other information reviewed by Findley for purposes of its
opinion. Findley did not make an independent evaluation or appraisal of the
assets and liabilities of Americorp, CIB or any of their respective
subsidiaries. CIB did not impose any limitations or restrictions with respect
to the scope of Findley's investigation or the procedures or methods it
followed, or with regard to any other matters relating to Findley's rendering
of the opinion regarding the fairness of the Merger. The Findley Group did
not participate in negotiations regarding the Agreement.
CIB's Board of Directors selected and instructed Findley to render an
opinion with respect to the fairness of the Merger to CIB's shareholders from a
financial perspective based on its belief that Findley is experienced and
qualified in such matters. Findley has extensive experience in the evaluation of
banks in connection with mergers and acquisitions, and valuations for corporate
and other purposes. In over 40 years of bank consulting, Findley has been
involved in the creating, developing, merging and acquisition of hundreds of
financial institutions.
Pursuant to the Engagement Letter, CIB agreed to pay Findley a fee of
$15,000 for Findley's services rendered to CIB in connection with the fairness
opinion plus expenses. CIB has agreed to indemnify Findley against certain
liabilities and expenses in connection with its services as financial advisor to
CIB. ACB has also agreed to pay Findley a fee of up to $2,000 plus expenses for
Findley's services to ACB in connection with the FDIC Application.
EXCHANGE RATIO
The issued and outstanding shares of Americorp Stock at the
Effective Time will remain outstanding (other than shares as to which
statutory dissenters' rights are perfected).
Other than shares as to which statutory dissenters' rights are
perfected, each share of CIB Stock issued and outstanding immediately prior to
the Effective Time will automatically, without any action on the part of the
holder thereof, be canceled and converted into the right to receive a number of
shares of Americorp Stock as determined by the Exchange Ratio established in the
Agreement.
The Exchange Ratio (i.e. the number of shares of Americorp Stock into
which a share of CIB Stock will be converted) will be computed by dividing the
CIB Book Value Per Share by the Americorp Book Value Per Share. Book Value Per
Share for the respective Parties will be determined as of the month end
preceding the Effective Time by dividing such Party's aggregate book value by
its number of shares outstanding on such date. "Aggregate Book Value" is a
Party's stockholders' equity on such date determined in accordance with
generally accepted accounting principles except (A) as otherwise provided in the
Agreement, (B) such amount will not be reduced by Merger related expenses, and
(C) the allowance
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for loan and lease losses shall be increased by any impairment in the
allowance. Any impairment in the allowance will be determined in accordance
with generally accepted accounting principles and applicable bank regulatory
requirements.
The exact amount of the Exchange Ratio is dependent, in part, upon
future results and, therefore, presently can not be determined. By way of
illustration only, if the respective Book Values Per Share had been
determined on June 30, 1998 and without any adjustment as permitted in the
Agreement, Americorp's Book Value Per Share would have been $20.02, CIB's
Book Value Per Share would have been $13.96 and the Exchange Ratio would have
been 0.6973 shares of Americorp Stock for each share of CIB Stock. THE ACTUAL
EXCHANGE RATIO MAY BE HIGHER OR LOWER THAN THE PRECEDING PRO FORMA
ILLUSTRATION.
If the Parties can not agree on the respective amounts of Book Value
Per Share, the Exchange Ratio or any adjustments to the foregoing (including the
amount of impairment to any Party's allowance for loan losses), the Parties
shall attempt to agree upon the amount in dispute within seven days. If no
mutual agreement is reached within said period, the Parties shall immediately
hire an independent expert qualified to render an opinion regarding the amount
of the particular matter in dispute. The Parties shall cooperate fully with any
such independent expert and will equally split the cost of such expert. The
opinion of such expert shall be binding on the Parties for purposes of the
Agreement.
The amount of adjustment, if any, to the respective Book Values Per
Share cannot currently be predicted.
FRACTIONAL SHARES
No fractional shares of Americorp Stock will be issued in the
Merger. In lieu thereof, each holder of CIB Stock who would otherwise be
entitled to receive a fractional share will receive an amount in cash equal
to the product (calculated to the nearest ten thousandth) obtained by
multiplying (a) the Americorp Book Value Per Share times (b) the fraction of
the shares of Americorp Stock to which such holder would otherwise be
entitled. No such holder shall be entitled to dividends or other rights in
respect of any such fraction.
EFFECTIVE TIME OF MERGER
The Effective Time shall occur on the day that the Agreement of Merger
(which is Exhibit A to the Agreement) is filed with the DFI after having been
previously filed with the Secretary with the DFI's approval endorsed thereon in
accordance with the provisions of the California Financial Code. The Effective
Time shall occur following the last to occur of (i) receipt of all necessary
regulatory approvals with the expiration of any applicable regulatory waiting
periods and (ii) satisfaction of the other conditions precedent set forth in the
Agreement. See "Conditions to the Merger." It is anticipated that the Effective
Time will occur sometime during the fourth quarter of 1998 or in early 1999. In
no event shall the Effective Time be later than March 31, 1999 unless a later
date is agreed to by the Parties.
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MANAGEMENT AND OPERATIONS OF AMERICORP AND ACB AFTER THE MERGER
At the Effective Time, CIB will be merged with and into ACB and its
separate corporate existence will terminate.
The number of directors of Americorp at the Effective Time will be
increased to nine and Allen W. Jue, Robert J. Lagomarsino, Gerald J.
Lukiewski, E. Thomas Martin, Harry L. Maynard (all of whom are from Americorp
and ACB), Michael T. Hribar, Edward F. Paul, Joseph L. Priske and Jacqueline
S. Pruner (all of whom are from CIB) will serve as the Board of Directors of
Americorp and ACB after the Merger until their successors have been chosen
and qualified in accordance with applicable law. Messrs Jue, Lagomarsino,
Paul and Priske will serve as the executive committee of Americorp and ACB
after the Merger. After the Merger, the principal officers of Americorp and
ACB will be Allen W. Jue (the current chairman of Americorp/ACB), who will
serve as chairman of the board, Joseph L. Priske (the current chairman of
CIB), who will serve as Vice Chairman, and Gerald J. Lukiewski (the current
president and chief executive officer of Americorp/ACB), who will serve as
president and chief executive officer. Thomas E. Anthony (the current Senior
Vice President/Chief Lending Officer of CIB), Allen R. Partridge (the current
Senior Vice President/Chief Financial Officer of CIB) and Mary Martha Stewart
(the current Senior Vice President/Chief Operating Officer of ACB) will serve
as the Chief Lending Officer, Chief Financial Officer and Chief Operating
Officer, respectively, of ACB after the Merger. Joseph L. Priske will also
serve as chairman of ACB's loan committee.
The Articles of Incorporation and Bylaws of Americorp (except as
otherwise noted above) will continue to govern the business and affairs of
Americorp after the Merger until amended or repealed in accordance with
applicable law. The Articles of Incorporation and Bylaws of ACB will continue
to govern the business and affairs of ACB after the Merger until amended or
repealed in accordance with applicable law except the head office of ACB will
be relocated to the current head office location of CIB.
AMENDMENT TO BYLAWS OF AMERICORP
Shareholder approval of the principal terms of the Agreement and the
transaction contemplated thereby includes the approval of an amendment to the
Americorp bylaws to expand the number of its authorized directors at the
Effective Time and the election of Messrs. Lukiewski, Hribar, Paul and Priske
and Ms. Pruner as directors of Americorp. See "Management and Operations of
Americorp and ACB After the Merger". In order to effect such expansion,
shareholder approval of the principal terms of the Agreement and the
transaction contemplated thereby will also include approval of an amendment
to the first two sentences of Section 4.2(a) of the Americorp bylaws to read
as follows:
"4.2 Number, Election, Qualification and Term of Office of
Directors
(a) Number. The number of Directors of this Corporation
shall be not fewer than seven (7) nor more than thirteen
(13), the exact numnber
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within such range to be fixed by the Board of Directors or
the Shareholders of the Corporation from time to time. Until
changed, the exact number of Directors shall be nine (9)."
If for any reason the Merger is not carried out, the amendment to the bylaws
will not become effective.
REGULATORY APPROVALS
The consummation of the Merger is subject to various conditions,
including, among others, receipt of the prior approvals of the DFI and the
FDIC.
The Agreement provides that the obligations of the Parties to
consummate the Merger are conditioned upon all regulatory approvals having
been granted by March 31, 1999 without the imposition of conditions which, in
the opinion of Americorp would materially adversely effect the financial
condition or operations of any Party or otherwise would be burdensome.
Applications for regulatory review and approval of the Merger and
the related transactions have been filed. There can be no assurance that the
DFI and the FDIC will approve or take other required action with respect to
the Merger and the related transactions or as to the date of such approvals
or action.
In determining whether to approve the Merger, the DFI will consider
factors such as (i) the effects of the Merger on competition; (ii) the
effects of the Merger on the convenience and needs of the communities to be
served; (iii) the financial condition of ACB; (iv) whether the Merger is fair
and reasonable to the depositors, creditors and shareholders of Americorp,
ACB and CIB; (v) the competence, experience and integrity of ACB's
management; and (vi) whether the Merger is fair, just and equitable to
Americorp, ACB and CIB.
In determining whether to approve the Merger, the FDIC will consider
factors such as (i) the financial condition, competence, experience and
integrity of ACB's management; and (ii) the effect of the Merger on
competition.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As a condition to the Merger, each of the directors of the respective
Parties has entered into an agreement whereby each has agreed to (i) vote his or
her shares of Stock in favor of approving the principal terms of the Agreement
and the transactions contemplated thereby, (ii) recommend, subject to his or her
fiduciary duty, to the Party's shareholders to vote in favor of the Agreement,
(iii) not dispose, subject to certain exceptions, of his or her shares of Stock,
and (iv) cooperate fully with the other Parties in connection with the Merger.
Under these agreements the respective directors of CIB and Americorp
have agreed to vote their respective shares (approximately ___% of the
outstanding shares in the case of CIB Stock and
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approximately ___% of the outstanding shares in the case of Americorp Stock)
to approve the principal terms of the Agreement, increasing the likelihood
that the Merger will be approved. The affirmative vote of the holders of an
additional ___% (in the case of CIB) and ___% (in the case of Americorp) of
the respective outstanding shares voting at the respective Meetings will be
required in order to approve the Agreement.
Messrs. Hribar, Paul and Priske and Ms. Pruner will be added as
directors of Americorp and ACB at the Effective Time. Messrs. Paul and Priske
will also serve on the executive committee of Americorp and ACB. Mr. Priske,
the current Chairman of CIB, will be elected as Vice Chairman of Americorp
and ACB and will be chairman of ACB's loan committee.
The officers and employees of CIB at the Effective Time will become
officers and employees of ACB subject to the policies of ACB, will be
entitled to participate in all employee benefits and benefit programs of ACB
on the same basis as similarly situated employees of ACB and will be credited
for eligibility, participation and vesting purposes with their respective
years of past service with CIB.
Pursuant to the Agreement, a committee has been established to
determine, among other things, a personnel, salary and benefits structure for
ACB after the Merger and to fix the amount of severance to be paid to
officers and employees of the Parties displaced by the Merger. The committee
is composed of Gerald J. Lukiewski (on behalf of Americorp) and Joseph L.
Priske and Jacqueline Pruner (on behalf of CIB). The amount of severance
benefits has not yet been determined by the committee.
ACB has also agreed to honor certain employment agreements for CIB's
Senior Lending Officer and Chief Financial Officer. For a description of such
agreements, see "BUSINESS OF CIB - Executive Compensation." Messrs. Anthony
and Partridge will become the Chief Lending Officer and the Chief Financial
Officer of ACB after the Merger.
Subject to the receipt of any required consents, a new stock option
plan will be adopted by Americorp in order for each person who is an officer
or employee of CIB and who will continue with ACB after the Merger, and for
each director of CIB, who does not exercise his stock option to have the
right to receive a substitute stock option from Americorp on a fully vested
basis.
CIB's directors' and officers' liability insurance will have its
discovery period extended for 36 months with respect to all matters arising
from facts or events which occurred before the Effective Time for which CIB
would have had an obligation to indemnify its directors and officers.
In connection with the three current directors of CIB and the two
current directors of Americorp who will resign at the time of the Merger, it
is anticipated that ACB will enter into consulting agreements with such
persons in order for them to continue to provide services and guidance to
Americorp and ACB after the Merger. It is anticipated that Catherine S. Wood
and Lincoln E. Cryne, (directors of Americorp and ACB) will receive aggregate
payments of $33,000 and $68,000, respectively, pursuant to their consulting
agreements and that Fred G. Buenger, William Burke and Glenn Farr (directors
of CIB) will
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receive $33,000, $33,000 and $4,500, respectively, pursuant to their
consulting agreements.
ADDITIONAL AGREEMENTS
In addition to the directors agreements described in "Interests of
Certain Persons in the Merger," the directors and certain other affiliates of
each of the Parties have entered into agreements restricting such persons'
ability to sell shares of Stock which such person has acquired or may acquire
in connection with the Merger except in accordance with such agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Parties have not requested a ruling from the Internal Revenue
Service in connection with the Merger. The following is a summary of the
opinion of Vavrinek, CIB's independent auditors, that CIB and Americorp
received concerning the material federal income tax consequences resulting
from the Merger. Consummation of the Merger is conditioned upon receipt by
CIB and Americorp of such opinion prior to the date of this Joint Proxy
Statement/Prospectus. The following is based upon applicable federal law and
judicial and administrative interpretations on the date hereof, any of which
is subject to change at any time and representations from the management of
CIB, Americorp and ACB.
(i) The Merger will qualify as a reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"), and CIB,
Americorp and ACB each will be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
(ii) No gain or loss will be recognized by any of the Parties as
a result of the Merger.
(iii) No gain or loss will be recognized by a shareholder of CIB
on the receipt solely of Americorp Stock in exchange for his shares of CIB
Stock.
(iv) The tax basis of the assets in ACB after the merger will be
the same as the tax basis of the assets held by CIB and ACB immediately
before the Merger.
(v) The holding period of Americorp Stock to be received in the
Merger by a CIB shareholder will include the holding period of shares of
CIB Stock exchanged therefor, provided that the shares of CIB Stock are
held as capital assets at the Effective Time.
(vi) The tax basis of Americorp Stock to be received in the
Merger by CIB shareholders will be the same as the basis of the sharers of
CIB Stock surrendered in exchange therefor, decreased by the amount of
basis allocated to any cash received in lieu of fractional shares that are
hypothetically received by the CIB shareholders and redeemed for cash.
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(vii) The payment of cash to shareholders of CIB in lieu of
fractional share interest of Americorp Stock will be treated as if the
fractional shares were distributed as part of the exchange and them
redeemed by Americorp. These cash payments will be treated as having been
received as a distribution in redemption of that fractional share interest
subject to the conditions and limitations of Section 302 of the Code. If a
fractional share of Americorp Stock would constitute a capital asset in the
hands of a redeeming shareholder, any resulting gain or loss will be
characterized as a capital gain or loss in accordance with the provisions
and limitations of Subchapter P of Chapter 1 of the Code.
(viii) No gain or loss will be recognized for federal income tax
purposes by the holders of outstanding stock options granted under CIB's
stock option plan as a result of the granting of substitute options
pursuant to Americorp's stock option plan.
(ix) The granting of any substitute stock option to a holder of a
CIB stock option will not be deemed a modification of an incentive stock
option.
The opinion of Vavrinek summarized above is not binding on the
Internal Revenue Service, which could take positions contrary to the
conclusions in such opinion.
The exchange of Americorp Stock or CIB Stock for cash pursuant to the
exercise of dissenters' rights will be a taxable transaction. Holders of
Americorp Stock or CIB Stock electing to exercise dissenters' rights should
consult their own tax advisers as to the tax treatment in their particular
circumstances. See "Dissenting Shareholders' Rights."
DUE TO THE INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE MERGER,
IT IS RECOMMENDED THAT CIB AND AMERICORP SHAREHOLDERS CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES OF THE MERGER (INCLUDING THE
APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS).
EXCHANGE PROCEDURES
As soon as practicable after the Effective Time, the exchange agent
to be designated by the Parties (the "Exchange Agent") will mail to each
holder of record of outstanding shares of CIB Stock a letter of transmittal
which is to be used by each CIB shareholder to return to the Exchange Agent
the stock certificates representing the CIB Stock owned by him (the "Old
Certificates"), which certificates should be duly endorsed in blank by such
CIB shareholder. As soon as practicable after receiving such Old Certificates
from a CIB shareholder together with the duly executed letter of transmittal
and any other items specified by the letter of transmittal, the Exchange
Agent will deliver to such CIB shareholder new certificates ("New
Certificates") representing the appropriate number of shares of Americorp
Stock, together with checks for payment of cash in lieu of fractional shares.
No dividends or other distributions that are declared on Americorp Stock will
be paid to persons otherwise entitled to receive the same until the Old
Certificates have been surrendered in exchange for New Certificates, but upon
such surrender, such dividends or other distributions, from and after the
Effective Time, will be paid to such persons in accordance with the terms of
Americorp Stock. No interest will be paid to the CIB shareholders on the
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cash or the value of the Americorp Stock into which their shares of CIB Stock
will be exchanged.
CIB SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
SALES OF AMERICORP STOCK
The shares of Americorp Stock to be issued to shareholders of CIB in
the Merger have been registered under the Securities Act. Such shares will be
freely transferable under the Securities Act, except for shares issued to any
person who may be deemed to be an "affiliate" of CIB within the meaning of
Rule 145 under the Securities Act.
NASDAQ LISTING
The Parties have agreed that following the Effective Time,
consideration will be given to listing the shares of Americorp Stock on
Nasdaq with the intent to so list such shares during the first full year of
operations. However, no assurance can be given that such application will be
filed or that the shares of Americorp Stock will become so listed.
ACCOUNTING TREATMENT
The Parties anticipate that the Merger will be treated as a pooling
of interests for accounting purposes. Prior to the Effective Time and as a
condition precedent to the closing, the respective accounting firms of the
Parties will confirm in writing the accounting treatment of the Merger as a
pooling of interest. The unaudited pro forma financial information contained
in this Joint Proxy Statement/Prospectus has been prepared using the pooling
of interest accounting method to account for the Merger. See "UNAUDITED PRO
FORMA COMBINED FINANCIAL STATEMENTS."
CONDITIONS TO THE MERGER
The obligation of each of the parties to consummate the Merger is
subject to the satisfaction or waiver on or before the Effective Time of,
among other things, the following conditions: (i) the Agreement and the
transactions contemplated thereby will have received all requisite approvals
of the shareholders and Boards of Directors of CIB, ACB and Americorp; (ii)
no judgment, decree, injunction, order or proceeding will be outstanding or
threatened by any governmental entity which prohibits or restricts the
effectuation of, or threatens to invalidate or set aside the Merger
substantially in the form contemplated by the Agreement unless counsel to the
Party against whom such action or proceeding was instituted or threatened
renders to the other Parties a favorable opinion that such judgment, decree,
injunction, order or proceeding is without merit; (iii) by March 31, 1999,
all approvals or consents of any applicable governmental agency will have
been obtained or granted for the Merger and the transactions contemplated by
the Agreement (in each case either unconditionally or without the imposition
of conditions or
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limitations that are applicable to any Party or would become applicable to
Americorp or ACB after the Merger that Americorp reasonably and in good faith
concludes would materially adversely affect the financial condition or
operations of any Party or otherwise would be materially burdensome to any
Party) and the applicable waiting period under all laws will have expired;
(iv) the Registration Statement shall have been declared effective by the SEC
and shall not be the subject of any stop order or proceedings seeking or
threatening a stop order; (v) Americorp shall have received all state
securities permits and other authorizations necessary to issue the Americorp
Stock to consummate the Merger; (vi) CIB and Americorp will have received an
opinion reasonably satisfactory to CIB and Americorp from Vavrinek to the
effect that the Merger will not result in the recognition of gain or loss for
federal income tax purposes, nor will the issuance of Americorp Stock result
in the recognition of gain or loss to holders of CIB Stock who receive
Americorp Stock in the Merger (see "- Certain Federal Income Tax
Consequences"); (vii) the Parties' respective accounting firms will have
confirmed in writing to CIB and Americorp that the Merger will quality for
pooling of interests accounting treatment (see "-Accounting Treatment"); and
(viii) all third party consent necessary to permit the parties to consummate
the Merger will have been obtained except under certain circumstances.
The obligations of CIB to consummate the Merger are also subject to
fulfillment of certain other conditions, including the following: (i) there
will not have occurred, between July 7, 1998 and the Effective Time, any
materially adverse change in the business, financial condition, results of
operations or properties of Americorp or ACB; (ii) receipt of the Findley
Opinion; and (iii) all corporate steps necessary to effect the corporate and
management changes described in "Management and Operations of Americorp and
ACB After the Merger" will have been completed.
The obligations of Americorp and ACB to consummate the Merger are
also subject to the fulfillment of certain other conditions. including the
following: (i) there will not have occurred, between July 7, 1998 and the
Effective Time, any material adverse change in the business, financial
condition, results of operations or properties of CIB; (ii) receipt of the
Cal.Research Opinion; and (iii) all corporate steps necessary to effect the
corporate and management changes described in "Management and Operations of
Americorp and ACB After the Merger" will have been completed
Additionally, the consummation of the Merger is subject to the
performance of covenants, the execution and delivery of certain ancillary
documents, the accuracy of representations and warranties and the receipt of
various legal opinions, third-party consents, officers' certificates and
other documents.
If these and other conditions are not satisfied or waived, the Agreement
may be terminated. The Agreement may also be terminated upon the occurrence
of certain other events. See "-Termination."
NONSOLICITATION
Under the terms of the Agreement, Americorp and CIB have each
agreed not to solicit, initiate or encourage any "Competing Transaction" (as
hereinafter defined). In addition, each has agreed (unless it determines,
with advice of counsel, that its fiduciary duty requires otherwise) not to
participate in any
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<PAGE>
negotiations or discussions regarding, or furnish any information with
respect to, or otherwise cooperate in any way in connection with, any effort
or attempt to effect any Competing Transaction with or involving any person
other than a Party unless it receives a bona fide offer from a person other
than the Parties to the Agreement and subject to fiduciary obligations. Each
Party has agreed to promptly notify the other party of the terms of any
proposal which it may receive in respect of any Competing Transaction. The
term "Competing Transaction" means any of the following: a merger,
consolidation, share exchange or other business combination; a sale, lease,
exchange, mortgage, pledge, transfer or other disposition of assets
representing 10% or more of Americorp's or of CIB's assets; a sale of shares
of capital stock (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock), representing 10% or more of the voting power; a tender offer
or exchange offer for at least 10% of the outstanding shares; a solicitation
of proxies in opposition to approval of the Merger by shareholders; or a
public announcement of an unsolicited bona fide proposal, plan or intention
to do any of the foregoing.
Failure to act or refraining from doing any act in certain
circumstances by a Party in connection with a Competing Transaction will
result in the other Party having the right to terminate the Agreement. If the
Agreement were to be so terminated and the Party involved in the Competing
Transaction enters into an agreement for a Competing Transaction prior to the
termination of the Agreement or during the 12 month period immediately
following the termination, such Party will be obligated to pay the other
Party $750,000 which amount represents (i) direct costs and expenses
(including, but not limited to, fees and expenses of financial or other
consultants, printing costs, accountants and counsel) incurred in negotiating
and undertaking to carry out the transactions contemplated by the Agreement,
including management time devoted to negotiation and preparation for the
transactions contemplated by the Agreement; (ii) indirect costs and expenses
incurred in connection with the transactions contemplated by the Agreement;
and (iii) loss as a result of the transactions contemplated by the Agreement
not being consummated
EXPENSES
If the Agreement is terminated by Americorp or ACB because CIB's
shareholders fail to approve the Merger, or because CIB fails to satisfy
certain of its obligations under the Agreement, CIB will be obligated to pay
all of Americorp's expenses incurred in connection with the Merger
transaction, not to exceed $150,000.
If the Agreement is terminated by CIB because Americorp's
shareholders fail to approve the Merger, or because Americorp fails to
satisfy certain of its obligations under the Agreement, Americorp will be
obligated to pay all of CIB's expenses incurred in connection with the Merger
transaction, not to exceed $150,000.
TREATMENT OF STOCK OPTIONS
At the Effective Time, the CIB stock option plan will terminate, the
current Americorp stock option plan will also be terminated (but not the
options granted thereunder) and a new stock option plan
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<PAGE>
will be adopted by Americorp in connection with the Merger (the "1998 Plan").
See "INFORMATION CONCERNING AMERICORP MEETING ONLY."
At and as of the Effective Time, Americorp shall grant substitute
stock options pursuant to the 1998 Plan to each and every officer, employee
and director of CIB who has at the Effective Time an outstanding option to
purchase shares of CIB Stock ("CIB Stock Options"). Each and every substitute
stock option so granted by Americorp pursuant to the Americorp stock option
plan to replace an CIB Stock Option shall retain the "vesting" schedule
reflected in each of the respective stock option agreements and shall be
exercisable for that number of whole shares of Americorp Stock equal to the
product of (A) the number of shares of CIB Stock that were purchasable under
such CIB Stock Option immediately prior to the Effective Time multiplied by
(B) the Exchange Ratio, rounded down to the nearest whole number of shares of
Americorp Stock. Further, each and every substitute stock option so granted
shall provide for a per share exercise price which shall be equal to the
quotient determined by dividing (A) the exercise price per share of CIB Stock
at which such CIB Stock Option was exercisable immediately prior to the
Effective Time by (B) the Exchange Ratio.
TERMINATION
The Agreement may be terminated at any time prior to the Effective
Time (i) by mutual consent of CIB and Americorp in writing; (ii) by CIB or
Americorp if any material breach or default by the other Party is not cured
within 20 business days after notice thereof; (iii) by CIB or Americorp if
any governmental or regulatory consent is not obtained by March 31, 1999 or
if any governmental or regulatory authority denies or refuses to grant any
approval, consent or authorization required to be obtained to consummate the
transactions contemplated by the Agreement unless, within 20 business days
after such denial or refusal, all parties agree to resubmit the application
to the regulatory authority that has denied or refused to grant the approval,
consent or qualification requested; (iv) by Americorp if any of the
conditions to its performance of the Agreement shall not have been met, or by
CIB if any of the conditions to its performance of the Agreement shall not
have been met, by March 31, 1999, or such earlier time as it becomes apparent
that such conditions shall not be met; or (v) if a Party shall have failed to
act or refrained from doing any act relating to a Competing Transaction.
COVENANTS; CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME
The Agreement provides that, during the period from July 7, 1998 to
the Effective Time, the Parties will conduct their businesses only in the
normal and customary manner and in accordance with sound banking practices
and will not, without the prior written consent of the other Party, which
will not be unreasonably withheld, take any of the following actions, among
others: (i) issue any security except pursuant to the exercise of options
outstanding as of the date of the Agreement; (ii) declare, set aside or pay
any dividend (other than cash dividends payable in accordance with past
practice) or make any other distribution upon, or purchase or redeem any
shares of its stock; (iii) except as may be required to effect the
transactions contemplated by the Agreement, amend its articles of
incorporation or its bylaws; (iv) grant any general or uniform increase in
the rate of pay of employees except in the ordinary course of
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<PAGE>
business and consistent with past practice; (v) grant any material increase
in salary, incentive compensation or employee benefits or pay any bonus to
any person except in the ordinary course of business and consistent with past
practice; (vi) make any capital expenditure in excess of specified amounts,
except for ordinary repairs, renewals and replacements. (vii) compromise,
settle or adjust any assertion or claim of a deficiency in taxes (or interest
thereon or penalties in connection therewith), extend the statute of
limitations with any tax authority or file any pleading in court on any tax
litigation or any appeal from an asserted deficiency, or file or amend any
federal, foreign, state or local tax return, or make any tax election: (viii)
grant, renew or commit to grant or renew any extension of credit or amend the
terms of any such credit outstanding on the date hereof to any executive
officer, director or principal shareholder; (ix) make their credit
underwriting policies, standards or practices less stringent than those in
effect on December 31, 1997; (x) enter into or consent to any new employment
agreement or other benefit arrangement, or amend or modify any employment
agreement or other benefit arrangement in effect on the date of the Agreement
to which it is a party or bound; (xi) grant any person a power of attorney or
similar authority; (xii) make any material investment by purchase of stock or
securities, contributions to capital, property transfers or otherwise in any
other person, except for investments made in the ordinary course of business
consistent with past practice: (xiii) amend, modify or terminate, except in
accordance with its terms, any material contract or enter into any material
agreement or contract; (xiv) create or incur or suffer to exist any mortgage,
lien, pledge, security interest, charge, encumbrance or restraint of any kind
against or in any property or right of the respective party; (xv) sell, lease
or otherwise dispose of any assets or release any claims, except in the
ordinary course of business consistent with past practice; (xvi) except as
required by law, knowingly take or cause to be taken any action which would
prevent the transactions contemplated hereby from qualifying as tax free
reorganizations under Section 368 of the Internal Revenue Code or prevent the
Parties from accounting for the business combination to be effected by the
Merger as a pooling of interests; (xvii) sell any investment security prior
to maturity, except in the ordinary course of business; or (xviii) grant,
renew or commit to grant or renew any extension of credit if such extension
of credit, together with all other credit then outstanding to the same person
and all affiliated persons, would exceed certain specified amounts subject to
certain exceptions; (xix) purchase, redeem or otherwise acquire any of its
securities or any rights, options or securities to acquire its equity
securities; (xx) change any of its basic policies and practices relating to
certain specified matters; or (xi) settle any claim, action or proceeding
involving any material liability for monetary damages or enter into any
settlement agreement containing material obligations.
The Agreement also provides that each Party will (i) use its best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by the Agreement as
promptly as practical; (ii) obtain the consent of the other Party before it
issues any press release or makes any public statement with respect to the
Agreement or the transactions contemplated hereby; and (iii) cause to be
prepared one or more environmental investigations with respect to real
property owned or leased.
The Agreement also provides that each Party will: (i) duly and
timely file all required governmental reports; (ii) periodically furnish to
the other Party certain information, loan reports and updates of information
previously provided; (iii) promptly notify the other Party of certain
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<PAGE>
communications from tax authorities, material litigation and any event which
has had or may reasonably be expected to have a materially adverse effect on
the financial condition, operations, business or properties; (iv) provide
access to the other Party of certain information: and (v) use its reasonable
efforts between the date of the Agreement and the Effective Time to take all
actions necessary or desirable, including the filing of any regulatory
applications.
AMENDMENT AND WAIVER
Subject to applicable law: (i) the Agreement may be amended at any
time by the action of the Boards of Directors of CIB, ACB and Americorp
without action by their shareholders pursuant to a writing signed by all
parties to the Agreement; and (ii) the Parties, by action of their respective
Boards of Directors, may, at any time prior to the Effective Time, extend the
performance of any obligation or action required by the Agreement, waive
inaccuracies in representations and warranties and waive compliance with any
agreements or conditions for their respective benefit contained in the
Agreement.
DISSENTING SHAREHOLDERS' RIGHTS
CIB
Shareholders of CIB will be entitled to exercise dissenters' rights
in connection with the Merger.
AMERICORP
Shareholders of Americorp will also be entitled to exercise
dissenters' rights in connection with the Merger.
PROCEDURES
Each holder of shares of Americorp Stock or CIB Stock that were
outstanding as of the respective Record Dates and remain outstanding at the
Effective Time who does not vote such shares in favor of the proposal to
approve the Merger by complying with the procedures set forth in Chapter 13
of the California General Corporation Law ("Chapter 13 of the California
Law") will be entitled to receive an amount equal to the fair market value of
his or her shares as of July 7, 1998, the day before the public announcement
of the Merger. The final bid price for Americorp Stock on July 6, 1998 was
$32.00. The Findley Opinion dated July 9, 1998 concluded that the fair market
value of CIB Stock on July 6, 1998 was $19.50. A copy of Chapter 13 of the
California Law is attached hereto as Appendix D and should be read for more
complete information concerning dissenters' rights. THE REQUIRED PROCEDURE
SET FORTH IN CHAPTER 13 OF THE CALIFORNIA LAW MUST BE FOLLOWED EXACTLY OR ANY
DISSENTERS' RIGHTS MAY BE LOST. The information set forth below is a general
summary of dissenters' rights as they apply to Americorp and CIB shareholders
and is qualified in its entirety by reference to Appendix D.
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<PAGE>
In order to be entitled to exercise dissenters' rights, a
shareholder must not vote "FOR" the Merger. Thus, any shareholder who wishes
to dissent and executes and returns a proxy in the accompanying form must
specify that his or her shares are to be either voted "AGAINST" or "ABSTAIN"
on the proposal to approve the principal terms of the Agreement. If the
shareholder returns a proxy without voting instructions or with instructions
to vote "FOR" the proposal to approve the principal terms of the Agreement,
his or her shares will automatically be voted in favor of the Merger and the
shareholder will lose his or her dissenters' rights.
If the Merger is approved by the shareholders, Americorp and CIB
will each have 10 days after the respective approvals to send to those
shareholders who did not vote in favor of the Merger written notice of such
approval accompanied by a copy of Chapter 13 of the California Law, a
statement of the price determined to represent the fair market value of the
dissenting shares as of July 6, 1998 and a brief description of the procedure
to be followed if a shareholder desires to exercise dissenters' rights.
Within 30 days after the date on which the notice of the approval of the
Merger is mailed, the dissenting shareholder must make written demand upon
Americorp or CIB, as the case may be, for the purchase of dissenting shares
and payment to such shareholder of their fair market value, specifying the
number of shares held of record by such shareholder and a statement of what
the shareholder claims to be the fair market value of those shares as of July
6, 1998, and must surrender, at the office designated in the notice of
approval, the certificates representing the dissenting shares to be stamped
or endorsed with a statement that they are dissenting shares or to be
exchanged for certificates of appropriate denomination so stamped or
endorsed. Any shares of Stock that are transferred prior to their submission
for endorsement lose their status as dissenting shares.
If the Party and the dissenting shareholder agree that the
surrendered shares are dissenting shares and agree upon the price of the
shares, the dissenting shareholder will be entitled to the agreed price with
interest thereon at the legal rate on judgments from the date of the
agreement. Subject to the restrictions imposed under California law on the
ability of a Party to purchase its outstanding shares, payment of the fair
value of the dissenting shares shall be made within 30 days after the amount
thereof has been agreed upon or 30 days after any statutory or contractual
conditions to the Merger have been satisfied, whichever is later, subject to
the surrender of the certificates therefor, unless provided otherwise by
agreement.
If the Party denies that the shares surrendered are dissenting
shares or the Party and the dissenting shareholder fail to agree upon a fair
market value of such shares, then the dissenting shareholder must, within six
months after the notice of approval is mailed, file a complaint in the
Superior Court of the proper county requesting the court to make such
determinations or intervene in any pending action brought by any other
dissenting shareholder. If the complaint is not filed or intervention in a
pending action is not made within the specified six-month period, the
dissenter's rights are lost. If the fair market value of the dissenting
shares is at issue, the court will determine, or will appoint one or more
impartial appraisers to determine, such fair market value.
A dissenting shareholder may not withdraw his or her dissent or demand
for payment unless the
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<PAGE>
effected Party consents to such withdrawal.
The Merger is not directly conditioned upon only a limited number of
shareholders of Americorp or CIB Stock having voted against the Merger or
otherwise having perfected dissenters' rights. Nevertheless, the payment of a
significant amount of cash pursuant to the exercise of dissenters' rights
would effect the ability of the Merger to be accounted for as a "pooling of
interest." The Merger is conditioned upon the respective accountants
confirming in writing that the accounting treatment for the Merger is a
pooling of interest (see "-Accounting Treatment").
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<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of financial
position are based on the historical consolidated statements of financial
position of Americorp and the historical statements of financial position of
CIB, using the pooling method of accounting for business combinations, as of
June 30, 1998 and December 31, 1997 after giving effect to Merger-related
adjustments described in the Note herein. It should be read in conjunction with
the historical financial statements of Americorp and CIB, which are included
elsewhere in this Joint Proxy Statement/Prospectus.
These pro forma financial statements are presented for illustrative
purposes only and are not indicative of the operating results that would have
been achieved or the financial position that would have existed had the Merger
been consummated on the respective dates nor are they indicative of the future
operating results or financial position of the combined companies. The pro forma
adjustments made in connection with the development of the pro forma information
are preliminary and have been made solely for purposes of developing such pro
forma information as necessary to comply with the disclosure requirements of the
SEC.
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<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
As of June 30, 1998
(in thousands)
Americorp CIB Adjustments Combined
---------- --- ----------- --------
<S> <C> <C> <C> <C>
Cash and Due From Banks $ 19,417 $ 8,223 $ 27,640
Federal Funds Sold 8,200 5,950 14,150
Time Deposits in Other Financial
Institutions 1,092 1,092
Investment Securities - Available for Sale 12,369 11,941 24,310
Investment Securities - Held to Maturity 10,948 76 11,024
--------- -------- ---------
Total Investment Securities 23,317 12,017 35,334
--------- -------- ---------
Total Loans 84,205 56,711 140,916
Loan Loss Allowance (1,131) (930) (2,061)
--------- -------- ---------
Net Loans 83,074 55,781 138,855
--------- -------- ---------
Loans Held for Sale 1,580 1,580
Accrued Interest Receivable 746 499 1,245
Premises and Equipment 1,343 1,043 2,386
Other Real Estate Owned -
Other Assets 3,011 529 3,540
Investment in Partnership -
Federal Reserve Bank Stock, at cost 167 167
Deferred Taxes 716 45 761
--------- -------- ---------
TOTAL ASSETS $ 139,824 $ 86,926 $ 226,750
--------- -------- ---------
--------- -------- ---------
DEPOSITS:
Non Interest Bearing Demand $ 37,741 $ 24,629 $ 62,370
Interest Bearing Demand 40,522 22,333 62,855
Savings 11,855 6,327 18,182
Time, under $100,000 20,831 15,210 36,041
Time, $100,000 and over 14,026 10,786 24,812
--------- -------- ---------
Total Deposits 124,975 79,285 204,260
--------- -------- ---------
Accrued Interest Payable 449 75 524
Other Liabilities 2,499 125 $ 376 3,000
--------- -------- ---------
Total Liabilities 127,923 79,485 $ 376 207,784
--------- -------- ---------
STOCKHOLDERS' EQUITY:
Common Stock 595 2,666 (2,293) 968
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Surplus 2,396 3,063 2,293 7,752
Retained Earnings 8,812 1,770 (376) 10,206
Net Unrealized Gain on Securities
Available for Sale, net of Deferred
Income Taxes 98 (58) 40
--------- -------- ---------
Total Stockholders' Equity 11,901 7,441 (376) 18,966
--------- -------- ---------
TOTAL LIABILTIES AND
STOCKHOLDERS' EQUITY $139,824 $ 86,926 - $226,750
--------- -------- ---------
--------- -------- ---------
</TABLE>
The following table reflects all nonrecurring Americorp and CIB estimated
Merger-related costs as of December 31, 1997 and June 30, 1998. These costs are
not included on the unaudited pro forma combined income statements but are
included on the unaudited pro forma combined balance sheet as a reduction to
equity capital. These costs will be charged to expense immediately following the
consummation of the Merger. Such estimated Merger-related costs are summarized
below (in thousands):
<TABLE>
<CAPTION>
Americorp CIB Combined
----------- ---- ----------
<S> <C> <C> <C>
Professional Fees $ 185 $ 111 $ 296
Printing and Other 80 80
---------- --------
Total $ 265 $ 111 $ 376
---------- ------- --------
---------- ------- --------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
As of December 31, 1997
(in thousands)
Americorp CIB Adjustments Combined
--------- --- ----------- --------
<S> <C> <C> <C> <C>
Cash and Due From Banks $ 11,462 $ 7,859 $ 19,321
Federal Funds Sold 5,900 12,750 18,650
Time Deposits in Other Financial
Institutions - 1,491 1,491
Investment Securities - Available for Sale 12,623 13,925 26,548
Investment Securities - Held to Maturity 12,490 76 12,566
--------- -------- ----------
Total Investment Securities 25,113 14,001 39,114
--------- -------- ---------
Total Loans 84,445 49,821 134,266
Loan Loss Allowance (1,048) (918) (1,966)
--------- -------- ---------
Net Loans 83,397 48,903 132,300
--------- -------- ---------
Loans Held for Sale - 1,726 1,726
Accrued Interest Receivable 856 456 1,312
Premises and Equipment 1,465 943 2,408
Other Real Estate Owned 123 152 275
Other Assets 2,676 456 3,132
Investment in Partnership 2,550 2,550
Federal Reserve Bank Stock, at cost - 147 147
Deferred Taxes 670 156 826
--------- -------- ---------
TOTAL ASSETS $ 134,212 $ 89,040 $ 223,252
--------- -------- ---------
--------- -------- ---------
DEPOSITS:
Non Interest Bearing Demand $ 36,510 $ 24,558 $ 61,068
Interest Bearing Demand 40,352 26,346 66,698
Savings 10,998 7,056 18,054
Time, under $100,000 18,663 13,038 31,701
Time, $100,000 and over 13,445 10,829 24,274
--------- -------- ---------
Total Deposits 119,968 81,827 201,795
--------- -------- ---------
Accrued Interest Payable 394 86 480
Other Liabilities 2,499 571 $ 376 3,446
--------- -------- -------------- ---------
Total Liabilities 122,861 82,484 $ 376 205,721
--------- -------- -------------- ---------
STOCKHOLDERS' EQUITY:
Common Stock 586 2,395 (2,060) 921
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<PAGE>
Surplus 2,184 2,715 2,060 6,959
Retained Earnings 8,500 1,485 (376) 9,609
Net Unrealized Gain on Securities
Available for Sale, net of Deferred
Income Taxes 81 (39) 42
---------- -------- ---------
Total Stockholders' Equity 11,351 6,556 (376) 17,531
---------- -------- -------------- ---------
TOTAL LIABILTIES AND
STOCKHOLDERS' EQUITY $ 134,212 $ 89,040 $ - $ 223,252
---------- --------- -------------- ---------
---------- --------- -------------- ---------
</TABLE>
The following table reflects all nonrecurring Americorp and CIB
estimated Merger-related costs as of December 31, 1997 and June 30, 1998.
These costs are not included on the unaudited pro forma combined income
statements but are included on the unaudited pro forma combined balance sheet
as a reduction to equity capital. These costs will be charged to expense
immediately following the consummation of the Merger. Such estimated
Merger-related costs are summarized below (in thousands):
<TABLE>
<CAPTION>
Americorp CIB Combined
--------- ---- --------
<S> <C> <C> <C>
Professional Fees $ 185 $ 111 $ 296
Printing and Other 80 80
------- --------
Total $ 265 $ 111 $ 376
------- ----- --------
------- ----- --------
</TABLE>
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<PAGE>
The following unaudited pro forma combined statements of income are
based on the historical consolidated financial statements of Americorp and
the historical financial statements of CIB, using the pooling method of
accounting for business combinations, for the six month period ended June 30,
1998 and the years ended December 31, 1997, 1996 and 1995. It should be read
in conjunction with the historical consolidated financial statements and
notes thereto of Americorp and the historical financial statements and notes
thereto of CIB, which are included elsewhere in this Joint Proxy
Statement/Prospectus. Weighted average shares outstanding of the pro forma
combined institution are based on a .7000 to 1.000 Exchange Ratio which
approximates the Exchange Ratio if it was computed based upon the Americorp
and CIB Book Values Per Share at June 30, 1998 and without taking into
account any adjustments as permitted by the Agreement. THE EXCHANGE RATIO
COULD BE HIGHER OR LOWER THAN .7000 TO 1.000.
These pro forma financial statements are presented for illustrative
purposes only and are not indicative of the operating results that would have
been achieved or the financial position that would have existed had the
Merger been consumated on the dates indicated in the preceding paragraph, nor
are they indicative of the future operating results or financial position of
the combined companies.
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Six Month Period Ended June 30, 1998
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Americorp CIB Adjustments Combined
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $ 4,363 $ 2,972 $ 7,335
Interest on Federal Funds Sold 184 200 384
Interest on Securities 691 395 1,086
Interest on Time Deposits in Other
Financial Institutions 37 37
-------- -------- --------
TOTAL INTEREST INCOME 5,238 3,604 8,842
-------- -------- --------
INTEREST EXPENSE ON DEPOSITS 1,427 1,006 2,433
-------- -------- --------
NET INTEREST INCOME 3,811 2,598 6,409
Provision for Loan and Lease Losses 265 58 323
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES 3,546 2,540 6,086
-------- -------- --------
Other Income:
Service Charges on Deposit Accounts 341 264 605
Gain (loss) on Sale of Securities 1 2 3
Gain on Sale of Assets 100 100
Equity in Net Income of Partnership -
Other Income and Fees 330 86 416
-------- -------- --------
TOTAL OTHER INCOME 672 452 1,124
-------- -------- --------
Other Expenses:
Salaries and Employee Benefits 1,726 1,281 3,007
Occupancy Expenses 364 237 601
Furniture and Equipment Expense 177 173 350
Other Operating Expenses 1,183 727 1,910
-------- -------- --------
TOTAL OTHER EXPENSES 3,450 2,418 5,868
-------- -------- --------
Income Before Income Taxes 768 574 1,342
Provision for Income Taxes 206 236 442
-------- -------- --------
NET INCOME $ 562 $ 338 $ 900
-------- -------- --------
-------- -------- --------
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<PAGE>
<S> <C> <C> <C> <C>
Earnings Per Share
- Basic $0.95 $0.64 $0.94
- Diluted $0.84 $0.60 $0.85
Shares used in Earnings Per Share Calculation
- Basic 590 530 (159) 961
- Diluted 667 564 (169) 1,062
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1997
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Americorp CIB Adjustments Combined
--------- ------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $7,804 $5,571 $13,375
Interest on Federal Funds Sold 236 612 848
Interest on Securities 1,709 554 2,263
Interest on Time Deposits in Other
Financial Institutions 89 89
------ ------ -------
TOTAL INTEREST INCOME 9,749 6,826 16,575
------ ------ -------
INTEREST EXPENSE ON DEPOSITS 2,747 1,879 4,626
------ ------ -------
NET INTEREST INCOME 7,002 4,947 11,949
Provision for Loan and Lease Losses 410 370 780
------ ------ -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES 6,592 4,577 11,169
------ ------ -------
Other Income:
Service Charges on Deposit Accounts 697 495 1,192
Gain (Loss) on Sale of Securities 54 54
Gain on Sale of Assets 28 28
Equity in Net Income of Partnership 51 51
Other Income and Fees 768 626 1,394
------ ------ -------
TOTAL OTHER INCOME 1,570 1,149 2,719
------ ------ -------
Other Expenses:
Salaries and Employee Benefits 3,392 2,345 5,737
Occupancy Expenses 624 405 1,029
Furniture and Equipment Expense 306 293 599
Other Operating Expenses 2,341 1,307 3,648
------ ------ -------
TOTAL OTHER EXPENSES 6,663 4,350 11,013
------ ------ -------
Income Before Income Taxes 1,499 1,376 2,875
Provision for Income Taxes 396 576 972
------ ------ -------
NET INCOME $1,103 $ 800 $ 1,903
------ ------ -------
------ ------ -------
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<PAGE>
<S> <C> <C> <C> <C>
Earnings Per Share
- Basic $1.91 $1.74 $2.11
- Diluted $1.66 $1.60 $1.87
Shares used in Earnings Per Share Calculation
- Basic 578 461 (138) 901
- Diluted 666 500 (150) 1,016
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1996
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Americorp CIB Adjustments Combined
--------- ------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $6,491 $5,176 $11,667
Interest on Federal Funds Sold 404 561 965
Interest on Securities 1,894 475 2,369
Interest on Time Deposits in Other
Financial Institutions 3 116 119
------ ------ -------
TOTAL INTEREST INCOME 8,792 6,328 15,120
------ ------ -------
INTEREST EXPENSE ON DEPOSITS 2,740 1,853 4,593
------ ------ -------
NET INTEREST INCOME 6,052 4,475 10,527
Provision for Loan and Lease Losses 1,046 697 1,743
------ ------ -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES 5,006 3,778 8,784
------ ------ -------
Other Income:
Service Charges on Deposit Accounts 620 467 1,087
Gain (loss) on Sale of Securities (207) (207)
Gain on Sale of Assets 1 1
Equity in Net Income of Partnership 215 215
Other Income and Fees 620 239 859
------ ------ -------
TOTAL OTHER INCOME 1,248 707 1,955
------ ------ -------
Other Expenses:
Salaries and Employee Benefits 2,954 2,152 5,106
Occupancy Expenses 521 392 913
Furniture and Equipment Expense 220 233 453
Other Operating Expenses 2,319 1,147 3,466
------ ------ -------
TOTAL OTHER EXPENSES 6,014 3,924 9,938
------ ------ -------
Income Before Income Taxes 240 561 801
Provision for Income Taxes 37 235 272
------ ------ -------
NET INCOME $ 203 $ 326 $ 529
------ ------ -------
------ ------ -------
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<PAGE>
Earnings Per Share
- Basic $ 0.35 $ 0.71 $ 0.59
- Diluted $ 0.31 $ 0.66 $ 0.53
Shares used in Earnings Per Share Calculation
- Basic 572 457 (137) 892
- Diluted 660 492 (148) 1,004
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1995
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Americorp CIB Adjustments Combined
--------- --- ----------- --------
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $6,398 $4,149 $10,547
Interest on Federal Funds Sold 126 463 589
Interest on Securities 2,015 440 2,455
Interest on Time Deposits in Other
Financial Institutions 166 166
-------- -------- --------
TOTAL INTEREST INCOME 8,539 5,218 13,757
-------- -------- --------
INTEREST EXPENSE ON DEPOSITS 2,520 1,332 3,852
-------- -------- --------
NET INTEREST INCOME 6,019 3,886 9,905
Provision for Loan and Lease Losses 554 (58) 496
-------- -------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN AND LEASE LOSSES 5,465 3,944 9,409
-------- -------- --------
Other Income:
Service Charges on Deposit Accounts 564 474 1,038
Gain (loss) on Sale of Securities 3 20 23
Gain on Sale of Assets 28 28
Equity in Net Income of Partnership 353 353
Other Income and Fees 550 115 665
-------- -------- --------
TOTAL OTHER INCOME 1,470 637 2,107
-------- -------- --------
Other Expenses:
Salaries and Employee Benefits 2,816 1,851 4,667
Occupancy Expenses 483 408 891
Furniture and Equipment Expense 113 235 348
Other Operating Expenses 2,353 1,054 3,407
-------- -------- --------
TOTAL OTHER EXPENSES 5,765 3,548 9,313
-------- -------- --------
Income Before Income Taxes 1,170 1,033 2,203
Provision for Income Taxes 225 433 658
-------- -------- --------
NET INCOME $ 945 $ 600 $ 1,545
-------- -------- --------
-------- -------- --------
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<PAGE>
Earnings Per Share
- Basic $ 1.67 $ 1.31 $ 1.74
- Diluted $ 1.41 $ 1.21 $ 1.52
Shares used in Earnings Per Share Calculation
- Basic 567 457 (137) 887
- Diluted 669 497 (149) 1,017
</TABLE>
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<PAGE>
DESCRIPTION OF CIB AND AMERICORP STOCK
CIB is a California banking corporation organized under the laws of
the State of California, and the rights of CIB Shareholders are governed by
the California Financial Code, the California Corporations Code (the
"Corporations Code"), the Articles of Incorporation of CIB (the "CIB
Articles"), and the bylaws of CIB, as amended (the "CIB Bylaws"). Upon
consummation of the Agreement, the CIB Shareholders will become shareholders
of Americorp ("Americorp Shareholders"). As Americorp Shareholders, the
rights of the then former CIB Shareholders will be governed by Division 1,
Chapters 1 - 23 of the Corporations Code, other applicable California
statutes, the Articles of Incorporation of Americorp (the "Americorp
Articles"), and the bylaws of Americorp (the "Americorp Bylaws").
CIB STOCK
CIB is authorized by the CIB Articles, as amended, to issue
5,000,000 shares of CIB Stock, without par value. At the CIB Record Date,
______________ shares of CIB Stock were issued and outstanding. Holders of
CIB Stock are entitled to one vote, in person or by proxy, for each share of
CIB Stock held of record in the shareholder's name on the books of CIB as of
the record date on any matter submitted to the vote of the shareholders,
except that in connection with the election of directors, the shares may be
voted cumulatively. Each share of CIB Stock has the same rights, privileges
and preferences as every other share and will share equally in CIB's net
assets upon liquidation or dissolution. CIB Stock has no conversion,
preemptive or redemption rights or sinking fund provisions.
California law prohibits a California state-chartered bank from
lending on the security of its own stock.
Shareholders are entitled to dividends when, as and if declared by
CIB's Board of Directors out of funds legally available therefor (and after
satisfaction of the prior rights of holders of outstanding preferred stock,
if any) subject to certain restrictions on payment of dividends imposed by
the California Financial Code and other applicable regulatory limitations.
See "Dividend Restrictions."
CIB acts as its own transfer agent and registrar for CIB Stock.
AMERICORP STOCK
Americorp is authorized by the Americorp Articles to issue 2,500,000
shares of Americorp Stock, $1.00 par value. As of the Americorp Record Date,
__________ shares of Americorp Stock were issued and outstanding. Holders of
Americorp Stock are entitled to one vote, in person or by proxy, for each
share of Americorp Stock held of record in the shareholder's name on the
books of Americorp as of the record date on any matter submitted to the vote
of the shareholders, except that in connection with the election of
directors, the shares may be voted cumulatively.
Each share of Americorp Stock has the same rights, privileges and
preferences as every other share
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<PAGE>
and will share equally in Americorp's net assets upon liquidation of
dissolution. Americorp Stock has no preemptive, conversion or redemption
rights or sinking fund provisions and all of the issued and outstanding
shares of Americorp Stock, when issued, will be fully paid and nonassessable.
Americorp shareholders are entitled to dividends when, as and if
declared by Americorp's Board of Directors out of funds legally available
therefor and after satisfaction of the prior rights of holders of outstanding
preferred stock, if any (subject to certain restrictions on payment of
dividends imposed by the General Corporation Law of California). See
"Dividend Restrictions."
The transfer agent and registrar for Americorp Stock is Chase Mellon
Financial Services.
DIFFERENCES BETWEEN RIGHTS OF HOLDERS OF AMERICORP STOCK AND CIB STOCK
The following subsections discuss in detail the differences between
rights of holders of Americorp Stock and CIB Stock.
CLASSIFICATION OF BOARD OF DIRECTORS
CIB's Articles do not permit the CIB Board of Directors to be
divided into classes with any class having a term of office of longer than
one year. Each director of CIB must be elected annually. Americorp's Articles
and Bylaws also do not provide for a classified Board of Directors.
VOTING RIGHTS
See the description of voting rights contained in "CIB Stock" and
"Americorp Stock".
NUMBER OF DIRECTORS
Although the Corporations Code does not require Americorp or CIB to
maintain any specific range of number of directors, the number of directors
of Americorp and CIB may not be less than a stated minimum nor more than a
stated maximum (which in no case shall be greater than two times the stated
minimum minus one) with the exact number of directors to be fixed, within the
limits specified. The CIB Bylaws currently provide that the number of
directors on the CIB Board of Directors may not be fewer than 5 nor more than
9, and the current number of members on CIB's Board of Directors has been
fixed at 7. Americorp Bylaws currently provide that the number of directors
on Americorp Board of Directors may not be fewer than four nor more than
seven, and the current number of members on Americorp's Board of Directors
has been fixed at six at the present time.
At the Effective Time of the Merger, (i) the number of directors for
Americorp will be increased to nine (9) and (ii) the Board will be
reconstituted to include the directors indicated in "THE MERGER - Management
and Operation of Americorp and ACB After the Merger.
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<PAGE>
DIVIDEND RESTRICTIONS
Since CIB is a state-chartered bank, its ability to pay dividends or
make distributions to its shareholders is subject to restrictions set forth
in the California Financial Code. The California Financial Code provides that
neither a bank nor any majority-owned subsidiary of a bank may make a
distribution to its shareholders in an amount which exceeds the lesser of (i)
the bank's retained earnings; or (ii) the bank's net income for its last
three fiscal years, less the amount of any distributions made by the bank or
by any majority-owned subsidiary of the bank to the shareholders of the bank
during such period. Notwithstanding the previous provision, a bank may, with
the prior approval of the Commissioner of Financial Institutions, make a
distribution to the shareholders of the bank in an amount not exceeding the
greatest of (a) its retained earnings; (b) its net income for its last fiscal
year; or (c) the net income of the bank for its current fiscal year. If the
Commissioner finds that the stockholders' equity of a bank is inadequate or
that the making of a distribution by a bank would be unsafe or unsound, the
Commissioner may order the bank to refrain from making a proposed
distribution.
The ability of Americorp to pay cash dividends is limited by the
provisions of Section 500 of the California Corporations Code, which
prohibits the payment of dividends unless (i) the retained earnings of the
corporation immediately prior to the distribution exceeds the amount of the
distribution; (ii) the assets of the corporation exceed 1 1/4 times its
liabilities; or (iii) the current assets of the corporation exceed its
current liabilities, but if the average pre-tax earnings of the corporation
before interest expense for the two years preceding the distribution was less
than the average interest expense of the corporation for those years, the
current assets of the corporation must exceed 1 1/4 times its current
liabilities.
The ability of Americorp to pay cash dividends is largely dependent
on cash dividends being paid to it by ACB. ACB has the same restrictions on
its ability to pay cash dividends as does CIB.
DISSENTERS' RIGHTS
Pursuant to the General Corporation Law of California, holders of
Americorp Stock would be entitled, subject to the provisions of Chapter 13,
to dissenters' rights in connection with any transaction which constitutes a
reorganization (as defined in Section 181 of the California Corporations
Code). See "THE MERGER - Dissenting Shareholders' Rights." However, pursuant
to the California Financial Code, shareholders of CIB Stock are not entitled
to dissenters' rights in connection with any transactions between two banking
institutions which constitutes a reorganization (as defined in Section 181 of
the California Corporations Code) where CIB is the corporation surviving such
transaction, even if dissenters' rights were otherwise available pursuant to
Chapter 13. Dissenters' rights are available to shareholders of CIB in the
Merger since CIB is not the surviving corporation in such merger.
RESTRICTIONS ON ACQUISITION OF AMERICORP
The following discussion is a summary of certain provisions of
California and Federal law and regulations and California corporate law, as well
as the Articles of Incorporation and Bylaws of
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<PAGE>
Americorp, which may be deemed to have "anti-takeover" effects. The
description of these provisions is necessarily general and reference should
be made to the actual law and regulations and to the Articles of
Incorporation and Bylaws of Americorp.
CALIFORNIA AND FEDERAL BANKING LAW
The Federal Change in Bank Control Act of 1978 prohibits a person or
group of persons "acting in concert" from acquiring "control" of a bank
holding company unless the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") has been given 60 days' prior written notice of
such proposed acquisition and within that time period the Federal Reserve
Board has not issued a notice disapproving the proposed acquisition or
extending for up to another 30 days the period during which such a
disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve Board issues written notice
of its intent not to disapprove the action. Under a rebuttable presumption
established by the Federal Reserve Board the acquisition of more than 10% of
a class of voting stock of a bank with a class of securities registered under
Section 12 of the Exchange Act, would, under the circumstances set forth in
the presumption, constitute the acquisition of control.
Under the California Financial Code, no person shall, directly or
indirectly, acquire control of a California licensed bank or a bank holding
company unless the Commissioner has approved such acquisition of control. A
person would be deemed to have acquired control of Americorp under this state
law if such person, directly or indirectly, has the power (i) to vote 25% or
more of the voting power of Americorp or (ii) to direct or cause the
direction of the management and policies of Americorp. For purposes of this
law, a person who directly or indirectly owns or controls 10% or more of the
Americorp Stock would be presumed to control Americorp.
In addition, any "company" would be required to obtain the approval
of the Federal Reserve Board under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"), before acquiring 25% (5% in the case of an acquiror
that is, or is deemed to be, a bank holding company) or more of the
outstanding Americorp Stock of, or such lesser number of shares as constitute
control over, Americorp.
ANTI-TAKEOVER PROVISIONS IN AMERICORP'S ARTICLES AND BYLAWS
Americorp's Articles and Bylaws contain identical provisions that
deal with matters of corporate governance and certain rights of shareholders
relating to offers to acquire Americorp.
These provisions authorize the Board of Directors to oppose a tender
or other offer for Americorp. When considering whether to oppose an offer,
the Board may consider any pertinent issue, including any or all of the
following: (A) whether the offer price is acceptable based upon the
historical and present operating results or financial condition of Americorp,
(B) whether a more favorable price could be obtained for Americorp's
securities in the future, (C) the impact which an acquisition of Americorp
would have on the employees, depositors and customers of Americorp and its
subsidiaries and the communities which they serve, (D) the reputation and
business practices of the offeror and its management and affiliates
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<PAGE>
as they would affect the employees, depositors, and customers of Americorp
and its subsidiaries and the communities which they serve and the future
value of Americorp stock, (E) the value of the securities (if any) which the
offeror is offering in exchange for Americorp's securities, based on an
analysis of the worth of Americorp as compared to the corporation or other
entity whose securities are being offered, and (F) any antitrust or other
legal and regulatory issues that raised by the offer.
If the Board of Directors determines that an offer should be
rejected, it may take any lawful action to accomplish its purpose, including,
but not limited to, any or all of the following: advising shareholders not to
accept the offer; litigation against the offeror; filing complaints with all
governmental and regulatory authorities; acquiring Americorp's securities;
selling or otherwise issuing authorized but unissued securities or granting
options with respect thereto; acquiring a company to create an antitrust or
other regulatory problem for the offeror; and soliciting a more favorable
offer from another individual or entity.
These provisions may have the effect of discouraging a future
takeover attempt which is not approved by the Board of Directors but which
individual Americorp stockholders may deem to be in their best interest or in
which stockholders may receive a substantial premium for their shares over
then current market prices. As a result, Americorp Shareholders who might
desire to participate in such a transaction may not have an opportunity to do
so.
PURPOSE AND TAKEOVER DEFENSIVE EFFECTS OF AMERICORP'S ARTICLES AND
BYLAWS
The Board of Directors of Americorp believes that the provisions
described above are prudent and will reduce Americorp's vulnerability to
takeover attempts and certain other transactions which have not been
negotiated with and approved by its Board of Directors. The Board of
Directors believes these provisions are in the best interest of Americorp and
its stockholders. In the judgment of the Board of Directors, Americorp's
Board will be in the best position to determine the true value of Americorp
and to negotiate more effectively for what may be in the best interest of its
stockholders. Accordingly, the Board of Directors believes that it is in the
best interest of Americorp and its stockholders to encourage potential
acquirors to negotiate directly with the Board of Directors of Americorp and
that these provisions will encourage such negotiations and discourage hostile
takeover attempts. It is also the view of the Board of Directors that these
provisions should not discourage persons from proposing a merger or other
transaction at a price reflective of the true value of Americorp and which is
in the best interest of all stockholders.
Attempts to acquire control of financial institutions have recently
become increasingly common. Takeover attempts which have not been negotiated
with and approved by the Board of Directors present to stockholders the risks
of a takeover on terms which may be less favorable than might otherwise be
available. A transaction which is negotiated and approved by the Board of
Directors, on the other hand, can be carefully planned and undertaken at an
opportune time in order to obtain maximum value of Americorp and its
stockholders, with due consideration given to matters such as the management
and business of the acquiring corporation and maximum strategic development
of Americorp's assets.
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<PAGE>
An unsolicited takeover proposal can seriously disrupt the business
and management of a corporation and cause it to incur great expense. Although
a tender offer or other takeover attempt may be made at a price substantially
above the current market prices, such offers are sometimes made for less than
all of the outstanding shares of a target company. As a result, stockholders
may be presented with the alternative of partially liquidating their
investment at a time that may be disadvantageous, or retaining their
investment in an enterprise which is under different management and whose
objectives may not be similar to those of the remaining stockholders.
Despite the belief of Americorp as to the benefits to stockholders
of these provisions, these provisions may also have the effect of
discouraging a future takeover attempt which would not be approved by
Americorp's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then current market prices. As a
result, stockholders who might desire to participate in such a transaction
may not have any opportunity to do so. The Board of Directors of Americorp,
however, has concluded that the potential benefits outweigh the possible
disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders, Americorp may adopt additional charter provisions regarding the
acquisition of its equity securities that would be permitted for a California
business corporation. Americorp does not presently intend to propose the
adoption of further restrictions on the acquisition of Americorp's equity
securities.
The cumulative effect of the restriction on acquisition of Americorp
contained in Americorp Articles and Bylaws, federal law and California law
may be to discourage potential takeover attempts and perpetuate incumbent
management, even though certain stockholders of Americorp may deem a
potential acquisition to be in their best interest, or deem existing
management not to be acting in their best interests.
BUSINESS OF AMERICORP
GENERAL
Americorp is a California corporation organized to act as the bank
holding company for ACB. In 1987, Americorp acquired all of the outstanding
common stock of the ACB in a holding company formation transaction. Other
than holding the shares of the ACB, Americorp conducts no significant
activities, although it is authorized, with the prior approval of the Federal
Reserve Board, Americorp's principal regulator, to engage in a variety of
activities which are deemed closely related to the business of banking. At
June 30, 1998, Americorp had approximately $140 million in consolidated
assets, $83 million in consolidated net loans, $125 million in consolidated
deposits, and $11.9 million in consolidated stockholders' equity.
ACB was licensed by the DFI and commenced operation in September
1973 as a California state bank. As a California state bank, ACB is subject
to primary supervision, examination and regulation by the DFI and the FDIC.
ACB is also subject to certain other federal laws and regulations. The
deposits
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<PAGE>
of ACB are insured by the FDIC up to the applicable limits thereof. ACB is
not a member of the Federal Reserve System.
BANKING SERVICES
ACB is engaged in substantially all of the business operations
customarily conducted by independent California state bank. ACB maintains
three full service-banking offices in the city of Ventura and a full service
office in the city of Camarillo. ACB's banking services include the
acceptance of checking and savings deposits, and the making of commercial,
SBA, real estate, personal, automobile and other installment loans. ACB also
offers traveler's checks, notary public and other customary bank services to
its customers. While ACB does offer credit cards to its customers, other
financial institutions issue the cards. Trust services are not offered by ACB.
ACB's deposits are attracted primarily from individuals and small
and medium-sized business-related sources. ACB also attracts deposits from
several local agencies. In connection with municipal deposits, ACB is
generally required to pledge securities to secure such deposits, except for
the first $100,000 of such deposits which are insured by the FDIC.
As of June 30, 1998, ACB had approximately 11,800 deposit accounts,
representing approximately 4,800 non-interest bearing (demand) accounts with
balances totaling approximately $37,642,000 for an average balance per
account of approximately $7,800; 5,400 savings, interest-bearing demand and
money market accounts with balances totaling approximately $52,375,000 for
an average balance per account of approximately $9,700 and 1,600 time
certificate of deposit accounts with balances totaling approximately
$35,516,000 for an average balance per account of approximately $21,700.
The areas in which ACB has directed virtually all of its lending
activities are (i) commercial loans, (ii) installment loans, and (iii) other
real estate loans or commercial loans secured by real estate. As of June 30,
1998, these three categories accounted for approximately 37%, 8% and 53%
respectively, of ACB's loan portfolio. A significant portion of ACB's lending
is real estate related, including mortgage lending and interim construction
loans as well as taking real estate as collateral for loans for other
purposes.
The principal sources of ACB's revenues are (i) interest and fees
on loans, (ii) interest on investments, (iii) service charges on deposit
accounts and other charges and fees, and (iv) interest on federal funds sold
(funds loaned on short-term basis to other banks). For the period ended June
30, 1998, these sources comprised 73.8%, 11.7%, 11.4% and 3.1%, respectively,
of ACB's total operating income. Virtually all of the consolidated net income
of Americorp is generated by ACB.
ACB has not engaged in any material research activities relating to
the development of new services or the improvement of existing ACB services.
There has been no significant change in the types of services offered
by ACB since its inception,
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except in connection with new types of accounts allowed by statute or
regulation in recent years. ACB has no present plans regarding "a new line of
business" requiring the investment of a material amount of total assets.
Most of ACB's business originates from Ventura County and there is
no emphasis on foreign sources and application of funds. ACB's business,
based upon performance to date, does not appear to be seasonal. Except as
described above, a material portion of ACB's loans is not concentrated within
a single industry or group of related industries, nor is ACB dependent upon a
single customer or group of related customers for a material portion of its
deposits. Management of ACB is unaware of any material effect upon ACB's
capital expenditures, earnings or competitive position as a result of
federal, state or local environmental regulation.
ACB holds no patents, licenses (other than licenses obtained from
ACB regulatory authorities), franchises or concessions.
EMPLOYEES
As of June 30, 1998, ACB had a total of 66 full-time employees and
12 part-time employees. The management of ACB believes that its employee
relations are satisfactory.
COMPETITION
Banking and financial services business in California generally, and
in ACB's market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation,
changes in technology and product delivery systems, and the accelerating pace
of consolidation among financial services providers. ACB competes for loans
and deposits and customers for financial services with other commercial
banks, savings and loan associations, securities and brokerage companies,
mortgage companies, insurance companies, finance companies, money market
funds, credit unions, and other nonbank financial service providers. Many of
these competitors are much larger in total assets and capitalization, have
greater access to capital markets and offer a broader array of financial
services than ACB. In order to compete with the other financial services
providers, ACB principally relies upon local promotional activities, personal
relationships established by officers, directors and employees with its
customers, and specialized services tailored to meet its customers' needs.
ACB maintains four full service-banking offices in Ventura County.
EFFECT OF GOVERNMENTAL POLICIES AND RECENT LEGISLATION
Banking is a business that depends on rate differentials. In
general, the difference between the interest rate paid by ACB on its deposits
and its other borrowings and the interest rate received by ACB on loans
extended to its customers and securities held in ACB's portfolio comprise the
major portion of ACB's earnings. These rates are highly sensitive to many
factors that are beyond the control of ACB. Accordingly, the earnings and
growth of ACB are subject to the influence of domestic and foreign
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economic conditions, including inflation, recession and unemployment.
The commercial banking business is not only affected by general
economic conditions but is also influenced by the monetary and fiscal
policies of the federal government and the policies of regulatory agencies,
particularly the Federal Reserve Board. The Federal Reserve Board implements
national monetary policies (with objectives such as curbing inflation and
combating recession) by its open-market operations in United States
Government securities, by adjusting the required level of reserves for
financial institutions subject to its reserve requirements and by varying the
discount rates applicable to borrowings by depository institutions. The
actions of the Federal Reserve Board in these areas influence the growth of
ACB loans, investments and deposits and also affect interest rates charged on
loans and paid on deposits. The nature and impact of any future changes in
monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies and
other financial institutions are frequently made in Congress, in the
California legislature and before various bank regulatory and other
professional agencies. For example, legislation has been introduced in
Congress that would repeal the current statutory restrictions on affiliations
between commercial banks and securities firms. See "SUPERVISION AND
REGULATION - Financial Modernization Legislation."
PROPERTIES
All ACB's offices are leased. See Note 13 to the Americorp Financial
Statements for certain additional information concerning the amount of ACB's
lease commitments.
LEGAL PROCEEDINGS
ACB is, from time to time, subject to various pending and threatened
legal actions which arise out of the normal course of its business. ACB is
not a party to any pending legal or administrative proceedings (other than
ordinary routine litigation incidental to ACB's business) and no such
proceedings are known to be contemplated.
There are no material proceedings adverse to ACB to which any
director, officer, affiliate of ACB or 5 % shareholder of ACB, or any
associate of any such director, officer, affiliate or 5% shareholder of ACB
is a party, and none of the above persons has a material interest adverse to
ACB.
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Table 1, "Distribution of Average Assets, Liabilities, and Shareholders'
Equity and Related Interest Income, Expense and Rates," sets forth the daily
average balances for the major asset and liability categories, the related
income or expense where applicable, and the resultant yield or cost to the
average earning assets and average interest-bearing liabilities.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
TABLE 1 - Distribution of Average Assets, Liabilities and Shareholders' Equity and Related Interest Income,
Expense and Rates
- -----------------------------------------------------------------------------------------------------------------
(dollars in 000's) June 30, 1998 (1) December 31, 1997
-------------------------------- ----------------------- ---------
Balance Interest Rate Balance Interest Rate
------------ ---------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 81,169 $ 4,146 10.22% $ 73,557 $ 7,511 10.21%
Loan Fees $ 217 $ 293
--------- ------- -------- -------
Total Loans 81,169 $ 4,363 10.75% 73,557 $ 7,804 10.61%
--------- ------- -------
Investment Securities:
Taxable Securities 14,248 $ 394 5.53% 18,379 $ 1,076 5.85%
Non-Taxable Securities 10,141 $ 290 5.72% 11,298 $ 620 5.49%
--------- ------- -------
Total Securities 24,389 $ 684 5.61% 29,677 $ 1,696 5.71%
--------- ------- -------- -------
Time Deposits in Other Financial
Institutions 199 $ 7 7.04% 199 $ 13 6.53%
Federal Funds Sold 6,971 $ 184 5.28% 4,507 $ 236 5.24%
--------- ------- -------- -------
Total Money Market Investments 7,170 $ 191 5.33% 4,706 $ 249 5.29%
--------- ------- -------- -------
Total Earnings Assets 112,728 $ 5,238 9.29% 107,940 $ 9,749 9.03%
------- -------
Total Non-Earnings Assets 20,726 19,458
--------- --------
TOTAL ASSETS $133,454 $127,398
--------- --------
--------- --------
Liabilities and Shareholders' Equity:
Borrowed Funds:
Federal Funds Purchased $ - $ - 0.00% $ - $ - 0.00%
Other - $ - 0.00% - $ - 0.00%
--------- ------- -------- -------
Total Borrowed Funds - $ - 0.00% - $ - 0.00%
--------- ------- -------- -------
Interest-Bearing Deposits:
Savings and Interest-Bearing
Transaction Accounts 51,994 $ 541 2.08% 51,778 $ 1,095 2.11%
Time Deposits 33,666 $ 886 5.26% 31,731 $ 1,652 5.21%
--------- ------- -------- -------
Total Interest-Bearing Accounts 85,660 $ 1,427 3.33% 83,509 $ 2,747 3.29%
--------- ------- -------- -------
Total Interest-Bearing Liabilities 85,660 $ 1,427 3.33% 83,509 $ 2,747 3.29%
------- -------
Demand Deposits 33,516 30,840
Other Liabilities 2,789 2,271
Shareholders' Equity 11,489 10,778
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $133,454 $127,398
-------- --------
-------- --------
Interest Income / Earning Assets 9.29% 9.03%
Interest Expense / Earning Assets 2.53% 2.54%
----- -----
Net Interest Margin $ 3,811 6.76% $ 7,002 6.49%
------- ----- -------- -----
------- ----- -------- -----
- ---------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
(dollars in 000's) December 31, 1996 December 31, 1995
--------------------------------- --------------------------------
Balance Interest Rate Balance Interest Rate
---------- ---------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans $ 60,482 $ 6,281 10.38% $ 58,032 $ 6,188 10.66%
Loan Fees $ 210 $ 210
-------- ------- -------- -------
Total Loans 60,482 $ 6,491 10.73% 58,032 $ 6,398 11.02%
-------- ------- -------- -------
Investment Securities:
Taxable Securities 19,928 $ 1,171 5.88% 21,368 $ 1,232 5.77%
Non-Taxable Securities 12,577 $ 723 5.75% 13,746 $ 783 5.70%
-------- ------- ------ -------
Total Securities 32,505 $ 1,894 5.83% 35,114 $ 2,015 5.74%
-------- ------- -------- -------
Time Deposits in Other Financial
Institutions 53 $ 3 5.66% - $ -
Federal Funds Sold 7,952 $ 404 5.08% 2,235 $ 126 5.64%
-------- ------- -------- -------
Total Money Market Investments 8,005 $ 407 5.08% 2,235 $ 126 5.64%
-------- ------- -------- -------
Total Earnings Assets 100,992 $ 8,792 8.71% 95,381 $ 8,539 8.95%
------- -------
Total Non-Earnings Assets 19,961 16,665
-------- --------
TOTAL ASSETS $120,953 $112,046
-------- --------
-------- --------
Liabilities and Shareholders' Equity:
Borrowed Funds:
Federal Funds Purchased $ - $ - 0.00% $ 156 $ 9 5.77%
Other - $ - 0.00% 1,407 $ 101 7.18%
-------- ------- -------- -------
Total Borrowed Funds 0.00% 1,563 $ 110 7.04%
-------- ------- -------- -------
Interest-Bearing Deposits:
Savings and Interest-Bearing
Transaction Accounts 51,131 $ 1,115 2.18% 51,899 $ 1,173 2.26%
Time Deposits 30,448 $ 1,625 5.34% 23,868 $ 1,237 5.18%
-------- ------- -------- -------
Total Interest-Bearing Accounts 81,579 $ 2,740 3.36% 75,767 $ 2,410 3.18%
-------- ------- -------- -------
Total Interest-Bearing Liabilities 81,579 $ 2,740 3.36% 77,330 $ 2,520 3.26%
-------- ------- -------- -------
Demand Deposits 26,557 23,063
Other Liabilities 2,084 1,621
Shareholders' Equity 10,733 10,032
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $120,953 $112,046
-------- --------
-------- --------
Interest Income / Earning Assets 8.71% 8.95%
Interest Expense / Earning Assets 2.71% 2.64%
----- -----
Net Interest Margin $ 6,052 5.99% $ 6,019 6.31%
-------- ----- -------- -----
-------- ----- -------- -----
</TABLE>
(1) Rates for the six month period ended June 30, 1998 are based upon
annualized interest income/expense.
92
<PAGE>
Changes in the dollar amount of interest earned or paid will vary from one
year to the next because of changes in the average balance ("volume") of the
various earning assets and interest-bearing liability accounts and changes in
the interest rates ("rate") applicable to each category. Table 2, "Volume and
Rate Variance Analysis of Net Interest Margin," analyzes the difference in
interest earned and paid on the major categories of assets and liabilities in
terms of the effects of volume and rate changes for the periods indicated.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TABLE 2 - Volume and Rate Analysis of Net Interest Margin
- -----------------------------------------------------------------------------------------------------------------------------------
(dollars in 000's)
1997 OVER 1996 1996 OVER 1995
---------------------------------------- --------------------------------------
---------- ---------- ----------- ---------- ---------- -----------
Volume Rate Total Volume Rate Total
---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) In:
Interest Income:
Loans $ 1,387 $ (74) $ 1,313 $ 264 $ (171) $ 93
------- ----- ------- ------ ------ ------
Investment Securities $ (160) $ (38) $ (198) $ (153) $ 32 $ (121)
------- ----- ------- ------ ------ ------
Money Market Investments:
Time deposits in Other Financial Institutions $ 10 $ - $ 10 $ 3 $ - $ 3
Federal Funds Sold $ (181) $ 13 $ (168) $ 292 $ (14) $ 278
------- ----- ------- ------ ------ ------
Total Money Market Investments $ (171) $ 13 $ (158) $ 295 $ (14) $ 281
------- ----- ------- ------ ------ ------
Total Earning Assets $ 1,056 $ (99) $ 957 $ 406 $ (153) $ 253
------- ----- ------- ------ ------ ------
Interest Expense
Borrowed Funds:
Federal Funds Purchased $ - $ - $ - $ (9) $ - $ (9)
Other $ - $ - $ - $ (101) $ - $ (101)
------- ----- ------- ------ ------ ------
Total Borrowed Funds $ - $ - $ - $ (110) $ - $ (110)
------- ----- ------- ------ ------ ------
Interest-Bearing Deposits:
Savings and Interest-Bearing
Transaction Accounts $ 15 $ (35) $ (20) $ (18) $ (40) $ (58)
Time Deposits $ 67 $ (40) $ 27 $ 349 $ 39 $ 388
------- ----- ------- ------ ------ ------
Total Interest-Bearing Deposits $ 82 $ (75) $ 7 $ 331 $ (1) $ 330
------- ----- ------- ------ ------ ------
Total Interest-Bearing Liabilities $ 82 $ (75) $ 7 $ 221 $ (1) $ 220
------- ----- ------- ------ ------ ------
Increase (Decrease) in Net Interest Margin $ 974 $ (24) $ 950 $ 185 $ (152) $ 33
------- ----- ------- ------ ------ ------
------- ----- ------- ------ ------ ------
</TABLE>
Changes in rate/volume (change in rate times the change in volume) was allocated
to the rate and volume variances in proportion to those variances.
93
<PAGE>
Table 3, "Investment Portfolio Maturity Distribution and Yield
Analysis", sets forth the amounts and maturity ranges of securities at
December 31, 1997 and June 30, 1998. The weighted average yields of the
securities are also shown.
- -------------------------------------------------------------------------------
TABLE 3 - Investment Portfolio Maturity Distribution and Yield Analysis
- -------------------------------------------------------------------------------
(dollars in 000's)
As of December 31, 1997:
<TABLE>
<CAPTION>
After One After Five
One Year Year to Years to After
or Less Five Years Ten Years Ten Years Total
-------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Maturity Distribution:
Mutual Funds $ 2,803 $ 2,803
Other U.S. Government Agencies
and Corporations $ 1,500 $ 3,245 4,745
Mortgage Backed Securities 280 3,576 $ 416 2,283 6,555
State and Municipal Securities (1) 738 3,257 4,809 2,087 10,891
------- -------- ------- ------- --------
Total $ 2,518 $ 10,078 $ 5,225 $ 7,173 $ 24,994
------- -------- ------- ------- --------
------- -------- ------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
After One After Five
One Year Year to Years to After
or Less Five Years Ten Years Ten Years
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted Average Yield:
Mutual Funds 5.490%
Other U.S. Government Agencies
and Corporations 5.341% 6.010%
Mortgage Backed Securities 5.065% 6.095% 5.798% 6.308%
State and Municipal Securities (1) 7.310% 6.982% 7.013% 7.351%
</TABLE>
(1) The following yields have been computed on a tax equivalent basis. The
incremental rate used for Federal basis is 20%.
94
<PAGE>
- ------------------------------------------------------------------------------
TABLE 3 (cont) - Investment Portfolio Maturity Distribution and Yield Analysis
- ------------------------------------------------------------------------------
(dollars in 000's)
As of June 30, 1998:
<TABLE>
<CAPTION>
After One After Five
One Year Year to Years to After
or Less Five Years Ten Years Ten Years Total
-------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Maturity Distribution:
Mutual Funds $ 2,770 $ 2,770
Other U.S. Government Agencies
and Corporations $ 2,250 $ 1,495 3,745
Mortgage Backed Securities 194 2,973 $ 369 2,863 6,399
State and Municipal Securities (1) 1,233 3,171 4,334 1,522 10,260
------- ------- ------- ------- --------
Total $ 3,677 $ 7,639 $ 4,703 $ 7,155 $ 23,174
------- ------- ------- ------- --------
------- ------- ------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
After One After Five
One Year Year to Years to After
or Less Five Years Ten Years Ten Years
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted Average Yield:
Mutual Funds 4.138%
Other U.S. Government Agencies
and Corporations 5.660% 5.835%
Mortgage Backed Securities 5.092% 6.237% 5.955% 5.698%
State and Municipal Securities (1) 7.122% 6.887% 7.083% 7.153%
</TABLE>
(1) The following yields have been computed on a tax equivalent basis. The
incremental rate used for Federal basis is 20%.
95
<PAGE>
Table 4, "Loan Portfolio Analysis by Category," sets forth the distribution
of ACB's loans at the end of the period ended June 30, 1998 and for each of
the last two years.
- -------------------------------------------------------------------------------
TABLE 4 - Loan Portfolio Analysis by Category
- -------------------------------------------------------------------------------
(dollars in 000's)
<TABLE>
<CAPTION>
June 30, December 31,
------------- ----------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Commercial Loans $ 29,558 $ 30,040 $ 29,370
Construction & Development Loans 3,467 2,494 202
Real Estate Loans 33,607 29,631 11,026
Equity Lines of Credit 9,204 10,217 12,134
Installment Loans 7,597 10,669 10,260
Leases Receivable 855 1,495 2,860
Credit Card Loans 177 145 76
Overdrafts 20 10 11
--------- -------- --------
Total Loans, Gross $ 84,485 $ 84,701 $ 65,939
--------- -------- --------
--------- -------- --------
</TABLE>
96
<PAGE>
Table 5, "Maturities and Sensitivities of Selected Loan Types to Changes in
Interest Rates", shows the maturity distribution of the loan portfolio at
December 31, 1997 and June 30, 1998, and shows the proportion of fixed and
floating rate loans for each t
- -------------------------------------------------------------------------------
TABLE 5 - Maturities and Sensitivities of Loans to Changes in Interest Rates
- -------------------------------------------------------------------------------
(dollars in 000's)
<TABLE>
<CAPTION>
Over
As of December 31, 1997: 3 Months Due after Due after
3 Months through one year to three years Due after
or less 12 months three years to five years five years Total
------------- ------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Rate $ 2,277 $ 2,885 $ 9,226 $ 13,107 $ 8,971 $ 36,466
Floating Rate 46,344 46,344
-------- ------- ------- -------- ------- --------
Total $ 48,621 $ 2,885 $ 9,226 $ 13,107 $ 8,971 82,810
-------- ------- ------- -------- -------
-------- ------- ------- -------- -------
Non-Accruals 1,891
--------
TOTAL LOANS, GROSS $ 84,701
--------
--------
</TABLE>
<TABLE>
<CAPTION>
Over
As of June 30, 1998: 3 Months Due after Due after
3 Months through one year to three years Due after
or less 12 months three years to five years five years Total
------------- ------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Rate $ 2,832 $ 4,055 $ 8,963 $ 10,351 $ 7,444 $ 33,645
Floating Rate 49,004 49,004
-------- ------- ------- -------- ------- --------
Total $ 51,836 $ 4,055 $ 8,963 $ 10,351 $ 7,444 82,649
-------- ------- ------- -------- ------- --------
-------- ------- ------- -------- ------- --------
Non-Accruals 1,836
--------
TOTAL LOANS, GROSS $ 84,485
--------
--------
</TABLE>
97
<PAGE>
Table 6, "Non-Accrual and Non-Performing Loans", summarizes ACB's
non-performing loans for the period ended June 30, 1998 and for the last five
years. Non-performing loans consist of loans that have been placed on
non-accrual status and loans that are delinquent 90 days or more. Non-accrual
loans are loans where there is reasonable doubt as to the collectibility of
principal or interest on a loan. All non-accrual loans carry a classified loan
grade of either "substandard", "doubtful", or "loss". ACB stops recognizing
income from the interest on the loan and reverses any uncollected interest that
had been accrued but not received. These loans may or may not be adequately
collateralized, and collection efforts are being pursued.
- -------------------------------------------------------------------------------
TABLE 6 - Non-Accrual and Non-Performing Loans
- -------------------------------------------------------------------------------
(dollars in 000's)
<TABLE>
<CAPTION>
June 30, December 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- ------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Non-Accrual $ 1,836 $ 1,891 $ 150 $ 190 $ 178 $ 199
90 Days or More Past Due 1 497 982 8 296
-------- ------- ----- ------- ------- ------
Total $ 1,836 $ 1,892 $ 647 $ 1,172 $ 186 $ 495
-------- ------- ----- ------- ------- ------
-------- ------- ----- ------- ------- ------
</TABLE>
Proper loan grading and the early detection of potentially problematic
credits help management and the Board of Directors accurately assess ACB's
level of portfolio risk, focus resources, and provide for adequate provision
for loan loss. All loans and leases are graded using the pre-classified and
classified loan grades of "special mention", "substandard", "doubtful", or
"loss" and include non-performing loans. Each classified credit is monitored
on an on-going basis by Credit Administration. The Board's Loan Committee
receives reports on the status of these loans on a monthly basis.
All loans and leases are defaulted on the computer system to be placed
on non-accrual status when interest and/or principal payments are past due 90
days or more. Loans and leases are reviewed periodically to determine if it
should be placed on non-accrual status even though, in some cases, the loans
are current at the time. If placed on non-accrual, removal from non-accrual
is directed by the Board.
As of December 31, 1996, classified loans totaled $1,642,000 or 2.53% of
the outstanding loan portfolio. At December 31, 1997, the representation was
$5,217,955 or 6.2% of the outstanding portfolio. As of June 30, 1998,
classified loan totals equaled $4,055,364 or 4.8% of the outstanding
portfolio.
Foreign Loans: ACB does not have and does not plan to have foreign loans
in its portfolio.
Participations: From time to time ACB will sell or purchase a portion of
a loan to another bank. ACB will usually sell a portion of a loan as a method
of accommodating a large borrowing customer that would otherwise exceed ACB's
maximum credit limit for loans of this nature to any single borrower or
borrowing entity. On occasion ACB will purchase a portion of a loan, under
specifically designated terms, from other banks after these loans have been
presented and approved within the guidelines of ACB's general lending
policies.
98
<PAGE>
Loan Concentrations: There is no knowledge of concentrations at or exceeding
10% of equity capital by industry, individual borrower, geographic location
or repayment source in the portfolio. Portfolio Mix is as follows at June 30,
1998:
<TABLE>
<CAPTION>
Current
Loan Classifications % Outstandings
-------------------------- --------- ---------------------
<S> <C> <C>
COMMERCIAL 39.18% $ 30,287,762
Commercial Unfunded $ 13,812,313
FACTORING LINES 1.44% $ 1,033,995
Factoring Lines Unfunded $ 591,005
INSTALLMENT 6.00% $ 6,706,952
Installment Unfunded $ 45,000
REAL ESTATE 8.95% $ 9,986,931
Real Estate Unfunded $ 86,226
COMMERCIAL REAL ESTATE 24.93% $ 25,540,590
Com'l Real Estate Unfunded $ 2,521,050
HOMELINE 14.06% $ 9,145,132
Homeline Unfunded $ 6,682,977
AMERICAN RESERVE 4.03% $ 891,361
American Reserve Unfunded $ 3,638,107
MASTERCARD 0.71% $ 176,973
Mastercard Unfunded $ 623,128
CAPITAL LEASES 0.70% $ 790,520
TOTAL GROSS LOANS 100.00% $ 112,560,022
TOTAL OUTSTANDING $ 84,560,216
</TABLE>
99
<PAGE>
Table 7, "Summary of Loan Loss Experience", shows the additions to,
charge-offs against, and recoveries for ACB's reserve for possible loan
losses for the six month period ended June 30, 1998 and the years ended
December 31, 1997 and 1996. Also shown is the ratio of charge-offs to average
loans for each year.
- --------------------------------------------------------------------------------
TABLE 7 - Summary of Loan Loss Experience
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------------------
1998 1997 1996
---------------- -------------- --------------
<S> <C> <C> <C>
BALANCE OF ALLOWANCE FOR LOAN AND LEASE LOSSES -
BEGINNING OF PERIOD $ 1,047,545 $ 811,552 $ 632,271
CHARGE-OFFS:
Construction and Development - - -
Real Estate Loans - (4,244) -
Home Equity Lines of Credit (4,932) (27,388) (77,217)
Installment Loans (11,259) (16,496) (15,641)
Commercial Loans (145,328) (82,681) (702,031)
Credit Card and Related Loans (28,103) (60,367) (54,258)
Leases - (4,345) (21,295)
---------------- -------------- --------------
TOTAL CHARGE-OFFS (189,622) (195,521) (870,442)
---------------- -------------- --------------
RECOVERIES:
Construction and Development - - -
Real Estate Loans - - -
Home Equity Lines of Credit - - -
Installment Loans 133 1,176 118
Commercial Loans 8,025 20,338 3,962
Credit Card and Related Loans - - 43
Leases - - -
---------------- -------------- --------------
TOTAL RECOVERIES 8,158 21,514 4,123
---------------- -------------- --------------
NET RECOVERIES AND CHARGE-OFFS (181,464) (174,007) (866,319)
Provision for Possible Loan Losses 265,000 410,000 1,045,600
BALANCE OF ALLOWANCE FOR LOAN AND LEASE LOSSES -
END OF PERIOD $ 1,131,081 $ 1,047,545 $ 811,552
---------------- -------------- --------------
Ratio of Net Recoveries/Charge-offs During the Period
to Average Loans Outstanding During the Period 0.22% 0.23% 1.38%
</TABLE>
100
<PAGE>
Table 8, "Average Deposits and Interest Rates", shows the average amount of
deposits for the period ended June 30, 1998 and for the last three years, the
interest paid and the rates.
- --------------------------------------------------------------------------------
TABLE 8 - Average Deposits and Interest Rates
- --------------------------------------------------------------------------------
(dollars in 000's)
<TABLE>
<CAPTION>
June 30, 1998 (1) December 31, 1997
----------------------------- ----------------------------
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-Bearing Deposits:
Interest-Bearing Demand $ 21,567 $ 168 1.56% $ 20,574 $ 321 1.56%
Money Market 19,132 249 2.60% 20,041 524 2.61%
Savings 11,295 124 2.20% 11,163 250 2.24%
Time Deposits 33,666 886 5.26% 31,731 1,652 5.21%
-------- -------- -------- --------
Total Interest-Bearing Deposits 85,660 $ 1,427 3.33% 83,509 $ 2,747 3.29%
-------- --------
Non-Interest Bearing Deposits 33,516 30,840
-------- --------
Total Deposits $119,176 $114,349
-------- --------
<CAPTION>
December 31, 1996 December 31, 1995
----------------------------- ----------------------------
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-Bearing Deposits:
Interest-Bearing Demand $ 19,742 $ 317 1.61% $ 19,195 $ 336 1.75%
Money Market 19,956 535 2.68% 18,631 484 2.60%
Savings 11,433 263 2.30% 14,073 353 2.51%
Time Deposits 30,448 1,625 5.34% 23,868 1,237 5.18%
-------- -------- -------- -------
Total Interest-Bearing Deposits 81,579 $ 2,740 3.36% 75,767 $ 2,410 3.18%
-------- -------
Non-Interest Bearing Deposits 26,557 23,063
-------- --------
Total Deposits $108,136 $98,830
-------- --------
</TABLE>
(1) Rates for the six month period ended June 30, 1998 are based upon annualized
interest expense.
101
<PAGE>
Table 9, "Maturity Distribution of Time Certificates of Deposit of $100,000",
shows the maturity distribution of time deposits of $100,000 or more and those
under $100,000 at June 30, 1998 and December 31, 1997.
- -------------------------------------------------------------------------------
TABLE 9 - Maturity Distribution of Time Certificates of Deposit
- -------------------------------------------------------------------------------
(dollars in 000's)
<TABLE>
<CAPTION>
At December 31, 1997
------------------------------------------------------------------------------------------------
Three After three After six After one
months or months to months to year to After
less six months one year three years three years Total
--------- ----------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 or more $ 4,842 $ 5,031 $2,857 $ 715 $13,445
Under $100,000 5,369 5,640 5,564 2,090 18,663
------- ------- ------ ------ ------- -------
Total $10,211 $10,671 $8,421 $2,805 $ - $32,108
------- ------- ------ ------ ------- -------
------- ------- ------ ------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1998
------------------------------------------------------------------------------------------------
Three After three After six After one
months or months to months to year to After
less six months one year three years three years Total
--------- ----------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 or more $ 4,378 $3,188 $ 5,727 $ 733 $14,026
Under $100,000 6,770 4,705 7,419 1,907 $ 30 20,831
------- ------ ------- ------ ------- -------
Total $11,148 $7,893 $13,146 $2,640 $ 30 $34,857
------- ------ ------- ------ ------- -------
------- ------ ------- ------ ------- -------
</TABLE>
102
<PAGE>
Table 10, "Financial Ratios", shows certain financial ratios for the period
ended June 30, 1998 and for the last three years.
- --------------------------------------------------------------------------------
TABLE 10 - Financial Ratios
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997 1996 1995
------- -------- ------- -------
<S> <C> <C> <C> <C>
Return on Average Assets (1) 0.84% 0.87% 0.17% 0.84%
Return on Average Shareholders' Equity (1) 9.78% 10.22% 1.89% 9.42%
Dividend Payout Ratio 44.21% 43.98% 240.00% 49.10%
Average Shareholders' Equity
to Average Assets Ratio 8.61% 8.47% 8.87% 8.95%
</TABLE>
(1) Ratios for the six month period ended June 30, 1998 is computed based on
annualized net income.
103
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION AND BUSINESS OF AMERICORP. Americorp is a California bank
holding company incorporated in 1988 that is headquartered in the city of
Ventura. The holding company currently has one subsidiary, ACB. ACB was
chartered as a California state chartered bank, and has been operating since
September 1973. ACB offers a wide range of banking services to households,
professionals, and small to medium size businesses. ACB operates four banking
offices in Ventura County: three in Ventura and one in Camarillo.
During 1997 and 1998 ACB continued its growth strategy, reflecting the
improvement in the Ventura County economy. During 1997, management continued its
effort to prepare ACB for continued growth by improving data processing systems,
automating tasks, and opening a new full service branch in Camarillo in
September.
1998 has been a year of change and challenge. In March, ACB's
President/CEO resigned. ACB's Senior Credit Officer was then promoted to
President/CEO. The Bank then hired a new Chief Operating Officer. ACB has a 50%
limited partner interest in two separate limited partnerships (Ventura
Affordable Homes, Ltd. ("VAH") and Santa Paula Affordable Homes, Ltd.).
Affordable Communities, Inc. ("ACI"), an unrelated entity, is the general
partner. Both partnerships were formed for the purpose of constructing
low-to-moderate income housing. Due to various factors, the Santa Paula
development will not commence. The Ventura development was to construct 151
homes, all of which have been completed. In January of 1997, a dispute arose
between ACB as limited partner and ACI, the general partner, over the amount of
management fees claimed to be owed to the general partner by VAH. In February
1997, ACB initiated a lawsuit against the general partner because of the
dispute. On May 1, 1998, ACB and ACI negotiated a complete settlement of the
dispute. In connection with the settlement agreement, both partnerships are
being dissolved and ACB has received a cash distribution in full satisfaction of
its 50% interest in the VAH partnership. As a result of the settlement, ACB will
record no gains or losses for either partnership during 1998.
