As filed with the Securities and Exchange Commission on July 19, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
Registration Statement Under the Securities Act of 1933
BAY VIEW CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 6120 94-3078031
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
ROBERT J. FLAX, ESQ.
1840 Gateway Drive Bay View Capital Corporation
San Mateo, California 94404 1840 Gateway Drive
(415) 573-7300 San Mateo, California 94404
(415) 573-7300
(Address, including ZIP code, (Name, address, including ZIP
and telephone number, including and telephone number, including
area code, of registrant's area code, of agent for service)
principal executive offices)
COPIES TO:
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CHRISTOPHER R. KELLY, P.C. WAYNE L. KNYAL ROBERT M. SMITH
DANIEL C. HOLDGREIWE President and Chief Executive Officer RAFAEL A. STONE
Silver, Freedman & Taff, L.L.P. Franchise Mortgage Acceptance Dewey Ballantine LLP
1100 New York Avenue, N.W. Company 333 South Hope Street
Suite 700 1888 Century Park East 30th Floor
Washington, D.C. 20005 Third Floor Los Angeles, CA 90071-1406
Los Angeles, CA 90067
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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 this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Calculation of Registration Fee
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Proposed maximum Proposed maximum
Title of each class of Amount to offering price aggregate offering Amount of
securities to be registered be registered(2) per share(3) price(4) registration fee(5)
- ---------------------------- ----------------- ----------------- ------------------- -------------------
Common Stock, $.01 par 9,500,000 shares $17.10 $162,497,114 $45,175
value(1)
================================================ =================== ==================================================
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(1) Includes one attached Right per share to purchase preferred stock upon the
occurrence of certain events. See "Comparison of Shareholders Rights -
Rights Agreement."
(2) Based upon the estimated maximum number of shares of Bay View Capital
Corporation ("Bay View") common stock, $.01 par value ("Bay View Common
Stock"), that may be issued in connection with the merger of Franchise
Mortgage Acceptance Company ("FMAC") into Bay View.
(3) The proposed maximum offering price per share has been determined by
dividing the proposed maximum aggregate offering price by the number of
shares being registered.
(4) Estimated solely for the purpose of calculating the registration fee. The
aggregate offering price has been computed pursuant to Rule 457(f)(1) and
(3) under the Securities Act of 1933, as amended, based on the aggregate
market value of the outstanding common stock of FMAC at July 16, 1999, less
the cash consideration to be paid by Bay View in the merger ($117,918,259).
(5) In accordance with Rule 457(b), the filing fee of $49,073 paid pursuant to
Section 14(g) of the Securities Exchange Act of 1934, as amended, and Rule
0-11 thereunder at the time of the filing of the Proxy Statement/Prospectus
contained in the Registration Statement as preliminary proxy materials of
Bay View has been credited to offset the $45,175 registration fee that
would otherwise be payable.
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[Bay View Capital [Franchise Mortgage
Corporation Logo] Acceptance Company Logo]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
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The Boards of Directors of Bay View Capital Corporation The dates, times and places of the meetings are as follows.
and Franchise Mortgage Acceptance Company have agreed on a
merger. The merger is structured so that Bay View will be For Bay View shareholders:
the surviving publicly-traded company. FMAC shareholders
will receive either $10.25 in cash or .5125 shares of Bay August 31, 1999
View common stock for each share of FMAC common stock they 1:00 p.m., local time
own. As of July __, 1999, .5125 shares of Bay View common 1840 Gateway Drive
stock were worth about $________. Bay View shareholders Third Floor
will continue to own their existing shares. San Mateo, California 94404
The merger cannot be completed unless the Bay View and For FMAC shareholders:
FMAC shareholders approve the merger. Each of us has
scheduled special meetings for our shareholders to vote on August 31, 1999
this matter. Your vote is very important. 10:00 a.m., local time
1888 Century Park East
Bay View shareholders will also be voting on a proposal Third Floor
to amend Bay View's 1995 Stock Option and Incentive Plan to Los Angeles, California 90067
increase the number of shares reserved thereunder by
500,000. Bay View common stock is listed on the New York Stock
Exchange under the symbol "BVC." FMAC common stock is listed
Whether or not you plan to attend your shareholder on the Nasdaq National Market under the symbol "FMAX."