ECONOMIC CONDITIONS. The most comprehensive review of local economic
conditions known to
104
<PAGE>
Management comes from the UCSB Economic Forecast Project which provides both
annual forecast information and periodic updates of economic conditions in
ACB's trade area. During 1997, the Ventura County economy continued down an
expansion path that was steady and orderly. With the exception of the booming
housing market, economic growth was generally modest but firm.
Existing businesses have strengthened and are expanding. Absorption
of office and industrial space accelerated in 1997. Home sales soared 18%
during the year, and selling prices generally firmed. The unemployment rate
averaged 6.5% during 1997, the lowest rate since 1990. Taxable retail sales
increased 4.6% during 1997. A strengthening California economy, the
continuous expansion of the U.S. economy, the unprecedented returns from the
financial and equity markets, and the steady and efficient growth of the farm
sector are the principal reasons for the current prosperity of the Ventura
County economy.
STATEMENT OF INCOME ANALYSIS
INCOME SUMMARY. Net income was $1,103,000 in 1997 compared to
$203,000 in 1996 and $945,000 in 1995. Basic income per share was $1.91 in
1997, $0.35 in 1996 and $1.67 in 1995, and diluted income per share was $1.66
in 1997, $0.31 in 1996 and $1.41 in 1995. Income for all three years was from
normal operations. However, income from 1996 decreased significantly due to a
large loan charge-off totaling $700,000, a write-down of bank owned mutual
funds totaling $148,000 and a onetime write-down of property owned in
connection with the Santa Paula Affordable Homes, Ltd. partnership totaling
$200,000. Income for 1997 increased due to growth in real estate lending
totaling $20,900,000.
ACB reported net earnings of $561,000 or $0.95 basic income per
share for the first six months of 1998. This represents a 9.8% increase over
the same period during 1997 when net earnings were $511,000 or $0.89 basic
income per share.
Return on average assets for 1997 was 0.87% compared with 0.17%
for 1996 and 0.84% for 1995. The return on average equity was 10.22% for
1997 compared with 1.89% for 1996 and 9.42% for 1995.
Annualized return on average assets for the six months ended 1998
was 0.84% compared with 0.82% for the same period during 1997. Annualized
return on average equity for the six months ended 1998 were 9.78% compared
with 9.68% for the same period during 1997.
Quarterly cash dividends of $0.20 per share were paid in January,
April of 1995. This amount was increased to $0.21 per share and paid in July
and October 1995. Quarterly cash dividends of $0.21 per share were paid in
January, April, July and October in 1997 and 1996. Quarterly cash dividends
of $0.21 per share were paid in January and April of 1998.
NET INTEREST INCOME. Net interest income is the amount by which the
interest and amortization of fees generated from loans and other earning assets
exceeds the cost of funding those assets, usually deposit account interest
expense. Net interest income depends on the difference (the "interest rate
spread")
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<PAGE>
between gross interest and fees earned on the loans and investment portfolios
and the interest rates paid on deposits and borrowings. Net interest income
was $7,002,000 in 1997 compared to $6,052,000 in 1996 and $6,019,000 in 1995.
Net interest income was $3,811,000 for the six months ended June 30, 1998,
compared to $3,363,000 for the six months ended June 30, 1997.
Interest income grew $957,000 or 10.9% in 1997 compared with an
increase of $253,000 or 3.0% in 1996 and an increase of $1,002,000 or 13.3%
in 1995. The increased interest income between 1997 and 1996 is comprised of
two key elements, interest on loans and investments. Average outstanding
loans for 1997 and 1996 were $74,507,000 and $61,277,000, respectively. This
represents a $13,230,000 average increase. The yield on loans for this period
decreased from 10.25% to 10.06% or (0.17%). The increase in average
outstanding balance and decrease in yield resulted in an overall increase in
loan interest income totaling $1,230,000. Average outstanding investments for
1997 and 1996 were $34,345,000 and $40,620,000, respectively. This represents
a $(6,275,000) average decrease. The yield on investments for this period
remained consistent at 5.66%. The decrease in average outstanding balance and
consistent yield resulted in an overall decrease in investment interest
income totaling $(355,000). Total fees on loans increased during 1997 by
$82,000.
Interest income grew $537,000 or 11.4% for six months ended June 30,
1998 compared to the six months ended June 30, 1997. The increased interest
income between these two periods is comprised of two key elements, interest
on loans and investments. Average outstanding loans for interim 1998 and 1997
were $82,684,000 and $70,627,000, respectively. This represents a $12,057,000
average increase. The yield on loans for this period increased from 9.96% to
10.03% or 0.07%. The increase in average outstanding balances and increase in
yield resulted in an overall increase in loan interest income totaling
$627,000. Average outstanding investments for interim 1998 and 1997 were
$31,238,000 and $35,303,000, respectively. This represents a $(4,065,000)
average decrease. The yield on investments for this period decreased from
5.87% to 5.60% or (0.27%). The decrease in average outstanding balance and
decrease in yield resulted in an overall decrease in investment interest
income totaling $(162,000). Total fees on loans increased during interim 1998
by $72,000.
Interest expense on deposits increased $7,000 or 0.3% in 1997 compared
to $220,000 or 8.7% in 1996 and $504,000 or 25.0% in 1995.
Interest expense increased $89,000 or 6.7% for six months ended June
30, 1998 compared to the six months ended June 30, 1997. Average outstanding
interest bearing deposits for interim 1998 and 1997 were $85,659,000 and
$82,549,000, respectively. This represents a $3,111,000 average increase. The
cost on these deposits for this period increased from 3.24% to 3.33% or
0.09%. The increase in average outstanding balances and increase in cost
resulted in an overall increase to interest expense for this period.
On March 26, 1997 the prime rate changed from 8.25% to 8.50% and
remained steady through June 30, 1998. In 1996 the prime rate decreased to
8.25% from 8.5% on February 1, and remained steady throughout the year. The
prime rate ranged from 9.00% to 8.50% and averaged 8.8% in 1995.
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<PAGE>
The average loan-to-deposit ratio increased to 65.2% in 1997 compared to
56.7% in 1996 and 59.48% in 1995. At year end the 1997 loan-to-deposit ratio was
70.6%.
For the six months ended June 30, 1998 and 1997 the average
loan-to-deposit ratio increased to 69.0% compared to 63.3%. As of June 30, 1998,
the loan-to-deposit ratio was 67.6%.
PROVISION FOR LOAN LOSSES. During 1997, net loans charged off were
$174,000 compared with $866,000 in 1996 and $583,000 in 1995. Net loans
charged off for the six months ended June 30, 1998 was $181,000 compared to
$134,000 for the same period during 1997. Due to growth in the loan portfolio
and an increase in classified assets, the provision for loan losses charged
against income in 1997 was $410,000 compared to $346,000 (excluding the one
time charge off of $700,000 which brought the total provision for the year to
$1,046,000) in 1996. The provision for 1995 was $554,000. The provision for
the six months ended June 30, 1998 was $265,000 compared to $260,000 for the
six months ended June 30, 1997 Again, due to the growth in the loan
portfolio, management increased the allowance for loan losses to $1,048,000
as of December 31, 1997 compared to $812,000 as of December 31, 1996 and
$632,000 as of December 31, 1995. As of June 30, 1998 the allowance was
$1,131,000 compared to $938,000 for the same period during 1997. The
provision for loan losses charged against income is added to the allowance
for loan losses. As of December 31, 1997, the allowance was 1.24% of total
loans compared to 1.23% at year end 1996. As of June 30, 1998, the allowance
was 1.34% of total loans compared to 1.23% as of June 30, 1997.
NON INTEREST INCOME. Non Interest Income represents deposit account
services charges and other types of non-loan related fee income. Non-interest
income was $1,571,000 in 1997 compared to $1,248,000 in 1996 and $1,384,000
in 1995. This represents an increase of $323,000 or 25.9% between 1997 and
1996. During 1996 ACB had a write-down on mutual funds of $148,000. During
1997 the following significant changes were noted: equity in net income in
partnerships decreased by $(164,000); the Bank opened a Real Estate
department whose brokering fees represented $57,000 in income; customer
service charges increased due to growth in overall deposit balances and
improved efforts to collect related fees totaling $106,000; and net
investment security sales gains totaled $54,000.
Non-interest income for the six months ended June 30, 1998
totaled $672,000 compared to $607,000 for the same period during 1997. This
represents an increase of $65,000. The major contributing factor to this
difference is an overall increase of $58,000 in Real Estate brokering fees.
NON INTEREST EXPENSE. Non Interest Expenses represent salaries,
occupancy expenses, professional expenses, outside services and other
miscellaneous expenses necessary to conduct business. Non-interest expense
was $6,664,000 in 1997 compared to $6,014,000 in 1996 and $5,678,000 in 1995.
This represents an increase of $650,000 or 10.8% between 1997 and 1996.
During 1996 ACB had a onetime write-down on real estate totaling $200,000.
During 1997 the following significant changes were noted: ACB opened a new
branch in Camarillo, CA., occupancy expense for the year increased by
$103,000 due to increases in rent, utilities and amortization for leasehold
improvements; salary and related expense increased by $438,000 due to the
paying of a
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<PAGE>
bonus during 1997 and an increased number of employees; legal expense
increased by $144,000 due to the lawsuit with ACI; furniture and equipment
expense rose due to the full implementation of a new bankwide computer
network totaling $87,000
Non-interest expense for the six months ended June 30, 1998 totaled
$3,450,000 compared to $2,988,000 for the same period during 1997. This
represents an increase of $462,000. The major contributing factors to this
difference are an overall increase in salaries of $218,000 due to the changes
that have taken place in upper management and the opening of a new branch.
Occupancy expenses are up $87,000 due to the opening of the new branch and a
significant increase in the Common Area Maintenance charges for one branch
and COL increases for another. Other smaller items make up the balance of the
remaining differences.
PROVISION FOR INCOME TAXES. The effective income tax rate was 26% in
1997, 15% in 1996 and 19% in 1995. For the interim period June 30, 1998 and
1997, the effective tax rate was 27% and 29%, respectively. The accrual
method of accounting is used to compute income taxes for financial accounting
purposes and for income tax return preparation. For further information about
the provision for income taxes during the June 30, 1998 and 1997 interim
periods, please refer to the footnotes to the financial statements included
elsewhere in this report.
BALANCE SHEET ANALYSIS
The improvement in the Southern California economy in 1997 and 1998
and specifically, the improving economy in Ventura County and the community
banks sales opportunities created by large banks' continued industry
consolidation are reflected in the growth of ACB's balance sheets in 1997 and
interim 1998. In 1997 ACB attracted quality customers from the larger banks
because of the higher level of personalized service offered. As of December
31, 1997, total assets increased by 5.6% to $134,212,000 compared to
$127,080,000 at year end 1996. Gross loans grew to $84,702,000 as of December
31, 1997 or 28.5% compared to $65,939,000 at December 31, 1996.
As of June 30, 1998, total assets increased by 10.4% to $139,824,000
compared to $126,643,000 at June 30, 1997. Gross loans grew to $84,485,000 as
of June 30, 1998, or 13.7% compared to $74,280,000 at June 30, 1997.
Securities and fed funds sold decreased to $31,013,000 as of
December 31, 1997 or 29% compared to $43,659,000 as of December 31, 1996.
Deposits grew to $119,968,000 or 5.0% as of December 31, 1997 compared to
$114,284,000 as of December 31, 1996.
Deposits grew to $124,975,000 or 9.9% as of June 30, 1998 compared
to $113,682,000 as of June 30, 1997.
INVESTMENTS. The securities portfolio of ACB serves several purposes: 1)
it provides liquidity to even out cash flows from the loan and deposit
activities of customers; 2) the deposits of public agencies
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<PAGE>
must be secured by certain assets of ACB as required by law, and portions of
any of the portfolio may be used for this function; 3) it is a large base of
assets, the maturity and interest rate characteristics of which can be
changed more readily than the loan portfolio to better match changes in the
deposit base and other funding sources of ACB; 4) it is an alternative
interest-earning use of funds when loan demand is light; and, 5) it may
provide partially tax-exempt income.
ACB's investment portfolio primarily consists of Federal Agency
Securities, Mortgage-backed Securities, Municipal Securities, Mutual Funds
and overnight investments in the Federal Funds market. During 1997 the
investment portfolio decreased by $12,647,000. The yield curve during 1997
shifted downward. This resulted in several Agency and Municipal securities
being called placing a significant amount of principal dollars back into
ACB's hands. Due to high loan demand, these funds and fed funds dollars were
reinvested into loans. See loans section for a further explanation of loan
growth.
During 1998 this trend has continued. However, ACB has increased its
fed funds balance as of June 30, 1998 by $5,800,000 to $8,200,000 compared
with $2,400,000 as of June 30, 1997. This increase is due to ACB's management
of liquidity risk.
LOANS. Loans outstanding, net of loan loss allowance increased to
$83,397,000 as of December 31, 1997, representing growth of 28.4% over the
December 31, 1996 balance of $64,943,000. A strong local economy contributed
to an increase in loan demand, primarily in the real estate sector.
Real Estate loans increased from $11,026,000 at December 31, 1996 to
$31,920,000 at December 31, 1997. This represents an increase of $20,894,000
or 189.5%. Although a significant portion of this increase was attributed to
a reclassification of existing loans due to a data conversion in May 1997,
another contributing factor to the loan growth was the opening of a Loan
Production office in the City of Camarillo in October 1996. Total loans
outstanding at this location grew to $7,545,000 as of December 31, 1997.
For the interim period ending June 30, 1998, outstanding loans
totaled $83,074,000 compared to $73,114,000 as of June 30, 1997. This
represents an increase of $9,960,000 or 13.6%. Real estate loans are up
$13,568,000 during this period for reasons previously discussed. Commercial
loans have increased $3,579,000 due to reclassifying existing loans and the
strong local economy. Consumer loans are down $(2,918,000) or (27.8%) due to
loan payoffs and reclassifications due to the data conversion. Equity lines
are down $(2,680,000) or (22.6%) due primarily to the refinancing of first
mortgages and home sales which have increased significantly in Ventura County
during the past twelve months.
ALLOWANCE FOR LOAN LOSSES. Lending is a risk based business that
recognizes losses despite prudent efforts to minimize risk.
The business of extending loans entails the possibility of risk
despite prudent efforts to minimize exposure. Economic downturns, unexpected
changes in a borrowers cash flow, and competitive pressures are among a
myriad of conditions that affect the timely repayment of loans.
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<PAGE>
The allowance for loan losses is a valuation reserve against the
banks total loan portfolio representing an amount thought to be adequate to
cover future loan losses. Included in this amount are all loans that have
been identified by management, outside auditors and regulatory agencies as
requiring additional monitoring and collective attention. Also included are
loans that management considers to be potential collection problems.
As of December 31, 1997, the allowance for loan losses was
$1,048,000 compared to $812,000 at year end 1996 and $632,000 at year end
1995. As a percentage of outstanding loans, the allowance was 1.24% as of
December 31, 1997, and 1.23% in 1996 and 1.05% in 1995. For the six months
ended June 30, 1998, the allowance for loan losses was $1,131,000 compared to
$938,000 as of June 30, 1997. As a percentage of outstanding loans, the
allowance was 1.34% as of June 30, 1998 and 1.27% for the same period during
1997.
Actual charges to the provision for losses charged to expense are as
follows:
<TABLE>
<CAPTION>
PERIOD YEAR-TO-DATE
CHARGES
<S> <C>
June 30, 1998 $ 265,000
June 30, 1997 $ 260,000
December 31, 1997 $ 410,000
December 31, 1996 $1,045,600
December 31, 1995 $ 554,002
</TABLE>
In management's opinion, the allowance for loan losses as of June
30, 1998, is adequate based upon its ongoing analysis of the loan portfolio.
Management also utilizes an independent loan review company to conduct a
quarterly analysis of the allowance. The most recent external examination
conducted as of March 31, 1998, supported the adequacy of the current level
of the reserve.
OTHER ASSETS. Bank premises and equipment, other real estate owned,
investment in partnerships and other assets are the four components of other
assets. Other assets as of December 31, 1997, totaled $8,340,000, compared to
$7,936,000 as of December 31, 1996, and $8,985,000 as of December 31, 1995.
Other assets as of June 30, 1998, totaled $5,815,000 compared to $8,240,000
as of June 30, 1997. The decrease between these two interim periods is
$2,425,000. As previously discussed, ACB is a limited partner in VAH. During
May 1998, ACB was paid back its full investment in the partnership totaling
$2,550,000.
DEPOSITS. In order to meet the demand for loans and to accommodate
the day-to-day activities of it's depositors, the bank maintains an adequate
liquidity position through the use of overnight investments in federal funds
and other short term investments.
CAPITAL. Total shareholders equity at December 31, 1997 totaled
$11,351,000, which represented
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<PAGE>
an 8.4% increase from $10,472,000 at December 31, 1996. At June 30, 1998,
shareholder equity was $11,901,000 compared to $10,718,000 for the same
period during 1997.
For all periods reviewed, the Company maintains capital ratios above
the Federal regulatory guidelines for a "well capitalized" bank. The ratios
are as follows:
<TABLE>
<CAPTION>
Six months
ended
June 30, December 31,
Required --------------------------------------------------------------
Ratio 1998 1997 1997 1996 1995
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital (to
Average Assets) 4.00% 8.77% 8.42% 8.27% 8.04% 9.21%
Tier 1 Capital (to
Risk
Weighted Assets) 4.00% 10.87% 10.75% 10.05% 11.53% 11.11%
Total Capital (to Risk
Weighted Assets) 8.00% 11.90% 11.69% 10.98% 12.42% 11.78%
</TABLE>
YEAR 2000. ACB is working to resolve the potential impact of the
year 2000 on the ability of ACB's computerized information systems to
accurately process information that may be date-sensitive. Any of ACB's
programs that recognize a date using "00" as the year 1900 rather than the
year 2000 could result in errors or system failures. ACB utilizes a number of
computer programs across its entire operation. ACB has not completed its
assessment, but currently believes that costs of addressing this issue will
not have a material adverse impact on ACB's financial position. However, if
ACB and third parties upon which its relies are unable to address this issue
in a timely manner, it could result in a material financial risk to ACB. In
order to assure this does not occur, ACB plans to devote all resources
required to resolve any significant year 2000 issues in a timely manner. See
"RISK FACTORS - Year 2000 Risks and Preparedness."
LIQUIDITY. Liquidity is ACB's ability to meet fluctuations in
deposit levels and to provide for the credit needs of its customers. The
objective in liquidity management is to maintain a balance between the
sources and uses of funds. Principal sources of liquidity include interest
and principal payments on loans and investments, proceeds from the maturity
of investments and growth in deposits. ACB holds overnight Federal funds as a
cushion from temporary liquidity needs. During the first six months of 1998,
Federal funds averaged $6,971,000 or 5.22% of total average assets. During
the first six month of 1997, Federal funds averaged $3,428,000 or 2.77% of
total average assets. In addition, ACB maintains Federal funds credit lines
with major correspondents totaling $4,700,000, subject to the customary terms
for such arrangements. ACB also maintains repurchase agreements totaling
$10,000,000.
NET INTEREST MARGIN. As previously discussed, net interest income is
the difference between the interest income and fees earned on loans and
investments and the interest expense paid on deposits and
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<PAGE>
other liabilities. The amount by which interest income exceeds interest
expense depends on two factors: the volume of earnings assets compared to the
volume of interest-bearing deposits and liabilities, and the interest rate
earned on those interest earning assets compared with the interest rate paid
on those interest-bearing deposits and liabilities.
Net interest margin is the net interest income expressed as a
percentage of earning assets. To maintain its net interest margin, the ACB
must manage the relationship between interest earned and paid, and that
relationship is subject to the following types of risks that are related to
changes in interest rates.
MARKET RISK. The market values of assets or liabilities on which the
interest rate is fixed will increase or decrease with changes in market
interest rates. If the Bank invests funds in a fixed rate long-term security
and then interest rates rise, the security is worth less than a comparable
security just issued because the older security pays less interest than the
newly issued security. If the older security had to be sold, ACB would have
to recognize a loss. Correspondingly, if interest rates decline after a fixed
rate security is purchased, its value increases. Therefore, while the value
changes regardless of which direction interest rates move, the adverse
exposure to "market risk" is primarily due to rising interest rates. This
exposure is lessened by managing the amount of fixed rate assets and by
keeping maturities relatively short. However, this strategy must be balanced
against the need for adequate interest income because variable rate and
shorter fixed rate securities generally earn less interest than longer term
fixed rate securities.
There is market risk relating to ACB's fixed rate or term
liabilities as well as its assets. For liabilities, the adverse exposure to
market risk is to lower rates because ACB must continue to pay the higher
rate until the end of the term. However, because the amount of fixed rate
liabilities is significantly less than the fixed rate assets, and because the
average maturity is substantially less than for the assets, the market risk
is not as great.
Net interest margin was 6.49% in 1997 compared to 5.99% in 1996 and
6.31% in 1995. Net interest margin was 6.76% for the six months ended June
30, 1998, compared to 6.36% for the six months ended June 30, 1997.
The following is a summary of the carrying amounts and estimated
fair values of selected Bank financial assets and liabilities at December 31,
1997:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------------ ------------
<S> <C> <C>
Financial assets:
Securities $ 25,113,000 $ 25,256,000
Loans, net of allowance for
loan losses $ 83,398,000 $ 83,279,000
Financial Liabilities:
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<PAGE>
Deposits $119,968,000 $120,014,000
</TABLE>
Other than a relatively small difference due to credit quality
issues pertaining to loans, the difference between the carrying amount and
the fair value is a measure of how much more or less valuable ACB's financial
instruments are to it than when acquired. The net difference for
interest-bearing financial assets is $24,000. The amount is not deemed to be
significant compared to the outstanding balances taken as a whole.
The net difference for interest-bearing financial liabilities is
$46,000. The amount is not deemed to be significant compared to the
outstanding balances taken as a whole.
MISMATCH RISK. Another interest-related risk arises from the fact
that when interest rates change, the changes do not occur equally in the
rates of interest earned and paid because of difference in the contractual
terms of the assets and liabilities held. ACB has a large portion of its loan
portfolio tied to the prime interest rate. If the prime rate is lowered
because of general market conditions, e.g., other banks are lowering their
lending rates; these loans will be repriced. If ACB were at the same time to
have a large proportion of its deposits in long-term fixed rate certificates,
net interest income would decrease immediately. Interest earned on loans
would decline while interest expense would remain at higher levels for a
period of time because of the higher rate still being paid on the deposits.
A decrease in net interest income could also occur with rising
interest rates if ACB had a large portfolio of fixed rate loans and
securities funded by deposit accounts on which the rate is steadily rising.
This exposure to "mismatch risk" is managed by matching the maturities and
repricing opportunities of assets and liabilities. This is done by varying
the terms and conditions of the products that are offered to depositors and
borrowers. For example, if many depositors want longer-term certificates
while most borrowers are requesting loans with floating interest rates, ACB
will adjust the interest rates on the certificates and loans to try to match
up demand. ACB can then partially fill in mismatches by purchasing securities
with the appropriate maturity or repricing characteristics.
One of the means of monitoring this matching process is the use of a
"gap" report table. This table shows the extent to which the maturities or
repricing opportunities of the major categories of assets and liabilities are
matched based upon specific interest rate change scenarios and assumptions.
ACB utilizes gap reports assuming simultaneous interest rate shifts of up to
+/- 200 basis points.
The following table shows the estimated impact to net interest
income for an instantaneous shift in various interest rates as of June 30,
1998 (the dollar change in net interest income represents the estimated
change for the next 12 months):
<TABLE>
<CAPTION>
Change in
Change in net interest
interest rates income
-------------- ------
<S> <C>
+200 basis points $ 226,000
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<PAGE>
+100 basis points $ 113,000
+ 50 basis points $ 169,000
- 50 basis points No change
-100 basis points $(244,000)
-200 basis points $(412,000)
</TABLE>
ACB has adequate capital to absorb any potential losses as a result
of a decrease in interest rates. Periods of more than one year are not
estimated because steps can be taken to mitigate the adverse effects of any
interest rate changes.
BASIS RISK. A third interest-related risk arises from the fact that
interest rates rarely change in a parallel or equal manner. The interest
rates associated with the various assets and liabilities differ in how often
they change, the extent to which they change, and whether they change sooner
or later than other interest rates. For example, while the repricing of a
specific asset and a specific liability may fall in the same period of a gap
report the interest rate on the asset my rise 100 basis points, while market
conditions dictate that the liability increases only 50 basis points. While
evenly matched in the gap report, ACB would experience an increase in net
interest income. This exposure to "basis risk" is the type of interest risk
least able to be managed, but is also the least dramatic. Avoiding
concentration in only a few types of assets or liabilities is the best
insurance that the average interest received and paid will move in tandem,
because the wider diversification means that many different rates, each with
their own volatility characteristics, will come into play. ACB has made an
effort to minimize concentrations in certain types of assets and liabilities.
MANAGEMENT
The following table sets forth information on those members
of the Boards of Directors of Americorp and ACB who will continue in such
positions after the Merger.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
BUSINESS EXPERIENCE APPOINTED AS
NAME AGE DURING PAST FIVE YEARS DIRECTOR AT ACB
---- --- ---------------------- ---------------
<S> <C> <C> <C>
Allen W. Jue 62 Owner, Jue's Market 1973
Robert J. Lagomarsino 71 VP Lagomarsino's 1993
(family business) U.S.
Congress, 1974-93
Gerald J. Lukiewski 44 Banker, President - ACB 3/98 to 1998
Present; S.V.P. Chief Credit Officer
7/97 to 3/98; V.P. Regional Manager
9/96 to 7/97; prior thereto various
114
<PAGE>
positions with Santa Barbara Bank
& Trust Co. and Bank of A Levy
E. Thomas Martin 55 MW Sign Corp, President 1996
Harry L. Maynard 70 Retired, former President of 1976
American Commercial Bank
</TABLE>
The following table sets forth information on those executive
officers of Americorp and ACB who will continue in such positions after the
Merger.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED OR
APPOINTED AS
BUSINESS EXPERIENCE DIRECTOR OR
NAME AND POSITION AGE DURING PAST FIVE YEARS OFFICER AT ACB
----------------- --- ---------------------- --------------
<S> <C> <C> <C>
Allen W. Jue 62 Owner, Jue's Market 1973
Chairman of the Board
Gerald J. Lukiewski 44 Banker, President - ACB 3/98 to 1997
present; S.V.P. Chief Credit Officer
7/97 to 3/98; V.P. Regional Manager
9/96 to 7/97; Loan Center Manager-
Santa Barbara Bank and
Trust Company, 3/95 to
9/96; various positions
with Bank of A. Levy,
6/90-2/95.
Mary Martha Stewart Banker, Senior Vice President and Chief 1998
Operating Officer - ACB, 3/98 to
Present; Senior Vice President Operations-
Colonial Western Agency, Inc., 10/97 to 1/98;
Group Vice President and Area Manger -
City National Bank, 1/97 to 9/97; Senior Vice
President Branch Administration - Ventura County
National Bank (acquired by City National), 5/90 to 1/97
</TABLE>
115
<PAGE>
COMPENSATION
None of the persons named in the preceding table relating to
executive officers received compensation from Americorp and/or ACB of
$100,000 or more in 1997.
In 1997, each director received $1,000 per month in director's fees
except as indicated in the following sentences. The Secretary to the Board
(Mr. Cryne) received $2,000 per month in fees and the Vice-Chairman of the
Board,(Mr. Lagomarsino) also received $2,000 per month in fees. Mr. Jue (the
Chairman of the Board) received $3,500 per month in fees.
During 1998, ACB's Directors' Retirement Plan was terminated and the
benefits payable thereunder frozen. Benefits will only be payable upon
retirement and then either on a lump sum basis or pursuant to a 10 year
pay-out. Directors Cryne, Jue, Lagomarsino and Wood were the only
participants in the plan. It is currently anticipated that the amount of such
additional accrual will be approximately $175,600.
EMPLOYMENT AGREEMENT
In connection with his appointment as President and Chief Executive
Officer of Americorp and ACB, ACB entered into an employment agreement with
Gerald J. Lukiewski as of March 2, 1998. The agreement, as amended and
extended, currently provides for a three year term with an annual salary of
$135,000. The agreement also provides for participation in ACB's bonus plan
and certain other benefits, including vacation, automobile allowance,
insurance, retirement benefits and expense reimbursements. In the event of
termination without cause, the agreement provides for the lesser of (i) three
months of additional salary and benefits or (ii) the remaining salary and
benefits due under the term of the agreement.
CERTAIN TRANSACTIONS
Some of the current directors and officers of Americorp and ACB and
the companies with which they are associated have been customers of , and
have had banking transactions with ACB, in the ordinary course of ACB's
business, and ACB expects to continue to have such banking transactions in
the future. All loans and commitments to lend included in such transactions
have been made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
persons of similar creditworthiness, and in the opinion of management of ACB,
have not involved more than the normal risk of repayment or presented any
other unfavorable features.
STOCK OWNERSHIP
Except as set forth in the following table, management of Americorp
does not know of any person who owns beneficially more than 5% of Americorp
Stock. The following table sets forth certain
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<PAGE>
information as of June 30, 1998, concerning the beneficial ownership of
Americorp Stock by each of the current directors of Americorp and ACB and by
all current directors and executive officers of Americorp and ACB as a group.
<TABLE>
<CAPTION>
AMOUNT OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- ------------------------ -------------------- -----------
<S> <C> <C>
Lincoln E. Cryne 18,209(3) 3.03%
Allen W. Jue 17,681(4) 2.95%
Robert J. Lagomarsino(5) 41,312(6) 6.94%
</TABLE>
- ----------------------------
(1) Beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has or shares; (a) voting power, which includes the power to
vote, or to direct the voting of such security; and/or; (b) investment power
which includes the power to dispose, or to direct the disposition of such
security. Benenficial owner also includes any person who has the right to
acquire beneficial ownership of such security as defined above within 60 days
of the date specified.
(2) Shares subject to options held by directors and executive officers that
were exercisable within 60 days after the Americorp Record Date ("vested"),
are treated as issued and outstanding for the purpose of computing the
percentage of class owned by such person (or group) but not for the purpose
of computing the percentage of class owned by any other individual person.
(3) Includes 5,000 shares exercisable pursuant to the Americorp stock option
plan.
(4) Includes 5,000 shares exercisable pursuant to the Americorp stock option
Plan.
(5) Directors Lagomarsino and Wood are brother and sister.
(6) Includes 1,000 shares exercisable pursuant to the Americorp stock option
plan.
117
<PAGE>
<TABLE>
<S> <C> <C>
Gerald J. Lukiewski 2,300(7) 0.38%
E. Thomas Martin 41,320(8) 6.94%
Harry L. Maynard 15,000(9) 2.52%
Catherine S. Wood(5) 40,408(10) 6.77%
Directors and Executive Officers
As a Group (10 persons) 185,460(11) 30.14%
</TABLE>
BUSINESS OF CIB
GENERAL
CIB commenced operations as a national banking association on
September 16, 1985. Effective February 20, 1998, CIB converted to a
state-chartered member bank. CIB is regulated by the DFI and the Federal
Reserve Bank ("FRB"). CIB's deposits are insured up to the maximum legal
limits by the FDIC. CIB is also subject to certain other federal laws and
regulations. As of June 30, 1998, CIB had total assets of approximately $86.9
million, total deposits of $79.3 million, and total stockholders' equity of
$7.4 million.
CIB is a community bank conducting a general commercial banking
business that serves individuals, professionals and small to medium-sized
businesses. CIB offers a full range of commercial banking services, including
commercial loans, various types of consumer and real estate loans, the
acceptance of check and savings deposits, money market and Super NOW
accounts, and other non-deposit banking services. CIB's main office and
administrative headquarters office are both located at 300 Esplanade Drive,
Oxnard, California 93030 and its telephone number is (805) 487-6581. CIB
maintains two additional branch offices, located at 155 South A Street,
Oxnard, California, and 2510 East Las Posas Road, Suite M, Camarillo,
California.
CIB has not engaged in any material research activities relating to
the development of new services or the improvement of existing CIB services.
- ----------------------------
(7) Includes 1,800 shares exercisable pursuant to the Americorp stock option
plan.
(8) Includes 1,000 shares exercisable pursuant to the Americorp stock option
plan.
(9) Includes 5,000 shares exercisable pursuant to the Americorp stock option
plan.
(10) Includes 2,000 shares exercisable pursuant to the Americorp stock option
plan.
(11) Includes 20,800 shares exercisable pursuant to the Americorp stock option
plan.
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<PAGE>
or the improvement of existing CIB services.
There as been no significant change in the types of services offered
by CIB since its inception, except in connection with new types of accounts
allowed by statute or regulation in recent years. CIB has no present plans
regarding "a new line of business" requiring the investment of a material
amount of total assets.
Most of CIB's business originates from Ventura County and there is
no emphasis on foreign sources and application of funds. CIB's business,
based upon performance to date, does not appear to be seasonal. Except as
described above, a material portion of CIB's loans is not concentrated within
a single industry or group of related industries, nor is CIB dependent upon a
single customer or group of related customers for a material portion of its
deposits. Management of CIB is unaware of any material effect upon CIB's
capital expenditures, earnings or competitive position as a result of
federal, state or local environmental regulation.
CIB holds no patents, licenses (other than licenses obtained from
CIB regulatory authorities), franchises or concessions.
EMPLOYEES
As of June 30, 1998, CIB had a total of 55 full-time employees and
12 part-time employees. The management of CIB believes that its employee's
relations are satisfactory.
COMPETITION
Banking and financial services business in California generally, and
in CIB's market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation,
changes in technology and product delivery systems, and the accelerating pace
of consolidation among financial services providers. CIB competes for loans
and deposits and customers for financial services with other commercial
banks, savings and loan associations, securities and brokerage companies,
mortgage companies, insurance companies, finance companies, money market
funds, credit unions, and other nonbank financial service providers. Many of
these competitors are much larger in total assets and capitalization, have
greater access to capital markets and offer a broader array of financial
services than CIB. In order to compete with the other financial services
providers, CIB principally relies upon local promotional activities, personal
relationships established by officers, directors and employees with its
customers, and specialized services tailored to meet its customers' needs.
CIB maintains three full service-banking offices in Ventura County.
EFFECT OF GOVERNMENTAL POLICIES AND RECENT LEGISLATION
Banking is a business that depends on rate differentials. In
general, the difference between the interest rate paid by CIB on its deposits
and its other borrowings and the interest rate received by CIB on
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<PAGE>
loans extended to its customer and securities held in CIB's portfolio
comprise the major portion of CIB's earnings. These rates are highly
sensitive to many factors that are beyond the control of CIB. Accordingly,
the earnings and growth of CIB are subject to the influence of domestic and
foreign economic conditions, including inflation, recession and unemployment.
The commercial banking business is not only affected by general
economic conditions but is also influenced by the monetary and fiscal
policies of the federal government and the policies of regulatory agencies,
particularly the Federal Reserve Board. The Federal Reserve Board implements
national monetary policies (with objectives such as curbing inflation and
combating recession) by its open-market operations in United States
Government securities, by adjusting the required level of reserves for
financial institutions subject to its reserve requirements and by varying the
discount rates applicable to borrowings by depository institutions. The
actions of the Federal Reserve Board in these areas influence the growth of
CIB loans, investment and deposits and also affect interest rates charged on
loans and paid on deposits. The nature and impact of any future changes in
monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies and
other financial institutions are frequently made in Congress, in the
California legislature and before various bank regulatory and other
professional agencies For example, legislation has been introduced in
Congress that would repeal the current statutory restrictions on affiliations
between commercial banks and securities firms.
PROPERTIES
All CIB's offices are leased. See Note 5 to the CIB Financial
Statements for certain additional information concerning the amount of CIB's
lease commitments.
LEGAL PROCEEDING
CIB is, from time to time, subject to various pending and threatened
legal actions which arise out of the normal course of its business. CIB is
not a party to any pending legal or administrative proceedings (other than
ordinary routine litigation incidental to CIB's business) and no such
proceedings are known to be contemplated.MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS ORGANIZATION
Channel Islands Bank (CIB) is a California chartered bank
headquartered in Oxnard, California. As of June 30, 1998 CIB operated three
full-service branches in Ventura County, California. Other than investing
excess funds, CIB currently conducts no other significant business activities.
CIB offers a full range of traditional commercial banking products
and services to individuals,
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<PAGE>
merchants, small and medium-sized businesses and professionals in Ventura
County, its primary service area. The commercial banking services that CIB
offers includes the acceptance of checking and savings deposits, and the
making of various types of installment, commercial and real estate loans. In
addition, CIB provides safe deposit, collection, travelers' checks, and other
customary non-deposit banking services. The Bank emphasizes personalized
service and convenience of banking and attracts banking customers by offering
morning through early evening banking hours. CIB has 24-hour Automated Teller
Machines ("ATM's") at all three of its banking offices.
The following sections set forth a discussion of the significant
operating changes, business trends, financial condition, earnings, capital
position and liquidity that have occurred in the two-year period ended
December 31, 1997, and the six month periods ending June 30, together with an
assessment, when considered appropriate, of external factors that may affect
CIB in the future. This discussion should be read in conjunction with CIB's
consolidated financial statements and notes attached hereto as Appendix B.
OVERVIEW
CIB earned net income of $800,000 for the year ended December 31,
1997, representing an increase of $474,000, or 168% over 1996 income of
$326,000. On a diluted per common share basis, net income for 1997 was $1.60
compared to $.66 per share for the preceding year. The improvement in net
income in 1997 was primarily due to growth in net interest income and
noninterest income that outpaced increases in operating expenses. Net income
in 1997 benefited from the sale of mortgage servicing rights which resulted
in a gain of $492,000 reflected in the Statements of Income as other income.
These and other factors are discussed in more detail later in this analysis.
Net income for the six month period ending June 30, 1998 was
$338,000, a decrease of $4,000, or 1% over income of $342,000 for the six
month period ending June 30, 1997. This decrease was primarily due to an
increase in salaries and benefits related to increases in staff, and to costs
related to the application for the state banking charter.
Common shareholder's equity increased by $960,000 or 17.2% during
1997 from $5,596,000 at December 31, 1996 to $6,556,000 at December 31, 1997,
through the retention of earnings and the exercise of stock options. It is
the objective of management to maintain adequate capital for future growth
through retention of earnings. In both 1997 and 1996 CIB paid two semiannual
cash dividends of $0.10.
Common Shareholders' Equity was $7,440,000 on June 30, 1998, a
$884,000, or 13.5%, increase over the December 31,1997 balance of $6,556,000
through the retention of earnings and the exercise of stock options. CIB paid
a $0.10 cash dividend during the six month period ending June 30, 1998.
The following table sets forth several key operating ratios for 1997
and 1996, and for the six month periods ending June 30 1998 and 1997 (dollars
in thousands).
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<PAGE>
<TABLE>
<CAPTION>
(unaudited)
For the period
ended
June 30, Year Ended
December 31,
---------------------- ---------------------
1998 1997 1997 1996
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Return on average assets 0.77% 0.88% 0.99% 0.42%
Return on average equity 9.45% 11.73% 13.28% 5.86%
Average shareholders' equity to
average
Assets 8.24% 7.57% 7.50% 7.21%
</TABLE>
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY
The following table presents, for the years indicated, the
distribution of average assets, liabilities and shareholders' equity, as well
as the total dollar amounts of interest income from average interest-earning
assets and the resultant yields, and the dollar amounts of interest expense
and average interest-bearing liabilities, expressed both in dollars and in
rates. Nonaccrual loans are included in the calculation of the average
balances of loans, and interest not accrued is excluded (dollar amounts in
thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 December 31, 1996
-------------------------- ----------------------------- ----------------------------
Average Average Average Average Average Average
Earning Assets Balance Interest Yield Balance Interest Yield Balance Interest Yield
-------------------------- ----------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities
U.S. treasuries(2) 680 17 5.00% 993 62 6.24% 475 30 6.32%
U.S. government agencies (2) 5,292 151 5.71% 5,250 334 6.36% 4,474 290 6.48%
Municipal agencies 76 2 5.26% 77 4 5.19% 77 4 5.19%
Mutual funds(2) 2,765 82 5.93% 2,001 119 5.95% 1,958 115 5.87%
Corporate bonds(2) 4,693 140 5.97% 412 26 6.31% 405 26 6.42%
Other securities 119 3 5.04% 173 9 5.20% 349 10 2.87%
Total Investment Securities 13,625 395 5.80% 8,906 554 6.22% 7,738 475 6.14%
Federal funds sold 7,325 200 5.46% 11,057 612 5.53% 14,259 561 3.93%
Due from banks- time deposits 1,246 37 5.94% 1,491 89 5.97% 2,012 116 5.77%
Loans (1) 55,585 2,795 10.06% 50,788 5,571 10.97% 47,090 5,175 10.99%
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<PAGE>
Total Interest Earning
Assets 77,781 3,427 8.81% 72,242 6,826 9.45% 71,099 6,327 8.90%
Interest Bearing Liabilities
Domestic Deposits and Borrowed Funds
Savings deposits (3) 30,971 341 2.20% 30,904 754 2.44% 29,180 732 2.51%
Time Deposits 25,056 665 5.31% 21,330 1,125 5.27% 21,131 1,121 5.31%
Short-term borrowings
Total Interest Bearing
Liabilities 56,027 1,006 3.59% 52,234 1,879 3.60% 50,311 1,853 3.68%
</TABLE>
<TABLE>
<CAPTION>
(dollars in thousands) JUNE 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C> <C>
Total interest income (1) 3,604 6,826 6,327
Total interest expense (4) 1,006 1,879 1,853
Total interest earnings (1) 2,598 4,947 4,474
Total average earning assets 77,781 72,242 71,099
Net yield on average earning assets (1) 6.7% 6.8% 6.3%
Net yield on average earning assets 5.5% 6.1% 5.5%
(excluding loan fees) (1)
</TABLE>
(1) Loans, net of unearned income, include non-accrual loans but do not
reflect average reserves for probable loan losses of $919,000 in June,
1998, $769,000 in 1997 and $391,000 in 1996. Loan fees of $278,000 in
June, 1998, $506,000 in 1997 and $581,000 in 1996 are included in loan
interest income. There were no loans on non-accrual for the periods
ending June30, 1998 and December 31, 1997 and two non-accruing loans
totaling approximately $202,000 at December 31, 1996.
(2) The yield for securities that are classified as available-for-sale
is based on historical amortized cost balances.
(3) Savings deposits includes Savings, NOW, and Money Market deposit
accounts.
(4) Includes Savings, NOW, and Money Market Deposit Accounts, and Time
Deposits.
EARNINGS ANALYSIS
NET INTEREST INCOME. Net interest income refers to the difference
between the interest paid on deposits and borrowings, and the interest earned
on loans and investments. It is the primary component of the earnings of a
financial institution. The primary factors that impact net interest income
are the composition and volume of interest-earning assets and interest-bearing
liabilities, the amount of noninterest-bearing liabilities and nonaccrual loans,
and changes in market interest rates.
Net interest income for 1997 was $4.9 million or 6.8% of interest-
earning assets compared to $4.5 million and 6.3% of interest-earning assets in
1996. The increase in 1997 compared to 1996 is primarily attributable to
increases in the amounts of interest-earning assets.
Net interest income for the six month period ending June 30, 1998 is
$2.6 million, an increase of $200,000 from the $2.4 million for the six month
period ending June 30, 1997. The increase is primarily
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<PAGE>
attributable to increases in the amount of interest-earning assets.
Interest income for 1997 was $6.8 million compared to $6.3 million for
1996. The increase in 1997 is primarily due to overall growth in
interest-earning assets.
Interest income for the period ending June 30, 1998 was $3.6 million
compared to $3.3 million for the period ending June 30, 1997, a $300,000
increase. This increase is primarily attributable to overall growth in
interest-bearing assets.
Interest expense has remained fairly stable in both amount and rate
over the past two years. Total interest expense was $1.9 million in both 1997
and 1996. The overall rate paid on interest-bearing liabilities was 3.59% in
1997 and 3.68% in 1996.
Interest expense increased $100,000 from $0.9 million to $1.0
million for the six month periods ended June 30, 1997 and June 30, 1998,
respectively. This increase was primarily due to overall growth in
interest-bearing deposits.
The following table sets forth changes in interest income and
interest expense for each major category of interest-earning asset and
interest-bearing liability, and the amount of change attributable to volume
and rate changes for the years indicated. Changes not solely attributable to
rate or volume have been allocated to volume and rate changes in proportion
to the relationship of the absolute dollar amounts of the changes in each
(dollar amounts in thousands):
<TABLE>
<CAPTION>
Six months Ended Year Ended Year Ended
June 30, 1998 December 31, 1997 December 31, 1996
Versus versus versus
Six months Ended Year Ended Year Ended
June 30, 1997 December 31, 1996 December 31, 1995
----------------------------- ------------------------------- -----------------------------
Increase (decrease) Due Increase (decrease) Due Increase (decrease) Due
To Change In To Change In To Change In
Rate Volume Total Rate Volume Total Rate Volume Total
--------- -------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Investment Securities:
Taxable (19) 180 161 (7) 86 79 68 (33) 35
Non-Taxable (1) 0 0 0 0 0 0 0 0 0
Federal Funds Sold 2 (71) (69) 114 (63) 51 (50) 148 98
Time Deposits 0 (7) (7) 4 (31) (27) (53) 3 (50)
Loans (2) (147) 204 57 (10) 406 396 (450) 1,476 1,026
--------- -------- --------- --------- --------- --------- --------- --------- ---------
Total Interest Income (164) 306 142 101 398 499 (485) 1,594 1,109
INTEREST-BEARING
LIABILITIES:
Savings Deposits (33) 18 (15) (19) 41 22 41 (10) 31
Time Deposit CD 16 122 138 (6) 10 4 (7) 500 493
--------- -------- --------- --------- --------- --------- --------- --------- ---------
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<PAGE>
Total Interest Expense (17) 140 123 (25) 51 26 34 490 524
--------- -------- --------- --------- --------- --------- --------- --------- ---------
Net-Interest Income (147) 166 19 126 347 473 (519) 1,104 585
--------- -------- --------- --------- --------- --------- --------- --------- ---------
--------- -------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
NONINTEREST INCOME. Noninterest income increased $400,000 in 1997 from
$.7 million in 1996 to $1.1 million in 1997. During 1997 CIB sold the servicing
rights on mortgage loans totaling approximately $54 million. CIB received
$492,000 from the sale which represents approximately 90% of the proceeds from
the sale. CIB will receive the balance of the proceeds in 1998.
Noninterest income increased $98,000 from $354,000 for the six month
period ending June 30, 1997 to $453,000 for the same six month period in
1998. This increase resulted primarily from increases in deposit account
service charges and a gain on the sale of a property classified as other real
estate owned.
NONINTEREST EXPENSE. Noninterest expense reflects the costs of
products and services related to systems, facilities and personnel for CIB.
Noninterest expense for 1997 was $4.3 million, a net increase of
$400,000 or 10.9% from the $3.9 million reported in 1996. One significant
component of this increase was salaries and employee benefits which increased
$193,000, primarily from increased staffing levels. Costs related to the
corporate office move and to the application for a state banking charter also
increased costs in 1997.
Noninterest expense for the six month period ending June 30, 1998
was $2.4 million, a $300,000 increase from $2.1 million for the first six
months of 1997. Increase in salaries and benefits, related to staff
increases, accounted for $148,000 of this increase. An increase in occupancy
costs related to the move of the corporate office, and legal costs related to
the application for the state banking charter account for most of the balance
of the difference.
INCOME TAXES. CIB's income tax provisions were $576,000 and
$235,000 for 1997 and 1996, respectively. The effective tax rate was 41.9%
in 1997 and 42.0% in 1996.
Income taxes were $236,000 for the six month period ending June 30,
1998, and $248,000 for the six month period ending June 30, 1997.
BALANCE SHEET ANALYSIS
Total assets of CIB at December 31, 1997 were $89.0 million compared
to $74.6 million on December 31,1996, representing an increase of 19.3%.
Based on average balances, total assets of $80.3 million in 1997 represent a
4.3% increase over $77.0 for 1996.
CIB's total assets at June 30, 1998 was $86.9 million, and increase
of $6.2 million, representing and increase of 7.7% over the June 30, 1997
balance of $80.7 million.
125
<PAGE>
<TABLE>
<CAPTION>
June 30,
(dollars in thousands) 1998 Year Ended December 31,
------------------------ ---------------------------------------------------
1997 1996
Average Percent Average Percent Average Percent
Balance of Total Balance of Total Balance of Total
------------------------ ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investment Securities
Taxable 13,478 15.54% 8,782 10.94% 7,662 9.96%
Non-taxable 76 0.09% 77 0.10% 77 0.10%
Federal funds sold 7,325 8.45% 11,057 13.78% 14,259 18.53%
Due from banks - time deposits 1,246 1.44% 1,491 1.86% 2,012 2.61%
Loans 55,585 64.09% 50,788 63.28% 47,090 61.19%
Reserve for loan and lease losses (919) -1.06% (769) -0.96% (851) 1.10%
Net Loans and Leases 54,666 63.03% 50,019 62.32% 46,239 60.09%
Total Interest Earning Assets 76,791 88.55% 71,426 89.00% 70,249 91.29%
Cash and non-interest earning deposits 7,967 9.18% 7,077 8.82% 5,348 6.95%
Net premises, furniture and equipment 993 1.14% 887 1.10% 584 0.76%
Other assets 985 1.13% 874 1.08% 773 1.00%
Total Assets 86,736 100.00% 80,264 100.00% 76,954 100.00%
Liabilities and Stockholders' Equity
Savings deposits (1) 30,971 35.71% 30,904 38.51% 29,180 37.92%
Time deposits 25,056 28.89% 21,330 26.57% 21,131 27.46%
Short-term borrowings
Total Interest-bearing Liabilities 56,027 64.60% 52,234 65.07% 50,311 65.38%
Demand deposits 23,386 26.96% 21,768 27.12% 20,864 27.11%
Other liabilities 174 0.20% 242 0.30% 224 0.29%
Total Liabilities 79,587 91.76% 74,244 92.50% 71,399 92.78%
Stockholders' Equity 7,149 8.24% 6,020 7.50% 5,554 7.22%
Total Liabilities and Stockholders'
Equity 86,736 100.00% 80,264 100.00% 76,954 100.00%
</TABLE>
(1) Includes Savings, NOW, and Money Market Accounts.
INVESTMENT PORTFOLIO
The following table summarizes the amounts and distribution of
CIB's investment securities held as of the dates indicated, and the weighted
average yields as of December 31, 1997:
<TABLE>
<CAPTION>
JUNE 30, 1998
----------------------------------------------------------------------------------
(dollars in thousands) Within One year After One But within Five Years
<S> <C> <C>
126
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale Held-to-maturity Available-for-sale
----------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government agencies - 0.00% 999 5.65% - 0.00% 3,044 6.11%
Corporate debt securities - 0.00% 2,013 6.34% - 0.00% 3,421 6.08%
Other securities - 0.00% 2,631 5.74% 76 4.80% - 0.00%
----------------------------------------------------------------------------------
Total - 0.00% 5,643 6.01% 76 4.80% 6,465 6.10%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
Within One year After One But within Five Years
Held-to-maturity Available-for-sale Held-to-maturity Available-for-sale
----------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government agencies - 0.00% 4,491 5.63% - 0.00% 4,509 6.47%
Corporate debt securities - 0.00% 1,500 5.92% - 0.00% 1,417 6.61%
Other securities - 0.00% 2,154 6.05% 77 4.80% - 0.00%
----------------------------------------------------------------------------------
Total - 0.00% 8,145 5.79% 77 4.80% 5,926 6.50%
</TABLE>
Securities may be pledged to meet security requirements imposed as a
condition to receipt of deposits of public funds and other purposes. At
December 31, 1997 and 1996, and June 30, 1998 the carrying values of
securities pledged to secure public deposits and other purposes were
$500,052, $501,633 and $500,000, respectively.
LOAN PORTFOLIO
The following table set forth the components of total net loans
outstanding in each category at the date indicated:
<TABLE>
<CAPTION>
(dollars in thousands) June 30,1998 December 31, 1997 December 31, 1996
<S> <C> <C> <C>
TYPES OF LOANS
Domestic
Commercial and industrial 15,079 12,745 14,110
Real estate construction 2,764 1,584 2,658
Real estate mortgage 28,946 26,104 22,697
Installment loans to individuals 12,742 12,216 12,561
All other loans (including overdrafts) 91 163 18
Less:
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<PAGE>
Unearned income 1,331 1,265 1,466
Reserve for loan and lease losses 930 918 723
Total 57,361 50,629 49,855
</TABLE>
Average loans in 1997 were $50.8 million representing an increase of
7.9% over 1996. Average loans represented 63.28% of average assets in 1997
compared to 61.19% 1996. Average loans were $55.6 million representing 64.09%
of average assets for the six month period ending June 30, 1998.
Commercial and industrial loans consist of credit lines for
operating needs, loans for equipment purchases and working capital, and
various other business purposes. At December 31, 1997, CIB had commercial
loans outstanding representing 24.1% of total loans compared to 27.1% at
December 31, 1996. Commercial loans represented 25.3% of total loans at June
30, 1998.
Real estate construction loans expressed as a percentage of total
loans were 3.0% and 5.1% at December 31, 1997 and 1996, respectively.
Construction loans were 4.6% of total loans on June 30, 1998. The
construction loans outstanding are generally composed of commitments to
customers within CIB's service area for construction of custom, semi-custom
single family residences, and industrial buildings.
Real estate mortgage loans, which consist primarily of loans to
CIB's depositors secured by trust deeds on commercial and residential real
estate, expressed as a percentage of total loans were 49.5% and 43.6% at
December 31, 1997 and 1996, respectively. At $28.9 million, other real estate
loans represent 48.6% of total loans on June 30, 1998.
Installment loans to individuals and all other loans include a range
of traditional consumer loan products offered by CIB such as home equity and
personal lines of credit and loans to finance purchases of autos, boats,
recreational vehicles, and various other consumer items. Dealer loans, which
are automobile loans purchased from local automobile dealers, are included in
this category. Unearned discounts on dealer loans are recognized as income
over the term of the loans by the sum-of-the-month-digits method (Rule of
78's.) At December 31, 1997, consumer loans outstanding were $12.4 million
representing 23.5% of total loans. This compares to consumer loans of $12.6
million representing 24.2% of total loans at December 31, 1996. Consumer
loans outstanding were $12.8 million representing 21.5% of total loans on
June 30, 1998.
RISK ELEMENTS
CIB assesses and manages credit risk on an ongoing basis through
lending policies. Management strives to continue the historically low level
of credit losses by continuing its emphasis on credit quality in the loan
approval process, active credit administration and regular monitoring.
In extending credit and commitments to borrowers, CIB generally
requires collateral and/or guarantees as security. The repayment of such
loans is expected to come from cash flow or from proceeds
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<PAGE>
from the sale of selected assets of the borrower. CIB's requirement for
collateral and/or guarantees is determined on a case-by-case basis in
connection with management's evaluation of the credit worthiness of the
borrower. Collateral held varies but may include accounts receivable,
inventory, plant and equipment, income-producing properties, residences and
other real property. CIB secures its collateral by perfecting its interest in
business assets, obtaining deeds of trust, or outright possession among other
means.
Management believes that its lending policies and underwriting
standards will tend to minimize losses in an economic downturn, however,
there is no assurance that losses will not occur under such circumstances.
NONPERFORMING ASSETS
Management generally places loans on nonaccrual status when they
become 90 days past due, unless the loan is well secured and in the process
of collection. Loans are charged-off when, in management's opinion,
collection appears unlikely. The following table provides information with
respect to the components of CIB's nonperforming assets at the dates
indicated:
<TABLE>
<CAPTION>
(amounts in thousands) December 31, June 30,
---------------------- -------------------
1997 1996 1998 1997
----------- ------- -------- -------
<S> <C> <C> <C> <C>
Accruing Loans More Than 90 Days Past Due
Aggregate loan amounts
Commercial, financial and agricultural $ 40 $ 15 $ 40 $ 50
Real estate
Installment loans to individuals 40 13 25 22
Aggregate leases
Renegotiated loans
Non-accrual loans
Aggregate loan amounts
Commercial 41 1
Real estate 383 197
Installment loans to individuals 23 19
----------- ------- -------- -------
$ 80 $475 $ 65 $289
----------- ------- -------- -------
----------- ------- -------- -------
</TABLE>
Interest due but excluded from interest income in nonaccrual loans
was approximately $0 in 1998 and 1997, and $39,000 in 1996. No payments
received on nonaccrual loans were included in interest income in 1998, 1997
and 1996.
The average recorded investment in loans that are considered
impaired under SFAS No. 114 was $293,000 in 1997, and $812,000 for 1996, and
$0 for the six months ended June 30, 1998, which are included as nonaccrual
loans above. Such impaired loans had a valuation allowance of $0 on December
31, 1997 and June 30, 1998, and $42,721 for December 31, 1996. CIB recognized
no interest on impaired loans in 1997 or 1996.
129
<PAGE>
Other real estate owned is acquired through foreclosure or other means.
These properties are recorded on an individual basis at the estimated fair
values less selling expenses. At December 31, 1997, other real estate owned was
comprised of one commercial building with a carrying value of $152,000. This
property was subsequently sold resulting in a $0 balance in other real estate
owned on June 30, 1998.
PROVISION AND ALLOWANCE FOR LOAN LOSS
The allowance for loan losses is maintained at a level that is
considered adequate to provide for the loan losses inherent in CIB's loans. The
provision for loan losses was $370,000 in 1997, $696,000 in 1996, and $58,000
for the six month period ending June 30, 1998.
The following table summarizes, for the years indicated, changes in the
allowances for loan losses arising from loans charged-off, recoveries on loans
previously charged-off, and additions to the allowance which have been charged
to operating expenses and certain ratios relating to the allowance for loan
losses:
<TABLE>
<CAPTION>
December 31,
(dollars in thousands) (unaudited) June 30, 1998 1997 1996
---------------------------------------------------
<S> <C> <C> <C>
Loans and Leases Outstanding, Period End (1) $ 58,291 $ 49,821 $ 49,021
Average Amount of Loans and Leases Outstanding (1) $ 55,585 $ 50,788 $ 47,090
Loans and Lease Loss Reserve Balance,
Beginning of Period $ 918 $ 723 $ 732
Charge-offs
Domestic
Commercial, financial & agricultural 10 207 581
Real estate - construction ------- ------- -------
Real estate - mortgage ------- ------- 81
Consumer loans 138 231 112
Lease financing ------- ------- -------
-----------------------------------------------------
148 438 774
Recoveries
Domestic
130
<PAGE>
<S> <C> <C> <C>
Commercial, financial & agricultural 73 217 25
Real estate - construction ------- ------- -------
Real estate - mortgage 14 30 11
Consumer loans 15 16 33
Lease financing ------- ------- -------
-----------------------------------------------------
102 263 69
-----------------------------------------------------
Net charge-offs/(recoveries) 46 175 705
Additions/(Reductions) charged to operations 58 370 696
Loan and Lease Loss Reserve balance
-----------------------------------------------------
End of period $ 930 $ 918 $ 723
-----------------------------------------------------
-----------------------------------------------------
Ratio of Net Charge-offs/(Recoveries)
During the Year to Average Loans and Leases
Outstanding During the Year 0.08% 0.34% 1.50%
Ratio of Reserve for Loan Losses to Loans
at Period End 1.60% 1.84% 1.47%
</TABLE>
(1) Loans, net of unearned income
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans and leases,
future additions to the allowance may be necessary based on changes in economic
conditions. In addition, both Federal and state regulators, as an integral part
of their examination process, periodically review CIB's allowance for loan
losses and may recommend additions based upon their evaluation of the portfolio
at the time of their examination.
The following table summarizes the allocation of the allowance for
loan losses by loan type for the years indicated and the percent of loans in
each category to total loans (dollar amounts in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997 December 31, 1996
--------------------------- --------------------------- ---------------------------
Percent of Percent of Percent of
Loans In Each Loans In Each Loans In Each
Allowance Category to Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans Amount Total Loans
----------- --------------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Commercial 253 25.29% 228 24.11% 234 27.06%
131
<PAGE>
<S> <C> <C> <C> <C> <C> <C>
Real Estate-Construction 13 4.64% 15 3.00% 20 5.11%
Real Estate 186 48.55% 289 49.45% 326 43.64%
Consumer 194 21.52% 120 23.45% 123 24.19%
Unallocated 284 n/a 266 n/a 20 n/a
----------- --------------- ----------- --------------- ----------- ---------------
Total 930 100.00% 918 100.00% 723 100.00%
----------- --------------- ----------- --------------- ----------- ---------------
----------- --------------- ----------- --------------- ----------- ---------------
</TABLE>
FUNDING
Deposits are CIB's primary source of funds. At December 31, 1997, CIB
had a deposit mix of 37.8% in time and savings deposits, 32.2% in money market
and NOW deposits, and 30.0% in noninterest-bearing demand deposits. CIB net
interest income is enhanced by its percentage of noninterest-bearing deposits.
At June 30, 1998, CIB had a deposit mix of 40.8% in time and savings
deposits, 28.2% in money market and NOW deposits, and 31.0% in
noninterest-bearing demand deposits
The following table summarizes the distribution of average deposits and the
average rates paid for the years indicated:
<TABLE>
<CAPTION>
(Dollars in Thousands) Year Ended December 31,
For period ended ------------------------------------------------
June 30, 1998 1997 1996
------------------------------------------------ ------------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------------ ---------------------------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
In Domestic Offices
Noninterest bearing demand deposits $23,386 ------ $21,768 ------ $20,864 ------
Savings deposits (1) 30,971 2.2% 30,904 2.4% 29,180 2.5%
Time deposits 25,056 5.3% 21,330 5.3% 21,131 5.3%
------------ ---------------------------------- ---------- -------------
Total Deposits $79,413 3.6% $74,002 3.6% $71,175 3.7%
------------ ---------- ---------
------------ ---------- ---------
</TABLE>
(1) Savings deposits include Savings, NOW, and Money Market deposit accounts.
The scheduled maturity distribution of CIB's time deposits of $100,000 or
greater, as of December 31, 1997, were as follows:
<TABLE>
<CAPTION>
(Dollars In Thousands) June 30,
1998
-----------------
<S> <C>
Three months or less $ 3,506
132
<PAGE>
<S> <C>
Over three through 12 months 6,247
Over one through five years 1,033
-----------------
$ 10,786
-----------------
-----------------
</TABLE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
LIQUIDITY. Liquidity management refers to CIB's ability to provide
funds on an ongoing basis to meet fluctuations in deposit levels as well as the
credit needs and requirements of its clients. Both assets and liabilities
contribute to CIB's liquidity position. Federal funds lines, short-term
investments and securities, and loan repayments contribute to liquidity, along
with deposit increases, while loan funding and deposit withdrawals decrease
liquidity. CIB assesses the likelihood of projected funding requirements by
reviewing historical funding patterns, current and forecasted economic
conditions and individual client funding needs. Commitments to fund loans and
outstanding letters of credit at June 30, 1998, December 31, 1997, and December
31, 1996 totaled approximately $17.2, $12.6 million, and $8.3 million,
respectively. Such loans relate primarily to revolving lines of credit,
construction loans and other commercial loans.
CIB's sources of liquidity consist of its deposits with other banks,
overnight funds sold to correspondent banks and unpledged short-term, marketable
investments. On December 31, 1997, liquid assets totaled $32.4 million or 36.4%
of total assets as compared to $27.2 million or 36.5% of total assets on
December 31, 1996. On June 30, 1998 liquid assets totaled $27.2 million or 31.3%
of total assets. In addition to liquid assets, CIB maintains lines of credit
with correspondent banks available on a short-term basis. Informal agreements
are also in place with various other banks to purchase participations in loans,
if necessary.
INTEREST RATE SENSITIVITY. Interest rate sensitivity is a measure of
the exposure to fluctuations in CIB's future earnings caused by fluctuation in
interest rates. Such fluctuations result from the mismatch in repricing
characteristics of assets and liabilities at a specific point in time. This
mismatch, or interest rate sensitivity gap, represents the potential mismatch in
the change in the rate of accrual of interest revenue and interest expense from
a change in market interest rates. Mismatches in interest rate repricing among
assets and liabilities arise primarily from the interaction of various customer
businesses (i.e. types of loans versus the types of deposits maintained) and
from management's discretionary investment and funds gathering activities. CIB
attempts to manage its exposure to interest rate sensitivity, but due to its
size and direct competition from the major banks, it must offer products which
are competitive in the market place, even if less than optimum with respect to
its interest rate exposure.
The table below sets forth the interest rate sensitivity of CIB's
interest-earning assets and interest-bearing liabilities as of June 30, 1998,
using the interest rate sensitivity gap ratio. For purposes of the
133
<PAGE>
following table, an asset or liability is considered rate sensitive with a
specified period when it can be repriced or matures within it contractual terms:
<TABLE>
<CAPTION>
June 30,1998
----------------------------------------------------------------------------
(dollar in thousands) (unaudited) Three Over Three Over One
Months Through Through Over Five Non-Interest
or Less 12 Months Five Years Years Bearing Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks 595 497 ------ ------ ------ 1,092
Federal funds sold 5,950 ------ ------ ------ ------ 5,950
Investment securities 2,449 3,012 6,539 183 ------ 12,183
Net loans and leases 35,295 604 12,359 10,072 (969) 57,361
Noninterest-bearing assets ------ ------ ------ ------ 10,340 10,340
----------------------------------------------------------------------------
Total assets 44,289 4,113 18,898 10,255 9,371 86,926
LIABILITIES AND STOCKHOLDERS' EQUITY ------
Noninterest-bearing deposits ------ ------ ------ ------ 24,629 24,629
Interest-bearing deposits 30,846 15,137 2,320 6,353 ------ 54,656
Other liabilities ------ ------ ------ ------ 201 201
Stockholders' Equity ------ ------ ------ ------ 7,440 7,440
----------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 30,846 15,137 2,320 6,353 32,270 86,926
Interest Rate Sensitivity Gap $13,443 ($11,024) $16,578 $3,902 ($22,899) $0
----------------------------------------------------------------------------
Cumulative Interest Rate Sensitivity Gap $13,443 $2,419 $18,997 $22,899 $0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
</TABLE>
CAPITAL RESOURCES
CIB's total shareholders' equity was $7.4 million on June 30, 1998,
$6.6 million at December 31, 1997 and $5.6 million as of December 31, 1996.
CIB is subject to regulations issued by the Department of Financial
Institutions and the FDIC which require maintenance of a certain level of
capital. These regulations impose two capital standards: a risk-based capital
standard and a leverage capital standard.
Under the risk-based capital guidelines, assets reported on an
institution's balance sheet and certain off-balance sheet items are assigned to
risk categories, each of which has an assigned risk weight. Capital ratios are
calculated by dividing the institution's qualifying capital by its period-end
risk-weighted assets. The guidelines establish two categories of qualifying
capital: Tier 1 Capital (defined to include common shareholders' equity and
noncumulative perpetual preferred stock) and Tier 2 Capital defined to include
limited life (and in the case of bank, cumulative) preferred stock, mandatory
convertible securities, subordinated debt, and a limited amount of reserves for
loan and lease losses. Each institution is required to maintain a risk-based
capital ratio (including Tier 1 and Tier 2 capital) of 8%, of which at least
half
134
<PAGE>
must be Tier 1 capital.
Under the leverage capital standard an institution is required to
maintain a minimum ratio of Tier 1 capital to the sum of its quarterly average
total assets and quarterly average reserve for loan losses, less intangibles not
included in Tier 1 capital. Period-end assets may be used in place of quarterly
average total assets on a case-by-case basis. A minimum leverage ratio of 3% is
required for institutions which have been determined to be in the highest of
five categories used by regulators to rate financial institutions and which are
not experiencing or anticipating significant growth. All other organizations are
required to maintain leverage ratios of at least 100 to 200 basis points above
the 3% minimum. The table below represents the capital and leverage ratios of
CIB as of December 31, 1997:
<TABLE>
<CAPTION>
Capital Needed
------------------------------------------
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Provisions
------------------- --------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ------ ----------- --------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998
Total capital to risk-weighted assets $8,350 11.6% 5,746 8.0% 7,183 10.0%
Tier 1 capital to risk-weighted assets 7,452 10.4% 2,873 4.0% 4,310 6.0%
Tier 1 capital to average assets 7,452 8.5% 3,493 4.0% 4,366 5.0%
As of December 31, 1997
Total capital to risk-weighted assets 7,346 11.6% 5,079 8.0% 6,349 10.0%
Tier 1 capital to risk-weighted assets 6,551 10.3% 2,539 4.0% 3,809 6.0%
Tier 1 capital to average assets 6,551 8.2% 3,211 4.0% 4,013 5.0%
As of December 31, 1996
Total capital to risk-weighted assets 6,319 11.8% 4,518 8.0% 5,648 10.0%
Tier 1 capital to risk-weighted assets 5,600 9.9% 2,259 4.0% 3,389 6.0%
Tier 1 capital to average assets 5,600 7.4% 2,988 4.0% 3,735 5.0%
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") substantially revises banking regulation and establishes a framework
for determination of capital adequacy of financial institutions. Under the
FDICIA, financial institutions are placed into one of five capital adequacy
categories as follows: (1) "well capitalized" consisting of institutions with a
total risk-based capital ratio of 10% or greater, a Tier 1 risk-based ratio of
6% or greater and a leverage ratio of 5% or greater, and the institution is not
subject to an order, written agreement, capital directive or prompt corrective
action directive; (2) "adequately capitalized" consisting of institutions with a
total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
ratio of 4% or greater and a leverage ratio of 4% or greater, and the
institution does not meet the definition of a "well-capitalized" institution;
(3) "under capitalized" consisting of institutions with a total risk-based
ration of less than 4%; (4) "significantly undercapitalized" consisting of
institutions with a total risk-based capital ratio of less than 6%, Tier 1
risk-based capital ratio
135
<PAGE>
of less than 3%, or a leverage ratio of less than 3%;
and (5) "critically undercapitalized" consisting of an institution with a ratio
of tangible equity to total assets that is equal to or less than 2%.
Financial institutions classified as under capitalized or below are
subject to various limitations including, among other matters, certain
supervisory actions by bank regulatory authorities and restrictions relating to
(i) growth of assets, (ii) payment of interest on subordinated indebtedness,
(iii) payment of dividends or other capital distributions, and (vi) payment of
management fees to a parent holding company. The FDICIA requires regulatory
authorities to initiate corrective action regarding financial institutions,
which fail to meet minimum capital requirements. Such actions may, among other
matters, require that the financial institution augment capital and reduce total
assets. Critically undercapitalized financial institutions may also be subject
to appointment of a receiver or conservator unless the financial institution
submits an adequate capitalization plan.
EFFECTS OF INFLATION
The financial statements and related financial information presented
herein have been prepared in accordance with GAAP, which require the measurement
of financial position and operating results in terms of historical dollars
without considering changes in the relative purchasing power of money over time
due to inflation. Unlike most industrial companies, virtually all of the assets
and liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or same magnitude as the price of goods
and services.
YEAR 2000 ISSUES
CIB has established a working committee of senior management, a
director and other employees to plan and monitor CIB's compliance with Year 2000
issues. This committee has developed a policy setting forth priorities and a
timetable for CIB to follow in this process. The Federal Reserve in their most
recent exam has indicated that CIB was in compliance with the progress standards
established by the Federal Reserve Bank with year 2000 issues. Management
currently believes that the costs related to all Year 2000 issues will not have
a material impact on future operations of CIB.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standards Board issued Statement
No. 130, "REPORTING COMPREHENSIVE INCOME". This statement, which is effective
for the year ending December 31, 1998, establishes standards of disclosure and
financial statement display for reporting comprehensive income and its
components.
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION."
This statement changes current practice under SFAS 14 by establishing a new
framework on which to base segment reporting (referred to as the
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<PAGE>
management approach) and also requires certain related disclosures about
products and services, geographic areas and major customers. The disclosures
are required for the year ending December 31, 1998.
BOARD OF DIRECTORS
At the Effective Time and pursuant to the Agreement, the Boards of
Directors of the Americorp and ACB will consist of four (4) members of the
current CIB Board and five (5) members from Americorp and ACB, including
Americorp's and ACB's President. It is currently contemplated that the four
members of the CIB Board who will continue to serve as directors of the
Americorp and ACB following the Effective Time are Joseph Priske, Michael T.
Hribar, Edward F. Paul and Jacqueline Pruner. For information on the members
of the Americorp and Bank Boards who will serve on the Americorp's and ACB's
Boards of Directors, see "BUSINESS OF AMERICORP"
The table below sets forth certain information, as of the CIB Record
Date, with respect to members of the Board of Directors.
<TABLE>
<CAPTION>
DIRECTOR OF
NAME AND POSITION BANK SINCE AGE PRINCIPAL OCCUPATION FOR PAST FIVE YEARS
<S> <C> <C> <C>
Fred G. Buenger, Director 04/03/87 65 President and Owner of Buenger Enterprises,
Operator of Coast Chandlery
William P. Burke, Director 04/03/87 62 President, Bill Burke Enterprises, Inc.
Glen C. Farr, Director 03/19/98 39 Chartered Life Underwriter
Michael T. Hribar, Director 04/03/87 51 Certified Public Accountant
Edward F. Paul, Director Organization 61 President, Walker, Inc.
Joseph L. Priske, Director; Chairman 03/16/95 49 Chief Executive Officer, Priske-Jones Company
Jacqueline S. Pruner, Director,
Vice Chairman Organization 59 Co-Owner, Pruner Investments
</TABLE>
COMPENSATION OF NON-EXECUTIVE DIRECTORS
Directors who were not executive officers of CIB were paid the
following in 1998:
(a) For each Board meeting attended, the Chairman of the Board
was paid $1,000 and the other Directors were each paid $500;
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<PAGE>
(b) For each Loan Committee attended, the Committee Chairman
was paid $100 and the other Committee members were each paid $50; and
(c) For each other Committee meeting attended, the Committee
Chairman was paid $100 and the other Committee members were each paid $50.
No additional compensation was paid to executive officers of CIB for
attendance at Board or Committee meetings. For the fiscal year ended December
31, 1997, the total paid to all other Directors for Board and Committee
meetings attended was $61,500.
EXECUTIVE OFFICERS
The following table sets forth as to each of the persons who are
currently executive officers of CIB, such person's age as of September 1,
1998, and the principal occupation during the past five (5) years.
<TABLE>
<CAPTION>
Business Experience Year First Appointed
Name Age During Past Five Years as Executive Officer
<S> <C> <C> <C>
Thomas E. Anthony 50 Senior Vice President and
Chief Lending Officer of CIB(1) 1992
Allen P. Partridge 58 Senior Vice President and
Chief Financial Officer of CIB(2) 1997
</TABLE>
None of the directors or executive officers of CIB were selected
pursuant to any arrangement or understanding, other than with the directors
and executive officers of CIB, acting within their capacities as such. There
are no family relationships between the directors and executive officers of
CIB, and none of the directors or executive officers of CIB serve as
directors of any company which has a class of securities registered under, or
which is subject to the periodic reporting requirements of, the Securities
Exchange Act of 1934 or any investment company registered under the
Investment Company Act of 1940, as amended.
- --------------------
(1) Mr. Anthony has been the Chief Lending Officer of Channel Islands Bank
since February 20, 1992. Prior to that time, Mr. Anthony served as Vice
President and Commercial Loan Officer for Independence Bank, Encino,
California from February 1987 through February 1992.
(2) Mr. Partridge was appointed Chief Financial Officer of Channel Islands
Bank on March 25, 1997. Prior to that date, Mr. Partridge served as an
in-house consultant for Israel Discount Bank from May 1996 to March 1997
acting as the chief accountant and information systems manager. From November
1993 through June 1995, Mr. Partridge served as the Chief Operating Officer
and Chief Financial Officer of the Bank of Los Angeles, West Hollywood,
California. Mr. Partridge previously served as the Chief Financial Officer
for the Bank from July 1985 until July 1992.
138
<PAGE>
None of the directors or executive officers of CIB have, during the
last five years, been involved in any legal proceedings that are material to
an evaluation of the ability or integrity of any director or executive
officer of CIB.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information as of the Record Date
pertaining to beneficial ownership (as defined below) of CIB's no par value
Common Stock (the "Common Stock"), by (i) persons known to CIB to own more
than 5% of its Common Stock (a "Principal Shareholder"), and (ii)
individually, each of the "Executive Officers" (as defined below) of CIB, its
current directors and nominees for the office of director, and (iii) all
directors and Executive Officers(1) of CIB as a group. The information
contained herein has been obtained from CIB's records and from information
furnished to CIB by each individual or entity required by law to report such
information to CIB and/or to a regulatory agency having supervisory
jurisdiction over CIB. Management knows of no persons who own, beneficially
or of record, either individually or with associates, more than five percent
of CIB's common stock, except as set forth below.
The number of shares "beneficially owned" by a given shareholder are
determined under Securities and Exchange Commission Rules, and the
designation of ownership set forth below is not necessarily indicative of
ownership for any other purpose. In general, the beneficial ownership as set
forth below includes shares over which a director, director nominee,
Principal Shareholder or Executive Officer has sole or shared voting or
investment power and certain shares which such person has a vested right to
acquire, under the stock options or otherwise, within 60 days of the date
hereof.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
NAME & ADDRESS OF AMOUNT OF BENEFICIAL PERCENT OF CLASS(2)(3)
BENEFICIAL OWNER OWNER(2)(3)
------------------ -------------------- ----------------------
<S> <C> <C>
Thomas Anthony 6,000(5) 1.06%
300 Esplanade Drive, #110
Oxnard, CA 93030
Fred G. Buenger 12,825(6) 2.27%
3600 S. Harbor Blvd.
Oxnard, CA 93035
139
<PAGE>
William P. Burke 17,821(6) 3.16%
1960 S. Victoria
Oxnard, CA 93030
Glen Farr 1,050 0.19%
300 Esplanade Dr., #1140
Oxnard, California 93030
Michael T. Hribar 8,095 1.44%
5700 Ralston St., #202
Ventura, CA 93003
Allen Partridge 1,000(6) 0.18%
155 S. "A" Street
Oxnard, CA 93030
Edward P. Paul (4) 55,365(6) 9.82%
335 N. "A" Street
Oxnard, CA 93030
Joseph L. Priske 11,959(6) 2.12%
711 Daily Drive
Camarillo, CA 93010
Jacqueline S. Pruner 21,029(6) 3.73%
29194 Old Mill Creek Ln.
Agoura, CA 91301
All Directors and Executive
Officers as a group (9 persons) 135,144(2) 23.96%
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
AMT. AND NATURE OF PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNER(2)(3) CLASS(2)(3)
- -------------- ------------------------ ----------------------- ----------
<C> <C> <C> <C>
Common James O. Birchfield as 27,251 4.83%
Stock Trustee of the James
O. Birchfield
1995 Trust
Common CEDE & Co. 48,134 8.53%
Stock
Common Cohen Family Trust 45,019 7.98%
Stock
Common Richard D. McNish 47,369 8.40%
Stock
- ----------------------------------
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<PAGE>
Common Martin V. Smith 36,258 6.43%
Stock
</TABLE>
(1) Based on a total of 546,414 shares issued and outstanding as of July
31, 1998 and a total of 17,566 vested option shares unexercised as of
July 31, 1998.
(2) As used throughout this Proxy Statement, the term "Executive Officer"
means Senior Vice President and Senior Lending Officer, and the Senior
Vice President and Chief Financial Officer.
(3) Includes shares beneficially owned by the named shareholder, together
with "associates" (as defined under applicable law), subject to
community property laws and shared voting and investment power with a
spouse, if applicable. The persons listed have sole voting power unless
otherwise noted.
(4) In the third calendar quarter of 1997, the OCC required Mr. Paul to
file an application for approval of a change in control of CIB due to
the fact that Mr. Paul and his related family members owned or
controlled more than 10% of CIB's outstanding shares, which holding was
and is the largest single holding by any Bank shareholder, to the best
knowledge of CIB. Mr. Paul was approved as a control person by the OCC
on December 31, 1997.
(5) Includes 6,000 vested option shares.
(6) Includes 1,000 vested option shares.
(7) Includes 6,566 vested option shares.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
EXECUTIVE COMPENSATION
Any Executive Officer serving as a Director of CIB does not receive
additional compensation for attending Board and committee meetings, and such
attendance is remunerated by the compensation of such person in his or her
capacity as an Executive Officer of CIB. For the fiscal year ended December
31, 1997, the aggregate cash compensation paid to or accrued for all
Executive Officers of CIB, as a group (3 persons), for services rendered to
CIB in all capacities was $283,561.76.
The following table sets forth the cash compensation of the Chief
Executive Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Name & Principal Position Year Salary ($) Bonus Options (#) All Other Comp.($)
------------------------- ---- ---------- ----- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Richard D. Spencer 1997 100,000 $13,184 0 0
President and 1996 N/A
Chief Executive
Officer 1995 N/A
</TABLE>
On June 1, 1998, Mr. Richard Spencer resigned as President and Chief
Executive Officer of CIB.
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On June 23, 1998, Mr. Spencer executed an agreement to release CIB from any
and all liability, and in return CIB agreed to pay Mr. Spencer all accrued
salary and unused vacation, certain health benefits, $60,000 representing
approximately six months salary, and $51,375 representing the value of Mr.
Spencer's CIB stock options. The parties agreed to make three installment
payments to Mr. Spencer, with the last installment payment due on October 1,
1998.
OPTION GRANTS FOR 1997 AND 1998
There were no stock options granted pursuant to the 1985 Incentive
Stock Option Plan to the Directors or Executive Officers in 1997. As of July
31, 1998, 45,000 shares had been granted to Directors and Executive Officers
in 1998 pursuant to the 1998 Stock Option Plan.
OPTION EXERCISES IN 1997 AND 1998
There were no exercises in 1997 of stock options by Executive
Officers, and 18,089 shares were exercised by Directors in 1997. As of July
31, 1998, 67,401 shares were exercised by Directors in 1998.
STOCK OPTION PLANS
1985 INCENTIVE STOCK OPTION PLAN
The 1985 Incentive Stock Option Plan of CIB adopted by the Board of
Directors on July 18, 1985, and approved by the shareholders on July 30, 1985
(the "1985 Plan"), intended to advance the interests of CIB by encouraging
stock ownership on the part of its officers and directors. According to its
terms, the 1985 Plan terminated on July 31, 1994. At the 1994 Annual Meeting
of shareholders, the shareholders approved certain amendments to the 1985
Plan, including an extension of time within which the grantees of options
under the 1985 Plan would be able to exercise their options for an additional
five years or until July 31, 1999. Other basic terms of the 1985 Plan
remained essentially unchanged.
Since the nine (9) year term of the 1985 Plan expired on July 31,
1994, stock options may no longer be granted under the 1985 Plan. However,
options previously granted and not exercised as of July 31, 1994 may not have
expired on that date. Under the terms of the 1985 Plan, options available for
grant under the 1985 Plan which were not granted, have been added to CIB's
authorized but unissued shares.
1998 STOCK OPTION PLAN
On March 19, 1998, the Board of Directors of CIB adopted, subject to
approval by a majority of the outstanding shares, the 1998 Stock Option Plan
(the "1998 Plan"). The 1998 Plan provides for the grant of "Incentive stock
options," within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and "non-qualified options," which are options not intended
to qualify as incentive stock options. Under the 1998 Plan, options for the
acquisition of an aggregate of 100,000 shares of CIB's common stock may be
granted to directors, officers and employees of CIB. Incentive stock options
may
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not be granted to non-employee directors. The 1998 Plan is administered by
the full Board of Directors acting as the Stock Option Committee which has
sole discretion and authority, consistent with the provisions of the 1998
Plan, to determine which eligible participants will receive options, the time
when options will be granted, the terms of options granted and the number of
shares which will be subject to options granted under the applicable 1998
Plan.
With the adoption on March 19, 1998, of the 1998 Plan by the Board,
the Board granted, subject to stockholder approval of the Plan, 5,000
non-qualified options to acquire shares of Bank common stock at an exercise
price of $18.00 per share to each of the seven non-officer directors of CIB.
Twenty (20) percent of these options are to vest on the date of such grant
with the remainder to vest 20 percent per year for the succeeding four years.
In addition, on June 18, 1998, the Board granted 5,000 incentive stock
options to each executive officer of CIB at an exercise price per share of
$20.00.
CHANNEL ISLANDS BANK 401(K) PLAN
On September 1, 1994, CIB's Board adopted a 401(K) Plan ("Plan"),
which is a defined contribution plan. The Plan is a "qualified" pension plan
(as defined in the Employee Retirement Income Security Act of 1974) for the
exclusive benefit of eligible employees and their beneficiaries. The Plan is
intended to provide death, disability or retirement income to participating
employees and their beneficiaries. Under the Plan, an employee must complete
a minimum of ninety (90) days of consecutive service and attain the age of
eighteen (18) years before he or she is eligible to participate in the Plan.
Eligible employees may elect to defer not less than 1 % or more than 15% of
their annual salary up to a dollar limit set by law each year based on cost
of living changes. CIB makes matching contributions equal to 50% of the
employee share on employee deferrals of up to 6%. These matching
contributions are monthly, discretionary amounts which may vary from month to
month. The annual expense to CIB of its contributions to the Plan for the
years ended December 31, 1997 and 1996 were $24,940.99 and $14,779.53,
respectively. Contributions to the Plan are held and invested by the Trustee
of the Plan.
INDEBTEDNESS OF MANAGEMENT
Some of CIB's directors, Executive Officers and principal
shareholders (including beneficial owners of 5% or more of CIB's Common
Stock), as well as their associates, are customers of, and have had banking
transactions with, CIB in the ordinary course of CIB's business and CIB
expects to have such ordinary banking transactions with such persons in the
future. In the opinion of the management of CIB, all loans and commitments to
lend included in such transactions were made in compliance with applicable
laws, and on substantially the same terms, including interest rates and
collateral, as those prevailing for comparable transactions with other
persons of similar credit worthiness, and did not involve more than a normal
risk of collectability or present other unfavorable features. Loans to
individual directors and officers must comply with CIB's lending policies and
statutory lending limits, and prior Board approval, not including the vote of
any director with a financial or other interest in such transaction, is
required for most of these loans. At December 31, 1997, the aggregate
indebtedness of CIB's Executive Officers, directors and principal
shareholders along with their associates was $1,263,290.96.
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EXECUTIVE OFFICER AGREEMENTS
On July 7, 1998, CIB entered into an employment agreement with Mr.
Thomas Anthony as CIB's Senior Vice President and Senior Lending Officer. The
term of the agreement commenced on June 18, 1998 and shall terminate on
December 31, 1999. Mr. Anthony shall receive a salary of $95,258.89 per year,
four weeks of vacation, use of a Bank owned automobile, a stock option of
5,000 shares vesting 20% per year at an exercise price of $20.00 per share,
certain health and medical benefits, and reimbursement of certain business
expenses. Mr. Anthony may be terminated with cause for any of the various
reasons enumerated in the agreement, and upon such termination, Mr. Anthony
would receive only accrued salary and payment for any unused vacation. The
agreement also provides for the payment of six months salary if Mr. Anthony
is terminated without cause. If Mr. Anthony is terminated, Mr. Anthony may
not, for a one year period following termination, solicit any customers or
employees of CIB to move their banking or employment relationships from CIB.
Also on July 7, 1998, CIB entered into an employment agreement with
Mr. Allen Partridge as CIB's Senior Vice President and Chief Financial
Officer. The term of the agreement commenced on June 18, 1998 and shall
terminate on December 31, 1999. Mr. Partridge shall receive a salary of
$88,400 per year, four weeks of vacation, a stock option of 5,000 shares
vesting 20% per year at an exercise price of $20.00 per share, certain health
and medical benefits, and reimbursement of certain business expenses. Mr.
Partridge may be terminated with cause for any of the various reasons
enumerated in the agreement, and upon such termination, Mr. Partridge would
receive only accrued salary and payment for any unused vacation. The
agreement also provides for the payment of six months salary if Mr. Partridge
is terminated without cause. If Mr. Partridge is terminated, Mr. Partridge
may not, for a one year period following termination, solicit any customers
or employees of CIB to move their banking or employment relationships from
CIB.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the Company's Directors and executive officers and their
immediate families, as well as the companies with which they are associated,
are customers of, or have had banking transactions with, CIB in the ordinary
course of CIB's business, and CIB expects to have banking transactions with
such persons in the future. In management's opinion, all loans and
commitments to lend included in such transactions were made in the ordinary
course of business, in compliance with applicable laws on substantially the
same terms, including interest rates and collateral, as those prevailing for
comparable transactions with other persons of similar creditworthiness and,
in the opinion of management, did not involve more than a normal risk of
repayment or presented other unfavorable features.
SUPERVISION AND REGULATION
Americorp, ACB and CIB are extensively regulated under both federal
and state law, as discussed below.
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AMERICORP
Americorp is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act"), and
is registered as such with, and subject to the supervision of, the Federal
Reserve Board. Americorp is required to file with the Federal Reserve Board
quarterly and annual reports and such additional information as the Federal
Reserve Board may require pursuant to the Bank Holding Company Act. The
Federal Reserve Board may conduct examinations of bank holding companies and
their subsidiaries.
Americorp is required to obtain the approval of the Federal Reserve
Board before it may acquire all or substantially all of the assets of any
bank, or ownership or control of the voting shares of any bank if, after
giving effect to such acquisition of shares, Americorp would own or control
more than 5% of the voting shares of such bank. Prior approval of the Federal
Reserve Board is also required for the merger or consolidation of Americorp
and another bank holding company.
Americorp is prohibited by the Bank Holding Company Act, except in
certain statutorily prescribed instances, from acquiring direct or indirect
ownership or control of more than 5% of the outstanding voting shares of any
company that is not a bank or bank holding company and from engaging,
directly or indirectly, in activities other than those of banking, managing
or controlling banks or furnishing services to its subsidiaries. However,
Americorp may, subject to the prior approval of the Federal Reserve Board,
engage in any, or acquire shares of companies engaged in, activities that are
deemed by the Federal Reserve Board to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
Americorp, and any subsidiaries which it may acquire or organize,
are deemed to be "affiliates" of ACB within the meaning of that term as
defined in the Federal Reserve Act. This means, for example, that there are
limitations (a) on loans by ACB to affiliates, and (b) on investments by ACB
in affiliates' stock as collateral for loans to any borrower. Americorp and
its subsidiary are also subject to certain restrictions with respect to
engaging in the underwriting, public sale and distribution of securities.
Americorp and ACB are prohibited from engaging in certain tie-in
arrangements in connection with an extension of credit, sale or lease of
property or furnishing of services. Section 106(b) of the Bank Holding
Company Act Amendments of 1970 generally prohibits a bank from tying a
product or service to another product or service offered by ACB, or by any of
its affiliates. Further, Americorp and ACB are required to maintain certain
levels of capital. See, "Effect of Governmental Policies and Recent
Legislation - Capital Standards."
The Federal Reserve Board may require that Americorp terminate an
activity or terminate control of or liquidate or divest subsidiaries or
affiliates when the Federal Reserve Board determines that the activity or the
control or the subsidiary or affiliates constitutes a significant risk to the
financial safety, soundness or stability of any of its banking subsidiaries.
The Federal Reserve Board also has the authority
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to regulate provisions of certain bank holding company debt, including
authority to impose interest ceilings and reserve requirements on such debt.
Under certain circumstances, Americorp must file written notice and obtain
approval from the Federal Reserve Board prior to purchasing or redeeming its
equity securities.
Under the Federal Reserve Board's regulations, a bank holding
company is required to serve as a source of financial and managerial strength
to its subsidiary banks and may not conduct its operations in an unsafe and
unsound manner. In addition, it is the Federal Reserve Board's policy that in
serving as a source of strength to its subsidiary banks, a bank holding
company should stand ready to use available resources to provide adequate
capital funds to its subsidiary banks during periods of financial stress or
adversity and should maintain the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks. A
bank holding company's failure to meet its obligations to serve as a source
of strength to its subsidiary banks will generally be considered by the
Federal Reserve Board to be an unsafe and unsound banking practice or a
violation of the Federal Reserve Board's regulations or both.
ACB
ACB is extensively regulated under both federal and state law. Set
forth below is a summary description of certain laws which relate to the
regulation of ACB. The description does not purport to be complete and is
qualified in its entirety by reference to the applicable laws and regulations.
ACB is chartered under the laws of the State of California and its
deposits are insured by the FDIC to the extent provided by law. ACB is
subject to the supervision of, and is regularly examined by, the DFI and the
FDIC. Such supervision and regulation include comprehensive reviews of all
major aspects of ACB's business and condition.
Various requirements and restrictions under the laws of the United
States and the State of California affect the operations of ACB. Federal and
California statutes relate to many aspects of ACB's operations, including
reserves against deposits, interest rates payable on deposits, loans,
investments, mergers and acquisitions, borrowings, dividends and locations of
branch offices. Further, ACB is required to maintain certain levels of
capital.
California law and regulations of the DFI authorize California
licensed banks, subject to applicable limitations and approvals of the DFI to
(1) provide real estate appraisal services, management consulting and advice
services, and electronic data processing services; (2) engage directly in
real property investment or acquire and hold voting stock of one or more
corporations, the primary activities of which are engaging in real property
investment; (3) organize, sponsor, operate or render investment advice to an
investment company or to underwrite, distribute or sell securities in
California; and (4) invest in the capital stock, obligations or other
securities of corporations not acting as insurance companies, insurance
agents or insurance brokers. In November 1988, Proposition 103 was adopted by
California voters. The DFI has established certain procedures to be followed
by banks desiring to engage in certain insurance
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activities.
CIB
As a California state chartered bank whose deposits are insured by
the FDIC, CIB is regulated under the same federal and state laws as ACB.
CAPITAL STANDARDS
The Federal Reserve Board and FDIC have adopted risk-based minimum
capital guidelines (for bank holding companies and insured non-member state
banks, respectively) intended to provide a measure of capital that reflects
the degree of risk associated with a banking organization's operations for
both transactions reported on the balance sheet as assets and transactions,
such as letters of credit and recourse arrangements, which are recorded as
off balance sheet items. Under these guidelines, nominal dollar amounts of
assets and credit equivalent amounts of off balance sheet items are
multiplied by one of several risk adjustment percentages, which range from 0%
for assets with low credit risk, such as certain U.S. Treasury securities, to
100% for assets with relatively high credit risk, such as business loans.
A banking organization's risk-based capital ratios are obtained by
dividing its qualifying capital by its total risk adjusted assets. The
regulators measure risk-adjusted assets, which includes off balance sheet
items, against both total qualifying capital (the sum of Tier 1 capital and
limited amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital
consists primarily of common stock, retained earnings, noncumulative
perpetual preferred stock (cumulative perpetual preferred stock for bank
holding companies) and minority interests in certain subsidiaries, less most
intangible assets. Tier 2 capital may consist of a limited amount of the
allowance for possible loan and lease losses, cumulative preferred stock,
long-term preferred stock, eligible term subordinated debt and certain other
instruments with some characteristics of equity. The inclusion of elements of
Tier 2 capital is subject to certain other requirements and limitations of
the federal banking agencies. The federal banking agencies require a minimum
ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum
ratio of Tier 1 capital to risk-adjusted assets of 4%.
In addition to the risked-based guidelines, federal banking
regulators require banking organizations to maintain a minimum amount of Tier
1 capital to total assets, referred to as the leverage ratio. For a banking
organization rated in the highest of the five categories used by regulators
to rate banking organizations, the minimum leverage ratio of Tier 1 capital
to total assets is 3%. For all banking organizations not rated in the highest
category, the minimum leverage ratio must be at least 100 to 200 basis points
above the 3% minimum, or 4% to 5%. In addition to these uniform risk-based
capital guidelines and leverage ratios that apply across the industry, the
regulators have the discretion to set individual minimum capital requirements
for specific institutions at rates significantly above the minimum guidelines
and ratios.
In June 1996, the federal banking agencies adopted a joint agency
policy statement to provide
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guidance on managing interest rate risk. These agencies indicated that the
adequacy and effectiveness of a bank's interest rate risk management process
and the level of its interest rate exposures are critical factors in the
agencies' evaluation of ACB's capital adequacy. A bank with material
weaknesses in its risk management process or high levels of exposure relative
to its capital will be directed by the agencies to take corrective action.
Such actions will include recommendations or directions to raise additional
capital, strengthen management expertise, improve management information and
measurement systems, reduce levels of exposure, or some combination thereof
depending upon the individual institution's circumstances.
The federal banking agencies issued an interagency policy statement
on the allowance for loan and lease losses which, among other things,
establishes certain benchmark ratios of loan loss reserves to classified
assets. The benchmark set forth by such policy statement is the sum of (a)
assets classified loss; (b) 50 percent of assets classified doubtful; (c) 15
percent of assets classified substandard; and (d) estimated credit losses on
other assets over the upcoming 12 months.
Federally supervised banks and savings associations are currently
required to report deferred tax assets in accordance with SFAS No. 109. The
federal banking agencies recently issued final rules governing banks and bank
holding companies, which became effective April 1, 1995, which limit the
amount of deferred tax assets that are allowable in computing an institutions
regulatory capital. The standard has been in effect on an interim basis since
March 1993. Deferred tax assets that can be realized for taxes paid in prior
carryback years and from future reversals of existing taxable temporary
differences are generally not limited. Deferred tax assets that can only be
realized through future taxable earnings are limited for regulatory capital
purposes to the lesser of (i) the amount that can be realized within one year
of the quarter-end report date, or (ii) 10% of Tier 1 Capital. The amount of
any deferred tax in excess of this limit would be excluded from Tier 1
Capital and total assets and regulatory capital calculations.
Future changes in regulations or practices could further reduce the
amount of capital recognized for purposes of capital adequacy. Such a change
could affect the ability of ACB to grow and could restrict the amount of
profits, if any, available for the payment of dividends.
Under applicable regulatory guidelines, Americorp and ACB were each
considered "Well Capitalized" at June 30, 1998.
On January 1, 1998, new legislation became effective which, among
other things, gave the power to the DFI to take possession of the business
and properties of a bank in the event that the tangible shareholders' equity
of the bank is less than the greater of (i) 3% of the bank's total assets or
(ii) $1,000,000.
PROMPT CORRECTIVE ACTION
Federal law requires each federal banking agency to take prompt
corrective action to resolve the problems of insured depository institutions,
including but not limited to those that fall below one or more
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prescribed minimum capital ratios. The law required each federal banking
agency to promulgate regulations defining the following five categories in
which an insured depository institution will be placed, based on the level of
its capital ratios: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized.
An insured depository institution generally will be classified in
the following categories based on capital measures indicated below:
<TABLE>
<CAPTION>
"Well capitalized" "Adequately capitalized"
---------------- ----------------------
<S> <C>
Total risk-based capital of 10%; Total risk-based capital of 8%;
Tier 1 risk-based capital of 6%; and Tier 1 risk-based capital of 4%; and
Leverage ratio of 5%. Leverage ratio of 4%.
"Undercapitalized" "Significantly undercapitalized"
---------------- ------------------------------
Total risk-based capital less than 8%; Total risk-based capital less than 6%;
Tier 1 risk-based capital less than 4%; or Tier 1 risk-based capital less than 3%; or
Leverage ratio less than 4%. Leverage ratio less than 3%.
"Critically undercapitalized"
---------------------------
Tangible equity to total assets less than 2%.
</TABLE>
An institution that, based upon its capital levels, is classified as
"well capitalized," "adequately capitalized" or undercapitalized" may be
treated as though it were in the next lower capital category if the
appropriate federal banking agency, after notice and opportunity for hearing,
determines that an unsafe or unsound condition or an unsafe or unsound
practice warrants such treatment. At each successive lower capital category,
an insured depository institution is subject to more restrictions. The
federal banking agencies, however, may not treat an institution as
"critically undercapitalized" unless its capital ratio actually warrants such
treatment.
The law prohibits insured depository institutions from paying
management fees to any controlling persons or, with certain limited
exceptions, making capital distributions if after such transaction the
institution would be undercapitalized. If an insured depository institution
is undercapitalized, it will be closely monitored by the appropriate federal
banking agency, subject to asset growth restrictions and required to obtain
prior regulatory approval for acquisitions, branching and engaging in new
lines of business. Any undercapitalized depository institution must submit an
acceptable capital restoration plan to the appropriate federal banking agency
45 days after becoming undercapitalized. The appropriate federal banking
agency cannot accept a capital plan unless, among other things, it determines
that the plan (i) specifies the steps the institution will take to become
adequately capitalized, (ii) is based on realistic assumptions and (iii) is
likely to succeed in restoring the depository institution's capital. In
addition, each company controlling an undercapitalized depository institution
must guarantee that the institution will comply with the capital plan until
the depository institution has been adequately capitalized on an average
basis during each of four consecutive calendar quarters and must otherwise
provide adequate assurances of performance. The aggregate liability of such
guarantee is limited to the lesser of (a) an amount equal to 5% of the
depository institution's total assets at the time the institution became
undercapitalized or (b)
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the amount which is necessary to bring the institution into compliance with
all capital standards applicable to such institution as of the time the
institution fails to comply with its capital restoration plan. Finally, the
appropriate federal banking agency may impose any of the additional
restrictions or sanctions that it may impose on significantly
undercapitalized institutions if it determines that such action will further
the purpose of the prompt correction action provisions.
An insured depository institution that is significantly
undercapitalized, or is undercapitalized and fails to submit, or in a
material respect to implement, an acceptable capital restoration plan, is
subject to additional restrictions and sanctions. These include, among other
things: (i) a forced sale of voting shares to raise capital or, if grounds
exist for appointment of a receiver or conservator, a forced acquisition;
(ii) restrictions on transactions with affiliates; (iii) further limitations
on interest rates paid on deposits; (iv) further restrictions on growth or
required shrinkage; (v) modification or termination of specified activities;
(vi) replacement of directors or senior executive officers; (vii)
prohibitions on the receipt of deposits from correspondent institutions;
(viii) restrictions on capital distributions by the holding companies of such
institutions; (ix) required divestiture of subsidiaries by the institution;
or (x) other restrictions as determined by the appropriate federal banking
agency. Although the appropriate federal banking agency has discretion to
determine which of the foregoing restrictions or sanctions it will seek to
impose, it is required to force a sale of voting shares or merger, impose
restrictions on affiliate transactions and impose restrictions on rates paid
on deposits unless it determines that such actions would not further the
purpose of the prompt corrective action provisions. In addition, without the
prior written approval of the appropriate federal banking agency, a
significantly undercapitalized institution may not pay any bonus to its
senior executive officers or provide compensation to any of them at a rate
that exceeds such officer's average rate of base compensation during the 12
calendar months preceding the month in which the institution became
undercapitalized.
Further restrictions and sanctions are required to be imposed on
insured depository institutions that are critically undercapitalized. For
example, a critically undercapitalized institution generally would be
prohibited from engaging in any material transaction other than in the
ordinary course of business without prior regulatory approval and could not,
with certain exceptions, make any payment of principal or interest on its
subordinated debt beginning 60 days after becoming critically
undercapitalized. Most importantly, however, except under limited
circumstances, the appropriate federal banking agency, not later than 90 days
after an insured depository institution becomes critically undercapitalized,
is required to appoint a conservator or receiver for the institution. The
board of directors of an insured depository institution would not be liable
to the institution's shareholders or creditors for consenting in good faith
to the appointment of a receiver or conservator or to an acquisition or
merger as required by the regulator.
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by the federal regulators for unsafe or unsound practices
in conducting their businesses or for violations of any law, rule, regulation
or any condition imposed in writing by the agency or any written agreement
with the agency.
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SAFETY AND SOUNDNESS STANDARDS
Effective in 1995 the federal banking agencies adopted final
guidelines establishing standards for safety and soundness, as required by
the Federal Deposit Insurance Corporation Improvement Act of 1991 (AFDICIA).
These standards are designed to identify potential safety and soundness
concerns and ensure that action is taken to address those concerns before
they pose a risk to the deposit insurance fund. The standards relate to (i)
internal controls, information systems and internal audit systems; (ii) loan
documentation; (iii) credit underwriting; (iv) asset growth; (v) earnings;
and (vi) compensation, fees and benefits. If a federal banking agency
determines that an institution fails to meet any of these standards, the
agency may require the institution to submit to the agency an acceptable plan
to achieve compliance with the standard. In the event the institution fails
to submit an acceptable plan within the time allowed by the agency or fails
in any material respect to implement an accepted plan, the agency must, by
order, require the institution to correct the deficiency. Effective October
1, 1996, the federal banking agencies promulgated safety and soundness
regulations and accompanying interagency compliance guidelines on asset
quality and earnings standards. These new guidelines provide six standards
for establishing and maintaining a system to identify problem assets and
prevent those assets from deteriorating. The institution should (i) conduct
periodic asset quality reviews to identify problem assets; (ii) estimate the
inherent losses in those assets and establish reserves that are sufficient to
absorb estimated losses; (iii) compare problem asset totals to capital; (iv)
take appropriate corrective action to resolve problems assets; (v) consider
the size and potential risks of material asset concentrations; and (vi)
provide periodic asset reports with adequate information for management and
the board of directors to assess the level of risk. These new guidelines also
set forth standards for evaluating and monitoring earnings and for ensuring
that earnings are sufficient for the maintenance of adequate capital and
reserves. If an institution fails to comply with a safety and soundness
standard, the appropriate federal banking agency may require the institution
to submit a compliance plan. Failure to submit a compliance plan or to
implement an accepted plan may result in enforcement action.
PREMIUMS FOR DEPOSIT INSURANCE
Federal law has established several mechanisms to increase funds to
protect deposits insured by Bank Insurance Fund ("BIF") administered by the
FDIC. The FDIC is authorized to borrow up to $30 billion from the United
States Treasury; up to 90% of the fair market value of assets of institutions
acquired by the FDIC as receiver from the Federal Financing Bank; and from
depository institutions that are members of the BIF. Any borrowings not
repaid by asset sales are to be repaid through insurance premiums assessed to
member institutions. Such premiums must be sufficient to repay any borrowed
funds within 15 years and provide insurance fund reserves of $1.25 for each
$100 of insured deposits. The FDIC also has authority to impose special
assessments against insured deposits.
The FDIC has adopted final regulations implementing a risk-based
premium system required by federal law. Under the regulations, which cover
the assessment periods commencing on and after January 1, 1994, insured
depository institutions are required to pay insurance premiums within a range
of 23 cents per $100 of deposits to 31 cents per $100 of deposits depending
on their risk classification. The FDIC,
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effective September 15, 1995, lowered assessments from their rates of $.23 to
$.31 per $100 of insured deposits to rates of $.04 to $.31, depending on the
health of the bank, as a result of the recapitalization of the BIF. On
November 15, 1995, the FDIC voted to drop its premiums for well capitalized
banks to zero effective January 1, 1996. Other banks will be charged
risk-based premiums up to $.27 per $100 of deposits. ACB and CIB pay the
minimum required premiums as a result of its "well capitalized" status.
Congress passed in 1996 and the President signed into law,
provisions to strengthen the Savings and Loan Insurance Fund ("SAIF") and to
repay outstanding bonds that were issued to recapitalize the SAIF as a result
of payments made due to the insolvency of savings and loan associations and
other federally insured savings institutions in the late 1980s and early
1990s. The new law requires saving and loan associations to be bear the cost
of recapitalizing the SAIF and, after January 1, 1997, banks will contribute
towards paying off the financing bonds, including interest. Effective January
1, 1997, SAIF-insured institutions pay 3.2 cents per $100 in domestic
deposits, and BIF-insured institutions, like ACB, pay 0.64 cents per $100 in
domestics deposits. In 2000, banking industry will share on a more equal
basis in the bulk of the payments.
FINANCIAL MODERNIZATION LEGISLATION
Various proposals to adopt comprehensive financial modernization
legislation have been introduced in Congress which include, among other
things, elimination of the federal thrift charter, creation of a uniform
financial institutions charter, expansion of bank powers, and integration of
banking, commerce, securities activities and insurance. Under the proposed
legislation, bank holding companies would be allowed to control both a
commercial bank and a securities affiliate, which could engage in the full
range of investment banking activities, including corporate underwriting. In
May, the House passed legislation that would overhaul the financial service
industry and allow mergers among banking, securities and insurance firms. The
Senate Banking Committee has taken up similar legislation. Substantial issues
apparently still exist between the banking and insurance industries and the
White House has also indicated that it would veto the legislation in its
current form unless restrictions on bank operating subsidiaries are removed.
It appears unlikely that the full Senate will be able to act on the
legislation before its scheduled adjournment.
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<PAGE>
INTERSTATE BANKING AND BRANCHING
On September 29, 1994, the President signed into law the Riegel-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Act"). Under the Interstate Act, beginning one year after the date of
enactment, a bank holding company that is adequately capitalized and managed
may obtain approval under Bank Holding Company Act to acquire an existing
bank located in another state without regard to state law. A bank holding
company would not be permitted to make such an acquisition if, upon
consummation, it would control (a) more than 10% of the total amount of
deposits of insured depository institutions in the United States or (b) 30%
or more of the deposits in the state in which ACB is located. A state may
limit the percentage of total deposits that may be held in that state by any
one bank or bank holding company if application of such limitation does not
discriminate against out-of-state banks. An out-of-state bank holding company
may not acquire a state bank in existence for less than a minimum length of
time that may be prescribed by state law except that a state may not impose
more than a five-year existence requirement.
The Interstate Act also permits, beginning June 1, 1997, mergers of
insured banks located in different states and conversion of the branches of
the acquired bank into branches of the resulting bank. Each state may permit
such combinations earlier than June 1, 1997, and may adopt legislation to
prohibit interstate mergers after that date in that state or in other states
by that state's banks. The same concentration limits discussed in the
preceding paragraph apply. The Interstate Act also permits a national or
state bank to establish branches in a state other than its home state if
permitted by the laws of that state, subject to the same requirements and
conditions as for a merger transaction.
In 1995, California adopted "opt in" legislation under the
Interstate Act that permits out-of-state banks to acquire California banks
that satisfy a five-year minimum age requirement (subject to exceptions for
supervisory transactions) by means of merger or purchases of assets, although
entry through acquisition of individual branches of California institutions
and de novo branching into California are not permitted. The Interstate Act
and the California branching statute will likely increase competition from
out-of-state banks in the markets in which Americorp operates, although it is
difficult to assess the impact that such increased competition may have on
Americorp's operations.Interstate Act may increase competition in Americorp's
market areas especially from larger financial institutions and their holding
companies. It is difficult to assess the impact such likely increased
competition may have on Americorp's operations.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS
ACB is subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the federal
banking agencies to evaluate the record of a financial institution in meeting
the credit needs of their local communities, including low and
moderate-income neighborhoods. In addition to substantial penalties and
corrective measures that may be required for a violation of certain fair
lending laws, the federal banking agencies may take compliance with such laws
and CRA into account when regulating and supervising other activities.
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<PAGE>
In 1995 the federal banking agencies issued final regulations which
change the manner in which they measure a bank's compliance with CRA
obligations. The final regulations adopt a performance-based evaluation
system which bases CRA ratings on an institution's actual lending, service
and investment performance, rather than the extent to which the institution
conducts needs assessments, documents community outreach activities or
complies with other procedural requirements.
In 1994 the federal Interagency Task Force on Fair Lending issued a
policy statement on discrimination in lending. The policy statement describes
the three methods that federal agencies will use to prove discrimination:
overt evidence of discrimination, evidence of disparate treatment and
evidence of disparate impact.
In connection with its assessment of CRA performance, the
appropriate bank regulatory agency assigns a rating of "outstanding,"
"satisfactory," "needs to improve" or "substantial noncompliance." At its
last examination by the FDIC, ACB received a CRA rating of "Satisfactory."
POTENTIAL ENFORCEMENT ACTIONS
Commercial banking organizations and bank holding companies, such as
ACB and Americorp, may be subject to potential enforcement actions by federal
and state bank regulatory officials for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with
the agency. Enforcement actions may include the imposition of a conservator
or receiver, the issuance of a cease and desist order that can be judicially
enforced, the termination of insurance of deposits (in the case of a
depository institution), the imposition of civil money penalties, the
issuance of directives to increase capital, the issuance of formal and
informal agreements, the issuance of removal and prohibition orders against
institution-affiliated parties and the enforcement of such actions through
injunctions or restraining orders based upon a judicial determination that
the agency would be harmed if such equitable relief was not granted. Neither
Americorp nor ACB is a party to any such enforcement action.
INFORMATION CONCERNING AMERICORP MEETING ONLY
In connection with its obligations under the Agreement to grant
substitute options to certain officers and directors of CIB (see "THE MERGER
- -Treatment of Stock Options"), Americorp, after consultation with CIB,
concluded that the adoption of a new stock option plan was more practical and
better fitted the future needs of Americorp than amending the current
Americorp stock option plan. This new stock option plan is referred to as the
"1998 Plan." If for any reason the Merger is not carried out, the 1998 Plan
will not become effective.
SUMMARY OF THE 1998 PLAN
On ________________, 1998 the Board of Directors of Americorp
adopted and approved, subject
154
<PAGE>
to shareholder approval, the 1998 Plan to provide that employees,
employee directors and non-employee directors will be eligible to receive
options to purchase shares of Americorp Stock. Substitute options will also
be granted pursuant to the Merger from the 1998 Plan. See "THE MERGER -
Treatment of Stock Options." The 1998 Plan does not supersede the current
stock option plan of Americorp (which will be terminated as part of the
Merger) or effect any of the stock options granted under such plan.
The 1998 Plan provides for the participation of directors as well as
employees. The Board of Directors believes that a stock option program is an
important factor in retaining, motivating and attracting key employees and
directors. It also believes that such plans provide incentives for high
levels of performance and encourage stock ownership in Americorp.
THE FOLLOWING DESCRIPTION OF THE 1998 PLAN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE 1998 PLAN WHICH IS ATTACHED
HERETO AS APPENDIX E AND WHICH YOU ARE URGED TO READ AND CONSIDER CAREFULLY.
PURPOSE
The purpose of the 1998 Plan is to strengthen Americorp by providing
to participating employees and officers ("Employees"), employee directors
("Employee Directors") and non-employee directors ("Non-Employee Directors")
added incentive for high performance and to encourage stock ownership in
Americorp. The 1998 Plan seeks to accomplish these goals by a means whereby
such Employees, Employee Directors and Non-Employee Directors of Americorp
may be given an opportunity to purchase, by way of option, Americorp Stock.
The 1998 Plan is also intended to enable Americorp to compete effectively for
and retain the services of such persons and to provide incentives for such
persons to exert maximum efforts for the success of Americorp
Americorp intends that the options issued under the 1998 Plan shall,
in the discretion of the committee which administers the 1998 Plan, be either
incentive stock options ("Incentive Stock Options") as that term is used in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor thereto, or options which do not qualify as incentive
stock options ("Non-Qualified Stock Options").
ADMINISTRATION
A committee of directors, appointed by the Board of Directors and
composed of not less than three "disinterested members," will administer the
1998 Plan (the "Committee"). The Committee shall have full power and
authority in its discretion to take any and all action required or permitted
to be taken under the 1998 Plan, including the selection of participants to
whom stock options may be granted, the determination of the number of shares
which may be covered by stock options, the purchase price, and other terms
and conditions thereof.
155
<PAGE>
SHARES RESERVED
There are _______________ shares of Americorp Stock reserved for
issuance upon exercise of options granted under the 1998 Plan. If any option
granted under the 1998 Plan shall for any reason expire, be canceled or
otherwise terminate without having been exercised in full, the shares not
purchased under such option shall again become available for the 1998 Plan.
ELIGIBILITY
All Employees, Employee Directors and Non-Employee Directors are
eligible to participate in the 1998 Plan and Employees and Employee Directors
are eligible to receive Incentive and Non-Qualified Stock Options.
Non-Employee Directors are only eligible to receive Non-Qualified Stock
Options. Americorp may issue Incentive Stock Options provided that the
aggregate fair market value (determined at the time the Incentive Stock
Option is granted) of the stock with respect to which Incentive Stock Options
are exercisable for the first time by the optionee during any calendar year
shall not exceed $100,000. Should it be determined that any Incentive Stock
Option granted pursuant to the 1998 Plan exceed such maximum, such Incentive
Stock Option shall be considered to be a Non-Qualified Stock Option and not
qualify for treatment as an Incentive Stock Option under Section 422A of the
Code to the extent, but only to the extent, of such excess.
OPTION PRICE
The exercise price of each option shall be determined by the
Committee and shall not be less than the fair market value of the stock
subject to the option on the date the option is granted; provided, however,
that the purchase price of the stock subject to an Incentive Stock Option may
not be less than 110% of such fair market value where the optionee owns (or
is deemed to own pursuant to the Code) shares of stock representing more than
10% of total combined voting power of all classes of stock of Americorp. The
purchase price of Americorp Stock acquired pursuant to an option shall be
paid in cash at the time the option is exercised or other shares of Americorp
Stock in partial or full payment. In such event, the stock being tendered as
payment shall be valued at its then-current fair market value.
SUBSTITUTE OPTIONS
The 1998 Plan provides for the grant of substitute options in the
event of certain acquisitions by Americorp or its affiliates. The terms under
which the substitute stock options are to be granted pursuant to the Merger
is discussed in "THE MERGER - Treatment of Stock Options."
ADJUSTMENTS UPON CHANGES IN STOCK
If the outstanding shares of Americorp Stock are increased,
decreased, or changed into, or exchanged for a different number or kind of
shares or securities of Americorp without receipt of consideration by
Americorp, through reorganization, merger, recapitalization,
reclassification, stock split,
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<PAGE>
stock dividend, stock consolidation, or otherwise, an appropriate and
proportionate adjustment shall be made in the number and kind of shares as to
which options may be granted. A corresponding adjustment changing the number
or kind of shares and the exercise price per share allocated to unexercised
options, or portions thereof, which shall have been granted prior to any such
change shall likewise be made. Any such adjustment, however, in an
outstanding option shall be made without change in the total price applicable
to the unexercised portion of the option but with a corresponding adjustment
in the price for each share subject to the option adjustments shall be made
by the Committee whose determination as to what adjustments shall be made,
and the extent thereof, shall be final and conclusive. No fractional shares
of stock shall be issued under the 1998 Plan on account of any such
adjustment.
EXPIRATION, TERMINATION AND TRANSFER OF OPTIONS
No option under the 1998 Plan may extend more than ten (10) years
from the date of grant. Notwithstanding the foregoing, any Incentive Stock
Option granted to an optionee who owns (or is deemed to own pursuant to the
Code) shares of stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of Americorp or any of its
affiliates shall expire not later than five (5) years from the date of grant.
For purposes of the 1998 Plan the date of grant of an option shall be the
date on which the Committee takes final action approving the award of the
option, notwithstanding the date the optionee accepts the option, the date of
execution of the option agreement, or any other date with respect to such
option.
Except in the event of termination of employment due to death,
disability or termination for cause, options will terminate three months
after an Employee or Employee Director optionee ceases to be employed by
Americorp or its subsidiaries or a Non-Employee Director optionee ceases to
serve as a director of Americorp or its subsidiaries unless the options by
their terms were scheduled to terminate earlier. During that three month
period after the Employee or Employee Director optionee ceases to be employed
by Americorp or its subsidiaries, or a Non-Employee Director optionee ceases
to serve as a director of Americorp or its subsidiaries, such options shall
be exercisable only as to those shares with respect to which installments, if
any, had accrued as of the date on which the optionee ceased to be employed
by Americorp or its subsidiaries or ceased to serve as director of the
Corporation or its subsidiaries. If such termination was due to such
optionee's permanent and total disability, or such optionee's death, the
option, by its terms, may be exercisable for one year after such termination
of employment or cessation of directorship. If the, Employee or Employee
Director optionee's employment is terminated for "just cause," the option
terminates immediately. An option by its terms may only be transferred by
will or by laws of descent and distribution upon the death of the optionee,
shall be transferable during the optionee's lifetime only pursuant to a
qualified domestic relations order or pursuant to a guardianship or
conservatorship for the benefit of an optionee, and shall be exercisable
during the lifetime of the person to whom the option is granted only by such
person.
TERMINATION AND AMENDMENT OF THE 1998 PLAN
The 1998 Plan will terminate upon the occurrence of a terminating
event, including, but not
157
<PAGE>
limited to, liquidation, reorganization, merger or consolidation of Americorp
with another corporation in which Americorp is not the surviving corporation,
or a sale of substantially all the assets of Americorp to another person, or
a tender offer or acquisition by one person or a group of persons acting in
concert of more than 50% of Americorp Stock (a "Terminating Event"). The
Committee shall notify each optionee not less than thirty (30) days prior
thereto of the pendency of a Terminating Event. Upon the delivery of such
notice, any option outstanding shall, notwithstanding any vesting schedule
contained in an option agreement, become fully exercisable. The Board of
Directors may also suspend or terminate the 1998 Plan at any time. Unless
sooner terminated, the 1998 Plan shall terminate ten (10) years from the
effective date of the 1998 Plan. No options may be granted under the 1998
Plan while it is suspended or after it is terminated. Rights and obligations
under any option granted pursuant to the 1998 Plan while it is in effect
shall not be altered or impaired by suspension or termination of the 1998
Plan, other than pursuant to the terms thereof, except with the consent of
the person to whom the stock option was granted.
The 1998 Plan may be amended by the Board of Directors at any time,
and from time to time. However, except as otherwise provided in the 1998 Plan
relating to adjustments upon changes in stock (e.g., stock splits or stock
dividends), no amendment shall be effective unless approved by the
affirmative vote of a majority of the shares of Americorp represented and
voting, within twelve (12) months before or after the adoption of the
amendment, if the amendment will: (a) increase the number of shares reserved
for options under the 1998 Plan; (b) materially modify the requirements as to
eligibility for participation in the 1998 Plan; or (c) materially increase
the benefits accruing to participants under the 1998 Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is only a summary of the principal federal
income tax consequences of the options and rights to be granted under the
1998 Plan and is based on existing federal law (including administrative
regulations and rulings) which is subject to change, in some cases
retroactively. This discussion is also qualified by the particular
circumstances of individual optionees, which may substantially alter or
modify the federal income tax consequences herein discussed.
Generally under present law, when an option qualifies as an
Incentive Stock Option under Section 422A of the Code: (a) an Employee will
not realize taxable income either upon the grant or the exercise of the
option, (b) any gain or loss upon a qualifying disposition of the shares
acquired by the exercise of the option will be treated as capital gain or
loss, and (c) no deduction will be allowed to Americorp for federal income
tax purposes in connection with the grant or exercise of an Incentive Stock
Option or a qualifying disposition of the shares. A disposition by an
Employee of stock acquired upon exercise of an Incentive Stock Option will
constitute a qualifying disposition if it occurs more than two years after
the grant of the option, and one year after the transfer of the shares to the
Employee. If such stock is disposed of by the Employee before the expiration
of those time limits, the transfer would be a "disqualifying disposition" and
the Employee, in general, will recognize ordinary income
158
<PAGE>
equal to the lesser of (a) the aggregate fair market value of the shares as
of the date of exercise less the option price, or (b) the amount realized on
the disqualifying disposition less the option price. Ordinary income from a
disqualifying disposition will constitute compensation to the Employee.
Upon the exercise of an Incentive Stock Option, the difference
between the fair market value of stock on the date of exercise and the option
price generally is treated as a "tax preference" item in that taxable year
for alternative minimum tax purposes, as are a number of other items
specified by the Code. Such tax preference items (with adjustments) form the
basis for the alternative minimum tax, which may apply depending on the
amount of the computed "regular tax" of the employee for that year. Under
certain circumstances the amount of alternative minimum tax is allowed as a
carry forward credit against regular tax liability in subsequent years.
In the case of stock options which do not qualify as an Incentive
Stock Option (Non-Qualified Stock Options), no income generally is recognized
by the optionee at the time of the grant of the option. Under present law the
optionee generally will recognize ordinary income at the time the
Non-Qualified Stock Option is exercised equal to the aggregate fair market
value of the shares acquired less the option price. Notwithstanding the
foregoing, if the shares received upon exercising a Non-Qualified Stock
Option are subject to certain restrictions, the taxable event is postponed
until the restrictions lapse.
Shares acquired upon exercise of Non-Qualified Stock Option will
have a tax basis equal to their market value on the exercise date or other
relevant date on which ordinary income is recognized and the holding period
for the shares generally will begin on the date of exercise or such other
relevant date. Upon subsequent disposition of the shares, the optionee
generally will recognize capital gain or loss provided the shares are held by
the optionee for more than one year prior to disposition.
Americorp generally will be entitled to a deduction equal to the
ordinary income recognized by the optionee in the case of a disqualifying
disposition of an Incentive Stock Option or in connection with the exercise
of a Non-Qualified Stock Option.
VOTE REQUIRED
Approval of the 1998 Plan requires the affirmative vote of a
majority of the outstanding shares of Americorp Stock.
The Board of Directors has approved the 1998 Plan and recommends
that the shareholders vote FOR the approval of the 1998 Plan.
LEGAL MATTERS
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<PAGE>
Certain legal matters in connection with the Merger will be passed
upon for Americorp and ACB by Reitner & Stuart, San Luis Obispo, California
and for CIB by Knecht & Hansen, Newport Beach, California.
EXPERTS
The consolidated financial statements of CIB as of December 31,
1997, 1996 and 1995 and for the years then ended appearing elsewhere in this
Joint Proxy Statement/Prospectus have been audited by Vavrinek, Trine, Day &
Co. as indicated in their report with respect thereto. Such consolidated
financial statements are included herein in reliance upon the authority of
said firm as independent auditors.
The consolidated financial statements of Americorp as of December
31, 1997, and 1996 and for each of the three years in the period ended
December 31, 1997 appearing elsewhere in of this Joint Proxy
Statement/Prospectus have been audited by Fanning & Karrh as indicated in
their report with respect thereto. Such consolidated financial statements are
included herein in reliance upon the authority of said firm as independent
auditors.
OTHER MATTERS
CIB and Americorp do not know of any business other than that
described in this Joint Proxy Statement/Prospectus which will be presented
for consideration at the respective Meetings. If any other business properly
comes before the respective Meetings or any and all adjournments or
postponements thereof, the proxy holders named in the accompanying proxies
will vote their respective shares represented by such proxies in accordance
with their best judgment and, as applicable, in accordance with said proxies.
160
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Vavrinek, Trine, Day & Co., LLP, Independent Auditors . . . . F-3
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Income. . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . F-7
Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . F-8
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . F-10
</TABLE>
F-1
<PAGE>
CHANNEL ISLANDS
NATIONAL BANK
--------------------------------
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
WITH
INDEPENDENT AUDITORS' REPORT
--------------------------------
F-2
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
DECEMBER 31, 1997 AND 1996
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Channel Islands National Bank
Oxnard, California
We have audited the accompanying balance sheets of Channel Islands National
Bank as of December 31, 1997 and 1996, and the related statements of income,
changes in stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the management of the
Bank. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to in
the first paragraph present fairly, in all material respects, the financial
positions of Channel Islands National Bank as of December 31, 1997 and 1996,
and the results of its operations and its cash flows for the years then ended
in conformity with generally accepted accounting principles.
Vavrinek, Trine, Day & Co., LLP
Rancho Cucamonga, California
January 23, 1998
F-3
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Notes 1997 1996
----- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks 2 $ 7,858,739 $ 6,145,015
Federal funds sold 12,750,000 8,250,000
----------- -----------
Cash and Cash Equivalents 20,608,739 14,395,015
Time deposits in other financial institutions 1,491,000 1,491,000
Investment securities 3
Available-for-sale 13,925,047 6,362,035
Held-to-Maturity, fair value of $77,400 (1997)
and $578,344 (1996) 76,326 577,634
Loans, net 4 48,903,016 48,297,722
Loans held for sale 1,725,659 1,557,231
Bank premises and equipment 5 942,841 877,069
Federal reserve bank stock, at cost 147,250 167,150
Other assets 912,185 783,122
Other real estate owned 151,690 44,600
Deferred taxes 155,885 47,276
----------- -----------
Total Assets $89,039,638 $74,599,854
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits 24,557,499 19,261,426
NOW and money market deposits 26,346,147 22,068,130
Savings deposits 7,055,770 7,594,905
Time deposits over $100,000 10,829,125 9,565,367
Other time deposits 13,038,473 10,272,955
----------- -----------
Total Deposits 81,827,014 68,762,783
Accrued interest and other liabilities 656,715 240,919
----------- -----------
Total Liabilities 82,483,729 69,003,702
----------- -----------
STOCKHOLDERS' EQUITY
Contributed capital
Common stock - $5 par value;
2,000,000 shares authorized; issued and outstanding
479,013 shares in 1997 and 456,924 shares in 1996 2,395,065 2,284,620
Surplus 2,714,645 2,582,338
Retained earnings 1,485,003 778,617
Valuation allowance for investments (38,804) (49,423)
----------- -----------
Total Stockholders' Equity 6,555,909 5,596,152
----------- -----------
Total Liabilities and Stockholders' Equity $89,039,638 $74,599,854
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Notes 1997 1996
----- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,570,544 $ 5,175,415
Interest on federal funds sold 611,851 560,706
Interest on time deposits in other financial institutions 89,174 116,391
Interest on investments 554,063 475,406
----------- -----------
Total Interest Income 6,825,632 6,327,918
INTEREST EXPENSE ON DEPOSITS AND INVESTMENTS 1,879,079 1,853,411
----------- -----------
NET INTEREST INCOME 4,946,553 4,474,507
PROVISION FOR LOAN LOSSES 4 370,000 696,947
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,576,553 3,777,560
----------- -----------
OTHER INCOME
Service charges, fees and other 1,120,704 705,977
Gain on sale of assets 28,555 631
----------- -----------
Total Other Income 1,149,259 706,608
----------- -----------
OTHER EXPENSES
Salaries and employee benefits 2,344,668 2,151,747
Occupancy 404,663 392,195
Other operating expenses 1,600,146 1,379,781
----------- -----------
Total Other Expenses 4,349,477 3,923,723
----------- -----------
Net Income Before Income Taxes 1,376,335 560,445
Income Taxes 7 575,959 234,938
----------- -----------
Net Income $ 800,376 $ 325,507
----------- -----------
----------- -----------
Earnings Per Share - Basic 8 $ 1.74 $ 0.71
----------- -----------
----------- -----------
Earnings Per Share - Diluted 8 $ 1.60 $ 0.66
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 800,376 $ 325,507
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 370,000 696,947
Depreciation 200,318 162,798
Gain on sale of fixed assets (7,545) -
Amortization of discount premium on investments, net - 21,002
Changes in operating assets and liabilities:
Other real estate owned (107,090) (44,600)
Interest receivable and other assets (237,672) (42,218)
Interest payable and other liabilities 415,796 7,594
------------ ------------
Net Cash Provided By Operating Activities 1,434,183 1,127,030
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in time certificates purchased - 592,000
Maturities and sales of investment securities 10,000,000 8,000,000
Purchases of investment securities (17,051,085) (8,985,110)
Sales (Purchases) of federal reserve bank stock 19,900 (9,550)
Increase in loans made to customers, net (1,143,722) (8,840,815)
Purchase of fixed assets (270,847) (601,668)
Proceeds on sale of fixed assets 12,302 -
------------ ------------
Net Cash Used In Investing Activities (8,433,452) (9,845,143)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in noninterest-bearing demand deposits 5,296,073 1,770,781
Increase in interest-bearing demand and saving deposits 3,738,882 2,713,394
Increase in certificates of deposit under $100,000 2,765,518 2,933,628
Increase in certificates of deposit of $100,000 or more 1,263,758 923,049
Proceeds from issuance of common stock 169,996 -
Stock options exercised - tax benefit 72,756 -
Dividends (93,990) (91,385)
------------ ------------
Net Cash Provided By Financing Activities 13,212,993 8,249,467
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,213,724 (468,646)
CASH AND CASH EQUIVALENTS, Beginning of year 14,395,015 14,863,661
------------ ------------
CASH AND CASH EQUIVALENTS, End of year $ 20,608,739 $ 14,395,015
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,859,259 $ 1,780,382
------------ ------------
------------ ------------
Income taxes $ 146,000 $ 151,000
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Real estate acquired through foreclosure $ 151,690 $ 44,600
------------ ------------
------------ ------------
CHANGE IN VALUATION ALLOWANCE FOR INVESTMENT SECURITIES $ 10,619 $ (5,630)
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Valuation
Allowance For
Common Retained Investment
Shares Stock Surplus Earnings Securities Total
-------- ----------- ---------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 456,924 $2,284,620 $2,582,338 $ 544,495 $(43,793) $5,367,660
Net Income 325,507 325,507
Dividends (91,385) (91,385)
Change in unrealized loss
on investments (5,630) (5,630)
------- ---------- ---------- ---------- -------- ----------
Balance, December 31, 1996 456,924 2,284,620 2,582,338 778,617 (49,423) 5,596,152
Net Income 800,376 800,376
Dividends (93,990) (93,990)
Stock options exercised
(including the realization of
tax benefits of $72,756) 22,089 110,445 132,307 242,752
Change in unrealized loss
on investments 10,619 10,619
------- ---------- ---------- ---------- -------- ----------
Balance, December 31, 1997 479,013 $2,395,065 $2,714,645 $1,485,003 $(38,804) $6,555,909
------- ---------- ---------- ---------- -------- ----------
------- ---------- ---------- ---------- -------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Channel Islands National Bank (the
Bank) are in accordance with generally accepted accounting principles and
conform to practices within the banking industry. The following are
descriptions of the more significant of those policies.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Estimates that are particularly susceptible to significant change relate to
the determination of the allowance for losses on loans and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowances for losses on
loans and foreclosed real estate, management obtains independent appraisals
for significant properties.
While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically
review the Bank's allowances for losses on loans and foreclosed real estate.
Such agencies may require the Bank to recognize additions to the allowances
based on their judgments about information available to them at the time of
their examination. Because of these factors, it is possible that the
allowances for losses on loans and foreclosed real estate may change.
INVESTMENT SECURITIES - The Bank adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which addresses the
accounting for investments in equity securities that have readily
determinable fair values and for investments in all debt securities.
Pursuant to SFAS No. 115, securities are classified in three categories and
accounted for as follows: Debt securities that the Bank has the positive
intent and ability to hold to maturity are classified as held-to-maturity and
are measured at amortized cost; debt and equity securities bought and held
principally for the purpose of selling in the near term are classified as
trading securities and are measured at fair value, with unrealized gains and
losses included in earnings; debt and equity securities not classified as
either held-to-maturity or trading securities are deemed as
available-for-sale and are measured at fair value, with unrealized gains and
losses, net of applicable taxes, reported in a separate component of
stockholders equity.
F-8
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
LOANS - Loans are stated at amounts advanced less payments collected. Interest
is calculated using the simple-interest method on all loans not discounted.
Unearned discounts on applicable installment loans are recognized as income over
the term of the loans by the sum-of-the-month-digits method (Rule of 78's).
Accrual of interest on a loan is generally discontinued when the loan becomes 90
days past due as to principal or interest (unless the loan is well secured and
in the process of collection) or when, in management's opinion, the full and
timely collection of principal or interest becomes uncertain.
The Bank adopted SFAS No. 114 (as amended by SFAS No. 118), "Accounting by
Creditors for Impairment of a Loan." The statement generally requires those
loans identified as "impaired" to be measured on the present value of
expected future cash flows discounted at the loan's effective interest rate,
except that as a practical expedient, a creditor may measure impairment based
on a loan's observable market price, or the fair value of the collateral if
the loan is collateral dependent. A loan is impaired when it is probable the
creditor will not be able to collect all contractual principal and interest
payments due in accordance with the terms of the loan agreement.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more.
Any unpaid interest previously accrued on those loans is reversed from
income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal
balance.
Loan origination fees and certain direct loan origination costs are deferred
and amortized over the life of related loans as yield adjustments.
LOANS HELD FOR SALE - Loans held for sale are recorded at the lower of cost
or market.
ALLOWANCE FOR LOAN AND LEASE LOSSES - The allowance for loan losses is
established through provisions for loan losses which are included in the
accompanying statements of income. Loans are charged against the allowance
for loan losses when management determines that collectibility of the
principal is unlikely. Recoveries on loans previously charged off are
credited to the allowance. The accompanying financial statements require the
use of management estimates to calculate the allowance for loan losses.
These estimates are inherently uncertain and depend on the outcome of future
events. Management's estimates are based upon previous loan loss experience,
current economic conditions, volume, growth and composition of the loan
portfolio, the value of collateral, and other relevant factors.
F-9
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
OTHER REAL ESTATE OWNED - Other real estate owned represents real estate
acquired through foreclosure, and is carried at the lower of fair market
value less estimated selling cost or the loan balance at time of foreclosure.
Any valuation adjustments required at the time of foreclosure are charged to
the allowance for loan losses. Any subsequent valuation adjustments,
operating expenses or income and gains and losses on disposition of such
properties are recognized in current operations.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
range from five to ten years. Leasehold improvements are amortized over the
shorter of the estimated useful lives of the improvements or the terms of the
leases.
INCOME TAXES - Provisions for income taxes are based on amounts reported in
the statements of income (after exclusion of non-taxable income such as
interest on state and municipal securities) and include deferred taxes on
temporary differences in the recognition of income and expense for tax and
financial statement purposes. Deferred taxes are computed on the liability
method as prescribed in SFAS No. 109, ACCOUNTING FOR INCOME TAXES.
LOAN SALES AND SERVICING - Gains and losses from the sale of participating
interests in loans guaranteed by the Small Business Administration (SBA) are
recognized based on the premium received or discount paid and the cost basis
of the portion of the loan sold. The cost basis of the portion of the loan
sold is obtained by allocating the total cost of each loan between the
guaranteed portion of the loan sold and the unguaranteed portion of the loan
retained, based on their relative fair values. The book value allocated to
the unguaranteed portion of the loan, if less than the principal amount, is
recorded as a discount on the principal amount retained. The discount is
accreted to interest income over the remaining estimated life of the loan.
The Bank retains the servicing on the portion of the loans sold and
recognizes income on the servicing fees that are received. During 1997 the
Bank sold all loan servicing rights; the gain is reflected in the Statements
of Income as other income.
EARNINGS PER SHARE (EPS)
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.
F-10
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
STATEMENTS OF CASH FLOWS - For purposes of reporting cash flows, cash and
cash equivalents include cash and due from banks and federal funds sold.
Generally, federal funds are sold for one-day periods. Certain cash flows
associated with loans and customer deposits have been reported net.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1996
financial statements to conform to the 1997 classifications.
NOTE #2 - RESERVE REQUIREMENTS
All depository institutions are required by law to maintain reserves on
transaction accounts. These reserves can be in the form of balances at the
Federal Reserve Bank or in cash held by the Bank. The average reserve
requirement for the Bank was $748,000 in 1997, and $633,000 in 1996.
NOTE #3 - INVESTMENT SECURITIES
At December 31, 1997, the investment securities portfolio was comprised of
securities classified as available-for-sale and held-to-maturity in
conjunction with the adoption of SFAS 115, resulting in investment securities
available for sale being carried at market value and investment securities
held to maturity being carried at cost, adjusted for amortization of premiums
and accretions of discounts.
The amortized cost and fair values of investment securities available-for-sale
at December 31, 1997, were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies
and corporations $ 8,990,885 $15,217 $ (5,851) $ 9,000,251
Corporate debt securities 2,917,641 2,819 (2,560) 2,917,900
Other securities 2,051,073 (44,177) 2,006,896
----------- ------- -------- -----------
Total $13,959,599 $18,036 $(52,588) $13,925,047
----------- ------- -------- -----------
----------- ------- -------- -----------
</TABLE>
The amortized cost and fair values of investment securities held-to-maturity at
December 31, 1997, were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Other securities $76,326 $1,074 $ - $77,400
------- ------ ------ -------
------- ------ ------ -------
</TABLE>
F-11
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #3 - INVESTMENT SECURITIES, CONTINUED
The amortized cost and fair values of investment securities available-for-sale
at December 31, 1996, were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies
and corporations $3,001,633 $1,625 $ (8,508) $2,994,750
U.S. Treasury note 990,776 2,694 - 993,470
Corporate debt securities 406,110 - (1,110) 405,000
Other securities 2,015,000 - (46,185) 1,968,815
---------- ------ -------- ----------
Total $6,413,519 $4,319 $(55,803) $6,362,035
---------- ------ -------- ----------
---------- ------ -------- ----------
</TABLE>
The amortized cost and fair values of investment securities held-to-maturity at
December 31, 1996, were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Obligations of U.S. Government agencies
and corporations $500,439 $ - $(283) $500,156
Other securities 77,195 993 - 78,188
-------- ---- ----- --------
Total $577,634 $993 $(283) $578,344
-------- ---- ----- --------
-------- ---- ----- --------
</TABLE>
The amortized cost and fair values of investment securities available-for-sale
and held-to-maturity at December 31, 1997, by expected maturity, are shown
below. Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
Available-for-Sale Held-to-Maturity
------------------------- -----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- --------- -------
<S> <C> <C> <C> <C>
Due in one year or less $ 5,276,958 $ 5,277,273 $ - $ -
Due after one year but less than five years 6,667,641 6,676,951 76,326 77,400
----------- ----------- ------- -------
Total 11,944,599 11,954,224 76,326 77,400
Other securities 2,015,000 1,970,823 - -
----------- ----------- ------- -------
Total $13,959,599 $13,925,047 $76,326 $77,400
----------- ----------- ------- -------
----------- ----------- ------- -------
</TABLE>
F-12
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #3 - INVESTMENT SECURITIES, CONTINUED
Proceeds from sales and maturities of investment securities
available-for-sale during 1997 were $8,500,000. Proceeds from sales and
maturities of investment securities held-to-maturity during 1997 were
$1,500,000. There were no gains on those sales and maturities. Included in
shareholders' equity at December 31, 1997, is $209 ($361 minus estimated
income tax of $152) of net unrealized gains on the reclassification of
securities from available-for-sale to held-to-maturity. The reclassification
gains are being amortized on a straight-line basis over the remaining life of
each security reclassified.
Proceeds from sales and maturities of available-for-sale investment
securities during 1996 were $7,003,520. Proceeds from sales and maturities of
investment securities held-to-maturity during 1996 were $1,012,153. There
were no gains on those sales and maturities. Included in shareholders' equity
at December 31, 1996, is $164 ($283 minus estimated income tax of $119) of
net unrealized gains on the reclassification of securities from
available-for-sale to held-to-maturity. The reclassification gains are being
amortized on a straight-line basis over the remaining life of each security
reclassified.
Securities with a carrying value of $500,052 and $501,633 and a market value
of $500,000 and $501,250 at December 31, 1997 and 1996, respectively, were
pledged to secure public deposits and for other purposes, as required or
permitted by law.
F-13
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #4 - LOANS
The loan portfolio consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Commercial $ 13,696,311 $ 14,934,111
Installment 12,625,063 13,347,205
Equity 2,313,225 1,755,290
Real Estate
Commercial 5,782,011 4,960,141
Mortgage 16,817,800 15,059,227
Construction 1,472,429 2,085,805
All other loans (including overdrafts) 162,880 18,065
------------ ------------
Total Loans 52,869,719 52,159,844
Unearned income on installment loans (1,265,498) (1,466,030)
Unearned loan fees (deferred costs) (44,637) (101,896)
Discounts and premiums, net (12,570) (13,717)
Allowance for loan losses (918,339) (723,248)
------------ ------------
Total Loans, Net 50,628,675 49,854,953
Less:
Loans held for sale (1,725,659) (1,557,231)
------------ ------------
Loans, Net $ 48,903,016 $ 48,297,722
------------ ------------
------------ ------------
</TABLE>
The Bank grants loans to customers throughout its primary market area of Ventura
County, California. The Bank's portfolio is well diversified and no significant
industry concentrations exist.
Transactions in the allowance for loan and lease losses account are summarized
as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Balance, beginning of year $ 723,248 $ 732,367
Loans charged off (437,946) (767,493)
Provision for loan losses 370,000 696,947
Recoveries on loans previously charged off 263,037 61,427
------------ ------------
Balance, end of year $ 918,339 $ 723,248
------------ ------------
------------ ------------
</TABLE>
At December 31, 1997 and 1996, the Bank had approximately $0 and $447,072,
respectively, of loans on nonaccrual status. The interest income, which was
forgone on nonaccrual loans, was $0 and $39,064, respectively.
F-14
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #4 - LOANS, CONTINUED
The Bank has identified all nonaccrual loans as being impaired loans in
accordance with SFAS No. 114 (as amended by SFAS No. 118), "Accounting by
Creditors for Impairment of a Loan." The allowance for loan losses related
to impaired loans amounted to approximately $0 for the year ended December
31, 1997, and $42,721 for the year ended December 31, 1996.
The average recorded investment in impaired loans was $293,000 for 1997, and
$812,000 for 1996.
In the ordinary course of business, the Bank has granted loans to officers
and directors and to entities with which they are associated. All such loans
were made under terms consistent with the Bank's normal lending policies.
Loans outstanding to these related parties amounted to $1,452,676 and
$1,520,017 at December 31, 1997 and 1996, respectively.
NOTE #5 - PREMISES AND EQUIPMENT
The following is a summary of the premises and equipment accounts at December
31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Furniture, fixtures and equipment $ 2,377,093 $ 2,181,228
Leasehold improvements 387,128 371,757
----------- -----------
Total Cost 2,764,221 2,552,985
Accumulated depreciation and amortization (1,821,380) (1,675,916)
----------- -----------
Premises and equipment, net $ 942,841 $ 877,069
----------- -----------
----------- -----------
</TABLE>
The amounts of depreciation included in other operating expenses and
amortization included in occupancy expense were $200,318 in 1997, and
$162,798 in 1996.
NOTE #6 - STOCK OPTION PLAN
At December 31, 1997, the Bank had an incentive stock option plan which is
described below. The Bank applies APB Opinion 25 and related interpretations in
accounting for its plan. Accordingly, no compensation cost has been recognized
for its fixed stock option plan. Had compensation costs for these plans been
determined based on the fair value at the grant dates consistent with the method
of SFAS 123, the impact would not have materially affected net income.
In 1985, the Bank adopted a stock option plan under which the Bank's Common
shares may be issued to officers and key employees at not less than 100 percent
of fair market value at the date the options were granted.
F-15
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #6 - STOCK OPTION PLANS, CONTINUED
The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
for 1996; risk-free rate of 6.23 percent, dividend yield of 0 percent,
volatility of 18.10 percent, and expected life of 5.9 years.
The Bank has an incentive stock-option plan which provides for the issuance
of up to 110,000 shares of the Bank's authorized but unissued common stock to
officers and directors. Options are granted at a price not less than the
fair market value of the stock at the date of grant (not less than 110
percent of fair market value if the option is granted to a person owning more
than 10 percent of the voting power of the Bank's stock) and expire no later
than fourteen years from the date of grant. Information concerning stock
options is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 106,556 $ 8.08 99,056 $ 7.71
Options granted - - 7,500 13.00
Options exercised (22,089) 7.70 - -
Options canceled (1,000) 10.00 - -
-------- --------
Outstanding at end of year 83,467 8.16 106,556 8.08
-------- --------
-------- --------
Options exercisable at year-end 74,684 7.70 91,490 7.52
Weighted-average fair value of
options granted during the year $ - $ 4.02
</TABLE>
A summary of the status of the Bank's incentive stock option plan as of
December 31, 1997, is presented below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------- -------------------------------------
Weighted-Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Life Exercise Price Outstanding Exercise Price
- ---------------- -------------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C>
83,467 1.8 $ 8.16 74,684 $ 7.70
</TABLE>
F-16
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #7 - INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current Expense
Federal $ 516,796 $ 127,072
State 189,815 52,980
--------- ---------
Total Current Expense 706,611 180,052
--------- ---------
Deferred Expense
Federal (105,997) 40,613
State (24,655) 14,273
--------- ---------
Total Deferred Expense (130,652) 54,886
--------- ---------
Total Income Tax Expense $ 575,959 $ 234,938
--------- ---------
--------- ---------
</TABLE>
The reasons for the difference between income tax expense and the amount
computed by applying the Federal statutory income-tax rate to income before
income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Tax expense at federal statutory rate 34.0% 34.0%
State franchise tax, net of federal income tax benefit 7.2% 7.5%
Other 0.3% 0.4%
------- ------
Effective Tax Rate 41.5% 41.9%
------- ------
------- ------
</TABLE>
Deferred income taxes result from temporary differences in the recognition of
revenues and expenses for financial and income tax reporting purposes.
Principal items resulting in deferred income taxes include the provision for
loan and lease losses, OREO valuation allowance, state taxes, and recognition
of prepaid expenses for tax.
F-17
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #7 - INCOME TAXES, CONTINUED
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred Tax Assets:
Allowance for loan and lease loss due to tax limitations $ 165,609 $ 44,576
Loan income recognized for tax purposes 5,636 105,291
OREO valuation allowance 47,424 -
State taxes 51,888 14,165
--------- ---------
270,557 164,032
Valuation allowance (29,966) (34,556)
Deferred Tax Liabilities:
Recognition of prepaid expenses for tax (71,688) (77,279)
Depreciation (13,018) (4,921)
--------- ---------
Net Deferred Taxes $ 155,885 $ 47,276
--------- ---------
--------- ---------
</TABLE>
NOTE #8 - EARNINGS PER SHARE
The following is a reconciliation of net income and shares outstanding to the
income and number of shares used to compute EPS:
<TABLE>
<CAPTION>
1997 1996
--------------------------- --------------------------
Income Shares Income Shares
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Net income as reported $800,376 - $325,507 -
Shares outstanding at year end - 479,013 - 456,924
Impact of Weighting Shares - - - -
Purchased during the year - (18,185) - -
--------- ------- -------- -------
Used in Basic EPS 800,376 460,828 325,507 456,924
Dilutive effect of outstanding stock options - 38,836 - 34,625
--------- ------- -------- -------
Used in Dilutive EPS $800,376 499,664 $325,507 491,549
--------- ------- -------- -------
--------- ------- -------- -------
</TABLE>
F-18
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #9 - COMMITMENTS
The Bank leases its current facilities in Oxnard and Camarillo under
operating leases with lease terms expiring through 2012. The Camarillo
branch facility lease agreement includes an option to extend the lease for an
additional five-year period with future rentals to be determined based on the
change in a specified inflation index. Future minimum commitments under
these leases are as follows:
<TABLE>
<S> <C>
1998 $ 390,433
1999 391,621
2000 391,621
2001 344,447
2002 336,237
Thereafter 2,704,752
-----------
$ 4,559,111
-----------
-----------
</TABLE>
Rent expense was $274,560 in 1997, and $268,506 in 1996.
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. These instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the
balance sheet. The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments
to extend credit and standby letters of credit is represented by the
contractual amount of those instruments. At December 31, 1997, the Bank had
commitments to extend credit of approximately $9,989,056 and obligations
under standby letters of credit of approximately $795,163.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Generally, the Bank
issues standby letters of credit for one year, which are reviewed annually for
renewal.
F-19
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #9 - COMMITMENTS, CONTINUED
The Bank uses the same credit policies in making commitments and conditional
commitments as it does for extending loan facilities to customers. The Bank
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension
of credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include certificates of deposit, marketable
securities, accounts receivable, inventory, property, plant and equipment,
and real estate.
At December 31, 1997, the Bank had a line of credit with a correspondent bank
totaling $2,000,000. There were no borrowings under this line of credit at
December 31, 1997 or 1996.
NOTE #10 - MORTGAGE LOAN SERVICING OPERATIONS
The Bank originated long-term first and second trust deed mortgages for
resale on the Secondary Market to Federal Home Loan Mortgage Corporation
(FHLMC) and Federal National Mortgage Association (FNMA). The gains or
losses on the sales of these loans were generally recognized at the time of
sale. The Bank retained servicing rights to these loans. Servicing
arrangements provided for the Bank to maintain all records related to the
servicing agreement, to assume responsibility for billing mortgagors, to
collect periodic mortgage payments, and to perform various other activity
necessary to the mortgage servicing function. The Bank receives as
compensation a servicing fee on the principal balance of the outstanding
loans. Servicing fee income amounted to approximately $124,122 and $136,629
in 1997 and 1996, respectively. During 1997, the Bank sold the servicing
rights on loans totaling approximately $54 million. The mortgage servicing
rights were sold without recourse. The Bank received approximately $492,000
from the sale which represents approximately 90 percent of the proceeds from
the sale. The Bank will receive the balance of the proceeds in 1998.
NOTE #11 - REGULATORY MATTERS
The Bank is subject to various capital requirements administered by the
Federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory -- and possibly additional discretionary --
actions by regulators that, if undertaken, could have a direct material
effect on the Bank's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31,1997, that the Bank
meets all capital adequacy requirements to which it is subject.
F-20
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #11 - REGULATORY MATTERS, CONTINUED
As of December 31,1997, the most recent notification from the Office of the
Comptroller of the Currency (OCC) categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action (there are no
conditions or events since that notification that management believes have
changed the Bank's category). To be categorized as well-capitalized, the
Bank must maintain minimum ratios as set forth in the table below. The
following table also sets forth the Bank's actual capital amounts and ratios
(dollar amounts in thousands):
<TABLE>
<CAPTION>
To Be To Be
Adequately Well-
Actual Capital Capitalized Capitalized
----------------- ---------------- ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Total Capital (to Risk-Weighted Assets) $7,346 11.6% $5,079 8.0% $6,349 10.0%
Tier 1 Capital (to Risk-Weighted Assets) 6,551 10.3 2,539 4.0 3,809 6.0
Tier 1 Capital (to Average Assets) 6,551 8.2 3,211 4.0 4,013 5.0
AS OF DECEMBER 31, 1996:
Total Capital (to Risk-Weighted Assets) $6,319 11.8% $4,518 8.0% $5,648 10.0%
Tier 1 Capital (to Risk-Weighted Assets) 5,600 9.9 2,259 4.0 3,389 6.0
Tier 1 Capital (to Average Assets) 5,600 7.4 2,988 4.0 3,735 5.0
</TABLE>
NOTE #12 - DEFINED CONTRIBUTION PLAN
Effective September 1, 1994, the Bank established a qualified defined
contribution plan [401(K) Retirement Savings Plan] for all eligible
employees. Employees may contribute from 1 percent to 15 percent of their
compensation with a maximum of $9,500 annually. The Bank's contributions to
the plan are a monthly, discretionary amount, which may vary from
month-to-month. The Bank's matching contribution will become vested at 60
percent after three years, 80 percent after four years, with full vesting
after five years. The expense was $24,941 and $14,780 for the years ended
December 31, 1997 and 1996, respectively.
F-21
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of
financial instruments at December 31, 1997. FASB Statement 107, "Disclosures
about Fair Value of Financial Instruments," defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced or
liquidation sale.
<TABLE>
<CAPTION>
1997
---------------------------------
Carrying Fair
Amount Value
------------ -----------
<S> <C> <C>
Assets:
Cash and cash equivalents $20,608,739 $20,608,739
Securities and money market investments 15,492,373 15,456,000
Loans receivable 51,547,017 51,897,000
Accrued interest receivable 456,372 456,372
Liabilities:
Noninterest-bearing deposits 24,557,499 24,557,499
Interest-bearing deposits 57,269,515 57,288,000
Accrued interest payable 85,760 85,760
<CAPTION>
Notional Cost to Cede
Amount or Assume
------------ -----------
<S> <C> <C>
Off-balance sheet instruments:
Commitments to extend credit and standby letters of credit $10,784,219 $ 107,842
</TABLE>
The Bank in estimating fair value disclosures used the following methods and
assumptions:
CASH AND CASH EQUIVALENTS - The carrying amounts reported in the balance sheet
for cash and cash equivalents approximate those assets' fair values due to the
short-term nature of the assets.
SECURITIES AND MONEY MARKET INVESTMENTS - Fair values are based upon quoted
market prices, where available.
LOANS - For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
Fair values of residential mortgage loans are based on quoted market prices
of similar loans sold in conjunction with securitization transactions. The
fair values for other loans are estimated using discounted cash flow analyses
using discount rates approximating the interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality. The
carrying amount of accrued interest receivable approximates its fair value.
F-22
<PAGE>
CHANNEL ISLANDS NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE #13 - FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
DEPOSITS - The fair values for interest and noninterest-bearing demand
deposits, savings deposits, and money market savings are equal to their
carrying value. Fair values for fixed-rate certificates of deposit are
estimated using discount cash-flow calculations that apply interest rates
currently being offered on certificates, to a schedule of aggregated expected
monthly maturities on time deposits. The intangible value of long-term
relationships with depositors is not taken into account in estimating the
fair values disclosed. The carrying amount of accrued interest payable
approximates fair value.
OFF-BALANCE SHEET INSTRUMENTS - Fair values of loan commitments and financial
guarantees are based upon fees currently charged to enter similar agreements,
taking into account the remaining terms of the agreement and the
counterparties' credit standing.
NOTE #14 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income". The statement which is effective for the year ending
December 31,1998, establishes standards of disclosure and financial statement
display for reporting comprehensive income and its components.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". The statement changes current practice
under SFAS 14 by establishing a new framework on which to base segment
reporting (referred to as management approach) and requires certain related
disclosures about products and services, geographic areas and major
customers. The disclosures are required for the year ending December 31,1998.
F-23
<PAGE>
Channel Islands Bank
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED) June 30, 1998 June 30, 1997
- ---------- ------------- -------------
<S> <C> <C>
ASSETS
Cash and due from banks $8,223,101 $10,945,747
Federal funds sold 5,950,000 9,525,000
----------- -----------
Cash and Cash Equivalents 14,173,101 20,470,747
Time deposits in other financial institutions 1,092,000 1,491,000
Investment securities
Available-for-sale 11,939,201 5,865,928
Held to Maturity, fair value of $76,252
(June 30, 1998) and $1,077,738 (June 30, 1997) 76,143 1,076,290
Loans, net 55,781,176 48,408,404
Loans held for sale 1,580,202 1,535,227
Bank premises and equipment 1,042,785 883,091
Federal Reserve Bank stock, at cost 168,300 167,150
Other assets 1,027,936 755,067
Other real estate owned ----- 44,600
Deferred taxes 45,051 45,051
----------- -----------
----------- -----------
TOTAL ASSETS $86,925,895 $80,742,555
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits 24,629,083 24,033,553
NOW and money market deposits 22,333,567 23,294,047
Savings deposits 6,326,764 6,398,348
Time deposits over $100,000 10,786,265 10,003,579
Other time deposits 15,209,567 10,881,483
----------- -----------
Total Deposits 79,285,246 74,611,010
Accrued Interest and other liabilities 200,193 197,963
----------- -----------
Total Liabilities 79,485,439 74,808,973
----------- -----------
STOCKHOLDERS' EQUITY
Contributed capital
Common stock no par value at June 30,1998,
$5.00 at June 30, 1997.
2,000,000 shares authorized: issued and
outstanding 533,282 shares in June 30, 1998,
460,924 shares in June 30, 1997. 2,666,410 2,304,620
Surplus 3,062,827 2,602,338
Retained earnings 1,769,427 1,074,975
Valuation allowance for investments (58,208) (48,351)
----------- -----------
Total Stockholders' Equity 7,440,456 5,933,582
----------- -----------
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $86,925,895 $80,742,555
----------- -----------
----------- -----------
</TABLE>
F-24
<PAGE>
Channel Islands Bank
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Six Month Periods Ended,
(UNAUDITED) June 30, 1998 June 30, 1998
- ----------- ------------- -------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,972,013 $2,737,846
Interest on federal funds sold 200,347 268,595
Interest on time deposits in other
financial institutions 36,637 44,040
Interest on investments 394,558 234,021
---------- ----------
Total Interest Income 3,603,555 3,284,502
Interest Expense on Deposits and Investments 1,006,084 882,643
---------- ----------
NET INTEREST INCOME 2,597,471 2,401,859
PROVISION FOR LOAN LOSSES 57,800 105,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,539,671 2,296,859
OTHER INCOME
Service Charges, fees and other 450,657 355,686
Gain (loss) on sale of assets 1,645 (1,833)
---------- ----------
Total Other Income 452,302 353,853
OTHER EXPENSES
Salaries and employee benefits 1,280,756 1,133,088
Occupancy 237,396 200,802
Other operating expenses 899,900 727,211
---------- ----------
Total Other Expenses 2,418,052 2,061,101
---------- ----------
Net Income Before Income Taxes 573,921 589,611
Income Taxes 236,168 247,165
---------- ----------
---------- ----------
NET INCOME $337,753 $342,446
---------- ----------
---------- ----------
Earnings Per Share Basic $0.64 $0.74
---------- ----------
---------- ----------
Earnings Per Share Diluted $0.60 $0.68
---------- ----------
---------- ----------
</TABLE>
F-25
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Valuation
Number of Allowance For
Shares Common Retained Investment
Outstanding Stock Surplus Earnings Securities Total
----------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 456,924 2,284,620 2,582,338 778,617 (49,423) 5,596,152
Net Income 342,446 342,446 342,446
Dividends (46,088) (46,088)
Stock options exercised 4,000 20,000 25,740 45,740
(including the realization of
tax benefits of $5,740)
Change in unrealised loss on investments 1,072 1,072
-------- --------- --------- --------- -------- ---------
Balance, June 30, 1997 460,924 2,304,620 2,608,078 1,074,975 (48,351) 5,939,322
-------- --------- --------- --------- -------- ---------
-------- --------- --------- --------- -------- ---------
</TABLE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Valuation
Number of Allowance For
Shares Common Retained Investment
Outstanding Stock Surplus Earnings Securities Total
----------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 479,013 2,395,065 2,714,645 1,485,003 (38,804) 6,555,909
Net Income 337,752 337,752
Dividends (53,328) (53,328)
Stock options exercised 54,269 271,345 348,182 619,527
(including the realization
of tax benefits of $229,472)
Change in unrealised loss on investments (19,404) (19,404)
-------- --------- --------- --------- -------- ---------
Balance, June 30, 1998 533,282 2,666,410 3,062,827 1,769,427 (58,208) 7,440,456
-------- --------- --------- --------- -------- ---------
-------- --------- --------- --------- -------- ---------
</TABLE>
F-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Americorp:
We have audited the accompanying consolidated balance sheets of
Americorp and subsidiary (the "Company") as of December 31, 1997 and 1996 and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Americorp and subsidiary
at December 31, 1997 and 1996, and the results of their operations and their
cash flows for each of the three years in the period December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ FANNING & KARRH
January 23, 1998, except for Note 6 as to
which the date is May 7, 1998 and for
Note 17 as to which the date is
August 27, 1998
F-27
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS NOTES 1997 1996
- ------ ----- ------------ ------------
<S> <C> <C> <C>
Cash and due from banks $ 11,461,522 $ 10,542,158
Federal funds sold 5,900,000 11,400,000
Securities 1,2 25,112,659 32,259,246
Loans, net 1,3 83,397,506 64,942,883
Accrued interest receivable 855,551 703,295
Premises and equipment, net 1,4 1,465,201 1,136,975
Other real estate owned 1,5 123,048 91,000
Investment in partnerships 6 2,549,515 2,898,943
Other assets 7,8 3,346,911 3,105,443
------------ ------------
TOTAL ASSETS $134,211,913 $127,079,943
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Noninterest-bearing demand $ 36,510,231 $ 30,625,649
Interest-bearing demand 40,351,999 41,487,472
Savings 10,997,418 11,135,396
Time, under $100,000 18,662,881 18,361,158
Time, $100,000 and over 13,444,974 12,674,418
------------ ------------
Total deposits 119,967,503 114,284,093
Accrued interest payable 394,234 509,184
Other liabilities 1,8 2,498,958 1,814,583
------------ ------------
Total liabilities 122,860,695 116,607,860
------------ ------------
STOCKHOLDERS' EQUITY: 1,9,12
Common stock - $1 par value;
2,500,000 shares authorized 585,518 575,665
Surplus 2,184,164 1,913,280
Retained earnings 8,500,241 7,932,965
Net unrealized gain on securities
available-for-sale, net of
deferred income taxes 81,295 50,173
------------ ------------
Total stockholders' equity 11,351,218 10,472,083
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $134,211,913 $127,079,943
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-28
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NOTES 1997 1996 1995
----- ---------- --------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $7,803,480 $6,491,245 $6,398,085
Interest on Federal funds sold 236,051 403,974 125,644
Interest on securities:
U.S. agency securities 368,240 461,865 525,146
State, county, and municipal
securities 664,370 774,635 848,825
Mortgage-backed securities 495,606 394,809 343,079
Mutual funds 167,854 261,452 285,976
Other 13,108 3,584 11,777
---------- ---------- ----------
Total interest income 9,748,709 8,791,564 8,538,532
---------- ---------- ----------
INTEREST EXPENSE ON DEPOSITS 2,746,538 2,739,824 2,519,965
---------- ---------- ----------
NET INTEREST INCOME 7,002,171 6,051,740 6,018,567
PROVISION FOR LOAN AND
LEASE LOSSES 3 410,000 1,045,600 554,002
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND
LEASE LOSSES 6,592,171 5,006,140 5,464,565
---------- ---------- ----------
OTHER OPERATING INCOME:
Service charges on deposit
accounts 697,560 619,454 563,490
Other service charges and fees 525,950 440,190 423,888
Gain (loss) on securities 2 53,954 (206,940) (82,850)
Equity in net income of
partnership 6 50,572 214,844 353,384
Other income 242,101 180,211 126,451
---------- ---------- ----------
Total other operating income 1,570,137 1,247,759 1,384,363
---------- ---------- ----------
OTHER EXPENSE:
Salaries and employee benefits 8 3,392,097 2,954,086 2,816,241
Net occupancy expense 624,083 521,085 482,741
Furniture and equipment expense 306,622 219,560 112,553
Advertising expense 1 220,333 172,063 205,378
Legal expense 205,166 61,043 113,418
Data processing expense 359,902 318,451 272,327
Net cost of other real estate
owned (including valuation
allowance for other real estate
losses and gains and losses on
sales of other real estate) 38,376 80,629 227,276
Write-down of real estate 6 200,000
Other operating expense 1,517,039 1,487,077 1,448,280
---------- ---------- ----------
Total other expense 6,663,618 6,013,994 5,678,214
---------- ---------- ----------
</TABLE>
F-29
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME - concluded
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NOTES 1997 1996 1995
----- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME BEFORE INCOME TAXES 1,498,690 239,905 1,170,714
PROVISION FOR INCOME TAXES 7 396,177 37,027 225,317
---------- ---------- ----------
NET INCOME $1,102,513 $ 202,878 $ 945,397
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER COMMON SHARE 1 $ 1.91 $ .35 $ 1.67
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER COMMON SHARE -
ASSUMING DILUTION 1 $ 1.66 $ .31 $ 1.41
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-30
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Net
Unrealized
COMMON STOCK Gain (Loss) on
---------------- Securities
Number of Retained Available-
Shares Amount Surplus Earnings For-sale
-------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1995 567,211 $567,211 $1,535,421 $7,944,292 $(600,612)
ISSUANCE OF STOCK 2,871 2,871 66,569
RETIREMENT OF STOCK (2,592) (2,592) (7,025) (59,069)
NET INCOME 945,397
DIVIDENDS
($.82 per share) (465,237)
NET CHANGE IN
UNREALIZED
GAIN (LOSS)
ON SECURITIES
AVAILABLE-
FOR-SALE,
NET OF TAXES 671,929
------- -------- ---------- ---------- ---------
BALANCE,
DECEMBER 31, 1995 567,490 567,490 1,594,965 8,365,383 71,317
ISSUANCE OF STOCK 14,496 14,496 337,936
RETIREMENT OF STOCK (6,321) (6,321) (19,621) (154,208)
NET INCOME 202,878
DIVIDENDS
($.84 per share) (481,088)
NET CHANGE IN
UNREALIZED
GAIN (LOSS)
ON SECURITIES
AVAILABLE-
FOR-SALE,
NET OF TAXES (21,144)
------- -------- ---------- ---------- ---------
BALANCE,
DECEMBER 31, 1996 575,665 575,665 1,913,280 7,932,965 50,173
</TABLE>
F-31
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - continued
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Net
Unrealized
COMMON STOCK Gain (Loss) on
---------------- Securities
Number of Retained Available-
Shares Amount Surplus Earnings For-sale
-------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF STOCK 11,765 11,765 277,678
RETIREMENT OF STOCK (1,912) (1,912) (6,794) (48,685)
NET INCOME 1,102,513
DIVIDENDS
($.84 per share) (486,552)
NET CHANGE IN
UNREALIZED
GAIN (LOSS)
ON SECURITIES
AVAILABLE-
FOR-SALE,
NET OF TAXES 31,122
------- -------- ---------- ---------- ---------
BALANCE,
DECEMBER 31, 1997 585,518 $585,518 $2,184,164 $8,500,241 $ 81,295
------- -------- ---------- ---------- ---------
------- -------- ---------- ---------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-32
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,102,513 $ 202,878 $ 945,397
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan and lease losses 410,000 1,045,600 554,002
Depreciation and amortization 283,276 173,300 59,699
Amortization of premium, net of
accretion of discount 74,729 82,454 132,751
Benefit for deferred income taxes (95,071) (161,575) (98,543)
Valuation allowance for other real
estate owned 12,705
Loss on sale of other real estate
owned 11,450 42,853 80,053
Write-down of real estate 200,000
Loss on disposition of premises
and equipment 696
Net (gain) loss on securities
available-for-sale (51,963) 208,129 47,617
Net (gain) loss on securities
held-to-maturity (1,991) (1,301) 35,233
Equity in net income of partnership (50,572) (214,844) (353,384)
(Increase) decrease in interest
receivable (152,256) 86,771 (103,503)
(Increase) decrease in other assets (160,709) 327,649 337,753
(Decrease) increase in interest
payable (114,950) 82,926 322,796
Increase (decrease) in other
liabilities 684,375 85,331 (19,749)
--------- --------- ---------
Net cash provided by operating
activities 1,938,831 2,173,572 1,944,088
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities
held-to-maturity (2,038,561) (2,387,265) (40,421)
Purchases of securities
available-for-sale (3,760,643) (444,741)
Proceeds from maturities, calls and
sales of securities held-to-
maturity 4,018,308 2,283,086 3,224,083
Proceeds from maturities, calls and
sales of securities available-
for-sale 5,191,499 5,050,097 1,664,605
Net increase in loans (19,276,853) (6,130,235) (4,571,326)
Proceeds from the sale of premises
and equipment 940 11,000
</TABLE>
F-33
<PAGE>
AMERICORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - concluded
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
(concluded):
Purchases of premises and equipment (611,502) (682,699) (500,176)
Proceeds from the sale of other real
estate owned 368,732 296,347 387,167
Distribution from partnership 400,000 341,060
Contribution to partnership (257,775)
----------- ----------- -----------
Net cash used for
investing activities (11,948,377) (4,989,312) (527,584)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 5,683,410 8,742,456 7,861,498
Retirement of common stock (57,391) (180,150) (68,686)
Proceeds from issuance of common
stock 289,443 352,432 69,440
Dividends paid (486,552) (481,088) (465,237)
----------- ----------- -----------
Net cash provided by
financing activities 5,428,910 8,433,650 7,397,015
----------- ----------- -----------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (4,580,636) 5,617,910 8,813,519
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 21,942,158 16,324,248 7,510,729
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $17,361,522 $21,942,158 $16,324,248
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during the
year for:
Interest $ 2,861,488 $ 2,656,898 $ 2,197,169
Income taxes $ 150,000 $ 257,965 $ 355,000
SUPPLEMENTAL DISCLOSURES OF NONCASH
ACTIVITIES:
Other real estate owned
acquired in settlement of loans $ 492,230 $ 0 $ 375,000
Other real estate owned
financed by loan $ 80,000 $ 635,800 $ 0
Total change in unrealized gain/loss
on securities available-for-sale $ 45,434 $ 30,868 $ 952,148
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-34
<PAGE>
AMERICORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Americorp and subsidiary (the
"Company") are in accordance with generally accepted accounting principles
and conform to practices within the banking industry. The following are
descriptions of the more significant of those policies.
BASIS OF PRESENTATION - The consolidated financial statements include
Americorp and its wholly owned subsidiary, American Commercial Bank (the
"Bank"). All significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses, the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans and the valuation allowance for deferred tax assets.
In connection with the determination of the allowance for losses on loans and
foreclosed real estate, management obtains independent appraisals for
significant properties. While management uses available information to
recognize losses on loans and foreclosed real estate, future additions to the
allowances may be necessary based on changes in local economic conditions.
In addition, regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for losses on loans and
foreclosed real estate. Such agencies may require the Company to recognize
additions to the allowances based on their judgements about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the allowances for losses on loans
and foreclosed real estate may change materially in the near future.
In connection with the determination of the valuation allowance for deferred
tax assets, management considers whether it is more likely than not that all
or part of the deferred tax asset will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near future for changes in certain assumptions or estimates used to calculate
future taxable income.
SECURITIES - The Company classifies its investment securities into three
categories as follows:
Trading Securities - Securities held principally for resale in the near
future are classified as trading securities and recorded at their fair
values. The Company holds no securities that are classified as trading
securities.
F-35
<PAGE>
Securities Held-to-Maturity - Securities for which the Company has the
positive intent and ability to hold to maturity are carried at cost,
increased by the accretion of discounts and decreased by the amortization of
premiums. Discount is accreted and premium is amortized over the period to
maturity of the related security.
Securities Available-for-Sale - Securities available-for-sale consist of
investment securities not classified as trading securities nor as securities
held-to-maturity. Securities available-for-sale are recorded at their fair
market values. Unrealized holding gains and losses, net of tax, are reported
as a net amount in a separate component of equity until realized. Gains and
losses are determined using the specific identification method. The
accretion of discounts and the amortization of premiums are recognized in
interest income using the interest method over the period to maturity.
LOANS - Loans are stated at unpaid principal balances, less the allowance for
loan losses and net deferred loan fees and unearned discounts.
Loan origination and commitment fees, as well as certain direct origination
costs, are deferred and amortized as a yield adjustment over the lives of the
related loans using the interest method. Amortization of deferred loan fees
is discontinued when a loan is placed on nonaccrual status.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more.
Any unpaid interest previously accrued on those loans is reversed from
income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal
balance. Interest income on other nonaccrual loans is recognized only to the
extent of interest payments received.
The allowance for loan and lease losses is increased by provisions for loan
and lease losses which are included in the accompanying statements of income.
Losses are charged against the allowance for loan and lease losses when
management determines the collectibility of the principal is unlikely.
Recoveries on loans and leases previously charged off are credited to the
allowance. Management's determination of the allowance is based on periodic
evaluations of the loan and lease portfolio which take into consideration
such factors as changes in the growth, size and composition of the loan and
lease portfolio, overall portfolio quality, prior loan and lease loss
experience, review of specific loans and leases, collateral, guarantees and
current economic conditions.
DIRECT FINANCING LEASES - Income from direct financing leases is recorded
over the life of the lease under the financing method of accounting. The
investment includes the sum of aggregate rentals receivable and the estimated
residual value of leased equipment less deferred income.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is generally charged
to income over the estimated useful lives of the assets by use of the
straight-line method. Leasehold improvements are amortized over the terms of
the leases or the estimated useful lives of improvements, whichever is
shorter.
F-36
<PAGE>
Estimated useful lives are as follows:
Furniture, fixtures and equipment 3 to 10 years
Leasehold improvements 5 to 15 years
OTHER REAL ESTATE OWNED - Real estate acquired through foreclosure or deed in
lieu of foreclosure is recorded at the lower of the outstanding loan balance
at the time of foreclosure or appraised value. Gains and losses on the sale
of other real estate owned and write-downs resulting from periodic
revaluation of the property are charged to other operating expenses.
ADVERTISING COSTS - The Company expenses the costs of advertising when
incurred.
INCOME TAXES - Deferred income taxes arise from temporary differences
between the tax basis of assets and liabilities and their reported amounts in
the financial statements.
EARNINGS PER SHARE - Earnings per common share are based on the weighted
average number of common shares outstanding. Earnings per common share -
assuming dilution are based on the weighted average number of common and
equivalent shares outstanding. The average number of common shares
outstanding and common equivalent shares outstanding for 1997 were 577,719
and 665,649, respectively. The average number of common shares outstanding
and common equivalent shares outstanding for 1996 were 571,685 and 660,293,
respectively. The average number of common shares outstanding and common
equivalent shares outstanding for 1995 were 567,331 and 669,135,
respectively. Common equivalent shares consist of the dilutive effect of
stock options using the treasury stock method.
STATEMENT OF CASH FLOWS - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, amounts due from banks, and Federal funds
sold. Generally, Federal funds are sold for one-day periods.
2. SECURITIES
Debt securities have been classified according to management's intent. The
amortized cost of securities and their approximate fair values at December
31, 1997 and 1996 follows.
Securities held-to-maturity:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------- -------------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
----------- -------- --------- ----------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. agency
securities $ 4,744,530 $ 6,795 $ (18,670) $ 4,732,655 $ 7,272,690 $ (80,758) $ 7,191,932
State, county
and municipal
securities 4,903,883 184,340 (9,694) 5,078,529 4,378,779 $105,404 (38,713) 4,445,470
Mortgage-backed
securities 2,841,375 820 (19,775) 2,822,420 3,869,990 6,784 (60,477) 3,816,297
----------- -------- --------- ----------- ----------- -------- --------- -----------
Totals $12,489,788 $191,955 $ (48,139) $12,633,604 $15,521,459 $112,188 $(179,948) $15,453,699
----------- -------- --------- ----------- ----------- -------- --------- -----------
----------- -------- --------- ----------- ----------- -------- --------- -----------
</TABLE>
F-37
<PAGE>
Securities available-for-sale:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------- -------------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
----------- -------- --------- ----------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. agency
securities $ 250,823 $ 115 $ 250,938
State, county
and municipal
securities $ 5,987,398 $234,832 $ 6,222,230 8,148,847 278,356 $ (18,446) 8,408,757
Mortgage-backed
securities 3,713,330 16,849 $ (19,348) 3,710,831 5,413,001 29,439 (34,848) 5,407,592
Mutual funds 2,803,463 (113,653) 2,689,810 2,851,871 (181,371) 2,670,500
----------- -------- --------- ----------- ----------- -------- --------- -----------
Totals $12,504,191 $251,681 $(133,001) $12,622,871 $16,664,542 $307,910 $(234,665) $16,737,787
----------- -------- --------- ----------- ----------- -------- --------- -----------
----------- -------- --------- ----------- ----------- -------- --------- -----------
</TABLE>
The scheduled maturities of securities held-to-maturity and
available-for-sale at December 31, 1997 are shown below. Actual maturities
may differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
held-to-maturity available-for-sale
------------------------ -------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 1,499,945 $ 1,494,688 $ 738,377 $ 745,127
Due after one year
through five years 3,860,359 3,846,548 2,640,833 2,733,883
Due after five years
through ten years 2,720,153 2,843,917 2,088,826 2,204,069
Due after ten years 1,567,956 1,626,031 519,362 539,151
Mortgage-backed securities 2,841,375 2,822,420 3,713,330 3,710,831
Mutual funds 2,803,463 2,689,810
----------- ----------- ----------- -----------
Totals $12,489,788 $12,633,604 $12,504,191 $12,622,871
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Proceeds from calls of securities held-to-maturity during 1997, 1996 and 1995
were $1,000,000, $700,000 and $1,175,000, respectively. No gains or losses
occurred on those calls during 1997. Gross losses of $2,637 and $38,103 were
realized on those calls during 1996 and 1995, respectively. Gross gains of
$2,870 were realized on those calls in 1995. Proceeds from the sale of a
security held-to-maturity during 1997 were $146,404. Gross gain of $1,991
was realized on that sale.
Proceeds from sales and calls of securities available-for-sale during 1997,
1996 and 1995 were $2,751,558, $1,368,938 and $1,664,605, respectively.
Gross gains of $51,963 were realized on those sales and calls during 1997.
Gross gains of $3,938 were realized on those calls during 1996. Gross losses
of $60,000 and $47,617 were realized on those sales during 1996 and 1995,
respectively.
At December 31, 1996, the Company wrote down certain mutual fund investments.
The write-down amounted to $148,129 and was due to a decline in fair value
considered to be other than temporary. The write-down is included in loss on
securities in the accompanying consolidated financial statements.
Securities carried at approximately $1,533,000 and $1,533,000 at December 31,
1997 and 1996, respectively, were pledged to secure public funds on deposit,
as required by law.
F-38
<PAGE>
3. LOANS
Loans consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Commercial $30,244,952 $29,572,316
Real estate 31,919,611 11,026,049
Equity lines 10,216,741 12,134,256
Installment 10,669,495 10,259,703
Leases receivable 1,495,295 2,859,330
Credit card loans 145,145 75,955
Overdrafts 10,020 11,180
----------- -----------
Total loans 84,701,259 65,938,789
Less allowance for loan and lease losses (1,047,545) (811,552)
Less deferred loan fees (256,208) (184,354)
----------- -----------
Loans, net $83,397,506 $64,942,883
----------- -----------
----------- -----------
</TABLE>
Transactions in the allowance for loan and lease losses account are summarized
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 811,552 $ 632,271 $ 660,851
Provision for losses charged
to expense 410,000 1,045,600 554,002
Loans and leases charged off (195,521) (870,442) (588,764)
Recoveries on loans previously
charged off 21,514 4,123 6,182
---------- ---------- ----------
Balance, end of year $1,047,545 $ 811,552 $ 632,271
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
At December 31, 1997 and 1996, there were no significant loans that were
specifically classified as impaired or on non-accrual status.
In the ordinary course of business, the Company has granted loans to
certain directors and companies with which they are associated. Loans made
to such related parties amounted to $100,450 in 1997. Balances outstanding
at December 31, 1997 and 1996 were $1,623,478 and $2,793,267, respectively.
4. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Furniture, fixtures and equipment $1,583,060 $1,198,277
Leasehold improvements 897,323 671,279
---------- ----------
Total cost 2,480,383 1,869,556
Less accumulated depreciation and
amortization (1,015,182) (732,581)
---------- ----------
Premises and equipment, net $1,465,201 $1,136,975
---------- ----------
---------- ----------
</TABLE>
F-39
<PAGE>
5. OTHER REAL ESTATE OWNED
Other real estate owned consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Foreclosed assets held for sale $ 123,048 $ 127,665
Valuation allowance (36,665)
---------- ----------
Other real estate owned, net $ 123,048 $ 91,000
---------- ----------
---------- ----------
</TABLE>
6. INVESTMENT IN PARTNERSHIPS
The Company has a 50% limited partner interest in a limited partnership
(Ventura Affordable Homes, Ltd.). Affordable Communities, Inc., an unrelated
entity, is the general partner. The partnership was formed for the purpose
of constructing a low-to-moderate income housing development located in
Ventura. The investment is accounted for on the equity method. In 1992, the
Company sold a parcel of land to the partnership at its cost of $1,200,000.
In exchange, the Company received a second trust deed for $1,200,000. During
1994, the Company contributed the trust deed and an additional $500,000 to
the partnership. $257,775 was contributed to the partnership in 1995. The
partnership is constructing 151 houses consisting of 5 phases. As of
December 31, 1997, 150 houses have been sold and one is in escrow.
Condensed financial information excerpted from audited financial
statements of Ventura Affordable Homes, Ltd. as of December 31, 1997 and for
the year then ended is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Inventory of unsold homes $ 168
Other assets $2,743
Accounts payable and accrued expenses $ 4
Amounts due partners $ 71
Partners' capital $2,835
Revenue from homebuilding $4,904
Cost of revenue from homebuilding $4,819
Net income $ 51
Company's equity in net income $ 51
</TABLE>
In January of 1997, a dispute arose between the Bank as limited partner
and Affordable Communities, Inc., the general partner, over the amount of
management fees claimed to be owed to the general partner by the partnership.
In February 1997, the Bank initiated a lawsuit against the general partner
because of this dispute. As of the date of this report, the Bank and the
general partner have negotiated a complete settlement of the dispute and a
request for dismissal has been filed with the court. In connection with the
settlement agreement, the partnership is currently being dissolved and the
Bank has received a $2,549,515 distribution in full satisfaction of its 50%
interest in the partnership.
F-40
<PAGE>
The Company has a 50% limited partner interest in a another limited
partnership (Santa Paula Affordable Homes, Ltd.). Affordable Communities,
Inc. is the general partner. The partnership was originally formed to
construct a low-to-moderate income housing development in Santa Paula,
California. Due to various factors, the development of the housing project
will not commence. As a result, the partners are in the process of
dissolving the Santa Paula Affordable Homes, Ltd. partnership. The
partnership's operations to date have not been significant. In connection
with the partnership agreement, the Company had purchased a parcel of land to
sell to Santa Paula Affordable Homes, Ltd. The land was purchased in 1988
for $800,000. In December 1996, the Company wrote down the land to estimated
fair market value. The write-down amounted to $200,000 and was based upon an
estimate of future discounted cash flows. The land was then sold to a 50%
owner of Affordable Communities, Inc. for $600,000. The Company financed
100% of the sale of the land.
7. INCOME TAXES
The current and deferred amounts of the provision for income taxes are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $346,224 $128,227 $141,576
State 190,090 70,375 182,284
Utilization of alternative
minimum tax credit (45,066)
-------- -------- --------
491,248 198,602 323,860
-------- -------- --------
Deferred:
Federal (111,440) (205,124) (53,543)
State (31,654) (38,898) (48,871)
Change in valuation allowance 48,023 82,447 3,871
-------- -------- --------
(95,071) (161,575) (98,543)
-------- -------- --------
Provision for income taxes $396,177 $ 37,027 $225,317
-------- -------- --------
-------- -------- --------
</TABLE>
Current state income tax receivable of $5,565 is included in other
assets and current federal income tax payable of $226,295 is included in
other liabilities in the accompanying consolidated financial statements.
The following summarizes the differences between the provision for
income taxes for financial statement purposes and the federal statutory rate
of 34%:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax provision at federal
statutory rate 34% 34% 34%
State franchise tax, net of federal
income tax benefit 7 9 8
Municipal interest (13) (95) (21)
Benefit of deferred deductions, alternative
minimum tax credits and changes in
valuation allowance, net 70
Other (2) (3) (2)
--- --- ---
Tax provision 26% 15% 19%
--- --- ---
--- --- ---
</TABLE>
F-41
<PAGE>
The components of the net deferred tax asset included in other assets in
the accompanying consolidated financial statements are as follows at December
31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax liability:
Federal $ (186,257) $ (156,505)
State (36,663) (29,493)
Deferred tax asset:
Federal 1,789,800 1,711,803
State 285,127 251,527
Valuation allowance (1,181,418) (1,187,502)
---------- ----------
Net deferred tax asset $ 670,589 $ 589,830
---------- ----------
---------- ----------
</TABLE>
The tax effects of each type of significant item that gave rise to
deferred taxes are:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net unrealized gain/loss on securities
available-for-sale $ (52,199) $ (31,837)
Depreciation (35,571) (9,690)
Allowance for loan losses 273,038 194,844
Deferred compensation 759,613 717,938
Leases (46,032) (66,115)
AMT credit 884,131 929,197
Other real estate owned 5,697
Postretirement benefits 48,566 27,782
State timing difference (89,118) (78,356)
Mutual fund 88,128 66,421
Investment in partnership 21,451 21,451
Valuation allowance (1,181,418) (1,187,502)
---------- ----------
Net deferred tax asset $ 670,589 $ 589,830
---------- ----------
---------- ----------
</TABLE>
8. PROFIT SHARING AND DEFERRED COMPENSATION PLANS
Profit Sharing - The Company has a profit sharing and salary deferral
401(k) plan for the benefit of its employees. Under the plan, eligible
employees may defer a portion of their salaries. The Company may, at its
option, make matching contributions or profit sharing contributions. For
1997, 1996 and 1995, the Company matched 50% of the employees' deferral which
amounted to $17,031, $34,212 and $35,876, respectively. No profit sharing
contributions were made in 1997, 1996 or 1995. In lieu of a contribution to
the profit sharing plan, the Company accrued bonuses to its employees of
$305,563 in 1997 and $193,410 in 1995. No bonuses were accrued in 1996.
F-42
<PAGE>
Deferred Compensation, Directors and Chief Executive Officers - In May
1997, the Company approved the Directors' Retirement Plan and the Chief
Executive Officer's Retirement Plan which restated and amended preexisting
retirement plans. The original plans provided for payments upon retirement,
death or disability for the benefit of directors and the chief executive
officer (now a director) of the Company. The preexisting and the restated
plans are nonqualified and nonfunded plans. The preexisting plans had been
amended several times and as of January 1, 1997 provided for six years of
retirement benefits upon retirement. Under the restated plans, each
participant upon normal retirement, death, or disability will receive a
monthly retirement benefit for 120 months in an amount stipulated in the
agreement. Any new participants shall vest 8% per year for services rendered
after a three year waiting period has expired. The plans also provide for
reduced benefits upon early retirement.
Deferred Compensation, Senior Officers - The Company has a nonqualified,
nonfunded income continuation plan providing for payments upon retirement,
death or disability of certain employees. Under the plan, certain employees
will receive retirement payments equal to a portion of the last three years'
average compensation. The payments are to be made monthly for a period of
ten years. The plan also provides for reduced benefits upon early
retirement, disability or termination of employment.
As of December 31, 1997 and 1996, the projected benefit obligation and
the net benefit liability of the plans are $1,698,863 and $1,599,281,
respectively, and are included in other liabilities in the accompanying
consolidated financial statements. Compensation expense relating to the plans
was $266,883, $403,397 and $219,250 in 1997, 1996 and 1995, respectively.
In anticipation of the future obligation of the deferred compensation
plans, the Company has invested in life insurance policies which are carried
at cash surrender values of $2,254,886 and are included in other assets in
the accompanying consolidated financial statements. The Company's intention
is to partially fund these plans from the proceeds and investment earnings of
the insurance policies and from the profits derived from the limited
partnerships' operations (see Note 6).
9. STOCK OPTION PLANS
The Company has stock option plans which provide for the granting of
options to directors and officers to purchase stock at its market value on
the date the options are granted. 150,000 shares of common stock have been
reserved for the granting of these options. Options granted become
exercisable commencing from the date of a grant. For the participants who
have been employed by or directors with the Company less than ten years, not
more than 20% of the shares granted, plus shares left over from previous
years, can be exercised in any one year. For participants who have been
employed by or directors with the Company more than ten years, up to 100% can
be exercised during the first year, with the percentage decreasing by 20%
increments over the next four years. At the end of the fifth year, the
options expire.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"), which was effective as
of January 1, 1996, the fair value of option grants is estimated on the date
of grant using the Black-Scholes option-pricing model for proforma footnote
F-43
<PAGE>
purposes with the following assumptions used for grants in all years;
dividend yield of 3.16%, risk-free interest rates of 5.723% to 6.296% and
expected option life of 3.91 years and 4.03 years for 1997 and 1996,
respectively. Expected volatility was assumed to be .0429 and .0525 for 1997
and 1996, respectively.
<TABLE>
<CAPTION>
Weighted Weighted
Number Average Average
Of Exercise Fair
Shares Price Value
------ -------- ---------
<S> <C> <C> <C>
Options outstanding,
December 31, 1995 110,579 $24.43
Granted 9,800 $28.50 $2.62
-----
Exercised (14,496) $24.31
Canceled (10,949) $23.35
-------
Options outstanding,
December 31, 1996 94,934 $25.00
Granted 19,400 $28.63 $2.56
-----
-----
Exercised (11,765) $24.60
Canceled (5,800) $25.47
-------
Options outstanding,
December 31, 1997 96,769 $25.72
------- ------
------- ------
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Weighted
Range of Number Average Number
Exercise Outstanding Remaining Exercisable
Prices at 12/31/97 Life at 12/31/97
- -------- ----------- --------- -----------
<S> <C> <C> <C>
$24.50 67,009 1.5 52,139
$26.50 560 2.9 280
$28.50 24,200 4.1 6,800
$29.00 5,000 4.8 1,000
------ ------
96,769 60,219
------ ------
------ ------
</TABLE>
As permitted by FAS 123, the Company has chosen to continue accounting
for stock options at their intrinsic value. Accordingly, no compensation
expense has been recognized for its stock option compensation plans. Had the
fair value method of accounting been applied to the Company's stock option
plans, the tax-effected impact would be as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net income as reported $1,102,513 $202,878
Estimated fair value of the year's
options grants, net of tax (36,751) (21,825)
---------- --------
Net income adjusted $1,065,762 $181,053
---------- --------
---------- --------
Adjusted net income per common share $1.84 $ .32
---------- --------
---------- --------
</TABLE>
This proforma impact only takes into account options granted since
January 1, 1996 and is likely to increase future years as additional options
are granted and amortized ratably over the vesting period.
10. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
F-44
<PAGE>
Most of the Company's business activity is with customers throughout its
primary market area of Ventura County, California. The Company's loan
portfolio is well diversified and no significant industry concentrations exist.
Investments in state and municipal securities involve governmental
entities within the State of California. As of December 31, 1997, the
Company had $14,849,043 due from a correspondent bank in excess of federal
deposit insurance limits.
11. POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
The Company provides health and life insurance benefits to retired
employees and directors. Employees may become eligible for benefits if they
retire after attaining specified age and service requirements while they
worked for the Company. Directors may become eligible after five years
regardless of their age at retirement.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106") effective January 1, 1996. These
benefits are now accrued over the period the employee provides services to
the Company. Prior to the change, costs were charged to expense as incurred.
The Company elected the delayed recognition treatment of the adoption of
SFAS 106. Under this method, the transition obligation will be amortized on
a straight line basis over the remaining service period of active plan
participants. The Company's current policy is to fund the cost of
postretirement health care and life insurance plans on a pay-as-you-go basis.
The net periodic cost for postretirement health care and life insurance
benefits includes the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $22,846 $19,754 $18,339
Interest cost 13,711 15,165 15,477
Amortization of unrecognized
transition obligation 9,792 9,697 9,104
------- ------- -------
Total $46,349 $44,616 $42,920
</TABLE>
Summary information on the Company's plans is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 3,647 $ 8,205
Fully eligible, active employees 63,179 69,637
Other active plan participants 122,296 94,250
--------- ---------
Total 189,122 172,092
Fair value of plan assets 0 0
--------- ---------
Unfunded accrued postretirement benefits
obligation 189,122 172,092
Unrecognized net gain 18,417 18,954
Unrecognized net transition obligation (154,765) (163,869)
--------- ---------
Accrued postretirement benefit cost $ 52,774 $ 27,177
--------- ---------
--------- ---------
</TABLE>
F-45
<PAGE>
The assumed discount rate and the assumed rate of increase in
compensation levels are 7.25% and 7.25%, respectively. The assumed health
care cost trend rate used in measuring the accumulated postretirement benefit
obligation was 6% declining to 4.75% in 10 years. If the health care cost
trend rate assumptions were increased by 1%, the accrued postretirement
benefit cost, as of December 31, 1997, would be increased by approximately
$22,732.