meeting, please take the time to vote by completing and
mailing the enclosed proxy card to us. If you sign, date This document provides you with detailed information about
and mail your proxy card without indicating how you want to the proposed merger and the stock option plan proposal. We
vote, your proxy will be counted as a vote in favor of the encourage you to read this entire document carefully. In
merger, and in favor of the stock option plan proposal in addition, you may obtain information about our companies from
the case of Bay View shareholders. Not returning your card publicly available documents that we have filed with the
or not instructing your broker how to vote any shares held Securities and Exchange Commission.
for you in "street name" will have the same effect as a
vote against the merger.
Edward H. Sondker Wayne L. Knyal
President and Chief Executive Officer President and Chief Executive Officer
Bay View Capital Corporation Franchise Mortgage Acceptance Company
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See "Risk Factors" beginning on page for a description of factors that may
affect the value of the Bay View common stock to be issued in the merger along
with several other risk factors that should be considered by shareholders with
respect to the merger.
Neither the SEC nor any state securities regulators has approved the Bay
View common shares to be issued under this document or determined if this
document is accurate or adequate. Any representation to the contrary is a
criminal offense. These securities are not savings or deposit accounts or other
obligations of any bank or nonbank subsidiary of any of the parties, and they
are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance
Fund or any governmental agency.
- --------------------------------------------------------------------------------
Joint Proxy Statement/Prospectus dated as of July __, 1999 and first mailed
to shareholders on or about July __, 1999.
<PAGE>
BAY VIEW CAPITAL CORPORATION
1840 Gateway Drive
San Mateo, California 94404
NOTICE OF SPECIAL MEETING
TO BE HELD ON AUGUST 31, 1999
To the Shareholders of Bay View Capital Corporation:
You are cordially invited to attend a special meeting of shareholders of Bay
View Capital Corporation at 1:00 p.m., local time, on August 31, 1999, at the
main office of Bay View, located at 1840 Gateway Drive, Third Floor, San Mateo,
California, to vote on proposals recommended by the Board of Directors of Bay
View to
o adopt the Agreement and Plan of Merger and Reorganization, dated as of
March 11, 1999, as amended, by and between Bay View and Franchise
Mortgage Acceptance Company and to approve issuing Bay View common stock
in the merger; and
o adopt an amendment to Bay View's 1995 Stock Option and Incentive Plan to
increase the number of shares reserved thereunder from 2,000,000 to
2,500,000.
Only shareholders of record at the close of business on July 15, 1999 are
entitled to vote at the special meeting or any adjournments or postponements of
the special meeting. A list of Bay View shareholders entitled to vote at the
special meeting will be available for examination by any shareholder at the main
office of Bay View during ordinary business hours for at least ten days prior to
the special meeting, as well as at the special meeting.
To ensure your representation at the special meeting, please sign, date and
promptly return the accompanying proxy card in the enclosed envelope whether or
not you plan to attend the meeting. If you attend the meeting, you may wish to
vote in person, whether or not you have already executed and returned your proxy
card. You may revoke your proxy at any time before it is voted. Please review
the Proxy Statement/Prospectus accompanying this notice for more complete
information regarding the matter proposed for your consideration at the special
meeting.
By Order of the Board of Directors
Robert J. Flax
Secretary
July __, 1999
The Board of Directors of Bay View unanimously recommends that you vote
"FOR" the proposals. Your support is appreciated.
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FRANCHISE MORTGAGE ACCEPTANCE COMPANY
1888 Century Park East, Third Floor
Los Angeles, California 90067
NOTICE OF SPECIAL MEETING
TO BE HELD ON AUGUST 31, 1999
To the Shareholders of Franchise Mortgage Acceptance Company:
You are cordially invited to attend a special meeting of shareholders of
Franchise Mortgage Acceptance Company at 10:00 a.m., local time, on August 31,
1999, at the main office of FMAC, located at 1888 Century Park East, Third
Floor, Los Angeles, California, to vote on a proposal recommended by the Board
of Directors of FMAC to adopt the Agreement and Plan of Merger and
Reorganization, dated as of March 11, 1999, as amended, by and between Bay View
Capital Corporation and Franchise Mortgage Acceptance Company.