12. REGULATORY MATTERS
Capital requirements -- The Company is subject to various regulatory
capital requirements administered by the Federal banking agencies. The
regulations require the Company to meet specific capital adequacy guidelines
that involve quantitative measures of the Company's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's capital classification is also subject to
qualitative judgements by the regulators about components, risk weighting,
and other factors. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Company's financial statements.
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and ratios (set
forth in the table below) of Tier 1 capital (as defined by the regulations)
to total average assets (as defined), and minimum ratios of Tier 1 and total
capital (as defined) to risk-weighted assets (as defined). To be considered
adequately capitalized (as defined) under the regulatory framework for prompt
corrective action, the Company must maintain minimum Tier 1 leverage, Tier 1
risk-based, total risk-based ratios as set forth in the table. The Company's
actual capital amounts and ratios are also presented in the table.
As of December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
Required Actual
Amount (Ratio) Amount (Ratio)
-------------- ---------------
<S> <C> <C>
Tier 1 Capital (to
Average Assets) $ 5,340 ( 4.00%) $11,044 ( 8.27%)
Tier 1 Capital (to Risk
Weighted Assets) $ 4,396 ( 4.00%) $11,044 (10.05%)
Total Capital (to Risk
Weighted Assets) $ 8,793 ( 8.00%) $12,072 (10.98%)
</TABLE>
As of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Required Actual
Amount (Ratio) Amount (Ratio)
-------------- ---------------
<S> <C> <C>
Tier 1 Capital (to
Average Assets) $ 5,044 ( 4.00%) $10,142 ( 8.04%)
Tier 1 Capital (to Risk
Weighted Assets) $ 3,519 ( 4.00%) $10,142 (11.53%)
Total Capital (to Risk
Weighted Assets) $ 7,038 ( 8.00%) $10,930 (12.42%)
</TABLE>
F-46
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company was obligated under operating leases
requiring annual rentals as follows:
<TABLE>
<S> <C>
1998 $ 419,532
1999 419,532
2000 419,532
2001 419,532
2002 191,430
----------
Total $1,869,558
----------
----------
</TABLE>
Rental expense was $430,467, $367,376 and $376,426 in 1997, 1996 and
1995, respectively.
At December 31, 1997, the Company had unused lines of credit with two
banks. The lines total $4,700,000, have variable interest rates based on the
lending bank's daily Federal funds rates, and are due on demand. The lines of
credit are unsecured.
14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the statement of financial position. Exposure to credit loss
in the event of nonperformance by the other party to commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of those instruments. At December 31, 1997, the Company had
commitments to extend credit of $25,014,995 and obligations under standby
letters of credit of $125,715.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
F-47
<PAGE>
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions.
The Company uses the same credit policies in making commitments and
conditional commitments as it does for extending loan facilities to
customers. The Company evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
upon extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, property, plant, and equipment and real estate.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards No. 107 ("FAS 107"), "Disclosures About
Fair Value of Financial Instruments" requires corporations to disclose the
fair value of its financial instruments, whether or not recognized in the
balance sheet, where it is practical to estimate that value.
Fair value estimates made as of December 31, 1997 are based on relevant
market information about the financial instruments. These estimates do not
reflect any premium or discount that could result from offering for sale at
one time the Company's entire holding of a particular financial instrument.
In cases where quoted market prices are not available, fair value estimates
are based on judgements regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instruments,
and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgement and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS - The carrying amounts reported in the balance
sheets for cash and short-term instruments approximate those assets' fair
values.
SECURITIES - Fair values were based on quoted market prices, where
available. If quoted market prices were not available, fair values were based
on quoted market prices of comparable instruments.
LOANS - The carrying values, reduced by estimated inherent credit
losses, of variable-rate loans and other loans with short-term
characteristics were considered fair values. For other loans, the fair
market values were calculated by discounting scheduled future cash flows
using current interest rates offered on loans with similar terms adjusted to
reflect the estimated credit losses inherent in the portfolio.
F-48
<PAGE>
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE - The carrying
amounts reported in the balance sheets for accrued interest receivable and
accrued interest payable approximate their fair values.
DEPOSIT LIABILITIES - The fair value of deposits with no stated
maturity, such as noninterest-bearing demand deposits, NOW, savings, and
money market deposits, was, by definition, equal to the amount payable on
demand as of December 31, 1997. The fair value of certificates of deposit
was based on the discounted value of contractual cash flows, calculated using
the discount rates that equaled the interest rates offered at the valuation
date for deposits of similar remaining maturities.
The following is a summary of the carrying amounts and estimated fair
values of the Company's financial assets and liabilities at December 31,
1997:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------------ ------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 11,461,522 $ 11,461,522
Federal funds sold $ 5,900,000 $ 5,900,000
Securities $ 25,112,659 $ 25,256,475
Loans, net of allowance for loan losses $ 83,397,506 $ 83,278,952
Accrued interest receivable $ 855,551 $ 855,551
Financial liabilities:
Deposits $119,967,503 $120,013,526
Accrued interest payable $ 394,234 $ 394,234
</TABLE>
At December 31, 1997, the Bank had outstanding standby letters of credit
and commitments to extend credit. These off-balance sheet financial
instruments are generally exercisable at the market rate prevailing at the
date the underlying transaction will be completed, and, therefore, they were
deemed to have no current fair market value (see Note 14).
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. Significant assets and liabilities that
are not considered financial assets or liabilities include the discounted
value of fee revenues generated by the mortgage banking operation nor is the
value of deferred tax assets or premises and equipment considered.
16. PARENT COMPANY INFORMATION
The following are condensed financial statements of Americorp (parent
company only) as of and for the year ended December 31, 1997:
F-49
<PAGE>
<TABLE>
<S> <C> <C>
BALANCE SHEET
ASSETS:
Cash $ 2,689
Other assets 130,871
Investment in and advances to the Bank 11,340,617
-----------
TOTAL ASSETS $11,474,177
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities $ 122,959
Stockholders' equity 11,351,218
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,474,177
-----------
-----------
STATEMENT OF INCOME
Equity in earnings of the Bank $ 1,122,622
Other (20,109)
-----------
NET INCOME $ 1,102,513
-----------
-----------
STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,102,513
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed earnings of the Bank (846,831)
Increase in dividend receivable
to the Bank (3,637)
Decrease in accrued liabilities 2,069 (848,399)
--------- -----------
Net cash provided by operating activities 254,114
-----------
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 289,443
Retirement of common stock (57,391)
Dividends paid (486,552) (254,500)
--------- -----------
-----------
Net cash used for financing activities (254,500)
----------
----------
DECREASE IN CASH (386)
CASH AT BEGINNING OF YEAR 3,075
-----------
CASH AT END OF YEAR $ 2,689
-----------
-----------
17. SUBSEQUENT EVENT
</TABLE>
On July 7, 1998, the Company and Channel Islands Bank ("CIB") signed a
definitive merger agreement. The agreement calls for each share of CIB
common stock to be converted into Americorp common stock in accordance with
the exchange ratio set forth in the agreement. Consummation of the merger is
expected to occur during the last quarter of 1998, and is subject to various
conditions, including, but not limited to, approval by the stockholders of
the Company and CIB.
It is expected that the merger will be accounted for under the pooling
of interests method and, accordingly, historical financial data in future
reports will be restated to include CIB data.
F-50
<PAGE>
The following unaudited pro forma data summarized the combined results
of operations of the Company and CIB as though the merger had occurred at the
beginning of 1995 (dollars in thousands, except per share amounts):
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
Interest income $ 16,575 $ 15,120 $ 13,757
Interest expense $ 4,626 $ 4,593 $ 3,852
Provision for loan losses $ 780 $ 1,743 $ 496
Non-interest income $ 2,719 $ 1,955 $ 2,107
Non-interest expense $ 11,013 $ 9,938 $ 9,313
Net income $ 1,903 $ 529 $ 1,545
Net income per share - basic $ 2.11 $ .59 $ 1.74
Net income per share - diluted $ 1.87 $ .53 $ 1.52
</TABLE>
- --------------------------------------------------------------------------------
F-51
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
- --------------------------------------
ASSETS NOTES 1998 1997
- ------ ----- ---- ----
<S> <C> <C> <C>
Cash and due from banks $ 19,417,380 $ 13,522,615
Federal funds sold 8,200,000 2,400,000
Securities 1,2 23,316,635 29,366,610
Loans, net 1,3 83,074,430 73,113,554
Accrued interest receivable 746,302 905,689
Premises and equipment, net 1,4 1,342,554 1,218,519
Other real estate owned 1,5 91,000
Investment in partnerships 6 2,498,943
Other assets 7,8 3,726,588 3,526,062
------------ ------------
TOTAL ASSETS $139,823,889 $126,642,992
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Noninterest-bearing demand $ 37,741,076 $ 31,528,283
Interest-bearing demand 40,521,408 39,454,140
Savings 11,855,170 11,553,557
Time, under $100,000 20,831,324 18,107,667
Time, $100,000 and over 14,025,743 13,038,528
------------ ------------
Total deposits 124,974,721 113,682,175
Accrued interest payable 448,915 196,488
Other liabilities 1,8 2,499,592 2,046,428
------------ ------------
Total liabilities 127,923,228 115,925,091
------------ ------------
STOCKHOLDERS' EQUITY: 1,9,12
Common stock - $1 par value;
2,500,000 shares authorized 594,518 575,665
Surplus 2,395,664 1,913,280
Retained earnings 8,812,789 8,201,876
Net unrealized gain on securities
available-for-sale, net of
deferred income taxes 97,690 27,080
------------ ------------
Total stockholders' equity 11,900,661 10,717,901
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $139,823,889 $126,642,992
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-52
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- ------------------------------------------------------
<TABLE>
<CAPTION>
NOTES 1998 1997
----- ---- ----
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 4,363,187 $ 3,663,809
Interest on Federal funds sold 183,519 85,659
Interest on securities:
U.S. agency securities 116,632 202,759
State, county, and municipal securities 311,561 352,722
Mortgage-backed securities 199,011 275,059
Mutual funds 57,700 114,142
Other 6,540 6,706
----------- -----------
Total interest income 5,238,150 4,700,856
----------- -----------
INTEREST EXPENSE ON DEPOSITS 1,427,133 1,337,786
----------- -----------
NET INTEREST INCOME 3,811,017 3,363,070
PROVISION FOR LOAN AND LEASE LOSSES 3 265,000 260,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE LOSSES 3,546,017 3,103,070
----------- -----------
OTHER OPERATING INCOME:
Service charges on deposit accounts 340,675 345,323
Other service charges and fees 330,269 239,541
Gain (loss) on securities 2 977 22,214
----------- -----------
Total other operating income 671,921 607,078
----------- -----------
OTHER EXPENSE:
Salaries and employee benefits 8 1,726,036 1,508,034
Net occupancy expense 363,688 276,670
Furniture and equipment expense 177,427 147,169
Data processing expense 192,876 175,603
Other operating expense 989,732 880,746
----------- -----------
Total other expense 3,449,759 2,988,222
----------- -----------
</TABLE>
F-53
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME - concluded
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- -------------------------------------------------------
<TABLE>
<CAPTION>
NOTES 1998 1997
----- ---- ----
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES 768,179 721,926
PROVISION FOR INCOME TAXES 7 206,775 211,232
----------- -----------
NET INCOME $ 561,404 $ 510,694
----------- -----------
----------- -----------
EARNINGS PER COMMON SHARE 1 $ .95 $ .89
----------- -----------
----------- -----------
EARNINGS PER COMMON SHARE -
ASSUMING DILUTION 1 $ .84 $ .77
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-54
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized
COMMON STOCK Gain (Loss) on
----------------- Securities
Number of Retained Available-
Shares Amount Surplus Earnings For-sale
------- -------- ---------- ---------- ---------
<C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 575,665 $575,665 $1,913,280 $7,932,965 $ 50,173
NET INCOME 510,694
DIVIDENDS ($.42 per share) (241,783)
NET CHANGE IN UNREALIZED
GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE,
NET OF TAXES (23,093)
------- -------- ---------- ---------- ---------
BALANCE, JUNE 30, 1997 575,665 $575,665 $1,913,280 $8,201,876 $ 27,080
------- -------- ---------- ---------- ---------
------- -------- ---------- ---------- ---------
BALANCE, JANUARY 1, 1998 585,518 $585,518 $2,184,164 $8,500,241 $ 81,295
ISSUANCE OF STOCK 9,000 9,000 211,500
NET INCOME 561,404
DIVIDENDS ($.42 per share) (248,856)
</TABLE>
F-55
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - concluded
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized
COMMON STOCK Gain (Loss) on
----------------- Securities
Number of Retained Available-
Shares Amount Surplus Earnings For-sale
------- -------- ---------- ---------- ---------
<C> <C> <C> <C> <C> <C>
NET CHANGE IN UNREALIZED
GAIN (LOSS) ON SECURITIES
AVAILABLE-FOR-SALE,
NET OF TAXES 16,395
------- -------- ---------- ---------- ---------
BALANCE, JUNE 30, 1998 594,518 $594,518 $2,395,664 $8,812,789 $ 97,690
------- -------- ---------- ---------- ---------
------- -------- ---------- ---------- ---------
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-56
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- ------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 561,404 $ 510,694
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan and lease losses 265,000 260,000
Depreciation and amortization 174,116 125,583
Amortization of premium, net of
accretion of discount 8,460 55,504
Benefit for deferred income taxes (52,477) (45,468)
Loss on sale of other real estate owned 13,112
Loss on disposition of premises and equipment 1,888
Net gain on securities available-for-sale (921) (22,214)
Net gain on securities held-to-maturity (56)
Decrease (increase) in interest receivable 109,249 (202,394)
Increase in other assets (334,740) (364,531)
Increase (decrease) in interest payable 54,681 (312,696)
Increase in other liabilities 634 231,845
--------- ----------
Net cash provided by operating activities 800,350 236,323
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities held-to-maturity (1,038,559)
Purchases of securities
available-for-sale (1,501,658) (1,000,000)
Proceeds from maturities, calls and sales
of securities held-to-maturity 1,533,961 1,361,160
Proceeds from maturities, calls and sales
of securities available-for-sale 1,780,173 3,503,032
Net (increase) decrease in loans 58,076 (8,430,671)
Proceeds from the sale of premises and
equipment 2,100
Purchases of premises and equipment (55,457) (207,127)
Proceeds from the sale of other real
estate owned 109,936
Distribution from partnership 2,549,515 400,000
--------- ----------
Net cash provided by (used for)
investing activities 4,476,646 (5,412,165)
--------- ----------
</TABLE>
F-57
<PAGE>
AMERICORP AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - concluded
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
- -----------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 5,007,218 (601,918)
Proceeds from issuance of common stock 220,500
Dividends paid (248,856) (241,783)
----------- -----------
Net cash provided by (used for)
financing activities 4,978,862 (843,701)
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 10,255,858 (6,019,543)
----------- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 17,361,522 21,942,158
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,617,380 $15,922,615
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Cash paid during the period for:
Interest $ 1,372,452 $ 1,650,482
Income taxes $ 462,585 $ 23,000
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES -
Total change in unrealized gain/loss
on securities available-for-sale $ (23,933) $ 33,713
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
F-58
<PAGE>
AMERICORP AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Americorp and subsidiary (the
"Company") are in accordance with generally accepted accounting principles
and conform to practices within the banking industry. The following are
descriptions of the more significant of those policies.
BASIS OF PRESENTATION - The consolidated financial statements include
Americorp and its wholly owned subsidiary, American Commercial Bank (the
"Bank"). All significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses, the valuation of
real estate acquired in connection with foreclosures or in satisfaction of loans
and the valuation allowance for deferred tax assets.
In connection with the determination of the allowance for losses on
loans and foreclosed real estate, management obtains independent appraisals
for significant properties. While management uses available information to
recognize losses on loans and foreclosed real estate, future additions to the
allowances may be necessary based on changes in local economic conditions.
In addition, regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for losses on loans and
foreclosed real estate. Such agencies may require the Company to recognize
additions to the allowances based on their judgements about information
available to them at the time of their examination. Because of these
factors, it is reasonably possible that the allowances for losses on loans
and foreclosed real estate may change materially in the near future.
In connection with the determination of the valuation allowance for
deferred tax assets, management considers whether it is more likely than not
that all or part of the deferred tax asset will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced in
the near future for changes in certain assumptions or estimates used to
calculate future taxable income.
F-59
<PAGE>
SECURITIES - The Company classifies its investment securities into three
categories as follows:
Trading Securities - Securities held principally for resale in the near
future are classified as trading securities and recorded at their fair
values. The Company holds no securities that are classified as trading
securities.
Securities Held-to-Maturity - Securities for which the Company has the
positive intent and ability to hold to maturity are carried at cost,
increased by the accretion of discounts and decreased by the amortization of
premiums. Discount is accreted and premium is amortized over the period to
maturity of the related security.
Securities Available-for-Sale - Securities available-for-sale consist of
investment securities not classified as trading securities nor as securities
held-to-maturity. Securities available-for-sale are recorded at their fair
market values. Unrealized holding gains and losses, net of tax, are reported
as a net amount in a separate component of equity until realized. Gains and
losses are determined using the specific identification method. The
accretion of discounts and the amortization of premiums are recognized in
interest income using the interest method over the period to maturity.
LOANS - Loans are stated at unpaid principal balances, less the
allowance for loan losses and net deferred loan fees and unearned discounts.
Loan origination and commitment fees, as well as certain direct
origination costs, are deferred and amortized as a yield adjustment over the
lives of the related loans using the interest method. Amortization of
deferred loan fees is discontinued when a loan is placed on nonaccrual status.
Loans are placed on nonaccrual when a loan is specifically determined to
be impaired or when principal or interest is delinquent for 90 days or more.
Any unpaid interest previously accrued on those loans is reversed from
income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal
balance. Interest income on other nonaccrual loans is recognized only to the
extent of interest payments received.
The allowance for loan and lease losses is increased by provisions for
loan and lease losses which are included in the accompanying statements of
income. Losses are charged against the allowance for loan and lease losses
when management determines the collectibility of the principal is unlikely.
Recoveries on loans and leases previously charged off are credited to the
allowance. Management's determination of the allowance is based on periodic
evaluations of the loan and lease portfolio which take into consideration
such factors as changes in the growth, size and composition of the loan and
lease portfolio, overall portfolio quality, prior loan and lease loss
experience, review of specific loans and leases, collateral, guarantees and
current economic conditions.
DIRECT FINANCING LEASES - Income from direct financing leases is
recorded over the life of the lease under the financing method of accounting.
The investment includes the sum of aggregate rentals receivable and the
estimated residual value of leased equipment less deferred income.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is generally charged
to income over the estimated useful lives of the assets
F-60
<PAGE>
by use of the straight-line method. Leasehold improvements are amortized
over the terms of the leases or the estimated useful lives of improvements,
whichever is shorter.
Estimated useful lives are as follows:
Furniture, fixtures and equipment 3 to 10 years
Leasehold improvements 5 to 15 years
OTHER REAL ESTATE OWNED - Real estate acquired through foreclosure or deed
in lieu of foreclosure is recorded at the lower of the outstanding loan balance
at the time of foreclosure or appraised value. Gains and losses on the sale of
other real estate owned and write-downs resulting from periodic revaluation of
the property are charged to other operating expenses.
ADVERTISING COSTS - The Company expenses the costs of advertising when
incurred.
INCOME TAXES - Deferred income taxes arise from temporary differences
between the tax basis of assets and liabilities and their reported amounts in
the financial statements.
EARNINGS PER SHARE - Earnings per common share are based on the weighted
average number of common shares outstanding. Earnings per common
share-assuming dilution are based on the weighted average number of common
and equivalent shares outstanding. The average number of common shares
outstanding and common equivalent shares outstanding for the period ended
June 30, 1998 were 590,015 and 666,615, respectively. The average number of
common shares outstanding and common equivalent shares outstanding for the
period ended June 30, 1997 were 575,665 and 663,966, respectively. Common
equivalent shares consist of the dilutive effect of stock options using the
treasury stock method.
STATEMENT OF CASH FLOWS - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, and Federal
funds sold. Generally, Federal funds are sold for one-day periods.
F-61
<PAGE>
2. SECURITIES
Debt securities have been classified according to management's intent.
The amortized cost of securities and their approximate fair values at June
30, 1998 and 1997 follows.
Securities held-to-maturity:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------- ---------------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
----------- ---------- ----------- ----------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. agency
securities $ 3,745,143 $ 9,528 $ (8,343) $ 3,746,328 $ 6,747,085 $ 64,473 $ (57,964) $ 6,753,594
State, county
and municipal
securities 4,895,013 191,728 (4,766) 5,081,975 4,907,498 163,091 (25,526) 5,045,063
Mortgage-backed
securities 2,307,298 1,863 (10,239) 2,298,922 3,503,020 7,181 (56,618) 3,453,583
----------- -------- --------- ----------- ----------- -------- --------- -----------
Totals $10,947,454 $203,119 $ (23,348) $11,127,225 $15,157,603 $234,745 $(140,108) $15,252,240
----------- -------- --------- ----------- ----------- -------- --------- -----------
----------- -------- --------- ----------- ----------- -------- --------- -----------
</TABLE>
Securities available-for-sale:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------------- ---------------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
----------- ---------- ----------- ----------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
State, county
and municipal
securities $ 5,364,536 $201,431 $ 5,565,967 $ 7,124,393 $282,000 $ (1,022) $ 7,405,371
Mortgage-backed
securities 4,091,845 16,214 $ (13,835) 4,094,224 4,193,210 13,348 (51,492) 4,155,066
Mutual funds 2,770,187 (61,197) 2,708,990 2,852,740 (204,170) 2,648,570
----------- -------- --------- ----------- ----------- -------- --------- -----------
Totals $12,226,568 $217,645 $ (75,032) $12,369,181 $14,170,343 $295,348 $(256,684) $14,209,007
----------- -------- --------- ----------- ----------- -------- --------- -----------
----------- -------- --------- ----------- ----------- -------- --------- -----------
</TABLE>
The scheduled maturities of securities held-to-maturity and
available-for-sale at June 30, 1998 are shown below. Actual maturities may
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Securities
held-to-maturity available-for-sale
------------------------- -------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less $ 2,757,144 $ 2,762,344 $ 725,959 $ 729,091
Due after one year
through five years 2,082,277 2,080,500 2,583,807 2,675,170
Due after five years
through ten years 2,717,255 2,860,100 1,616,789 1,704,470
Due after ten years 1,083,480 1,125,359 437,981 457,236
Mortgage-backed securities 2,307,298 2,298,922 4,091,845 4,094,224
Mutual funds 2,770,187 2,708,990
----------- ----------- ----------- -----------
Totals $10,947,454 $11,127,225 $12,226,568 $12,369,181
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
F-62
<PAGE>
Proceeds from calls of securities held-to-maturity during the period ended
June 30, 1998 were $755,150 for a gross gain of $56.
Proceeds from sales and calls of securities available-for-sale during the
periods ended June 30, 1998 and 1997 were $1,169,412 and $2,788,845,
respectively. Gross gains of $921 and $22,214 were realized on those sales and
calls for the periods ended June 30, 1998 and 1997, respectively.
Securities carried at approximately $1,532,328 and $1,532,740 at June 30,
1998 and 1997, respectively, were pledged to secure public funds on deposit, as
required by law.
3. LOANS
Loans consisted of the following at June 30:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Commercial $31,016,996 $27,438,195
Real estate 35,613,745 22,045,963
Equity lines 9,204,355 11,883,647
Installment 7,597,013 10,515,317
Leases receivable 855,425 2,263,546
Credit card loans 176,973 121,009
Overdrafts 20,331 11,931
----------- -----------
Total loans 84,484,838 74,279,608
Less allowance for loan and
lease losses (1,131,081) (937,896)
Less deferred loan fees (279,327) (228,158)
----------- -----------
Loans, net $83,074,430 $73,113,554
----------- -----------
----------- -----------
</TABLE>
Transactions in the allowance for loan and lease losses account are summarized
as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Balance, beginning of period $1,047,545 $ 811,552
Provision for losses charged
to expense 265,000 260,000
Loans and leases charged off (189,622) (139,616)
Recoveries on loans previously
charged off 8,158 5,960
---------- ----------
Balance, end of period $1,131,081 $ 937,896
---------- ----------
---------- ----------
</TABLE>
At June 30, 1998 and 1997, there were no significant loans that were
specifically classified as impaired or on non-accrual status.
In the ordinary course of business, the Company has granted loans to
certain directors and companies with which they are associated. Loans made
to such related parties amounted to $103,673 during the period ended June 30,
1998. Balances outstanding at June 30, 1998 and 1997 were $1,283,231 and
$2,752,484, respectively.
F-63
<PAGE>
4. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following at June 30:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Furniture, fixtures and equipment $1,608,061 $1,400,252
Leasehold improvements 901,815 676,431
---------- ----------
Total cost 2,509,876 2,076,683
Less accumulated depreciation and
amortization (1,167,322) (858,164)
---------- ----------
Premises and equipment, net $1,342,554 $1,218,519
---------- ----------
---------- ----------
</TABLE>
5. OTHER REAL ESTATE OWNED
Other real estate owned consisted of the following at June 30, 1997:
<TABLE>
<S> <C>
Foreclosed assets held for sale $ 91,000
Valuation allowance
----------
Other real estate owned, net $ 91,000
----------
----------
</TABLE>
6. INVESTMENT IN PARTNERSHIPS
The Company has a 50% limited partner interest in a limited partnership
(Ventura Affordable Homes, Ltd.). Affordable Communities, Inc., an unrelated
entity, is the general partner. The partnership was formed for the purpose
of constructing a low-to-moderate income housing development located in
Ventura. The investment is accounted for on the equity method. In 1992, the
Company sold a parcel of land to the partnership at its cost of $1,200,000.
In exchange, the Company received a second trust deed for $1,200,000. During
1994, the Company contributed the trust deed and an additional $500,000 to
the partnership. $257,775 was contributed to the partnership in 1995. The
partnership is constructing 151 houses consisting of 5 phases. As of
December 31, 1997, 150 houses have been sold and one is in escrow.
Condensed financial information excerpted from audited financial statements
of Ventura Affordable Homes, Ltd. as of December 31, 1997 and for the year then
ended is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Inventory of unsold homes $ 168
Other assets $2,743
Accounts payable and accrued expenses $ 4
Amounts due partners $ 71
Partners' capital $2,835
Revenue from homebuilding $4,904
Cost of revenue from homebuilding $4,819
Net income $ 51
Company's equity in net income $ 51
</TABLE>
F-64
<PAGE>
In January of 1997, a dispute arose between the Bank as limited partner and
Affordable Communities, Inc., the general partner, over the amount of management
fees claimed to be owed to the general partner by the partnership. In February
1997, the Bank initiated a lawsuit against the general partner because of this
dispute. As of the date of this report, the Bank and the general partner have
negotiated a complete settlement of the dispute and a request for dismissal has
been filed with the court. In connection with the settlement agreement, the
partnership is currently being dissolved and the Bank has received a $2,549,515
distribution in full satisfaction of its 50% interest in the partnership.
The Company has a 50% limited partner interest in a another limited
partnership (Santa Paula Affordable Homes, Ltd.). Affordable Communities, Inc.
is the general partner. The partnership was originally formed to construct a
low-to-moderate income housing development in Santa Paula, California. Due to
various factors, the development of the housing project will not commence. As a
result, the partners are in the process of dissolving the Santa Paula Affordable
Homes, Ltd. partnership. The partnership's operations to date have not been
significant. In connection with the partnership agreement, the Company had
purchased a parcel of land to sell to Santa Paula Affordable Homes, Ltd.. The
land was purchased in 1988 for $800,000. In December 1996, the Company wrote
down the land to estimated fair market value. The write-down amounted to
$200,000 and was based upon an estimate of future discounted cash flows. The
land was then sold to a 50% owner of Affordable Communities, Inc. for $600,000.
The Company financed 100% of the sale of the land. In connection with the
aforementioned settlement agreement with Affordable Communities, Inc., this
partnership is also currently being dissolved.
7. INCOME TAXES
The current and deferred amounts of the provision for income taxes are as
follows at June 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current:
Federal $179,429 $181,301
State 109,838 100,161
Utilization of alternative minimum tax credit (30,015) (24,762)
-------- --------
259,252 256,700
-------- --------
Deferred:
Federal (62,617) (68,058)
State (22,404) (15,567)
Change in valuation allowance 32,544 38,157
-------- --------
(52,477) (45,468)
-------- --------
Provision for income taxes $206,775 $211,232
-------- --------
-------- --------
</TABLE>
Current Federal and state income tax payables of $106,676 and $6,506,
respectively, are included in other liabilities in the accompanying consolidated
financial statements as of June 30, 1998.
F-65
<PAGE>
The following summarizes the differences between the provision for
income taxes for financial statement purposes and the federal statutory rate
of 34%:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Tax provision at federal
statutory rate 34% 34%
State franchise tax, net of federal
income tax benefit 8 8
Municipal interest (12) (14)
Benefit of deferred deductions, alternative
minimum tax credits and changes in
valuation allowance, net 0 2
Other (3) (1)
--- ---
Tax provision 27% 29%
--- ---
--- ---
</TABLE>
The components of the net deferred tax asset included in other assets in
the accompanying consolidated financial statements are as follows at June 30:
<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
Deferred tax liability:
Federal $ (186,670) $ (147,877)
State (35,478) (27,062)
Deferred tax asset:
Federal 1,815,039 1,754,051
State 303,595 268,542
Valuation allowance (1,180,960) (1,201,735)
----------- -----------
Net deferred tax asset $ 715,526 $ 645,919
----------- -----------
----------- -----------
</TABLE>
The tax effects of each type of significant item that gave rise to deferred
taxes are:
<TABLE>
<CAPTION>
1998 1997
------------ -------------
<S> <C> <C>
Net unrealized gain/loss on securities
available-for-sale $ (62,725) $ (12,453)
Depreciation (25,328) (27,716)
Allowance for loan losses 328,423 245,695
Deferred compensation 764,366 746,103
Leases (37,360) (51,121)
AMT credit 865,609 912,586
Other real estate owned 5,697
Postretirement benefits 57,188 37,348
State timing difference (96,736) (83,649)
Mutual fund 103,049 66,421
Investment in partnership 8,743
Valuation allowance (1,180,960) (1,201,735)
----------- -----------
Net deferred tax asset $ 715,526 $ 645,919
----------- -----------
----------- -----------
</TABLE>
F-66
<PAGE>
8. PROFIT SHARING AND DEFERRED COMPENSATION PLANS
Profit Sharing - The Company has a profit sharing and salary deferral
401(k) plan for the benefit of its employees. Under the plan, eligible
employees may defer a portion of their salaries. The Company may, at its
option, make matching contributions or profit sharing contributions. For the
periods ended June 30, 1998 and 1997, the Company matched 50% of the
employees' deferral which amounted to $44,246 and $7,960, respectively. No
profit sharing contributions were made for the periods ended June 30, 1998
and 1997.
Deferred Compensation, Directors and Chief Executive Officers - In May
1997, the Company approved the Directors' Retirement Plan and the Chief
Executive Officer's Retirement Plan which restated and amended preexisting
retirement plans. The original plans provided for payments upon retirement,
death or disability for the benefit of directors and the chief executive
officer (now a director) of the Company. The preexisting and the restated
plans are nonqualified and nonfunded plans. The preexisting plans had been
amended several times and as of January 1, 1997 provided for six years of
retirement benefits upon retirement. Under the restated plans, each
participant upon normal retirement, death, or disability will receive a
monthly retirement benefit for 120 months in an amount stipulated in the
agreement. Any new participants shall vest 8% per year for services rendered
after a three year waiting period has expired. The plans also provide for
reduced benefits upon early retirement.
Deferred Compensation, Senior Officers - The Company has a nonqualified,
nonfunded income continuation plan providing for payments upon retirement,
death or disability of certain employees. Under the plan, certain employees
will receive retirement payments equal to a portion of the last three years'
average compensation. The payments are to be made monthly for a period of
ten years. The plan also provides for reduced benefits upon early retirement,
disability or termination of employment.
As of December 31, 1997 and 1996, the projected benefit obligation and
the net benefit liability of the plans are $1,698,863 and $1,599,281,
respectively, and are included in other liabilities in the accompanying
consolidated financial statements. Compensation expense relating to the
plans was $115,437 and $141,500 for the periods ended June 30, 1998 and 1997,
respectively.
In anticipation of the future obligation of the deferred compensation
plans, the Company has invested in life insurance policies which are carried
at cash surrender values of $2,254,886 and are included in other assets in
the accompanying consolidated financial statements. The Company's intention
is to partially fund these plans from the proceeds and investment earnings of
the insurance policies and from the profits derived from the limited
partnerships' operations (see Note 6).
9. STOCK OPTION PLANS
The Company has stock option plans which provide for the granting of
options to directors and officers to purchase stock at its market value on
the date the options are granted. 150,000 shares of common stock have been
reserved for the granting of these options. Options granted become
exercisable commencing from the date of a grant. For the participants who
have been employed by or directors with the Company less than ten years, not
more than 20% of the shares granted, plus shares left over from previous
years, can be exercised in any one year. For participants who have been
employed by or directors with the Company more than ten years, up to 100% can
be exercised during the first year, with the
F-67
<PAGE>
percentage decreasing by 20% increments over the next four years. At the end
of the fifth year, the options expire.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"), which was effective as
of January 1, 1996, the fair value of option grants is estimated on the date
of grant using the Black-Scholes option-pricing model for pro forma footnote
purposes. This information is not available as of June 30, 1998 and 1997.
However, the weighted average fair value of annual option grants as of
December 31, 1997 and 1996 was $2.56 and $2.62, respectively.
<TABLE>
<CAPTION>
Weighted
Number Average
Of Exercise
Shares Price
-------- ---------
<S> <C> <C>
Options outstanding,
January 1, 1997 94,934 $25.00
Granted 10,200 $28.50
Exercised 0
Canceled (4,200) $25.64
-------
Options outstanding,
June 30, 1997 100,934 $25.32
-------
-------
Options outstanding,
January 1, 1998 96,769 $25.74
Granted 2,000 $31.50
Exercised (9,000) $24.50
Canceled (1,200) $28.50
-------
Options outstanding,
June 30, 1998 88,569 $25.96
-------
-------
</TABLE>
The following table summarizes information about stock options outstanding
at June 30, 1998:
<TABLE>
<CAPTION>
Weighted
Range of Number Average Number
Exercise Outstanding Remaining Exercisable
Prices at 6/30/98 Life at 6/30/98
- -------- ----------- ---------- -----------
<S> <C> <C> <C>
$24.50 58,009 1.0 46,139
$26.50 560 2.4 280
$28.50 23,000 3.6 8,820
$29.00 5,000 4.3 1,000
$31.50 2,000 4.7 400
------ ------
88,569 56,639
------ ------
------ ------
</TABLE>
As permitted by FAS 123, the Company has chosen to continue accounting
for stock options at their intrinsic value. Accordingly, no compensation
expense has been recognized for its stock option compensation plans for the
periods ended June 30, 1998 and 1997.
10. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK
F-68
<PAGE>
Most of the Company's business activity is with customers throughout its
primary market area of Ventura County, California. The Company's loan
portfolio is well diversified and no significant industry concentrations
exist.
Investments in state and municipal securities involve governmental
entities within the State of California. As of June 30, 1998, the Company
had $20,228,503 due from a correspondent bank in excess of federal deposit
insurance limits.
11. POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
The Company provides health and life insurance benefits to retired
employees and directors. Employees may become eligible for benefits if they
retire after attaining specified age and service requirements while they
worked for the Company. Directors may become eligible after five years
regardless of their age at retirement.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106") effective January 1, 1996. These
benefits are now accrued over the period the employee provides services to
the Company. Prior to the change, costs were charged to expense as incurred.
The Company elected the delayed recognition treatment of the adoption of
SFAS 106. Under this method, the transition obligation will be amortized on
a straight line basis over the remaining service period of active plan
participants. The Company's current policy is to fund the cost of
postretirement health care and life insurance plans on a pay-as-you-go basis.
The net periodic cost for postretirement health care and life insurance
benefits includes the following for the periods ended June 30:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Service cost $ 9,743 $ 9,799
Interest cost 5,621 7,404
Amortization of unrecognized
transition obligation 3,864 4,129
------- -------
Total $19,228 $21,332
------- -------
------- -------
</TABLE>
The following summary information on the Company's plans is presented as
of December 31, 1997 and 1996, which is the most recent available.
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 3,647 $ 8,205
Fully eligible, active employees 63,179 69,637
Other active plan participants 122,296 94,250
-------- --------
Total 189,122 172,092
Fair value of plan assets 0 0
-------- --------
</TABLE>
F-69
<PAGE>
<TABLE>
<S> <C> <C>
Unfunded accrued postretirement benefits
obligation 189,122 172,092
Unrecognized net gain 18,417 18,954
Unrecognized net transition obligation (154,765) (163,869)
-------- --------
Accrued postretirement benefit cost $ 52,774 $ 27,177
-------- --------
-------- --------
</TABLE>
The assumed discount rate and the assumed rate of increase in
compensation levels are 7.25% and 7.25%, respectively. The assumed health
care cost trend rate used in measuring the accumulated postretirement benefit
obligation was 6% declining to 4.75% in 10 years. If the health care cost
trend rate assumptions were increased by 1%, the accrued postretirement
benefit cost, as of December 31, 1997, would be increased by approximately
$22,732.
12. REGULATORY MATTERS
Capital requirements - The Company is subject to various regulatory
capital requirements administered by the Federal banking agencies. The
regulations require the Company to meet specific capital adequacy guidelines
that involve quantitative measures of the Company's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Company's capital classification is also subject to
qualitative judgements by the regulators about components, risk weighting,
and other factors. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material effect on the
Company's financial statements.
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum amounts and ratios (set
forth in the table below) of Tier 1 capital (as defined by the regulations)
to total average assets (as defined), and minimum ratios of Tier 1 and total
capital (as defined) to risk-weighted assets (as defined). To be considered
adequately capitalized (as defined) under the regulatory framework for prompt
corrective action, the Company must maintain minimum Tier 1 leverage, Tier 1
risk-based, total risk-based ratios as set forth in the table. The Company's
actual capital amounts and ratios are also presented in the table.
As of June 30, 1998 (in thousands):
<TABLE>
<CAPTION>
Required Actual
Amount (Ratio) Amount (Ratio)
--------------- ----------------
<S> <C> <C>
Tier 1 Capital (to
Average Assets) $ 5,338 ( 4.00%) $11,707 ( 8.77%)
Tier 1 Capital (to Risk
Weighted Assets) $ 4,308 ( 4.00%) $11,707 (10.87%)
Total Capital (to Risk
Weighted Assets) $ 8,616 ( 8.00%) $12,819 (11.90%)
</TABLE>
As of June 30, 1997 (in thousands):
<TABLE>
<CAPTION>
Required Actual
Amount (Ratio) Amount (Ratio)
--------------- ----------------
<S> <C> <C>
Tier 1 Capital (to
Average Assets) $ 4,966 ( 4.00%) $10,459 ( 8.42%)
</TABLE>
F-70
<PAGE>
<TABLE>
<S> <C> <C>
Tier 1 Capital (to Risk
Weighted Assets) $ 3,890 ( 4.00%) $10,459 (10.75%)
Total Capital (to Risk
Weighted Assets) $ 7,780 ( 8.00%) $11,373 (11.69%)
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
At June 30, 1998, the Company was obligated under operating leases
requiring annual rentals as follows:
<TABLE>
<S> <C>
July 1 through December 31, 1998 $ 216,235
1999 432,469
2000 432,469
2001 432,469
2002 295,518
----------
Total $1,809,160
----------
----------
</TABLE>
Rental expense was $257,575 and $197,783 for the periods ended June 30,
1998 and 1997, respectively.
At June 30, 1998, the Company had unused lines of credit with two banks.
The lines total $4,700,000, have variable interest rates based on the lending
bank's daily Federal funds rates, and are due on demand. The lines of credit
are unsecured.
14. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the statement of financial position. Exposure to credit loss
in the event of nonperformance by the other party to commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of those instruments. At June 30, 1998, the Company had
commitments to extend credit of $24,146,015 and obligations under standby
letters of credit of $125,715.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions.
The Company uses the same credit policies in making commitments and
conditional commitments as it does for extending loan facilities to
customers. The Company evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary
upon extension
F-71
<PAGE>
of credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory,
property, plant, and equipment and real estate.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards No. 107 ("FAS 107"), "Disclosures About
Fair Value of Financial Instruments" requires corporations to disclose the
fair value of its financial instruments, whether or not recognized in the
balance sheet, where it is practical to estimate that value.
Fair value estimates made as of June 30, 1998 are based on relevant
market information about the financial instruments. These estimates do not
reflect any premium or discount that could result from offering for sale at
one time the Company's entire holding of a particular financial instrument.
In cases where quoted market prices are not available, fair value estimates
are based on judgements regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instruments,
and other factors.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgement and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS - The carrying amounts reported in the balance
sheets for cash and short-term instruments approximate those assets' fair
values.
SECURITIES - Fair values were based on quoted market prices, where
available. If quoted market prices were not available, fair values were based
on quoted market prices of comparable instruments.
LOANS - The carrying values, reduced by estimated inherent credit
losses, of variable-rate loans and other loans with short-term
characteristics were considered fair values. For other loans, the fair
market values were calculated by discounting scheduled future cash flows
using current interest rates offered on loans with similar terms adjusted to
reflect the estimated credit losses inherent in the portfolio.
ACCRUED INTEREST RECEIVABLE AND ACCRUED INTEREST PAYABLE - The carrying
amounts reported in the balance sheets for accrued interest receivable and
accrued interest payable approximate their fair values.
DEPOSIT LIABILITIES - The fair value of deposits with no stated
maturity, such as noninterest-bearing demand deposits, NOW, savings, and
money market deposits, was, by definition, equal to the amount payable on
demand as of June 30, 1998. The fair value of certificates of deposit was
based on the discounted value of contractual cash flows, calculated using the
discount rates that equaled the interest rates offered at the valuation date
for deposits of similar remaining maturities.
The following is a summary of the carrying amounts and estimated fair
values of the Company's financial assets and liabilities at June 30, 1998:
F-72
<PAGE>
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------------ ------------
<S> <C> <C>
Financial assets:
Cash and due from banks $ 19,417,380 $ 19,417,380
Federal funds sold $ 8,200,000 $ 8,200,000
Securities $ 23,316,635 $ 23,496,406
Loans, net of allowance for loan losses $ 83,074,430 $ 83,192,693
Accrued interest receivable $ 746,302 $ 746,302
</TABLE>
F-73
<PAGE>
<TABLE>
<S> <C> <C>
Financial liabilities:
Deposits $124,974,721 $124,926,795
Accrued interest payable $ 448,915 $ 448,915
</TABLE>
At June 30, 1998, the Bank had outstanding standby letters of credit and
commitments to extend credit. These off-balance sheet financial instruments
are generally exercisable at the market rate prevailing at the date the
underlying transaction will be completed, and, therefore, they were deemed to
have no current fair market value (see Note 14).
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. Significant assets and liabilities that
are not considered financial assets or liabilities include the discounted
value of fee revenues generated by the mortgage banking operation nor is the
value of deferred tax assets or premises and equipment considered.
16. PARENT COMPANY INFORMATION
The following are condensed financial statements of Americorp (parent
company only) as of and for the period ended June 30, 1998:
<TABLE>
<S> <C> <C>
BALANCE SHEET
ASSETS:
Cash $ 129
Other assets 150,320
Investment in and advances to the Bank 11,875,060
-----------
TOTAL ASSETS $12,025,509
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities $ 124,848
Stockholders' equity 11,900,661
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,025,509
-----------
-----------
STATEMENT OF INCOME
Equity in earnings of the Bank $ 574,223
Other (12,819)
-----------
NET INCOME $ 561,404
-----------
-----------
STATEMENT OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 561,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed earnings of the Bank (518,047)
Increase in dividend receivable
to the Bank (19,449)
</TABLE>
F-74
<PAGE>
<TABLE>
<S> <C> <C>
Decrease in accrued liabilities 1,890 (535,606)
-------- --------
Net cash provided by operating activities 25,798
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 220,500
Dividends paid (248,858) (28,358)
-------- --------
Net cash used for financing activities (28,358)
--------
DECREASE IN CASH (2,560)
CASH AT BEGINNING OF PERIOD 2,689
--------
CASH AT END OF PERIOD $ 129
--------
--------
</TABLE>
F-75
<PAGE>
APPENDIX A
<PAGE>
AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
DATED AS OF JULY 7, 1998
BY AND AMONG
AMERICAN COMMERCIAL BANK
AMERICORP
AND
CHANNEL ISLANDS BANK
<PAGE>
AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
THIS AGREEMENT TO MERGE AND PLAN OF REORGANIZATION ("AGREEMENT") is
entered into as of July 7, 1998, among American Commercial Bank, a banking
company organized under the laws of California ("BANK"), being located in
Ventura, California, Americorp, a corporation and registered bank holding
company organized under the laws of California ("AMERICORP") located in
Ventura, California, and Channel Islands Bank, a banking company organized
under the laws of California ("CIB"), located in Oxnard, California.
R E C I T A L S:
A. Bank is a wholly owned subsidiary of Americorp.
B. Americorp, Bank and CIB believe that it would be in their respective
best interests and in the best interests of their respective shareholders for
CIB to merge with and into Bank (the "Bank Merger"), and for the shareholders of
CIB to become shareholders of Americorp, all in accordance with the terms set
forth in this Agreement and applicable law.
C. The respective Boards of Directors of Bank and CIB have adopted by
majority vote resolutions approving and authorizing the Bank Merger upon the
terms and conditions set forth in this Agreement and the Board of Directors of
Americorp has adopted by majority vote resolutions approving the Bank Merger,
this Agreement and the transactions contemplated herein.
D. Americorp, Bank and CIB desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement.
A G R E E M E N T
IN CONSIDERATION of the premises and mutual covenants hereinafter
contained, Bank, Americorp and CIB agree as follows:
DEFINITIONS AND DETERMINATIONS
1.1 DEFINITIONS. Capitalized terms used in this Agreement shall
have the meanings set forth below:
"Agreement of Merger" means the Agreement of Merger substantially in
the form attached hereto as Exhibit A.
2
<PAGE>
"Affiliate" means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
"Aggregate Book Value of Americorp" shall mean the consolidated
stockholders' equity of Americorp determined in accordance with GAAP
consistently applied on the Determination Date except (i) as otherwise
provided herein, (ii) such amount shall not be reduced by the amount of
Americorp's or Bank's Expenses (even though some or all of such Expenses
shall have already been expensed) and (iii) Bank's allowance for loan and
lease losses shall be increased by any Impairment in the Reserve.
"Aggregate Book Value of CIB" shall mean the stockholders' equity
of CIB determined in accordance with GAAP consistently applied on the
Determination Date except (i) as otherwise provided herein, (ii) such amount
shall not be reduced by the amount of CIB's Expenses (even though some or
all of such Expenses shall have already been expensed) and (iii) CIB's
allowance for loan and lease losses shall be increased by any Impairment in
the Reserve.
"Aggregate Book Value Certificate of Americorp" shall mean a
certificate, executed by the chief executive officer and the chief financial
officer of Americorp dated as of the Determination Date, setting forth the
calculation of the Aggregate Book Value of Americorp and the number of
outstanding shares of Americorp Stock as of the Determination Date.
"Aggregate Book Value Certificate of CIB" shall mean a certificate,
executed by the chief executive officer and the chief financial officer of
CIB dated as of the Determination Date, setting forth the calculation of the
Aggregate Book Value of CIB and the number of outstanding shares of CIB Stock
as of the Determination Date.
"Americorp" shall have the meaning given such term in the
introductory clause.
"Americorp Book Value Per Share" shall mean the Aggregate Book
Value of Americorp on the Determination Date divided by the number of
outstanding shares of Americorp Stock on the Determination Date.
"Americorp Corporate Governance Changes" shall have the meaning
given such term in Section 2.1(d).
"Americorp Directors' Agreement" shall mean an agreement,
substantially in the form attached as Exhibit 2.6(a).
"Americorp Dissenting Shares" means shares of Americorp Stock held
by
3
<PAGE>
"dissenting shareholders" within the meaning of Chapter 13 of the CGCL.
"Americorp Perfected Dissenting Shares" means Dissenting Shares
which the holders thereof have not withdrawn or caused to lose their status
as Americorp Dissenting Shares.
"Americorp Property" shall have the meaning given such term in
Section 3.26.
"Americorp Scheduled Contracts" shall have the meaning given such
term in Section 3.15.
"Americorp Shareholders' Meeting" shall have the meaning given such
term in Section 5.6.
"Americorp Stock" means the common stock, $1.00 par value, of
Americorp.
"Americorp Stock Option" means any option issued pursuant to the
Americorp Stock Option Plan.
"Americorp Stock Option Plan" means the Americorp 1994 Stock Option
Plan.
"Bank" shall have the meaning given such term in the introductory
clause.
"Bank Benefit Arrangement" shall have the meaning given such term
in Section 3.19(b).
"Bank Corporate Governance Changes" shall have the meaning given
such term in Section 2.1(b).
"Bank Merger" shall have the meaning given such term in the Recitals.
"Bank Stock" means the common stock, $1.25 par value, of Bank.
"Benefit Arrangement" means any plan or arrangement maintained or
contributed to by a Party, including an "employee benefit plan" within the
meaning of ERISA, (but exclusive of base salary and base wages) which provides
for any form of current or deferred compensation, bonus, stock option, profit
sharing, benefit, retirement, incentive, group health or insurance, welfare or
similar plan or arrangement for the benefit of any employee, officer or director
or class of employee, officer or director, whether active or retired, of a
Party.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
4
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or day
on which commercial banks in California are authorized or required to be
closed.
"Certificates" shall have the meaning given such term in Section 2.5.
"CFC" means the California Financial Code.
"CGCL" means the California General Corporation Law.
"Charter Documents" means, with respect to any business
organization, any certificate or articles of incorporation or articles of
association, and any bylaws, each as amended to date, that regulate the basic
organization of the business organization and its internal relations.
"CIB" shall have the meaning given such term in the introductory
clause.
"CIB Benefit Arrangement" shall have the meaning given such term in
Section 4.18(b).
"CIB Book Value Per Share" shall mean the Aggregate Book Value of
CIB on the Determination Date divided by the number of outstanding shares of
CIB Stock on the Determination Date.
"CIB's Directors' Agreement" shall mean an agreement, substantially
in the form attached as Exhibit 2.6(b).
"CIB Dissenting Shares" means shares of CIB Stock held by
"dissenting shareholders" within the meaning of Chapter 13 of the CGCL.
"CIB Perfected Dissenting Shares" means Dissenting Shares which the
holders thereof have not withdrawn or caused to lose their status as CIB
Dissenting Shares.
"CIB Property" shall have the meaning given such term in Section 4.25.
"CIB Scheduled Contracts" shall have the meaning given such term in
Section 4.30.
"CIB Shareholders' Meeting" shall have the meaning given such term
in Section 6.6.
"CIB Stock" means the common stock, no par value, of CIB.
5
<PAGE>
"CIB Stock Options" shall have the meaning given such term in
Section 7.4.
"Closing" means the consummation of the Bank Merger on the
Effective Day at the main office of Bank or at such other place as may be
agreed upon by the Parties.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder.
"Commissioner" means the Commissioner of Financial Institutions,
State of California.
"Competing Transaction" shall have the meaning given such term in
Section 6.13.
"Confidential Information" means all information exchanged heretofore
or hereafter between CIB, its affiliates and agents, on the one hand, and
Americorp and Bank, their affiliates and agents, on the other hand, which is
information related to the business, financial position or operations of the
Person responsible for furnishing the information or an Affiliate of such Person
(such information to include, by way of example only and not of limitation,
client lists, company manuals, internal memoranda, strategic plans, budgets,
forecasts/ projections, computer models, marketing plans, files relating to
loans originated by such Person, loans and loan participation purchased by such
Person from others, investments, deposits, leases, contracts, employment
records, minutes of board of directors meetings (and committees thereof) and
stockholder meetings, legal proceedings, reports of examination by any
Governmental Entity, and such other records or documents such Person may supply
to the other Party pursuant to the terms of this Agreement or as contemplated
hereby). Notwithstanding the foregoing, "Confidential Information" shall not
include any information that (i) at the time of disclosure or thereafter is
generally available to and known by the public (other than as a result of a
disclosure directly or indirectly by the recipients or any of their officers,
directors, employees or other representatives or agents), (ii) was available to
the recipients on a nonconfidential basis from a source other than Persons
responsible for furnishing the information, PROVIDED that such source is not and
was not bound by a confidentiality agreement with respect to the information, or
(iii) has been independently acquired or developed by the recipients without
violating any obligations under this Agreement.
"Consents" means every required consent, approval, absence of
disapproval, waiver or authorization from, or notice to, or registration or
filing with, any Person.
"Determination Date" shall mean the last day of the month preceding
the Effective Time, unless the Parties mutually agree to another day.
"Disclosure Letter" means a disclosure letter from the Party making
the disclosure and delivered to the other Party.
6
<PAGE>
"DPC Property" means voting securities, other personal property and
real property acquired by foreclosure or otherwise, in the ordinary course of
collecting a debt previously contracted for in good faith, retained with the
object of sale for any applicable statutory holding period, and recorded in the
holder's business records as such.
"Effective Day" means the day on which the Effective Time occurs.
"Effective Time" shall have the meaning given such term in Section
2.2.
"Encumbrances" means any option, pledge, security interest, lien,
charge, encumbrance, mortgage, assessment, claim or restriction (whether on
voting, disposition or otherwise), whether imposed by agreement, understanding,
law or otherwise.
"Environmental Laws" shall have the meaning given such term in Section
3.26.
"Equity Securities" means capital stock or any options, rights,
warrants or other rights to subscribe for or purchase capital stock, or any
plans, contracts or commitments that are exercisable in such capital stock or
that provide for the issuance of, or grant the right to acquire, or are
convertible into, or exchangeable for, such capital stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means either ChaseMellon Shareholder Services or U.S.
Stock Transfer Corporation (to be mutually determined by the Parties), to effect
the exchange contemplated by Section 2.5 hereof. The determination of which
entity shall be named Exchange Agent shall be based on a comparison of the costs
to be charged by each entity. Any transmittal documents to be sent to be sent
to holders of CIB Stock pursuant to Section 2.5 hereof shall be subject to CIB's
prior review and approval.
"Exchange Fund" shall have the meaning given such term in Section 2.5.
"Exchange Ratio" means the number of shares of Americorp Stock into
which a share of CIB Stock shall be converted which shall be equal to the amount
calculated (to the nearest ten thousandth) by dividing the CIB Book Value Per
Share by the Americorp Book Value Per Share.
7
<PAGE>
"Expenses" shall have the meaning given such term in Section 11.1.
"Executive Officer" means with respect to any company a natural Person
who participates or has the authority to participate (other than solely in the
capacity of a director) in major policy making functions of the company, whether
or not such Person has a title or is serving with salary or compensation.
"F&K" shall have the meaning given such term in Section 5.1.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of Americorp" means the audited consolidated
financial statements and notes thereto of Americorp and the related opinions
thereon for the years ended December 31, 1995, 1996 and 1997 and the unaudited
consolidated statements of financial condition and statements of operations and
cash flow of Americorp for the three months ended March 31, 1998.
"Financial Statements of CIB" means the audited financial statements
and notes thereto of CIB and the related opinions thereon for the years ended
December 31, 1995, 1996 and 1997 and the unaudited statements of financial
condition and statements of operations and cash flow of CIB for the three months
ended March 31, 1998.
"FRB" shall mean the Board of Governors of the Federal Reserve System.
"GAAP" means generally accepted accounting principles.
"Governmental Entity" means any court or tribunal in any jurisdiction
or any United States federal, state, district, domestic, or other administrative
agency, department, commission, board, bureau or other governmental authority or
instrumentality.
"Hazardous Materials" shall have the meaning given such term in
Section 3.26.
"Immediate Family" shall mean a Person's spouse, parents, in-laws,
children and siblings.
"Impairment in the Reserve" shall mean the amount of any inadequacy in
a Party's allowance for loan and lease losses at the Determination Date with
any such inadequacy being determined in accordance with GAAP and in accordance
with all applicable regulatory requirements of any Governmental Entity.
8
<PAGE>
"IRS" shall mean the Internal Revenue Service.
"Investment Securities" means any equity security or debt security as
defined in Statement of Financial Accounting Standard No. 115.
"Operating Loss" shall have the meaning given such term in Section
3.25.
"Party" means any of Americorp, Bank or CIB.
"Permit" means any United States federal, foreign, state, local or
other license, permit, franchise, certificate of authority, order of approval
necessary or appropriate under applicable Rules.
"Person" means any natural person, corporation, trust, association,
unincorporated body, partnership, joint venture, Governmental Entity,
statutorily or regulatory sanctioned unit or any other person or organization.
"Proxy Statement" means the joint proxy statement that is included as
part of the S-4 and used to solicit proxies for the CIB Shareholders' Meeting
and the Americorp Shareholders' Meeting and to offer and sell the shares of
Americorp Stock to be issued in connection with the Bank Merger.
"Related Group of Persons" means Affiliates, members of an Immediate
Family or Persons the obligation of whom would be attributed to another Person
pursuant to the regulations promulgated by the SEC.
"Rule" means any statute or law or any judgment, decree, injunction,
order, regulation or rule of any Governmental Entity.
"S-4" means the registration statement on Form S-4, and such
amendments thereto, that is filed with the SEC to register the shares of
Americorp Stock to be issued in the Bank Merger under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" mean all reports filed by a Party hereto pursuant to the
Exchange Act with the SEC or other Governmental Entity.
"Securities Act" means the Securities Act of 1933, as amended.
9
<PAGE>
"Surviving Bank" means the Bank as the California state-chartered bank
surviving the Bank Merger of CIB with and into Bank.
"Tank" shall have the meaning given such term in Section 3.26.
"Third Party Consent" shall have the meaning given such term in
subsection (b) of Section 5.7.
"To the knowledge" shall have the meaning given such term in
Section 11.13.
"VTD" shall have the meaning given such term in Section 6.1.
ARTICLE 2
CONSUMMATION OF THE BANK MERGER
2.1 THE MERGER; PLAN OF REORGANIZATION.
(a) Subject to the terms and conditions of this Agreement and
the Agreement of Merger, at the Effective Time, CIB shall merge with and into
Bank under the charter of Bank.
(b) The Charter Documents of Bank as in effect immediately
prior to the Effective Time shall continue in effect after the Bank Merger until
thereafter amended in accordance with applicable law and the members of the
Board of Directors and the Executive Officers of Bank immediately prior to the
Bank Merger shall continue in their respective positions after the Bank Merger
and be the Board of Directors and Executive Officers of the Surviving Bank;
except that Bank shall have taken prior to the Effective Time all necessary
steps so that at the Effective Time (i) the number of authorized directors of
Bank shall be expanded to ten, (ii) the persons set forth on Exhibit 2.1(b)
shall be the Board of Directors of the Bank and shall serve until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, (iii) the current Chairman of the Board of CIB shall be
elected and appointed Vice Chairman of the Board of Directors of the Bank and
Chairman of the Bank's Loan Committee, (iv) the head office of the Bank shall
be relocated to 300 Esplanade, Suite 110, Oxnard, California 93030, (v) an
executive committee shall be established composed of those directors set forth
on Exhibit 2.1(b) and (vi) the Executive Officers of the Bank shall be Gerald J.
Lukiewski (President and Chief Executive Officers) and the persons selected by
the committee provided for in Section 9.1(a) (clauses (i) - (vi) being
hereinafter collectively referred to as the "Bank Corporate Governance
Changes").
(c) At the Effective Time, the corporate existence of CIB shall
be merged and continued in the Surviving Bank. All assets, rights, franchises,
titles and interests of
10
<PAGE>
Bank and CIB, in and to every type of property (real, personal and mixed) and
choses in action shall be transferred to and vested in the Surviving Bank by
virtue of the Bank Merger without any deed or other transfer, and the
Surviving Bank, without any order or action on the part of any court or
otherwise, shall hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations, and all
other rights and interests as trustee, executor, administrator, registrar of
stocks and bonds, guardian of estates, assignee or receiver and in every
other fiduciary capacity in the same manner and to the same extent that such
rights, franchises and interests were held by Bank and CIB at the Effective
Time. At the Effective Time, the Surviving Bank shall be liable for all
liabilities of Bank and CIB and all deposits, debts, liabilities, obligations
and contracts of Bank and CIB, matured or unmatured, whether accrued,
absolute, contingent or otherwise, and whether or not reflected or reserved
against on balance sheets, books of accounts or records of Bank and CIB,
shall be those of the Surviving Bank; and all rights of creditors or other
obligees and all liens on property of Bank and CIB shall be preserved
unimpaired.
(d) The Charter Document of Americorp as in effect immediately
prior to the Effective Time shall continue in effect after the Bank Merger until
thereafter amended in accordance with applicable law, the members of the Board
of Directors and the Executive Officers of Americorp immediately prior to the
Bank Merger shall continue in their respective positions after the Bank Merger
and be the Board of Directors and Executive Officers of Americorp and the
operations of Americorp shall continue in effect after the Bank Merger; except
that Americorp shall have taken prior to the Effective Time all necessary steps
so that at the Effective Time (i) the number of authorized directors of
Americorp shall be expanded to ten, (ii) the persons set forth on Exhibit
2.1(d) shall be the Board of Directors of the Americorp and shall serve until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, (iii) the current Chairman of the Board of CIB
shall be elected and appointed Vice Chairman of the Board of Directors of
Americorp, (iv) an executive committee shall be established composed of those
directors set forth on Exhibit 2.1(d) and (v) the Executive Officers of
Americorp shall be Gerald J. Lukiewski (President and Chief Executive Officers)
and the persons selected by the committee provided for in Section 9.1(a)
(clauses (i) - (v) being hereinafter collectively referred to as the "Americorp
Corporate Governance Changes").
2.2 EFFECTIVE TIME. The Closing shall take place as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Sections 8.1, 8.2 and 8.3, and the Parties shall use best efforts to cause the
Closing to occur as soon as possible after receipt of approval of the Bank
Merger from the Commissioner and the FDIC and the expiration of all required
waiting periods, or such later time and date as to which the Parties may agree.
The Bank Merger shall be effective upon the filing by the Commissioner of the
Agreement of Merger as specified in the CFC. Such time is referred to herein as
the "Effective Time."
2.3 CONVERSION OF SHARES. At the Effective Time and pursuant to the
Agreement of Merger:
11
<PAGE>
(a) Subject to the exceptions and limitations in Section 2.4,
each outstanding share of CIB Stock shall, without any further action on the
part of CIB or the holders of any of such shares, be converted into shares of
Americorp Stock in accordance with the Exchange Ratio.
(b) Each outstanding share of Bank Stock shall, without any
further action on the part of Bank or of the holder of any of such shares, be
converted into shares of the Surviving Bank and each certificate that, prior to
the Effective Time, represented shares of Bank Stock shall evidence ownership of
shares of the Surviving Bank.
(c) Each outstanding share of Americorp Stock shall remain
outstanding and shall not be converted or otherwise affected by the Bank Merger,
except that any Americorp Perfected Dissenting Shares shall remain outstanding
subject to the right of the holder of such shares to receive payment for such
shares in an amount determined pursuant to Chapter 13 of the CGCL.
(d) The Aggregate Book Value of Americorp shall be set forth
in the Aggregate Book Value Certificate of Americorp, and the calculations
and procedures shall be reviewed by CIB. The Aggregate Book Value of CIB
shall be set forth in the Aggregate Book Value Certificate of CIB, and the
calculations and procedures shall be reviewed by Americorp. If the Parties
cannot initially agree on the Aggregate Book Value of Americorp, the
Aggregate Book Value of CIB, the Americorp Book Value Per Share, the CIB Book
Value Per Share, the Exchange Ratio, any Impairment in the Reserve of any
Party or the calculation of any of the foregoing, the Parties shall attempt
to agree upon the amount or amounts in dispute within seven days. If no
mutual agreement is reached within said period, the Parties shall immediately
hire an independent expert qualified to render an opinion regarding the
amount of the particular matter or matters in dispute. The Parties shall
cooperate fully with any such independent expert and will equally split the
cost of such expert. The opinion of such expert shall be binding on the
parties for purposes of this Agreement.
12
<PAGE>
2.4 CERTAIN EXCEPTIONS AND LIMITATIONS. (A) Any shares of CIB Stock
held by Americorp or any subsidiary of Americorp (other than shares held in a
fiduciary capacity or as DPC Property) will be canceled at the Effective Time;
(B) CIB Perfected Dissenting Shares shall not be converted into shares of
Americorp Stock, but shall, after the Effective Time, be entitled only to such
rights as are granted them by Chapter 13 of the CGCL (each dissenting
shareholder who is entitled to payment for his shares of CIB Stock shall receive
such payment in an amount as determined pursuant to Chapter 13 of CGCL), and (C)
no fractional shares of Americorp Stock shall be issued in the Bank Merger and,
in lieu thereof, each holder of CIB Stock who would otherwise be entitled to
receive a fractional share shall receive an amount in cash equal to the product
(calculated to the nearest ten thousandth) obtained by multiplying (a) the
Americorp Book Value Per Share times (b) the fraction of the share of Americorp
Stock to which such holder would otherwise be entitled.
2.5 EXCHANGE PROCEDURES.
(a) As of the Effective Time, Americorp shall have deposited
with the Exchange Agent for the benefit of the holders of shares of CIB Stock,
for exchange in accordance with this Section 2.5 through the Exchange Agent,
certificates representing the shares of Americorp Stock issuable pursuant to
Section 2.3 in exchange for shares of CIB Stock outstanding immediately prior to
the Effective Time, and funds in an amount not less than the amount of cash
payable in lieu of fractional shares of Americorp Stock which would otherwise be
payable in connection with Section 2.3 hereof, but for the operation of Section
2.4 of this Agreement (collectively, the "Exchange Fund").
(b) Americorp shall direct the Exchange Agent to mail promptly
after the Effective Time, to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of CIB Stock (the "Certificates") whose shares were converted
into the right to receive shares of Americorp Stock pursuant to Section 2.3
hereof: (i) 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
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as CIB may reasonably specify), and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Americorp Stock. Upon surrendering of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by CIB, together with such letters of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor that amount of cash and a certificate representing that number
of whole shares of Americorp Stock which such holder has the right to receive
pursuant to the provisions of Sections 2.3 and 2.4 hereof, and the Certificate
so surrendered shall forthwith be canceled. In the event a Certificate is
surrendered representing CIB Stock, the transfer of ownership which is not
registered in the transfer records of CIB, a certificate representing the proper
number of shares of Americorp Stock may be issued to a transferee if the
Certificate representing such CIB Stock is presented to
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the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 2.5 and
except as provided in subsection (g) hereof, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive
upon such surrender the certificate representing shares of Americorp Stock
and cash in lieu of any fractional shares of stock as contemplated by this
Section 2.5. Notwithstanding anything to the contrary set forth herein, if
any holder of shares of CIB should be unable to surrender the Certificates
for such shares, because they have been lost or destroyed, such holder may
deliver in lieu thereof, in the discretion of Americorp, such bond in form
and substance and with surety reasonably satisfactory to Americorp and shall
be entitled to receive the certificate representing the proper number of
shares of Americorp Stock and cash in lieu of fractional shares in accordance
with Sections 2.3 and 2.4 hereof.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to Americorp Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Americorp Stock represented thereby and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.4 until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Americorp Stock issued in exchange
thereof, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Americorp Stock to which such
holder is entitled pursuant to Section 2.4 and the amount of dividends or other
distribution with a record date after the Effective Time theretofore paid with
respect to such whole shares of Americorp Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Americorp Stock.
(d) All shares of Americorp Stock issued upon the surrender for
exchange of CIB Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.4) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of CIB Stock, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Bank of the shares of CIB Stock which were outstanding immediately
prior to the Effective Time. If after the Effective Time, Certificates are
presented to Americorp for any reason, they shall be canceled and exchanged as
provided in this Agreement.
(e) Any portion of the Exchange Fund which remains
undistributed to the shareholders of CIB following the passage of six months
after the Effective Time shall be delivered to Americorp, upon demand, and any
shareholders of CIB who have not theretofore complied with this Section 2.5
shall thereafter look only to Americorp for payment of their claim for Americorp
Stock, any cash in lieu of fractional shares of Americorp Stock and any
dividends or distributions with respect CIB Stock.
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(f) Neither Americorp nor CIB shall be liable to any holder of
shares of CIB Stock for such shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(g) The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the shares of Americorp Stock
held by it from time to time hereunder, except that it shall receive and hold
all dividends or other distributions paid or distributed with respect to such
shares of Americorp Stock for the account of the Persons entitled thereto.
Former shareholders of record of CIB shall be entitled to vote after the
Effective Time at any meeting of Americorp shareholders the number of whole
shares of Americorp Stock into which their respective shares of CIB Stock are
converted, regardless of whether such holders have exchanged their Certificates
for certificates representing Americorp Stock in accordance with the provisions
of this Agreement.
2.6 DIRECTORS' AGREEMENTS.
(a) Concurrently with the execution of this Agreement,
Americorp and Bank shall cause each of its respective directors to enter into a
Americorp Directors' Agreement.
(b) Concurrently with the execution of this Agreement, CIB
shall cause each of its respective directors to enter into an CIB's Directors'
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AMERICORP AND BANK
Americorp and Bank represent and warrant to CIB as follows:
3.1 INCORPORATION, STANDING AND POWER. Americorp has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the State of California and is registered as a bank holding company
under the BHC Act. Bank has been duly incorporated and is validly existing as a
banking company under the laws of California and is authorized by the
Commissioner to conduct a general banking business. Bank's deposits are insured
by the FDIC in the manner and to the extent provided by law. Americorp and Bank
have all requisite corporate power and authority to own, lease and operate their
respective properties and assets and to carry on their respective businesses as
presently conducted. Neither the scope of the business of Americorp or Bank nor
the location of any of their respective properties requires that Americorp or
Bank be licensed to do business in any jurisdiction other than in California
where the failure to be so
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licensed would, individually or in the aggregate, have a materially adverse
effect on the financial condition, results of operation or business of
Americorp on a consolidated basis.
3.2 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of Americorp consists of 2,500,000 shares of Americorp
Stock, of which 594,518 shares are outstanding. As of the date of this
Agreement, the authorized capital stock of Bank consists of 720,000 shares of
Bank Stock, of which 523,200 shares are outstanding and are owned by Americorp
without Encumbrance. All the outstanding shares of Americorp Stock and Bank
Stock are duly authorized, validly issued, fully paid, nonassessable and without
preemptive rights. Except for Americorp Stock Options covering 86,569 shares of
Americorp stock granted pursuant to the Americorp Stock Option Plan and except
as set forth in Americorp's Disclosure Letter, there are no outstanding options,
warrants or other rights in or with respect to the unissued shares of Americorp
Stock or Bank Stock or any other securities convertible into such stock, and
neither Americorp nor Bank is obligated to issue any additional shares of its
capital stock or any options, warrants or other rights in or with respect to the
unissued shares of its capital stock or any other securities convertible into
such stock.
3.3 SUBSIDIARIES. Except as set forth in Americorp's Disclosure
Letter, neither Americorp nor Bank own, directly or indirectly, any outstanding
stock, Equity Securities or other voting interest in any corporation,
partnership, joint venture or other entity or Person, other than DPC Property.
3.4 FINANCIAL STATEMENTS. Americorp has previously furnished to CIB
a copy of the Financial Statements of Americorp. The Financial Statements of
Americorp: (a) present fairly the consolidated financial condition of Americorp
as of the respective dates indicated and its consolidated results of operations
and cash flow for the respective periods indicated; and (b) have been prepared
in accordance with GAAP. The audits of Americorp have been conducted in
accordance with generally accepted auditing standards. The books and records of
Americorp and Bank are being maintained in material compliance with applicable
legal and accounting requirements. Except to the extent (i) reflected in the
Financial Statements of Americorp and (ii) of liabilities incurred since
December 31, 1997 in the ordinary course of business and consistent with past
practice, neither Americorp nor Bank has any liabilities, whether absolute,
accrued, contingent or otherwise.
3.5 AUTHORITY OF AMERICORP AND BANK. The execution and delivery by
Americorp and Bank of this Agreement and, subject to the requisite approval of
the shareholders of Americorp and of Americorp as the sole shareholder of Bank,
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Americorp
and Bank, and this Agreement is a valid and binding obligation of Americorp and
Bank enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, liquidation, receivership,
conservatorship, insolvency, moratorium or other
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similar laws affecting the rights of creditors generally and by general
equitable principles and by Section 8(b)(6)(D) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1818(b)(6)(D). Except as set forth in
Americorp's Disclosure Letter, neither the execution and delivery by
Americorp and Bank of this Agreement, the consummation of the Bank Merger or
the transactions contemplated herein, nor compliance by Americorp and Bank
with any of the provisions hereof, will: (a) violate any provision of their
respective Charter Documents; (b) constitute a breach of or result in a
default (or give rise to any rights of termination, cancellation or
acceleration, or any right to acquire any securities or assets) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
franchise, license, permit, agreement, Encumbrances or other instrument or
obligation to which Americorp or Bank is a party, or by which Americorp or
Bank or any of their respective properties or assets is bound, if in any such
circumstances, such event could have consequences materially adverse to
Americorp on a consolidated basis; or (c) violate any Rule applicable to
Americorp or Bank or any of their respective properties or assets. No
Consent of any Governmental Entity having jurisdiction over any aspect of the
business or assets of Americorp or Bank, and no Consent of any Person, is
required in connection with the execution and delivery by Americorp and Bank
of this Agreement or the consummation by Americorp and Bank of the Bank
Merger and the transactions contemplated hereby, except (i) the approval of
this Agreement and the transactions contemplated hereby by the shareholders
of Americorp and by Americorp as the sole shareholder of Bank; (ii) such
approvals or notices as may be required by the FRB, the Commissioner and the
FDIC; (iii) the declaring effective of the S-4 by the SEC and the approvals
of all necessary blue sky administrators; (iv) the California Department of
the State of California as to certain matters related to stock options; and
(v) as otherwise set forth in Americorp's Disclosure Letter.
3.6 INSURANCE. Americorp and Bank have policies of insurance and
bonds covering their assets and businesses against such casualties and
contingencies and in such amounts, types and forms as are customary in the
banking industry for their businesses, operations, properties and assets. All
such insurance policies and bonds are in full force and effect. Except as set
forth in Americorp's Disclosure Letter, neither Americorp nor Bank has received
notice from any insurer that any such policy or bond has canceled or indicating
an intention to cancel or not to renew any such policy or bond or generally
disclaiming liability thereunder. Except as set forth in Americorp's Disclosure
Letter, neither Americorp nor Bank is in default under any such policy or bond
and all material claims thereunder have been filed in a timely fashion.
Americorp's Disclosure Letter sets forth a list of all policies of insurance
carried and owned by Americorp or Bank, showing the name of the owner and the
insurance company, the nature of the coverage, the policy limit, the annual
premiums and the expiration dates. The existing insurance carried by Americorp
and Bank is sufficient for compliance by Americorp and Bank with all material
requirements of law and regulations and agreements to which they are subject or
are a party.
3.7 TITLE TO ASSETS. Americorp's Disclosure Letter sets forth a
summary of all items of personal property and equipment with a book value of
$25,000 or more, or having an
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annual lease payment of $10,000 or more, owned or leased by Americorp or
Bank. Americorp and Bank have good and marketable title to all their
respective properties and assets, other than real property, owned or stated
to be owned by Americorp and Bank, free and clear of all Encumbrances except:
(a) as set forth in the Financial Statements of Americorp; (b) Encumbrances
for current taxes not yet due; (c) Encumbrances incurred in the ordinary
course of business, if any, that, to the knowledge of Americorp and Bank, (i)
are not substantial in character, amount or extent, (ii) do not materially
detract from the value, (iii) do not interfere with present use, of the
property subject thereto or affected thereby, and (iv) do not otherwise
materially impair the conduct of business of Americorp and Bank; or (d) as
set forth in Americorp's Disclosure Letter.
3.8 REAL ESTATE. Americorp's Disclosure Letter sets forth a list of
all real property, including leaseholds, owned by Americorp and Bank, together
with (i) a description of the locations thereof, (ii) a description of each real
property lease, sublease, installment purchase, or similar arrangement to which
either Americorp or Bank is a party, and (iii) a description of each contract
for the purchase, sale or development of real estate to which Americorp or Bank
is a party. Americorp and Bank have good and marketable title to the
respective real property, and valid leasehold interests in the respective
leaseholds, set forth in Americorp's Disclosure Letter, free and clear of all
Encumbrances, except (a) for rights of lessors, co-lessees or sublessees in such
matters that are reflected in the lease; (b) Encumbrances for current taxes not
yet due and payable; (c) Encumbrances incurred in the ordinary course of
business, if any, that, to the knowledge of Americorp and Bank, (i) are not
substantial in character, amount or extent, (ii) do not materially detract from
the value, (iii) do not interfere with present use, of the property subject
thereto or affected thereby, and (iv) do not otherwise materially impair the
conduct of business of Americorp or Bank; or (d) as set forth in Americorp's
Disclosure Letter. Americorp or Bank, as the case may be, as lessee, has the
right under valid and subsisting leases to occupy, use and possess all property
leased by it, as identified in Americorp's Disclosure Letter, and, to the
knowledge of Americorp and Bank, there has not occurred under any such lease any
breach, violation or default. Except as set forth in Americorp's Disclosure
Letter and except with respect to deductibles under insurance policies set forth
in Americorp's Disclosure Letter, neither Americorp nor Bank has experienced any
uninsured damage or destruction with respect to the properties identified in
Americorp's Disclosure Letter. To the knowledge of Americorp and Bank, all
properties and assets used by Americorp and Bank are in good operating condition
and repair, suitable for the purposes for which they are currently utilized, and
comply with all applicable Rules related thereto. Americorp and Bank enjoy
peaceful and undisturbed possession under all leases for the use of real or
personal property under which it is the lessee, and, to the knowledge of
Americorp and Bank, all leases to which Americorp or Bank is a party are valid
and enforceable in all material respects in accordance with the terms thereof
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting creditors' rights and except as may be limited by the exercise of
judicial discretion in applying principles of equity. Neither Americorp nor
Bank is in default with respect to any such lease, and to the knowledge of the
officers of Americorp and Bank no event has occurred which with the lapse of
time or the giving of notice, or both, would constitute a default
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under any such lease. Copies of each such lease are attached to Americorp's
Disclosure Letter.
3.9 LITIGATION. Except as set forth in Americorp's Disclosure
Letter, to the knowledge of Americorp and Bank, there is no private or
governmental suit, claim, action, investigation or proceeding pending, nor to
Americorp's or Bank's knowledge threatened, against Americorp or Bank or against
any of their directors, officers or employees relating to the performance of
their duties in such capacities or against or affecting any properties of
Americorp or Bank. Also, except as disclosed in Americorp's Disclosure Letter,
there are no judgments, decrees, stipulations or orders against Americorp or
Bank enjoining either of them or any of their directors, officers or employees
in respect of, or the effect of which is to prohibit, any business practice or
the acquisition of any property or the conduct of business in any area of
Americorp or Bank. To the knowledge of Americorp and Bank, neither Americorp
nor Bank is a party to any pending or, to the knowledge of any of the officers,
threatened legal, administrative or other claim, action, suit, investigation,
arbitration or proceeding challenging the validity or propriety of any of the
transactions contemplated by this Agreement.
3.10 TAXES. Except as set forth in Americorp's Disclosure Letter,
Americorp and Bank had filed all federal and foreign income tax returns, all
state and local franchise and income tax, real and personal property tax, sales
and use tax, premium tax, excise tax and other tax returns of every character
required to be filed by it and have paid all taxes, together with any interest
and penalties owing in connection therewith, shown on such returns to be due in
respect of the periods covered by such returns, other than taxes which are being
contested in good faith and for which adequate reserves have been established.
Except as set forth in Americorp's Disclosure Letter, Americorp and Bank have
filed all required payroll tax returns, have fulfilled all tax withholding
obligations and have paid over to the appropriate governmental authorities the
proper amounts with respect to the foregoing. The tax and audit positions taken
by Americorp and Bank in connection with the tax returns described in the
preceding sentence were reasonable and asserted in good faith. Adequate
provision has been made in the books and records of Americorp or Bank and, to
the extent required by generally accepted accounting procedures, reflected in
the Financial Statements of Americorp, for all tax liabilities, including
interest or penalties, whether or not due and payable and whether or not
disputed, with respect to any and all federal, foreign, state, local and other
taxes for the periods covered by such financial statements and for all prior
periods. Americorp's Disclosure Letter sets forth (i) the date or dates through
which the IRS has examined the federal tax returns of Americorp and Bank and the
date or dates through which any foreign, state, local or other taxing authority
has examined any other tax returns of Americorp and Bank; (ii) a complete list
of each year for which any federal, state, local or foreign tax authority has
obtained or has requested an extension of the statute of limitations from
Americorp or Bank and lists each tax case of Americorp or Bank currently pending
in audit, at the administrative appeals level or in litigation; and (iii) the
date and issuing authority of each statutory notice of deficiency, notice of
proposed assessment and revenue agent's report issued to Americorp within the
last twelve (12) months. Except as set forth in Americorp's Disclosure Letter,
to the knowledge of Americorp and Bank,
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neither the IRS nor any foreign, state, local or other taxing authority has,
during the past three years, examined or is in the process of examining any
federal, foreign, state, local or other tax returns of Americorp or Bank. To
the knowledge of Americorp and Bank, neither the IRS nor any foreign, state,
local or other taxing authority is now asserting or threatening to assert any
deficiency or claim for additional taxes (or interest thereon or penalties in
connection therewith) except as set forth in Americorp's Disclosure Letter.
3.11 COMPLIANCE WITH LAWS AND REGULATIONS. Except as set forth in
Americorp's Disclosure Letter, neither Americorp nor Bank is in default under or
in breach of any provision of its Charter Documents or any Rule promulgated by
any Governmental Entity having authority over it, where such default or breach
would have a material adverse effect on the business, financial condition or
results of operations of Americorp or Bank.
3.12 PERFORMANCE OF OBLIGATIONS. Americorp and Bank have performed
all of the respective obligations required to be performed by it to date and
neither of them is in material default under or in breach of any term or
provision of any of the Americorp Scheduled Contracts, and no event has occurred
that, with the giving of notice or the passage of time or both, would constitute
such default or breach. To Americorp's and Bank's knowledge, no party with whom
either has an agreement that is material to the business of Americorp or Bank is
in default thereunder.
3.13 EMPLOYEES. Except as set forth in Americorp's Disclosure
Letter, there are no controversies pending or threatened between Americorp or
Bank and any of their respective employees that are likely to have a material
adverse effect on the business, financial condition or results of operation of
Americorp or Bank. Neither Americorp nor Bank is a party to any collective
bargaining agreement with respect to any of its employees or any labor
organization to which its employees or any of them belong.
3.14 BROKERS AND FINDERS. Except as provided in Americorp's
Disclosure Letter with copies of any such agreements attached, neither Americorp
nor Bank is not a party to or obligated under any agreement with any broker or
finder relating to the transactions contemplated hereby, and neither the
execution of this Agreement nor the consummation of the transactions provided
for herein or therein will result in any liability to any broker or finder.
3.15 MATERIAL CONTRACTS. Except as set forth in Americorp's
Disclosure Letter (all items listed or required to be listed in Americorp's
Disclosure Letter as a result of this Section being referred to herein as
"Americorp Scheduled Contracts"), neither Americorp nor Bank is a party or
otherwise subject to:
(a) any employment, deferred compensation, bonus or consulting
contract;
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(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract;
(c) any contract or agreement that would restrict Americorp or
the Surviving Bank after the Effective Time from competing in any line of
business with any Person or using or employing the services of any Person;
(d) any collective bargaining agreement or other such contract
or agreement with any labor organization;
(e) any lease of real or personal property providing for annual
lease payments by or to Americorp or Bank in excess of $10,000 per annum other
than financing leases entered into in the ordinary course of business in which
Americorp or Bank is lessor and leases of real property presently used by Bank
as banking offices.
(f) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of Americorp or Bank (other than as mortgagor or pledgor in the ordinary course
of their banking business or as mortgagee, secured party or deed of trust
beneficiary in the ordinary course of their business) in personal property
having a value of $25,000 or more;
(g) any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or
former employees, officers or directors of Americorp or Bank;
(h) any agreement to acquire equipment or any commitment to
make capital expenditures of $25,000 or more;
(i) other than agreements entered into in the ordinary course
of business with respect to DPC Property, any agreement for the sale of any
property or assets in which Americorp or Bank has an ownership interest or for
the grant of any preferential right to purchase any such property or asset;
(j) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of their banking
business and reflected in the financial records of Americorp or Bank);
(k) any restrictive covenant contained in any deed to or lease
of real property owned or leased by Americorp or Bank (as lessee) that
materially restricts the use, transferability or value of such property;
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(l) any guarantee or indemnification which involves the sum of
$25,000 or more, other than letters of credit or loan commitments issued in the
normal course of business;
(m) any supply, maintenance or landscape contracts not
terminable by Americorp or Bank without penalty on 30 days or less notice and
which provides for payments in excess of $10,000 per annum;
(n) other than as disclosed with reference to subparagraph (k)
of this Section 3.15, any agreement which would be terminable other than by
Americorp or Bank or as a result of the consummation of the transactions
contemplated by this Agreement;
(o) any contract of participation with any other bank in any
loan entered into by Americorp or Bank subsequent to December 31, 1997 in excess
of $25,000 or any sales of assets of Americorp or Bank with recourse of any kind
to Americorp or Bank except the sale of mortgage loans, servicing rights,
repurchase or reverse repurchase agreements, securities or other financial
transactions in the ordinary course of business;
(p) any other agreement of any other kind, including for data
processing and similar services, which involves future payments or receipts or
performances of services or delivery of items requiring aggregate payment of
$10,000 or more to or by Americorp or Bank other than payments made under or
pursuant to loan agreements, participation agreements and other agreements for
the extension of credit in the ordinary course of their business;
(q) any material agreement, arrangement or understanding not
made in the ordinary course of business;
(r) any agreement, arrangement or understanding relating to the
employment, election, retention in office or severance of any present or former
director, officer or employee of Americorp or Bank;
(s) any agreement, arrangement or understanding pursuant to
which any payment (whether severance pay or otherwise) became or may become due
to any director, officer or employee of Americorp or Bank upon execution of this
Agreement or upon or following consummation of the transactions contemplated
hereby (either alone or in connection with the occurrence of any additional acts
or events); or
(t) any written agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order, capital order, or
condition of any regulatory order or decree with or by the Commissioner, FDIC,
FRB or any other regulatory agency.
True copies of all Americorp Scheduled Contracts, including all amendments and
supplements
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thereto, are attached to Americorp's Disclosure Letter.
3.16 ABSENCE OF MATERIAL CHANGE. Since December 31, 1997, the
businesses of Americorp and Bank have been conducted only in the ordinary
course, in substantially the same manner as theretofore conducted, and, except
as set forth in Americorp's Disclosure Letter, there has not occurred since
December 31, 1997 any event that has had or may reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operation of Americorp or Bank.
3.17 LICENSES AND PERMITS. Americorp and Bank have all licenses and
permits that are necessary for the conduct of their respective businesses, and
such licenses are in full force and effect, except for any failure to be in full
force and effect that would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of Americorp or Bank. The properties and operations of Americorp and
Bank are and have been maintained and conducted, in all material respects, in
compliance with all applicable Rules.
3.18 UNDISCLOSED LIABILITIES. Except as set forth in Americorp's
Disclosure Letter, neither Americorp nor Bank have any liabilities or
obligations, either accrued or contingent, that are material to Americorp or
Bank and that have not been: (a) reflected or disclosed in the Financial
Statements of Americorp or (b) incurred subsequent to December 31, 1997 in the
ordinary course of business. Neither Americorp nor Bank knows of any basis for
the assertion against it of any liability, obligation or claim (including,
without limitation, that of any Governmental Entity) that is likely to result in
or cause a material adverse change in the business, financial condition or
results of operations of Americorp or Bank that is not fairly reflected in the
Financial Statements of Americorp or otherwise disclosed in this Agreement.
3.19 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Americorp's Disclosure Letter,
neither Americorp nor Bank has an "employee benefit plan," as defined in
Section 3(3) of ERISA.
(b) Americorp's Disclosure Letter sets forth copies or
descriptions of each Benefit Arrangement maintained or otherwise contributed to
by Americorp or Bank (such plans and arrangements being collectively referred to
herein as "Bank Benefit Arrangements"). All Bank Benefit Arrangements which are
in effect have been in effect for substantially all of 1997. There has been no
material amendment thereof or increase in the cost thereof or benefits payable
thereunder since December 31, 1997. Except as set forth in Americorp's
Disclosure Letter, there has been no material increase in the compensation of or
benefits payable to any senior executive employee of Americorp or Bank since
December 31, 1997, nor any employment, severance or similar contract entered
into with any such employee, nor any amendment to any such contract,
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since December 31, 1997. Except as set forth in Americorp's Disclosure
Letter, there is no contract, agreement or benefit arrangement covering any
employee of Americorp or Bank which individually or collectively could give
rise to the payment of any amount which would constitute an "excess parachute
payment," as such term is defined in Section 280(G) of the Code.
(c) With respect to all Bank Benefit Arrangements, Americorp
and Bank are in substantial compliance (other than noncompliance the cost or
liability for which is not material) with the requirements prescribed by any and
all statutes, governmental or court orders, or governmental rules or regulations
currently in effect, applicable to such plans or arrangements.
(d) Except for the contracts set forth in Americorp's
Disclosure Letter, each Bank Benefit Arrangement and each personal services
contract, fringe benefit, consulting contract or similar arrangement with or for
the benefit of any officer, director, employee or other person can be terminated
by Bank within a period of 30 days following the Effective Time of the Bank
Merger, without payment of any amount as a penalty, bonus, premium, severance
pay or other compensation for such termination.
3.20 CORPORATE RECORDS. The Charter Documents of Americorp and Bank
and all amendments thereto to the date hereof (true, correct and complete copies
of which are set forth in Americorp's Disclosure Letter) are in full force and
effect as of the date of this Agreement. The minute books of Americorp and
Bank, together with the documents and other materials incorporated therein by
reference, reflect all meetings held and contain complete and accurate records
of all corporate actions taken by the boards of directors of Americorp and Bank
(or any committees thereof) and stockholders. Except as reflected in such
minute books, there are no minutes of meetings or consents in lieu of meetings
of the board of directors (or any committees thereof) or of the stockholders of
Americorp or Bank.
3.21 ACCOUNTING RECORDS. Americorp and Bank maintain accounting
records which fairly and validly reflect, in all material respects, their
transactions and accounting controls sufficient to provide reasonable assurances
that such transactions are (i) executed in accordance with their management's
general or specific authorization, and (ii) recorded as necessary to permit the
preparation of financial statements in conformity with GAAP. Such records, to
the extent they contain material information pertaining to Americorp or Bank
which is not easily and readily available elsewhere, have been duplicated, and
such duplicates are stored safely and securely.
3.22 OFFICES AND ATMS. Set forth in Americorp's Disclosure Letter is
a list of the headquarters of Bank (identified as such) and each of the offices
and automated teller machines ("ATMs") maintained and operated (or to be
maintained and operated) by Bank (including, without limitation, representative
and loan production offices and operations centers) and the location thereof.
Except as set forth in Americorp's Disclosure Letter, neither Americorp nor Bank
maintains any other office or ATM and conducts business at any other location,
and neither
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Americorp nor Bank has applied for or received permission to open
any additional branch nor operate at any other location.
3.23 LOAN PORTFOLIO. Americorp's Disclosure Letter sets forth a
description of: (a) by type and classification, all loans, leases, other
extensions and commitments to extend credit of Bank of $100,000 or more, that
have been classified by itself, its bank examiners or auditors (external or
internal) as "Watch List," "Substandard," "Doubtful," "Loss" or any comparable
classification; and (b) all loans due to Bank as to which any payment of
principal, interest or any other amount is 30 days or more past due.
Americorp's consolidated allowance for loan losses is and will be at the
Effective Time adequate and in accordance with GAAP in all material respects and
in accordance with all applicable regulatory requirements of any Governmental
Entity.
3.24 POWER OF ATTORNEY. Except as set forth in Americorp's
Disclosure Letter, neither Americorp nor Bank has granted any Person a power of
attorney or similar authorization that is presently in effect or outstanding.
3.25 OPERATING LOSSES. Americorp's Disclosure Letter sets forth any
Operating Loss (as herein defined) which has occurred at Americorp or Bank
during the period after December 31, 1997. To the knowledge of Americorp and
Bank, no action has been taken or omitted to be taken by an employee of
Americorp or Bank that has resulted in the incurrance by Americorp or Bank of an
Operating Loss or that might reasonably be expected to result in an Operating
Loss after December 31, 1997, which, net of any insurance proceeds payable in
respect thereof, would exceed $25,000. "Operating Loss" means any loss
resulting from cash shortages, lost or misposted items, disputed clerical and
accounting errors, forged checks, payment of checks over stop payment orders,
counterfeit money, wire transfers made in error, theft, robberies, defalcations,
check kiting, fraudulent use of credit cards or electronic teller machines or
other similar acts or occurrences.
3.26 ENVIRONMENTAL MATTERS. Except as set forth in Americorp's
Disclosure Letter, to the knowledge of Americorp and Bank, (i) each of Americorp
and Bank is in compliance with all Environmental Laws; (ii) there are no Tanks
on or about Americorp Property; (iii) there are no Hazardous Materials on, below
or above the surface of, or migrating to or from Americorp Property; (iv)
neither Americorp nor Bank has loans outstanding secured by real property that
is not in compliance with Environmental Laws or which has a leaking Tank or upon
which there are Hazardous Materials on or migrating to or from; and (v) without
limiting the foregoing representations and warranties contained in clauses (i)
through (iv), as of the date of this Agreement, there is no claim, action ,
suit, or proceeding or notice thereof before any Governmental Entity pending
against Americorp or Bank or concerning property securing Americorp and Bank
loans and there is no outstanding judgment, order, writ, injunction, decree, or
award against or affecting Americorp Property or property securing Americorp or
Bank loans, relating to the foregoing representations (i) -- (iv), in each case
the noncompliance with which, or the presence of
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which would have a material adverse effect on the business, financial
condition, results of operations or prospects of Americorp or Bank. For
purposes of this Agreement, the term "Environmental Laws" shall mean all
applicable statutes, regulations, rules, ordinances, codes, licenses,
permits, orders, approvals, plans, authorizations, concessions, franchises,
and similar items of all Governmental Entities and all applicable judicial,
administrative, and regulatory decrees, judgments, and orders relating to the
protection of human health or the environment, including, without limitation:
all requirements, including, but not limited to those pertaining to
reporting, licensing, permitting, investigation, and remediation of
emissions, discharges, releases, or threatened releases of Hazardous
Materials, chemical substances, pollutants, contaminants, or hazardous or
toxic substances, materials or wastes whether solid, liquid, or gaseous in
nature, into the air, surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of chemical substances, pollutants, contaminates, or
hazardous or toxic substances, materials, or wastes, whether solid, liquid,
or gaseous in nature and all requirements pertaining to the protection of the
health and safety of employees or the public. "Americorp Property" shall
mean real estate currently owned, leased, or otherwise used by Americorp or
Bank, or in which Americorp or Bank has an investment or security interest by
mortgage, deed of trust, sale and lease-back or otherwise, including without
limitation, properties under foreclosure and properties held by Americorp or
Bank in its capacity as a trustee or otherwise. "Tank" shall mean treatment
or storage tanks, sumps, or water, gas or oil wells and associated piping
transportation devices. "Hazardous Materials" shall mean any substance the
presence of which requires investigation or remediation under any federal,
state, or local statute, regulation, ordinance, order, action, policy or
common law, or which is or becomes defined as a hazardous waste, hazardous
substance, hazardous material, used oil, pollutant or contaminant under any
federal, state or local statute, regulation, rule or ordinance or amendments
thereto including without limitation, the Comprehensive Environmental
Response; Compensation and Liability Act (42 U.S.C.9601, ET SEQ.); the
Resource Conservation and Recovery Act (42 U.S.C. 6901, ET SEQ.); the Clean
Air Act, as amended (42 U.S.C. 7401, ET SEQ.); the Federal Water Pollution
Control Act, as amended (33 U.S.C. 1251, ET SEQ.); the Toxic Substances
Control Act, as amended (15 U.S.C. 9601, et seq.); the Occupational Safety
and Health Act, as amended (29 U.S.C. 65); the Emergency Planning and
Community Right-to-Know Act of 1986 (42 U.S.C. 11001, ET SEQ.); the Mine
Safety and Health Act of 1977, as amended (30 U.S.C. 801, ET SEQ.); the Safe
Drinking Water Act (42 U.S.C. 300f, ET SEQ.); and all comparable state and
local laws, including without limitation, the Carpenter-Presley-Tanner
Hazardous Substance Account Act (State Superfund), the Porter-Cologne Water
Quality Control Action, 25140, 25501(j) and (k); 25501.1.25281 and 25250.1 of
the California HEALTH AND SAFETY CODE and/or Article I of Title 22 of the
California CODE OF REGULATIONS, Division 4, Chapter 30; laws of other
jurisdictions or orders and regulations; or the presence of which causes or
threatens to cause a nuisance, trespass or other common law tort upon real
property or adjacent properties or poses or threatens to pose a hazard to the
health or safety of persons or without limitation, which contains gasoline,
diesel fuel or other petroleum hydrocarbons; polychlorinated biphenyls
(PCB's), asbestos or urea formaldehyde foam
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insulation.
3.27 COMMUNITY REINVESTMENT ACT. Bank received a rating of
"satisfactory" or better in its most recent examination or interim review with
respect to the Community Reinvestment Act. Neither Americorp nor Bank has been
advised of any concerns regarding compliance with the Community Reinvestment Act
by any Governmental Entity or by any other Person.
3.28 DERIVATIVES. Neither Americorp nor Bank is currently a party to
any interest rate swap, cap, floor, option agreement, other interest rate risk
management arrangement or agreement or derivative-type security or derivative
arrangement or agreement.
3.29 [Intentionally Left Blank]
3.30 SEC REPORTS. Americorp is not currently required to file any
reports pursuant to the Exchange Act.
3.31 TRUST ADMINISTRATION. Americorp and Bank do not presently
exercise trust powers, including, but not limited to, trust administration,
and have not exercised such trust powers for a period of at least 3 years
prior to the date hereof. The term "trusts" as used in this Section 3.31
includes (i) any and all common law or other trusts between an individual,
corporation or other entities and Americorp or Bank, as trustee or
co-trustee, including, without limitation, pension or other qualified or
nonqualified employee benefit plans, compensation, testamentary, inter vivos,
charitable trust indentures; (ii) any and all decedents' estates where
Americorp or Bank are serving or have served as a co-executor or sole
executor, personal representative or administrator, administrator de bonis
non, administrator de bonis non with will annexed, or in any similar
fiduciary capacity; (iii) any and all guardianships, conservatorships or
similar positions where Americorp or Bank are serving or have served as a
co-grantor or a sole grantor or a conservator or a co-conservator of the
estate, or any similar fiduciary capacity; and (iv) any and all agency and/or
custodial accounts and/or similar arrangements, including plan administrator
for employee benefit accounts, under which Americorp or Bank are serving or
have served as an agent or custodian for the owner or other party
establishing the account with or without investment authority.
3.32 REGULATORY APPROVALS. To the knowledge of Americorp and Bank,
except as described in Americorp's Disclosure Letter, Americorp and Bank have no
reason to believe that they would not receive all required approvals from any
Governmental Entity of any application to consummate the transactions
contemplated by this Agreement without the imposition of a materially burdensome
condition in connection with the approval of any such application.
3.33 YEAR 2000. Except as described in Americorp's Disclosure
Letter, Americorp and Bank are taking all reasonable steps to correct their
respective computer programs
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and applications so that they will not fail or will create erroneous results
by or at the Year 2000 and neither Americorp nor Bank has been advised of
any concerns regarding compliance with Year 2000 issues by any Governmental
Entity or by any other Person.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
CIB
CIB represents and warrants to Americorp and Bank as follows:
4.1 INCORPORATION, STANDING AND POWER. CIB has been duly
incorporated and is validly existing as a banking company under the laws of
California and is authorized by the Commissioner to conduct a general banking
business. CIB is a member bank of the Federal Reserve System and its deposits
are insured by the FDIC in the manner and to the extent provided by law. CIB has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as presently conducted.
Neither the scope of the business of CIB nor the location of any of its
properties requires that CIB be licensed to do business in any jurisdiction
other than in California where the failure to be so licensed would, individually
or in the aggregate, have a materially adverse effect on the financial
condition, results of operation or business of CIB.
4.2 CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of CIB consists of 5,000,000 shares of CIB Stock, of
which 533,282 shares are outstanding. All the outstanding shares of CIB Stock
are duly authorized, validly issued, fully paid, nonassessable and without
preemptive rights. Except as set forth in CIB's Disclosure Letter, there are no
outstanding options, warrants or other rights in or with respect to the unissued
shares of CIB Stock or any other securities convertible into such stock, and CIB
is not obligated to issue any additional shares of its capital stock or any
options, warrants or other rights in or with respect to the unissued shares of
its capital stock or any other securities convertible into such stock.
4.3 SUBSIDIARIES. Except as set forth in CIB's Disclosure Letter,
CIB does not own, directly or indirectly, any outstanding stock, Equity
Securities or other voting interest in any corporation, partnership, joint
venture or other entity or Person, other than DPC Property.
4.4 FINANCIAL STATEMENTS. CIB has previously furnished to Bank and
Americorp a copy of the Financial Statements of CIB. The Financial Statements
of CIB: (a) present fairly the financial condition of CIB as of the respective
dates indicated and its results of operations and cash flow for the respective
periods indicated; and (b) have been prepared in accordance with GAAP. The
audits of CIB have been conducted in accordance with generally accepted auditing
standards.
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The books and records of CIB are being maintained in material compliance with
applicable legal and accounting requirements. Except to the extent (i)
reflected in the Financial Statements of CIB and (ii) of liabilities incurred
since December 31, 1997 in the ordinary course of business and consistent
with past practice, CIB has no liabilities, whether absolute, accrued,
contingent or otherwise.
4.5 AUTHORITY OF CIB. The execution and delivery by CIB of this
Agreement and, subject to the requisite approval of the shareholders of CIB, the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of CIB, and this
Agreement is a valid and binding obligation of CIB, enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium
or other similar laws affecting the rights of creditors generally and by general
equitable principles and by Section 8(b)(6)(D) of the Federal Deposit Insurance
Act, 12 U.S.C. Section 1818(b)(6)(D). Except as set forth in CIB's Disclosure
Letter, neither the execution and delivery by CIB of this Agreement, the
consummation of the Bank Merger or the transactions contemplated herein, nor
compliance by CIB with any of the provisions hereof, will: (a) violate any
provision of its Charter Documents; (b) constitute a breach of or result in a
default (or give rise to any rights of termination, cancellation or
acceleration, or any right to acquire any securities or assets) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
franchise, license, permit, agreement, Encumbrance or other instrument or
obligation to which CIB is a party, or by which CIB or any of its properties or
assets is bound, if in any such circumstances, such event could have
consequences materially adverse to CIB; or (c) violate any Rule applicable to
CIB or any of its properties or assets. No Consent of any Governmental Entity
having jurisdiction over any aspect of the business or assets of CIB, and no
Consent of any Person, is required in connection with the execution and delivery
by CIB of this Agreement or the consummation by CIB of the Bank Merger and the
transactions contemplated hereby, except (i) the approval of this Agreement and
the transactions contemplated hereby by the shareholders of CIB; (ii) such
approvals or notices as may be required by the FRB, the Commissioner and the
FDIC; (iii) the declaring effective of the S-4 by the SEC and the approvals of
all necessary blue sky administrators; (iv) the California Department of the
State of California as to certain matters related to stock options; and (v) and
(v) as otherwise set forth in CIB's Disclosure Letter.
4.6 INSURANCE. CIB has policies of insurance and bonds covering its
assets and businesses against such casualties and contingencies and in such
amounts, types and forms as are customary in the banking industry for its
businesses, operations, properties and assets. All such insurance policies and
bonds are in full force and effect. Except as set forth in CIB's Disclosure
Letter, CIB has not received notice from any insurer that any such policy or
bond has canceled or indicating an intention to cancel or not to renew any such
policy or bond or generally disclaiming liability thereunder. Except as set
forth in CIB's Disclosure Letter, CIB is not in default under any such policy or
bond and all material claims thereunder have been filed in a timely fashion.
CIB's
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Disclosure Letter sets forth a list of all policies of insurance carried and
owned by CIB, showing the name of the insurance company, the nature of the
coverage, the policy limit, the annual premiums and the expiration dates.
The existing insurance carried by CIB is sufficient for compliance by CIB
with all material requirements of law and regulations and agreements to which
CIB is subject or is a party.
4.7 TITLE TO ASSETS. CIB's Disclosure Letter sets forth a summary
of all items of personal property and equipment with a book value of $25,000 or
more, or having an annual lease payment of $10,000 or more, owned or leased by
CIB. CIB has good and marketable title to all its properties and assets, other
than real property, owned or stated to be owned by CIB, free and clear of all
Encumbrances except: (a) as set forth in the Financial Statements of CIB;
(b) Encumbrances for current taxes not yet due; (c) Encumbrances incurred in the
ordinary course of business, if any, that, to the knowledge of CIB, (i) are not
substantial in character, amount or extent, (ii) do not materially detract from
the value, (iii) do not interfere with present use, of the property subject
thereto or affected thereby, and (iv) do not otherwise materially impair the
conduct of business of CIB; or (d) as set forth in CIB's Disclosure Letter.
4.8 REAL ESTATE. CIB's Disclosure Letter sets forth a list of all
real property, including leaseholds, owned by CIB, together with (i) a
description of the locations thereof, (ii) a description of each real property
lease, sublease, installment purchase, or similar arrangement to which CIB is a
party, and (iii) a description of each contract for the purchase, sale or
development of real estate to which CIB is a party. CIB has good and
marketable title to the real property, and valid leasehold interests in the
leaseholds, set forth in CIB's Disclosure Letter, free and clear of all
Encumbrances, except (a) for rights of lessors, co-lessees or sublessees in such
matters that are reflected in the lease; (b) Encumbrances for current taxes not
yet due and payable; (c) Encumbrances incurred in the ordinary course of
business, if any, that, to the knowledge of CIB, (i) are not substantial in
character, amount or extent, (ii) do not materially detract from the value,
(iii) do not interfere with present use, of the property subject thereto or
affected thereby, and (iv) do not otherwise materially impair the conduct of
business of CIB; or (d) as set forth in CIB's Disclosure Letter. CIB, as
lessee, has the right under valid and subsisting leases to occupy, use and
possess all property leased by it, as identified in CIB's Disclosure Letter,
and, to the knowledge of CIB, there has not occurred under any such lease any
breach, violation or default. Except as set forth in CIB's Disclosure Letter
and except with respect to deductibles under insurance policies set forth in
CIB's Disclosure Letter, CIB has not experienced any uninsured damage or
destruction with respect to the properties identified in CIB's Disclosure
Letter. To the knowledge of CIB, all properties and assets used by CIB are in
good operating condition and repair, suitable for the purposes for which they
are currently utilized, and comply with all applicable Rules related thereto.
CIB enjoys peaceful and undisturbed possession under all leases for the use of
real or personal property under which it is the lessee, and, to the knowledge of
CIB, all leases to which CIB is a party are valid and enforceable in all
material respects in accordance with the terms thereof except as may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
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rights and except as may be limited by the exercise of judicial discretion in
applying principles of equity. CIB is not in default with respect to any such
lease, and to the knowledge of the officers of CIB no event has occurred which
with the lapse of time or the giving of notice, or both, would constitute a
default under any such lease. Copies of each such lease are attached to CIB's
Disclosure Letter.
4.9 LITIGATION. Except as set forth in CIB's Disclosure Letter, to
the knowledge of CIB, there is no private or governmental suit, claim, action,
investigation or proceeding pending, nor to CIB's knowledge threatened, against
CIB or against any of its directors, officers or employees relating to the
performance of their duties in such capacities or against or affecting any
properties of CIB. Also, except as disclosed in CIB's Disclosure Letter, there
are no judgments, decrees, stipulations or orders against CIB enjoining it or
any of its directors, officers or employees in respect of, or the effect of
which is to prohibit, any business practice or the acquisition of any property
or the conduct of business in any area of CIB. To the knowledge of CIB, CIB is
not a party to any pending or, to the knowledge of any of the officers,
threatened legal, administrative or other claim, action, suit, investigation,
arbitration or proceeding challenging the validity or propriety of any of the
transactions contemplated by this Agreement.
4.10 TAXES. Except as set forth in CIB's Disclosure Letter, CIB had
filed all federal and foreign income tax returns, all state and local franchise
and income tax, real and personal property tax, sales and use tax, premium tax,
excise tax and other tax returns of every character required to be filed by it
and have paid all taxes, together with any interest and penalties owing in
connection therewith, shown on such returns to be due in respect of the periods
covered by such returns, other than taxes which are being contested in good
faith and for which adequate reserves have been established. Except as set
forth in CIB's Disclosure Letter, CIB has filed all required payroll tax
returns, has fulfilled all tax withholding obligations and have paid over to the
appropriate governmental authorities the proper amounts with respect to the
foregoing. The tax and audit positions taken by CIB in connection with the tax
returns described in the preceding sentence were reasonable and asserted in good
faith. Adequate provision has been made in the books and records of CIB and, to
the extent required by generally accepted accounting procedures, reflected in
the Financial Statements of CIB, for all tax liabilities, including interest or
penalties, whether or not due and payable and whether or not disputed, with
respect to any and all federal, foreign, state, local and other taxes for the
periods covered by such financial statements and for all prior periods. CIB's
Disclosure Letter sets forth (i) the date or dates through which the IRS has
examined the federal tax returns of CIB and the date or dates through which any
foreign, state, local or other taxing authority has examined any other tax
returns of CIB; (ii) a complete list of each year for which any federal, state,
local or foreign tax authority has obtained or has requested an extension of the
statute of limitations from CIB and lists each tax case of CIB currently pending
in audit, at the administrative appeals level or in litigation; and (iii) the
date and issuing authority of each statutory notice of deficiency, notice of
proposed assessment and revenue agent's report issued to CIB within the last
twelve (12) months. Except as set forth in CIB's Disclosure Letter, to the
knowledge of
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CIB, neither the IRS nor any foreign, state, local or other taxing authority
has, during the past three years, examined or is in the process of examining
any federal, foreign, state, local or other tax returns of CIB. To the
knowledge of CIB, neither the IRS nor any foreign, state, local or other
taxing authority is now asserting or threatening to assert any deficiency or
claim for additional taxes (or interest thereon or penalties in connection
therewith) except as set forth in CIB's Disclosure Letter.
4.11 COMPLIANCE WITH LAWS AND REGULATIONS. Except as set forth in
CIB's Disclosure Letter, CIB is not in default under or in breach of any
provision of its Charter Documents or any Rule promulgated by any Governmental
Entity having authority over it, where such default or breach would have a
material adverse effect on the business, financial condition or results of
operations of CIB.
4.12 PERFORMANCE OF OBLIGATIONS. CIB has performed all of the
obligations required to be performed by it to date and is not in material
default under or in breach of any term or provision of any material contract ,
and no event has occurred that, with the giving of notice or the passage of time
or both, would constitute such default or breach. To CIB's knowledge, no party
with whom CIB has an agreement that is material to the business of CIB is in
default thereunder.
4.13 EMPLOYEES. Except as set forth in CIB's Disclosure Letter,
there are no controversies pending or threatened between CIB and any of its
employees that are likely to have a material adverse effect on the business,
financial condition or results of operation of CIB. CIB is not a party to any
collective bargaining agreement with respect to any of its employees or any
labor organization to which its employees or any of them belong.
4.14 BROKERS AND FINDERS. Except as provided in CIB's Disclosure
Letter with copies of any such agreements attached, CIB is not a party to or
obligated under any agreement with any broker or finder relating to the
transactions contemplated hereby, and neither the execution of this Agreement
nor the consummation of the transactions provided for herein or therein will
result in any liability to any broker or finder.
4.15 ABSENCE OF MATERIAL CHANGE. Since December 31, 1997, the
business of CIB has been conducted only in the ordinary course, in substantially
the same manner as theretofore conducted, and, except as set forth in CIB's
Disclosure Letter, there has not occurred since December 31, 1997 any event that
has had or may reasonably be expected to have a material adverse effect on the
business, financial condition or results of operation of CIB.
4.16 LICENSES AND PERMITS. CIB has all licenses and permits that are
necessary for the conduct of its businesses, and such licenses are in full force
and effect, except for any failure to be in full force and effect that would
not, individually or in the aggregate, have a material adverse effect on the
business, financial condition or results of operations of CIB. The properties
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and operations of CIB are and have been maintained and conducted, in all
material respects, in compliance with all applicable Rules.
4.17 UNDISCLOSED LIABILITIES. Except as set forth in CIB's
Disclosure Letter CIB has no liabilities or obligations, either accrued or
contingent, that are material to CIB and that have not been:(a) reflected or
disclosed in the Financial Statements of CIB or (b) incurred subsequent to
December 31, 1997 in the ordinary course of business. CIB does not know of any
basis for the assertion against it of any liability, obligation or claim
(including, without limitation, that of any Governmental Entity) that is likely
to result in or cause a material adverse change in the business, financial
condition or results of operations of CIB that is not fairly reflected in the
Financial Statements of CIB or otherwise disclosed in this Agreement.
4.18 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in CIB's Disclosure Letter, CIB has no
"employee benefit plan," as defined in Section 3(3) of ERISA.
(b) CIB's Disclosure Letter sets forth copies or descriptions
of each Benefit Arrangement maintained or otherwise contributed to by CIB (such
plans and arrangements being collectively referred to herein as "CIB Benefit
Arrangements"). Except as set forth in CIB's Disclosure Letter, all CIB Benefit
Arrangements which are in effect have been in effect for substantially all of
1997. Except as set forth in CIB's Disclosure Letter, there has been no
material amendment thereof or increase in the cost thereof or benefits payable
thereunder since December 31, 1997. Except as set forth in CIB's Disclosure
Letter, there has been no material increase in the compensation of or benefits
payable to any senior executive employee of CIB since December 31, 1997, nor any
employment, severance or similar contract entered into with any such employee,
nor any amendment to any such contract, since December 31, 1997. Except as set
forth in CIB's Disclosure Letter, there is no contract, agreement or benefit
arrangement covering any employee of CIB which individually or collectively
could give rise to the payment of any amount which would constitute an "excess
parachute payment," as such term is defined in Section 280(G) of the Code.
(c) With respect to all CIB Benefit Arrangements, CIB is in
substantial compliance (other than noncompliance the cost or liability for which
is not material) with the requirements prescribed by any and all statutes,
governmental or court orders, or governmental rules or regulations currently in
effect, applicable to such plans or arrangements.
(d) Except for the contracts set forth in CIB's Disclosure
Letter, each CIB Benefit Arrangement and each personal services contract, fringe
benefit, consulting contract or similar arrangement with or for the benefit of
any officer, director, employee or other person can be terminated by CIB within
a period of 30 days following the Effective Time of the Bank Merger,
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without payment of any amount as a penalty, bonus, premium, severance pay or
other compensation for such termination.
4.19 CORPORATE RECORDS. The Charter Documents of CIB and all
amendments thereto to the date hereof (true, correct and complete copies of
which are set forth in CIB's Disclosure Letter) are in full force and effect as
of the date of this Agreement. The minute books of CIB, together with the
documents and other materials incorporated therein by reference, reflect all
meetings held and contain complete and accurate records of all corporate actions
taken by the board of directors of CIB (or any committees thereof) and
stockholders. Except as reflected in such minute books, there are no minutes of
meetings or consents in lieu of meetings of the board of directors (or any
committees thereof) or of the stockholders of CIB.
4.20 ACCOUNTING RECORDS. CIB maintains accounting records which
fairly and validly reflect, in all material respects, its transactions and
accounting controls sufficient to provide reasonable assurances that such
transactions are (i) executed in accordance with its management's general or
specific authorization, and (ii) recorded as necessary to permit the preparation
of financial statements in conformity with GAAP. Such records, to the extent
they contain material information pertaining to CIB which is not easily and
readily available elsewhere, have been duplicated, and such duplicates are
stored safely and securely.
4.21 OFFICES AND ATMS. Set forth in CIB's Disclosure Letter is a
list of the headquarters of CIB (identified as such) and each of the offices and
automated teller machines ("ATMs") maintained and operated (or to be maintained
and operated) by CIB (including, without limitation, representative and loan
production offices and operations centers) and the location thereof. Except as
set forth in CIB's Disclosure Letter, CIB maintains no other office or ATM and
conducts business at no other location, and CIB has not applied for nor received
permission to open any additional branch nor operate at any other location.
4.22 LOAN PORTFOLIO. CIB's Disclosure Letter sets forth a
description of: (a) by type and classification, all loans, leases, other
extensions and commitments to extend credit of CIB of $100,000 or more, that
have been classified by itself, its bank examiners or auditors (external or
internal) as "Watch List," "Substandard," "Doubtful," "Loss" or any comparable
classification; and (b) all loans due to CIB as to which any payment of
principal, interest or any other amount is 30 days or more past due. CIB's
allowance for loan losses is and will be at the Effective Time adequate and in
accordance with GAAP in all materials respects and in accordance with all
applicable regulatory requirements of any Governmental Entity.
4.23 POWER OF ATTORNEY. Except as set forth in CIB's Disclosure
Letter, CIB has not granted any Person a power of attorney or similar
authorization that is presently in effect or outstanding.
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4.24 OPERATING LOSSES. CIB's Disclosure Letter sets forth any
Operating Loss which has occurred at CIB during the period after December 31,
1997. To the knowledge of CIB, no action has been taken or omitted to be taken
by an employee of CIB that has resulted in the incurrence by CIB of an Operating
Loss or that might reasonably be expected to result in an Operating Loss after
December 31, 1997, which, net of any insurance proceeds payable in respect
thereof, would exceed $25,000.
4.25 ENVIRONMENTAL MATTERS. Except as set forth in CIB's Disclosure
Letter, to the knowledge of CIB, (i) CIB is in compliance with all Environmental
Laws; (ii) there are no Tanks on or about CIB Property; (iii) there are no
Hazardous Materials on, below or above the surface of, or migrating to or from
CIB Property; (iv) CIB has no loans outstanding secured by real property that is
not in compliance with Environmental Laws or which has a leaking Tank or upon
which there are Hazardous Materials on or migrating to or from; and (v) without
limiting the foregoing representations and warranties contained in clauses (i)
through (iv), as of the date of this Agreement, there is no claim, action ,
suit, or proceeding or notice thereof before any Governmental Entity pending
against CIB or concerning property securing CIB loans and there is no
outstanding judgment, order, writ, injunction, decree, or award against or
affecting CIB Property or property securing CIB loans, relating to the foregoing
representations (i) -- (iv), in each case the noncompliance with which, or the
presence of which would have a material adverse effect on the business,
financial condition, results of operations or prospects of CIB. "CIB Property"
shall mean real estate currently owned, leased, or otherwise used by CIB, or in
which CIB has an investment or security interest by mortgage, deed of trust,
sale and lease-back or otherwise, including without limitation, properties under
foreclosure and properties held by CIB in its capacity as a trustee or
otherwise.
4.26 COMMUNITY REINVESTMENT ACT. CIB received a rating of
"satisfactory" or better in its most recent examination or interim review with
respect to the Community Reinvestment Act. CIB has not been advised of any
concerns regarding CIB's compliance with the Community Reinvestment Act by any
Governmental Entity or by any other Person.
4.27 DERIVATIVES. CIB is not currently a party to any interest rate
swap, cap, floor, option agreement, other interest rate risk management
arrangement or agreement or derivative-type security or derivative arrangement
or agreement.
4.28 [Intentionally left blank]
4.29 SEC REPORTS. CIB is not currently required to file any reports
pursuant to the Exchange Act.
4.30 MATERIAL CONTRACTS. Except as set forth in CIB's Disclosure
Letter (all items listed or required to be listed in CIB's Disclosure Letter as
a result of this Section being referred to
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herein as "CIB Scheduled Contracts"), CIB is not a party or otherwise subject
to:
(a) any employment, deferred compensation, bonus or consulting
contract;
(b) any advertising, brokerage, licensing, dealership,
representative or agency relationship or contract;
(c) any contract or agreement that would restrict Americorp or
the Surviving Bank after the Effective Time from competing in any line of
business with any Person or using or employing the services of any Person;
(d) any collective bargaining agreement or other such contract
or agreement with any labor organization;
(e) any lease of real or personal property providing for annual
lease payments by or to CIB in excess of $10,000 per annum other than financing
leases entered into in the ordinary course of business in which CIB is lessor
and leases of real property presently used by CIB as banking offices.
(f) any mortgage, pledge, conditional sales contract, security
agreement, option, or any other similar agreement with respect to any interest
of CIB (other than as mortgagor or pledgor in the ordinary course of their
banking business or as mortgagee, secured party or deed of trust beneficiary in
the ordinary course of their business) in personal property having a value of
$25,000 or more;
(g) any stock purchase, stock option, stock bonus, stock
ownership, profit sharing, group insurance, bonus, deferred compensation,
severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or
former employees, officers or directors of CIB;
(h) any agreement to acquire equipment or any commitment to
make capital expenditures of $25,000 or more;
(i) other than agreements entered into in the ordinary course
of business with respect to DPC Property, any agreement for the sale of any
property or assets in which CIB has an ownership interest or for the grant of
any preferential right to purchase any such property or asset;
(j) any agreement for the borrowing of any money (other than
liabilities or interbank borrowings made in the ordinary course of their banking
business and reflected in the financial records of CIB);
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(k) any restrictive covenant contained in any deed to or lease
of real property owned or leased by CIB (as lessee) that materially restricts
the use, transferability or value of such property;
(l) any guarantee or indemnification which involves the sum of
$25,000 or more, other than letters of credit or loan commitments issued in the
normal course of business;
(m) any supply, maintenance or landscape contracts not
terminable by CIB without penalty on 30 days or less notice and which provides
for payments in excess of $10,000 per annum;
(n) other than as disclosed with reference to subparagraph (k)
of this Section 4.30, any agreement which would be terminable other than by CIB
or as a result of the consummation of the transactions contemplated by this
Agreement;
(o) any contract of participation with any other bank in any
loan entered into by CIB subsequent to December 31, 1997 in excess of $25,000 or
any sales of assets of CIB with recourse of any kind to CIB except the sale of
mortgage loans, servicing rights, repurchase or reverse repurchase agreements,
securities or other financial transactions in the ordinary course of business;
(p) any other agreement of any other kind, including for data
processing and similar services, which involves future payments or receipts or
performances of services or delivery of items requiring aggregate payment of
$10,000 or more to or by CIB other than payments made under or pursuant to loan
agreements, participation agreements and other agreements for the extension of
credit in the ordinary course of their business;
(q) any material agreement, arrangement or understanding not
made in the ordinary course of business;
(r) any agreement, arrangement or understanding relating to the
employment, election, retention in office or severance of any present or former
director, officer or employee of CIB;
(s) any agreement, arrangement or understanding pursuant to
which any payment (whether severance pay or otherwise) became or may become due
to any director, officer or employee of CIB upon execution of this Agreement or
upon or following consummation of the transactions contemplated hereby (either
alone or in connection with the occurrence of any additional acts or events); or
(t) any written agreement, supervisory agreement, memorandum of
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understanding, consent order, cease and desist order, capital order, or
condition of any regulatory order or decree with or by the Commissioner, FDIC,
FRB or any other regulatory agency.
True copies of all CIB Scheduled Contracts, including all amendments and
supplements thereto, are attached to CIB's Disclosure Letter.
4.31 TRUST ADMINISTRATION. CIB does not presently exercise trust
powers, including, but not limited to, trust administration, and has not
exercised such trust powers for a period of at least 3 years prior to the date
hereof. The term "trusts" as used in this Section 4.31 includes (i) any and all
common law or other trusts between an individual, corporation or other entities
and CIB, as trustee or co-trustee, including, without limitation, pension or
other qualified or nonqualified employee benefit plans, compensation,
testamentary, inter vivos and charitable trust indentures; (ii) any and all
decedents' estates where CIB is serving or has served as a co-executor or sole
executor, personal representative or administrator, administrator de bonis non,
administrator de bonis non with will annexed, or in any similar fiduciary
capacity; (iii) any and all guardianships, conservatorships or similar positions
where CIB is serving or has served as a co-grantor or a sole grantor or a
conservator or a co-conservator of the estate, or any similar fiduciary
capacity; and (iv) any and all agency and/or custodial accounts and/or similar
arrangements, including plan administrator for employee benefit accounts, under
which CIB is serving or has served as an agent or custodian for the owner or
other party establishing the account with or without investment authority.
4.32 REGULATORY APPROVALS. To the knowledge of CIB, except as
described in CIB's Disclosure Letter, CIB has no reason to believe that it would
not receive all required approvals from any Governmental Entity of any
application to consummate the transaction contemplated by this Agreement without
the imposition of a materially burdensome condition in connection with the
approval of any such application.
4.33 YEAR 2000. Except as described in CIB's Disclosure Letter, CIB
is taking all reasonable steps to correct its computer programs and applications
so that they will not fail or will create erroneous results by or at the Year
2000 and CIB has not been advised of any concerns regarding compliance with Year
2000 issues by any Governmental Entity or by any other Person.
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ARTICLE 5
AGREEMENTS WITH RESPECT TO CONDUCT OF
AMERICORP AND BANK AFTER THE DATE HEREOF
Americorp and Bank covenant and agree with CIB as follows:
5.1 ACCESS.
(a) Americorp and Bank will authorize and permit CIB, its
representatives, accountants and counsel, to have access during normal business
hours, on notice and in such manner as will not unreasonably interfere with the
conduct of the businesses of either Americorp or Bank, to all properties, books,
records, branch operating reports, branch audit reports, operating instructions
and procedures, tax returns, tax settlement letters, contracts and documents,
and all other information with respect to their business affairs, financial
condition, assets and liabilities as CIB may from time to time reasonably
request. Americorp and Bank shall permit CIB, its representatives, accountants
and counsel to make copies of such books, records and other documents and to
discuss the business affairs, condition (financial and otherwise), assets and
liabilities of Americorp and Bank with such third Persons, including, without
limitation, its directors, officers, employees, accountants, counsel and
creditors, as CIB considers necessary or appropriate for the purposes of
familiarizing itself with the businesses and operations of Americorp and Bank,
obtaining any necessary orders, consents or approvals of the transactions
contemplated by this Agreement by any Governmental Entity and conducting an
evaluation of the assets and liabilities of Americorp and Bank. Americorp and
Bank will cause Fanning & Karrh ("F&K") to make available to CIB, its
accountants, counsel and other agents, such personnel, work papers and other
documentation of F&K relating to its work papers and its audits of the books
and records of Americorp and Bank as may be requested by CIB in connection with
its review of the foregoing matters.
(b) The Chairman of the Board of CIB or in his absence another
representative of CIB selected by him shall be invited by Americorp and Bank to
attend all regular and special Board of Directors' and Executive Committee
meetings of Americorp or Bank from the date hereof until the Effective Time.
The Chairman of the Board of CIB and CIB's Senior Vice President/Senior Lending
Officer shall be invited by Bank to attend all loan committee meetings of Bank
from the date hereof until the Effective Time. Americorp and Bank shall inform
CIB of all such Board meeting at least 2 Business Days in advance of each such
meeting; provided, however, that the attendance of such representative of CIB
shall not be permitted at any meeting, or portion thereof, for the sole purpose
of discussing the transaction contemplated by this Agreement or the obligations
of either Americorp or the Bank under this Agreement.
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5.2 MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS;
FILINGS.
(a) Americorp and Bank will promptly notify CIB (i) of any
event of which Americorp or Bank obtains knowledge which may materially and
adversely affect the business, financial condition, or results of operations of
either Americorp or Bank; (ii) in the event Americorp or Bank determine that it
is possible that the conditions to the performance of CIB set forth in
Sections 8.1 and 8.3 may not be satisfied; (iii) of the opening or closing of
any branch or other office of Americorp or Bank at which business is conducted;
or (iv) any event, development or circumstance that, to the best knowledge of
Americorp or Bank, will or, with the passage of time or the giving of notice or
both, is reasonably expected to result in the loss to Americorp or Bank of the
services of any Executive Officer of Americorp or Bank.
(b) Americorp and Bank will furnish to CIB as provided in
Section 11.12 of this Agreement, as soon as practicable, and in any event within
5 Business Days after it is prepared or becomes available to either Americorp or
Bank, (i) a copy of any report submitted to the board of directors of either
Americorp or Bank and access to the working papers related thereto and copies of
other operating or financial reports prepared for management of any of its
businesses and access to the working papers related thereto, PROVIDED, HOWEVER,
that Americorp and Bank need not furnish CIB any privileged communications of or
memoranda prepared by its legal counsel in connection with the transactions
contemplated by, and the rights and obligations of Americorp and Bank under,
this Agreement; (ii) quarterly unaudited consolidated balance sheets and
statements of operations, changes in stockholders' equity and cash flow for
Americorp and Bank; (iii) monthly unaudited consolidated balance sheets and,
statements of operations for Americorp and Bank; (iv) as soon as available, all
letters and communications sent by Americorp to its shareholders and all reports
filed by Americorp or Bank with the SEC, the FRB, the FDIC, the Commissioner and
any other Person; and (v) such other reports as CIB may reasonably request
relating to Americorp or Bank.
(c) Each of the financial statements delivered pursuant to
subsection (b) shall be (i) prepared in accordance with GAAP on a basis
consistent with that of the Financial Statements of Americorp, except that such
financial statements may omit statements of cash flows and footnote disclosures
required by GAAP; and (ii) accompanied by a certificate of the chief financial
officer to the effect that such consolidated financial statements fairly present
the financial condition and results of operations of Americorp and Bank for the
period covered, and reflect all adjustments (which consist only of normal
recurring adjustments) necessary for a fair presentation.
5.3 CONDUCT OF BUSINESS.
(a) Between the date hereof and the Effective Time, except (i)
as contemplated by this Agreement, (ii) for a new employment agreement and
related Benefit Arrangements to be entered into between Americorp/Bank with the
Bank's current president, (iii) for certain amendments to the Americorp Stock
Option Plan contemplated by Section 9.1 and as
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required to clarify its tax status, (iv) for certain amendments to the
Americorp Stock Option Plan and the Americorp/Bank's Directors Retirement
Plan contemplated by Section 9.1, (v) certain amendments to the existing
stock option agreement of one directors of Americorp concerning the
termination date of such option, and (vi) subject to requirements of law and
regulation generally applicable to bank holding companies and banks,
Americorp or Bank shall not, without prior written consent of CIB (which
consent shall not be unreasonably withheld and which consent
[except with respect to subparagraph (29) of this Section 5.3(a)] shall be
deemed granted if within five (5) Business Days of CIB's receipt of written
notice of a request for prior written consent, written notice of objection is
not received by Americorp and Bank):
(1) amend, modify, terminate or fail to renew or preserve
their material Permits;
(2) amend or modify in any material respect, or, except as
they may expire in accordance with their terms, terminate any Americorp
Scheduled Contract or any other material contract or agreement to which
Americorp or Bank is a party, or materially default in the performance of any of
its obligations under any such contract or agreement;
(3) enter into any agreement or contract that would be
required to be included as a Americorp Scheduled Contract.
(4) terminate or unilaterally fail to renew any existing
insurance coverage or bonds;
(5) make any loan or other extension of credit, or enter
into any commitment to make any loan or other extension of credit to any
director, officer, employee or shareholder holding 5% or more of the outstanding
shares of Americorp Stock;
(6) grant any general or uniform increase in the rate of
pay to any employee or employee benefit or profit sharing plan or increase the
salary or employee benefits of any non-exempt employee or agent or pay any
bonus, severance or similar payment to any Person, except in the ordinary course
of business and consistent with past practice or established practices;
(7) grant any promotion or any increase in the rate of pay
to any exempt employee, profit sharing plan or increase in any employee benefits
or pay any bonus, severance or similar payment to any exempt employee except for
prorata bonuses, profit sharing or 401(k) matching payments which are in the
ordinary course of business and consistent with past practices and which do not
exceed the total amount of all such payments declared in 1997 multiplied by the
fraction derived by dividing (a) the number of full calendar months between
January 1, 1998 and the Effective Day by (b) twelve (12);
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(8) sell, transfer, mortgage, encumber or otherwise
dispose of any assets or release or waive any claim, except in the ordinary
course of business and consistent with past practice or as required by any
existing contract or for ordinary repairs, renewals or replacements or as
contemplated in this Agreement;
(9) issue, sell, or grant any Equity Securities of
Americorp or Bank (except pursuant to the exercise of an Americorp Stock Option
outstanding as of the date hereof), any other securities (including long term
debt), or any rights, options or securities to acquire any Americorp Stock
Option or any Equity Securities of Americorp or any other securities (including
long term debt) of Americorp;
(10) declare, issue or pay any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other things of value, to the shareholders of Americorp, or
split, combine or reclassify any shares of its capital stock or other Equity
Securities except for quarterly cash dividends payable by Americorp to its
shareholders in accordance with past practice and not to exceed $0.21 per share
per quarter;
(11) purchase, redeem or otherwise acquire any Equity
Securities, or other securities of Americorp or Bank or any rights, options, or
securities to acquire any Equity Securities of Americorp or Bank;
(12) amend or modify its Charter Documents except as
contemplated hereby;
(13) make their credit underwriting policies, standards or
practices relating to the making of loans and other extensions of credit, or
commitments to make loans and other extensions of credit, less stringent than
those in effect on December 31, 1997;
(14) make any capital expenditures, or commitments with
respect thereto, in excess of $25,000 except in the ordinary course of business
and consistent with past practice;
(15) make extraordinary payments to any Person other than
as contemplated, or as disclosed, in this Agreement;
(16) make any investment by purchase of stock or securities
(including an Investment Security), contributions to capital, property transfers
or otherwise in any other Person, except for federal funds or obligations of the
United States Treasury or an agency of the United States Government the
obligations of which are entitled to or implied to have the full faith and
credit of the United States government and which have an original maturity not
in excess of one year, or bank qualified investment grade municipal bonds, in
any case, in the ordinary course
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of business consistent with the past practices, and which are not designated
as trading;
(17) compromise or otherwise settle or adjust any assertion
or claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith); file any appeal from an asserted deficiency except in a
form previously approved by CIB in writing; file or amend any United States
federal, foreign, state or local tax return without CIB's prior written
approval, which approval shall not be unreasonably withheld; or make any tax
election or change any method or period of accounting unless required by GAAP or
applicable law;
(18) enter into or consent to any new employment agreement
or other Benefit Arrangement, or amend or modify any employment agreement or
other Bank Benefit Arrangement in effect on the date of this Agreement to which
either Americorp or Bank is a party or bound;
(19) grant any Person a power of attorney or similar
authority except in accordance with a written policy previously disclosed to
CIB;
(20) agree or make any commitment to take any actions
prohibited by this Section 5.3;
(21) change any of Bank's basic policies and practices with
respect to liquidity management and cash flow planning, marketing, deposit
origination, lending, budgeting, profit and tax planning, personnel practices or
any other material aspect of Bank's business or operations, except such changes
as may be required in the opinion of Americorp and Banks management to respond
to economic or market conditions or as may be required by any Governmental
Entity;
(22) take any action which would or is reasonably likely to
(i) adversely affect the ability of Americorp, Bank or CIB to obtain any
necessary approval of any Governmental Entity required for the transactions
contemplated hereby; (ii) adversely affect Americorp or Bank's ability to
perform their covenants and agreements under this Agreement; or (iii) result in
any of the conditions to the performance of Americorp, Bank or CIB's obligations
hereunder, as set forth in Article 8 herein not being satisfied;
(23) reclassify any Investment Security from
hold-to-maturity or available for sale to trading;
(24) sell any Investment Security prior to maturity, except
in the ordinary course of business;
(25) knowingly take or cause to be taken any action which
would
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disqualify the Bank Merger as a "reorganization" within the meaning of
Section 368 of the Code or prevent CIB from accounting for the business
combination to be effected by the Bank Merger as a pooling-of-interests;
(26) settle any claim, action or proceeding involving any
material liability for monetary damages or enter into any settlement agreement
containing material obligations;
(27) make, acquire a participation in, or reacquire an
interest in a participation sold of, any loan that is not in compliance with its
normal credit underwriting standards, policies and procedures as in effect as of
the date of this Agreement; or renew, extend the maturity of, or alter any of
the material terms of any such loan for a period of greater than six months;
(28) incur any indebtedness for borrowed money or assume,
guaranty, endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or (ii)
short-term borrowings made at prevailing market rates and terms; and
(29) grant, renew or commit to grant or renew any extension
of credit if such extension of credit, together with all other credit then
outstanding to the same Person and all Affiliated Persons, would exceed $500,000
on an unsecured basis and $1,000,000 on a secured basis. Consent shall be
deemed granted if within two Business Days of written notice delivered to CIB's
Chief Credit Officer, written notice of objection is not received by Americorp
or Bank.
(b) Between the date hereof and the Effective Time, Americorp
and Bank shall:
(1) duly observe and conform in all material respects to
all lawful requirements applicable to its business;
(2) maintain their assets and properties in good condition
and repair, normal wear and tear excepted;
(3) promptly upon learning of such information, advise CIB
in writing of any event or any other transaction within its knowledge whereby
any Person or Related Group of Persons acquires, directly or indirectly, record
or beneficial ownership or control (as defined in Rule 13d-3 promulgated by the
SEC under the Exchange Act) of five percent (5%) or more of the outstanding
Americorp Stock prior to the record date fixed for the Americorp
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Shareholders' Meeting or any adjourned meeting thereof to approve this
Agreement and the transaction contemplated herein;
(4) promptly notify CIB regarding receipt from any tax
authority of any notification of the commencement of an audit, any request to
extend the statute of limitations, any statutory notice of deficiency, any
revenue agent's report, any notice of proposed assessment, or any other similar
notification of potential adjustments to the tax liabilities of Americorp or
Bank, or any actual or threatened collection enforcement activity by any tax
authority with respect to tax liabilities of Americorp or Bank; and
(5) maintain an allowance for loan and lease losses
consistent with practices and methodology as in effect on the date of the
execution of this Agreement, and shall not, notwithstanding any recoveries
received with respect to loans previously charged off, reduce the allowance for
loan and lease losses below the amount in effect on the date of the execution of
this Agreement.
5.4 CERTAIN LOANS AND OTHER EXTENSIONS OF AMERICORP AND BANK.
Americorp and Bank will promptly inform CIB of the amounts and categories of any
loans, leases or other extensions of credit that have been classified by any
Governmental Entity or by any internal or external loan reviewer of Americorp or
Bank as "Watch List," "Substandard," "Doubtful," "Loss" or any comparable
classification. Americorp and Bank will furnish to CIB, as soon as practicable,
and in any event within 10 days after the end of each calendar month, schedules
including a listing of the following:
(a) classified credits, showing with respect to each such
credit in amount equal to or exceeding $25,000, the classification category,
credit type, and office, and with respect to all other such credits, by credit
type and office, the aggregate dollar amount;
(b) nonaccrual credits, showing with respect to each such
credit in amount equal to or exceeding $25,000, the credit type and office, and
with respect to all other such credits, by credit type and office, the aggregate
dollar amount;
(c) accrual exception credits that are delinquent 90 or more
days and have not been placed on nonaccrual status, showing with respect to each
such credit in amount equal to or exceeding $25,000, the credit type and office,
and with respect to all other such credits, by credit type and office, the
aggregate dollar amount;
(d) delinquent credits showing with respect to each such credit
in amount equal to or exceeding $25,000, the credit type, office and an aging
schedule broken down into 30-59, 60-89, 90 + day categories, and with respect to
all other such credits, by credit type, office and by aging category, the
aggregate dollar amount;
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(e) loan and lease participations, stating, with respect to
each, whether it is purchased or sold, the loan or lease type, and the office;
(f) loans or leases (including any commitments) by Americorp or
Bank to any director, officer, or employee of Americorp or Bank, or any
shareholder holding 5% or more of the capital stock of Americorp, including with
respect to each such loan or lease, the identity and, to the best knowledge of
Americorp and Bank, the relation of the borrower to Americorp and Bank, the loan
or lease type and the outstanding and undrawn amounts;
(g) letters of credit, showing with respect to each letter of
credit in an amount equal to or exceeding $25,000, the credit type and office,
and showing with respect to all other such letters of credit, by credit type and
office, the aggregate dollar amount;
(h) loans or leases charged off during the previous month,
showing with respect to each such loan or lease, the credit type and office;
(i) loans or leases written down during the previous month,
including with respect to each the original amount, the writeoff amount, credit
type and office;
(j) other real estate or assets owned, stating with respect to
each its credit type;
(k) a reconciliation of the allowance for loan and lease
losses, identifying specifically the amount and sources of all additions and
reductions to the allowance (which may be by reference to specific portions of
another schedule furnished pursuant to this Section 5.4 and, in the case of
unallocated adjustments, shall disclose the methodology and calculations through
which the amount of such adjustment was determined);
(l) extensions of credit whether unsecured or secured in amount
equal to or exceeding $1,000,000, originated on or after the date of the
schedule previously provided to CIB (or if it is the first such schedule, the
date of this Agreement) and before the date of the schedule in which reported,
showing with respect to each, the credit type and the office; and
(m) renewals or extensions of maturity of outstanding
extensions of credit whether unsecured or secured in amount equal to or
exceeding $1,000,000, showing with respect to each, the credit type and the
office.
5.5 DISCLOSURE LETTER. Promptly in the case of material matters,
and not less than monthly in the case of all other matters, Americorp and Bank
shall amend or supplement the Americorp Disclosure Letter provided for herein
pertaining to Americorp and Bank as necessary so that the information contained
therein accurately reflects the then current status of Americorp and
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Bank and shall transmit copies of such amendments or supplements to CIB in
accordance with Section 11.12 of this Agreement.
5.6 SHAREHOLDER APPROVAL.
(a) Americorp will promptly take action necessary in accordance
with applicable law and its Charter Documents to convene a meeting of its
shareholders (the "Americorp Shareholders' Meeting") to be held as soon as
practicable, for the purpose of voting on the Bank Merger, this Agreement and
related matters. In connection with the Americorp Shareholders' Meeting, (i)
the Board of Directors of Americorp shall, subject to fiduciary duty, recommend
shareholder approval of the Bank Merger, this Agreement and related matters; and
(ii) Americorp shall use its best efforts to obtain such shareholder approval by
the largest possible percentage.
(b) Bank will promptly take action necessary in accordance with
applicable law and its Charter Documents to convene a meeting of its shareholder
to be held as soon as practicable, for the purpose of voting on the Bank Merger,
this Agreement and related matters. Americorp shall vote all shares of Bank
Stock which it owns at such meeting in favor of the Bank Merger, this Agreement
and related matters.
5.7 CONSENTS AND APPROVALS.
(a) Americorp and Bank will cooperate with CIB in the
preparation of all filings, applications, notices and requests for waiver for
Consents necessary or desirable for the consummation of the Bank Merger, and the
other transactions contemplated in this Agreement. Americorp's and Bank's
cooperation hereunder shall include, but not be limited to, providing all
information concerning Americorp or Bank and their respective shareholders as
may be required for such filings, applications, notices and requests for
Consents and signing, to the extent required, all such filings, applications,
notices and requests.
(b) To the extent that the consent of a third party ("Third
Party Consent") with respect to any contract, agreement, license, franchise,
lease, commitment, arrangement, Permit or release that is material to the
business of Americorp or Bank or that is contemplated in this Agreement is
required in connection with the Bank Merger or the transactions contemplated in
this Agreement, Americorp and Bank shall use its best efforts to obtain such
consent prior to the Effective Time.
5.8 PRESERVATION OF EMPLOYMENT RELATIONS PRIOR TO EFFECTIVE TIME.
Americorp and Bank will use their best efforts consistent with current
employment practices and policies to maintain the services of the officers and
employees of Americorp and Bank through the Effective Time.
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5.9 COMPLIANCE WITH RULES. Americorp and Bank shall comply with
the requirements of all applicable Rules, the noncompliance with which would
materially and adversely affect the assets, liabilities, business, financial
condition or results of operations or prospects of Americorp or Bank.
5.10 AGREEMENT OF MERGER. As soon as practicable, Americorp and
Bank shall execute the Agreement of Merger.
5.11 AFFILIATES AND FIVE PERCENT SHAREHOLDER AGREEMENTS. Within
thirty (30) days of the execution of this Agreement, (a) Americorp and Bank
shall deliver to CIB a letter identifying all persons who are then "affiliates"
of Americorp or Bank for purposes of Rule 145 under the Securities Act and (b)
Americorp shall advise the persons identified in such letter of the resale
restrictions imposed by applicable securities laws and shall use reasonable
efforts to obtain from each person identified in such letter a written agreement
substantially in the form attached hereto as Exhibit 5.11. Americorp shall use
reasonable efforts to obtain from any person who becomes an affiliate of
Americorp after Americorp's delivery of the letter referred to above, and on or
prior to the date of the Americorp Shareholders' Meeting to approve this
Agreement, a written agreement substantially in the form attached as Exhibit
5.11 hereto as soon as practicable after obtaining such status. At least 10
Business Days prior to the issuance of the opinion to be provided for in Section
8.1(h), Americorp shall use its best efforts to cause each person or group of
persons who holds more than five percent (5%) of the Americorp Stock (regardless
of whether such person is an "affiliate" under Rule 145) to deliver to F&K, VTD
(as hereinafter defined) and Reitner & Stuart, a letter stating that such
shareholder(s) has no present plan or intention to dispose of Americorp Stock
and committing that such shareholder(s) will not dispose of Americorp Stock in a
manner to cause a violation of the "continuity of shareholder interest"
requirements of Treasury Regulation 1.368-1.
5.12 INSURANCE.
(a) Americorp and Bank shall permit CIB to extend the discovery
period of its directors' and officers' liability insurance for a period of 36
months with respect to all matters arising from facts or events which occurred
before the Effective Time for which CIB would have had an obligation to
indemnify its directors and officers. The cost of such extension shall not be
included in the calculation of the Aggregate Book Value of CIB.
(b) If Americorp or Bank or any of its successors or assigns
(i) shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then and
in each such case, Americorp or Bank shall take no action to impair the rights
provided in this Section 5.12.
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(c) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each director or officer of CIB and his
or her heirs and representatives.
5.13 NO SHOP. Neither Americorp nor any of its Affiliates shall, on
or before the earlier of the Effective Time or the date of termination of this
Agreement, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to any Competing Transaction (as such term is defined in
Section 6.13), or negotiate with any Person in furtherance of such inquiries or
to obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or any other
representative retained by it or any of its Affiliates to take any such action,
and Americorp shall promptly notify Americorp (orally and in writing) of all of
the relevant details relating to all inquiries and proposals which they may
receive relating to any of such matters. Notwithstanding any other provision
in this Section 5.13 or elsewhere in this Agreement, the obligations of
Americorp in this Agreement are subject to the continuing fiduciary duties of
its Board of Directors. In the event the Board of Directors of Americorp
receives a bona fide offer for a Competing Transaction with another entity, and
reasonably determines, upon written advice of counsel, that as a result of such
offer, any duty to act or to refrain from doing any act pursuant to this
Agreement, is inconsistent with the continuing fiduciary duties of said Board of
Directors to their shareholders, such failure to act or refrain from doing any
act shall not constitute the failure of any condition, breach of any covenant or
otherwise constitute any breach of this Agreement, except that any such failure
to act or refrain from doing any act shall entitle CIB to terminate this
Agreement pursuant to Section 10.1(g) hereof, and in no event shall this
sentence or the previous sentence operate to excuse or modify the obligations of
Americorp under Section 11.1(d) hereof.
5.14 BANK BENEFIT ARRANGEMENTS. Subject to Article 9 hereof, Bank
and any effected officers, directors or employees shall mutually terminate all
Bank Benefit Arrangements without the imposition of any liability therefor to
Americorp or any other Party.
ARTICLE 6
AGREEMENTS WITH RESPECT TO CONDUCT OF
CIB AFTER THE DATE HEREOF
CIB covenant and agree with Americorp and Bank as follows:
6.1 ACCESS.
(a) CIB will authorize and permit Americorp, its
representatives, accountants and counsel, to have access during normal business
hours, on notice and in such
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manner as will not unreasonably interfere with the conduct of the businesses
of CIB, to all properties, books, records, branch operating reports, branch
audit reports, operating instructions and procedures, tax returns, tax
settlement letters, contracts and documents, and all other information with
respect to its business affairs, financial condition, assets and liabilities
as Americorp may from time to time reasonably request. CIB shall permit
Americorp, its representatives, accountants and counsel to make copies of
such books, records and other documents and to discuss the business affairs,
condition (financial and otherwise), assets and liabilities of CIB with such
third Persons, including, without limitation, its directors, officers,
employees, accountants, counsel and creditors, as Americorp considers
necessary or appropriate for the purposes of familiarizing itself with the
businesses and operations of CIB, obtaining any necessary orders, consents or
approvals of the transactions contemplated by this Agreement by any
Governmental Entity and conducting an evaluation of the assets and
liabilities of CIB. CIB will cause Vavrinek, Trine, Day and Co. ("VTD") to
make available to Americorp, its accountants, counsel and other agents, such
personnel, work papers and other documentation of VTD relating to its work
papers and its audits of the books and records of CIB as may be requested by
Americorp in connection with its review of the foregoing matters.
(b) The Chairman of the Board of Americorp or in his absence
another representative of Americorp selected by him shall be invited by CIB to
attend all regular and special Board of Directors' and Executive Committee
meetings of CIB from the date hereof until the Effective Time. The Chairman of
the Board of Bank and Bank's President shall be invited by CIB to attend all
loan committee meetings of CIB from the date hereof until the Effective Time.
CIB shall inform Americorp of all such Board meeting at least 2 Business Days in
advance of each such meeting; provided, however, that the attendance of such
representative of Americorp shall not be permitted at any meeting, or portion
thereof, for the sole purpose of discussing the transaction contemplated by this
Agreement or the obligations of CIB under this Agreement.
6.2 MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS;
FILINGS.
(a) CIB will promptly notify Americorp (i) of any event of
which CIB obtains knowledge which may materially and adversely affect the
business, financial condition, or results of operations of either CIB; (ii) in
the event CIB determine that it is possible that the conditions to the
performance of Americorp set forth in Sections 8.1 and 8.2 may not be satisfied;
(iii) of the opening or closing of any branch or other office of CIB at which
business is conducted; or (iv) any event, development or circumstance that, to
the best knowledge of CIB, will or, with the passage of time or the giving of
notice or both, is reasonably expected to result in the loss to CIB of the
services of any Executive Officer of CIB.
(b) CIB will furnish to Americorp as provided in Section 11.12
of this Agreement, as soon as practicable, and in any event within 5 Business
Days after it is prepared or becomes available to either CIB, (i) a copy of any
report submitted to the board of directors of
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either CIB and access to the working papers related thereto and copies of
other operating or financial reports prepared for management of any of its
businesses and access to the working papers related thereto, PROVIDED,
HOWEVER, that CIB need not furnish Americorp any privileged communications of
or memoranda prepared by its legal counsel in connection with the
transactions contemplated by, and the rights and obligations of CIB under,
this Agreement; (ii) quarterly unaudited balance sheets and statements of
operations, changes in stockholders' equity and cash flow for CIB; (iii)
monthly unaudited balance sheets and, statements of operations for CIB; (iv)
as soon as available, all letters and communications sent by CIB to its
shareholders and all reports filed by CIB with the SEC, the FRB, the FDIC,
the Commissioner and any other Person; and (v) such other reports as
Americorp may reasonably request relating to CIB.
(c) Each of the financial statements delivered pursuant to
subsection (b) shall be (i) prepared in accordance with GAAP on a basis
consistent with that of the Financial Statements of CIB except that such
financial statements may omit statements of cash flows and footnote disclosures
required by GAAP; and (ii) accompanied by a certificate of the chief financial
officer to the effect that such financial statements fairly present the
financial condition and results of operations of CIB for the period covered, and
reflect all adjustments (which consist only of normal recurring adjustments)
necessary for a fair presentation.
6.3 CONDUCT OF BUSINESS.
(a) Between the date hereof and the Effective Time, except (i)
as contemplated by this Agreement, (ii) for new employment agreements and
related Benefit Arrangements to be entered into between CIB with its Senior Vice
President and Chief Financial Officer and its Senior Vice Presdient/ Senior
Lending Officer, and (iii) subject to requirements of law and regulation
generally applicable to bank holding companies and banks, CIB shall not, without
prior written consent of Americorp (which consent shall not be unreasonably
withheld and which consent [except with respect to subparagraph (29) of this
Section 6.3(a)] shall be deemed granted if within five (5) Business Days of
Americorp's receipt of written notice of a request for prior written consent,
written notice of objection is not received by CIB):
(1) amend, modify, terminate or fail to renew or preserve
their material Permits;
(2) amend or modify in any material respect, or, except as
they may expire in accordance with their terms, terminate any CIB Scheduled
Contract or any other material contract or agreement to which CIB is a party, or
materially default in the performance of any of its obligations under any such
contract or agreement;
(3) enter into any agreement or contract that would be
required to be included as a CIB Scheduled Contract.
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(4) terminate or unilaterally fail to renew any existing
insurance coverage or bonds;
(5) make any loan or other extension of credit, or enter
into any commitment to make any loan or other extension of credit to any
director, officer, employee or shareholder holding 5% or more of the outstanding
shares of CIB Stock;
(6) grant any general or uniform increase in the rate of
pay to any employee or employee benefit or profit sharing plan or increase the
salary or employee benefits of any non-exempt employee or agent or pay any
bonus, severance or similar payment to any Person, except in the ordinary course
of business and consistent with past practice or established practices;
(7) grant any promotion or any increase in the rate of pay
to any exempt employee, profit sharing plan or increase in any employee benefits
or pay any bonus, severance or similar payment to any exempt employee except for
prorata bonuses, profit sharing or 401(k) matching payments which are in the
ordinary course of business and consistent with past practices and which do not
exceed the total amount of all such payments declared in 1997 multiplied by the
fraction derived by dividing (a) the number of full calendar months between
January 1, 1998 and the Effective Day by (b) twelve (12);
(8) sell, transfer, mortgage, encumber or otherwise
dispose of any assets or release or waive any claim, except in the ordinary
course of business and consistent with past practice or as required by any
existing contract or for ordinary repairs, renewals or replacements or as
contemplated in this Agreement;
(9) issue, sell, or grant any Equity Securities of CIB
(except pursuant to the exercise of CIB options outstanding as of the date
hereof), any other securities (including long term debt), or any rights, options
or securities to acquire any CIB Stock Option or any Equity Securities of CIB or
any other securities (including long term debt) of CIB;
(10) declare, issue or pay any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other things of value, to the shareholders of CIB, or split,
combine or reclassify any shares of its capital stock or other Equity Securities
except for semi-annual cash dividends payable in accordance with past practice
and schedule not to exceed $0.10 per share per semi-annual period;
(11) purchase, redeem or otherwise acquire any Equity
Securities, or other securities of CIB or any rights, options, or securities to
acquire any Equity Securities of CIB;
(12) amend or modify its Charter Documents;
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(13) make their credit underwriting policies, standards or
practices relating to the making of loans and other extensions of credit, or
commitments to make loans and other extensions of credit, less stringent than
those in effect on December 31, 1997;
(14) make any capital expenditures, or commitments with
respect thereto, in excess of $25,000 except in the ordinary course of business
and consistent with past practice;
(15) make extraordinary payments to any Person other than
as contemplated, or as disclosed, in this Agreement;
(16) make any investment by purchase of stock or securities
(including an Investment Security), contributions to capital, property transfers
or otherwise in any other Person, except for federal funds or obligations of the
United States Treasury or an agency of the United States Government the
obligations of which are entitled to or implied to have the full faith and
credit of the United States government and which have an original maturity not
in excess of one year, or bank qualified investment grade municipal bonds, in
any case, in the ordinary course of business consistent with the past practices,
and which are not designated as trading;
(17) compromise or otherwise settle or adjust any assertion
or claim of a deficiency in taxes (or interest thereon or penalties in
connection therewith); file any appeal from an asserted deficiency except in a
form previously approved by Americorp in writing; file or amend any United
States federal, foreign, state or local tax return without Americorp's prior
written approval, which approval shall not be unreasonably withheld; or make any
tax election or change any method or period of accounting unless required by
GAAP or applicable law;
(18) enter into or consent to any new employment agreement
or other Benefit Arrangement, or amend or modify any employment agreement or
other CIB Benefit Arrangement in effect on the date of this Agreement to which
either CIB is a party or bound;
(19) grant any Person a power of attorney or similar
authority except in accordance with a written policy previously disclosed to
Americorp;
(20) agree or make any commitment to take any actions
prohibited by this Section 6.3;
(21) change any of CIB's basic policies and practices with
respect to liquidity management and cash flow planning, marketing, deposit
origination, lending, budgeting, profit and tax planning, personnel practices or
any other material aspect of CIB's business or operations, except such changes
as may be required in the opinion of CIB's
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management to respond to economic or market conditions or as may be required
by any Governmental Entity;
(22) take any action which would or is reasonably likely to
(i) adversely affect the ability of CIB, Bank or Americorp to obtain any
necessary approval of any Governmental Entity required for the transactions
contemplated hereby; (ii) adversely affect CIB's ability to perform their
covenants and agreements under this Agreement; or (iii) result in any of the
conditions to the performance of CIB, Bank or Americorp's obligations hereunder,
as set forth in Article 8 herein not being satisfied;
(23) reclassify any Investment Security from
hold-to-maturity or available for sale to trading;
(24) sell any Investment Security prior to maturity, except
in the ordinary course of business;
(25) knowingly take or cause to be taken any action which
would disqualify the Bank Merger as a "reorganization" within the meaning of
Section 368 of the Code or prevent Americorp from accounting for the business
combination to be effected by the Bank Merger as a pooling-of-interests;
(26) settle any claim, action or proceeding involving any
material liability for monetary damages or enter into any settlement agreement
containing material obligations;
(27) make, acquire a participation in, or reacquire an
interest in a participation sold of, any loan that is not in compliance with its
normal credit underwriting standards, policies and procedures as in effect as of
the date of this Agreement; or renew, extend the maturity of, or alter any of
the material terms of any such loan for a period of greater than six months;
(28) incur any indebtedness for borrowed money or assume,
guaranty, endorse or otherwise as an accommodation become responsible for the
obligations of any other Person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or (ii)
short-term borrowings made at prevailing market rates and terms; and
(29) grant, renew or commit to grant or renew any extension
of credit if such extension of credit, together with all other credit then
outstanding to the same Person and all Affiliated Persons, would exceed $500,000
on an unsecured basis and $1,000,000 on a secured basis. Consent shall be
deemed granted if within two Business Days of written notice
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delivered to Bank's Chief Credit Officer, written notice of objection is not
received by CIB.
(b) Between the date hereof and the Effective Time , CIB shall:
(1) duly observe and conform in all material respects to
all lawful requirements applicable to its business;
(2) maintain its assets and properties in good condition
and repair, normal wear and tear excepted;
(3) promptly upon learning of such information, advise
Americorp in writing of any event or any other transaction within its knowledge
whereby any Person or Related Group of Persons acquires, directly or indirectly,
record or beneficial ownership or control (as defined in Rule 13d-3 promulgated
by the SEC under the Exchange Act) of five percent (5%) or more of the
outstanding CIB Stock prior to the record date fixed for the CIB Shareholders'
Meeting or any adjourned meeting thereof to approve this Agreement and the
transaction contemplated herein;
(4) promptly notify Americorp regarding receipt from any
tax authority of any notification of the commencement of an audit, any request
to extend the statute of limitations, any statutory notice of deficiency, any
revenue agent's report, any notice of proposed assessment, or any other similar
notification of potential adjustments to the tax liabilities of CIB, or any
actual or threatened collection enforcement activity by any tax authority with
respect to tax liabilities of CIB; and
(5) maintain an allowance for loan and lease losses
consistent with practices and methodology as in effect on the date of the
execution of this Agreement, and shall not, notwithstanding any recoveries
received with respect to loans previously charged off, reduce the allowance for
loan and lease losses below the amount in effect on the date of the execution of
this Agreement.
6.4 CERTAIN LOANS AND OTHER EXTENSIONS OF CIB. CIB will promptly
inform Americorp of the amounts and categories of any loans, leases or other
extensions of credit that have been classified by any Governmental Entity or by
any internal or external loan reviewer of CIB as "Watch List," "Substandard,"
"Doubtful," "Loss" or any comparable classification. CIB will furnish to
Americorp, as soon as practicable, and in any event within 10 days after the end
of each calendar month, schedules including a listing of the following:
(a) classified credits, showing with respect to each such
credit in amount equal to or exceeding $25,000, the classification category,
credit type, and office, and with respect to all other such credits, by credit
type and office, the aggregate dollar amount;
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(b) nonaccrual credits, showing with respect to each such
credit in amount equal to or exceeding $25,000, the credit type and office, and
with respect to all other such credits, by credit type and office, the aggregate
dollar amount;
(c) accrual exception credits that are delinquent 90 or more
days and have not been placed on nonaccrual status, showing with respect to each
such credit in amount equal to or exceeding $25,000, the credit type and office,
and with respect to all other such credits, by credit type and office, the
aggregate dollar amount;
(d) delinquent credits showing with respect to each such credit
in amount equal to or exceeding $25,000, the credit type, office and an aging
schedule broken down into 30-59, 60-89, 90 + day categories, and with respect to
all other such credits, by credit type, office and by aging category, the
aggregate dollar amount;
(e) loan and lease participations, stating, with respect to
each, whether it is purchased or sold, the loan or lease type, and the office;
(f) loans or leases (including any commitments) by CIB to any
director, officer, or employee of CIB, or any shareholder holding 5% or more of
the capital stock of CIB, including with respect to each such loan or lease, the
identity and, to the best knowledge of CIB, the relation of the borrower to CIB,
the loan or lease type and the outstanding and undrawn amounts;
(g) letters of credit, showing with respect to each letter of
credit in an amount equal to or exceeding $25,000, the credit type and office,
and showing with respect to all other such letters of credit, by credit type and
office, the aggregate dollar amount;
(h) loans or leases charged off during the previous month,
showing with respect to each such loan or lease, the credit type and office;
(i) loans or leases written down during the previous month,
including with respect to each the original amount, the writeoff amount, credit
type and office;
(j) other real estate or assets owned, stating with respect to
each its credit type;
(k) a reconciliation of the allowance for loan and lease
losses, identifying specifically the amount and sources of all additions and
reductions to the allowance (which may be by reference to specific portions of
another schedule furnished pursuant to this Section 6.4 and, in the case of
unallocated adjustments, shall disclose the methodology and calculations through
which the amount of such adjustment was determined);
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(l) extensions of credit whether unsecured or secured in amount
equal to or exceeding $1,000,000, originated on or after the date of the
schedule previously provided to Americorp (or if it is the first such schedule,
the date of this Agreement) and before the date of the schedule in which
reported, showing with respect to each, the credit type and the office; and
(m) renewals or extensions of maturity of outstanding
extensions of credit whether unsecured or secured in amount equal to or
exceeding $1,000,000, showing with respect to each, the credit type and the
office.
6.5 DISCLOSURE LETTER. Promptly in the case of material matters,
and not less than monthly in the case of all other matters, CIB shall amend or
supplement the CIB Disclosure Letter provided for herein pertaining to CIB as
necessary so that the information contained therein accurately reflects the then
current status of CIB and shall transmit copies of such amendments or
supplements to Americorp in accordance with Section 11.12 of this Agreement.
6.6 SHAREHOLDER APPROVAL. CIB will promptly take action necessary
in accordance with applicable law and its Charter Documents to convene a meeting
of its shareholders (the "CIB Shareholders' Meeting") to be held as soon as
practicable, for the purpose of voting on the Bank Merger, this Agreement and
related matters. In connection with the CIB Shareholders' Meeting, (i) the
Board of Directors of CIB shall, subject to fiduciary duty, recommend
shareholder approval of the Bank Merger, this Agreement and related matters; and
(ii) CIB shall use its best efforts to obtain such shareholder approval by the
largest possible percentage.
6.7 CONSENTS AND APPROVALS.
(a) CIB will cooperate with Americorp in the preparation of all
filings, applications, notices and requests for waiver for Consents necessary or
desirable for the consummation of the Bank Merger, and the other transactions
contemplated in this Agreement. CIB's and Bank's cooperation hereunder shall
include, but not be limited to, providing all information concerning CIB and its
shareholders as may be required for such filings, applications, notices and
requests for Consents and signing, to the extent required, all such filings,
applications, notices and requests.
(b) To the extent that a Third Party Consent with respect to
any contract, agreement, license, franchise, lease, commitment, arrangement,
Permit or release that is material to the business of CIB or that is
contemplated in this Agreement is required in connection with the Bank Merger or
the transactions contemplated in this Agreement, CIB shall use its best efforts
to obtain such consent prior to the Effective Time.
6.8 PRESERVATION OF EMPLOYMENT RELATIONS PRIOR TO EFFECTIVE TIME.
CIB will
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use its best efforts consistent with current employment practices and
policies to maintain the services of the officers and employees of CIB
through the Effective Time.
6.9 COMPLIANCE WITH RULES. CIB shall comply with the requirements
of all applicable Rules, the noncompliance with which would materially and
adversely affect the assets, liabilities, business, financial condition or
results of operations or prospects of CIB.
6.10 CIB BENEFIT ARRANGEMENTS. Subject to Article 9 hereof, CIB and
any effected officers, directors or employees shall mutually terminate all CIB
Benefit Arrangements without the imposition of any liability therefor to
Americorp or any other Party.
6.11 AGREEMENT OF MERGER. As soon as practicable, CIB shall execute
the Agreement of Merger.
6.12 LOAN POLICIES AND CERTAIN ACCRUALS.
(a) The Parties shall establish a committee composed of Messrs.
Gerald L. Lukiewski, Joseph L. Priske and the Senior Lending Officer of the
Surviving Bank. Mr. Priske will serve as chairman of such committee. The sole
purpose of the committee shall be to establish the Surviving Bank's Loan Policy
and Procedures which will be recommended to the board of directors for approval
within 60 days of the Effective Time. After the approval of such policy and
procedures by the board of directors of the Surviving Bank, the committee will
be dissolved.
(b) In addition to other costs and expenses provided for herein
which are to be paid or accrued by CIB prior to the Determination Date, the
costs and expenses relating to the termination of CIB's prior president and any
severance or similar payments related thereto (whether or not due after the
Determination Date) shall be paid and/or accrued prior to the Determination Date
and shall be a reduction to the Aggregate Book Value of CIB.
6.13 NO SHOP. Neither CIB nor any of its Affiliates shall, on or
before the earlier of the Effective Time or the date of termination of this
Agreement, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to any Competing Transaction (as such term is defined below),
or negotiate with any Person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or any other
representative retained by it or any of its Affiliates to take any such action,
and CIB shall promptly notify Americorp (orally and in writing) of all of the
relevant details relating to all inquiries and proposals which they may receive
relating to any of such matters. For purposes of this Agreement, "Competing
Transaction"
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shall mean any of the following involving CIB: any merger, consolidation,
share exchange or other business combination; a sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets of CIB representing
ten percent (10%) or more of the asset of CIB; a sale of shares of capital
stock (or securities convertible or exchangeable into or otherwise
evidencing, or any agreement or instrument evidencing, the right to acquire
capital stock) or other Equity Security, representing ten percent (10%) or
more of the voting power of CIB, a tender offer or exchange offer for at
least ten percent (10%) of the outstanding shares of CIB Stock; a
solicitation of proxies in opposition to approval of the Bank Merger by CIB
shareholders; or a public announcement of an unsolicited BONA FIDE proposal,
plan, or intention to do any of the foregoing. Notwithstanding any other
provision in this Section 6.13 or elsewhere in this Agreement, the
obligations of CIB in this Agreement are subject to the continuing fiduciary
duties of its Board of Directors. In the event the Board of Directors of CIB
receives a bona fide offer for a Competing Transaction with another entity,
and reasonably determines, upon written advice of counsel, that as a result
of such offer, any duty to act or to refrain from doing any act pursuant to
this Agreement, is inconsistent with the continuing fiduciary duties of said
Board of Directors to their shareholders, such failure to act or refrain from
doing any act shall not constitute the failure of any condition, breach of
any covenant or otherwise constitute any breach of this Agreement, except
that any such failure to act or refrain from doing any act shall entitle
Americorp to terminate this Agreement pursuant to Section 10.1(f) hereof,
and in no event shall this sentence or the previous sentence operate to
excuse or modify the obligations of CIB under Section 11.1(c) hereof.
6.14 AFFILIATES AND FIVE PERCENT SHAREHOLDER AGREEMENTS. Within
thirty (30) days of the execution of this Agreement, (a) CIB shall deliver to
Americorp a letter identifying all persons who are then "affiliates" of CIB for
purposes of Rule 145 under the Securities Act and (b) CIB shall advise the
persons identified in such letter of the resale restrictions imposed by
applicable securities laws and shall use reasonable efforts to obtain from each
person identified in such letter a written agreement substantially in the form
attached hereto as Exhibit 6.14. CIB shall use reasonable efforts to obtain
from any person who becomes an affiliate of CIB after CIB's delivery of the
letter referred to above, and on or prior to the date of the CIB Shareholders'
Meeting to approve this Agreement, a written agreement substantially in the form
attached as Exhibit 6.14 hereto as soon as practicable after obtaining such
status. At least 10 Business Days prior to the issuance of the opinion to be
provided for in Section 8.1(h), CIB shall use its best efforts to cause each
person or group of persons who holds more than five percent (5%) of the CIB
Stock (regardless of whether such person is an "affiliate" under Rule 145) to
deliver to F&K, VTD and Reitner & Stuart, a letter stating that such
shareholder(s) has no present plan or intention to dispose of CIB Stock and
committing that such shareholder(s) will not dispose of CIB Stock in a manner to
cause a violation of the "continuity of shareholder interest" requirements of
Treasury Regulation 1.368-1.
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ARTICLE 7
FURTHER COVENANTS OF AMERICORP, BANK AND CIB
7.1 S-4 AND PROXY STATEMENT.
(a) As promptly as practicable, Americorp and CIB shall
cooperate with each other and exercise their best efforts to prepare and file
with the SEC the S-4, in which the Proxy Statement will be included as a
prospectus. The Parties hereto agree to provide the information necessary for
inclusion in the Proxy Statement and S-4. Each of the parties will use its
respective best efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after it is filed. Americorp and CIB shall
divide equally all third party costs (except legal and accounting fees)
associated with the preparation and filing of the S-4, including the filing fees
with the SEC and Blue Sky regulators as well as the costs of printing and
mailing the Proxy Statement.
(b) After the date of the filing of the S-4 with the SEC, each
of the Parties agrees promptly to notify the other of and to correct any
information furnished by such Party that shall have become false or misleading
in any material respect and to cooperate with the other to take all steps
necessary to file with the SEC and have declared effective or cleared by the SEC
any amendment or supplement to the S-4 so as to correct such information and to
cause the Proxy Statement as so corrected to be disseminated to the shareholders
of Americorp and CIB to the extent required by applicable Rules. All documents
that the Parties file with the SEC or any other Governmental Entity in
connection with this Agreement will comply as to form in all material respects
with the provisions of applicable Rules.
(c) Americorp shall take all required action with appropriate
Governmental Entities under state securities or blue sky laws in connection with
the issuance of Americorp Stock pursuant to this Agreement.
7.2 FILINGS. The Parties agree that through the Effective Time,
each of its reports, registration statements and other filings required to be
filed with any applicable Governmental Entity will comply in all material
respects with the applicable statutes, rules and regulations enforced or
promulgated by the Governmental Entity with which it will be filed and none will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Any
financial statement contained in any such report, registration statement or
other filing that is intended to represent the financial position of the
entities or entity to which it relates will fairly present the financial
position of such entities or entity and will be prepared in accordance with GAAP
consistently applied during the periods involved.
7.3 APPLICATIONS. Americorp will promptly prepare and file or cause
to be prepared and filed (i) an application for approval of the Bank Merger with
the FDIC; (ii) an
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application for approval of the Bank Merger with the Commissioner; (iii) if
required, a request for waiver from the FRB; and (iv) any other applications
or notices necessary to consummate the transactions contemplated hereby.
Americorp shall afford CIB a reasonable opportunity to review all such
applications and all amendments and supplements thereto before the filing
thereof. The Parties covenant and agree that the S-4 and the Proxy
Statement and all applications to the appropriate Governmental Entities for
approval or consent to the Bank Merger, with respect to information relating
to it, will comply in all material respects with the provisions of applicable
law. Americorp will use its best efforts to obtain all regulatory approvals
or consents necessary to effect the Bank Merger and CIB shall cooperate with
Americorp and Bank in such efforts.
7.4 STOCK OPTIONS.
(a) At and as of the Effective Time and without further action
by any Party, the stock option plan of CIB shall terminate. The Americorp Stock
Option Plan shall not be terminated at the Effective Time and outstanding
Americorp Stock Options at the Effective Time shall continue in effect.
(b) Subject to the shareholder approval and receipt of any
required Consent, as of the Effective Time Americorp shall grant substitute
stock options to (i) each and every officer and employee of CIB who shall
continue as an officer or employee of the Surviving Bank and (ii) each director
of CIB, who has at the Effective Time an outstanding option to purchase shares
of CIB Stock ("CIB Stock Options"). Any other stock option granted by CIB other
than a CIB Stock Option shall be exercised or terminated without liability by
the Effective Time. Each and every substitute stock option so granted by
Americorp to replace an CIB Stock Option shall retain the "vesting" schedule
reflected in each of the respective stock option agreements evidencing a CIB
Stock Option and shall be exercisable for that number of whole shares of
Americorp Stock equal to the product of (A) the number of shares of CIB Stock
that were purchasable under such CIB Stock Option immediately prior to the
Effective Time multiplied by (B) the Exchange Ratio, rounded down to the nearest
whole number of shares of Americorp Stock. Further, each and every substitute
stock option so granted by Americorp to replace an CIB Stock Option shall
provide for a per share exercise price which shall be equal to the quotient
determined by dividing (A) the exercise price per share of CIB Stock at which
such CIB Stock Option was exercisable immediately prior to the Effective Time by
(B) the Exchange Ratio. At the Effective Time, Americorp shall issue to each
holder of an outstanding CIB Stock Option a substitute stock option providing
for the terms discussed above.
(c) Americorp shall use its best effort to assure that each
holder of an CIB Stock Option which qualified as an incentive stock option prior
to the Effective Time shall receive a substitute stock option which will
qualify as an incentive stock option.
(d) Subject to the shareholder approval and receipt of any
required
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Consent, Americorp shall to amend, if necessary, the Americorp Stock Option
Plan to provide for the grant of substitute stock options to holders of CIB
Stock Options. Americorp shall seek all required Consents to effect the
amendments to the Americorp Stock Option Plan contemplated by this Section.
The Parties may also discuss the feasibility of Americorp adopting a new
stock option plan from which such substitute options could be granted.
7.5 FURTHER ASSURANCES. Americorp/Bank and CIB agree that from time
to time, whether before, at or after the Effective Time, they will execute and
deliver such further instruments of conveyance and transfer and to take such
other action as may be reasonable or necessary to consummate the Bank Merger and
the transactions contemplated in this Agreement. Americorp, Bank and CIB agree
to take such further action as may reasonably be requested to facilitate
consummation of the Bank Merger and the transactions contemplated in this
Agreement and that are not inconsistent with the other provisions of this
Agreement.
7.6 REMOVAL OF CONDITIONS. In the event of the imposition of a
condition to any consent of, the Commissioner, the FDIC or other Government
Entity which any Party deems to materially adversely affect it or to be
materially burdensome as provided in Section 8.1(c), the Parties shall use their
respective best efforts to obtain the removal of such condition.
7.7 CORPORATE GOVERNANCE.
(a) Prior to the Effective Time, Bank shall take all necessary
steps to effect the Bank Corporate Governance Changes at the Effective Time.
(b) Prior to the Effective Time, Americorp shall take all
necessary steps to effect the Americorp Corporate Governance Changes at the
Effective Time.
7.8 LISTING OF AMERICORP STOCK. After the Effective Time, the Board
of Directors of Americorp shall explore the feasbility and costs of listing the
shares of Amerciorp Stock on Nasdaq with the intention of listing such shares
within one year after the Effective Time.
ARTICLE 8
CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE
8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CLOSE. The respective
obligations of Americorp and Bank, on the one hand, and CIB, on the other, to
consummate the Bank Merger and the other transactions contemplated hereby are
subject to the satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a) The Agreement and the transactions contemplated hereby
shall have received all requisite approvals of the shareholders of CIB,
Americorp or Bank.
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(b) No judgment, decree, injunction, order or proceeding shall
be outstanding or threatened by any Governmental Entity which prohibits or
restricts the effectuation of, or threatens to invalidate or set aside, the Bank
Merger substantially in the form contemplated by this Agreement, unless counsel
to the party again whom such action or proceeding was instituted or threatened
renders to the other Parties hereto a favorable opinion that such judgment,
decree, injunction, order or proceeding is without merit.
(c) On or before March 31, 1999, the Parties shall have
received any required Consent from the FRB, the Commissioner, the FDIC, and, at
or prior to the Effective Time, this Agreement and the transactions contemplated
hereby shall have been approved by any other Governmental Entity whose Consent
is required for consummation of the transactions contemplated in this Agreement,
in each case either unconditionally or without the imposition of conditions or
limitations that are applicable to any Party or would become applicable to
Americorp or the Surviving Bank after the Bank Merger that Americorp reasonably
and in good faith concludes would materially adversely affect the financial
condition or operations of any Party or otherwise would be materially burdensome
to any Party and all such Consents shall be in effect at the Effective Time,
which Consents shall permit the Bank Merger and permit the Surviving Bank to
acquire and conduct all direct and indirect activities as previously conducted
by CIB and Bank, at or prior to the Effective Time, and all required waiting
periods shall have expired.
(d) No Rule shall be outstanding or threatened by any
Governmental Entity which prohibits or materially restricts the consummation of,
or threatens to invalidate or set aside, the Bank Merger substantially in the
forms contemplated by this Agreement or which would not permit the businesses
presently carried on by CIB, Americorp or Bank to continue materially unimpaired
following the Effective Time, unless counsel to the Party or Parties against
whom such action or proceeding was instituted or threatened renders to the other
Party or Parties hereto a favorable opinion that such Rule is without merit and
counsel to the other Party concurs with such opinion.
(e) All Third Party Consents necessary to permit the Parties to
consummate the transactions contemplated in the Agreement shall have been
obtained prior to the Effective Time, unless the failure to obtain any such
Third Party Consent would not have a material adverse effect on the business,
financial condition, or results of operations of Americorp on a consolidated
basis.
(f) The S-4 shall have been declared effective by the SEC and
shall not be the subject of any stop order or proceedings seeking or threatening
a stop order. Americorp shall have received all state securities or "Blue Sky"
permits and other authorization necessary to issue the Americorp Stock to
consummate the Bank Merger.
(g) CIB and Americorp shall have received from VTD, an opinion
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reasonably satisfactory to CIB and Americorp to the effect that the Bank Merger
shall not result in the recognition of gain or loss for federal income tax
purposes to CIB, Americorp or Bank, nor shall the issuance of Americorp Stock
result in the recognition of gain or loss by the holders of CIB Stock who
receive such stock in connection with the Bank Merger, nor shall a holder of an
outstanding stock option granted under CIB's stock option plan recognize income,
gain or loss as a result of the granting of a substitute option nor shall the
granting of such substitute options be deemed to be a modification of any
incentive stock option granted under CIB's stock option plan, dated prior to the
date of the Proxy Statement is first mailed to the shareholders of Americorp and
CIB and such opinions shall not have been withdrawn or modified in any material
respect.
(h) Prior to the Effective Time, F&K and VTD shall have jointly
delivered a written opinion to CIB and Americorp that the Bank Merger and the
other transactions contemplated hereby will qualify for pooling-of-interest
accounting treatment. In making their determination that the Bank Merger will
qualify for such treatment, F&K and VTD shall be entitled to assume that cash
will be paid with respect to all shares held of record by any holder of
Dissenting Shares.
8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF AMERICORP AND BANK TO
CLOSE. The obligations of Americorp and Bank to consummate the Bank Merger and
the other transactions contemplated hereby are subject to the satisfaction or
waiver at or prior to the Effective Time of each of the following conditions:
(a) All actions necessary to authorize the execution, delivery
and performance of the Agreement by CIB, the consummation of the Bank Merger by
CIB and the consummation of the Agreement of Merger by CIB shall have been duly
and validly taken by the board of directors and shareholders of CIB, as the case
may be.
(b) The representations and warranties of CIB contained in
Article 4 of this Agreement shall have been true and correct in all material
respects (i) on the date of this Agreement; and (ii) at and as of the Effective
Time as though all such representations and warranties had been made on and as
of the Effective Time, except with respect to representations and warranties
that, by their terms, speak as of a different time; and Americorp and Bank shall
have received a certificate to that effect dated the Effective Time and executed
on behalf of CIB by its chief executive officer and chief financial officer. It
is understood and acknowledged that the representations made on and as of the
Effective Time shall be made without giving effect to any update with respect to
the Disclosure Letter pertaining to CIB as updated in accordance with
Section 6.5.
(c) Each of the covenants and agreements of CIB contained in
this Agreement to be performed at or before the Effective Time shall have been
so performed in all material respects; and Americorp and Bank shall have
received a certificate to that effect dated the
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Effective Time and executed by the chief executive officer and chief
financial officer of CIB.
(d) During the period from the date of this Agreement to the
Effective Time, there shall not have occurred any event related to the business,
condition (financial or otherwise), capitalization or properties of CIB that
has had or could reasonably be expected to have a material adverse effect on the
business, financial condition, results of operations or prospects of CIB after
consummation of the Bank Merger, whether or not such event, change or effect is
reflected in CIB's Disclosure Letter to this Agreement, as amended or
supplemented, after the date of this Agreement; and Americorp and Bank shall
have received a certificate to that effect dated the Effective Time and signed
by the chief executive officer and chief financial officer of CIB.
(e) CIB shall have delivered to Americorp and Bank a written
opinion of Knecht & Hansen dated as of the Effective Time substantially in the
form attached to this Agreement as Exhibit 8.2(e).
(f) Americorp shall have received a letter from California
Research Corp. dated as of a date within five (5) Business Days of the mailing
of the Proxy Statement to the shareholders of Americorp to the effect that the
transactions contemplated by this Agreement are fair from a financial point of
view to the shareholders of Americorp.
(g) Concurrently with the execution of this Agreement, each
director of CIB shall have executed and delivered to Americorp an CIB Directors'
Agreement substantially in the form of Exhibit 2.6(b).
(h) Americorp shall have received satisfactory evidence that
all of CIB's Benefit Arrangements have been treated as provided in Articles 6
and 9 of this Agreement.
8.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF CIB TO CLOSE. The
obligations of CIB to consummate the Bank Merger and the other transactions
contemplated herein is subject to the satisfaction or waiver, at or prior to the
Effective Time, of each of the following conditions:
(a) All actions necessary to authorize the execution, delivery
and performance of the Agreement, consummation of the Bank Merger by Americorp
and Bank and the consummation of the Agreement of Merger by Americorp and Bank
shall have been duly and validly taken by the respective boards of directors and
shareholders of Americorp and Bank, as the case may be.
(b) The representations and warranties of Americorp and Bank
contained in Article 3 of this Agreement shall be true and correct in all
material respects (i) on the date of this Agreement; and (ii) at and as of the
Effective Time as though all such representations
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and warranties had been made at and as of such time, except with respect to
representations and warranties that, by their terms, speak as of a different
time; and CIB shall have received a certificate to that effect dated the
Effective Time and executed on behalf of Americorp and Bank by their
respective chief executive officers and chief financial officers. It is
understood and acknowledged that the representations made on and as of the
Effective Time shall be made without giving effect to any update with respect
to the Disclosure Letters pertaining to Americorp and Bank as updated in
accordance with Section 5.5.
(c) The covenants and agreements of Americorp and Bank to be
performed at or before the Effective Time shall have been duly performed in all
material respects; and CIB shall have received one or more certificates to that
effect dated the Effective Time and executed by the respective chief executive
officers and chief financial officers of Americorp and Bank.
(d) During the period from the date of this Agreement to the
Effective Time, there shall not have occurred any event related to the business,
condition (financial or otherwise), capitalization or properties of Americorp
or Bank that has had or could reasonably be expected to have a material adverse
effect on the business, financial condition, results of operations or prospects
of the Surviving Bank or Americorp after consummation of the Bank Merger,
whether or not such event, change or effect is reflected in Americorp's
Disclosure Letters to this Agreement, as amended or supplemented, after the date
of this Agreement; and CIB shall have received a certificate to that effect
dated the Effective Time and signed by the chief executive officer and chief
financial officer of Americorp and Bank.
(e) Americorp and Bank shall have delivered to CIB a written
opinion of Reitner & Stuart dated the Effective Time substantially in the form
attached to this Agreement as Exhibit 8.3(e).
(f) CIB shall have received a letter from the Findley Companies
dated as of a date within five (5) Business Days of the mailing of the Proxy
Statement to the shareholder of CIB, to the effect that the transactions
contemplated by this Agreement are fair from a financial point of view to the
shareholders of CIB.
(g) Concurrently with the execution of this Agreement, each
director of Americorp and Bank shall have executed and delivered to CIB a
Americorp Directors' Agreement substantially in the form of Exhibit 2.6(a).
(h) All necessary action shall have been taken by Americorp and
Bank, respectively, to effect the Americorp and Bank Corporate Governance
Changes.
ARTICLE 9
EMPLOYEE BENEFITS
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9.1 EMPLOYEE BENEFITS
(a) The Surviving Bank shall honor, in accordance with their
terms, the employment agreement between CIB and its Senior Vice President/ Chief
Fiancial Officer and its Senior Vice President/Senior Lending Officer.
(b) From the date hereof, Americorp, Bank and CIB shall
cooperate to determine mutually the appropriate treatment of the Benefit
Arrangements, such as termination, merger into a plan, etc., and shall take such
actions as shall be reasonably required with respect to the Benefit
Arrangements, provided that CIB, Americorp and Bank shall not be required to
take any action that would be in breach of the fiduciary duties of the plan
trustees or administrators.
(c) The Parties shall establish a committee composed of the
President of the Surviving Bank, Joseph L. Priske and Jacqueline S. Pruner. The
committee shall develop a personnel, salary and benefits structure for the
Survivng Bank and the amount of severance to be paid to officers and employees
displaced by the Bank Merger. The committee shall also complete interviews of
the officers of the Parties within 60 days of the date of this Agreement in
order to determine the officers which shall be retained by the Surviving Bank
after the Effective Time. After completing these matters, the committee will be
dissolved. Non-officer positions shall be determined by the President of the
Surviving Bank.
(d) All proposed payments under the consulting agreements with
the directors of CIB who do not continue as directors of Americorp and the
Surviving Bank following the Effective Time shall be accrued prior to the
Determination Date and shall be a reduction to the Aggregate Book Value of CIB.
Such consulting agreements are attached as Exhibit 9.1(d).
(e) The aggregate of (i) all additional amounts to be accrued
pursuant to the director retirement plan which has been previously terminated
and (ii) all proposed payments under the consulting agreement with the director
of Americorp and the Surviving Bank who will not continue as a director of
Americorp and the Surviving Bank following the Effective Time, shall be accrued
prior to the Determination Date and shall be a reduction to the Aggregate Book
Value of Americorp. Such consulting agrement is attached as Exhibit 9.1(e).
ARTICLE 10
TERMINATION OF AGREEMENT; WAIVER OF CONDITIONS
10.1 TERMINATION OF AGREEMENT. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated hereby
including the Bank Merger may be terminated at any time before the Effective
Time, whether before or after approval
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by the respective shareholders of CIB and Americorp as follows, and in no
other manner:
(a) By mutual consent of Americorp and Bank, on the one hand,
and CIB, on the other;
(b) By Americorp, Bank or CIB (i) if any conditions set forth
in Section 8.1 shall not have been met by March 31, 1999, or (ii) upon the
expiration of 20 Business Days after any Governmental Entity denies or refuses
to grant any approval, consent or authorization required to be obtained in order
to consummate the transaction contemplated by this Agreement unless, within said
20 Business Day period after such denial or refusal, all Parties hereto agree to
resubmit the application to the Governmental Entity that has denied, or refused
to grant the approval, consent or authorization requested;
(c) By Americorp and Bank if any conditions set forth in
Section 8.2 shall not have been met, or by CIB if any conditions set forth in
section 8.3 shall not have been met, by March 31, 1999, or such earlier time as
it becomes apparent that such condition cannot be met;
(d) By Americorp or Bank, if CIB should materially default in
the observance or in the due and timely performance of any of its covenants and
agreements herein contained and such default shall not have been fully cured
within 20 Business Days from the date of delivery of written notice specifying
the alleged default;
(e) By CIB, if Americorp or Bank should materially default in
the observance or in the due and timely performance of any of their covenants
and agreements herein contained and such default shall not have been fully cured
within 20 Business Days from the date of delivery of written notice specifying
the alleged default;
(f) By Americorp, if CIB shall have failed to act or refrain
from doing any act pursuant to Section 6.13; or
(g) By CIB, if Americorp shall have failed to act or refrain
from doing any act pursuant to Section 5.13
10.2 EFFECT OF TERMINATION. In the event that this Agreement shall
be terminated pursuant to Section 10.1 hereof, all further obligations of the
Parties hereto under this Agreement shall terminate without further liability of
any Party to another; provided, however, that no termination of this Agreement
under Section 10.1 for any reason or in any manner shall release, or be
construed as so releasing, any Party from its obligations under Sections 11.1,
11.9 or 11.10, hereof and notwithstanding the foregoing if such termination
shall result from the willful failure of a Party to fulfill a condition to the
performance of the obligations of any other Party or to perform a
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covenant of such Party in this Agreement, such Party shall, subject to the
provision of Section 11.1, be fully liable for any and all damages, costs and
expenses (including, but not limited to, reasonable attorneys' fees sustained
or incurred by the other Party or Parties in connection with negotiating and
implementing the transactions contemplated in this Agreement).
10.3 WAIVER OF CONDITIONS. If any of the conditions specified in
Section 8.2 has not been satisfied, Americorp and Bank may nevertheless, at
their election, proceed with the transactions contemplated in this Agreement.
If any of the conditions specified in Section 8.3 has not been satisfied, CIB
may nevertheless, at its election, proceed with the transactions contemplated in
this Agreement. If any Party elects to proceed pursuant to the provisions
hereof, the conditions that are unsatisfied immediately prior to the Effective
Time shall be deemed to be satisfied, as evidence by a certificate delivered by
the electing Party.
ARTICLE 11
GENERAL
11.1 EXPENSES.
(a) CIB hereby agrees that if this Agreement is terminated by
Americorp or Bank pursuant to Section 10.1(c) with respect to the failure of CIB
shareholders to approve the Agreement and the transactions contemplated hereby,
or pursuant to Section 10.1(d), CIB shall promptly, and in any event within
seven Business Days after such termination, pay Americorp and Bank all Expenses
(as defined below) of Americorp and Bank but not to exceed $150,000.
(b) Americorp and Bank hereby agree that if this Agreement is
terminated by CIB pursuant to Section 10.1(c) with respect to the failure of
Americorp shareholders to approve the Agreement and transactions contemplated
hereby, or pursuant to Section 10.1(e), Americorp shall promptly, and in any
event within seven Business Days after such termination, pay (or cause Bank to
pay) CIB all Expenses (as defined below) of CIB but not to exceed $150,000.
(c) As an inducement to Americorp to enter into this Agreement,
in the event this Agreement is terminated by Americorp pursuant to Section
10.1(f) and CIB enters into an agreement for a Competing Transaction prior to
termination of this Agreement or during the twelve-month period immediately
following termination of this Agreement, CIB shall promptly, and in any event
within seven Business Days after it enters into an agreement for such Competing
Transaction, pay Americorp $750,000 which amount represents (i) Americorp's and
Bank's direct costs and expenses (including, but not limited to, fees and
expenses of financial or other consultants, printing costs, accountants and
counsel) incurred in negotiating and undertaking to carry out the transactions
contemplated by this Agreement, including Americorp's and Bank's
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management time devoted to negotiation and preparation for the transactions
contemplated by this Agreement; (ii) Americorp's and Bank's indirect costs
and expenses incurred in connection with the transactions contemplated by
this Agreement; and (iii) Americorp's and Bank's loss as a result of the
transactions contemplated by this Agreement not being consummated.
(d) As an inducement to CIB to enter into this Agreement, in
the event this Agreement is terminated by CIB pursuant to Section 10.1(g) and
Americorp enters into an agreement for a Competing Transaction prior to
termination of this Agreement or during the twelve-month period immediately
following termination of this Agreement, Americorp shall promptly, and in any
event within seven Business Days after it enters into an agreement for such
Competing Transaction, pay CIB $750,000 which amount represents (i) CIB's direct
costs and expenses (including, but not limited to, fees and expenses of
financial or other consultants, printing costs, accountants and counsel)
incurred in negotiating and undertaking to carry out the transactions
contemplated by this Agreement, including CIB's management time devoted to
negotiation and preparation for the transactions contemplated by this Agreement;
(ii) CIB's indirect costs and expenses incurred in connection with the
transactions contemplated by this Agreement; and (iii) CIB's loss as a result of
the transactions contemplated by this Agreement not being consummated.
(e) Except as otherwise provided herein and in Section 7.1, all
Expenses incurred by Americorp/Bank or CIB in connection with or related to the
authorization, preparation and execution of this Agreement, the solicitation of
shareholder approvals and all other matters related to the closing of the
transaction contemplated hereby, including, without limitation of the generality
of the foregoing, all fees and expenses of agents, representatives, counsel, and
accountants employed by either of the Parties or its affiliates, shall be borne
solely and entirely by the Party which has incurred the same.
(f) "Expenses" as used in this Agreement shall include all
reasonable out-of-pocket expenses (including all fees and expenses of attorneys,
accountants, investment bankers, experts and consultants to the Party and its
Affiliates) incurred by the Party or on its behalf in connection with or related
to the authorization, preparation and execution of this Agreement, the
solicitation of shareholder approvals and all other matters related to the
closing of the transaction contemplated hereby.
11.2 AMENDMENTS. To the fullest extent permitted by law, this
Agreement may be amended by agreement in writing of the Parties hereto at any
time prior to the Effective Time, whether before or after approval of this
Agreement by the shareholders of CIB or the shareholders of Americorp.
11.3 DISCLOSURE LETTER; EXHIBITS; INTEGRATION. Each Disclosure
Letter, exhibit and letter delivered pursuant to this Agreement shall be in
writing and shall constitute a part of the Agreement, although Disclosure
Letters and other letters need not be attached to each copy of this
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Agreement. This Agreement, together with such Disclosure Letters, exhibits
and letters, constitutes the entire agreement between the Parties pertaining
to the subject matter hereof and supersedes all prior agreements and
understanding of the Parties in connection therewith.
11.4 BEST EFFORTS. Each Party will use its best efforts to cause
all conditions to the obligations of the Parties to be satisfied.
11.5 GOVERNING LAW. This Agreement and the legal relations between
the Parties shall be governed by and construed in accordance with the laws of
California except to the extent that the provisions of federal law are
mandatorily applicable.
11.6 NO ASSIGNMENT. Neither this Agreement nor any rights, duties
or obligations hereunder shall be assignable by Americorp/Bank or CIB, in whole
or in part, without the prior written consent of the other Party. Any attempted
assignment in violation of this prohibition shall be null and void. Subject to
the foregoing, all of the terms and provisions hereof shall be binding upon, and
inure to the benefit of, the successors and assigns of the Parties hereto.
11.7 HEADINGS. The descriptive headings contained in this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
11.8 COUNTERPARTS. This Agreement and any exhibit hereto may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each Party hereto and delivered to each Party hereto.
11.9 PUBLICITY AND REPORTS. Americorp and CIB shall coordinate all
publicity relating to the transactions contemplated by this Agreement and no
Party shall issue any press release, publicity statement or other public notice
relating to this Agreement or any of the transactions contemplated hereby
without obtaining the prior consent of the other Party, except to the extent
that legal counsel to any Party shall deliver a written opinion to the other
Party to the effect that a particular action is required by applicable Rules.
11.10 CONFIDENTIALITY. All Confidential Information disclosed
heretofore or hereafter by any Party to this Agreement to any other Party to
this Agreement shall be kept confidential by such other Party and shall not be
used by such other Party otherwise than as herein contemplated, except to the
extent that (a) it is necessary or appropriate to disclose to the Commissioner,
the FDIC or any other Governmental Entity having jurisdiction over any of the
Parties or as may be otherwise be required by Rule (any disclosure of
Confidential Information to a Governmental Entity shall be accompanied by a
request that such Governmental Entity preserve the confidentiality of such
Confidential Information): or (b) to the extent such duty as to confidentiality
is waived by the other Party. Such obligation as to confidentiality and non-use
shall survive the termination of this Agreement pursuant to Article 10. In the
event of such termination and on
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request of another Party, each Party shall use all reasonable efforts to (1)
return to the other Parties all documents (and reproductions thereof)
received from such other Parties that contain Confidential Information (and,
in the case of reproductions, all such reproductions made by the receiving
Party); and (2) destroy the originals and all copies of any analyses,
computations, studies or other documents prepared for the internal use of
such Party that included Confidential Information.
11.11 SPECIFIC PERFORMANCE. CIB, Bank and Americorp each acknowledge
that, in view of the uniqueness of their respective businesses and the
transactions contemplated in this Agreement, each Party would not have an
adequate remedy at law for money damages in the event that this Agreement has
not been performed in accordance with its terms, and therefore each Party agrees
that the other shall be entitled to specific enforcement of the terms hereof in
addition to any other remedy to which it may be entitled, at law or in equity.
11.12 NOTICES. Any notice or communication required or permitted
hereunder, including, without limitation, supplemental Disclosure Letters shall
be deemed to have been given if in writing and (a) delivered in person,
(b) telexed, or (c) telecopied (provided that any notice given pursuant to
clauses (b) and (c) is also mailed by certified or registered mail, postage
prepaid), as follows:
If to Americorp or Bank, addressed to:
American Commercial Bank
300 South Mills Road
Ventura, CA 93003
Attn: Gerald J. Lukiewski, President and CEO
Fax No. (805) 658-6635
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With a copy addressed to:
John F. Stuart, Esq.
Reitner & Stuart
1319 Marsh Street
San Luis Obispo, CA 93401
Fax No. (805) 545-8599
If to CIB, addressed to:
Mr. Joseph L. Priske
Chairman of the Board
Channel Islands Bank.
c/o Priskie-Jones Company
711 Daily Drive, Suite 200
Camarillo, CA 93010
Fax No. (805) 987-0820
With a copy addressed to:
Loren P. Hansen, Esq.
Knecht & Hansen
1301 Dove Street, Suite 900
Newport Beach, CA 92660
Fax No. (714) 851-1732
or at such other address and to the attention of such other Person as a Party
may notice to the others in accordance with this Section 11.12. Notwithstanding
anything to the contrary contained herein, notice and/or delivery to Americorp
shall be deemed notice and/or delivery to Bank.
11.13 KNOWLEDGE. Whenever any statement herein or in any Disclosure
Letter, certificate or other document delivered to any Party pursuant to this
Agreement is made "to the knowledge" or "to the best knowledge" of any Party or
other Person such Party or other Person shall make such statement only after
conducting an investigation reasonable under the circumstances of
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the subject matter thereof, and each such statement shall constitute a
representation that such investigation has been conducted.
11.14 SEVERABILITY. If any portion of this Agreement shall be deemed
by a court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms hereof shall provide for the consummation of
the transactions contemplated herein in substantially the same manner as
originally set forth at the date this Agreement was executed.
11.15 ATTORNEYS' FEES. In the event any of the parties to this
Agreement brings an action or suit against any other party by reason of any
breach of any covenant, agreement, representation, warranty or other provision
hereof, or any breach of any duty or obligation created hereunder by such other
party, the prevailing party, as determined by the court or the body having
jurisdiction, shall be entitled to have and recover of and from the losing
party, as determined by the court or other party having jurisdiction, all
reasonable costs and expenses incurred or sustained by such prevailing party in
connection with such prevailing action, including, without limitation, legal
fees and court costs (whether or not taxable as such).
11.16 TERMINATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants of each Party contained herein or
in any certificate or other writing delivered by such party pursuant hereto or
in connection herewith shall not survive the Effective Time.
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WITNESS, the signature of Americorp, as of the 7th day of July, 1998, set
by its President and attested to by its Secretary, pursuant to a resolution of
its Board of Directors, acting by a majority:
AMERICORP
By: /s/ GERALD LUKIEWSKI
--------------------
President
Attest:
By: /s/ LINCOLN E. CRYNE
--------------------
Secretary
WITNESS, the signature of Bank, as of the 7th day of July, 1998, set
by its President and attested to by its Secretary, pursuant to a resolution of
its Board of Directors, acting by a majority:
AMERICAN COMMERCIAL BANK
By: /s/ GERALD L. LUKIEWSKI
-----------------------
President
Attest:
By: /s/ LINCOLN E. CRYNE
--------------------
Secretary
WITNESS, the signature of CIB, as of the 7th day of July, 1998, set by its
President and attested to by its Secretary, pursuant to a resolution of its
Board of Directors, acting by a majority:
CHANNEL ISLANDS BANK
By: /s/ THOMAS E. ANTHONY
---------------------
President
Attest:
By: /s/ ALLEN R. PARTRIDGE
----------------------
Secretary
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FIRST AMENDMENT TO
AGREEMENT TO MERGE
AND PLAN OF REORGANIZATION
THIS FIRST AMENDMENT TO THE AGREEMENT TO MERGE AND PLAN OF REORGANIZATION
(the "First Amendment") is entered into as of September 17, 1998, among American
Commercial Bank, a banking company organized under the laws of California
("Bank"), being located in Ventura, California, Americorp, a corporation and
registered bank holding company organized under the laws of California
("Americorp"), and Channel Islands Bank, a banking company organized under the
laws of California ("CIB"), located in Oxnard, California.
WHEREAS, Bank, Americorp and CIB entered into an Agreement to Merge and
Plan of Reorganization dated as of July 7, 1998 (the "Agreement");
WHEREAS, the Parties wish to make certain changes and amendments to the
Agreement before it is submitted to their respective shareholders for approval;
NOW, THEREFORE, in consideration of the premises and mutual promises of the
parties, the Parties hereto agree as follows:
1. Clause (i) of Section 2.1(b) of the Agreement is hereby amended to
read:
"(i) the number of authorized directors of Bank shall be expanded to
nine,"
2. Clause (i) of Section 2.1(d) of the Agreement is hereby amended to
read:
"(i) the number of authorized directors of Americorp shall be expanded
to nine,"
3. Exhibits 2.1(b) and 2.1(d) of the Agreement are amended to read in the
form attached to this First Amendment.
4. Capitalized terms used herein and not otherwise defined shall have
the same meaning as set forth in the Agreement.
5. This First Amendment may be entered into in one or more
counterparts, all of which shall be considered one and the same instrument, and
it shall become effective when one or more counterparts have been signed by each
of the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
6. Except as herein amended, the Agreement shall remain in full force
and effect.
7. This First Amendment shall be governed by and construed in
accordance with the
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laws of the State of California.
WITNESS, the signature of Americorp, as of the 17th day of September, 1998,
set by its President and attested to by its Secretary, pursuant to a resolution
of its Board of Directors, acting by a majority:
AMERICORP
By: /s/ GERLAD J. LUKIEWSKI
-----------------------
President
Attest:
By: /s/ LINCOLN E. CRYNE
--------------------
Secretary
WITNESS, the signature of Bank, as of the17th day of September, 1998,
set by its President and attested to by its Secretary, pursuant to a resolution
of its Board of Directors, acting by a majority:
AMERICAN COMMERCIAL BANK
By: /s/ GERLAD J. LUKIEWSKI
-----------------------
President
Attest:
By: /s/ LINCOLN E. CRYNE
--------------------
Secretary
WITNESS, the signature of CIB, as of the 17th day of September, 1998, set
by its President and attested to by its Secretary, pursuant to a resolution of
its Board of Directors, acting by a majority:
CHANNEL ISLANDS BANK
By: /s/ THOMAS E. ANTHONY
---------------------
President
Attest:
By: /s/ ALLEN R. PARTRIDGE
----------------------
Secretary
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APPENDIX B
<PAGE>
July 7, 1998
Members of the Board of Directors
Channel Islands Bank
1555 South "A" Street
Oxnard, California 93030
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial perspective, to the shareholders of Channel Islands Bank,
Oxnard, California ("CIB") of the terms of the proposed merger of CIB with
and into American Commercial Bank, Ventura, California ("ACB") and CIB
shareholders receiving shares of common stock of ACB's parent corporation,
Americorp, Ventura, California ("Americorp") as defined in the Agreement to
Merge and Plan of Reorganization (the "Agreement") entered into as of July 7,
1998. Pursuant to the Agreement and subject to the terms and conditions
therein, each share of CIB Stock issued and outstanding immediately prior to
the Effective Time of the Merger shall, on and at the Effective Time of the
Merger, pursuant to the Agreement and without any further action on the part
of CIB or the holders of CIB Stock, be exchanged for and converted into the
right to receive shares of Americorp Stock which is equal to the Exchange
Ratio. The Exchange Ratio is obtained by dividing the CIB Book Value Per
Share by the Americorp Book Value Per Share. The components of CIB Book
Value Per Share and Americorp Book Value Per Share are set forth in the
Agreement.
As part of its investment banking business, The Findley Group is
continually engaged in the valuation bank, bank holding company and thrift
securities in connection with mergers and acquisitions nationwide. We have
not previously provided investment banking and financial advisory services to
CIB.
In arriving at our opinion, we have reviewed and analyzed, among other
things, the following: (i) a draft of the Agreement; (ii) Annual Reports to
Shareholders of CIB and Americorp for the years ended December 31, 1997 and
December 31, 1996; (iii) Quarterly Call Reports for the Quarters ended March
31, 1998 , December 31, 1997, September 30, 1997, June 30, 1997, March 31,
1997 and December 31, 1996 for CIB and ACB; (iv) certain other publicly
available financial and other information concerning CIB, Americorp and
ACB; and (v) publicly available information concerning other banks and
holding companies, the trading markets for their securities and the nature
and terms of certain other merger transactions we believe relevant to our
inquiry. We have held discussions with senior management of CIB concerning
their past and current operations, financial condition and prospects, as well
as the results of regulatory examinations.
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We have reviewed earnings projections for 1998 through 2002 for CIB and
ACB as stand-alone entities, assuming the Merger does not occur, prepared by
the respective entities. We reviewed earnings projections for 1998 through
2002, assuming the Merger does occur, as well as projected operating cost
savings and earnings enhancement opportunities expected to be achieved in
each such years resulting from the Merger. Certain pro forma financial
projections for the combined entity were derived by us based partially upon
the projections discussed above, as well as our own assessment of general
economic, market and financial conditions. In certain cases, such combined
pro forma financial projections included projected operating cost savings and
earnings enhancement opportunities derived by us partially based upon the
projections discussed above to be realizable in the Merger.
In conducting our review and in arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of the financial and other
information provided to us or publicly available, and we have not assumed any
responsibility for independent verification of the same. We have relied upon
the management of CIB and Americorp as to the reasonableness of the financial
and operating forecasts, projections and projected operating cost savings and
earnings enhancement opportunities (and the assumptions and bases therefor)
provided to us, and we have assumed that such forecasts, projections and
projected operating cost savings and earnings enhancement opportunities
reflect the best currently available estimates and judgements of the
applicable management's. We have also assumed, without assuming any
responsibility for the independent verification of the same, that the
aggregate allowances for loan losses for CIB and ACB are adequate to cover
such losses. We have not made or obtained any evaluations or appraisals of
the property of CIB or Americorp, nor have we examined any individual loan
credit files. For purposes of this opinion, we have assumed that the Merger
will have the tax, accounting and legal effects described in the Agreement
and assumed the accuracy of the disclosures set forth in the Agreement. Our
opinion as expressed herein is limited to the fairness, from a financial
perspective, to the holders of the shares of CIB Common Stock of the terms of
the proposed merger of CIB with and into ACB, with CIB shareholders receiving
shares of Americorp Stock and does not address CIB's underlying business
decision to proceed with the Merger.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following:
(i) the historical and current financial position and results of operations
of CIB and Americorp; (ii) the assets and liabilities of CIB and Americorp,
including the loan and investment portfolios, deposits, other liabilities,
historical and current liability sources and costs and liquidity; and (iii)
the nature and terms of certain other merger transactions involving banks and
bank holding companies. We have also taken into account our assessment of
general economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily
based upon conditions as they exist and can be evaluated on the date hereof.
Based upon and subject to the foregoing, we are of the opinion as
investment bankers that, as of the date hereof, the terms of the proposed
merger of CIB with and into ACB, with CIB shareholders receiving Americorp
Stock, are fair, from a financial perspective, to the holders of the shares
of CIB Stock.
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This opinion may not be used or referred to by CIB or quoted or disclosed
to any person in any manner without our prior written consent, with the
exception of submission to the regulatory agencies as part of the applications
and included in the proxy materials provided to shareholders of CIB in relation
to approval of the Merger. This opinion is not intended to be and shall not be
deemed to be a recommendation to any shareholder of CIB as to how such
shareholder should vote with respect to the Merger.
Respectfully submitted,
THE FINDLEY GROUP
Gary Steven Findley
Director
B-3
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B-4
<PAGE>
APPENDIX C
<PAGE>
As of August 12, 1998
Board of Directors
Americorp
300 So. Mills Road
Ventura, California 93001
Dear Sirs:
You have requested our opinion as to the fairness from a financial point
of view to the shareholders of Americorp of the terms of the proposed merger
of American Commercial Bank ("ACB") with Channel Islands Bank of Oxnard
("CIB") pursuant to the Agreement to Merge and Plan of Reorganization dated
as of July 7, 1998. According to the terms of the Agreement each outstanding
share of CIB stock issued and outstanding immediately prior to the Effective
Time of the Merger shall be converted into shares of Americorp and each
certificate that represented shares of CIB stock shall evidence ownership of
shares of Americorp in accordance with the Exchange Ratio. The Exchange
Ratio is obtained by dividing the CIB Book Value per share by the Americorp
Book Value per share. Components of Book Value per share are set forth in the
Agreement.
In connection with this opinion, we have:
(i) Reviewed a draft and final copy of the Agreement to Merge and Plan
of Re-Organization;
(ii) Reviewed certain publicly available business and financial
information on all the banks of Ventura County;
(iii) Reviewed Call Reports to the banking regulators for ACB and
CIB for the periods ending December 31, 1995, December 31, 1996, December 31,
1997, and March 31, 1998. We have also reviewed the Annual Reports to
Stockholders for each bank for the years 1995, 1996 and 1997;
(iv) Reviewed information for each bank pertaining to classified or
criticized loans, premises, lease terms for office facilities, internal
financial reports, summaries of stock options, stock prices for the last four
quarters, and other data provided us by the senior management personnel of
each bank. We reviewed a pro-forma analysis of both banks as provided by
ACB's President/CEO;
C-1
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(v) Reviewed certain other banking companies that California Research
considered relevant and compared them to ACB and CIB. We have analyzed the
financial terms of banks involved in comparable merger and consolidation
transactions.
We have had discussions with senior management personnel at both CIB and
ACB regarding current operations and projections of future lending volume and
earnings. We have also reviewed with senior managements of both banks
earnings projections for ACB and CIB as stand-alone entities and ACB's senior
management forecasts regarding projected operating cost savings expected to
be achieved each year over the next three years resulting from the merger.
We reviewed earnings projections for 1998, 1999 and 2000, assuming the
merger does occur and the projected operating cost savings to be expected
from the merger are achieved. We made a series of pro-forma projections
based on our forecasts of earning assuming various levels of operating cost
savings are achieved.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that
was available to us from public sources and that was provided to us by ACB
and CIB, including information provided during discussions with their
respective managements. We have assumed that the merger will be accounted
for as a pooling of interests under generally accepted accounting principles.
We have also assumed that in the course of obtaining the necessary
regulatory approvals for the merger, no restrictions will be imposed that
will have a material adverse effect on the contemplated benefits of the
merger.
We have not independently verified such information nor undertaken an
independent evaluation or appraisal of any of the assets or liabilities of
ACB or CIB or been furnished with any such evaluation or appraisal. We have
assumed that the aggregate allowances for loan losses for CIB and ACB are
adequate to cover possible loss without independently verifying them. We
have not examined any individual loan credit files.
Our opinion as expressed herein is limited to the fairness from a
financial point of view to the shareholders of ACB in going ahead with the
merger.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including the present operations of both
banks, their current and historical financial trends, positions and the
nature and terms of other bank merger transactions. Our opinion is based
upon market, economic and other conditions as they exist and can be evaluated.
This opinion is for the use and benefit of the Board of Directors of
Americorp and ACB. Our opinion does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the proposed merger or
any matter related thereto. It is expected that this opinion will be
included as part of the applications submitted to the
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<PAGE>
regulatory agencies and provided to the shareholders as part of the proxy
materials in relation to approval of the Merger.
Based upon and subject to the foregoing and based upon such other
matters as we deem relevant, it is our opinion as of this date that the terms
of the Agreement and the Exchange Ratio are fair from a financial point of
view to the shareholders of Americorp.
We consent to the filing of this opinion as Appendix C to the
Registration Statement and to the description of this opinion in the Joint
Proxy Statement/Prospectus.
Very truly yours,
/s/ BARRY M. RUBENS
California Research Corporation
Barry M. Rubens
President
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<PAGE>
APPENDIX D
<PAGE>
CALIFORNIA CORPORATIONS CODE
CHAPTER 13
DISSENTERS' RIGHTS
SECTION 1300. RIGHT TO REQUIRE PURCHASE -- "DISSENTING SHARES" AND
"DISSENTING SHAREHOLDER" DEFINED.
(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-term 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-term
merger, excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stocks 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 Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does apply to
any shares with respect to which there exists any restrictions on
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 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
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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 the 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.
SECTION 1301. DEMAND FOR PURCHASE.
(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 of cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its 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 rights 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 subsection (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
vote the fair market value of those shares as of the day before the
announcement of 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.
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SECTION 1302. ENDORSEMENT OF SHARES.
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 or
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.
SECTION 1303. AGREED PRICE -- TIME FOR 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.
(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.
SECTION 1304. DISSENTER'S ACTION TO ENFORCE PAYMENT.
(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 shareholder 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.
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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.
SECTION 1305. APPRAISERS' REPORT -- PAYMENT -- 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.
(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).
SECTION 1306. DISSENTING SHAREHOLDER'S STATUS AS CREDITOR.
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.
SECTION 1307. DIVIDENDS PAID AS CREDIT AGAINST PAYMENT.
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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
thereafter.
SECTION 1308. CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING SHAREHOLDERS.
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.
SECTION 1309. TERMINATION OF DISSENTING 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.
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SECTION 1310. SUSPENSION OF PROCEEDINGS FOR PAYMENT OF PENDING LITIGATION.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Section 1304 and 1305 shall be suspended until final determination of
such litigation.
SECTION 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.
SECTION 1312. ATTACKING VALIDITY OF REORGANIZATION OR MERGER.
(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.
(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 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 a 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.
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APPENDIX E
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1998 AMERICORP
STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this 1998 Americorp Stock Option Plan (the "Plan") is to
advance the interests of the Company through providing select key Employees
and Directors of the Bank, the Company, and their Affiliates with the
opportunity to acquire Shares. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate the best available personnel
for positions of substantial responsibility and to provide additional
incentive to Directors and key Employees of the Company or any Affiliate to
promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply:
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code, and any other subsidiary corporations of a
parent corporation of the Company.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Award" shall mean an Option evidenced by a written agreement entered
into in accordance with Paragraph 5(c).
(d) "Bank" shall mean American Commercial Bank.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock, $1.00 par value, of the
Company.
(i) "Company" shall mean Americorp.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of
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service as an Employee or Director of the Company or an Affiliate.
Continuous Service shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Company
or between the Company, an Affiliate or a successor.
(k) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution designated
as being eligible for participation in this Plan.
(l) "Non-Employee Director" shall mean any member of the Board who is a
"non-employee director" within the meaning of Rule 16b-3.
(m) "Effective Date" shall mean the date specified in Paragraph 13 hereof.
(n) "Employee" shall mean any person employed by the Company, the Bank or
an Affiliate who is an employee for federal tax purposes.
(o) "Exercise Price" shall mean the price per Optioned Share at which an
Option may be exercised.
(p) "ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Market Value" shall mean the fair market value of the Common Stock,
as determined under Paragraph 7(b) hereof.
(r) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(s) "Option" means an ISO and/or a Non-ISO.
(t) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(u) "Participant" shall mean any key Employee or other person who receives
an Award pursuant to the Plan.
(v) "Plan" shall mean this 1998 Americorp Stock Option Plan.
(w) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
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(x) "Share" shall mean one share of Common Stock.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of
10 years from the Effective Date or the date the Plan is adopted by the Board
(whichever period ends earlier), unless sooner terminated pursuant to
Paragraph 15 hereof. No Award shall be granted under the Plan after such 10
year term.
(b) Term of Awards. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10 years;
provided, however, that in the case of an Employee who owns Shares
representing more than 10% of the outstanding Common Stock at the time an ISO
is granted, the term of such ISO shall not exceed five years, subject to the
provisions of Section 8(e) hereof.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required by the provisions of Paragraph 10 hereof,
the aggregate number of Shares deliverable pursuant to Awards shall not
exceed _________ Shares. Such Shares will be authorized but unissued Shares.
If any Awards should expire, become unexercisable, or be forfeited, for any
reason without having been exercised or become vested in full, the Optioned
Shares shall, unless the Plan shall have been terminated, be available for
the grant of additional Awards under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by
the Committee, which shall consist of not less than three (3) members of the
Board who are Non-Employee Directors. Members of the Committee shall serve
at the pleasure of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by those members of the Board who
are Non-Employee Directors.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select
Participants and grant Awards, (ii) to determine the form and content of
Awards to be issued in the form of Agreements under the Plan, (iii) to
interpret the Plan, (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan, (v) to make other determinations necessary
or advisable for the administration of the Plan. The Committee shall have
and may exercise such other power and authority as may be delegated to it by
the Board from time to time. A majority of the entire Committee shall
constitute a quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by a
majority of the Committee without a meeting, shall be deemed the
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action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall
be bound by the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the Plan. In
particular, the Committee shall set forth in each Agreement (i) the Exercise
Price of an Option, (ii) the number of Shares subject to, and the expiration
date of, the Award, (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award, and
(v) whether the Option is intended to be an ISO or a Non-ISO.
The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute
Agreements on behalf of the Company and to cause them to be delivered to the
recipients of Awards.
(d) Effect of the Committee=s Decisions. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any Award, granted hereunder to the full extent
provided for under the Company=s governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only key Employees and Directors shall be eligible to
receive grants of Options pursuant to the Plan.
(b) Special Rules for ISOs. The aggregate Market Value, as of the date
the option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of
the Company or any present or future Parent or Subsidiary of the Company)
shall not exceed $100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which case such
Options granted in excess of such limitations shall be Options which are
Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Options Shares on the date of grant
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without taking into account any restrictions on the Optioned Shares. In the
case of an Employee who owns Shares representing more than 10% of the
Company's outstanding Shares of Common Stock at the time an ISO is granted,
the Exercise Price shall not be less than 110% of the Market Value of the
Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including NASDAQ National Market or
Small Cap System) on the date in question, then the Market Value per Share
will be the average of the highest and lowest selling price on such exchange
on such date, or if there were no sales on such date, then the Exercise Price
shall be the mean between the bid and asked price on such date. If the
Common Stock is traded otherwise than on a national securities exchange on
the date in question, then the Market Value per Share shall be the mean
between the bid and asked price on such date, or, if there is no bid and
asked price on such date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is available, then
the Market Value per Share shall be its fair market value as determined by
the Committee, in its sole and absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Subject to (e) below, any Option granted hereunder
shall be exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement granted to a
Participant. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise Options,
subject to provisions relative to its termination and limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash , in Common Stock,
or a combination of cash and Common Stock, of the amount of the Exercise
Price for the number of Shares with respect to which the Option is then being
exercised. Each such notice shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Chief Financial Officer of the
Company at the Company's executive offices. Common Stock utilized in full or
partial payment of the Exercise Price for Options shall be valued at its
Market Value per Share at the date of exercise.
(c) Period of Exercisability. Except to the extent otherwise provided
in more restrictive terms of an Agreement, an Option may be exercised by a
Participant only with respect to the vested portion of such Option and only
while he is an Employee or Director and has maintained Continuous Service
from the date of the grant of the Option, or within three months after
termination of such Continuous Service (but not later than the date on which
the Option would otherwise expire), except if the Employee's or Director's
Continuous Service terminates by reason of:
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(1) "Just Cause" which for purposes hereof shall mean termination
because of the Employee's or Director's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, then the Participant's rights to exercise
such Option shall expire on the date of such termination;
(2) Death, then all Options of the deceased Participant shall become
immediately exercisable and may be exercised within one year from the date
of his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution;
(3) Permanent and Total Disability (as such term is defined in
Section 22(e)(3) of the Code), then all Options of the disabled Participant
shall become immediately exercisable and may be exercised within one year
from the date of such Permanent and Total Disability, but not later than
the date on which the Option would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
(e) The vesting period of an Option shall be provided for in the
Agreement and shall be determined in the sole discretion of the Committee.
The vesting periods for Options need not be identical. Vesting shall cease
immediately upon the termination of employment or directorship of an
optionee.
9. SUBSTITUTE OPTIONS.
Notwithstanding any other provisions of this Plan to the contrary, where
the outstanding shares of another corporation are changed into or exchanged
for shares of Common Stock of the Company in a merger, consolidation,
reorganization or similar transaction, then, subject to the approval of the
Board, Options may be granted in exchange for unexercised, unexpired stock
options of the other corporation (whether to directors, officers or employees
and irrespective of whether they will continue with the Company), and the
exercise price of the Optioned Shares subject to such Option so granted may
be fixed at a price less than one hundred percent of the Market Value of the
Common Stock at the time such Option is granted if said Exercise Price has
been computed to be not less than the Exercise Price set forth in the stock
option of the other corporation, with appropriate adjustment to reflect the
exchange ratio of the shares of stock of the other corporation into the
shares of Common Stock of the Company. The number of shares of the options
of the other corporation shall also be adjusted in accordance with the
exchange ratio so that any
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substituted Option shall reflect such adjustment.
10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number and kind of
shares subject to outstanding Awards (and the Exercise Price thereof), shall
be proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(b) Transactions in which the Company Is Not the Surviving Entity. In
the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, (iii) the
sale or disposition of all or substantially all of the Company's assets or
(iv) a tender offer or acquisition by one person or a group of persons acting
in concert of more than 50% of the Company's outstanding Shares (any of the
foregoing to be referred to herein as a "Transaction"), the Committee shall
notify each optionee of the pendency of the Transaction. Upon delivery of
said notice, any Award granted prior to the Transaction shall be,
notwithstanding the provisions of Paragraph 8(e), exercisable in full and not
only as to those Shares with respect to which installments, if any, have been
accrued, subject, however, to earlier expiration or termination as provided
elsewhere in the Plan. Upon the date thirty (30) days after delivery of such
notice, any option or portion thereof not exercised shall terminate, and upon
the effective date of the Transaction, this Plan shall terminate, unless
provision is made in connection with the Transaction for assumption of
Options theretofore granted, or payment therefor, or substitution for such
Options of new options covering stock of a successor corporation, or a parent
or subsidiary corporation thereof, solely at the option of such successor
corporation or parent or subsidiary corporation, with appropriate adjustments
as to number and kind of shares and prices.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code,
of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional or Difference Shares
or Securities. If, by reason of any adjustment made pursuant to this
Paragraph, a Participant becomes entitled to new, additional or different
shares of stock or securities, such new, additional or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by
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the Company or an Affiliate of shares of stock of any class, or of securities
convertible in to Shares or stock of another class, for cash or property or
for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, shall not affect and no adjustment shall
be made with respect to, the number, class, Exercise Price of Shares then
subject to Awards or reserved for issuance under the Plan.
11. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution, or pursuant to the terms of a "qualified domestic relations
order" (within the meaning of Section 414(p) of the Code and the regulations
and rulings thereunder). An Award may be exercised only by a Participant,
the Participant's personal representative or a permitted transferee.
12. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such
Award, and the Effective Date. Notice of the determination shall be given
to each Participant to whom an Award is so granted within a reasonable time
after the date of such grant.
13. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the Shares
eligible to be cast at a meeting duly held in accordance with applicable laws.
14. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification
of any outstanding Award, provided no such modification shall confer on the
holder of said Award any right or benefit which could not be conferred on him
by the grant of a new Award at such time, or impair the Award without the
consent of the holder of the Award.
15. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan.
Except for any changes that may be required to be made at the direction
of the Department of Corporations in connection with a permit procedure under
the California
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Corporate Securities Law, shareholder approval must be obtained for any
amendment of the Plan that would change the number of Shares subject to the
Plan (except in accordance with Paragraph 10 above), change the category of
persons eligible to be Participants, or materially increase the benefits
under the Plan.
No amendment, suspension or termination of the Plan shall, without the
consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Award unless the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) Special Circumstance. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder shall relieve the Company of any liability in respect of the
non-issuance or sale of such Shares.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable.
17. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the
Plan.
18. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options
shall be subject to the Participant's satisfaction of all applicable federal,
state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
having a value equal to the amount required to be withheld. The value of
Shares to be with withheld, or delivered to the Company, shall be based on
the Market Value of the Shares on the date the amount of tax to be withheld
is to be determined. As an alternative, the Company may retain, or sell
without notice, a number of such Shares sufficient to cover the amount
required to be withheld.
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19. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate
or participation in the Plan create or be deemed to create any legal or
equitable right of the Employee, Director, or any other party to continue
service with the Company, the Bank, or any Affiliate of such corporations.
20. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws
of the State of California, except to the extent that federal law shall be
deemed to apply.
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PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
CALIFORNIA LEGISLATION
Americorp and its subsidiary, ACB, are subject to the California
General Corporation Law (the "CGCL"), which provides a detailed statutory
framework covering indemnification of any officer or other agent of a
corporation who is made or threatened to be made a party to any legal
proceeding by reason of his or her services on behalf of such corporation.
With respect to indemnification, the CGCL provides that to the
extent any officer, director or other agent of a corporation is successful
"on the merits" in defense of any legal proceeding to which such person is a
party or is threatened to be made a party by reason of his or her service on
behalf of such corporation or in defense of any claim, issue, or matter
therein, such agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith, but does not
require indemnification in any other circumstance. The CGCL also provides
that a corporation may indemnify any agent of the corporation, including
officers and directors, against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in a third party proceeding
against such person by reason of his or her services on behalf of the
corporation, provided the person acted in good faith and in a manner he or
she reasonably believed to be in the best interests of such corporation. The
CGCL further provides that in derivative suites a corporation may indemnify
such a person against expenses incurred in such a proceeding, provided such
person acted in good faith and in a manner he or she reasonably believed to
be in the best interests of the corporation and its shareholders.
Indemnification is not available in derivative actions (i) for amounts paid
or expenses incurred in connection with a matter that is settled or otherwise
disposed of without court approval or (ii) with respect to matters for which
the agent shall have been adjudged to be liable to the corporation unless the
court shall determine that such person is entitled to indemnification.
The CGCL permits the advancing of expenses incurred in defending any
proceeding against a corporate agent by reason of his or her service on
behalf of the corporation upon the giving of a promise to repay any such sums
in the event it is later determined that such person is not entitled to be
indemnified. Finally, the CGCL provides that the indemnification provided by
the statute is not exclusive of other rights to which those seeking
indemnification may be entitled, by bylaw, agreement or otherwise, to the
extent additional rights are authorized in a corporation's articles of
incorporation. The law further permits a corporation to procure insurance on
behalf of its directors, officers and agents against any liability incurred
by any such individual, even if a corporation would not otherwise have the
power under applicable law to indemnify the director, officer or agent for
such expenses.
The Bylaws of Americorp and ACB contain provisions substantial
identical to the provisions of the CGCL.
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DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Americorp presently maintains a policy of directors' and officers'
liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
2.1 Agreement to Merge and Plan of Reorganization, dated
July 7, 1998, and amended on September 17, 1998 - Appendix A
of Joint Proxy Statement/Prospectus
3.1 Articles of Incorporation of Americorp
3.2 Bylaws of Americorp, as amended
4.1 Specimen Share Certificate for Common Stock
5.1 Opinion of Reitner & Stuart
8.1 Tax Opinion of Vavrinek, Trine, Day & Co., LLP*
10.1 Employment Agreement of Gerald L. Lukiewski
10.2 1994 Stock Option Plan
10.3 1998 Stock Option Plan - Appendix E of Joint Proxy Statement/Prospectus
10.4 ACB 401K Profit Sharing Plan
10.5 Restated and Amended Senior Executives' Retirement Plan
10.6 Restated and Amended Chief Executive Officer Retirement Plan
10.7 Restated and Amended Directors Retirement Plan
10.8 Data processing Agreement with Electronic Data Systems Corp.
10.9 Findley Fairness Opinion - Appendix B of Joint Proxy Statement/Prospectus
10.10 Cal.Research Fairness Opinion - Appendix C of Joint Proxy Statement/Prospectus
II-2
<PAGE>
21.1 Subsidiary of Americorp - American Commercial Bank is the only subsidiary of Americorp
23.1 Consent of Findley
23.2 Consent of Cal.Research (included in Appendix C)
23.3 Consent of Vavrinek, Trine, Day & Co., LLP
23.4 Consent of Fanning & Karrh
23.5 Consent of Reitner & Stuart (included in Exhibit 5.1)
23.6 Consent of Persons about to Become Directors*
27 Financial Data Schedule
99.1 Americorp - form of proxy
99.2 CIB - form of proxy
- -------------------------
* to be filed by amendment
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because the required information is not
applicable or is included in the financial statements of Americorp and the
related notes.
(c) NOT APPLICABLE.
ITEM 22. UNDERTAKINGS.
1. The undersigned registrant hereby undertake to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth
II-3
<PAGE>
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
2. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
3. The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Americorp has duly caused this Registration Statement to be signed on its
behalf by the undersigned, there unto duly authorized, in the City of
Ventura, State of California on September 17, 1998.
AMERICORP
By: /s/ Gerald J. Lukiewski
---------------------------------
GERALD J. LUKIEWSKI
President and Chief Executive Officer
By: /s/ Keith Sciarillo
---------------------------------
KEITH SCIARILLO
Chief Financial Officer
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Dated:
<C> <S> <C>
/s/ ALLEN W. JUE
- ----------------
ALLEN W. JUE Chairman of the Board of Directors September 17, 1998
/s/ LINCOLN E. CRYNE
- --------------------
LINCOLN E. CRYNE Director September 17, 1998
/s/ ROBERT J. LAGOMARSINO
- -------------------------
ROBERT J. LAGOMARSINO Director September 17, 1998
/s/ E. THOMAS MARTIN
- --------------------
E. THOMAS MARTIN Director September 17, 1998
/s/ HARRY L. MAYNARD
- --------------------
HARRY L. MAYNARD Director September 17, 1998
/s/ CATHERINE S. WOOD
- ---------------------
CATHERINE S. WOOD Director September 17, 1998
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
2.1 Agreement to Merge and Plan of Reorganization, dated
July 7, 1998, and amended on September 17, 1998 - Appendix A
of Joint Proxy Statement/Prospectus
3.1 Articles of Incorporation of Americorp
3.2 Bylaws of Americorp, as amended
4.1 Specimen Share Certificate for Common Stock
5.1 Opinion of Reitner & Stuart
8.1 Tax Opinion of Vavrinek, Trine, Day & Co., LLP*
10.1 Employment Agreement of Gerald L. Lukiewski
10.2 1994 Stock Option Plan
10.3 1998 Stock Option Plan - Appendix E of Joint Proxy Statement/Prospectus
10.4 ACB 401K Profit Sharing Plan
10.5 Restated and Amended Senior Executives' Retirement Plan
10.6 Restated and Amended Chief Executive Officer Retirement Plan
10.7 Restated and Amended Directors Retirement Plan
10.8 Data processing Agreement with Electronic Data Systems Corp.
10.9 Findley Fairness Opinion - Appendix B of Joint Proxy Statement/Prospectus
10.10 Cal.Research Fairness Opinion - Appendix C of Joint Proxy Statement/Prospectus
21.1 Subsidiary of Americorp - American Commercial Bank is the only subsidiary of Americorp
23.1 Consent of Findley
23.2 Consent of Cal.Research (included in Appendix C)
23.3 Consent of Vavrinek, Trine, Day & Co., LLP
23.4 Consent of Fanning & Karrh
23.5 Consent of Reitner & Stuart (included in Exhibit 5.1)
23.6 Consent of Persons about to Become Directors*
27 Financial Data Schedule
99.1 Americorp - form of proxy
99.2 CIB - form of proxy
- -------------------------
* to be filed by amendment
</TABLE>
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF AMERICORP
<PAGE>
ARTICLES OF INCORPORATION
OF
AMERICORP
ARTICLE I
NAME AND LOCATION
The name of the Corporation is Americorp (the "Corporation").
ARTICLE II
DURATION
The period of duration of the Corporation shall be perpetual.
ARTICLE III
PURPOSE AND POWERS
3.1 PURPOSE. The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated
by the California Corporation Code.
ARTICLE IV
CAPITAL STOCK
4.1 AUTHORIZED SHARES. The Corporation shall have authority to issue
2,500,000 shares of a single class of common stock. The par value of each
share shall be $1.00.
4.2 LACK OF PREEMPTIVE RIGHTS. No holder of common stock of the
Corporation, as such, shall be entitled, as a matter of right, to subscribe
for or purchase any part of any new or additional issue of stock of any class
whatsoever, any rights or options to purchase stock of any class whatsoever,
or any securities convertible into, exchangeable for or carrying rights or
options to purchase stock of any class whatsoever, whether now or hereafter
- 1 -
<PAGE>
authorized, and whether issued for cash or other consideration, or by way of
dividend.
ARTICLE V
TENDER OFFER
5.1 OPPOSITION OF TENDER OFFER. The Board of Directors may, if it deems it
advisable, oppose a tender offer or other offer for the Corporation's
securities, whether the offer is in cash or in the securities of a corporation
or otherwise. When considering whether to oppose an offer, the Board of
Directors may, but it is not legally obligated to, consider any pertinent issue;
by way of illustration, but not of limitation, the Board of Directors may, but
shall not be legally obligated to, consider any or all of the following:
(a) Whether the offer price is acceptable based on the historical and
present operating results or financial condition of the Corporation;
(b) Whether a more favorable price could be obtained for the Corporation's
securities in the future;
(c) The impact which an acquisition of the Corporation would have on the
employees, depositors and customers of the Corporation and its subsidiaries and
the communities which they serve;
(d) The reputation and business practices of the offeror and its management
and affiliates as they would affect the employees, depositors and customers of
the Corporation and its subsidiaries and the future value of the Corporation
stock;
(e) The value of the securities (if any) which the offeror is offering
in exchange for the Corporation's securities, based on an analysis of the
worth of the Corporation as compared to the corporation or other entity whose
securities are being offered; and
- 2 -
<PAGE>
(f) Any antitrust or other legal and regulatory issues that are raised by
the offer.
5.2 REJECTION OF OFFER. If the Board of Directors determines that an
offer should be rejected, it may take any lawful action to accomplish its
purpose, including, but not limited to, any or all of the following: advising
shareholders not to accept the offer; litigation against the offeror; filing
complaints with all governmental and regulatory authorities; acquiring the
Corporation's securities; selling or otherwise issuing authorized but unissued
securities or treasury stock or granting options with respect thereto; acquiring
a company to create an antitrust or other regulatory problem for the offeror;
and soliciting a more favorable offer from another individual or entity.
ARTICLE VI
AGENT
The name and address in the State of California of the Corporation's
initial agent for service process is: Harry L. Maynard, 300 South Mills Road,
Ventura, California 93003.
ARTICLE VII
INCORPORATOR
The incorporator of the Corporation shall be Harry L. Maynard, whose
address is 300 South Mills Road, Ventura, California 93003.
IN WITNESS WHEREOF, the undersigned being a natural person over the age
of eighteen years, and constituting the incorporator designated in Article
VIII of the foregoing Articles of Incorporation, has executed said Articles
of Incorporation as of the 6 day of March 1987.
/s/ Harry L. Maynard
---------------------------------------
Harry L. Maynard
- 3 -
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF VENTURA )
I, the undersigned, a Notary Public duly commissioned to take
acknowledgments and administer oaths in the State of California, certify that
Harry L. Maynard, being the incorporator referred to in Article VIII of the
foregoing Articles of Incorporation, personally appeared before me and swore to
the truth of the facts therein stated.
WITNESS my hand and official seal this 6th day of March, 1987.
My Commission expires: May 11, 1990.
/s/ Julie Hedrick
----------------------------------------
Notary Public
[SEAL]
<PAGE>
EXHIBIT 3.2
Bylaws of Americorp, as amended
<PAGE>
BYLAWS
OF
AMERICORP
ARTICLE I
OFFICES
1.1. PRINCIPAL OFFICE. The principal offices of Americorp (the
"Corporation") shall be at 300 South Mills Road, Ventura, California 93003.
1.2. OTHER OFFICES. The Corporation may have such other offices within or
without the State of California as the Board of Directors may, from time to
time, determine.
1.3. REGISTERED OFFICE AND REGISTERED AGENT. The registered office of the
Corporation is situated at 304 East Main Street, Ventura, California 93003, and
the registered agent, whose business address is and shall be identical to the
address of the registered office, is Harry L. Maynard. The registered office,
registered agent, or the address thereof, may be changed from time to time by
the Board of Directors as provided by law.
ARTICLE II
STOCK AND THE TRANSFER THEREOF
2.1. STOCK CERTIFICATES. The shares of the Corporation shall be
represented by certificates signed by the Chairman or Vice Chairman of the Board
or the President or a Vice-President and by the Chief Financial Officer or an
Assistant Chief Financial Officer or the Secretary or Assistant Secretary of the
Corporation and shall be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures on the certificate may be facsimile. In
case any officer who has signed shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of its issue.
There shall be set forth upon the face or back of every certificate
representing shares issued by the Corporation a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class authorized to be issued by the Articles of Incorporation.
Each certificate representing shares shall state upon the face thereof:
(a) The Corporation is organized under the laws of the State of
California,
(b) The name of the person to whom issued,
(c) The number and class of shares which such certificate represents,
and
(d) The par value of each share.
- 1 -
<PAGE>
No certificate shall be issued for any share until such share is fully paid
for.
2.2. CONSIDERATION FOR SHARES. Shares may be issued:
(a) for such consideration as is determined from time to time by the
board consisting of any or all of the following: money paid; labor done;
services actually rendered to the Corporation or for its benefit or in its
formation or reorganization; debts or securities cancelled; and tangible or
intangible property actually received either by the Corporation or by a wholly
owned subsidiary. Neither promissory notes of the purchaser (unless adequately
secured by collateral other than the shares acquired or unless permitted under
the California General Corporation Law) nor future services shall constitute
payment or part payment for shares of the Corporation.
(b) As a share dividend or upon a stock split, reverse stock split,
reclassification of outstanding shares into shares of another class, conversion
of outstanding shares into shares of another class, exchange of outstanding
shares for shares of another class or other change affecting outstanding shares.
The board shall state by resolution its determination of the fair value to
the Corporation in monetary terms of any consideration other than money for
which shares are issued. This does not affect the accounting treatment of any
transaction, which shall be in conformity with generally accepted accounting
principles.
2.3. LOST AND DESTROYED CERTIFICATES. The Board of Directors may direct
new certificate or certificates to be issued in place of any certificate or
certificates which has been allegedly lost, stolen or destroyed upon receipt of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, and the Board of Directors when authorizing such
issue of a new certificate or certificates may, in its discretion, require the
owner of such lost, stolen or destroyed certificate or certificates or his legal
representative to advertise the same in such manner as it shall require or give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation or both. Except as provided
herein, no new certificate evidencing shares of stock shall be issued until the
old certificate or certificates for which the new certificate is to be issued is
surrendered for cancellation.
2.4. TRANSFERS OF STOCK. Except as otherwise provided by law, the stock of
the Corporation shall be transferable or assignable only on the books of the
Corporation by the holder thereof in person or by his duly authorized attorney
upon surrender of the certificate or certificates for such shares only endorsed
or transferred.
The Corporation shall be entitled to treat the holder of record, including
any voting trust, of any share of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equity or any other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as may be required by the laws of
California.
- 2 -
<PAGE>
2.4.1. TRANSFER RESTRICTIONS. The Corporation shall have the
right to impose restrictions upon the transfer of any shares of its common
stock or any interest therein, from time to time issued, provided that such
restrictions as made from time to time be so imposed or notice of the
substance thereof shall be set forth upon the face or back of the
certificates representing such shares of stock.
2.4.2. FIRA NOTICE. As a condition to the transfer of shares in
the stock transfer books of the Corporation, the Corporation shall have the
right to demand from any shareholder requesting a transfer evidence
sufficient to the Corporation to assure itself that the shareholder
requesting the transfer has complied with all prior notice requirements, if
any, imposed by regulatory agencies which supervise the Corporation. In
particular, but without limitation, the Corporation can, as a condition to
transfer, require sufficient evidence to indicate to its satisfaction
shareholder compliance, if applicable, with the prior notification
requirements of the Change in Control Act of 1978 (12 U.S.C. Section
1817(j)), Title VI of FIRA as set forth in Regulation Y at 12 C.F.R. Section
225.41.
2.5. REDEMPTION OR PURCHASE OF THE CORPORATION'S OWN SHARES. Before the
Corporation purchases or redeems any shares of its common or preferred stock,
the appropriate officer of the Corporation shall, if applicable, have the
Corporation comply with the prior notice requirements upon certain purchases or
redemptions as set forth in Regulation Y at 12 C.F.R. Section 225.4 which
requires the Corporation to provide sixty (60) days' prior notice if, generally,
the consideration paid during any twelve (12) month period for the purchase or
redemption of its equity securities equals or exceeds ten percent (10%) of the
Corporation's consolidated net worth.
ARTICLE III
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
3.1. ANNUAL MEETING. The annual meeting of the shareholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on the third Tuesday of February of each
year, but if such day be a holiday, then on the first day thereafter which is
not a holiday. The place of the annual meeting shall be the principal executive
office of the Corporation or such other place within or without the State of
California as the Board of Directors may determine.
3.2. SPECIAL MEETINGS. Special meetings of the shareholders may be called
by the President, a Vice-President, Chairman of the Board, the Board of
Directors or the holders of shares entitled to not less than ten percent (10%)
of the votes at the meeting. Special meetings shall be held at the principal
office of the Corporation or such other place within or without the State of
California as the Board of Directors may determine.
3.3. NOTICE OF MEETINGS. Written notice of the meeting shall be given not
less than ten (10) not more than sixty (60) days before the date of the meeting
to each shareholder entitled to vote thereat. Such notice shall state the place,
date and hour of the meeting and (1) in the case of a special meeting, the
general nature of the business to be transacted, and no other business may be
transacted, or (2) in the case of the annual meeting, those
- 3 -
<PAGE>
matters which the board, at the time of the mailing of the notice, intends to
present for action by the shareholders. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at
the time of the notice to be presented by the board for election. Notice
shall be given either personally or by first-class mail.
3.4. NOTICE AND WAIVER.
(a) If mailed, notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his address as it
appears on the stock transfer books of the Corporation, with postage thereon
paid. If notice mailed to the last known address of any shareholder of record is
returned as undeliverable, all future notices to such shareholders shall be
deemed to have been duly given without further mailing if the same shall be
available for the shareholder upon written demand of the shareholder at the
principal executive office of the Corporation for a period of one (1) year from
the date of the giving of the notice to all other shareholders.
(b) When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than
forty-five (45) days or if after the adjournment a new record date is fixed for
the adjournment meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting.
(c) The transactions of any meeting of shareholders, however called
and noticed, and wherever held, are valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or in
proxy, and if, either before or after, the meeting, each of the persons
entitled to vote, not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the
minutes thereof. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of notice of and
presence at such meeting, except when the person objects, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters required to be
included in the notice but not so included, if such objection is expressly
made at the meeting. Neither the business to be transacted at nor the purpose
of any regular or special meeting of shareholders need be specified in any
written waiver of notice, consent to the holding of the meeting or approval of
the minutes thereof, unless otherwise required by the laws of California.
3.5. FIXING RECORD DATE. In order that the Corporation may determine the
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the board
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days prior to the date of such meeting nor more than sixty
(60) days prior to any other action. If no record date is
- 4 -
<PAGE>
fixed: (1) the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholder shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; (2) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting, when
no prior action by the board has been taken, shall be the day on which the first
written consent is given; and (3) the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
board adopts the resolution relating thereto, or the sixtieth day prior to the
date of such action, whichever is later. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall apply
to any adjournment of the meeting unless the board fixes a new record date for
the adjourned meeting, but the board shall fix a new record date if the meeting
is adjourned for more than forty-five (45) days from the date set for the
original meeting.
3.6. VOTING RECORD. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall prepare, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
The record, for a period of ten (10) days before such meeting, shall be kept on
file at the principal office of the Corporation and shall be subject to
inspection by any shareholder for any purpose germane to the meeting at any time
during usual business hours. Such record shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder for any purpose germane to the meeting during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such record or transfer books or to
vote at any meeting of shareholders. Failure to comply with these requirements
shall not affect the validity of any action taken at any such shareholders'
meeting.
3.7. QUORUM. A quorum at any meeting of the shareholders shall consist of
a majority of the shares entitled to vote, represented in person or by proxy. If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting entitled to vote on the subject matter, which shares
voting affirmatively also constitute at least a majority of the required quorum,
shall be the act of the shareholders. The shareholders present at a duly called
or held meeting at which a quorum is present may continue to transact business
until adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum, if any action taken (other than adjournment) is approved by
at least a majority of the shares required to constitute a quorum. If less than
a majority of the shares entitled to vote are represented at a meeting, a
majority of the shares as represented may adjourn the meeting. At such later
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at a meeting as originally notified,
if the adjournment is less than forty-five (45) days.
3.8. PROXIES.
- 5 -
<PAGE>
(a) Every person entitled to vote shares may authorize another person
or persons to act by proxy with respect to such shares.
(b) No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
continues in full force and effect until revoked by the person executing it
prior to the vote pursuant thereto, except as otherwise provided in this
section. Such revocation may be effected by a writing delivered to the
Corporation stating that the proxy is revoked or by a subsequent proxy executed
by the person executing the prior proxy and presented to the meeting or, as to
any meeting by attendance at such meeting and voting in person by the person
executing the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed.
(c) A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the Corporation.
(d) Except when other provision shall have been made by written
agreement between the parties, the recordholder of shares which such person
holds as pledgee or otherwise as security or which belong to another shall issue
to the pledgor or to the owner of such shares, upon demand therefor and payment
of necessary expenses thereof, a proxy to vote or take other action thereon.
(e) A proxy which states that it is irrevocable is irrevocable for
the period specified therein (notwithstanding paragraph (c)) when it is held by
any of the following or a nominee of any of the following:
(1) A pledgee.
(2) A person who has purchased or agreed to purchase or holds an
option to purchase the shares or a person who has sold a portion of such
person's shares in the Corporation to the maker of the proxy.
(3) A creditor or creditors of the Corporation or the shareholder
who extended or continued credit to the Corporation or the shareholder in
consideration of the proxy if the proxy states that it was given in
consideration of such extension or continuation of credit and the name of the
person extended or continuing credit.
(4) A person who has contracted to perform services as an
employee of the Corporation, if a proxy is required by the contract of
employment and if the proxy states that it was given in consideration of such
contract of employment, the name of the employee and the period of employment
contracted for.
(5) A beneficiary of a trust with respect to shares held by the
trust.
Notwithstanding the period of irrevocability specified, the proxy becomes
revocable when the pledge is redeemed, the option or agreement to purchase is
terminated or the seller no longer owns any shares of the Corporation or dies,
- 6 -
<PAGE>
the debt of the Corporation or the shareholder is paid, the period of employment
provided for in the contract of employment has terminated, or the person ceases
to be a beneficiary of the trust. In addition to the foregoing clauses (1)
through (4), a proxy may be made irrevocable (notwithstanding paragraph (c)) if
it is given to secure the performance of a duty or to protect a title, either
legal or equitable, until the happening of events which, by its terms, discharge
the obligations secured by it.
(f) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a transferee of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability appears, in
the case of certificated securities, on the certificate representing such
shares.
3.9. VOTING OF SHARES. Each outstanding share of common stock shall be
entitled to one vote and each fractional share shall be entitled to a
corresponding fractional vote on each matter submitted to vote at a meeting of
shareholders.
3.10. ELECTION OF DIRECTORS, CUMULATIVE VOTING.
(a) Every shareholder complying with paragraph (b) and entitled to
vote at any election of directors may cumulate such shareholder's votes and give
one candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are normally
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit.
(b) No shareholder shall be entitled to cumulate votes (i.e., cast
for any candidate a number of votes greater than the number of votes which such
shareholder normally is entitled to cast) unless such candidate or candidates'
names have been placed in nomination prior to the voting and the shareholder's
intention to cumulate the shareholder's votes. If any one shareholder has given
such notice, all shareholders may cumulate their votes for candidates in
nomination.
(c) In any election of directors, the candidates receiving the
highest number of affirmative votes of the shares entitled to be voted for them
up to the number of directors to be elected by such shares are elected; votes
against the director and votes withheld shall have no legal effect.
(d) Elections for directors need not be by ballot unless a
shareholder demands election by ballot at the meeting and before the voting
begins.
3.11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Corporation owned
by its subsidiary shall not be entitled to vote on any matter.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by such officer, agent or proxy as the bylaws of such corporation
may prescribe, or, in the absence of such provisions, as the board of directors
of such corporation may determine, or, in the absence of such provision, by the
chairman of the board, president or any vice president of
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such corporation, or by any other person authorized to do so by the chairman of
the board, president or any vice president of such other corporation.
Shares held by the Corporation in a fiduciary capacity, and shares of the
Corporation held in a fiduciary capacity by its subsidiary, shall not be
entitled to vote on any matter, except to the extent that the seller or
beneficial owner possesses and exercises a right to vote or to give the
Corporation binding instructions as to how to vote such shares.
Subject to the preceding paragraph, shares held by an administrator,
executor, guardian, conservator or custodian may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the Court by which such receiver was
appointed.
Subject to the provisions of Section 3.8 above, a shareholder whose shares
are pledged shall be entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the pledgee shall be
entitled to vote the shares so transferred.
Shares standing in the name of a minor may be voted and the Corporation may
treat all rights incident thereto as exercisable by the minor, in person or by
proxy, whether or not the Corporation has notice, actual or constructive, of the
nonage, unless a guardian of the minor's property has been appointed and
written notice of such appointment is given to the Corporation.
If authorized to vote shares by the power of attorney by which the attorney
in fact was appointed, shares held by or under the control of an attorney in
fact may be voted and the Corporation may treat all rights incident thereto as
exercisable by the attorney in fact, in person or by proxy, without the transfer
of the shares into the name of the attorney in fact.
3.12. CHAIRMAN. The Chairman of the Corporation or in his absence the
Vice-Chairman shall act as Chairman at all meetings of the shareholders.
3.12 ORAL VOTE. Voting shall be oral but shall be by written ballot if
such vote is demanded by any shareholder present in person or by proxy and
entitled to vote.
3.13. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required to be
taken at a meeting of the shareholders or any action which may be taken at a
meeting of the shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares having not less than the minimum number of votes that would
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be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
Unless the consents of all shareholders entitled to vote have been
solicited in writing, (1) notice of any shareholder approval pursuant to
California General Corporation Law Sections 310, 317, 1201 or 2007 without a
meeting by less than unanimous written consent shall be given at least ten (10)
days before the consummation of the action authorized by such approval, and (2)
prompt notice shall be given of the taking of any other corporate action
approved by shareholders without a meeting by less than unanimous written
consent, to those shareholders entitled to vote who have not consented in
writing.
Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the Corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary.
ARTICLE IV
DIRECTORS, POWERS AND MEETINGS
4.1. GENERAL POWERS. The business and affairs of the Corporation shall be
managed by a Board of Directors, except as otherwise provided by the California
General Corporation Law, the Articles of Incorporation or these Bylaws.
4.2. NUMBER, TENURE AND QUALIFICATIONS. The directors of the Corporation
shall be not less than four (4) nor more than seven (7) natural persons of the
age of eighteen (18) years or older. The number of directors to serve until the
next succeeding annual meeting shall be set at each annual meeting of
shareholders. Directors shall be elected at each annual meeting of shareholders.
Each director shall hold office until the next annual meeting of shareholders
and, thereafter, until his successor has been elected and has qualified.
Directors shall be removable in the manner provided by the statutes of
California.
4.3. RESIGNATIONS. Any director may resign effective upon giving written
notice of his resignation to the Chairman of the Board, the President, the
Secretary or the Board of Directors, which resignation shall take effect at the
time specified therein, or, if no time be specified, then at the time of receipt
thereof.
4.4. FILLING VACANCIES-SPECIAL MEETING OF SHAREHOLDERS-NOTICE OF
OPPOSITION-RESIGNATION. Except for a vacancy created by the removal of a
director, vacancies on the board may be filed by approval of the board or, if
the number of directors then in office is less than a quorum, by (1) the
unanimous written consent of the directors then in office, (2) the affirmative
vote of a majority of the directors then in office at a meeting held pursuant to
notice or waivers of notice or (3) a sole remaining director. Vacancies
occurring in the board by reason of the removal of directors may be filled only
by approval of the shareholders.
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The shareholders may elect a director at any time to fill any vacancy not
filled by the directors. Any such election by written consent other than to fill
a vacancy created by removal requires the consent of a majority of the
outstanding shares entitled to vote.
If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders shall constitute less than a
majority of the directors then in office, then both of the following shall be
applicable:
(a) Any holder or holders of an aggregate of five percent (5%) or
more of the total number of shares at the time outstanding having the right to
vote for those directors may call a special meeting of shareholders, or
(b) The superior court of the proper county shall, upon application
of such shareholder or shareholders, summarily order a special meeting of
shareholders, to be held to elect the entire board. The term of office of any
director shall terminate upon that election of successors.
4.5. ANNUAL MEETINGS. The annual meeting of the Board of Directors or any
committee designated by the Board shall be held without notice other than this
Bylaw immediately after, and at the same place as, the annual meeting of
shareholders. The Board of Directors may provide, by resolution, the time and
place, either within or outside California, for the holding of additional
regular meetings without other notice than such resolution.
4.6. SPECIAL MEETINGS. Special meeting of the Board of Directors or any
committee designated by the Board may be called by or at the request of the
President or any director.
4.7. NOTICE. Notice of any special meeting of the Board of Directors or
any committee designated by the Board shall be given by written notice mailed to
each director at his business address at least four (4) days prior to the
meeting, or by notice given at least forty-eight (48) hours previously by
telegram, telephone or written notice delivered personally. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Notice need not be given to any director who signs a waiver
of notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting. All such warranties, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. The attendance of a director at a meeting constitutes a
waiver of notice of such meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. Neither business to be
transacted at nor the purpose of any special meeting of the Board of Directors
or any committee designated by the Board need be specified in the notice or
waiver of notice of such meeting.
4.8. TELEPHONE MEETINGS. Members of the Board of Directors or any
committee designated by such Board may participate in a meeting of the Board or
committee by means of conference telephone or similar communications equipment
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by which all persons participating in the meeting can hear each other at the
same time.
4.9. QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business. The act of the majority of
the directors present at a meeting in which a quorum is present shall be the act
of the Board of Directors.
4.10. COMPENSATION. By resolution of the Board of Directors, any director
may be paid any one or more of the following: his expenses, if any, of
attendance at meetings; a fixed sum for attendance at meetings; or a stated
salary as director. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any capacity as an officer, as an
officer, employee, agent or otherwise and receiving compensation therefor.
4.11. PRESUMPTION OF ASSENT. The assent of a director of the Corporation
who is present at a meeting of the Board of Directors at which action on
any corporate matter is taken shall be entered in the minutes of the meeting
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof, or shall forward
such dissent by registered or certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
4.12. EXECUTIVE COMMITTEE. The Board of Directors, by resolution adopted by
a majority of the authorized number of directors, may designate from among its
members an executive and one or more other committees, each consisting of two or
more directors, each committee of which to the extent provided in such
resolution, shall have and may exercise all of the authority of the Board of
Directors, but no such committee shall have the authority of the Board of
Directors in reference to the approval of any action for which the California
General Corporation Law also requires shareholders' approval or approval of
outstanding shares, the filling of vacancies on the board or any committee, the
amendment or repeal of the Bylaws or the adoption of new bylaws, the amendment
or repeal of any resolution of the board which by its express terms is not so
amendable or repealable, a distribution, except at a rate in a periodic amount
or within a price range determined by the board, and the appointment of other
committees of the board or the members thereof. The designation of such
committees and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed by
law.
4.13. ACTION BY DIRECTORS WITHOUT MEETING. Any action required to be taken
at a meeting of the directors of the Corporation or of any executive committee
or any action which may be taken at any such meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors or executive committee members entitled to vote
with respect to the subject matter thereof.
4.14. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such officer
shall be chosen by the Board of Directors, shall preside at all meetings of
the Board of Directors at which he is present. He shall, subject to the
direction of the Board of Directors, have general oversight over the affairs
of the Corporation and shall, from time to time, consult and advise with the
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President in the direction and management of the Corporation's business and
affairs, and shall also do and perform such other duties as may, from time to
time, be assigned to him by the Board of Directors.
4.15. BANK ACCOUNTS. Anything herein to the contrary notwithstanding, the
Board of Directors may, except as may otherwise be required by law, authorize
any officer or officers, agent or agents, in the name of and on behalf of the
Corporation, to sign checks, drafts or other orders for the payment of money or
notes or other evidences of indebtedness, to endorse for deposit, deposit to the
credit of the Corporation at any bank or trust company or banking institution in
which the Corporation may maintain an account or to cash checks, notes, drafts
or other bankable securities or instruments, and such authority may be general
or confined to specific instances, as the Board may elect; but unless so
authorized by the Board, no officer, agent or employee shall have the power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it pecuniarily liable for any purpose or to any amount.
4.16. DIVIDENDS. If and in the manner permitted by the California General
Corporation Law, the Board of Directors of the Corporation may, from time to
time, declare, and the Corporation may pay, dividends in cash, property or its
own shares.
4.17. DIRECTORS AND OFFICERS TO EXERCISE POWERS IN GOOD FAITH; LIABILITY.
(a) A director shall perform the duties of a director, including
duties as a member of any committee of the board upon which the director may
serve, in good faith, in a manner such director believes to be in the best
interests of the Corporation and with such care, including reasonable inquiry,
as an ordinary prudent person in a like position would use under similar
circumstances.
(b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by:
(1) One or more officers or employees of the Corporation whom the
director believes to be reliable and competent in the matters presented,
(2) Counsel, independent accountants or other persons as to
matters which the director believes to be within such person's professional or
expert competence, or
(3) A committee of the board upon which the director does not
serve, as to matters within its designated authority, which committee the
director believes to merit confidence, so long as, in any such case, the
director acts in good faith, after reasonable inquiry when the need therefor is
indicated by the circumstances and without knowledge that would cause such
reliance to be unwarranted.
(c) A person who performs the duties of a director in accordance with
subsections (a) and (b) shall have no liability based upon any alleged failure
to discharge the person's obligations as a director.
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4.18. CONFLICT OF INTEREST.
(a) No contract or other transaction between the Corporation and one
or more of its directors, or between the Corporation and any corporation, firm
or association in which one or more of its directors has a material financial
interest, is either void or voidable because such director or directors or such
other corporation, firm or association are parties or because such director or
directors are present at the meeting of the board or a committee thereof which
authorizes, approves or ratifies the contract or transaction, if,
(1) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the shareholders and such
contract or transaction is approved by the shareholders in good faith, with the
shares owned by the interested directors or directors not being entitled to vote
thereon, or
(2) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the board or committee, and
the board or committee authorizes, approves or ratifies the contract or
transaction in good faith by a vote sufficient without counting the vote of the
interested director or directors and the contract or transactions is just and
reasonable as to the Corporation at the time it is authorized, approved or
ratified, or
(3) As to contracts or transactions not approved as provided in
paragraph (1) or (2) of this subsection, the person asserting the validity of
the contract or transaction sustains the burden of proving that the contract or
transaction was just and reasonable as to the Corporation at the time it was
authorized, approved or ratified. A mere common directorship does not constitute
a material financial interest within the meaning of this subsection. A director
is not interested within the meaning of this subsection in a resolution fixing
the compensation of another director as a director, officer or employee of the
Corporation, notwithstanding the fact that the first director is also receiving
compensation from the Corporation.
(b) No contract or other transaction between the Corporation and any
corporation or association of which one or more of its directors are directors
is either void or voidable because such director or directors are present at the
meeting of the board or a committee thereof which authorizes, approves or
ratifies the contract or transaction, if
(1) The material facts as to the transaction and as to such
director's other directorship are fully disclosed or known to the board or
committee, and the board or committee authorizes, approves or ratifies the
contract or transaction in good faith by a vote sufficient without counting the
vote of the common director or directors or the contract or transaction is
approved by the shareholders in good faith, or
(2) As to contracts or transactions not approved as provided in
paragraph (1) of this subsection, the contract or transaction is just and
reasonable as to the Corporation at the time it is authorized, approved or
ratified.
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(c) Interested or common directors may be counted in determining the
presence of a quorum at a meeting of the board or a committee thereof which
authorizes, approves or ratifies a contract or transaction.
4.19. SALE, MORTGAGE OR LEASE OF ASSETS. The sale, lease, conveyance,
exchange, transfer or other disposition of all or substantially all of the
property and assets of the Corporation in the usual and regular course of its
business and the mortgage or pledge of, hypothecation, the creation of security
interests in, or any other dedication to the repayment of indebtedness or
performance of any contract or obligation of any or all property and assets of
the Corporation, with or without recourse and whether or not in the usual and
regular course of business, may be made upon such terms and conditions and for
such consideration, which may consist in whole or in part of cash or other
property, including shares, obligations or other securities of any other
corporation, domestic or foreign, as are authorized by the Board of Directors,
and in any such case, approval by the shareholders shall not be required.
ARTICLE V
OFFICERS AND AGENTS
5.1. OFFICERS. The officers of the Corporation shall consist of a
Chairman of the Board, President, or both, a Vice-Chairman, a Secretary and a
Chief Financial Officer, each of whom shall be natural persons of the age of
eighteen (18) years or older and elected by the Board of Directors. The Board of
Directors may elect or appoint such other officers and assistant officers and
agents as may be deemed necessary. All officers and agents of the Corporation
shall have such authority and perform such duties in the management of the
Corporation as are provided in these Bylaws. The Chairman of the Board shall fix
the term of office and salaries of all of the officers of the Corporation. Any
two or more offices may be held by the same person.
5.2. REMOVAL OF OFFICERS. Any officer or agent may be removed by the Board
of Directors or by the Executive Committee, if any, whenever, in its judgment,
the best interests of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
5.3. PRESIDENT. The President shall be the chief executive officer of the
Corporation and in the absence of the Chairman and Vice-Chairman of the Board or
Vice-Chairman shall preside at any meeting of the Board of Directors at which he
is present. He shall be in charge of the management of the business of the
Corporation and shall see that all orders and resolutions of the Board are
carried into effect, and he shall have the authority and powers necessary to
perform such duties.
5.4. CHAIRMAN.
The Board of Directors shall appoint one of its members to be the Chairman
of the Board to serve at the pleasure of the Board. Such person shall preside at
all meeting of the Board of Directors and the Chairman of the
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Board shall have and may exercise such further powers and dues as from time
to time may be conferred upon, or assigned by the Board of Directors.
5.5. VICE-CHAIRMAN. The Vice Chairman shall, in the absence or disability
of the Chairman, perform the duties and exercise the powers of the Chairman, and
shall perform such other duties as may, from time to time, be prescribed by the
Board of Directors.
5.6. VICE-PRESIDENT. Any Vice-President shall, in the absence or
disability of the President, perform the duties and exercise the powers of the
President and shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors.
5.7. SECRETARY. The Secretary shall, if requested by the President, attend
all sessions of the Board of Directors and record all votes and the minutes of
all proceedings in a book or books to be kept for that purpose, and shall
perform like duties for the standing committees when required. He shall cause
due notice to be given of all meetings of the shareholders and Board of
Directors. He shall keep in safe custody the corporate records and the seal of
the Corporation and when authorized by the Board shall affix the seal to any
instrument requiring it, and when so affixed, it shall be attested by his
signature. The Secretary shall sign with the President or a Vice-President
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors. He shall have general
charge of the stock transfer books of the Corporation and copies of information
concerning voting trusts, if any. He shall in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
Assistant Secretaries, if any, shall have the same duties and powers,
subject to supervision by the Secretary.
5.8. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall keep, in a
book kept for such purpose, the records of all shareholders' meetings, including
records of all votes and minutes of such meetings; such book shall be kept by
him at the registered office of the Corporation and shall be deemed to be in the
Chief Financial Officer's custody. Additionally, the Chief Financial Officer
shall act as voting inspector as provided in Section 7.07 of the California
General Corporation Law, shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum and the authenticity, validity and effect of proxies, receive votes,
ballots and consents, hear and determine all challenges and questions in any way
arising in connection with the right to vote, count and tabulate all votes or
consents, determine when the polls shall close, determine the result and do such
acts as may be proper to conduct the election or vote with fairness to all
shareholders. In addition, the Chief Financial Officer shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, take proper vouchers for such disbursements, and shall render to the
President and the directors whenever they may require it an account of all his
transactions and of the
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financial condition of the Corporation. He shall, if required by the Board, give
the Corporation a bond in such sums and with such sureties as shall be
satisfactory to the Board, conditioned upon the faithful performance of the
duties and for the restoration to the Corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Assistant Chief Financial Officers, if any, shall have the same powers and
duties, subject to the supervision of the Chief Financial Officer.
ARTICLE VI
INDEMNIFICATION OF CORPORATE AGENTS
6.1. DEFINITIONS. For the purposes of this Article, (1) "agent" means any
person who is or was a director, officer, employee or other agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of another foreign or domestic corporation which was
a predecessor corporation of the Corporation or of another enterprise at the
request of such predecessor corporation; (2) "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and (3) "expenses" includes, without
limitation, attorneys' fees and any expenses of establishing a right to
indemnification under Section 6.4 or paragraph (3) of Section 6.5.
6.2. THIRD-PARTY ACTIONS. The Corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding (other than an action by or in the right of the Corporation to
procure a judgment in its favor) by reason of the fact that such person is or
was an agent of the Corporation, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in the best interests of the Corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct of
such person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, itself, create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in the best interests of
the Corporation or that the person had reasonable cause to believe that the
person's conduct was unlawful.
6.3. DERIVATIVE ACTIONS. The Corporation shall have the power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or was
an agent of the Corporation, against expenses actually and reasonably incurred
by such person in connection with the defense or settlement of such action if
such person acted in good faith, in a manner such person believed to be in the
best interest of the Corporation and with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this Section 6.3:
(1) In respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation
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in the performance of such person's duty to the Corporation, unless and only to
the extent that the court in which proceeding is or was pending shall determine
upon application that, in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for the expenses which such court
shall determine; (2) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or (3) Of expenses
incurred in defending a threatened or binding action which is settled or
otherwise disposed of without court approval.
6.4. MANDATORY INDEMNIFICATION. To the extent that an agent of the
Corporation has been successful on the merits in defense of any proceeding
referred to in Section 6.2 or 6.3 or in defense of any claim, issue or matter
therein, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith.
6.5. STANDARDS. Except as provided in Section 6.4, any indemnification
under this Section shall be made by the Corporation only if authorized in the
specific case, upon determination that indemnification of the agent is proper in
the circumstances because the agent has met the applicable standard of conduct
set forth in Section 6.2 or 6.3, by: (1) A majority vote or a quorum consisting
of directors who are not parties to such proceeding; (2) Approval of the
shareholders, with the shares owned by the person to be indemnified not being
entitled to vote thereon; or (3) The court in which such proceeding is or was
pending upon application made by the Corporation or the agent or the attorney or
other person rendering services in connection with the defense, whether or not
such application by the agent, attorney or other person is opposed by the
Corporation.
6.6. EXPENSES. Expenses incurred in defending any proceeding may be
advanced by the Corporation prior to the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of the agent to repay such amount
unless it shall be determined ultimately that the agent is entitled to be
indemnified as authorized in this Article.
6.7. NONEXCLUSIVE. The indemnification provided by this Article shall not
be deemed exclusive of any other rights, consistent with the law, to which those
indemnified may be entitled under these Articles of Incorporation, any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise, and
any procedure provided for by any of the foregoing, both as to action in his
official capacity and as to action in another capacity while holding such office
and shall continue as to a person who has ceased to be an agent and shall inure
to the benefit of heirs, executors and administers. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
such directors and officers may be entitled to by contract or otherwise. The
indemnification provided by this Article shall not be interpreted as limiting.
Indemnification shall be allowed to the fullest extent as is and shall be
permitted by the laws of California.
6.8. INSURANCE. The Corporation shall have power to purchase and maintain
insurance on behalf of any agent of the Corporation against any liability
asserted against or incurred by the agent in such capacity or arising out of the
agent's status as such whether or not the Corporation would have the power to
indemnify the agent against such liability under the provisions of this Article.
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ARTICLE VII
TENDER OFFER
7.1. OPPOSITION OF TENDER OFFER. The Board of Directors may, if it deems
it advisable, oppose a tender offer or other offer for the Corporation's
securities, whether the offer is in cash or in the securities of a corporation
or otherwise. When considering whether to oppose an offer, the Board of
Directors may, but it is not legally obligated to, consider any pertinent issue;
by way of illustration, but not of limitation, the Board of Directors may, but
shall not be legally obligated to, consider any or all of the following:
(a) Whether the offer price is acceptable based on the historical and
present operating results or financial condition of the Corporation;
(b) Whether a more favorable price could be obtained for the
Corporation's securities in the future;
(c) The impact which an acquisition of the Corporation would have on
the employees, depositors and customers of the Corporation and its subsidiaries
and the communities which they serve;
(d) The reputation and business practices of the offeror and its
management and affiliates as they would affect the employees, depositors and
customers of the Corporation and its subsidiaries and the future value of the
Corporation stock;
(e) The value of the securities (if any) which the offeror is
offering in exchange for the Corporation's securities, based on an analysis of
the worth of the Corporation as compared to the corporation or other entity
whose securities are being offered; and
(f) Any antitrust or other legal and regulatory issues that are
raised by the offer.
7.2. REJECTION OF OFFER. If the Board of Directors determines that an
offer should be rejected, it may take any lawful action to accomplish its
purpose, including, but not limited to, any or all of the following: advising
shareholders not to accept the offer; litigation against the offeror; filing
complaints with all governmental and regulatory authorities; acquiring the
Corporation's securities; selling or otherwise issuing authorized but unissued
securities or treasury stock or granting options with respect thereto; acquiring
a company to create an antitrust or other regulatory problem for the offeror;
and soliciting a more favorable offer from another individual or entity.
ARTICLE VIII
MISCELLANEOUS
8.1. FISCAL YEAR. The fiscal year of the Corporation shall be determined
by the Board of Directors.
- 18 -
<PAGE>
8.2. WAIVER AND EFFECTIVE DATE OF NOTICE. Whenever notice is required to
be given to any shareholder or director under the provisions of the California
General Corporation Law or under the provisions of the Articles of Incorporation
or these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before, at or after the time stated therein,
shall be equivalent to the giving of such notice.
8.3. AMENDMENT OF BYLAWS. Subject to repeal or change by action of the
shareholders, the Bylaws may be altered, amended or repealed, from time to time,
in while or in part, by the affirmative vote of a majority of the Board of
Directors at a meeting called for that purpose or by consent.
8.4. CONFLICT. In the event of any conflict between any provision in
these Bylaws and in the Corporation's Articles of Incorporation, the provision
in the Articles shall control.
- 19 -
<PAGE>
SEE REVERSE SIDE
FOR THE
RESTRICTIVE LEGEND
NUMBER [LOGO] SHARES
SFU 1633 ***4000***
INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA
- -------------------------------------------------------------------------------
THIS CERTIFIES THAT SFU 001633 4000*********
0425 *4000********
NCO0002577 **4000*******
MARTIN---- ***4000******
EDWAT0000 ****4000*****
is the owner of
- -------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK $1.00 PAR VALUE OF
AMERICORP
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney, upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Certificate of
Incorporation and the Bylaws of the Corporation and any amendments thereto.
This Certificate is not valid unless countersigned and registered
by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the signatures
of its duly authorized officers.
Dated 04/25/96
/s/ Lincoln E. Cryne [seal] /s/ James E. Beeninga
- ----------------------------- ----------------------------
Secretary President
<PAGE>
EXHIBIT 5.1
Opinion of Reitner & Stuart
<PAGE>
[Letterhead of Reitner & Stuart]
Board of Directors
Americorp
304 E. Main Street
Ventura, CA 93001
RE: Registration Statement on Form S-4
Gentlemen:
At your request, we have examined the Registration Statement on Form S-4
(the "Registration Statement") being filed by Americorp (the "Company") with
the Securities & Exchange Commission in connection with the registration under
the Securities Act of 1933, as amended, of shares of the Company's common stock,
(the "Common Stock"), issuable pursuant to the merger of Channel Islands Bank
with and into the Company's subsidiary, American Commercial Bank (the "Merger").
In rendering this opinion, we have examined such documents and records as
we have deemed relevant. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
originals of all documents submitted to us as certified or reproduced copies.
Based upon the foregoing and such other and further review of fact and law as we
have deemed necessary or appropriate under the circumstances, and assuming that
the shares of Common Stock subject to the Registration Statement are issued
pursuant to and in accordance with the terms of the Merger, upon which
assumptions the following opinions are expressly conditioned, it is our opinion
that the shares of Common Stock that are the subject of the Registration
Statement will, when issued and sold in accordance with the terms of the Merger,
be validly issued, fully paid and non-assessable.
This opinion is issued to you solely for use in connection with the
Registration Statement and is not to be quoted or otherwise referred to in any
financial statements of the Company or related documents, nor is it to be filed
with or furnished to any government agency or other person, without the prior
written consent of this firm in each instance.
This firm hereby consents to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to the undersigned under the
heading "Legal Matters" therein and in any prospectus delivered pursuant to the
Merger.
Respectfully submitted,
/s/ Reitner & Stuart
REITNER & STUART
<PAGE>
EXHIBIT 10.1
Employment Agreement of Gerald J. Lukiewski
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made this 2nd day of March,
1998, by and between AMERICAN COMMERCIAL BANK ("Employer"), and JERRY
LUKIEWSKI ("Employee"). This Agreement is made with specific reference to the
following facts:
RECITALS
A. Employee has substantial experience and expertise in the banking
industry, and his qualifications have been reviewed and approved by Employer's
Board of Directors.
B. Employer, acting by and through its Board of Directors, desires to
employ Employee as Employer's President and Chief Executive Officer, and
Employee desires to accept such employment, based upon the following terms and
conditions.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement and the foregoing Recitals, the parties agree as follows:
1. EMPLOYMENT OF EMPLOYEE. Subject to the remaining provisions hereof,
Employer hereby employs Employee as Employer's President and Chief Executive
Officer, and Employee hereby accepts employment from Employer.
2. EMPLOYEE'S DUTIES AND AUTHORITY.
(a) DUTIES. As Employer's President and Chief Executive Officer,
Employee shall have general executive supervision of the business and affairs of
Employer, subject at all times to the pleasure, direction and control of
Employer's Board of Directors (the "Board"). Employee shall be senior in rank to
all other employees of Employer. Employee shall devote his best efforts to the
business and affairs of Employer and its affiliates on a full-time basis. In the
event Employee shall become a member of the Board, Employee shall be a member of
all committees appointed by the Board, except the audit committee; PROVIDED,
HOWEVER, if Employee's employment by Employer is terminated for any reason, with
or without cause, by resignation or otherwise, Employee shall immediately cease
to be a member of the Board and of any and all committees appointed by the
Board. Employee shall serve on the Board without additional compensation.
Employee shall acquire with his own funds and retain any number of shares of
stock of Employer required of Board members pursuant to the By-laws of Employer
and all applicable governmental regulations.
(b) AUTHORITY. Employee shall have authority to sign contracts,
bills, notes, drafts, and other instruments or obligations of Employer, as
provided in Employer's By-laws, as authorized in advance by the Board and in
accordance with applicable law. Notwithstanding the foregoing, Employee shall at
all times be subject to Employer's By-laws and the direction of Employer's Board
of Directors. Employee shall devote his best efforts and attention to
Employer's business and will not render any personal service of any character to
any other person, firm or corporation, whether for compensation or otherwise,
without the Board's prior written
<PAGE>
consent, which consent shall not be unreasonably withheld. Employee shall
perform his duties at all times to the best of his abilities, in accordance with
the highest standards of the banking industry, and in compliance with all
applicable laws, Employer's Articles of Incorporation and Employer's By-laws.
3. TERM OF EMPLOYMENT. Employee's employment shall be for an initial term
of six (6) months, commencing on March 2, 1998; SUBJECT, HOWEVER, to the prior
termination of this Agreement as provided below (the "Initial Term"). The
Initial Term may be extended by the mutual, written agreement of Employer and
Employee.
4. COMPENSATION. As compensation for all services rendered pursuant to
this Agreement, Employee shall receive an annual salary of One Hundred Five
Thousand Dollars ($105,000.00), which salary shall be reviewed by Employer at
the end of the Initial Term. Such salary shall be payable in periodic
installments in accordance with Employer's payroll practices in effect from time
to time and shall be subject to the deductions and withholdings prescribed by
law. Employee's salary shall be prorated for any year in which this Agreement is
in effect for only a portion of the year.
(a) BONUS PROGRAM. In addition to the payment of the annual salary
specified in Section 4 above, Employee shall have the ability to earn an
incentive bonus, pursuant to Employer's bonus program in effect for its senior
executives from time to time. In no event, however, regardless of Employer's
after-tax profit for any year, shall Employee's incentive bonus exceed fifty
percent (50%) of Employee's then existing annual base salary.
5. ADDITIONAL BENEFITS.
(a) VACATION. Employee shall be entitled to twenty (20) days of paid
vacation each year during the term of this Agreement. Employee shall schedule
his vacation after consultation with the Board and shall take no less than ten
(10) days of his vacation without interruption. Sick leave shall be in
accordance with the policies of Employer for its senior executive employees in
effect from time to time. Employee shall accrue vacation and sick leave on an
hourly basis.
(b) AUTOMOBILE ALLOWANCE. Employer agrees to pay Employee Six Hundred
Dollars ($600.00) per month, in addition to his salary, as reimbursement for
his automobile expenses. Employee shall not be entitled to reimbursement of
automobile expenses in excess of the Six Hundred Dollars ($600.00) per month.
Employee shall maintain automobile insurance with a liability limit of no less
than $500,000.00 per occurrence, with an insurer reasonably acceptable to
Employer. Employee shall provide Employer with proof of his required automobile
insurance throughout the term of this Agreement.
(c) INSURANCE. Employer shall cover Employee and his dependents,
without cost to Employee, with the group medical, hospitalization and dental
insurance that is otherwise provided by Employer from time to time for its
senior executive employees. Employee shall also receive Employer-paid life
insurance equal to 1 1/2 times Employee's annual salary throughout the term of
this Agreement.
(d) RETIREMENT BENEFITS. Employer agrees to cover Employee under all
pension, profit sharing, or other retirement plans or benefits that may be
provided by Employer for its senior executive employees from time to time, to
the extent Employee otherwise qualifies for participation in the subject benefit
plans.
<PAGE>
(e) EXPENSE REIMBURSEMENTS. Employer shall reimburse Employee for
all reasonable, ordinary and necessary expenses incurred by Employee in the
performance of his duties under this Agreement, including, but not limited
'to,.- reimbursement for educational programs and banking seminars; SUBJECT
HOWEVER, to the submission of written reports by Employee outlining the need
for the program and the prior written approval thereof by the Board. Employee
shall submit expense accounting forms in detail reasonably satisfactory to
Employer to substantiate all expense reimbursement requests. In all events,
however, absent the Board's prior written approval, Employee's reimbursable
expenses shall not exceed Five Hundred Dollars ($500.00) per month. If any
reimbursements paid by Employer are subsequently disallowed by Employer's
audit committee or independent accountants, Employee agrees to repay Employer
the FULL amounts that are disallowed, immediately upon demand. The Board
shall previously approve any and all service or social clubs Employee wishes
to participate in for business purposes on behalf of Employer and, once
approved, Employee's dues for membership in any service or social clubs shall
be paid directly by Employer.
6. TERMINATION.
(a) TERMINATION BY EMPLOYER FOR CAUSE. Employer, acting by and
through the Board, may terminate Employee's employment, without further
obligation or liability to Employee, at any time the Board determines that there
is cause for such termination. The occurrence of any of the following events
shall constitute cause for purposes of this Agreement:
(i) Employee's neglect of his duties, negligence, WILLFUL
wrongdoing, or violation of applicable banking laws or regulations;
(ii) , Employee's engaging in an activity which adversely
affects Employer's reputation in the community, or which evidences
Employee's lack of fitness or ability to perform his duties as determined
by the Board, in good faith;
(iii) Employee's commission of any act that causes termination
of coverage under Employer's Banker's Blanket Bond as to Employee, as
distinguished from termination of coverage as to Employer's employees
generally;
(iv) The physical or mental inability of Employee to perform
his duties for a period of ninety (90) days or more during any twelve (12)
month period;
(v) Action taken by the California Department of Banking or
other regulatory authority, including the Federal Deposit Insurance
Corporation, to close or take over Employer;
(vi) Mutual agreement of the parties;
(vii) Employee's death; or
(viii) The exercise of the power of any duly constituted
regulatory authority to remove Employee from office.
Any determination of termination of Employee for cause made by the Board in
good faith shall terminate Employee's employment immediately, without further
liability or obligation to Employee under this
<PAGE>
Agreement. Employee, however, will thereafter be entitled to any accrued but
unpaid salary, reimbursable expenses, and accrued vacation to the date of his
termination, but all other remuneration and benefits will cease as of the date
of termination.
(b) TERMINATION BY EMPLOYER WITHOUT CAUSE. Employer, acting by and
through the Board, may terminate Employee at any time, without cause;
PROVIDED, HOWEVER, that in the event of any such termination Employee shall
be entitled to any then accrued but unpaid salary, reimbursable expenses, and
accrued vacation. In addition, if Employee is terminated without cause during
this Agreement's term, Employer shall continue Employee's base salary for
three (3) months from the date of termination, or for the remainder of the
term of this Agreement, whichever sum shall be less. Further, for a period of
three (3) months from the date of termination, Employer shall provide
Employee with a sum equal to Employee's monthly cost for group medical and
hospitalization insurance benefits for Employee and Employee's dependents
under Employer's then existing health insurance plan, should Employee elect
to continue such health insurance coverage at his own expense after
termination. All such severance pay shall be at the rate in effect
immediately prior to such termination. Payment to Employee of those sums
required pursuant to this Section 6(b) shall discharge Employer and the Board
from any further liability to Employee hereunder.
(c) TERMINATION BY EMPLOYEE. Employee may terminate this Agreement
upon ninety (90) days prior written notice to Employer. In such an event,
Employee will be entitled to accrued but unpaid salary, reimbursable expenses,
and accrued vacation, but all other remuneration and benefits will cease as of
the effective date of termination.
(d) MERGER OR OTHER REORGANIZATION. In the event of the merger of
Employer into another corporation (where Employer is not the surviving entity),
an exchange of all of the outstanding shares of Employer for the shares of
another corporation, a transfer or other consideration of all or substantially
all of the assets of Employer for the shares of another corporation, or other
corporate reorganization resulting in a successor to Employer, this Agreement
shall remain in full force and effect, and shall be assigned or be deemed to be
assigned to any such successor of Employer, unless otherwise mutually agreed
between Employer and Employee. Upon any such assignment, Employer shall be
unconditionally released from any and all continuing duties and obligations
under this Agreement. In the event of Employee's termination without cause in
connection with the acquisition, merger or reorganization of Employer, Employee
shall be entitled hereunder to the lesser of six (6) month's base salary or the
base salary due Employee for the balance of the term of this Agreement, or any
extension thereof, whichever may be less.
(e) SOLE REMEDY. Employee agrees that his sole remedy for an alleged
breach of this Agreement shall be against Employer. For and in consideration of
this Agreement, Employee expressly waives any right he may have for a lawsuit
for damages against any shareholder, director, officer or employee of Employer
for any claim, cause of action, damage, cost or expense, arising from, in
connection with, or relating to, the terms and provisions of this Agreement or
any breach hereof.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) TRADE SECRETS. During the term or any extended term of this
Agreement, Employee will have access to and become acquainted with what Employee
and Employer both acknowledge are trade secrets. Specifically, Employee will
acquire by virtue of his employment knowledge or data concerning Employer,
including its operations and business, and the identity of customers of
Employer, including knowledge of their financial needs and methods of doing
business. Employee shall not disclose any of the above-described trade
<PAGE>
secrets or any other trade secrets of Employer, directly or indirectly, or use
them in any way, either during the term of this Agreement or for a period of one
(1) year after the TERMINATION of this Agreement for whatever reason, except as
required in the course of Employee's employment with Employer.
(b) RETURN OF PERSONAL PROPERTY. Employee expressly agrees that
all manuals, documents, files, reports, studies, computer programs or models,
budgets, instruments or other materials used, supplied to and/or developed by
Employee during the term of this Agreement are solely the property of
Employer, and that Employee shall have no right, title or interest therein.
Upon termination of this Agreement, for whatever reason, Employee or
Employee's representative shall promptly deliver possession of all of
Employer's personal property to Employer in good condition. Further, Employee
shall also immediately tender to Employer or its representative(s) any and
all keys, credit cards, combinations, and/or computer access codes then
maintained by Employee.
(c) The foregoing covenants of Employee are given to Employer as a
material inducement to Employer to enter into this Agreement and to pay
Employee the compensation stated in Section 4 above. Further, in the event of
a breach or threatened breach by Employee of any of the covenants contained
in this Section 7, Employer shall have the right to seek monetary damages for
any past breach and equitable relief, including specific performance by means
of an injunction, against Employee or against Employee's partners, agents,
representatives, servants, employers, employees, family members, and/or any
and all persons acting directly or indirectly by or with him, to prevent or
restrain and threatened or further breach of these covenants.
8. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and
warrants to Employer that:
(a) The execution, delivery and performance of this Agreement by
Employee will not violate, be in conflict with, or constitute a default under
any contract or agreement to which Employee is a party or is bound.
(b) Employee does not and will not have any material agreements or
commitments including, but without limiting the generality of the foregoing,
any agreement restricting competition or any material commitments or
obligations, contingent or otherwise, under any contract or agreement which
would conflict in any way with Employee's ability to fully perform his
obligations hereunder, or which would impede Employer's ability to market
Employee's services.
(c) Employee is not a party to any pending or threatened
litigation, proceedings, claims or governmental investigation which may
either (i) adversely affect Employee's practice of banking or impair
Employee's ability to perform his duties under this Agreement, or (ii) seek
to prevent, restrain or interfere with the performance by Employee of his
duties under this Agreement.
Employee's representations and warranties contained in this Agreement
shall be deemed to have been made as of the date of this Agreement and shall
continue to be made throughout the term of this Agreement. Employee shall
immediately notify Employer of any and all subsequent misstatements or
inaccuracies in any of the representations and warranties set forth herein.
9. MISCELLANEOUS PROVISIONS.
<PAGE>
(a) NOTICES. Any notice, request, demand, or other communication
required or permitted to be given hereunder shall be in writing and may be
delivered by hand, deposited in the United States mail, certified or registered
and postage prepaid, or by facsimile transmission addressed as follows:
If to Employer: American Commercial Bank
300 South Mills Road
Ventura, CA 93003
Attention: CHAIRMAN of the Board
Fax: (805)
If to Employee: Jerry Lukiewski
2224 Marco Drive
Camarillo, California 93010
All such notices, requests, demands, or other communications so delivered
shall be deemed to have been received by the addressee (i) if delivered by
hand, on the date of delivery; (ii) if sent by facsimile transmission, on the
date of transmission; and (iii) if sent by United States mail, two (2)
calendar days after the date of posting. If either party hereto changes his
or its address, then such party shall immediately notify other party in
writing of the return address in accordance with the foregoing procedures.
(b) GOVERNING LAW. To the extent not otherwise in conflict with
all applicable Federal laws and regulations, this Agreement shall be governed
by, interpreted under, and construed and enforced in accordance with the laws
of the State of California applicable to agreements made and to be performed
wholly within the State of California.
(c) ENTIRE AGREEMENT. There have been no representations or
warranties made by the parties except as expressly set forth herein. The
terms and conditions hereof are intended by the parties as a complete and
final expression of their agreement with respect to the subject matter of
this Agreement and may not be contradicted by evidence of any prior or
contemporaneous agreement, all of which are merged herein.
(d) MODIFICATIONS AND AMENDMENTS. This Agreement may not be
modified, changed, or supplemented, nor may any obligations hereunder be
waived, except by a written instrument, signed by each of the parties.
Employee further acknowledges and agrees that the terms and conditions of
this Agreement may only be amended by a written resolution of the Board, as
approved by the then required majority of Employer's directors.
(e) TITLES AND HEADINGS. Titles and headings of sections of this
Agreement are for convenience of reference only and shall not affect the
construction of any provision of this Agreement.
(f) ASSIGNMENTS. Except as provided in paragraph 6(d), this
Agreement, and the rights, duties, and obligations hereunder may not be assigned
by any party without the prior written consent of the other parties.
(g) SUCCESSORS AND ASSIGNS. This Agreement and the provisions hereof
shall be binding upon and inure to the benefit of each of the parties and their
respective heirs, executors, administrators, successors, and permitted assigns.
<PAGE>
(h) PARTIAL INVALIDITY. If any provision of this Agreement is found
to be invalid by any court, the invalidity of such provision shall not affect
the validity of the remaining provisions hereof.
(i) SURVIVAL. Notwithstanding any other provisions hereof, the
provisions of paragraphs 6 and 7 and their subparagraphs shall survive the
termination of this Agreement.
(j) ADDITIONAL INSTRUMENTS. The parties agree that they will execute
such other instruments and documents as are or may become necessary or
convenient to carry out the intent and purposes of this Agreement.
(k) WAIVER. Pursuit of any one remedy shall not preclude pursuit of
any other remedies provided for herein or by law. No waiver of one violation of
this Agreement shall be deemed or construed to constitute a waiver of any
similar violations subsequently occurring, or any other violation whatsoever.
(l) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same Agreement.
(m) AMENDMENTS. This Agreement may not be amended, altered or
modified except by a written instrument signed by all of the parties.
(n) ARBITRATION. Any and all disputes, controversies or questions
arising under this Agreement shall be referred for decision by arbitration in
Ventura, California, by a single arbitrator selected by the parties. The
proceeding shall be governed by the Rules of the American Arbitration
Association then in effect or SUCH rules last in effect (in the event that
SUCH Association is no longer in existence). If the parties are unable to
agree upon an arbitrator within thirty (30) days after either party has given
the other party written notice of its desire to submit the dispute,
controversy or question for decision, then either party may apply to the
American Arbitration Association for the appointment of an arbitrator or, if
such Association is not then in existence or does not desire to act in the
matter, either party may apply to the Presiding Judge of the Superior Court
of the County of Ventura, California, for the appointment of an arbitrator to
hear the parties and settle the dispute, controversy or question, and such
judge is authorized to make such appointment. The compensation and expenses
of an arbitrator shall be borne equally by the parties to this Agreement.
Arbitration shall be the exclusive remedy for the settlement of disputes
arising under this Agreement or for the breach of this Agreement. The
decision of the arbitrator shall be final, conclusive and binding on all
interested persons and no action at law or in equity shall be instituted by
either party other than to enforce the award of the arbitrator.
IN WITNESS WHEREOF, the parties hereto have executed the foregoing
Agreement on the date first written above.
"EMPLOYER": "EMPLOYEE":
AMERICAN COMMERCIAL BANK JERRY LUKIEWSKI
By:
----------------------- ----------------
Title:
--------------------
<PAGE>
EXHIBIT 10.2
1994 Stock Option Plan
<PAGE>
STOCK OPTION PLAN
AMERICORP (herein "Corporation"), 100% owner of AMERICAN COMMERCIAL BANK
(herein "Bank"), hereby adopts this Stock Option Plan. The purposes of the Plan
are to secure to AMERICORP the advantages of the incentive inherent in stock
ownership on the part of the officers and directors who will be responsible for
the continued success of the Corporation Bank and to create in such officers and
directors a proprietary interest in, and a greater concern for the welfare of,
the Corporation and Bank.
1. SHARES. The Corporation shall set aside up to 60,000 shares of
its authorized but unissued common shares $1 par value for sale under the Plan
(hereinafter "Shares").
2. POTENTIAL OPTIONEES. The following shall be eligible to
participate in the Plan:
(a) Officers - President, Senior Vice President, Vice Presidents
and Assistant Vice Presidents of Bank.
(b) Directors - All directors of Bank, including Chairman of the
Board.
(c) Other Employees - Operations Officers and Loan Officers and
such other employees as the Board may in its discretion select.
3. SELECTION OF OPTIONEES. The Board of Directors of Corporation
shall select the Plan Participants from time to time from among the list set
forth in paragraph 2. Once selected they shall be referred to as "Participants".
4. TERMS OF OPTIONS. Once a Participant and number of Shares has
been selected, the option terms shall be as follows:
(a) OPTION PRICE. The price to be paid by the Participant shall
be one hundred percent (100%) of the fair market value of the Shares at the time
the option is granted to such Participant, as determined by the Board of
Directors of the Corporation. In deciding on fair market value, the Board shall
consider most recent trade information as prime indicator of value.
Notwithstanding the foregoing, in the event that an option is granted to any
person who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of
1
<PAGE>
AMERICORP or its parent or subsidiary corporations, the purchase price shall be
110% of the fair market value of the shares at the time the option is granted to
such participant.
(b) PERIOD FOR EXERCISE OF OPTIONS. The period for exercising
options shall not exceed five (5) years from the date the option is granted.
Exercise of options depends on tenure of service with Bank.
(1) Prior to its expiration, a Participant who has been
employed by the Bank or been a director of the Bank for less than ten (10) years
at the date of granting of the option may exercise the option as follows:
(a) During the first year commencing from the date
the option is granted Participant may exercise it as to not more than 20% of the
Shares under option.
(b) During the second year after the date the
option is granted Participant may exercise it as to not more than an additional
twenty percent (20%) of the Shares under option, plus any Shares left from the
previous year.
(c) During the third year from the date the option
is granted Participant may exercise it as to not more than an additional twenty
percent (20%) of the Shares under option, plus any shares left over from the
previous years.
(d) During the fourth year from the date the
option is granted Participant may exercise it as to not more than an additional
twenty percent (20%) of the Shares under option, plus any Shares left over from
previous years.
(e) During the fifth year from the date the option
is granted Participant may exercise it as to any remaining Shares. At the end of
the fifth year, this option shall expire.
(2) Prior to its expiration, a Participant who has been
employed by the Bank or been a director of the Bank for more than ten (10) years
as of the date of the granting of the option may exercise the option either
under paragraph (1) above or as follows:
(a) During the first year commencing from the date
the option is granted, Participant may exercise it as to one hundred percent
(100%) of the Shares under option.
(b) During the second year, as to any unexercised
Shares the Participant may exercise up to eighty percent (80%) of the original
grant.
2
<PAGE>
(c) During the third year, as to any unexercised
Shares the Participant may exercise up to sixty percent (60%) of the original
grant.
(d) During the fourth year, as to any unexercised
Shares the Participant may exercise up to forty percent (40%) of the original
grant.
(e) During the fifth year, as to any unexercised
Shares the Participant may exercise up to twenty percent (20%) of the original
grant. At the end of the fifth year, this option shall expire.
(c) EXERCISE OF OPTION. The option to purchase such Shares may
be exercised in whole or in part at any time after such option arises by
written notice delivered to the Corporation. Such notice shall state the
number of Shares with respect to which the option is being exercised and
shall specify a date, not less than five (5) nor more than ten (10) days
after the date of such notice, as the date on which the Shares will be taken
up and payment made therefor in cash or other consideration as provided in
this Plan at the principal office of the Corporation. If any law or
regulation requires the Corporation to take any action with respect to the
Shares specified in such notice, then the date for the delivery of such
Shares against payment therefor shall be extended for the period necessary to
take such action. No Participant shall have any rights as a shareholder of
any Shares to which option rights have been exercised if the Stock Option has
not been signed and said Shares have not been paid for in full and issued.
(d) OPTIONS NOT TRANSFERABLE. The right of any Participant to
exercise the options herein granted is not transferable otherwise than by will
or laws of descent and distribution.
(e) DEATH OF PARTICIPANT. In the event of the death of the
Participant, the Participant's personal representative may, subject to
provisions hereof, within twelve months after such death, exercise the option
granted to such Participant in respect to the total number of Shares remaining
under option. To the extent such option is not so exercised, it shall lapse at
the expiration of the twelve months.
(f) TERMINATION OF EMPLOYMENT. The option of any Participant
whose employment as officer, director or other employee is terminated for any
cause other than death, shall lapse thirty-one (31) days after termination.
During the period between termination and the lapse, the Participant may
exercise any then outstanding Shares.
(g) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If
3
<PAGE>
the outstanding Shares of the stock of the Corporation are increased, decreased,
or changed into, or exchanged for a different number or kind of Shares or
securities of the Corporation through reorganization, merger, recapitalization,
reclassification, stock split-up, stock dividend, stock consolidation, or
otherwise, an appropriate and proportionate adjustment shall be made in the
number and kind of Shares as to which options may be granted. A corresponding
adjustment changing the number or kind of Shares and the exercise price per
Share allocated to unexercised options or portions thereof, which shall have
been granted to any such change, shall likewise be made. Any such adjustment,
however, in an outstanding option shall be made without change in the total
price applicable to the unexercised portion of the option but with a
corresponding adjustment in the price for each Share covered by the option.
(h) CONTRACT. Upon grant of the option, the Corporation shall
offer an option agreement to the Participant in substantially the form set forth
as Exhibit "A: of this Plan.
5. ASSUMPTION OF OBLIGATION. Upon the dissolution or liquidation of
the Company, or upon a reorganization, merger, or consolidation of the Company
with one or more corporations as a result of which the Company is not the
surviving corporation, or upon a sale of substantially all the property of the
Company to another corporation or individual, provision must be made in
connection with such transaction for the assumption of options theretofore
granted, or the substitution for such options of new options covering the stock
of the successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to number and kind of Shares and prices.
6. DURATION OF PLAN. The duration of the Plan shall be ten (10)
years, commencing on the date of ratification by the shareholders of the
Corporation, and ending ten (10) years thereafter.
7. AMENDMENT. The Board of Directors of the Corporation may from
time to time alter or amend this plan or alter or amend any and all option
agreements granted thereunder, provided however, that in such action the Board
of Directors may not without the approval of the shareholders alter the
provisions of the Plan so as to (a) increase the maximum number of Shares as to
which options may be granted under the Plan; (b) decrease the option price
specified by paragraph 4a; (c) extend the term of the Plan or the maximum term
of options granted thereunder; (d) decrease directly or indirectly, by
cancellation or substitution or options or otherwise, the exercise price
applicable to any option granted under the Plan. In no event may the Board of
Directors alter any outstanding option agreement without consent of the
optionee.
8. ADMINISTRATION. The Plan shall be administered by
4
<PAGE>
the Board of Directors of the Corporation. Subject to the provisions of the Plan
the Board is authorized to interpret it, to prescribe, amend, and rescind rules
and regulations relating to it (subject to the limitations of paragraph 7 of
this Plan), and to make all other determinations necessary or advisable for its
administration.
9. MISCELLANEOUS.
(a) CONTINUANCE OF EMPLOYMENT. The plan shall not impose any
obligation on the Corporation to continue the employment of any Participant.
This Plan shall not constitute any contract or agreement of employment or in any
way interfere with the right of the Corporation or its subsidiary to reduce a
Participant;s compensation from the rate in existence at the time of the
granting of the option, or to terminate a Participant's employment.
(b) PRIVILEGE OF STOCK OWNERSHIP; NONDISTRIBUTIVE INTENT. A
Participant of an option shall not be entitled to any of the rights or
privileges of stock ownership as to any Shares which have not actually been
issued and delivered to said Participant upon exercise of the option in whole
or in part. Upon the exercise of an option at a time when there is not in effect
under the Securities Act of 1933, as amended (the "Act"), a registration
statement relating to the Shares issuable upon exercise thereof and available
for delivery a prospectus meeting the requirements of Section 10 (a) of said
Act, and Participant shall provide representations and warranties in writing to
the Corporation to the effect that the Shares purchased pursuant to exercise of
his option are not being acquired with a view to the distribution thereof and,
if required by the Corporation's Board of Directors, that the Participant is a
permanent resident domiciled in the state of California. No shares shall be
issued upon exercise of any option unless and until any then applicable
requirements of the United States Securities and Exchange Commission, the
California Corporation Commission, or other regulatory agencies having
jurisdiction and of any exchanges upon which securities of the Corporation may
be listed shall have been fully complied with.
(c) SEC LIMITATIONS. It is the Corporation's intention that the
issuance of the Corporation's Shares upon exercise of options granted pursuant
to this Plan will qualify for an exemption from the registration requirements of
the Act. To that end, the Corporation may require a Participant to delay
exercise of an option or may, as a condition to its obligation to issue a
certificate or certificates representing the Shares issued to the Participant
upon exercise of the option, require the Participant to provide written
assurance to the Corporation, as necessary, to assure compliance with applicable
federal and state securities laws. Additionally, the Corporation may endorse or
cause to be endorsed on such certificate or certificates an appropriate legend
referring to the foregoing restrictions, as
5
<PAGE>
applicable.
(d) LAPSED SHARES OPTION. If any option granted under this Plan
shall expire or terminate for any reason without having been exercised in full,
the unpurchased Shares subject thereto shall again be available for purposes of
this Plan.
(e) SURRENDER OF SHARES IN PAYMENT. The optionees may pay for
stock to be issued pursuant to the option exercise by surrender of Americorp
shares at full fair market value subject to the following restrictions:
(1) The board shall set the full fair market value of the
shares for purposes of surrender.
(2) No surrender shall be allowed which will in any way
jeopardize the qualification of the Stock Option Plan, or any rules or
regulations of the Internal Revenue Service or the Securities Exchange
Commission.
(f) EFFECTIVE DATE. This Plan shall become effective upon the
latter of the following events:
(1) Approval by the shareholders as required under
regulations issued by the Commissioner of Corporations 260.140.41 and all other
applicable regulations.
(2) Approval by the Commissioner of Corporations of the
Stock Option Plan.
(g) ANNUAL FINANCIAL STATEMENTS. The plan shall provide
optionees who become security holders with annual financial statements as
required by the California Department of Corporations, Title 10,
Section 260.140.46.
Dated: June 21, 1994
-----------------------------
/s/ Allen W. Jue
-----------------------------------
ALLEN W. JUE
/s/ Robert J. Lagomarsino
-----------------------------------
ROBERT J. LAGOMARSINO
/s/ Lincoln E. Cryne
-----------------------------------
LINCOLN E. CRYNE
/s/ [ILLEGIBLE]
-----------------------------------
EDWARD T. MARTIN
/s/ Edward T. Martin
/s/ [ILLEGIBLE]
6
<PAGE>
/s/ Harry L. Maynard
-----------------------------------
HARRY L. MAYNARD
/s/ Robert Mobley
-----------------------------------
ROBERT MOBLEY
/s/ Catherine S. Wood
-----------------------------------
CATHERINE S. WOOD
/s/ James Beeninga
-----------------------------------
JAMES BEENINGA
7
<PAGE>
UNION BANK
NON-STANDARDIZED ADOPTION AGREEMENT
401(K) PROFIT SHARING PLAN
CAUTION: THE FAILURE TO PROPERLY FILL OUT THIS ADOPTION
AGREEMENT MAY RESULT IN DISQUALIFICATION OF THE PLAN.
The undersigned Employer adopts the UNION BANK Non-Standardized 401(k)
Profit Sharing Plan for those Employees who shall qualify as Participants
hereunder, to be known as the
A1 _____________________________________________________
(Enter Plan Name)
It shall be effective as of the date specified below. The Employer hereby
selects the following Plan specifications:
EMPLOYER INFORMATION
B1 NAME OF EMPLOYER: _____________________________________
_____________________________________
B2 ADDRESS: _____________________________________
_______________, ___________ _______
City State Zip
Telephone ___________________________
B3 EMPLOYER IDENTIFICATION NUMBER: _____-_____________
B4 DATE BUSINESS COMMENCED: __________________
B5 TYPE OF ENTITY
a. ( ) S Corporation
b. ( ) Professional Service Corporation
c. ( ) Corporation
d. ( ) Sole Proprietorship
e. ( ) Partnership
f. ( ) Other ___________________________
AND, is the Employer a member of...
g. a controlled group? ( ) Yes ( ) No
h. an affiliated service group? ( ) Yes ( ) No
-1-
<PAGE>
NOTE: If a group of related corporations filing a consolidated
federal income tax return is adopting the Plan as a
single Employer, one of the corporations should be
designated the "Employer" and a Schedule should be
attached hereto setting forth the information requested
in Items B1 - B9 with respect to each other corporation
in the group.
B6 NAME OF TRUSTEE:
B7 TRUSTEE'S ADDRESS
a. ( ) Use Employer Address
b. ( ) ___________________________________________
Street
__________________, ___________ _________
City State Zip
B8 LOCATION OF EMPLOYER'S PRINCIPAL OFFICE:
a. ( ) state b. ( ) commonwealth of c. __________________
This Plan and Trust shall be construed and enforced according to ERISA
and the laws of the State of California, to the extent not pre-empted
by ERISA.
B9 EMPLOYER FISCAL YEAR means the 12 consecutive month period:
Commencing on a. ____________________ (e.g., January 1st) and
month day
ending on b. ____________________.
month day
PLAN INFORMATION
C1 EFFECTIVE DATE
This Adoption Agreement of the UNION BANK Non-Standardized 401(k) Profit
Sharing Plan and Trust shall:
a. ( ) establish a new Plan effective as of ________________
(hereinafter called the "Effective Date").
b. ( ) constitute an amendment and restatement in its entirety of a
previously established qualified Plan of the Employer which was
effective ____________________ (hereinafter called the "Effective
Date"). Except as specifically provided in the Plan, the
effective date of this amendment and restatement is ___________
(For TRA '86 amendments, enter the first day of the first Plan
Year beginning in 1989).
-2-
<PAGE>
IS THERE A SHORT PLAN YEAR?
c. ( ) No
d. (x) Yes, beginning October 1, 1994
and ending December 31, 1994.
C3 ANNIVERSARY DATE of Plan (Annual Valuation Date)
a. December 31st
C4 PLAN NUMBER assigned by the Employer (select one)
a. (x) 001 b. ( ) 002 c. ( ) 003 d. ( ) Other __________.
C5 NAME OF PLAN ADMINISTRATOR (Document provides for the Employer to appoint
an Administrator. If none is named, the Employer will become the
Administrator.)
a. (x) Employer (Use Employer Address)
b. ( ) Name: _____________________________________
Address: ___________________________________________
__________________, ___________ _________
City State Zip
Telephone ___________________________
Administrator's I.D. Number: _____-_____________
C6 PLAN'S AGENT FOR SERVICE OF LEGAL PROCESS
a. (x) Employer (Use Employer Address)
b. ( ) Name: ___________________________________________
Address: ___________________________________________
__________________, ___________ _________
City State Zip
-3-
<PAGE>
C7 VALUATION DATE (Section 4.3 of the Plan)
The Valuation Date(s) of Participant accounts will be:
a. ( ) the last day of the Plan Year only (as specified in C3 above).
b. ( ) the last day of each month.
c. ( ) the last day of the Plan Year & the last day of _____________.
d. ( ) the last day of each Plan Quarter Ending ______________,
______________, ______________, and ______________.
e. ( ) daily.
ELIGIBILITY, VESTING AND RETIREMENT AGE
D1 ELIGIBLE EMPLOYEES (Plan Section 1.16) shall mean:
a. ( ) all Employees who have satisfied the eligibility requirements
b. ( ) all Employees who have satisfied the eligibility requirements,
except those checked below:
1. ( ) Employees paid by commissions only.
2. ( ) Employees who are hourly paid.
3. ( ) Employees paid by Salary.
4. ( ) Employees whose employment is governed by a collective
bargaining agreement between the Employer and "Employee
Representatives" under which retirement benefits were the
subject of good faith bargaining. For this purpose, the
term "Employee Representatives" does not include any
organization more than half of whose members are employees
who are owners, officers, or executives of the Employer.
5. ( ) Highly Compensated Employees.
6. ( ) Employees who are nonresident aliens who received no earned
income [withing the meaning of Code Section 911(d)(2)] from
the Employer which constitutes income from sources within
the United States [within the meaning of Code Section
861(a)(3)].
7. ( ) Other _____________________________________________________
___________________________________________________________
___________________________________________________________
NOTE: For purposes of this section, the term Employee shall
include all Employees of this Employer, and any leased
employees deemed to be Employees under Code Section 414(n)
or 414(o).
-4-
<PAGE>
D2 EMPLOYEES OF AFFILIATED EMPLOYERS (Plan Section 1.17) Employees of
Affiliated Employers:
a. ( ) will not or N/A.
b. ( ) will be treated as Employees of the Employer adopting this Plan.
NOTE: If b. is selected a separate schedule should be
attached hereto setting forth the information requested
in items B1 - B9 above with respect to each other
Affiliated Employer and each Affiliated Employer should
execute this Adoption Agreement as a Participating
Employer.
D3 HOURS OF SERVICE (Plan Section 1.32) will be determined on the basis of the
method selected below. Only one method may be selected. The method
selected will be applied to all Employees covered under the Plan:
a. ( ) On the basis of actual hours for which an Employee is paid or
entitled to payment.
b. ( ) On the basis of days worked. An employee will be credited with
ten (10) Hours of Service if under the Plan such Employee would
be credited with at least one (1) Hour of Service during the day.
c. ( ) On the basis of weeks worked. An employee will be credited
forty-five (45) Hours of Service if under the Plan such Employee
would be credited with at least one (1) Hour of Service during
the week.
d. ( ) On the basis of semi-monthly payroll periods. An Employee will
be credited with ninety-five (95) Hours of Service if under the
Plan such Employee would be credited with at least one (1) Hour
of Service during the semi-monthly payroll period.
e. ( ) On the basis of months worked. An Employee will be credited with
one hundred ninety (190) Hours of Service if under the Plan such
Employee would be credited with at least one (1) Hour of Service
during the month.
D4 CONDITIONS OF ELIGIBILITY (Plan Section 3.1) (Check either a OR b and c,
and if applicable, d) Any Eligible Employee will be eligible to
participate in the Plan if such Eligible Employee has satisfied the service
and age requirements, if any, specified below:
a. ( ) NO AGE OR SERVICE REQUIRED.
b. ( ) SERVICE REQUIREMENT. (may not exceed 1 year)
1. ( ) None
2. ( ) 1/2 Year of Service
3. ( ) 1 Year of Service
4. ( ) Other _________ (Must be a period less than 1 year)
NOTE: If the Year(s) of Service selected is or includes a
fractional year, an Employee will not be required to
complete any specified number of Hours of Service to
receive credit for such fractional year. If expressed
in Months of Service, an Employee will not be required
to complete any specified number of Hours of Service in
a particular month.
-5-
<PAGE>
c. ( ) AGE REQUIREMENT (may not exceed 21)
1. ( ) N/A - No Age Requirement
2. ( ) 20 1/2
3. ( ) 21
4. ( ) Other _______________
d. ( ) FOR NEW PLANS ONLY - Regardless of any of the above age or
service requirements, any Eligible Employee who was employed on
the Effective Date of the Plan shall be eligible to participate
hereunder and shall enter the Plan as of such date.
D5 EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.2)
An Eligible Employee shall become a Participant as of:
a. ( ) The first day of the Plan Year in which he met the requirements.
b. ( ) The first day of the Plan Year in which he met the requirements,
if he met the requirements in the first 6 months of the Plan
Year, or as of the first day of the next succeeding Plan Year if
he met the requirements in the last 6 months of the Plan Year.
c. ( ) The earlier of the first day of the seventh month or the first
day of the Plan Year coinciding with or next following the date
on which he met the requirements.
d. ( ) The first day of the Plan Year next following the date on which
he met the requirements. (Eligibility must be 1/2 Year of
Service or less or 1 1/2 Years of Service or less if 100%
immediate vesting is selected and age 20 1/2 or less.)
e. ( ) The first day of the month coinciding with or next following the
date on which he met the requirements.
f. ( ) The first day of the plan quarter coinciding with or next
following the date on which he met the requirements.
g. ( ) Other: ________________________________________________________
_______________________________________________________________
NOTE: If item g. is selected the method described is
conditional upon; 1) the Employee satisfying the
maximum age and service requirements set forth in
Section D4, 2) the Employee must be otherwise entitled
to participate, 3) the method set forth must allow the
Employee to begin participating no later than the
earlier of (a) 6 months after the requirements are
satisfied or (b) the first day of the first Plan Year
after the requirements are satisfied.
-6-
<PAGE>
D6 VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4(b))
The vesting schedule, based on number of Years of Service, shall be as
follows:
a. ( ) 100% upon entering Plan. (Required if eligibility requirement is
greater than one (1) Year of Service.)
b. ( ) 0-2 years 0% c. ( ) 0-4 years 0%
( ) 3 years 100% 5 years 100%
c. ( ) 0-1 year 0% e. ( ) 1 year 25%
2 years 20% 2 years 50%
3 years 40% 3 years 75%
4 years 60% 4 years 100%
5 years 80%
6 years 100%
f. ( ) 1 year 20% g. ( ) 0-2 years 0%
2 years 40% 3 years 20%
3 years 60% 4 years 40%
4 years 80% 5 years 60%
5 years 100% 6 years 80%
7 years 100%
h. ( ) Other - Must be at least as liberal as either c or g above.
Year of Service Percentage
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
D7 FOR AMENDED PLANS (Plan Section 6.4(f))
If the vesting schedule has been amended to a less favorable schedule,
enter the pre-amended schedule below:
a. ( ) Vesting schedule has not been amended or amended schedule is more
favorable in all years.
b. ( ) Vesting schedule has been amended from the following:
Year of Service Percentage
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
--------------- ----------
-7-
<PAGE>
D8 TOP HEAVY VESTING ((Plan Section 6.4(c)) If this Plan becomes a Top Heavy
Plan, the following vesting schedule, based on number of Years of Service,
for such Plan Year and each succeeding Plan Year, whether or not the Plan
is a Top Heavy Plan, shall apply and shall be treated as a Plan amendment
pursuant to this Plan. Once effective, this schedule shall also apply to
any contributions made prior to the effective date of Code Section 416
and/or before the Plan became a Top Heavy Plan.
a. ( ) N/A (D6 a, b, d, e or f was selected)
b. ( ) 0-1 year 0% c. ( ) 0-2 years 0%
2 years 20% 3 years 100%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
NOTE: This section does not apply to the Account balances of any
Participant who does not have an Hour of Service after the
Plan has initially become Top Heavy. Such Participant's
Account balance attributable to Employer contributions and
Forfeitures will be determined without regard to this
section.
D9 VESTING (Plan Section 6.4(h)) In determining Years of Service for vesting
purposes, Years of Service attributable to the following shall be EXCLUDED:
a. ( ) Service prior to the Effective Date of the Plan or a predecessor
plan.
b. ( ) N/A
c. ( ) Service prior to the time an Employee attained age 18.
d. ( ) N/A
e. ( ) Service excludable under rule of parity [Plan Section
6.4(g)(3)(i)].
f. ( ) Years of Service for vesting prior to January 1, 1976, that would
not have constituted Years of Service for vesting under the
"Break in Service Rules" of a predecessor plan in effect prior to
that date if this Plan is an amendment of such predecessor plan.
For purposes of this part, "Break in Service rules" are previous
plan rules which result in the loss of prior vesting or benefit
accruals of an employee, or which deny an employee eligibility to
participate, by reason of separation from service or failure to
complete a required amount of service within a specified period
of time.
D10 PLAN SHALL RECOGNIZE SERVICE WITH PREDECESSOR EMPLOYER
a. ( ) No.
b. ( ) Yes. Years of Service with __________________ shall be recognized
for the purpose of this Plan.
NOTE: If the predecessor Employer maintained this qualified
Plan, then Years of Service with such predecessor Employer
shall be recognized pursuant to Section 1.77 and b. must be
marked.
-8-
<PAGE>
D11 NORMAL RETIREMENT AGE ("NRA") (Plan Section 1.43) means:
a. ( ) The date a Participant attains his _______ birthday. (Not to
exceed 65th)
b. ( ) The later of the date a Participant attains his ______ birthday
(not to exceed 65th) or the c. _____ (not to exceed 5th)
anniversary of the first day of the Plan Year in which
participation in the Plan commenced.
D12 NORMAL RETIREMENT DATE (Plan Section 1.44) shall commence:
a. ( ) As of the Participant's "NRA". OR (must select b. or c.
AND 1. or 2.)
b. ( ) As of the first day of the month .......
c. ( ) As of the Anniversary Date ..........
1. ( ) coinciding with or next following the Participant's
"NRA".
2. ( ) nearest the Participant's "NRA".
D13 EARLY RETIREMENT DATE (Plan Section 1.13) means the:
a. ( ) No Early Retirement provision provided.
b. ( ) Date on which a Participant .....
c. ( ) First day of the month coinciding with or next following the date
on which a Participant .....
d. ( ) Anniversary Date coinciding with or next following the date on
which a Participant .....
AND, if b, c or d was selected .....
1. ( ) attains his _____ birthday and has
2. ( ) completed at least ______ Years of Service.
CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
E1 COMPENSATION DEFINED
a. COMPENSATION (Plan Section 1.9) with respect to any Participant means:
1. ( ) "415 Compensation."
2. ( ) Wages as defined in Section 3401(a) for the purposes of
income tax witholding at the source but determined without
regard to any rules that limit the remuneration included
in wages based on the nature or location of the employment
or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
b. COMPENSATION shall be
1. ( ) actually paid (must be selected if Plan is integrated)
2. ( ) accrued
-9-
<PAGE>
c. HOWEVER, for non-integrated plans, Compensation shall exclude (select
all that apply):
1. ( ) N/A, No exclusions.
2. ( ) overtime
3. ( ) bonuses
4. ( ) commissions
5. ( ) other __________________
________________________
d. FOR PURPOSES OF THIS SECTION E1, Compensation shall be based on:
1. ( ) the Plan Year.
2. ( ) the Fiscal Year coinciding with or ending within the
Plan Year.
3. ( ) the Calendar Year coinciding with or ending within the
Plan Year.
NOTE: The Limitation Year shall be the same as the year
on which Compensation is based.
e. HOWEVER, for an Employee's first year of participation, Compensation
shall be recognized as of:
1. ( ) the first day of the Plan Year.
2. ( ) the date the participant entered the Plan.
f. IN ADDITION, COMPENSATION and "414(s) Compensation"
1. ( ) shall
2. ( ) shall not include compensation which is not currently
includible in the Participant's gross income by reason of
the application of code Sections 125, 402(a)(8),
402(h)(1)(B), or 403(b).
E2 SALARY REDUCTION ARRANGEMENT - ELECTIVE CONTRIBUTION (Plan Section 11.2)
Each Employee may elect to have his Compensation reduced by:
a. ( ) ____%
b. ( ) up to ____%
c. ( ) from ____% to ____%
d. ( ) up to the maximum percentage allowable not to exceed the limits
of Code Section 401(k), 404 and 415.
AND....
e. ( ) a Participant may elect to commence salary reductions as of _____
(ENTER AT LEAST ONE DATE OR PERIOD). A Participant may modify the
amount of salary reductions as of _______________ (ENTER AT LEAST ONE
DATE OR PERIOD).
AND....
Shall cash bonuses paid within 2 1/2 months after the end of the Plan
Year be subject to the salary reduction election?
f. ( ) Yes
g. ( ) No
-10-
<PAGE>
E3 FORMULA FOR DETERMINING EMPLOYER'S MATCHING CONTRIBUTION (Plan Section
11.1(b))
a. ( ) N/A There shall be no matching contributions.
b. ( ) The Employer shall make matching contributions equal to ______%
(e.g. 50%) of the Participant's salary reductions.
c. ( ) The Employer may make matching contributions equal to a
discretionary percentage, to be determined by the Employer, of the
Participant's salary reductions.
d. ( ) The Employer shall make matching contributions equal to the
percentage determined under the following schedule:
<TABLE>
<CAPTION>
Participant's Total
Years of Service Matching Percentage
------------------- -------------------
<S> <C>
----------- -----------
----------- -----------
----------- -----------
----------- -----------
</TABLE>
e. ( ) Other
--------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOR PLANS WITH MATCHING CONTRIBUTIONS
f. ( ) Matching contributions....
g.( ) shall h.( ) shall not
be used in satisfying the deferral percentage tests. (If used,
full vesting and restrictions on withdrawals will apply and the
match will be deemed to be an Elective Contribution.)
i. ( ) Shall a Year of Service be required in order to share in the
matching contributions?
with respect to Plan Years beginning after 1989.....
1. ( ) A Participant will be required to complete a Year of
Service (i.e. 1,000 Hours) in order to share in the
matching contribution.
2. ( ) A Participant will be required to complete only 501
Hours of Service in order to share in the matching
contribution.
3. ( ) A Participant will be permitted to share in the
matching contributions regardless of Hours of Service.
NOTE: Selection of item 1. could cause the Plan to violate
minimum participation and coverage requirements under Code
Sections 401(a)(26) and 410.
-11-
<PAGE>
with respect to Plan Years beginning before 1990.....
1. ( ) N/A New Plan or same as years beginning after 1989.
2. ( ) Yes
3. ( ) No
j. ( ) In determining matching contributions, only salary reductions up
to _______% of a Participant's Compensation will be matched.
k. ( ) N/A
l. ( ) The matching contribution made on behalf of a Participant for any
Plan Year shall not exceed $ ______________. m. ( ) N/A
n. ( ) Matching contributions shall be made on behalf of
1. ( ) all Participants.
2. ( ) only Non-Highly Compensated Employees.
E4 WILL A DISCRETIONARY EMPLOYER CONTRIBUTION BE PROVIDED (OTHER THAN A
DISCRETIONARY MATCHING OR QUALIFIED NON-ELECTIVE CONTRIBUTION) (Plan Section
11.1(c))?
a. ( ) No.
b. ( ) Yes, the Employer may make a discretionary contribution out of its
current or accumulated Net Profit.
c. ( ) Yes, the Employer may make a discretionary contribution which is
not limited to its current or accumulated Net Profit.
If b. or c. was selected above the Employer's discretionary contribution
shall be allocated as follows:
d. ( ) FOR A NON-INTEGRATED PLAN... the Employer's discretionary
contribution for the Plan Year shall be allocated in the same ratio
as each Participant's Compensation bears to the total of such
Compensation of all Participants.
e. ( ) FOR AN INTEGRATED PLAN... the Employer's discretionary
contribution for the Plan Year shall be allocated in accordance
with Plan Section 4.3(b)(2) based on a Participant's Compensation
in excess of:
f. ( ) The Taxable Wage Base.
g. ( ) The greater of $10,000 or 20% of the Taxable Wage Base.
h. ( ) ____% of the Taxable Wage Base. (See Note below)
i. ( ) $__________. (See Note below)
NOTE: The integration percentage of 5.7% shall be reduced to:
1. 4.3% in h. or i. above is more than 20% and less than or
equal to 80% of the Taxable Wage Base.
2. 5.4% if h. or i. above is less than 100% and more than
80% of the Taxable Wage Base.
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<PAGE>
E5 QUALIFIED NON-ELECTIVE CONTRIBUTIONS (Plan Section 11.1(d))
a. ( ) N/A There shall be no Qualified Non-Elective Contributions,
except as provided in Section 11.5(b) and 11.7(h).
b. ( ) The Employer shall make a Qualified Non-Elective Contribution
equal to _____% of the Participant's Total Compensation to:
1. ( ) all Participants eligible to share in the allocation.
2. ( ) only Non-Highly Compensated Employees eligible to share
in the allocation.
c. ( ) The Employer may make a Qualified Non-Elective Contribution in an
amount to be determined by the Employer to:
1. ( ) all Participants eligible to share in the allocation.
2. ( ) only Non-Highly Compensated Employees eligible to share
in the allocation.
E6 FORFEITURES (Plan Section 4.3(e))
a. Forfeitures of contributions other than matching contributions shall
be......
1. ( ) added to the Employer's contribution under the Plan.
2. ( ) allocated to all Participants eligible to share in the
allocations in the same proportion that each Participant's
Compensation for the year bears to the Compensation of all
Participants for such year.
b. Forfeitures of matching contributions shall be......
1. ( ) N/A No matching contributions or match is fully vested.
2. ( ) used to reduce the Employer's matching contribution.
3. ( ) allocated to Participants eligible to share in the
allocations in proportion to each such Participant's
Compensation for the year.
4. ( ) allocated to all Non-Highly Compensated Employees eligible
to share in the allocations in proportion to each such
Participant's Compensation for the year.
5. ( ) allocated only to those Participants with salary reductions
for the Plan Year who are employed on the last day of the
Plan Year, in proportion to each such Participant's
Compensation for the year.
6. ( ) allocated only to those Non-Highly Compensated Employees
with salary reductions for the Plan Year and who are
employed on the last day of the Plan Year, in proportion to
each such Participant's Compensation for the year.
7. ( ) allocated only to those Participants with salary reductions
for the Plan Year and who are employed on the last day of
the Plan Year, in proportion to each such Participant's
Deferred Compensation for the Plan Year.
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<PAGE>
8. ( ) allocated only to those Non-Highly Compensated Employees
with salary reductions for the Plan Year and who are
employed on the last day of the Plan Year, in proportion to
each such Participant's Deferred Compensation for the Plan
Year.
NOTE: If item 7. or 8. is selected, the Plan could become
discriminatory in operation.
E7 ALLOCATIONS TO ACTIVE PARTICIPANTS (Plan Section 4.3)
For Plan Years beginning after 1989, a Participant......
a. ( ) shall be required to complete a Year of Service (i.e.
1,000 Hours) in order to share in any Qualified Non-Elective
Contributions or Non-Elective Contributions (other than
matching contributions).
b. ( ) shall be required to complete more than 500 Hours of Service in
order to share in any Qualified Non-Elective Contributions or
Non-Elective Contributions (other than matching contributions).
NOTE: if item a. selected, the Plan could become discriminatory
in operation.
For Plan Years beginning before 1990, a Participant......
c. ( ) must d. ( ) need not e. ( ) N/A, Plan not effective before 1990
complete a Year of Service to share in the allocations.
E8 ALLOCATIONS TO TERMINATED PARTICIPANTS (Plan Section 4.3(k))
Any Participant who terminated employment during the Plan Year (i.e. not
actively employed on the last day of the Plan Year) for reasons other than
death, Total and Permanent Disability or retirement:
a. With respect to the allocation of Employer Non-Elective Contributions
(other than matching), Qualified Non-Elective Contributions, and
Forfeitures for Plan Years beginning prior to 1990:
1. For Plan Years beginning after 1989,
i ( ) N/A, Plan does not provide for such contributions.
ii ( ) shall share in such allocations, regardless of Hours of
Service.
iii ( ) shall share in such allocations provided such
Participant completed more than 500 Hours of Service.
iv ( ) shall share in such allocations provided such
Participant completed a Year of Service.
v ( ) shall not share in such allocations, regardless of
Hours of Service.
2. For Plan Years beginning before 1990,
i ( ) N/A, new Plan, or same as for Plan Years beginning
after 1989.
ii ( ) shall share in such allocations provided such
Participant completed a Year of Service.
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<PAGE>
iii ( ) shall not share in such allocations, regardless of
Hours of Service.
NOTE: if a. 1 (iii) or (iv) is selected, the Plan could
violate minimum participation and coverage requirements
under Code Sections 401(a)(26) and 410.
b. With respect to the allocation of Employer Matching Contributions, a
Participant:
1. For Plan Years beginning after 1989,
i ( ) N/A, Plan does not provide for matching contributions.
ii ( ) shall share in such allocations, regardless of Hours of
Service.
iii ( ) shall share in such allocations provided such
Participant completed more than 500 Hours of Service.
iv ( ) shall share in such allocations provided such
Participant completed a Year of Service.
v ( ) shall not share in such allocations, regardless of
Hours of Service.
2. For Plan Years beginning before 1990,
i ( ) N/A, new Plan, or same as for Plan Years beginning
after 1989.
ii ( ) shall share in such allocations, regardless of Hours of
Service.
iii ( ) shall share in such allocations provided such
Participant completed a Year of Service.
iv ( ) shall not share in such allocations, regardless of
Hours of Service.
NOTE: if b. 1 (iv) or (v) is selected, the Plan could violate
minimum participation and coverage requirements under
Code Sections 401(a)(26 and 410).
c. For Plan Years beginning prior to 1990, any Participant who terminated
employment during the Plan Year for reason of......
1. ( ) Death
2. ( ) Disability
3. ( ) Retirement
shall share in the allocations of Contributions and Forfeitures
regardless of whether such Participant completed a Year of Service
during the Plan Year.
d. For Plan Years beginning after 1989, any Participant who terminated
employment during the Plan Year for reasons of......
1. ( ) Death
2. ( ) Disability
3. ( ) Retirement
shall share in the allocations of Contributions and Forfeitures
regardless of whether such Participant completed a Year of Service
during the Plan Year.
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<PAGE>
E9 ALLOCATIONS OF EARNINGS/LOSSES (Plan Section 4.3(c)) Allocations of
earnings or losses with respect to contributions specified, but received
after the previous Anniversary Date or other valuation date, shall be
credited according to the following method:
a. ( ) by using a weighted average.
b. ( ) based on the Participant's non-segregated account balance as of
the previous Anniversary Date or valuation date adjusted for
investment transfers (if any) in and out less withdrawals and
distributions plus one-half of all voluntary contributions, salary
reduction contributions, and transfers from qualified plans made
since the previous Anniversary Date or valuation date.
c. ( ) as specified in Plan Section 4.3(c), based on the Participant's
non-segregated account balance as of the previous Anniversary Date
or valuation date adjusted for investment transfers (if any) in
and out less withdrawals and distributions since the previous
Anniversary Date or valuation date.
d. ( ) based on the Participant's non-segregated account balance as of
the previous Anniversary Date or valuation date adjusted for
investment transfers (if any) in and out less withdrawals and
distributions plus all voluntary contributions, salary
reduction contributions, and transfers from qualified Plans made
since the previous Anniversary Date or valuation date.
e. ( ) based on the Participant's non-segregated account balance as of the
previous Anniversary Date or valuation date adjusted for
investment transfers (if any) in and out less withdrawals and
distributions plus one-half of all voluntary contributions, salary
reduction contributions, employer matching contributions under
Plan Section 11.1(b), and transfers from qualified plans made
since the previous Anniversary Date or valuation date.
f. ( ) gains and losses will be allocated to each participant's account
on a daily basis in accordance with plan section 4.3(c)(2).
g. ( ) not applicable.
E10 LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)
a. If any Participant is or was covered under another qualified defined
contribution plan maintained by the Employer, other than a Master or
Prototype Plan, or if the Employer maintains a welfare benefit fund, as
defined in Code Section 419(c), or an individual medical account, as
defined in Code Section 415(1)(2), under which amounts are treated as
Annual Additions with respect to any Participant in this Plan:
1. ( ) N/A
2. ( ) The provisions of Section 4.4(b) of the Plan will apply as
if the other plan were a Master or Prototype Plan.
3. ( ) Provide the method under which the Plans will limit total
annual Additions to the Maximum Permissible Amount, and
will properly reduce any Excess Amounts, in a manner that
precludes Employer discretion.
---------------------------------------------
---------------------------------------------
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<PAGE>
NOTE: If a. 3 above is selected, an Employer
may not rely on the opinion letter issued
by the Internal Revenue Service that this
Plan is qualified under Code Section 401.
b. If the Participant is or ever has been a Participant in a defined
benefit plan maintained by the Employer:
1. ( ) N/A
2. ( ) In any Limitation Year, the Annual Additions credited to
the Participant under this Plan may not cause the sum of
the Defined Benefit Plan Fraction and the Defined
Contribution Fraction to exceed 1.0. If the Employer's
contribution that would otherwise be made on the
Participant's behalf during the limitation year would
cause the 1.0 limitation to be exceeded, the rate of
contribution under this Plan will be reduced so that the
sum of the fractions equals 1.0. If the 1.0 limitation is
exceeded because of an Excess Amount, such Excess Amount
will be reduced in accordance with Section 4.4(a)(4) of
the Plan.
3. ( ) Provide the method under which the Plans involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
E11 DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h)) Distributions upon the
death of a Participant prior to receiving any benefits shall.....
a. ( ) be made pursuant to the election of the Participant or beneficiary.
b. ( ) begin within 1 year of death for a designated beneficiary and be
payable over the life (or over a period not exceeding the life
expectancy) of such beneficiary, except that if the beneficiary is
the Participant's spouse, begin within the time the Participant
would have attained age 70 1/2.
c. ( ) be made within 5 years of death for all beneficiaries.
d. ( ) Other ___________________________________________
E12 LIFE EXPECTANCIES (Plan Section 6.5(f)) for minimum distributions
required pursuant to Code Section 401(a)(9) shall.....
a. ( ) be recalculated at the Participant's election.
b. ( ) be recalculated.
c. ( ) not be recalculated.
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<PAGE>
E13 CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION
Distributions upon termination of employment pursuant to Section 6.4(a)
of the Plan shall not be made unless the following conditions have been
satisfied:
a. ( ) N/A. Immediate distributions may be made at Participant's election.
b. ( ) The Participant has incurred ____ 1-Year Break(s) in Service.
c. ( ) The Participant has reached his or her Early or Normal Retirement
Age.
d. ( ) Distributions may be made at the Participant's election on or after
the Anniversary Date following termination of employment.
e. ( ) Other _________________________________________________
E14 FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6)
Distributions under the Plan may be made.....
a. 1. ( ) in lump sums.
2. ( ) in lump sums or installments.
b. AND, pursuant to Plan Section 6.13,
1. ( ) no annuities are allowed (avoids Joint and Survivor rules).
2. ( ) annuities are allowed (Plan Section 6.13 shall not apply).
NOTE: b.1. above may not be elected if this is an amendment to a
plan which permitted annuities as a form of distribution
or if this Plan has accepted a plan to plan transfer of
assets from a plan which permitted annuities as a form of
distribution.
c. AND may be made in.....
1. ( ) cash only (except for insurance or annuity contracts).
2. ( ) cash or property.
d. AND may be made in.....
1. ( ) the following other form(s):
-------------------------------------------------------
2. ( ) any other non-discriminatory form selected by the Participant.
-18-
<PAGE>
TOP HEAVY REQUIREMENTS
F1 TOP HEAVY DUPLICATIONS (Plan Section 4.3(i)): When a Non-Key
Employee is a Participant in this Plan and a Defined Benefit Plan
maintained by the Employer, indicate which method shall be utilized to
avoid duplication of top heavy minimum benefits.
a. ( ) The Employer does not maintain a Defined Benefit Plan.
b. ( ) A minimum, non-integrated contribution of 5% of each Non-Key
Employee's total Compensation shall be provided in this Plan,
as specified in Section 4.3(i). (The Defined Benefit and Defined
Contribution Fractions will be computed using 100% if this
choice is selected.)
c. ( ) A minimum, non-integrated contribution of 7 1/2% of each
Non-Key Employee's total Compensation shall be provided in this
Plan, as specified in Section 4.3(i). (If this choice is
selected, the Defined Benefit and Defined Contribution
Fractions will be computed using 125% for all Plan
Years in which the Plan is Top Heavy, but not Super Top Heavy.)
d. ( ) Specify the method under which the Plans will provide Top
Heavy minimum benefits for Non-Key Employees that will
preclude Employer discretion and avoid inadvertent omissions,
including any adjustments required under Code Section 415(e).
-------------------------------------------------
F2 PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2) for Top Heavy
purposes where the Employer maintains a Defined Benefit Plan in addition
to this Plan, shall be based on ...
a. ( ) N/A. The Employer does not maintain a defined benefit plan.
b. ( ) Interest Rate:
------------------------------------
Mortality Table:
----------------------------------
F3 TOP HEAVY DUPLICATIONS: Employer maintaining two (2) or more Defined
Contribution Plans (other than paired plans).
a. ( ) N/A.
b. ( ) A minimum, non-integrated contribution of 3% of each Non-Key
Employee's total Compensation shall be provided in the Money
Purchase Plan (or other plan subject to Code Section 412),
where the Employer maintains two (2) or more non-paired Defined
Contribution Plans.
c. ( ) Specify the method under which the Plans will provide Top
Heavy minimum benefits for Non-Key Employees that will preclude
Employer discretion and avoid inadvertent omissions, including
any adjustments required under Code Section 415(e).
-------------------------------------------------
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<PAGE>
MISCELLANEOUS
G1 LOANS TO PARTICIPANTS (Plan Section 7.1)
a. ( ) Yes, loans may be made up to $50,000 or 1/2 Vested interest.
b. ( ) No, loans may not be made.
If YES, (Check all that apply) .......
c. ( ) loans shall be treated as an "earmarked" investment of the
borrowing Participant's Account.
d. ( ) loans shall be treated as a general investment of Plan assets.
e. ( ) loans shall only be made for hardship or financial necessity.
IF PARTICIPANTS ARE ALLOWED TO ELECT INVESTMENT OPTIONS (UNDER
ITEM G8 BELOW), THE PROMISSORY NOTE WILL BE HELD AS AN ASSET
UNDER THE _______________ OPTION.
NOTE: Department of Labor Regulations require the adoption of
a separate written loan program setting forth the
requirements outlined in Plan Section 7.1.
G2 DIRECTED INVESTMENT ACCOUNTS (Plan Section 4.8(h)) are permitted for the
interest in any one or more accounts.
a. ( ) Yes, regardless of the Participant's Vested interest in the
Plan.
b. ( ) Yes, but only with respect to the Participant's Vested
interest in the Plan.
c. ( ) Yes, but only with respect to those accounts which are 100%
Vested.
d. ( ) No directed investments are permitted.
G3 TRANSFERS FROM QUALIFIED PLANS (Plan Section 4.6)
a. ( ) Yes, transfers from qualified plans (and rollovers) will be
allowed.
b. ( ) No, transfers from qualified plans (and rollovers) will not be
allowed.
AND, transfers shall be permitted ........
c. ( ) from any Employee, even if not a Participant.
d. ( ) from Participants only.
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<PAGE>
G4 EMPLOYEE'S VOLUNTARY CONTRIBUTIONS (Plan Section 4.7)
a. ( ) Yes, Voluntary Contributions are allowed subject to the limits
of Section 4.10.
b. ( ) No, Voluntary Contributions will not be allowed.
NOTE: TRA '86 subjects voluntary contributions to strict
discrimination rules.
G5 HARDSHIP DISTRIBUTION (Plan Section 6.11 and 11.8)
a. ( ) Yes, from any accounts which are 100% Vested.
b. ( ) Yes, from Participant's Elective Account only.
c. ( ) Yes, but limited to the Participant's Account only.
d. ( ) No.
NOTE: Distributions from a Participant's Elective Account are
limited to the portion of such account attributable to
such Participant's Deferred Compensation and earnings
attributable thereto up to December 31, 1988. Also
hardship distributions are not permitted from a
Participant's Qualified Non-Elective Account.
The Plan provides that when a Hardship Distributions under
Section 11.8 is requested under a 401(k) Plan that the
request for Hardship Distribution will be reviewed in
accordance with the "Safe Harbor" criteria of Section
11.8(a)(2) and 11.8(c)(2).
G6 PRE-RETIREMENT DISTRIBUTION (Plan Section 6.10)
a. ( ) If a Participant has reached the age of ____, distributions
may be made, at the Participant's election, from any accounts
which are 100% Vested without requiring the Participant to
terminate employment.
b. ( ) No pre-retirement distribution may be made.
NOTE: Distributions from a Participant's Elective Account and
Qualified Non-Elective Account are not permitted prior
to age 59 1/2.
G7 LIFE INSURANCE may be purchased with Plan contributions.
a. ( ) No life insurance may be purchased.
b. ( ) Yes, at the option of the Administrator.
c. ( ) Yes, at the option of the Participant.
AND, the purchase of initial or additional life insurance shall be
subject to the following limitations: (select all that apply)
d. ( ) N/A no limitation.
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<PAGE>
e. ( ) each initial Contract shall have a minimum face amount of $_______.
f. ( ) each additional Contract shall have a minimum face
amount of $________.
g. ( ) the Participant has completed __________Years of Service.
g. ( ) the Participant has completed __________Years of Service while a
Participant in the Plan.
i. ( ) the Participant is under age ____ on the Contract issue date.
j. ( ) the maximum amount of all Contracts on behalf of a Participant
shall not exceed $_____________.
k. ( ) the maximum face amount of life insurance shall be
$_____________.
G8 INVESTMENT OPTIONS (Section 4.8 of the Plan)
a. ( ) Participants may not elect Investment Options.
b. ( ) Participants may elect one or more of the Investment Options as
listed on Exhibit "A", attached hereto and incorporated for all
purposes.
c. ( ) If item b. has been selected, investment transfers requested by
a Participant may be restricted as follows:
_______________________________________________________________
_______________________________________________________________
NOTE: If item b. has been selected above, but a Participant fails
to select Investment Option(s), such Participant's account
balance shall be invested under the _________________ option.
G9 INVESTMENT TRANSFER DATE (Section 4.8 of the Plan)
a. ( ) Not Applicable (Investment Options not provided under Item G8
above).
b. ( ) The Transfer Date on which amounts may be transferred between
investment options is:
1. ( ) the first day of each calendar quarter.
2. ( ) the first day of the Plan Year.
3. ( ) the first day of each Plan Year and the first day of
the seventh month of each Plan Year.
4. ( ) the first day following each Valuation Date.
5. ( ) daily to the extent administratively feasible and in no
event less frequently than the first day of each Plan
quarter.
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<PAGE>
G10 RESTRICTIONS ON TRANSFERS (Section 4.8 of the Plan)
a. ( ) Not applicable (Investment Options not provided Item G8 above).
b. ( ) Except for the restrictions described in Section 4.8 of the
Plan, transfers may be made between investment options.....
1. ( ) without restriction
2. ( ) with the following restriction (specify):
_____________________________________________________
G11 ELECTION DATE (Section 4.8 of the Plan)
a. ( ) Not Applicable (Investment Options not provided under
Item G8 above).
b. ( ) The Election Date on which Participants may change investment
options for future contributions is:
1. ( ) the first day of each calendar quarter.
2. ( ) the first day of each Plan Year.
3. ( ) the first day of each Plan Year and the first day of
the seventh month of each Plan Year.
4. ( ) the first day following each Valuation Date.
5. ( ) daily to the extent administratively feasible and in no
event less frequently than the first day of each Plan
quarter.
G12 EMPLOYER SECURITIES - PASS THROUGH VOTING (Trust Section 1.11)
a. ( ) Yes, pass through voting is required subject to the conditions
set forth in the Trust Agreement.
b. ( ) No, pass through voting is not required.
c. ( ) N/A, Employer Securities are not held as an asset of the Trust,
nor are they an Investment Option.
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<PAGE>
The adopting Employer may not rely on an opinion letter issued by the
National Office of the Internal Revenue Service as evidence that the plan is
qualified under Code Section 401. In order to obtain reliance with respect to
plan qualification, the Employer must apply to the appropriate Key District
Office for a Determination Letter.
This Adoption Agreement may be used only in conjunction with basic Plan
document #03. This Adoption Agreement and the basic Plan document shall
together be known as UNION BANK Non-Standardized 401(k) Profit Sharing Plan
#03-005.
The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax
and legal advisors.
UNION BANK will notify the Employer of any amendments made to the Plan or of
the discontinuance or abandonment of the Plan provided this Plan has been
acknowledged by UNION BANK or its authorized representative. Furthermore, in
order to be eligible to receive such notification, we agree to notify UNION
BANK of any change in address.
-24-
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan and Trust
to be executed on the dates listed below. Furthermore, this Plan and Trust
may not be used unless acknowledged by UNION BANK or its authorized
representative. The Trustee hereby accepts appointment as Trustee under the
Trust Agreement Pursuant To The Union Bank Master Defined Contribution Plan.
EMPLOYER: TRUSTEE:
- --------------------------- ------------------------------
(enter name) (enter name)
By: By:
------------------------ --------------------------
By:
--------------------------
Dated: Dated:
----------------- ------------------
PARTICIPATING EMPLOYER:
- -----------------------
(enter name)
By:
--------------------
Dated:
---------------
This Plan may not be used, and shall not be deemed to be a Prototype Plan,
unless an authorized representative of UNION BANK has acknowledged the use of
the Plan. Such acknowledgment is for administerial purposes only. It
acknowledges that the Employer is using the Plan but does not represent that
this Plan, including the choices selected on the Adoption Agreement, has been
reviewed by a representative of the sponsor or constitutes a qualified
retirement plan.
UNION BANK, SPONSOR
By:
----------------------
Dated:
---------------
With regard to any questions regarding the provisions of the Plan, adoption
of the Plan, or the effect of an opinion letter from the IRS, call or write
(this information must be completed by the sponsor of this Plan or its
designated representative):
Name:
-------------------------------------------------------
Address:
-----------------------------------------------------
Telephone: ( )
------------------------
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<PAGE>
EXHIBIT A
INVESTMENT OPTIONS
In accordance with Section 4.8(e) of the Union Bank Master Defined
Contribution Plan, participants in the INSERT NAME OF THE PLAN will be
permitted to elect the investment of the portions of their account balances,
as specified below, from any of the following Investment Options, as
specified by the Employer in Section G8 of the Adoption Agreement effective
INSERT DATE:
Fund A Money Market Fund
Fund B
Fund C
The Plan Administrative Committee appointed by the Employer will direct the
Trustee as to the specific investment vehicles for each of the Investment
Options.
A Participant will be permitted to elect investment options for his/her
balance within the (CHANGE THE HIGHLIGHTED ITEMS AS NECESSARY) EMPLOYER
MATCHING, QUALIFIED NON-ELECTIVE, PROFIT SHARING, AND SALARY DEFERRAL
portions within the Plan.
IN WITNESS WHEREOF, the Employer and Trustee hereby cause this to be executed
on the dates listed below.
EMPLOYER: TRUSTEE:
- --------------------------- UNION BANK
(Enter Name)
By:
--------------------------
By: By:
------------------------ --------------------------
Dated: Dated:
----------------- ------------------
<PAGE>
EXHIBIT 10.5
Restated and Amended Senior Executives' Retirement Plan
<PAGE>
AMERICAN COMMERCIAL BANK
RESTATED AND AMENDED SENIOR EXECUTIVES' RETIREMENT PLAN
This Restated and Amended Senior Executives' Retirement Plan is executed in
consideration of the following facts:
A. The Board of Directors of American Commercial Bank adopted a Senior
Executives' Income Continuation Plan, July 30, 1990, to be effective, January
1, 1990.
B. The Senior Executives' Income Continuation Plan was renamed the Senior
Executives' Retirement Plan (hereinafter the "Plan") by amendment adopted
January 5, 1993.
C. The Plan has been amended previously on January 5, 1993, January 19,
1993, September 21, 1993, and October 23, 1997.
D. The Directors desire to restate and amend the Plan. It is the intention
that after adoption, this document shall constitute the entire Plan, and that
prior amendments and versions need not be consulted, except as explicitly set
forth herein.
WHEREFORE, the Senior Executives' Retirement Plan is amended and restated as
follows:
1. PLAN BENEFITS. The Plan shall offer the following benefits:
a. NORMAL RETIREMENT BENEFIT. Upon Normal Retirement Date, any
extension thereof, or actual retirement, whichever occurs later, the Participant
shall receive a monthly retirement benefit equal to fifty percent (50%) of Base
Pay (as hereinafter defined), payable for 120 months. This benefit is subject to
the vesting rules set forth in this Plan.
b. POST-RETIREMENT DEATH BENEFIT. In the event a Participant
dies prior to receipt of the payments set forth in paragraph 1a, the payments
shall be made to the Designated Beneficiary. If there is no Designated
Beneficiary, or if such Designated Beneficiary dies, such benefit shall be
payable to Participant's Estate. If the Designated Beneficiary dies prior to
receipt of all benefits, then such benefits shall be paid to Participant's
Estate.
c. PRE-RETIREMENT DEATH BENEFIT. In the event the Participant
dies before attaining Normal Retirement Date, such Participant's Designated
Beneficiary shall receive the benefit as set forth in paragraph 1a. Payments
will commence within thirty days of the death of the Participant. If the
Designated Beneficiary dies prior to receipt of all benefits, then such benefits
shall be paid to Participant's Estate.
d. DISABILITY RETIREMENT. In the event a Participant resigns
or is removed due to medical disability, such Participant shall receive the
benefit as set forth in paragraph 1a. Benefits will commence within thirty
days of the resignation or removal.
<PAGE>
e. EARLY RETIREMENT. In the event a Participant resigns, or
is terminated, such Participant shall receive, commencing at Normal Retirement
Date, such portion of the Benefit as has vested in accordance with the terms of
this Plan. Such benefit shall not be payable if the resignation or removal is
due to fraudulent or dishonest conduct. In the event Participant so elects, the
retirement benefit may be commenced after age 60, and up to five years prior to
Normal Retirement Date, provided that the benefit otherwise payable shall be
reduced by ten percent (10%) per year or portion thereof that payments commence
prior to Normal Retirement Date. As an example, if a Participant joined plan at
age 50, and worked for the Bank for 12 years, and then chose to retire, the
vested benefit paid would be 80% of the normal benefit, and this sum would be
reduced by 30% for the three years early retirement, yielding a 56% benefit. As
a further example, if a Participant joined the plan at age 45, AND PRIOR TO
APRIL 1, 1998, and worked for the Bank for 15 years and was fully vested, and
chose to retire at age 60, there would be no reduction, as the Participant would
have attained both age 60 and Normal Retirement Date. If a Participant joined
the plan at age 45, BUT AFTER MARCH 31,1998, and worked for the Bank for 15
years, and was fully vested, and chose to retire at age 60, there would be a 50%
reduction in benefit (5 years early retirement x 10% per year).
f. EXCLUSION OF DUPLICATED BENEFITS. No Senior Executive shall
be eligible for benefits under this Plan if said Officer is receiving or
entitled to receive benefits under the Chief Executive Officer's Retirement Plan
or the Directors' Retirement Plan maintained by the Bank.
g. BUYOUT OF BENEFITS. Nothing in the forgoing shall prohibit
Bank and a Participant who has terminated employment from the Bank from agreeing
to a lump sum payoff of the liability for future payments. Neither party,
however, is obliged to agree to any such buyout. The fact of a buyout of one
Participant shall not require the Bank to agree to a buyout as to any other
Participant.
h. WITHHOLDING. Bank shall withhold any required taxes from any
benefits otherwise payable under this Plan, in accordance with the laws of the
United States of America and the State of California.
2. VESTING RULES. A Participant's benefits under this Plan shall vest
as follows:
a. FIVE-YEAR WAITING PERIOD. No Participant shall be eligible
under this Plan for a benefit until said Participant has served five years both
as a Senior Executive and a Participant. Said five-year period commences with
date of execution of the Adoption Agreement provided in this Plan.
b. CLIFF VESTING AT FIVE-YEAR ANNIVERSARY. At 12:01 a.m., on the
fifth anniversary of execution of the Adoption Agreement (regardless of whether
such day shall fall on a banking day, holiday or otherwise) a Participant shall
be vested thirty-three and one third percent (33 1/3%) in the Plan.
AMERICAN COMMERCIAL BANK
RESTATED AND AMENDED SENIOR EXECUTIVES' RETIREMENT PLAN
MARCH 26, 1998
PAGE 2
<PAGE>
c. ACCRUAL AFTER FIFTH ANNIVERSARY. From and after the fifth
anniversary, benefits shall vest at faster of the following rates:
(1) Six and two thirds percent (6 2/3%) per year, accruing
at 12:01 a.m., beginning on the sixth anniversary, and annually thereafter on
each anniversary until fully vested.
(2) A percentage calculated by dividing sixty-six and two
thirds percent by the number of whole years (ignoring all fractions) to Normal
Retirement Date from the fifth anniversary date of the Plan. For example, if a
Participant has 8 years and eleven months to Normal Retirement Date on the fifth
anniversary, the fraction would be 66 2/3% divided by 8, or eight and a third
percent (8 1/3%).
d. DEATH OR DISABILITY. In the event a Participant dies, or in
the event a Participant resigns due to disability, such Participant shall be
immediately vested 100% under this Plan.
e. AMENDMENT RULE. No amendment may have the effect of
reducing benefits already vested in a Participant. Amendments may restrict
further vesting of benefits until such benefits would accrue under the Plan.
f. TRANSITION RULE. The vesting set forth in this restatement is
effective October 23, 1997. There is no intention in this restatement to change
the previously adopted vesting schedule, except for the five-year cliff vesting
rule, which was adopted October 23, 1997. To the extent any Participant was
already vested as of such date, and had been a Participant less than five years,
then any further vesting shall continue under the old plan, until the fifth
anniversary, at which time the Participant shall be vested in at least one third
of the benefits. Vesting thereafter shall be under the terms of this restated
plan. If any Participant has been a Participant for at least five years, and is
vested as of the date of adoption of this Plan at a rate higher than such
Participant would have been vested under the vesting schedule herein, then the
vesting accrued shall be retained, but further vesting shall not occur until
such benefits would accrue under this Plan. If any Participant became such after
October 23, 1997, only the vesting plan set forth in this restated plan shall
apply.
g. PAYMENT OF PARTIAL BENEFITS. In the event a Participant
retires and is vested less than one hundred percent, said Participant shall
receive the vested portion of the benefit payable over ten years. For example,
if a Participant is 70% vested at retirement, said Participant shall receive 70%
of the normal retirement benefit set forth in paragraph 1a for ten years.
3. PARTICIPATION. Participation in the Plan shall be at the discretion
of the Board of Directors. The Plan is not intended to automatically include all
employees of Bank, nor all Senior Executives of Bank. The Board of Directors
shall designate those Senior Executives to whom it
American Commercial Bank
Restated and Amended Senior Executives' Retirement Plan
March 26, 1998
Page 3
<PAGE>
wishes to offer Participation. Upon acceptance, and execution of the Adoption
Agreement, the Senior Executive shall become a Participant under this Plan.
4. SPECIAL RULE IN EVENT OF SALE OR MERGER OF BANK. In the event all
stock of American Commercial Bank or Americorp is transferred to a single buyer,
or in the event that the Bank or Americorp is merged into another corporation,
and Americorp is not the surviving corporation, AND the successor bank does not
assume and confirm the Plan as then in effect, THEN all benefits to Participants
who have not previously retired shall be deemed vested, effective upon such
merger or sale, at the higher of the following rates:
a. The vesting of the Participant pursuant to the provisions of
paragraph 2 of this Plan OR
b. Twenty five percent (25%) per full year employed by Bank,
excluding the first full year of employment, but not to exceed one hundred
percent (100%).
If the Participant is terminated any time within the twelve months immediately
following the merger, except for fraudulent or dishonest conduct, or if the Plan
is terminated during this period, the termination will be deemed to be a result
or condition of the merger and the vesting rule of this paragraph will apply.
This provision is intended only to have the affect of accelerating vesting. No
other provision, including the time for payment of normal retirement benefits,
shall be affected.
5. UNFUNDED PLAN. This Plan is not funded by any fund or specific
asset or assets of the Bank. No Participant or any other person shall have any
interest in any fund or in any specific asset or assets of the Bank by reason
of any amounts due to such Participant under this Plan, nor any right to receive
any distribution under the Plan except as, and to the extent expressly provided
in the Plan. Nothing in the Plan shall be deemed to give any subsidiary, parent
or affiliate of the Bank rights to participate in the Plan, except in accordance
with the provisions of the Plan. All benefits provided for hereunder are
completely unsecured and are payable only out of the general assets of the Bank.
The Bank shall be under no obligation whatsoever to purchase or maintain any
life insurance policy or annuity contract or in any other manner provide the
benefits or fund its obligations under this Plan.
6. RIGHT OF THE BANK TO TERMINATE THE PLAN. The Bank shall have the
right to terminate this Plan at any time. If the Plan is terminated, the
Participants shall receive future benefits in the same manner and amount as such
Participant would have received under Paragraph 1a, subject to the vesting
limitations set forth in Paragraph 2. Should the Bank elect to Terminate the
Plan, it shall be obligated to continue to pay all benefits provided for
hereunder to all Participants or their Designated Beneficiaries, as the case may
be, who have died or retired and who have become entitled to receive benefits in
accordance with the terms of this Plan.
American Commercial Bank
Restated and Amended Senior Executives' Retirement Plan
March 26, 1998
Page 4
<PAGE>
7. ADMINISTRATION. The Board of Directors of the Bank shall have full
power and authority to administer this Plan. The Board may establish a committee
of three (3) members of the Bank's Board of Directors to administer the Plan. No
member of the Board shall be liable to any person for any action taken or
omitted in connection with the administration of this Plan unless attributable
to his own willful misconduct or lack of good faith. The Directors shall, from
time to time, establish eligibility requirements for participation in the Plan
and rules for the Administration of the Plan that are consistent with the
provisions of the Plan.
8. AMENDMENT. The Board of Directors reserves the right to amend this
Plan in such manner as it deems necessary, in its sole discretion, subject to
the limitations of recognizing vesting as set forth in this Plan.
9. ADOPTION AGREEMENTS. A Senior Executive who is offered
participation in the Plan shall execute an Adoption Agreement in order to
become a Participant in the Plan. The Bank shall promptly sign Adoption
Agreements of Senior Executives offered participation who accept and sign the
Adoption Agreement. All those who have previously signed Adoption Agreements
on the effective date of this amendment and restatement shall be asked to
execute amended Adoption Agreements to bring benefits into line with the Plan
as restated. Bank shall present amended Adoption Agreements to all
Participants within 30 days of final adoption of this restated Plan. The form
of Adoption Agreement is attached hereto as Exhibit A and incorporated herein
by reference. The form of Amended Adoption Agreement for current Participants
is attached hereto as Exhibit B and incorporated herein by reference.
10. CONTINUED EMPLOYMENT. This Plan and the Adoption Agreement shall
not be construed as a contract of employment. Neither the Plan nor the Adoption
Agreement restrict the right of the Bank to terminate the Participant's
employment, or the right of the Participant to resign. Any Participant's
continued employment shall continue on terms mutually agreed between Participant
and Bank without respect to this Plan or the Adoption Agreement. Any payments
made under this Plan shall be independent of, and in addition to, those under
any other Plan, program or agreement which may be in effect from time to time
between the Bank and Participant.
11. MISCELLANEOUS.
a. DEFINITIONS.
(1) "Bank" means American Commercial Bank.
(2) "Base Pay" means the annualized salary for the
last three calendar years of employment with the Bank, divided by thirty-six.
For example, if a Participant retires July 1, 1999, the annualized salary for
1999, plus the actual salary for 1998, and 1997, will be added and divided by
thirty-six.
American Commercial Bank
Restated and Amended Senior Executives' Retirement Plan
March 26, 1998
Page 5
<PAGE>
(3) "Designated Beneficiary" means any person
designated in writing by a Participant to receive benefits under this Plan in
the event of the Participant's death. A Participant may elect to name more than
one person, setting forth the shares they are each to receive. Failure to
designate shares among multiple Designated Beneficiaries will be deemed an
election to have them share equally. A Participant may also elect to name a
person or persons to be alternates. Unless otherwise stated, alternate
nominations shall take effect only if every Designated Beneficiary is deceased
or (if not an individual) no longer in existence. A Designated Beneficiary shall
have no rights or standing under this Plan until the death of the Participant.
Until the condition arises which would trigger the elevation of an alternate to
a Designated Beneficiary, such alternate shall have no rights or standing under
this Plan.
(4) "Medical Disability" shall mean a medical condition
which significantly limits or restricts the ability of the Participant to
function fully and competently as a Senior Executive of Bank for a period of not
less than six (6) months. The Board of Directors shall consider and rule upon
requests for resignation based upon medical disability on a case by case basis,
taking all factors and information available to the Board into consideration. It
shall not be necessary for the Participant to provide a medical opinion that he
is medically disabled for purposes of Social Security, disability benefits
provided by the Bank under other plans, or for purposes of State Disability
Insurance.
(5) "Normal Retirement Date" for Participants who have
become Participants in the Plan for the first time prior to April 1, 1998 shall
be the earlier of age sixty-five (65) or the fifteenth anniversary of execution
of the Adoption Agreement by Participant and Bank. "Normal Retirement Date" for
Participants who become Participants in the Plan for the first time after March
31, 1998 shall be age sixty-five (65). By agreement between Bank and
Participant, Normal Retirement Date may be extended to a later date: Extensions
of longer than one year shall require Board approval.
(6) "Plan" means the Senior Executives' Retirement Plan
of American Commercial Bank as described in this instrument.
(7) "Participant" means any Senior Executive of
American Commercial Bank who is offered the opportunity to participate in this
Plan and who signs an Adoption Agreement pursuant to this Plan which is
countersigned by Bank. Any individual who has become a Participant in the Plan
and subsequently retires or is disabled, remains a Participant until all
benefits have been paid pursuant to the Plan. A Designated Beneficiary is a
Participant upon death of the Participant, and remains a Participant until all
benefits have been paid pursuant to the Plan.
(8) "Senior Executive" means any Executive of American
Commercial Bank with the title of Vice President or higher. The fact that an
individual is a Senior Executive does
American Commercial Bank
Restated and Amended Senior Executives' Retirement Plan
March 26, 1998
Page 6
<PAGE>
not entitle such individual to become a Participant in the Plan. Participation
is at the discretion of the Board of Directors of Bank.
b. GOVERNING LAW. This Plan shall be construed in accordance with
and governed by the laws of the State of California.
c. LIMITATIONS ON LIABILITY. The payment of benefits hereunder
to the Participant or his or her beneficiary pursuant to this Plan shall fully
discharge the Bank from all claims or liabilities with respect to such payments
unless, before such payment is made, the Bank has received at its principal
place of the business written notice by or on behalf of some other person who
claims to be entitled to such payments or some part thereof. In the event the
Participant is deceased and a Court of competent jurisdiction has entered a
final order with respect to his or her estate, payment of such money, or
portions thereof, if any be due, pursuant to the terms of the judgment shall
likewise fully protect the Bank making such payment unless, before such payment
is made, written notice of a claim or adverse claim is received in the manner
provided above.
d. SUICIDE. No benefits shall be payable hereunder to a
Designated Beneficiary if the Participant's death occurs as a result of suicide,
while sane or insane, within two years after
(1) execution of the Adoption Agreement or
(2) any subsequent change in the benefits for said
Participant, but the benefit withheld under this paragraph d(2) shall only be
the amount of increase in benefits represented by such change.
American Commercial Bank
Restated and Amended Senior Executives' Retirement Plan
March 26, 1998
Page 7
<PAGE>
ADOPTION AGREEMENT
This agreement is executed the ____day of ___________, ____ between
American Commercial Bank (hereinafter "Bank") and __________________
(hereinafter "[Last Name of Employee]") in consideration of the following
facts:
A. Bank has adopted a Senior Executives' Retirement Plan (hereinafter
"Plan"). [Last Name] has been provided with a copy of the Plan as it exists on
the date of this Adoption Agreement.
B. The board of directors of Bank has offered to [Last Name] the
opportunity to participate in the Plan.
C. [Last Name] accepts the offer on the terms and conditions set forth
herein.
WHEREFORE, the parties agree as follows:
1. EFFECTIVE DATE. Effective on ____________ [Last Name] shall
become a Participant in the Plan. Hereinafter, references to Participant
shall mean [Last Name]. Participant shall be entitled to the benefits as
provided in the Plan.
2. PLAN. The parties shall be bound by all of the provisions of the
Plan, as they exist at the time of signing of this Agreement, and as amended
from time to time. Amendments shall be subject to the limitations on
amendment in effect as of the date of execution of this Adoption Agreement.
No amendment may have the effect of reducing benefits already vested in
Participant. Amendments may restrict further vesting of benefits until such
benefits would accrue under the Plan.
3. NORMAL RETIREMENT DATE. For purposes of the Plan, the
Participant's Normal Retirement Date shall be _______________________.
4. DESIGNATED BENEFICIARY. For purposes of any death benefits, the
following is my Designated Beneficiary:
a. Designated Beneficiary/Beneficiaries:________________________
_______________________________________________________________________________
b. Alternate Designated Beneficiary/Beneficiaries. In the event
the Designated Beneficiary/Beneficiaries set forth in paragraph a does not
survive Participant, or does not exist at Participant's death, the following
shall be the Designated Beneficiary/Beneficiaries:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT A
<PAGE>
NOTE: If Participant is married, the spouse of Participant must sign a consent
to this Adoption Agreement if the spouse is not the sole Designated Beneficiary
under subparagraph a.
5. PHYSICAL EXAMINATION. Participant agrees to take such physical
examination and to provide such information as may be required by Bank for the
purpose of acquiring life insurance, which the Bank may choose purchase on
Participant's life, with Bank as beneficiary. Participant shall have no rights
in any such insurance.
Date:
----------------------- ----------------------------------
[Last Name], Participant
AMERICAN COMMERCIAL BANK
Date: By
----------------------- -------------------------------
SPOUSAL CONSENT
(MUST BE NOTARIZED)
The undersigned, spouse of Participant, agrees to the Designated
Beneficiary being other than the undersigned.
Date:
----------------------- -------------------------------
EXHIBIT A
<PAGE>
AMENDED ADOPTION AGREEMENT
This agreement is executed the ____ day of___________,_____, between
American Commercial Bank (hereinafter "Bank") and ____________________
(hereinafter "[Last Name of Employee]") in consideration of the following
facts:
A. Bank has adopted a Senior Executives' Retirement Plan. Participant has
been provided with a copy of the Restated and Amended Senior Executives'
Retirement Plan as adopted on March 26, 1998 (hereinafter "Plan").
B. [Last Name] is presently a participant in the Plan.
C. Bank has amended and restated the Plan since the original Adoption
Agreement was signed.
WHEREFORE, the parties agree as follows:
1. EFFECTIVE DATE. Effective on ______________________, [Last Name]
became a Participant in the Plan. Hereinafter, references to Participant shall
mean [Last Name]. Participant shall be entitled to the benefits as provided in
the Plan.
2. VESTED BENEFITS. As of the date of this Amendment, Participant was
vested in Plan benefits __________________ percent (_________%). Further
vesting [shall continue as provided in the Plan from this date forward] [shall
cease until ____________________, at which time it shall resume as provided in
the Plan].
3. PLAN. The parties shall be bound by all of the provisions of the Plan,
as they exist at the time of signing of this Agreement, and as amended from time
to time. Amendments shall be subject to the limitations on amendment in effect
as of the date of execution of this Adoption Agreement. No amendment may have
the effect of reducing benefits already vested in Participant. Amendments may
restrict further vesting of benefits until such benefits would accrue under the
Plan.
4. NORMAL RETIREMENT DATE. For purposes of the Plan, the Participant's
Normal Retirement Date shall be __________________________.
5. DESIGNATED BENEFICIARY. For purposes of any death benefits, the
following is my Designated Beneficiary:
a. Designated Beneficiary/Beneficiaries:____________________________
______________________________________________________________________________
EXHIBIT B
<PAGE>
b. Alternate Designated Beneficiary/Beneficiaries. In the event the
Designated Beneficiary/Beneficiaries set forth in paragraph a does not survive
Participant, or does not exist at Participant's death, the following shall be
the Designated Beneficiary/Beneficiaries:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
NOTE: If Participant is married, the spouse of Participant must sign a consent
to this Adoption Agreement if the spouse is not the sole Designated Beneficiary
under subparagraph a.
6. PHYSICAL EXAMINATION. Participant agrees to take such physical
examination and to provide such information as may be required by Bank for the
purpose of acquiring life insurance, which the Bank may choose purchase on
Participant's life, with Bank as beneficiary. Participant shall have no rights
in any such insurance.
7. PRIOR ADOPTION AGREEMENTS. This Adoption Agreement supersedes and
replaces all prior Adoption Agreements, provided, however, that nothing in this
Adoption Agreement shall be deemed to reduce benefits already vested in
Participant.
Date:
----------------------- ----------------------------------
[Last Name], Participant
AMERICAN COMMERCIAL BANK
Date: By
----------------------- -------------------------------
SPOUSAL CONSENT
(MUST BE NOTARIZED)
The undersigned, spouse of Participant, agrees to the Designated
Beneficiary being other than the undersigned.
Date:
----------------------- ----------------------------------
EXHIBIT B
<PAGE>
EXHIBIT 10.6
Restated and Amended Chief Executive Officer's Retirement Plan
<PAGE>
AMERICAN COMMERCIAL BANK
RESTATED AND AMENDED CHIEF EXECUTIVE OFFICER'S RETIREMENT PLAN
This Restated and Amended Chief Executive Officer's Retirement Plan is
executed in consideration of the following facts:
A. The Board of Directors of American Commercial Bank adopted a Chief
Executive Officer's Income Continuation Plan effective January 1, 1990.
B. The Chief Executive Officer's Income Continuation Plan was renamed the
Chief Executive Officer's Retirement Plan by amendment adopted January 5, 1993.
C. The Plan has been amended previously on December 17, 1991, January 5,
1993, January 18, 1994, and January 12, 1995.
D. The prior Chief Executive Officer, HARRY L. MAYNARD agreed to consent
to amendments previously executed upon the agreement that, if, when and as the
Directors' Retirement Plan was expanded in its scope, he would have comparable
adjustments made in the Chief Executive Officer's Retirement Plan.
E. The Directors desire to restate and amend the plan.
WHEREFORE, The Chief Executive Officer's Retirement Plan is adopted as follows:
1. PLAN BENEFITS. The Plan shall offer the following benefits:
a. NORMAL RETIREMENT BENEFIT. Upon normal retirement date, any
extension thereof, or actual retirement, whichever occurs later, the Chief
Executive Officer of American Commercial Bank shall receive, a monthly
retirement benefit, for 120 months payment in the amount set forth in the
adoption agreement. This benefit is subject to the vesting rules set forth in
this plan.
b. POST-RETIREMENT DEATH BENEFIT. In the event a Participant
dies prior to receipt of the payments set forth in paragraph 1a, the payments
shall be made to the Designated Beneficiary. If there is no Designated
Beneficiary, or if such Designated Beneficiary dies and there are no
alternates named, such benefit shall be payable to Participant's Estate.
c. PRE-RETIREMENT DEATH BENEFIT. In the event the Participant
dies before attaining normal retirement age, such Participant's Designated
Beneficiary shall receive the benefit as set forth in paragraph 1a. Payments
will commence within thirty days of the death of the participant.
<PAGE>
d. DISABILITY RETIREMENT. In the event a Participant
resigns or is removed due to medical disability, such Participant shall
receive the benefit as set forth in paragraph 1a. Benefits will commence
within thirty days of the resignation or removal or the Participant's Normal
Retirement Date, whichever is later.
e. EARLY RETIREMENT. In the event a Participant resigns, is
removed, or is not reelected, such Participant shall receive, commencing at
normal retirement age, such portion of the Benefit as has vested in accordance
with the terms of this plan. Such benefit shall not be payable if the
resignation or removal is due to fraudulent or dishonest conduct.
f. EXCLUSION OF DUPLICATED BENEFITS. No Chief Executive
Officer shall be eligible for benefits under this plan if said Chief Executive
Officer is receiving or entitled to receive benefits under the Senior Executive
Retirement Plan or the Directors' Retirement Plan previously adopted by the
Bank.
2. VESTING RULES. A Participant's benefits under this plan shall
vest as follows:
a. ONE YEAR WAITING PERIOD. No Participant shall be eligible
under this Plan for a benefit until said Participant has served one year as
Chief Executive Officer, commencing with date of first appointment.
b. SERVICE CREDIT. A Participant shall vest 8% per year for
services rendered after the one year waiting period has expired. Only services
rendered after the waiting period shall be counted for vesting purposes.
Service accrued prior to January 1, 1990 shall not be counted. Service as a
Director after resignation as Chief Executive Officer shall count toward such
vesting.
c. DEATH OR DISABILITY. In the event a Participant dies, or in
the event a Participant resigns due to disability, such Participant shall be
immediately vested 100% under this plan.
d. AMENDMENT RULE. No amendment may have the effect of
reducing benefits already vested in a Participant. Amendments may restrict
further vesting of benefits until such benefits would accrue under the
amendment.
e. TRANSITION RULE. Because previous vesting rules were
different, some Participants may have vested more benefits than are set forth
under paragraphs 2a and 2b. HARRY L. MAYNARD,
American Commercial Bank
Restated and Amended Chief Executive Officer's Retirement Plan
Draft run September 23, 1997
Page 2
<PAGE>
the only participant to the date of this restatement, has accrued 60% of his
benefit as of the adoption of this amendment. Said participant shall accrue and
be vested additional benefits, regardless of the benefits already accrued,
commencing with the adoption of this restated plan. For example, if the Chief
Executive Officer has three years service on the board as of the date of
adoption of this amendment, and who is vested in 60% benefits under prior rules
will accrue an additional 8% per year under the amended plan, regardless of the
fact that such accrual would not have taken place absent this transitional
provision.
f. PAYMENT OF PARTIAL BENEFITS. In the event a Participant
retires and is vested less than one hundred percent, said Participant shall have
the option of either receiving the vested portion of the monthly benefit over
the full ten years, or receive the full monthly benefit for the vested portion
of ten years. For example, if a Participant is 70% vested at retirement, said
director shall have the option to receive 70% of the monthly benefit set forth
in the adoption agreement for ten years, or the full amount of the monthly
benefit set forth in the adoption agreement for seven years.
3. SPECIAL RULE IN EVENT OF SALE OR MERGER OF BANK. In the event
all stock of American Commercial Bank or Americorp is transferred to a single
buyer, or in the event that the Bank or Americorp is merged into another
corporation, and Americorp is not the surviving corporation, then all benefits
shall vest 100% upon such merger or sale.
4. UNFUNDED PLAN. This Plan is not funded by any fund or specific
asset or assets of the Bank. No Participant or any other person shall have any
interest in any fund or in any specific asset or assets of the Bank by reason
of any amounts due to such Participant under this Plan, nor any right to receive
any distribution under the Plan except as, and to the extent expressly provided
in the Plan. Nothing in the Plan shall be deemed to give any subsidiary, parent
or affiliate of the Bank rights to participate in the Plan, except in accordance
with the provisions of the Plan. All benefits provided for hereunder are
completely unsecured and are payable only out of the general assets of the Bank.
The Bank shall be under no obligation whatsoever to purchase or maintain any
life insurance policy or annuity contract or in any other manner provide the
benefits or fund its obligations under this plan.
5. RIGHT OF THE BANK TO TERMINATE THE PLAN. The Bank shall have the
right to terminate this Plan at any time. If the Plan is terminated, the
Participants shall receive future benefits in the same manner and amount as such
Participant would have
American Commercial Bank
Restated and Amended Chief Executive Officer's Retirement Plan
Draft run September 23, 1997
Page 3
<PAGE>
received under paragraph 1d. Should the Bank elect to Terminate the Plan, it
shall be obligated to continue to pay all benefits provided for hereunder to all
Participants or their Designated Beneficiaries, as the case may be, who have
died or retired and who have become entitled to receive benefits in accordance
with the terms of this Plan.
6. ADMINISTRATION. The Board of Directors of the Bank shall have
full power and authority to administer this Plan. The Board may establish a
committee of three (3) members of the Bank's Board of Directors to administer
the plan. No member of the Board shall be liable to any person for any action
taken or omitted in connection with the administration of this Plan unless
attributable to his own willful misconduct or lack of good faith. The Directors
shall, from time to time, establish eligibility requirements for participation
in the Plan and rules for the Administration of the Plan that are not
inconsistent with the provisions of the Plan.
7. AMENDMENT. The Board of Directors reserves the right to amend
this Plan in such manner as it deems necessary, in its sole discretion, subject
to the limitations of Paragraphs 2 and 4.
8. ADOPTION AGREEMENTS. All participants shall execute adoption
agreements upon becoming participants in the plan. All those who have
previously signed adoption agreements on the effective date of this amendment
and restatement shall execute amended adoption agreements to bring benefits into
line with the plan as restated. Bank shall present amended adoption agreements
to all participants within 30 days of final adoption of this restated plan.
9. MISCELLANEOUS.
a. DEFINITIONS.
(1) "Plan" means the Chief Executive Officer's Retirement
Plan of American Commercial Bank as described in this instrument.
(2) "Bank" means American Commercial Bank.
(3) "Designated Beneficiary" means any individual or
individuals designated in writing by a Participant to receive benefits under
this plan in the event of the Participant's death.
(4) "Chief Executive Officer" means the Chief Executive
Officer of American Commercial Bank, a California State Bank, and any one
serving in that capacity since January 1, 1990.
(5) "Medical Disability" shall mean a medical condition
which significantly limits or restricts the ability of the Participant to
function fully and competently, as a Director of Bank. The Board of Directors
shall consider and rule upon requests
American Commercial Bank
Restated and Amended Chief Executive Officer's Retirement Plan
Draft run September 23, 1997
Page 4
<PAGE>
for resignation based upon medical disability on a case by case basis, taking
all factors and information available to the Board into consideration. It
shall not be necessary for the Chief Executive Officer to provide a medical
opinion that he is medically disabled for purposes of Social Security,
(disability benefits provided by the bank under other plans, or for purposes
of State Disability Insurance.
(6) "Normal Retirement Date" shall ordinarily be age
seventy-two (72). The Normal Retirement Date for each participant shall be set
forth in the Adoption Agreement.
(7) "Participant" means the Chief Executive Officer of
American Commercial Bank who is eligible to participant in this plan and any
individual who has become a participant in the plan and subsequently retires or
is disabled.
b. GOVERNING LAW. This Plan shall be construed in accordance
with and governed by the laws of the State of California.
c. LIMITATIONS ON LIABILITY. The payment of benefits hereunder
to the Participant or his or her beneficiary pursuant to this Plan shall fully
discharge the Bank from all claims or liabilities with respect to such payments
unless, before such payment is made, the Bank has received at its principal
place of the business written notice by or on behalf of some other person who
claims to be entitled to such payments or some part thereof. In the event the
Participant is deceased and a Court of competent jurisdiction has entered a
final order with respect to his or her estate, payment of such money, or
portions thereof, if any be due, pursuant to the terms of the judgment shall
likewise fully protect the Bank making such payment unless, before such payment
is made, written notice of a claim or adverse claim is received in the manner
provided above.
d. SUICIDE. No benefits shall be payable hereunder to a
Designated Beneficiary if the Participant's death occurs as a result of suicide,
while sane or insane, within two years after
(1) execution of the Adoption Agreement or
(2) any subsequent change in the benefits for said
Participant, but the benefit withheld under this paragraph d(2) shall only be
the amount of increase in benefits represented by such change.
American Commercial Bank
Restated and Amended Chief Executive Officer's Retirement Plan
Draft run September 23, 1997
Page 5
<PAGE>
ADOPTION AGREEMENT
CHIEF EXECUTIVE OFFICER'S RETIREMENT PLAN
AMERICAN COMMERCIAL BANK
This Adoption Agreement is entered into this ___ day of
________, 1996, between American Commercial Bank (hereinafter "ACB") and HARRY
L. MAYNARD (hereinafter "Participant"), in consideration of the following facts:
A. The Board of Directors of American Commercial Bank adopted a Chief
Executive Officer's Income Continuation Plan effective January 1, 1990.
B. The Chief Executive Officer's Income Continuation Plan was renamed the
Chief Executive Officer's Retirement Plan by amendment adopted January 5, 1993.
C. The Plan was amended on December 17, 1991, January 5, 1993, January
18, 1994, January 12, 1995, and May 30, 1996. Hereinafter, this is referred
to as the "Plan".
D. The parties desire to execute a current adoption agreement, reflecting
the changes implemented by all previous amendments.
WHEREFORE, the Parties agree as follows:
1. PARTICIPANT. Participant is an eligible Participant under the
Plan.
2. ADOPTION. The parties agree that each is bound by the provisions
of the plan as adopted and amended to date, and as hereafter amended.
3. BENEFIT. The amount of retirement benefit, once fully vested
under the plan, is $5,033.33 per month for ten years, commencing January 1,
1993. If not fully vested, the benefit shall be paid pursuant to election of
the Participant under the terms of the plan.
4. BENEFICIARY. In the event that Participant dies before
receiving all benefits under the plan, the following are to receive the benefits
remaining:
PRIMARY BENEFICIARY/IES:
---------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ALTERNATE BENEFICIARY/IES:
--------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5. EFFECTIVE DATE. The effective date for Participant's enrollment
in the plan is
---------------------------------------------------------------.
6. PRIOR ADOPTION AGREEMENTS. This Adoption Agreement
<PAGE>
replaces all prior Adoption Agreements and amendments thereto executed by the
parties pursuant to the Plan.
Date:
----------------------- ------------------------------
Participant
Date: AMERICAN COMMERCIAL BANK
-----------------------
by
------------------------------
JAMES E. BEENINGA, President
SPOUSAL CONSENT
As witnessed by my signature below, I give my consent to the benefit
designated in this Adoption Agreement.
Date:
----------------------- ------------------------------
Spouse of Participant
<PAGE>
EXHIBIT 10.7
Restated and Amended Directors' Retirement Plan
<PAGE>
AMERICAN COMMERCIAL BANK
RESTATED AND AMENDED DIRECTORS RETIREMENT PLAN
This Restated and Amended Directors Retirement Plan is executed in
consideration of the following facts:
A. The Board of Directors of American Commercial Bank adopted a
Directors Income Continuation Plan effective January 1, 1990.
B. The Directors Income Continuation Plan was renamed the Directors'
Retirement Plan by amendment adopted January 5, 1993.
C. The Plan has been amended previously on December 17, 1991, January
5, 1993, January 18, 1994, and January 12, 1995.
D. The Directors desire to restate and amend the plan.
WHEREFORE, the Directors Retirement Plan is adopted as follows:
1. PLAN BENEFITS. The Plan shall offer the following benefits:
a. DIRECTOR'S NORMAL RETIREMENT BENEFIT. Upon normal
retirement date, any extension thereof, or actual retirement, whichever
occurs later, each Director of American Commercial Bank shall receive, a
monthly retirement benefit, for 120 months payment in the amount set forth in
the adoption agreement for each director. This benefit is subject to the
vesting rules set forth in this plan. Attached hereto as schedule A is a
listing of directors serving as of the date of adoption of this restated
plan, and their monthly benefit.
b. POST-RETIREMENT DEATH BENEFIT. In the event a Participant
dies prior to receipt of the payments set forth in paragraph 1a, the payments
shall be made to the Designated Beneficiary. If there is no Designated
Beneficiary, or if such Designated Beneficiary dies and there are no
alternates named, such benefit shall be payable to Participant's Estate.
c. PRE-RETIREMENT DEATH BENEFIT. In the event a Director
dies while in office, such Director's Designated Beneficiary shall receive
the benefit as set forth in paragraph 1a. Payments will commence within
thirty days of the death of the Director
d. DISABILITY RETIREMENT. In the event a Participant resigns
or is removed due to medical disability, such Participant shall receive the
benefit as set forth in paragraph 1a. Benefits will commence within thirty
days of the resignation or removal or the Participant's Normal Retirement
Date, whichever is later.
<PAGE>
e. EARLY RETIREMENT. In the event a Participant resigns, is
removed, or is not reelected, such participant shall receive, commencing at
normal retirement age, such portion of the Benefit as has vested in
accordance with the terms of this plan. Such benefit shall not be payable if
the resignation or removal is due to fraudulent or dishonest conduct.
f. LATE RETIREMENT. In the event a Participant has reached
the age of 75, is still serving as a Director, and has a current Adoption
Agreement with the Bank, said Director, at the Director's Option, may
commence payments under the adoption agreement upon 10 days written notice.
Said payments shall be made only to the extent they are vested in the
director. The Director must meet all qualification requirements under the
plan except for the requirement of death or retirement. All payments made
pursuant to the notice shall be in discharge of the obligations of Bank under
this plan.
g. EXCLUSION OF DUPLICATED BENEFITS. No Director shall be
eligible for benefits under this plan if:
(1) Said Director is receiving or entitled to receive
benefits under the Senior Executive Retirement Plan or the Chief Executive
Officer Retirement Plan previously adopted by the Bank.
(2) Said Director is or was, a Director of another bank
which is merged into or purchased by Bank, and which Bank had a director's
retirement plan offering similar benefits. The Board shall determine on a
case by case basis whether such plan is similar.
h. QUALIFICATION FOR INSURANCE. For all Directors not part
of this plan as of the date of adoption of this provision, to be eligible to
participate the Bank must be able to obtain life insurance on said Director
adequate to cover said Director's benefits under this plan, and must
cooperate in obtaining insurance on which Bank is the beneficiary. Once
determined to be insurable, and Bank has had an opportunity to acquire
insurance, said Director shall be a participant. The right of the Director to
participate under this provision, once established, shall not terminate. That
is, in the event Bank subsequently elects not to purchase life insurance, or
Bank terminates life insurance for any reason, including failure to pay
premium, the right of the Director to participate shall not terminate.
2. VESTING RULES. A Participant's benefits under this plan shall
vest as follows:
a. THREE YEAR WAITING PERIOD. No Participant shall be
eligible under this Plan for a benefit until said Participant
American Commercial Bank
Restated and Amended Director's Retirement Plan
Adopted May 30, 1996
Page 2
<PAGE>
has served three years as a Director, commencing with date of first
appointment.
b. SERVICE CREDIT. A Participant shall vest 8% per year for
services rendered after the three year waiting period has expired. Only
services rendered after the three-year waiting period shall be counted for
vesting purposes.
c. DEATH OR DISABILITY. In the event a Participant dies, or
in the event a Participant resigns due to disability, such Participant shall
be immediately vested 100% under this plan.
d. TRANSITION RULE. Because previous vesting rules were
different, some Participants may have vested more benefits than are set forth
under paragraphs 2a and 2b. Schedule B attached hereto lists the vesting
percentages of present directors under the plan as herein amended.
Notwithstanding any other provision, each presently serving director shall
accrue and be vested additional benefits, regardless of the benefits already
accrued, commencing with the adoption of this restated plan. For example, a
director who has three years service on the board as of the date of adoption
of this amendment, and who is vested in 60% benefits under prior rules will
accrue an additional 8% per year under the amended plan, regardless of the
fact that such accrual would not have taken place absent this transitional
provision.
e. AMENDMENT RULE. No amendment may have the effect of
reducing benefits already vested in a Participant. Amendments may restrict
further vesting of benefits until such benefits would accrue under the
amendment.
f. PAYMENT OF PARTIAL BENEFITS. In the event a director
retires and is vested less than one hundred percent, said director shall have
the option of either receiving the vested portion of the monthly benefit over
the full ten years, or receive the full monthly benefit for the vested
portion of ten years. For example, if a director is 70% vested at retirement,
said director shall have the option to receive 70% of the monthly benefit set
forth in the adoption agreement for ten years, or the full amount of the
monthly benefit set forth in the adoption agreement for seven years.
3. SPECIAL RULE IN EVENT OF SALE OR MERGER OF BANK. In the event
all stock of American Commercial Bank or Americorp is transferred to a single
buyer, or in the event that the Bank or Americorp is merged into another
corporation, then the following two rules shall apply:
American Commercial Bank
Restated and Amended Director's Retirement Plan
Adopted May 30, 1996
Page 3
<PAGE>
a. In the event that the benefits payable pursuant to
paragraph 1a of this plan are less than the compensation being then paid
monthly to the Chairman, Vice-Chairman or Director, then the benefit payable
under this plan shall be modified to be equal to the then monthly benefit
being received by the Chairman, Vice Chairman, or Directors as appropriate.
b. All benefits shall vest 100% upon such merger or sale.
4. UNFUNDED PLAN. This Plan not funded by any fund or specific
asset or assets of the Bank. No Participant or any other person shall have
any interest in any fund or in any specific asset or assets of the Bank by
reason of any amounts due to such Participant under this Plan, nor any right
to receive any distribution under the Plan except as, and to the extent
expressly provided in the Plan. Nothing in the Plan shall be deemed to give
any subsidiary, parent or affiliate of the Bank rights to participate in the
Plan, except in accordance with the provisions of the Plan. All benefits
provided for hereunder are completely unsecured and are payable only out of
the general assets of the Bank. The Bank shall be under no obligation
whatsoever to purchase or maintain any life insurance policy or annuity
contract or in any other manner provide the benefits or fund its obligations
under this plan.
5. RIGHT OF THE BANK TO TERMINATE THE PLAN. The Bank shall have
the right to terminate this Plan at any time. If the Plan is terminated, the
Participants shall receive future benefits in the same manner and amount as
such Participant would have received under Paragraph 1d. Should the Bank
elect to Terminate the Plan, it shall be obligated to continue to pay all
benefits provided for hereunder to all Participants or their Designated
Beneficiaries, as the case may be, who have died or retired and who have
become entitled to receive benefits in accordance with the terms of this Plan.
6. ADMINISTRATION. The Board of Directors of the Bank shall have
full power and authority to administer this Plan. The Board may establish a
committee of three (3) members of the Bank's Board of Directors to administer
the plan. No member of the Board shall be liable to any person for any action
taken or omitted in connection with the administration of this Plan unless
attributable to his own willful misconduct or lack of good faith. The
Directors shall, from time to time, establish eligibility requirements for
participation in the Plan and rules for the Administration of the Plan that
are not inconsistent with the provisions of the Plan.
American Commercial Bank
Restated and Amended Director's Retirement Plan
Adopted May 30, 1996
Page 4
<PAGE>
7. AMENDMENT. The Board of Directors reserves the right to amend
this Plan in such manner as it deems necessary, in its sole discretion,
subject to the limitations of Paragraphs 2 and 4.
8. ADOPTION AGREEMENTS. All participants shall execute adoption
agreements upon becoming participants in the plan. All those who have
previously signed adoption agreements on the effective date of this amendment
and restatement shall execute amended adoption agreements to bring benefits
into line with the plan as restated. Bank shall present amended adoption
agreements to all participants within 30 days of final adoption of this
restated plan.
9. MISCELLANEOUS.
a. DEFINITIONS.
(1) "Plan" means the Directors Retirement Plan of
American Commercial Bank as described in this instrument.
(2) "Bank" means American Commercial Bank.
(3) "Designated Beneficiary" means any individual or
individuals designated in writing by a Participant to receive benefits under
this plan in the event of the Participant's death.
(4) "Director" means a Director of American Commercial
Bank, a California State Bank.
(5) "Medical Disability" shall mean a medical condition
which significantly limits or restricts the ability of the Participant to
function fully and competently as a Director of Bank. The Board of Directors
shall consider and rule upon requests for resignation based upon medical
disability on a case by case basis, taking all factors and information
available to the Board into consideration. It shall not be necessary for a
director to provide a medical opinion that the Director is medically disabled
for purposes of Social Security, disability benefits provided by the bank
under other plans, or for purposes of State Disability Insurance.
(6) "Normal Retirement Date" shall ordinarily be age
seventy-four (74). The Normal Retirement Date for each participant shall be
set forth in the Adoption Agreement.
(7) "Participant" means a Director of American Commercial
Bank who is eligible to participant in this plan and any individual who has
become a participant in the plan and subsequently retires or is disabled.
b. GOVERNING LAW. This Plan shall be construed in accordance
with and governed by the laws of the State of California.
American Commercial Bank
Restated and Amended Director's Retirement Plan
Adopted May 30, 1996
Page 5
<PAGE>
c. LIMITATIONS ON LIABILITY. The payment of benefits
hereunder to the Participant or his or her beneficiary pursuant to this Plan
shall fully discharge the Bank from all claims or liabilities with respect to
such payments unless, before such payment is made, the Bank has received at
its principal place of the business written notice by or on behalf of some
other person who claims to be entitled to such payments or some part thereof.
In the event the Participant is deceased and a Court of competent
jurisdiction has entered a final order with respect to his or her estate,
payment of such money, or portions thereof, if any be due, pursuant to the
terms of the judgment shall likewise fully protect the Bank making such
payment unless, before such payment is made, written notice of a claim or
adverse claim is received in the manner provided above.
d. SUICIDE. No benefits shall be payable hereunder to a
Designated Beneficiary if the Participant's death occurs as a result of
suicide, while sane or insane, within two years after
(1) execution of the Adoption Agreement or
(2) any subsequent change in the benefits for said
Participant, but the benefit withheld under this paragraph d(2) shall only be
the amount of increase in benefits represented by such change.
American Commercial Bank
Restated and Amended Director's Retirement Plan
Adopted May 30, 1996
Page 6
<PAGE>
ADOPTION AGREEMENT
DIRECTOR'S RETIREMENT PLAN
AMERICAN COMMERCIAL BANK
This Adoption Agreement is entered into this _____ day of __________,
1996 between American Commercial Bank (hereinafter "ACB") and _______________
(hereinafter "Participant"), in consideration of the following facts:
A. The Board of Directors of American Commercial Bank adopted a
Directors Income Continuation Plan effective January 1, 1990.
B. The Directors Income Continuation Plan was renamed the Directors'
Retirement Plan by amendment adopted January 5, 1993.
C. The Plan was amended on December 17, 1991, January 5, 1993, January
18, 1994, January 12, 1995, and May 30, 1996. Hereinafter, this is referred
to as the "Plan".
D. The parties desire to execute a current adoption agreement,
reflecting the changes implemented by all previous amendments.
WHEREFORE, the Parties agree as follows:
1. PARTICIPANT. Participant is an eligible Participant under the
Plan.
2. ADOPTION. The parties agree that each is bound by the
provisions of the plan as adopted and amended to date, and as hereafter
amended.
3. BENEFIT. The amount of retirement benefit, once fully vested
under the plan, is $___________ per month for ten years. If not fully
vested, the benefit shall be paid pursuant to election of the Participant
under the terms of the plan.
4. BENEFICIARY. In the event that Participant dies before
receiving all benefits under the plan, the following are to receive the
benefits remaining:
PRIMARY BENEFICIARY/IES:________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
ALTERNATE BENEFICIARY/IES:______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
5. EFFECTIVE DATE. The effective date for Participant's
enrollment in the plan is __________________.
6. PRIOR ADOPTION AGREEMENTS. This Adoption Agreement replaces
all prior Adoption Agreements and amendments thereto executed by the parties
pursuant to the Plan.
<PAGE>
Date:
---------------------------- -----------------------------------
Participant
Date: AMERICAN COMMERCIAL BANK
----------------------------
by
----------------------------
JAMES E. BEENINGA, President
SPOUSAL CONSENT
As witnessed by my signature below, I give my consent to the benefit
designated in this Adoption Agreement.
Date:
---------------------------- -----------------------------------
Spouse of Participant
<PAGE>
Schedule A
Monthly
Director Benefit
---------------------------------- ----------
Edward T. Martin $ 3,300
Allen W. Jue $ 1,200
Lincoln E. Cryne $ 1,200
Robert J. Lagomarsino $ 500
Robert L. Mobley $ 500
Catherine S. Wood $ 500
<PAGE>
Schedule B
Vesting
Director Percentages
---------------------------------- ----------
Edward T. Martin 60%
Allen W. Jue 60%
Lincoln E. Cryne 60%
Robert J. Lagomarsino 60%
Robert L. Mobley 60%
Catherine S. Wood 60%
<PAGE>
EXHIBIT 10.8
Data processing Agreement with Electronic Data Systems Corp.
<PAGE>
AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES
THIS AGREEMENT ("Agreement") is between Electronic Data Systems Corporation
("EDS"), a Delaware corporation with an address at 5400 Legacy Drive, Plano,
Texas 75024, and AMERICAN COMMERCIAL BANK ("Customer"), a California state-
chartered bank with an address at 300 SOUTH MILLS ROAD, VENTURA, CA 93003.
WHEREAS, Customer desires to purchase certain information technology
services from EDS, a provider of such services.
NOW, THEREFORE, Customer and EDS hereby agree as follows:
ARTICLE I - DEFINITIONS
1.1 DEFINITIONS. In this Agreement:
(a) "Account Record" is an end-customer account (including, without
limitation, any open or closed DDA/checking account, savings
account, certificate of deposit account, or loan account) that
is maintained on the EDS System during the applicable month.
(b) "Additional Services" are the Services described in
Section 3.1(d).
(c) "Basic Services" are the Services listed in Section I of Schedule A.
(d) "Business Day" is each weekday, Monday through Friday, which is
not a holiday of Customer.
(e) "Conversion Services" are the Services described in Section
3.1(c).
(f) "CPI" is the Consumer Price Index for All Urban Consumers, U.S.
City Average, for All Items (1982-1984=100) as published by the
Bureau of Labor Statistics of the U.S. Department of Labor. If
the Bureau of Labor Statistics stops publishing the CPI, the
parties will substitute another comparable measure published by a
mutually agreeable source. However, if such change is merely to
redefine the base period for the CPI from 1982-1984 to some other
period, the parties will continue to use the CPI but will, if
necessary, convert the two CPI's being compared to the same basis
by multiplying one of them by the appropriate conversion factor.
(g) "Customer Systems" are the Systems listed in Schedule D to be
provided by Customer for use in conjunction with EDS Systems.
(h) "Data Center" is the space at one or more locations where EDS
performs Services, excluding Customer locations.
(i) "EDS Systems" are all Systems, except for Systems provided by
Customer, used by EDS to provide Services, including without
limitation any improvements, modifications, or enhancements made by
EDS to any System and provided to Customer under this Agreement. The
term "EDS Systems" includes, without limitation, the ITI Premier
systems described in Schedule A.
(j) "Effective Date" is the date that this Agreement is executed by
EDS pursuant to Section 9.11.
(k) "Equipment" is all telecommunications lines, modems, and other
equipment, including without limitation terminals, control units,
ports, logical units, and all related data transmission service
required by EDS for Customer to access the EDS Systems, transmit
data to EDS, and receive reports and other output from EDS.
(l) "Initial Term" is defined in Section 2.1.
(m) "ITI" is Information Technology, Inc.
(n) "Operational Date" is the later of (i) the Effective Date, or
(ii) the first day on which any Conversion Services are
completed and Customer has the capability to input transactions
or data for processing by EDS. If the Operational Date occurs
after the Effective Date, EDS will notify Customer of the
Operational Date by delivery of a notice to Customer in the form
attached as Attachment 1 to Schedule A.
(o) "Optional Services" are the Services listed in Schedule B.
<PAGE>
(p) "PC Software" means the PC-based software applications to be
utilized by Customer in connection with the Services, as such
software applications are described in Section I(a) of Schedule
A.
(q) "Renewal Term" is defined in Section 2.1.
(r) "Service" or "Services" are all of the services to be provided by
EDS under this Agreement, which include the Basic Services,
Optional Services, Conversion Services and Additional Services.
(s) "System" or "Systems" are (i) computer programs, including
without limitation software, firmware, application programs,
operating systems, files and utilities; (ii) supporting
documentation for such computer programs, including without
limitation input and output formats, program listings, narrative
descriptions, operating instructions and procedures, user and
training documentation, special forms, and source code; and (iii)
the tangible media upon which such programs are recorded, including
without limitation chips, tapes, disks and diskettes.
Other terms are defined elsewhere in this Agreement.
ARTICLE II - TERM
2.1 TERM. This Agreement will begin on the Effective Date and, unless
terminated earlier under Section 7.3, 7.4, 7.5, 7.6, or 9.5, will continue
for a period of five years from the Operational Date (the "Initial Term").
Thereafter this Agreement will automatically renew for successive terms of
two years each (the "Renewal Terms") unless either party gives the other
party written notice at least six months prior to the expiration date of
the Initial Term or the Renewal Term then in effect that the Agreement will
not be renewed beyond such term.
ARTICLE III - EDS RESPONSIBILITIES
3.1 SERVICES PROVIDED. EDS or its subcontractors will provide Customer with the
following Services:
(a) BASIC SERVICES. Customer's requirements for Basic Services.
(b) OPTIONAL SERVICES. The Optional Services that Customer requests and
EDS agrees to provide.
(c) CONVERSION SERVICES. On a mutually agreeable schedule EDS will
provide those services and instructions ("Conversion Services")
reasonably required for Customer to convert to and use the EDS
Systems as described in Section II of Schedule A. Customer will
cooperate in the conversion effort and timely provide whatever
information, data, clerical and office support, management
decisions, approvals, and sign-offs that EDS reasonably requires.
According to a plan to be developed by Customer and EDS, EDS will
train a mutually designated group of Customer's personnel in the
proper use of the EDS Systems for the charges set forth in
Section III(b), Section III(c), Section III(d) and Section III(e)
of Schedule C. Additional training in the proper use of the EDS
systems will be provided as an Additional Service. Customer will
cooperate with EDS in scheduling training in conjunction with
Customer's conversion to the EDS Systems. In connection with the
Conversion Services, the parties will also comply with their
respective obligations, as described in Schedule E.
(d) ADDITIONAL SERVICES. If Customer requests EDS to perform any Service
which is not a Basic Service, an Optional Service or a Conversion
Service, then EDS may provide such service as an "Additional Service".
3.2 GENERAL TERMS RELATING TO SERVICES. EDS will:
(a) Beginning on the Operational Date, operate the EDS Systems at the
Data Center, and accept data and other input from Customer. EDS
will not be responsible for the loss of any input or output
during transportation to or from the Data Center.
(b) Provide all Equipment at Customer's expense, including related
shipping, installation, and maintenance charges, and advise
Customer on the compatibility of its Equipment with the EDS
Systems. Customer may elect, with EDS' approval, which will not
be unreasonably withheld, to provide such Equipment at Customer's
expense, subject to charges for Additional Services required for
EDS Systems access or configuration.
(c) Provide for Customer's use one copy of EDS' standard user
documentation and one copy of any revisions describing the
preparation of input for, and use of, output from the EDS
Systems. Such documentation will address the reports
2
<PAGE>
provided under this Agreement. Upon Customer's request, EDS will
provide additional copies of such documentation at EDS' then standard
charges.
(d) Correct any errors in customer files that result in errors in
reports or other output, including without limitation microfiche
or electronic transmissions, where such errors (i) are due
solely to either malfunctions of EDS' equipment or the EDS
Systems or errors of EDS' operators, programmers or other
personnel, and (ii) are called to EDS' attention within the time
frames specified in Section 4.3, EDS will, to the extent
reasonably practicable, correct any other errors as an Additional
Service.
(e) Establish, modify, or substitute from time to time any Equipment,
processing priorities, programs, or procedures used in the
operation of the EDS Systems or the provision of the Services
that EDS reasonably deems necessary, and notify Customer of any
such changes that will affect Customer's operations.
(f) Install and provide, at EDS' expense, all standard or regular
updates and releases received from ITI with respect to EDS Systems.
(g) Perform the Services in accordance with the service level
standards (the "Performance Standards") described in Schedule F.
3.3 AUDITS. EDS will provide auditors and inspectors that Customer designates
in writing with reasonable access to the Data Center for the limited
purpose of performing audits or inspections of Customer's business. EDS
will provide to such auditors and inspectors reasonable assistance, and
Customer will compensate EDS for any Additional Services provided in
connection with the audit or inspection. EDS will not be required to
provide access to data of other EDS customers.
3.4 REGULATORY COMPLIANCE. EDS will endeavor to maintain the EDS Systems so
that they will not be disapproved by any federal or state regulatory
authority with jurisdiction over Customer's business. If Customer believes
that any modifications to the EDS Systems are required under any laws,
rules, or regulations. Customer will promptly so inform EDS. EDS will
perform any modifications to the EDS Systems or recommend changes to
operating procedures of Customer that EDS determines are necessary or
desirable: provided, that if any such changes or modifications result in a
significant increase in EDS' cost of providing Services, EDS will be
entitled to increase the charges under this Agreement by an amount that
reflects a pro rata allocation of EDS' increased cost among the applicable
EDS customers. New or enhanced EDS System features, functions, reports, or
other Services that may result from such modifications or recommendations
may be provided as an Additional Service. Notwithstanding the foregoing,
Customer acknowledges that the EDS Systems may, from time to time, consist
in part of System(s) licensed by EDS from third-party vendor(s) and,
therefore, EDS shall have no duty or responsibility to modify any such
third-party System under this Section 3.4 except to the extent that the
vendor thereof has such a duty or responsibility to modify such System
pursuant to the applicable license agreement between EDS and such vendor.
3.5 FINANCIAL STATEMENTS AND EDP AUDIT. Upon request, EDS will provide at no
charge one copy of EDS' most recent audited financial statements to
Customer. Upon request, EDS will also provide at no charge to Customer one
copy of EDS' most recent independent Data Center EDP audit.
3.6 PC SOFTWARE. EDS will either (i) license to Customer or (ii) arrange with
the appropriate third party vendor for a direct license, or a sublicense
through EDS, to Customer of the PC Software. Customer will execute any
such license or sublicense that may be required by such vendor and will be
responsible for compliance with all terms and conditions thereof. Such
license or sublicense will provide for Customer to have the use of the PC
Software at all times during the term of this Agreement.
ARTICLE IV - CUSTOMER RESPONSIBILITIES
4.1 MAINTENANCE OF EQUIPMENT. Customer will maintain all Equipment owned or
leased by Customer in good working order in accordance with manufacturer's
specifications.
4.2 PROVISION OF FORMS. Unless otherwise agreed in writing, Customer will
provide or pay for all forms required by Customer. These forms will
conform to EDS' reasonable specifications. Customer will also provide all
forms produced or printed at Customer's premises and required for the
performance of Services, or will pay mutually agreed charges to EDS for
such forms if provided by EDS at Customer's request.
4.3 CORRECTION OF REPORTS AND OUTPUT. Customer will balance reports to verify
master file information and will inspect and review all reports and other
output (whether printed, microfiched or electronically
3
<PAGE>
transmitted) created from data provided by Customer to EDS. Customer will
reject all incorrect reports or output within two Business Days after
receipt of daily reports or output, within five Business Days after receipt
of annual. quarterly or monthly reports or output. and within three
Business Days after receipt of all other reports or output.
4.4 PROVISION OF DATA. Customer will be responsible for the quality and
accuracy of all data and other input provided to EDS. EDS may, at its
option, return to Customer for correction before processing any data
submitted by Customer which is incorrect, illegible or not in proper form.
If Customer does not provide its data to EDS in accordance with EDS'
specified format and schedule. EDS will use reasonable efforts to
reschedule and process the data as promptly as possible. Related expenses
incurred by EDS will be charged to Customer.
4.5 USE OF SYSTEM, PROCEDURES, ETC. Customer will comply with all operating
instructions for the EDS Systems which are issued by EDS ham mine to min,
Except as otherwise provided in this Agreement, Customer will be
responsible for the supervision, management and control of its use of the
EDS Systems, including without limitation (i) implementing sufficient
procedures to satisfy its requirements for the security and accuracy of the
data and other input Customer provides. (ii) implementing reasonable
procedures to verify reports and other output from EDS within the time
frames specified in Section 4.3, and (iii) specifying the methods of
accrual calculation to be used by EDS in providing the Services from the
options available in the EDS Systems.
4.6 CUSTOMER SYSTEMS. Customer will provide, at Customer's expense. the
Customer Systems. Customer will be responsible for any license or
maintenance fees related to providing the Customer Systems for use by EDS
in connection with the Services. Customer will. at Customer's expense.
ensure that the Customer Systems are at V times compatible with the EDS
Systems and EDS will have no liability hereunder for any delay or failure
to perform Services which arises as a result of the failure of Customer
to maintain any Customer System so that it is compatible with the EDS
Systems.
4.7 PC SOFTWARE.
(a) Notwithstanding Section 3.2(b). Customer will. at Customers
expense. provide and be responsible for all equipment required
for Customer to use the PC Software ("PC Software Equipment").
(b) Without EDS' prior written consent. Customer will not (i) install
any System other than the PC Software on applicable PC Software
Equipment:(ii) sell, assign, lease, transfer, or disclose to any
third party the PC Software, (iii) use the PC Software for the
commercial benefit of any third party; (iv) copy or reproduce the
PC Software; or (v) reverse assemble, reverse compile, or
otherwise recreate the PC Software. Customer may transfer its use
of the PC Software to a backup or replacement system to the PC
Software Equipment on a temporary or permanent basis provided
Customer gives prior written notice to EDS and discontinues use
of the PC Software on the applicable PC Software Equipment.
4.8 OTHER RESPONSIBILITIES. Customer will also comply with its obligations as
set forth in Schedule E.
ARTICLE V - PAYMENTS TO EDS
5.1 SERVICE CHARGES. Customer will pay EDS for the Services as follows:
(a) For Basic Services, the monthly charges listed in Section I of
Schedule C.
(b) For Conversion Services, the applicable conversion charges listed
in Section HI of Schedule C.
(c) For Optional Services, the monthly charges listed in Section II
of Schedule C.
(d) For Additional Services, EDS' then standard charges for such
Services. or, if EDS then has no standard charges for such
Services. upon whatever other basis that the parties agree.
5.2 ADDITIONAL CHARGES. Customer will also pay EDS the following, if
applicable:
(a) All costs incurred by EDS (i) in mailing reports or other output
to Customer. its customers or third parties. and (ii) in
transporting, shipping, or delivering reports. output. or input
between the. Data Center and Customer's locations.
(b) All actual out-of-pocket costs and expenses, including, without
limitation. travel and travel related expenses, which are
incurred by EDS in
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providing Services when incurred at Customer's request.
(c) All taxes, however designated or levied. based upon any charges
under this Agreement. or upon this Agreement or the Systems,
Services, or materials provided hereunder, or their use,
including without limitation state and local privilege or excise
taxes based on gross revenue, sales and use taxes, and any taxes
or amounts in lieu thereof paid or payable by EDS in respect of
the foregoing, exclusive, however, of franchise taxes and taxes
based on the net income of EDS.
5.3 TIME OF PAYMENT.
(a) All charges under this Agreement will be due and payable within
ten days of invoice date. Any charges not paid within thirty days
of invoice date will bear interest until paid at a rate equal to
the lesser of 0% per month or the maximum interest rate allowed
by applicable law.
(b) If Customer reasonably disputes in good faith any invoiced
charge, then, no later than ninety days after the date of such
invoice, Customer will give EDS written notice specifying the
reasons for such dispute. Charges not disputed as set forth in
this Section 5.3(b) will be deemed acceptable by Customer.
5.4 COST OF LIVING ADJUSTMENT. No more than once in any twelve month period.
EDS may, at its option and by giving Customer written notice. increase the
charges for Services by a percentage not to exceed the percentage by which
the CPI as of that time is higher than the CPI as of (i) for the first
adjustment, the earlier of the Effective Date or the date of the last
adjustment previously made pursuant to any immediately prior agreement. if
any. under which EDS provided the same or similar Services to Customer. and
(ii) thereafter. the previous time that EDS adjusted its charges to
Customer pursuant to this Section. These increased charges will remain in
effect until EDS adjusts them again pursuant to this Section.
ARTICLE VI - SYSTEMS,
DATA, AND CONFIDENTIALITY
6.1 EDS SYSTEMS. All EDS Systems are and will remain the exclusive property of
EDS or licensees of such EDS Systems. as applicable, and. except as
expressly provided in this Agreement, Customer shall have no ownership
interest or other rights in any EDS System. Customer acknowledges that the
EDS Systems include EDS proprietary information and agrees to keep the EDS
Systems confidential at all times. Upon the expiration or termination of
this Agreement, Customer will return all copies of all items relating to
the EDS Systems which are in the possession of Customer and certify to EDS
in writing that Customer has retained no material relating to the EDS
Systems.
6.2 CUSTOMER'S INFORMATION. Information relating to Customer or its customers
contained in Customer's data files is the exclusive property of Customer
and EDS will only be the custodian of that information. EDS agrees to hold
in confidence all proprietary information of Customer and its customers
provided to EDS in accordance with Section 6.3. However, upon the request
of any appropriate federal or state regulatory authority with jurisdiction
over Customer's business and after EDS has, when reasonably possible,
notified Customer of such request, EDS will allow such authority access to
all records and other information of Customer and its customers in the
possession of EDS and provide as an Additional Service any related
assistance that is required Promptly after the termination or expiration of
this Agreement and the payment to EDS of all sums due and owing, including
without limitation any amounts due under Sections 7.7 or 7.8. EDS will, at
Customer's request arid expense. return to Customer all of Customer's
information. data. and files in EDS' then standard machine-readable format
and media.
6.3 CONFIDENTIALITY. Except as otherwise provided in this Agreement. EDS and
Customer each agree that all information communicated to one by the other
or the other's affiliates, whether before or after the Effective ate.
will be received in strict confidence, will be used only for purposes of
this Agreement. and except for the requirements of Section 6.2 will not be
disclosed by the recipient party. its agents. subcontractors. or
employees without the prior written consent of the other party. Each party
agrees to take all reasonable precautions to prevent the disclosure to
outside parties of such information, including, without limitation, the
terms of this Agreement, except as required by legal, accounting, or
regulatory requirements beyond the reasonable control of the recipient par,
If Customer is required to disclose any proprietary information of EDS in
accordance with any such legal, accounting, or regulatory requirements,
then Customer will promptly notify EDS of such requirement and will
cooperate with EDS (at EDS' expense) in EDS' efforts, if any, to avoid or
limit such disclosure including, without limitation, through obtaining an
injunction or an appropriate redaction of the proprietary information in
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question. The provisions of this Section will survive the expiration or
termination of this Agreement for any reason.
6.4 SAFEGUARDING DATA INTEGRITY. EDS will maintain internal computer data
integrity safeguards (such as access codes and passwords) to protect
against the accidental or unauthorized deletion or alteration of Customer's
data in the possession of EDS. EDS will provide additional internal
computer data integrity safeguards that Customer reasonably requests as an
Additional Service. EDS will also employ and maintain controlled access
systems in the Data Center.
6.5 CONTINGENCY PLANNING. The parties' hereby agree that their respective
responsibilities under the Agreement with respect to contingency planning
will be as follows:
(a) EDS will develop, maintain and, as necessary in the event of a
disaster, execute a disaster recovery plan (the "EDS Plan") for the
Data Center and will provide to Customer and its auditors and
inspectors such access to the EDS Plan as Customer may reasonably
request from time to time. EDS will not be required to provide access
to information of other EDS customers.
(b) Customer will develop, maintain and, as necessary in the event of
a disaster, execute a business resumption plan (the "Customer
Plan") for all Customer locations and the telecommunications
links between the Customer locations and the Data Center and will
provide to EDS such access to the Customer Plan as EDS may
reasonably request from time to time.
(c) EDS will provide to Customer such information as may be
reasonably required for Customer to assure that the Customer Plan
is compatible with the EDS Plan.
(d) Each party will be responsible for the training of its own
personnel as required in connection with all applicable
contingency planning activities.
(e) Each party's contingency planning activities will comply, as
appropriate, with such of the following regulatory policies as
may be applicable to Customer's business, as the same may be
amended or replaced from time to time: (i) Federal Deposit
Insurance Corporation Bank Letter BL-22-89 dated July 14, 1989;
(ii) Federal Reserve System Supervision and Regulation Number
SR-89-16 dated August 1, 1989; and (iii) Office of the
Comptroller of the Currency Banking Circular Number BC177 dated
July 12, 1989. If compliance with any amendments or replacements
of the policies listed above would significantly increase EDS'
cost of providing Services, EDS will be entitled to increase the
charges under Agreement by an amount that reflects a pro rata
allocation of EDS' increased cost among the applicable EDS
customers.
ARTICLE VII - TERMINATION AND RELATED MATTERS
7.1 PERFORMANCE REVIEW. A designated representative of EDS and a designated
representative of Customer will meet as often as reasonably requested by
either party to review the performance of EDS or Customer under this
Agreement. Written minutes of such meetings may be kept. In the event of
any dispute, controversy, or claim between the parties arising from or
relating to this Agreement (a "Dispute"), then, upon the written request of
either party, each of the parties shall appoint a designated officer to
meet and negotiate in good faith to resolve such Dispute. Formal
proceedings for the arbitration of such Dispute in accordance with Section
7.2 may not be commenced until the earlier of (a) the expiration of thirty
days after the initial request for such negotiations, or (b) either of the
designated officers concluding in good faith and notifying the other
designated officer that amicable resolution through continued negotiation
of the matter in issue does not appear likely.
7.2 ARBITRATION. EDS and Customer stipulate and agree that if they are unable
to resolve any Dispute as contemplated by Section 7.1, then such Dispute
will be resolved by final and binding arbitration by a panel of three
arbitrators (the "Arbitration Panel") in accordance with and subject to the
Commercial Arbitration Rules of the American Arbitration Association
("AAA") then in effect. Following notice of a party's election to require
arbitration, each party will within thirty days select one arbitrator, and
those two arbitrators will within thirty days thereafter select a third
arbitrator. If the two arbitrators are unable to agree on a third
arbitrator within thirty days, the AAA will within thirty days thereafter
select such third arbitrator. Discovery as permitted by the Federal Rules
of Civil Procedure then in effect will be allowed in connection with
arbitration to the extent consistent with the purpose of the arbitration
and as allowed by the Arbitration Panel. Judgment upon the award rendered
in any arbitration may be entered in any court of competent jurisdiction,
or application may be made to such court for a judicial
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acceptance of the award and an enforcement, as the law of the state having
jurisdiction may require or allow. Unless (a) EDS has commenced a
proceeding or has presented a claim pursuant to this Section 7.2 for
nonpayment of amounts due under this Agreement by Customer, and Customer
has not promptly paid all amounts in dispute into the escrow account
referred to below, or (b) this Agreement has been terminated in accordance
with this Article VII, EDS will continue to provide the Services during any
arbitration proceedings commenced pursuant to this Section 7.2, and
Customer will continue to perform its obligations (including the making of
payments to EDS) in accordance with this Agreement. Up to the maximum
amount in dispute, any disputed payment will be paid pending rendition of
the award by the Arbitration Panel into an escrow account that is
structured by agreement of the parties, or if agreement cannot be reached,
as directed by the Arbitration Panel. Any such escrow account will provide
for the payment of interest on the amounts deposited therein, and the
Arbitration Panel will make the determination regarding distribution of
such deposited amounts plus interest.
7.3 TERMINATION DUE TO ACQUISITION. If fifty percent or more of the stock or
assets of Customer are acquired by another person or entity, whether by
merger, reorganization, sale, transfer, or other similar transaction, EDS
and Customer will negotiate in good faith the terms and conditions upon
which this Agreement may be modified to accommodate such transaction. If
the parties are unable to agree upon such modification, either party upon
written notice to the other may terminate this Agreement upon the
consummation of such acquisition or on a mutually agreeable date
thereafter.
7.4 TERMINATION FOR NON-PAYMENT. If Customer defaults in the payment of any
charges or other amounts due under this Agreement and fails to cure such
default within ten days after receiving written notice specifying such
default then EDS may, by giving Customer at least thirty days prior
written notice thereof, terminate this Agreement as of a date specified in
such notice.
7.5 TERMINATION FOR CAUSE. If either party materially defaults in its
performance under this Agreement except for non-payment of amounts due to
EDS, and fails to either substantially cure such default within ninety days
after receiving written notice specifying the default or, for those
defaults which cannot reasonably be cured within ninety days, promptly
commence curing such default and thereafter proceed with all due diligence
to substantially cure the default then the party not in default may, by
giving the defaulting party at least thirty days prior written notice
thereof terminate this Agreement as of a date specified in such notice.
7.6 TERMINATION FOR INSOLVENCY. If either party becomes or is declared
insolvent or bankrupt, is the subject of any proceedings relating to its
liquidation or insolvency or for the appointment of a receiver,
conservator, or similar officer, or makes an assignment for the benefit of
all or substantially all of its creditors or enters into any agreement for
the composition, extension, or readjustment of all or substantially all of
its obligations, then the other party may, by giving prior written notice
thereof to the non-terminating party, terminate this Agreement as of a date
specified in such notice.
7.7 PAYMENT UPON TERMINATION. The parties acknowledge that upon termination
of this Agreement for any reason, including under Section 7.3, 7.4, 7.5, or
7.6 (but excluding by election by either party not to renew pursuant to
Section 2.1 or termination by Customer pursuant to Section 7.5 or 9.5), EDS
will incur damages resulting from such termination that will be difficult
or impossible to ascertain. Therefore, prior to such termination and in
addition to all other amounts then due and owing to EDS, Customer will pay
to EDS as reasonable liquidated damages an amount equal to the sum of
subsections (a) and (b):
(a) All costs reasonably incurred by EDS in connection with such
termination, including without limitation telecommunication line
disengagement expenses and costs of terminating leases on or
shipping or storing any Equipment provided to Customer by or
through EDS under this Agreement, plus a 25% management fee on
such costs, plus EDS' charges for any Additional Services
reasonably requested by Customer for deconversion assistance and
EDS' then standard charges for the resources utilized to prepare
any test or conversion tapes (together, the "Termination Costs").
EDS may, at its option, invoice Customer for the lesser of (i)
EDS' good faith estimate of the Termination Costs, or (ii) the
aggregate of the charges payable to EDS pursuant to Article V for
the two calendar months preceding the month in which notice of
termination is given. If the actual Termination Costs are greater
or less than the amount of EDS' invoice that is paid by Customer
under the immediately preceding sentence, then Customer will pay
EDS, or EDS will refund to Customer, as the case may be, the
difference between the actual Termination Costs and the amount
paid.
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(b) Twenty-five percent of the total compensation which would have
been paid or reimbursed to EDS under this Agreement during the
remainder of its term. The amount of total compensation will be
computed by multiplying the total number of months remaining in
the Initial Term or the Renewal Term then in effect from the
effective date of the termination by the average monthly charge
to Customer for Services under this Agreement during the twelve
calendar months immediately preceding the calendar month in which
notice of termination was given, and multiplying that number by
25%. This is expressed mathematically as follows:
(Number of months remaining in term) x (average monthly charge
for Services during the twelve months preceding notice of
termination) X 0.25.
If this Agreement has been in effect less than twelve calendar
months prior to the giving of the notice of termination, then the
parties will compute the amount due under this subsection (b)
using the average monthly charge for Services made during such
lesser number of calendar months. If termination of this
Agreement occurs prior to the Operational Date, then the parties
will compute the amount due under this subsection (b) assuming
that the Operational Date had occurred when scheduled by EDS and
using the average monthly charges reasonably estimated to be paid
by Customer.
All amounts payable under this Section 7.7 will be invoiced and
paid prior to the effective date of such termination and prior to
the release of any test tapes or other data of Customer.
7.8 PAYMENT UPON NON-RENEWAL. If Customer gives or receives notice not to renew
this Agreement pursuant to Section 2.1, or Customer terminates this
Agreement under Section 9.5, Customer will pay to EDS an amount equal to
all amounts then due and payable to EDS, plus, (a) EDS' charges for any
Additional Services reasonably requested by Customer for de-conversion
assistance, (b) EDS' then standard charges for the resources utilized to
prepare any test or conversion tapes, and (c) all other costs reasonably
incurred by EDS in connection with such election not to renew or such
termination that are described in Section 7.7(a) and that relate to
obligations that Customer approved, which extend beyond the then current
term of this Agreement or earlier termination date under Section 9.5. All
amounts payable under this Section 7.8 will be invoiced and paid prior to
the expiration date and prior to the release of any test tapes or other
data of Customer.
ARTICLE VIII - LIABILITY AND INDEMNITY
8.1 LIMITATION OF LIABILITY. Section 3.2(d) sets forth Customer's exclusive
remedies for errors in reports or other output provided by EDS under
this Agreement. If EDS becomes liable to the Customer under this
Agreement for any other reason, then, except for damages arising from
EDS' willful misconduct, the damages recoverable against EDS for all
events, acts, delays, or omissions will not exceed in the aggregate the
compensation payable to EDS pursuant to Section 5.1 of this Agreement
for the lesser of the months that have elapsed since the Operational
Date or the three (3) months ending with the latest month in which
occurred the events, acts, delays or omissions for which damages are
claimed. In no event will EDS be liable for any indirect, consequential
or punitive damages of any party, including third parties, or damages
which could have been avoided had the output provided by EDS been
verified before use. Customer may not assert any cause of action against
EDS of which the Customer knew or should have known more than two years
prior to such assertion. In connection with the conduct of any
litigation with third parties relating to any liability of EDS to
Customer or to such third parties, EDS will have all rights which are
appropriate to its potential responsibilities or liabilities. EDS will
have the right to participate in all such litigation and to settle or
compromise its liability to third parties.
8.2 WARRANTY. EXCEPT AS EXPRESSLY PROVIDED HEREIN, EDS DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, IN FACT OR BY OPERATION OF LAW OR
OTHERWISE, CONTAINED IN OR DERIVED FROM THIS AGREEMENT, ANY OF THE
SCHEDULES ATTACHED HERETO, ANY OTHER DOCUMENTS REFERENCED HEREIN, OR IN ANY
OTHER MATERIALS, PRESENTATIONS, OR OTHER DOCUMENTS OR COMMUNICATIONS
WHETHER ORAL OR WRITTEN, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
8.3 FORCE MAJEURE. Each party will be excused from performance under this
Agreement, except for any payment obligations for any period and to the
extent
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that it is prevented from performing, in whole or in part, as a result of
delays caused by the other party or any act of God, war, civil
disturbance, court order, labor dispute, third party nonperformance, or
other cause beyond its reasonable control, including failures,
fluctuations or non-availability of electrical power, heat, light, air
conditioning, or telecommunications equipment. Such nonperformance will
not be a default or a ground for termination as long as reasonable means
are taken to expeditiously remedy the problem causing such nonperformance.
8.4 CROSS INDEMNITY. EDS and Customer each will indemnify, defend, and hold
harmless the other from any and all claims, actions, damages, liabilities,
costs, and expenses, including without limitation reasonable attorney's
fees and expenses, arising out of (a) the death or bodily injury of any
agent, employee, customer or business invitee of the indemnitor, and (b)
the damage, loss, or destruction of any property of the indemnitor.
8.5 RELIANCE ON INSTRUCTIONS. EDS is entitled to rely upon and act in
accordance with any instructions, guidelines or information provided to EDS
by Customer, which are given by persons having actual or apparent authority
to provide such instructions, guidelines or information, and will incur no
liability in doing so. Customer will indemnify, defend, and hold harmless
EDS from any and all claims, actions, damages, liabilities, costs, and
expenses, including without limitation reasonable attorneys' fees and
expenses, arising out of or resulting from EDS acting in accordance with
this Agreement.
ARTICLE IX - MISCELLANEOUS
9.1 BINDING NATURE AND ASSIGNMENT. This Agreement will be binding on the
parties and their respective successors and assigns. Neither party may
assign this Agreement unless it obtains the prior written consent of the
other party, which will not be unreasonably withheld. The following
transactions relating to either party will not require approval of the
other party under this Section: any merger (including without limitation a
re-incorporation merger), consolidation, reorganization, stock exchange,
sale of stock or substantially all of the assets, or other similar or
related transaction in which such party is the surviving entity or, if such
party is not the surviving entity, the surviving entity continues to
conduct the business conducted by such party prior to consummation of the
transaction.
9.2 HIRING OF EMPLOYEES. During the term of this Agreement and for a period
of twelve months thereafter, neither party will, without the prior
written consent of the other, offer employment to or employ any person
employed then or within the preceding twelve months by the other party,
if the person was involved in providing or receiving Services.
9.3 NOTICES. Any notice under this Agreement will be deemed to be given when
delivered by a nationally recognized delivery service or mailed by
registered United States mail, return receipt requested, and addressed to
the recipient party at its address set forth in the first paragraph of this
Agreement and to the attention of its President, in the case of Customer,
or to the attention of Division President, Financial Services Division, in
the case of EDS. Either party may from time to time change its address for
notification purposes by giving the other prior written notice of the new
address and the date upon which it will become effective.
9.4 RELATIONSHIP OF PARTIES. EDS, in providing Services, is acting as an
independent contractor and does not undertake by this Agreement or
otherwise to perform any regulatory or contractual obligation of the
Customer. EDS has the sole right and obligation to supervise, manage,
contract, direct, procure, perform, or cause to be performed, all work
to be performed by EDS under this Agreement.
9.5 MODIFICATION. EDS may from time to time modify any of the provisions of
this Agreement to be effective at any time on or after the expiration of
the Initial Term by giving Customer at least six months prior written
notice describing the modification and the date upon which it will be
effective (the "Modification Date"). If EDS gives Customer notice of a
modification pursuant to this Section, Customer may, by giving EDS
written notice at least three months prior to the Modification Date,
terminate this Agreement as of such Modification Date or at a specified
later date. Unless Customer provides such notice, the modification will
be effective for any period after the Modification Date.
9.6 WAIVER. A waiver by either of the parties of any of the covenants,
conditions, or agreements to be performed by the other or any breach
thereof will not be construed to be a waiver of any succeeding breach or of
any other covenant, condition, or agreement contained in this Agreement.
9.7 MEDIA RELEASES. All media releases, public announcements, and public
disclosures by Customer or Customer's employees or agents relating to this
Agreement or the subject matter of this Agreement, including without
limitation promotional or marketing material, but not including any
announcement intended
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solely for internal distribution by Customer or any disclosure required by
legal, accounting, or regulatory requirements beyond the reasonable control
of Customer, will be coordinated with and approved by EDS prior to release.
9.8 ENTIRE AGREEMENT. This Agreement and all attached Schedules constitute the
entire agreement between EDS and Customer with respect to the subject
matter of this Agreement. There are no understandings or agreements
relative to this Agreement which are not fully expressed herein and no
change, waiver, or discharge of this Agreement will be valid unless in
writing and executed by the party against whom such change, waiver, or
discharge is sought to be enforced. This Agreement may be amended only by
an amendment in writing, signed by the parties.
9.9 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of California.
9.10 TIME. For purposes of this Agreement, all references to time shall mean
Pacific Time.
9.11 EXECUTION OF AGREEMENT. Three original copies of this Agreement will be
executed and submitted to EDS by Customer. This Agreement will become
effective when EDS executes this Agreement. EDS will return one of the
executed copies to Customer. By executing this Agreement, Customer
represents and warrants that (a) this Agreement has been duly authorized;
(b) such execution does not, and will not, cause a breach by Customer of
any other contract, agreement, or understanding to which Customer is a
party; and (c) this Agreement constitutes a valid, fully enforceable, and
legally binding obligation of Customer. Customer will maintain this
Agreement as an official record of Customer continuously from the time of
its execution.
IN WITNESS WHEREOF, EDS and Customer each have caused this Agreement to be
signed and delivered by its duly authorized representative.
AMERICAN COMMERCIAL BANK
By: /s/ James E. Beeninga
--------------------------------------
Printed
Name: James E. Beeninga
------------------------------------
Title: President
-----------------------------------
Date: Oct. 29, 1996
------------------------------------
ELECTRONIC DATA SYSTEMS CORPORATION
By: /s/ Chris M. Carrington
--------------------------------------
Printed
Name: Chris M. Carrington
------------------------------------
Title: Managing Director - Western Region
-----------------------------------
Date: Oct. 31, 1996
------------------------------------
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SCHEDULE A
BASIC SERVICES
I. DATA PROCESSING SERVICES.
Effective on the Operational Date (as determined in accordance with the
Agreement including, if applicable, by delivery of written notice of the
Operational Date in the form attached as Attachment I to this Schedule A),
EDS shall provide the following Basic Services for Customer in a service
bureau environment:
(a) BASE SYSTEM
Effective on the Operational Date, the following host-based
application processing modules (the "Base System") will be on-line and
available for Customer access from Customer's terminals as set forth
in this Section I(a) of this Schedule A.
<TABLE>
<CAPTION>
Product Product
Product Name Vendor Code Number
------------ ------ ---- ------
<S> <C> <C> <C>
Central Information File ITI CIS 101-000
Demand Deposit Accounting System ITI DDA 102-000
Savings Accounting System ITI SAV 103-000
Certificate of Deposit Accounting System ITI COD 104-000
Loan Accounting System ITI LAS 105-000
General Ledger Accounting System ITI FMS 151-000
Item Entry System ITI IES 106-000
Bulk Filing System ITI BFM 108-101
Express Exception Item System ITI EIM 102-103
Universal Proof Output Module ITI UPO 106-218
Universal Proof Input Module ITI UPI 106-011
ATM File Transfer Module ITI AFT 220-000
Data Communications File Transfer Module ITI DFT 221-000
Paperless Item Module ITI PIM 380-000
Check Reconciliation System ITI CRS 350-000
Premier Reference System ITI PRS 900-203
Premier II GUI Interface ITI
</TABLE>
ON-LINE HOST AVAILABILITY
On-line Systems will be available for use from 7:30 a.m. until 6:30
p.m. each Monday through Thursday that is a Business Day, from 7:30
a.m. until 7:00 p.m. each Friday that is a Business Day, and from
9:00 a.m. until 2:00 p.m. each Saturday that is a Business Day.
REPORTS AND REPORT DISTRIBUTION
Paper reports will be available for courier pick-up by 7:00 am. on
Business Days.
Electronic reports available via downloads to Customer on Business
Days.
Monthly, quarterly and annual reports available at 12:00 p.m. on
second Business Day following month-end, quarter-end or year-end.
No report delivery or downloads on Saturdays or Sundays.
CUSTOMER SERVICE TELEPHONE SUPPORT
Monday - Friday Business Days 7:30 a.m. - 5:30 p.m.
ACCOUNT EXECUTIVE SUPPORT
On-site visits once a month.
Upon bank request for scheduled meetings.
TELECOMMUNICATIONS SUPPORT
Monitor data communication lines between Customer and EDS.
A-1
<PAGE>
SCHEDULE A
BASIC SERVICE
DATA TRANSMISSIONS -- ACH, ATM AND ITEM PROCESSING
Receipt and origination.
REPORT CARDS
EDS report of measurement of service levels.
Quarterly - delivered mid-quarter
THIRD PARTY REVIEW
One copy per year
PC SOFTWARE
Product Name Vendor
------------ ------
PC-based portion of Output Management EDS
System (OMS)
(b) OTHER SERVICES
Magnetic Tapes and Transmissions (miscellaneous)
Smart Reports (50 reports included in Basic Services)
Application Downloads
Microfiche - Originals/Duplicates
Third Party Review (additional copies)
Daily Notice Printing
Report Printing
Statement Printing
Audit Confirmation Printing
1098/1099 Notice Printing
II. CONVERSION SERVICES
EDS will work with Customer to create a mutually agreeable schedule that
will meet the Operational Date. EDS will provide management oversight for
the conversion process. At Customer's request, EDS may also provide the
following assistance: specification training, specification assistance
including product set-up, chart of accounts creation, end-user training and
on-site conversion assistance for the charges listed in Section III of
Schedule C. Other conversion assistance may be provided as an Additional
Service. EDS will manage the ITI relationship that includes data mapping
performed by ITI on behalf of EDS and the coordination of the mock
conversion. EDS will provide an on-site post conversion support team for
the week following the conversion. A transition process that eliminates the
on-site resource will occur during the second and third week after the
conversion.
The Customer is responsible for, including but not limited to:
- Balancing all appropriate general ledger and control accounts.
- Performing maintenance on the general ledger.
- Set-up of new and maintenance of existing products.
- Design and writing of Smart Reports.
- Creation of new bank policies and procedures based on and around
the ITI system.
- Providing EDS with a list of 24 hour emergency contacts.
- Insuring that bank personnel are provided the time to be trained.
- Communicate changes to EDS that impact the Data Center.
- Responsible for the accuracy and balancing of all blocks entered
on-line.
A-2
<PAGE>
ATTACHMENT 1
TO
SCHEDULE A
NOTICE OF DATA PROCESSING OPERATIONAL DATE
__________, 199_
[Customer]
[Customer Address]
Re: Agreement for Information Technology Services dated ________, 199_
(the "Agreement") between ___________________ ("Customer") and
Electronic Data Systems Corporation ("EDS")
Gentlemen:
In accordance with the above-referenced Agreement, please be advised that
the Operational Date for purposes of the Agreement shall be __________, 199_.
Sincerely,
ELECTRONIC DATA SYSTEMS CORPORATION
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
A-3
<PAGE>
SCHEDULE B
OPTIONAL SERVICE
I. DESCRIPTION OF OPTIONAL SERVICES
The following host-based application processing modules or services
("Optional Services") will be available no sooner than ninety (90) days
after the Operational Date (except for those Optional Services below marked
by an asterisk (*) indicating availability on or after the Operational Date
and upon at least thirty (30) days prior written notice from Customer to
EDS requesting the Optional Service(s)) for on-line Customer access from
Customer terminals. Optional Services charges are listed in Section II of
Schedule C. It is the Customer's responsibility to review the ITI
documentation, utilize outside resources such as consultants, input module
specifications and train end-users for Optional Services. The Conversion
Services listed in Section III of Schedule C are not intended to include
these Optional Services.
<TABLE>
<CAPTION>
Product Product Product
Optional Services Vendor Code Number
----------------- ------ ------- ------
<S> <C> <C> <C>
* Asset Liability Management System ITI ALM 152-003
* Federal Call Reporting Module ITI FCR 391-003
* Automated Credit Reporting Module ITI CRM 105-101
* Currency Transaction System ITI CTS 320-000
Signature Management Module ITI SMM 107-116
Bill Payment Module ITI BPM 372-001
* On-line Teller Terminal Module ITI TTM 107-000
* TTM Interface - EZ Teller ITI TTMZ 107-136
Platform Transfer Module ITI PTM 101-100
PTM Batch Loan Interface - CFI LaserPro ITI PMCB 101-101
PTM Interactive Deposit Interface - CFI DepositPro ITI PMCD 101-105
Electronic Banking Base ITI EBB 370-000
EBB Interface to Telebanc Intervoice Level 2 ITI TBM2 370-101
EBB Interface to Execubanc II ITI N/A N/A
EBB Interface to PCbanc ITI PBM 370-200
* Premier Image Director Host Module ITI PDSH 110-001
* 10 User License
Prime Host Module ITI N/A N/A
</TABLE>
B-1
<PAGE>
SCHEDULE C
SERVICE CHARGES
I. BASIC SERVICES.
(a) DATA PROCESSING SERVICES
(i) INITIAL PAYMENT. Customer will pay EDS $35,000.00 upon
execution of this agreement.
(ii) BASE SYSTEMS. The monthly service fee for Basic Services
provided using the Systems listed in Section I(a) of Schedule
A ("Base Systems") is based on the number of Account Records,
open or closed, maintained on the System at the end of each
month. For Basic Services provided using Base Systems, Customer
will pay EDS $1.05 per Account Record. If the number of
Account Records processed by EDS hereunder, in any month, is
less than 10,000, then for the purposes of this provision, EDS
will be deemed to have processed 10,000 Account Records.
(iii) OTHER SERVICES. The fees for other Basic Services identified
in Schedule A are as follows:
<TABLE>
<CAPTION>
Description Service Fee
----------- -----------
<S> <C>
Magnetic Tapes/Transmissions $25.00 per tape/transmission
Smart Reports $15.00 per report (no charge for first 50 reports)
Application Downloads $25.00 per EDS initiated download
Microfiche - Original $1.70 per plate
Microfiche - Duplicates $0.40 per plate
Third Party Review $50.00 per copy (first copy free)
Daily Notice Printing $ No Charge
Report Printing $0.03 per page
Statement Printing $0.03 per page
Audit Confirmation Printing $0.15 per notice
1098/1099 Notice Printing $0.15 per notice
</TABLE>
(iv) RE-BILLS. If billed to EDS, the following items will be
re-billed to Customer:
<TABLE>
<CAPTION>
Description Service Fee
----------- -----------
<S> <C>
Postage Direct bill to Customer
Processing Supplies Direct bill to Customer
Courier Direct bill to Customer
Telecommunications - to EDS Direct bill to Customer
</TABLE>
(v) MAN-TIME. The following rates apply:
<TABLE>
<CAPTION>
Description Service Fee
----------- -----------
<S> <C>
Conversion/Training Specialists $125.00 per hour
System/Network Consultants $115.00 per hour
Project Manager $110.00 per hour
</TABLE>
II. OPTIONAL SERVICES. For Optional Services, Customer will pay the following
fees in addition to the charges listed in Section I of Schedule C:
<TABLE>
<CAPTION>
Description Fee
----------- ---
<S> <C> <C> <C>
Asset Liability Management System ALM 152-003 $ No Charge
Federal Call Reporting Module FCR 391-003 $ No Charge
Automated Credit Reporting Module CRM 105-101 $ No Charge
Currency Transaction System CTS 320-000 $ No Charge
Signature Management Module SMM 107-116 $ No Charge
Bill Payment Module BPM 372-001 $ No Charge
</TABLE>
C - I
<PAGE>
SCHEDULE C
SERVICE CHARGES
<TABLE>
<CAPTION>
Description Fee
----------- ---
<S> <C> <C> <C>
On-line Teller Terminal Module TTM 107-000 $ No Charge
TTM Interface - EZ Teller TTMZ 107-135 $ No Charge
Platform Transfer Module PTM 101-100 $ No Charge
PTM Batch Loan Interface - CFI LaserPro PMCB 101-101 $ No Charge
PTM Interactive Deposit Interface - PMCD 101-105 $ No Charge
CFI DepositPro
Electronic Banking Base EBB 370-000 $ No Charge
EBB Interface to Telebanc Intervoice TBM2 370-101 $ No Charge
Level 2 (service bureau option - unlimited calls)
EBB Interface to Execubanc II N/A N/A $ No Charge
EBB Interface to PCbanc PBM 370-200 $ No Charge
Premier Image Director Host Module - PDSH 110-001 $ No Charge
10 User License
Prime Host Module N/A N/A $ No Charge
</TABLE>
III. CONVERSION SERVICES. For Conversion Services, Customer will pay the
following fees:
(a) Conversion Programming (performed by ITI)
<TABLE>
<CAPTION>
Application Conversion Fee
----------- --------------
<S> <C> <C>
DDA $2,000.00, plus 0.25 per account
DDA Transaction History $2,000.00, plus 0.02 per transaction
Savings $2,000.00, plus 0.25 per account
Certificate of Deposit $2,000.00, plus 0.25 per account
IRAs $2,000.00, plus 0.25 per account
Installment Loans $3,000.00, plus 0.35 per account
Commercial Loans $3,000.00, plus 0.35 per account
Mortgage Loans $3,000.00, plus 0.35 per account
Closed Loans $3,000.00, plus 0.35 per account
General Ledger Automated Current $3,000.00. plus 0.35 per account
Balance and Balance History -
Transaction History Not Included
(b) Specification Training $125.00 per hour
Optional - $125.00 per hour if provided by EDS.
(c) Specification Assistance $125.00 per hour
Optional - $125.00 per hour if provided by EDS.
(d) End-user Training $125.00 per hour
Optional - $125.00 per hour if provided by EDS.
(e) On-site Conversion Assistance $125.00 per hour
Optional - $125.00 per hour if provided by EDS.
(f) Telecommunications-related Expenses
Telecommunications Hardware & Software Bank Expense
Telecommunications Line Installation & Testing Bank Expense
Data Communications Hardware & Installation Bank Expense
Data Communications Software & Installation Bank Expense
EDS Host Data Communications Testing $2,000.00 one-time
</TABLE>
C - 2
<PAGE>
SCHEDULE D
CUSTOMER SYSTEMS
"Customer Systems" are the Systems to be provided by Customer for use in
conjunction with EDS Systems. Customer Systems include, but are not limited to
the following:
<TABLE>
<CAPTION>
System Vendor
------ ------
<S> <C>
Data Communications Equipment Various
PC Equipment Various
Execubanc II Cash Management System ITI
Home Banking System To Be Determined
Premier Image Director Optical Disk Storage System ITI
Prime Ad Hoc Reporting System ITI
DepositPro CFI
LaserPro CFI
Teller Automation System To Be Determined
InfoConnect Intercom Attachmate
InfoConnect FileXpress Attachmate
ITI Connect ITI
Netware Novell
NT Microsoft
Windows Microsoft
Office Microsoft
</TABLE>
D - 1
<PAGE>
CUSTOMER RESPONSIBILITIES
I. CUSTOMER RESPONSIBILITIES
In connection with the Basic, Optional, Additional and Conversion Services
and in addition to Customer's other obligations under this agreement,
Customer will:
(a) After initial training provided in connection with the Conversion
Services, Customer will ensure that its personnel maintain a working
knowledge of the EDS System and that new Customer personnel are
properly trained.
(b) Provide to EDS and keep current, by mutually agreeable means, such
information concerning the DDA/Checking Accounts as EDS may reasonably
require.
(c) Ensure that all transmissions, magnetic tapes, documents and other
media which EDS may require to process hereunder are in a format
acceptable to EDS and contain, in machine readable form, the data and
information required by EDS.
(d) Cooperate with EDS in the performance of Services and provide to EDS
such data and information, management decisions, regulatory
interpretations and policy guidelines as EDS reasonably requires.
(e) Select, and be responsible for (financially and otherwise), the
courier service to be utilized in conjunction with the Basic Services
provided herein. The parties agree that such courier service may be
either an existing courier service shared by other EDS customers or,
if Customer in its sole discretion determines that it is not feasible
or desirable to utilize such existing courier service, such other
courier service as is designated by Customer.
(f) EDS will print reports at the Data Center for up to 120 days after the
Operational Date for the charges listed in Schedule C, which will give
Customer time to install an optical disk data storage system and/or
remote printing system at one of their locations. In the event that
Customer's optical disk data storage system and/or remote printing
system is not fully operational 120 days after the Operational Date,
EDS may, at its option, install the Output Management System (OMS)
remote print system at one of Customer's locations which will replace
printing reports at the Data Center. Any reports which still need to
be printed at the Data Center (i.e. general ledger statement of
condition and general ledger posted transactions reports, etc., which
will be mutually agreed upon by Customer and EDS in advance) will, for
the charge listed in Schedule C, be available for pick-up at 7:00 a.m.
on the same Business Day as the other reports are delivered
electronically. The charge for installation of OMS is $1,500 and will
be paid by Customer upon completion of the installation process.
E - 1
<PAGE>
SERVICE LEVEL STANDARDS
Beginning on the first day of the calendar month immediately following the
expiration of ninety (90) days after the Operational Date, EDS shall perform
Services in such a manner so as to meet or exceed the performance standards
described in this Schedule F (the "Performance Standards"). Compliance with the
Performance Standards will be determined on a monthly basis. EDS will keep
accurate records relating to its compliance with the Performance Standards and
provide to Customer on a quarterly basis a report or reports relating to such
compliance. For purposes hereof, a failure by EDS to meet a Performance Standard
during a calendar month, each evidenced by the report or reports provided by
EDS, shall be deemed to be an "Occurrence".
A.) PERFORMANCE STANDARDS
1.) 98% On-line Systems Availability
PERFORMANCE STANDARD: On-line mainframe Systems (programs BDS001, EIM001
and BDS010 only) are to be available at least 98% of the time during the
hours specified in Schedule A.
MEASUREMENT: On-line mainframe Systems availability will be calculated as
[(the total number of Available Hours (defined below) minus the "down"
hours which occur during the same calendar month) divided by the total
Available Hours] to determine the percentage of on-line mainframe Systems
availability. "Available Hours" are the total number of hours that the
on-line mainframe Systems are required to be available in a calendar month
as specified in Schedule A. A failure by EDS to meet or exceed 98% on-line
mainframe Systems availability during a calendar month will create an
Occurrence. Down-time related to Customer's local or wide area network will
not be calculated into this measurement.
2.) Daily Optical Downloads
PERFORMANCE STANDARD: Optical downloads for daily standard ITI reports will
be initiated by 8:00 a.m. on Business Days. Optical downloads for daily
SMART reports will be initiated by 1:00 p.m. on Business Days, provided the
SMART report request was received by EDS before 3:00 p.m. on the Business
Day before the SMART report was to be run by EDS.
MEASUREMENT: Missing any standard or SMART report optical download
deadline more than three times in a calendar month will create an
Occurrence. Optical deadlines missed due to unavailability of Customer
Systems will be excluded from this measurement.
3.) Month-end, Quarter-end and Year-end Optical Downloads
PERFORMANCE STANDARD: Optical downloads for month-end, quarter-end and
year-end standard ITI reports will be initiated by 8:00 a.m. on the second
Business Day after the month-end, quarter-end or year-end date. Optical
downloads for month-end, quarter-end and year-end SMART ITI reports will be
initiated by 1:00 p.m. on the second Business Day after the month-end,
quarter-end or year-end date. Month-end, quarter-end or year-end SMART
report requests must be received by EDS before 3:00 p.m. on the Business
Day before the SMART report was to be run by EDS.
MEASUREMENT: Missing a month-end, quarter-end, or year-end standard ITI
report or SMART ITI report optical download deadline will create an
Occurrence. Optical deadlines missed due to unavailability or Customer
Systems will be excluded from this measurement.
4.) Statement Printing
PERFORMANCE STANDARD: Printed statements will be available for Customer
pick-up by 7:00 a.m. on the second Business Day after the statement cycle
cut-off date.
F - 1
<PAGE>
SCHEDULE F
SERVICE LEVEL STANDARDS
MEASUREMENT: Missing a non-month-end statement printing deadline more than
twice in a calendar month will create an Occurrence. Missing the month-end
statement printing deadline once in a calendar month will create an
Occurrence.
5.) Annual Audit Confirmation and Year-end Notice Printing
PERFORMANCE STANDARD: Annual audit confirmation notices will be printed
within two weeks of Customer request. Year-end (1099 and 1098) notices will
be printed within legally required time frames.
MEASUREMENT: Missing these deadlines once in a calendar year will create an
Occurrence. Year-end notice deadlines missed due to Customer requests or
situations related to Customer's decisions regarding year-end closing and
reporting will be excluded from this measurement.
6.) Relationship Manager Monthly On-site Visits
PERFORMANCE STANDARD: A relationship manager will be assigned to Customer
at all times. At Customer's request, the relationship manager will make
on-site visits to Customer's administrative office, such on-site visits not
to exceed one (1) per month. In the event that the relationship manager is
reassigned or for any other reason no longer available to act as
relationship manager, EDS must act promptly to provide an interim
relationship manager until such time as a replacement relationship manager
is assigned.
MEASUREMENT: Missing two (2) monthly visits in succession will constitute
an Occurrence.
B.) CERTAIN EXCEPTIONS
Notwithstanding anything contrary in this Agreement or the Schedules, EDS
will not be responsible for, and may exclude from the calculation of
compliance with the Performance Standards, any failure to meet the
Performance Standards if, during, and to the extent that such a failure is
related to or caused by (i) any matter constituting force majeure, as
provided in Section 8.3 of this Agreement, (ii) Customer's failure to
perform its obligations under this Agreement where such failure was the
proximate cause of the failure to meet the Performance Standards, (iii)
special production jobs, testing procedures or other services which are
given priority at the request of the Customer, (iv) any significant
increase in processing volumes or business resulting from the acquisition
or indirectly, of asset or stock of a financial institution by Customer,
whether by merger or otherwise, (in each case during a reasonable
transition period to be agreed upon by EDS and Customer in good faith), (v)
significant unforeseen increases in processing volumes or business or any
significant change in the nature or scope of Services provided under this
Agreement (in each case during a reasonable transition period to be agreed
upon by EDS and Customer in good faith), (vi) any significant change in the
manner in which Customer conducts its business (in each case during a
reasonable transition period to be agreed upon by EDS and Customer in good
faith).
C.) REMEDY FOR OCCURRENCES
In the event that three (3) Occurrences take place during any six (6) month
period with respect to the same Performance Standard, then for a period
of thirty (30) days after receipt by Customer of a report from EDS
reflecting the third Occurrence, Customer will have the right to terminate
this Agreement, through delivery of written notice to EDS; provided the
effective date of such termination will not be less than thirty (30) days
after receipt by EDS of such notice. Customer's right to terminate the
Agreement pursuant to this provision will constitute Customer's sole remedy
with respect to any Occurrences.
Notwithstanding the foregoing, in regards to quarter-end and year-end
optical downloads as specified in Section A (3) of this Schedule F, and in
regards to annual audit confirmation and year-end notice printing as
specified in Section A (5) of this Schedule F, in the event that three (3)
consecutive Occurrences take place with respect to the same Performance
Standard, then for a period of thirty (30) days after receipt by Customer
of a report from EDS reflecting the third consecutive Occurrence, Customer
will have the right to terminate
F-2
<PAGE>
SCHEDULE F
SERVICE LEVEL STANDARDS
this Agreement, through delivery of written notice to EDS; provided the
effective date of such termination will not be less than thirty (30) days
after receipt by EDS of such notice. Customer's right to terminate the
Agreement pursuant to this provision will constitute Customer's sole remedy
with respect to any Occurrences.
D.) TERMINATION FOR INABILITY TO PROVIDE BASIC SERVICES
In the event that EDS is unable to provide all or substantially all of the
Basic Service to Customer for five Business Days as a result of EDS'
material default in its performance under this Agreement, then for a period
of thirty (30) days after the fifth Business Day, Customer will have the
right to terminate this Agreement through delivery of written notice to EDS
as of a date specified in such notice.
F-3
<PAGE>
ADDENDUM
THIS ADDENDUM ("Addendum") to the AGREEMENT FOR INFORMATION TECHNOLOGY SERVICE
("Agreement") between Electronic Data Systems Corporation ("EDS") and American
Commercial Bank ("Customer"), dated of even date herewith, is between Customer
and EDS.
The parties agree to amend the Agreement as follows:
1. The first sentence of Section 2.1 of the Agreement is amended to read as
follows:
"This Agreement will begin on the Effective Date and, unless terminated
earlier under Sections 7.3, 7.4, 7.5, 7.6 or 9.5, will continue for a
period of seven years from the Operational Date (the "Initial Term.")
2. The first sentence of Section 3.2(d) is amended to read as follows:
"Correct any errors in customer files, so long as it is reasonably within
the capabilities of the Systems and the operating environment, that result
in errors in reports or other output where such errors (i) are due solely
to either malfunctions of EDS' equipment or the EDS Systems or errors of
EDS' operators, programmers or other personnel, and (ii) are called to EDS'
attention within the time frames specified in Section 4.3."
3. The last sentence of Section 4.3 is amended to read as follows:
"Customer will reject all incorrect reports or output within five Business
Days after receipt of daily reports or output, within ten Business Days
after receipt of annual, quarterly or monthly reports or output, and within
five Business Days after receipt of all other reports or output."
4. Section 5.1 (a) of the Agreement is amended to read as follows:
"For Basic Services, the charges listed in Section 1 of Schedule C."
5. The first sentence of Section 5.3 of the Agreement is amended to read as
follows:
"All charges under this Agreement will be due and payable within thirty
days of invoice date."
6. Section 5.4 of the Agreement is amended to read as follows:
"COST OF LIVING ADJUSTMENT. No more than once in any twelve (12) month
period, EDS may, at its option and by giving Customer written notice,
increase the charges for the Basic Services listed in Section I(a) of
Schedule A by a percentage not to exceed the percentage by which the CPI as
of that time is higher than the CPI as of (i) for the first adjustment, the
earlier of the Effective Date or the date of the last adjustment previously
made pursuant to any immediately prior agreement, if any, under which EDS
provided the same or similar Services to Customer; and (ii) thereafter, the
previous time that EDS adjusted its charges to Customer pursuant to this
Section. In no event will any such adjustment exceed four percent (4%).
These increased charges will remain in effect until EDS adjusts them again
pursuant to this Section."
7. A new sentence is added to the end of Section 6.2 of the Agreement:
"However, if the payment to EDS of any due and owing amount is reasonably
and in good faith disputed by Customer then EDS will, in accordance with
the provisions of this Section 6.2, return to Customer all of
1
<PAGE>
Customer's information, data, and files so long as Customer (i) notifies
EDS upon termination that such payment is disputed, what amount is being
withheld from EDS and the reasons why that amount is disputed, and (ii)
within ten days of such notice, deposits all such amounts into an escrow
account, established in the name of and as the property of EDS and Customer
in a major national bank pursuant to an escrow agreement; such an escrow
agreement to provide that EDS will pay for the expenses associated with
such an escrow account, and for the escrowed funds and any interest such
escrowed funds may have borne to be disbursed to EDS or Company, as
applicable, only in accordance with the mutual agreement of the parties or
an arbitration decision binding upon both parties as provided for in
Section 7.2."
8. Section 7.5 of the Agreement is amended to read as follows:
"TERMINATION FOR CAUSE. If either party materially defaults in its
performance under this Agreement, except for non-payment of amounts due to
EDS or for failure of EDS to meet the Performance Standards as outlined in
Schedule F, and fails to promptly take reasonable action to substantially
cure such default within ninety days after receiving written notice
specifying the default or, for those defaults which cannot reasonably be
counted within ninety days, promptly commence curing such default and
thereafter proceed with all due diligence to substantially cure the
default, then the party not in default may by giving the defaulting party
at least thirty days prior written notice thereof, terminate this Agreement
as of a date specified in such notice."
9. The first sentence of Section 17 of the Agreement is amended to read as
follows:
"The parties acknowledge that upon termination of this Agreement for any
reason, including under Sections 7.3, 7.4, 7.5, or 7.6 (but excluding by
election by either party not to renew pursuant to Section 2.1 or
termination by Customer pursuant to Sections 7.5, 7.6, 8.3, 9.5 or
Section D of Schedule F), EDS will incur damages resulting from such
termination that will be difficult or impossible to ascertain."
10. The last sentence of Section 7.7(a) of the Agreement is amended to read as
follows:
"If the actual Termination Costs are greater or less than the amount of
EDS' invoice that is paid by Customer under the immediately preceding
sentence, then as soon as reasonably practicable, Customer will pay EDS or
EDS will refund to Customer, as the case may be, the difference between the
actual Termination Costs and the amount paid."
11. The last sentence of Section 7.7 (b) of the Agreement is amended to read as
follows:
"All amounts payable under this Section 7.7 will be invoiced and paid prior
to the effective date of such termination and prior to the release of any
test tapes or other data of Customer except in the event the amount due and
owing is reasonably and in good faith disputed by Customer. In such an
event, Customer will deposit such disputed amounts into an escrow account
in accordance with the provisions of Section 6.2."
12. The second, third and fourth sentences of Section 8.1 of the Agreement are
amended to read as follows:
"If EDS becomes liable to the Customer under this Agreement for any other
reason, then, except for damages arising from EDS' gross negligence or
willful misconduct, then the damages recoverable against EDS for all
events, acts, delays, or omissions will not exceed in the aggregate the
compensation payable to EDS pursuant to Section 5.1 of this Agreement for
the lesser of the months that have elapsed since the Operational Date or
the three months ending with the latest month in which occurred the events,
acts, delays or omissions for which damages are claimed. In no event will
the measure of damages include any amounts for indirect, consequential or
punitive damages of any party, including third parties, or damages which
could have been avoided had the output provided by EDS been verified by
Customer before use, so long as the output provided by EDS had been capable
of being verified within the time frames specified in
2
<PAGE>
Section 4.3. Customer may not assert any cause of action against EDS of
which the Customer knew or should have known more than three years prior to
such assertion."
13. Section 8.3 of the Agreement is amended to read as follows:
"FORCE MAJEURE. Each party will be excused from performance under this
Agreement, except for any payment obligations for Services which have been
or are being provided, for any period and to the extent that it is
prevented from performing, in whole or in part, as a result of delays
caused by the other party or any act of God, war, civil disturbance, court
order, labor dispute, third party nonperformance (excluding the actions or
omissions of a party's agents), or other cause beyond its reasonable
control, including failures, fluctuations or nonavailability of electrical
power, heat, light, air conditioning, or telecommunications equipment. In
the case of Customer's nonperformance, such nonperformance will not be a
default or a ground for termination as long as reasonable means are taken
to expeditiously remedy the problem causing such nonperformance. In the
case of EDS' nonperformance, such nonperformance will not be a default or a
ground for termination unless EDS is unable to provide all or substantially
all of the Basic Services to Customer for five Business Days. In the event
that EDS is unable to provide all or substantially all of the Basic
Services to Customer for five Business Days then, for a period of thirty
Business Days after the fifth Business Day, Customer will have the right to
terminate this Agreement, through delivery of written notice to EDS, as of
a date specified in such notice."
14. Section 8.4 of the Agreement is amended to read as follows:
"PERSONAL INJURY AND PERSONAL PROPERTY INDEMNITY. Each party will
indemnify and defend the other party and will hold the other party harmless
(such indemnifying party, the "Indemnitor") from and against any and all
claims, actions, damages, liabilities, costs and expenses (including
without limitation reasonable attorneys' fees and expenses) relating to or
arising out of the death or bodily injury of any agent, employee, customer,
business invitee or business visitor of the indemnitee or the damage, loss
or destruction of any property of the indemnitee caused by the negligent
act or omission or the willful misconduct of the Indemnitor."
15. Section 9.1 of the Agreement is amended to read as follows:
"BINDING NATURE AND ASSIGNMENT. This Agreement will be binding on the
parties and their respective successors and assigns. Neither party may
assign this Agreement unless it obtains the prior written consent of the
other party, which will not be unreasonably withheld; provided that EDS may
assign this Agreement to its affiliates or in connection with the sale of
all or substantially all of EDS' business in one or a series of related
transactions."
16. The second sentence of Section 9.5 of the Agreement is amended to read as
follows:
"If EDS gives Customer notice of a modification pursuant to this Section,
Customer may, by giving EDS written notice at least one month prior to the
Modification Date, terminate this Agreement as of such Modification Date
or at a specified later date."
17. Section 9.7 of the Agreement is amended to read as follows:
"MEDIA RELEASES. All media releases, public announcements and public
disclosures by either party or its employees or agents relating to this
Agreement or the subject matter of this Agreement, including without
limitation promotional or marketing material, but not including any
announcement intended solely for internal distribution or any disclosure
required by legal, accounting or regulatory requirements beyond the
reasonable control of Customer, will be coordinated with and approved by
the other party prior to release."
3
<PAGE>
18. Except as amended by this Addendum will be and remain in full force and
effect in accordance with its terms. Capitalized terms used in this
Addendum will be as defined in the Agreement unless otherwise expressly
defined in this Addendum
19. Three (3) original copies of this Addendum will be executed and submitted
to EDS by Customer. This Addendum will become effective when EDS executes
this Addendum. EDS will return one of the executed copies to Customer.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date set
forth above.
AMERICAN COMMERCIAL BANK ELECTRONIC DATA SYSTEMS
CORPORATION
By:/s/ James E. Beeninga By: Chris M. Carrington
------------------------------- -------------------------------
Name: James E. Beeninga Name: Chris M. Carrington
----------------------------- -----------------------------
Date: Oct. 29, 1996 Date: Oct. 31, 1996
----------------------------- -----------------------------
4
<PAGE>
SCHEDULE A
BASIC SERVICES
ATTACHMENT 1
TO
SCHEDULE A
NOTICE OF DATA PROCESSING OPERATIONAL DATE
MAY 9, 1997
American Commercial Bank
300 Such Mills Road
Ventura, California 93003
Re: Agreement for Information Technology Services dated October 29, 1996, (the
"Agreement") between American Commercial Bank ("Customer") and Electronic
Data Systems("EDS").
Gentlemen:
In accordance with the above-referenced Agreement, please be advised that
the Operational Date for purposes of the Agreement shall be May 5, 1997.
Sincerely,
ELECTRONIC DATA SYSTEMS CORPORATION
/s/ Teresa Cooney
Teresa Cooney
Relationship Manager
<PAGE>
AMENDMENT NUMBER THREE
TO AGREEMENT FOR INFORMATION TECHNOLOGY
SERVICES BETWEEN
ELECTRONIC DATA SYSTEMS CORPORATION
AND AMERICAN COMMERCIAL BANK
THIS AMENDMENT NUMBER THREE (this "Amendment") is between Electronic Data
Systems Corporation ("EDS") and American Commercial Bank ("Customer"), and is in
amendment of that certain Agreement for Information Technology Services between
EDS and Customer dated as October 31, 1996 (the "Agreement").
For and in consideration of the mutual agreements of the parties herein
contained and other good and sufficient consideration the receipt of which is
hereby acknowledged, EDS and Customer agree as follows:
1. Pursuant to Section 3.1(d) of the Agreement, the following Additional
Service has been requested by Customer and will be provided by EDS. EDS
will provide such Additional Service in accordance with this Amendment and
the Agreement and such Additional Service will be deemed an Additional
Service under the Agreement for all purposes.
(a) EDS will provide Customer with the ITI Retirement Reporting Module
(RRM) in conjunction with Customer's current suite of modules pursuant
to the Agreement.
2. For the provision by EDS of the Additional Service described in Section 1
of this Amendment, Customer will pay EDS the amounts set forth below:
<TABLE>
<CAPTION>
Additional Service Service Fee
------------------ -----------
<S> <C>
Retirement Reporting Module (RRM) $.01 per account record
monthly minimum charge of $175.00
A one time set up fee $1,500.00.
Training at Customer site $850.00 per day plus any travel
and travel-related expenses as
provided for in the Agreement
</TABLE>
Such amounts will be due and payable in accordance with the terms of the
Agreement.
3. Except as expressly amended by this Amendment, the Agreement will be and
remain in full force and effect in accordance with its terms. Capitalized
terms used in this Amendment will be as defined in the Agreement unless
otherwise expressly defined in this Amendment.
4. Three (3) original copies of this Amendment will be executed and submitted
to EDS by Customer. This Amendment will become effective as of the date
set forth below when EDS executes this Amendment. EDS will return one of
the executed copies to Customer.
IN WITNESS WHEREOF, the parties have executed this Amendment as of March 25,
1998.
<PAGE>
ELECTRONIC DATA SYSTEMS AMERICAN COMMERCIAL
CORPORATION BANK
By: By: /s/ Gerald J. Lukiewski
-------------------------------- --------------------------------
Name: Brian Van Dyk Name: Gerald J. Lukiewski
Title: Western Regional Manager Title: President
Date: Date: 4-3-98
------------------------------ -----------------------------
<PAGE>
SCHEDULE G
Item Processing Services
I. ITEM PROCESSING SERVICES
EDS shall provide the following Basic Services to Customer:
a.) PROOF OF DEPOSIT ENCODING
EDS will receive all Proof Items processed at Customer's locations in
accordance with mutually agreed upon cut-off times. EDS will proof and
endorse each Item and encode the dollar amount of each Item. Proof errors
detected by EDS will be corrected and documentation supporting corrections
will be sent to Customer the following Business Day via courier.
Teller balancing tapes and tapes accompanying deposits will be included in
the daily proof work sent to EDS by Customer, and EDS will return said
balancing tapes to Customer upon a mutually agreed upon schedule.
All Proof Items delivered to EDS by the mutually agreed upon delivery
deadlines will be processed to meet Customer's outgoing cash letter
deadline(s). EDS will make best reasonable efforts to handle Customer's
work received after the required deadline(s).
The parties are in agreement that the Proof of Deposit Encoding Services,
as described in this Section I(a) of this Schedule G, will not commence
until a mutually agreeable date has been selected in the first or second
calendar quarter of 1998.
b.) PROOF OF DEPOSIT CAPTURE
All Proof of Deposit Items will be captured, filmed front and back and
assigned a unique batch and sequence number. All Item rejects will be
corrected on-line. Proof of Deposit capture files will be uploaded each
Business Day for nightly posting on the EDS Systems.
c.) MICR REJECT REPAIR
EDS will complete or correct the electronic information record from the
MICR line on-line.
d.) FINE SORTING INTO ACCOUNT NUMBER ORDER
All on-us Items and general ledger tickets will be sorted into account
number order and made available for pick-up by Customer's courier by 7:00
a.m. the first Business Day after processing.
e.) COURIER BAG STORAGE
EDS will hold courier bags overnight at the Data Center for Customer. EDS'
only responsibility will be to remove the bag containing Items from the
courier bag for further processing. Courier will pick-up courier bags the
following Business Day.
II. ITEM PROCESSING SERVICES PRICING
<TABLE>
<CAPTION>
Service Description Unit Price
------------------- ----------
<S> <C>
Proof of Deposit Encoding $0.0250 per Item
Proof of Deposit Capture $0.0186 per Item
MICR Reject Repair - < 1% of Daily Volume $ No Charge
MICR Reject Repair - > 1% of Daily Volume $0.1500 per Item
Fine Sorting into Account Number Order $0.0138 per Item
</TABLE>
G - 1
<PAGE>
ADDENDUM
THIS ADDENDUM ("Addendum") to that certain Agreement for Information Technology
Services ("Agreement") between ELECTRONIC DATA SYSTEMS CORPORATION ("EDS") and
American Commercial Bank ("Customer"), dated as of October 31, 1996, is made and
entered into by and between Customer and EDS.
The parties agree to amend the Agreement as follows:
1 Section 1.1(c) of the Agreement is amended to read as follows:
"Basic Services" are the Services listed in Schedule A and the Item
Processing Services listed in Schedule G.
2. Section 1.1(d) of the Agreement is amended to read as follows:
"Business Day" is Monday through Friday during which Customer conducts
its business operations and which is not a holiday of the Federal
Reserve Bank.
3. New Sections 1.1(t) and 1.1(u) are added to the Agreement to read as
follows:
(t) "Item" shall mean a MICR document on which is recorded information
evidencing a debit or credit.
(u) "Item Processing Services" are the Services described in Schedule G.
(v) "MICR" is the magnetic ink character recognition that is encoded on
Items for processing.
(w) "MICR Reject" shall mean Items captured that reject due to poor or
missing MICR encoding which will be corrected on-line by EDS for same
Business Day processing.
(x) "Proof Item" shall mean a document received by EDS to be MICR encoded
with the dollar amount.
(v) "Proof of Deposit" shall mean the MICR encoding of the dollar amount
of each Item and balancing the debits to the credits.
4. New Section 3.1(e) is added to the Agreement to read as follows:
On a mutually agreeable schedule EDS will provide those services and
instructions ("Item Processing Conversion Services") reasonably required
for Customer to convert to and use the EDS Systems and the Item Processing
Services. Customer will cooperate in the conversion effort and timely
provide whatever information, data, clerical and office support, management
decisions, approvals and signoffs that EDS reasonably requires. Customer
will cooperate with EDS in scheduling training in conjunction with
Customer's conversion to the EDS Systems.
5. Section 3.2 of the Agreement does not apply to Item Processing Services
provided by EDS.
6. Section 3.4 of the Agreement does not apply to EDS Systems used to provide
Item Processing Services.
Page 1
<PAGE>
7. A new Section 3.7 is added to the Agreement to read as follows:
GENERAL TERMS RELATING TO ITEM PROCESSING SERVICES.
(a) With respect to Item Processing Services, EDS will be
responsible for the Items from the time that such Items are received
by EDS at the Data Center until the Items are released for pickup at
the Data Center to couriers; provided that EDS' liability for the
destruction or disappearance of Items will be limited to cases where
the destruction or disappearance is due entirely to the negligence or
willful misconduct of EDS and, if so, EDS' sole obligation is to
reconstruct the Items from microfilm created by Customer.
(b) Provide for Customer's use one copy of EDS' standard user
documentation and one copy of any revisions describing the preparation
of input for, and use of, output from the EDS Systems. Such
documentation will address the reports provided under this Agreement.
Notwithstanding anything in this Agreement to the contrary, Customer
may duplicate or copy the user documentation and revisions, so long as
it is done (i) for Customer's internal use only in connection with the
Services provided pursuant to this Agreement and (ii) in accordance
with the applicable provisions of Section 6.3.
(c) Establish, modify or substitute from time to time any
Equipment, processing priorities, programs, or procedures used in the
operation of the EDS Systems or the provision of the Item Processing
Services that EDS reasonably deems necessary, and notify Customer of
any such changes that will affect Customer's operations. EDS shall not
make any such establishment, modification, or substitution which would
materially and adversely affect Customer's operations without
Customer's prior written approval, which approval shall not be
unreasonably withheld or delayed: provided, however that EDS shall
have the right without approval of Customer to install and implement
updates and releases pursuant to this Section 3.7(c). In the event
EDS installs and implements an update and/or release pursuant to this
Section 3.7(c) or 3.2(e) without Customer's approval, Customer
expressly retains the right to dispute such installation and
implementation in accordance with the provisions of Section 7.2 of the
Agreement. Notwithstanding the above, however, if a third party vendor
of any EDS Systems requires all users to upgrade such System due to
the vendor's decision to stop maintaining the version of such System
provided under this Agreement, then EDS may charge Customer for any
additional expenses reasonably incurred by EDS for such upgrade,
subject to the prior written consent of Customer to such additional
expenses.
8. A new Section 3.8 is added to the Agreement to read as follows:
REGULATORY COMPLIANCE RELATED TO ITEM PROCESSING SERVICES. If either
EDS or Customer becomes aware of any changes or proposed changes to any
statutes, regulations or rules applicable to the Item Processing
Services, that party will promptly notify the other of the change or
proposed change, and the parties will cooperate in analyzing the impact,
if any, that the change or proposed change will have on the obligations
of the parties under this Agreement. If any such change requires EDS to
modify any Item Processing Services, EDS will comply with such change
and Customer will reimburse EDS for (a) any additional costs thereby
incurred by EDS that are specific to Customer (such as the cost of
retaining Customer's data for a longer period of time), and (b)
Customer's pro rata share (based on such method of proration as EDS in
good faith determines to be appropriate) of any additional costs thereby
incurred by EDS that are not specific to Customer (such as the cost of
modifications to the EDS
Page 2
<PAGE>
Systems that apply to Customer and to other EDS customers for item
processing services) and that are in excess of the costs that EDS would
customarily absorb as part of its normal services to its customers for item
processing services, as reasonably determined by EDS.
9. A new Section 3.9 is added to the Agreement to read as follows:
YEAR 2000. With respect to Year 2000, as part of the Services, EDS will
(a) with respect to EDS Systems which are proprietary to EDS, provide
those improvements and enhancements to such Systems so that they will
maintain the functionality existing as of the as part of the Effective
Date taking into account any processing, accepting, calculating, writing
and outputting of times or dates, or both, whether before, on or after
12:00 a.m. January 1, 2000, and any time periods determined or to be
determined based on any such times or dates, or both, and (b) with
respect to EDS Systems which are not proprietary to EDS, use all
reasonable efforts to obtain from the third party vendor thereof, those
improvements and enhancements to such Systems so that they will maintain
the functionality existing as of the Effective Date taking into account
any processing, accepting, calculating, writing and outputting of times
or dates, or both, whether before, on or after 12:00 a.m. January 1,
2000, and any time periods determined or to be determined based on any
such times or dates, or both. Customer acknowledges and agrees that EDS
will not be responsible for (i) changes, modifications, updates or
enhancements to, and any inaccuracies, delays, interruptions or errors
caused by interfaces between the EDS Systems and any software or systems
which EDS does not operate under this Agreement, (ii) any inaccuracies,
delays, interruptions or errors occurring as a result of incorrect data
or data from other systems, software, hardware, processes or third
parties provided in a format that is inconsistent with the format and
protocols established for EDS Systems including date data in two digit
format, even if such data is required for the operation of the EDS
proprietary software or systems, and (iii) any inaccuracies, delays,
interruptions or errors occurring as a result of incorrect data or data
from telecommunication systems.
10. Section 5.1(a) of the Agreement is amended to read as follows:
For Basic Services the monthly charges listed in Section I of Schedule C
and the monthly charges for Item Processing Services listed in Schedule G.
11. Section 5.2(a) of the Agreement is amended to read as follows:
All costs incurred by EDS (i) in mailing reports or other output to
Customer, its customers, or third parties, and (ii) in transporting,
shipping, or delivering Items, reports, output, or input between the Data
Center and Customer's locations.
12. A new Section 5.5 is added to the Agreement to read as follows:
CUSTOMER RESPONSIBILITIES RELATED TO ITEM PROCESSING SERVICES. In order
that EDS may perform its obligations to provide Item Processing Services,
Customer shall perform the actions provided in Schedule G.
13. The first sentence of Section 8.1 of the Agreement is amended to read as
follows:
Section 3.2(d) sets forth Customer's exclusive remedies for errors in
reports or other output provided by EDS under this Agreement and Section
3.7(a) sets forth Customer's exclusive remedies for the destruction or
disappearance of Items that occurs while such Items are being held at the
Data Center.
Page 3
<PAGE>
14. New sixth and seventh sentences added to Section 8.1 to read as follows:
Customer expressly waives and releases any claim that it may otherwise
have against EDS in excess of such amounts provided for pursuant to this
Section. By releasing and discharging EDS from such claims both known and
unknown, Customer expressly waives any rights it may have had under
California Civil Code Section 1542 which provides as follows: "A general
release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which
if known by him must have materially affected his settlement with the
debtor."
15. A new Schedule G, attached, is added to the Agreement.
16. Except as amended by this Addendum, the Agreement will be and remain in
full force and effect in accordance with its terms. Capitalized terms, used
in this Addendum will be as defined in the Agreement unless otherwise
expressly defined in this Addendum.
17. Three (3) original copies of this Addendum will be executed and submitted
to EDS by Customer. This Addendum will become effective when EDS executes
this Addendum. EDS will return one of the executed copies to Customer.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date set
forth above.
AMERICAN COMMERCIAL BANK ELECTRONIC DATA SYSTEMS
CORPORATION
By: /s/ James E. Beeninga By:
-------------------------------- --------------------------------
Name: James E. Beeninga Name:
------------------------------ ------------------------------
Date: 12-19-97 Date:
------------------------------ ------------------------------
Page 4
<PAGE>
ITEM PROCESSING SERVICES
<TABLE>
<CAPTION>
Service Description Unit Price
------------------- ----------
<S> <C>
Microfiche - Originals $1.7000 per plate
Microfiche - Duplicates $0.4000 per plate
Courier Bag Storage $ No Charge
</TABLE>
III. CUSTOMER RESPONSIBILITIES
a.) Customer or Customer's courier will deliver Proof of Deposit Items to
EDS each Business Day in accordance with mutually agreed upon cut-off
times. EDS will make reasonable efforts to encode and capture Items
delivered to EDS after the arrival deadline for same day posting.
Customer will be invoiced for any additional costs reasonably incurred
by EDS for processing work received after the deadlines. Items not
processed by EDS will be held at EDS awaiting Customer's instructions.
b.) Customer assumes full responsibility for the accuracy, completeness
and authenticity of all Items furnished to EDS, and EDS shall be
entitled to rely thereon and shall have no obligation or
responsibility to audit, check or verify the Items.
c.) Customer will microfilm all Items prior to delivery to EDS.
d.) Customer will be responsible for the selection of couriers and will
pay for such courier services. If EDS is billed for Customer's courier
service, EDS will re-bill Customer without mark-up.
IV. SERVICE LEVEL STANDARDS
Customer and EDS will develop and implement mutually agreed upon Performance
Standards for Item Processing Services on a mutually agreed upon schedule after
the conversion date (December 22, 1997).
G-2
<PAGE>
EXHIBIT 23.1
Consent of Findley
<PAGE>
September 16, 1998
Americorp
304 East Main Street
Ventura, California 93001
Gentlemen:
We hereby consent to the inclusion of the Fairness Opinion of The Findley
Group in the Form S-4 Registration Statement of Americorp in connection with
the acquisition of Channel Islands National Bank. We also consent to the
references made in such Form S-4 Registration Statement to The Findley Group.
Sincerely,
/s/ GARY STEVEN FINDLEY
-----------------------
Gary Steven Findley
Director
<PAGE>
EXHIBIT 23.3
Consent of Vavrinek, Trine, Day & Co. LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our Independent Auditor's Report dated
January 23, 1998 regarding the balance sheets of Channel Islands National
Bank as of December 31, 1997 and 1996 and the related statements of income,
changes in shareholder's equity and cash flows for the years then ended, in
the Form S-4 filed by Americorp with the Securities and Exchange Commission,
and the reference to our firm as experts.
/s/ VAVRINEK, TRINE, DAY & CO., LLP
- -----------------------------------
VAVRINEK, TRINE, DAY & CO., LLP
Rancho Cucamonga, CA
September 11, 1998
<PAGE>
EXHIBIT 23.4
Consent of Fanning & Karrh
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our auditors' report, dated January 23, 1998 (except
for Note 6 as to which the date is May 7, 1998 and for Note 17 as to which
the date is August 27, 1998), included in Channel Islands Bank and Americorp
Joint Proxy/Prospectus Statement and to the reference to our firm under the
heading of "Experts" in the Joint Proxy/Prospectus Statement.
/s/ FANNING & KARRH
- -------------------
Fanning & Karrh
Ventura, California
September 11, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 19,417,380
<INT-BEARING-DEPOSITS> 87,233,645
<FED-FUNDS-SOLD> 8,200,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 12,369,181
<INVESTMENTS-CARRYING> 10,947,454
<INVESTMENTS-MARKET> 11,127,225
<LOANS> 84,484,838
<ALLOWANCE> 1,131,081
<TOTAL-ASSETS> 139,823,889
<DEPOSITS> 124,974,721
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,948,507
<LONG-TERM> 0
0
0
<COMMON> 594,518
<OTHER-SE> 11,306,143
<TOTAL-LIABILITIES-AND-EQUITY> 139,823,889
<INTEREST-LOAN> 4,363,187
<INTEREST-INVEST> 691,444
<INTEREST-OTHER> 183,519
<INTEREST-TOTAL> 5,238,150
<INTEREST-DEPOSIT> 1,427,133
<INTEREST-EXPENSE> 1,427,133
<INTEREST-INCOME-NET> 3,811,017
<LOAN-LOSSES> 265,000
<SECURITIES-GAINS> 977
<EXPENSE-OTHER> 3,499,759
<INCOME-PRETAX> 768,179
<INCOME-PRE-EXTRAORDINARY> 768,179
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 561,404
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.84
<YIELD-ACTUAL> 9.04
<LOANS-NON> 1,836,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 3,264,897
<ALLOWANCE-OPEN> 1,047,515
<CHARGE-OFFS> 189,622
<RECOVERIES> 8,158
<ALLOWANCE-CLOSE> 1,131,081
<ALLOWANCE-DOMESTIC> 1,131,081
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
Americorp - form of proxy
<PAGE>
REVOCABLE PROXY - AMERICORP
SPECIAL MEETING OF SHAREHOLDERS - _______________, 1998
The undersigned shareholder(s) of Americorp hereby appoints, constitutes
and nominates ___________________________________________________, and each of
them, the attorney, agent and proxy of the undersigned, with full power of
substitution, to vote all shares of Americorp which the undersigned is entitled
to vote at the Special Meeting of Shareholders to be held at __________________,
California on ________________________, 1998 at _______ ____. m. local time, and
any and all adjournments thereof, as fully and with the same force and effect
as the undersigned might or could do if personally present thereat, as
follows:
1. MERGER AGREEMENT. To consider and vote upon a proposal to approve the
principal terms of the amended Agreement to Merge and Plan of
Reorganization dated as of July 7, 1998 and amended on September 17,
1998, (the "Agreement") by and among Americorp, American Commercial
Bank (the "Bank") and Channel Islands Bank ("CIB") and the
transactions contemplated thereby pursuant to which (i) CIB will merge
with and into the Bank and the Bank will continue as the surviving
bank, and (ii) the shareholders of CIB will become shareholders of
Americorp in accordance with the exchange ratio set forth in the
Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. STOCK OPTION PLAN. To consider and vote upon a proposal to adopt a
new stock option plan for Americorp in accordance with the Agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. OTHER BUSINESS. To transact such other business as may properly
come before the Meeting and any adjournment or adjournments thereof.
(CONTINUED ON THE REVERSE)
EXHIBIT 99.1
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
THE PROXY CONFERS AUTHORITY AND SHALL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATION OF THE BOARD OF DIRECTORS UNLESS A CONTRARY INSTRUCTION IS
INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS. IF NO INSTRUCTION IS SPECIFIED, THE SHARES REPRESENTED BY THE
PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS LISTED ON THIS PROXY. IN ALL
OTHER MATTERS, IF ANY, PRESENTED AT THE SPECIAL MEETING, THE PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS WHO
WILL MAKE ANY SUCH DETERMINATION IN THEIR SOLE DISCRETION.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS USE.
The undersigned hereby acknowledges receipt of the combined Notice of
Special Meeting and the Joint Proxy Statement/Prospectus that accompanies
this proxy and ratifies all lawful actions taken by the above-named proxies.
Signature(s) Date:
---------------------------- -----------------------
---------------------------- -----------------------
Number of shares
--------------
I (We) will [ ] will not [ ] attend the Special Meeting in person.
NOTE: Please sign your full name. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
EXHIBIT 99.1
<PAGE>
EXHIBIT 99.2
CIB - form of proxy
<PAGE>
PROXY CHANNEL ISLANDS BANK PROXY
SPECIAL MEETING OF SHAREHOLDERS
____ __, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder acknowledges receipt of the Notice of
Special Meeting of Shareholders of Channel Islands Bank ("CIB") and the
accompanying Joint Proxy Statement/Prospectus dated ________ __, 1998, and
revoking any proxy heretofore given, hereby appoints ________________,
_________________, and ____________________, or any one of them, with full
power to act alone, my true and lawful attorney(s), agent(s) and proxy, with
full power of substitution, for me and in my name, place and stead to vote
and act with respect to all shares of common stock of CIB which the
undersigned would be entitled to vote at the Special Meeting of Shareholders
to be held on ____ __, 1998, at _:__ p.m., __________________________________,
________________, ____________, and at any and all adjournment or
adjournments thereof, with all the powers that the undersigned would possess
if personally present, as follows:
1. APPROVAL OF MERGER AGREEMENT. To approve the principal terms
of the Agreement to Merge and Plan of Reorganization dated July 7, 1998 (the
"Agreement) by and among CIB, American Commercial Bank ("ACB") and its parent
holding company, Americorp, and the transactions contemplated thereby
pursuant to which (i) CIB will merge with and into ACB and ACB will continue
as the surviving bank, and (ii) the shareholders of CIB will become
shareholders of Americorp in accordance with the exchange ratio set forth in
the Agreement (the "Merger"). A copy of the Agreement is included in the
Joint Proxy Statement/Prospectus as Appendix A. The terms and conditions of
the Agreement and the formulas for calculating the number of shares of
Americorp Common Stock to be issued for each share of CIB Stock are set forth
in the accompanying Joint Proxy Statement/Prospectus dated ________, 1998.
Approval of the principal terms of the Agreement requires the affirmative
vote of a majority of the outstanding shares of CIB Stock.
/ / FOR / / AGAINST / / ABSTAIN
2. OTHER BUSINESS.
To transact such other business as may properly come before the
meeting.
Execution of this proxy confers authority to vote "FOR" each proposal
listed above unless the shareholder directs otherwise. If any other business is
presented at said meeting, this proxy shall be voted in accordance with the
recommendations of the Board of
EXHIBIT 99.2
<PAGE>
Directors. When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If more than one trustee, all should sign.
All joint owners SHOULD sign.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE.
I/WE DO / / or I/WE DO NOT / / expect to attend the meeting.
Dated: , 1998
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(Number of Shares)
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Signature of Shareholder(s)
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Signature of Shareholder(s)
EXHIBIT 99.2