Only shareholders of record at the close of business on July 19, 1999 are
entitled to vote at the special meeting or any adjournments or postponements of
the special meeting. A list of FMAC shareholders entitled to vote at the special
meeting will be available for examination by any shareholder at the main office
of FMAC during ordinary business hours for at least ten days prior to the
special meeting, as well as at the special meeting.
To ensure your representation at the special meeting, please sign, date and
promptly return the accompanying proxy card in the enclosed envelope whether or
not you plan to attend the meeting. If you do attend the meeting, you may wish
to vote in person, whether or not you have already executed and returned your
proxy card. You may revoke your proxy at any time before it is voted. Please
review the Proxy Statement/Prospectus accompanying this notice for more complete
information regarding the matter proposed for your consideration at the special
meeting.
By Order of the Board of Directors
Raedelle Walker
Secretary
July __, 1999
The Board of Directors of FMAC unanimously recommends that you vote "FOR"
the adoption of the merger agreement. Your support is appreciated.
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TABLE OF CONTENTS
Page
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TABLE OF CONTENTS............................................................................i
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE MEETINGS......................................1
SUMMARY......................................................................................2
The Companies........................................................................2
The Shareholder Meetings.............................................................2
The Merger...........................................................................3
RISK FACTORS.................................................................................7
FORWARD-LOOKING INFORMATION.................................................................15
SELECTED FINANCIAL DATA OF BAY VIEW.........................................................16
SELECTED FINANCIAL DATA OF FMAC.............................................................18
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
.......................................................................................20
UNAUDITED COMPARATIVE PER SHARE DATA
OF BAY VIEW AND FMAC....................................................................21
COMPARATIVE MARKET VALUE INFORMATION........................................................22
THE SHAREHOLDER MEETINGS....................................................................22
Dates, Times and Places.............................................................22
MATTERS TO BE CONSIDERED; VOTES REQUIRED....................................................22
VOTING OF PROXIES...........................................................................24
Revocability of Proxies.............................................................24
Record Dates; Voting Rights; Quorums................................................24
Solicitation of Proxies.............................................................24
THE MERGER..................................................................................25
General.............................................................................25
Merger Consideration................................................................25
Treatment of Stock Options..........................................................28
Background of the Merger............................................................28
Reasons for the Merger..............................................................30
Exchange of Financial Forecasts.....................................................32
Opinion of Bay View Financial Advisor...............................................33
Opinion of FMAC Financial Advisor...................................................37
Appraisal Rights....................................................................42
Structure of the Merger.............................................................44
Representations and Warranties......................................................44
Conduct of Business.................................................................44
Additional Agreements...............................................................46
Waiver..............................................................................47
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Amendment...........................................................................47
Confidentiality.....................................................................47
What Needs to be Done to Complete the Merger........................................47
Termination of the Merger Agreement; Expenses.......................................49
Break-up Fee and Expense Reimbursement..............................................49
Regulatory Approvals Required.......................................................50
Interests of Directors and Officers in the Merger that are Different from
Your Interests ...................................................................52
Management Following the Merger.....................................................54
Certain Legal Proceedings...........................................................54
Accounting Treatment................................................................54
Resale of Bay View Common Stock; Restrictions on Transfer...........................54
Material United States Federal Income Tax Consequences..............................55
Dividends after the Merger..........................................................58
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION................................58
COMPARISON OF SHAREHOLDER RIGHTS............................................................64
General.............................................................................64
Capital Stock.......................................................................64
Shareholder Meetings................................................................64
Advance Notice Requirements at Shareholder Meetings.................................64
Security Holder Action by Written Consent...........................................65
Cumulative Voting for Election of Directors.........................................65
Board of Directors..................................................................65
Business Combinations with Certain Persons..........................................65
Director Liability and Indemnification..............................................66
Amendment of Certificate and Bylaws.................................................66
Rights Agreement....................................................................66
APPROVAL OF AMENDMENT TO BAY VIEW'S
1995 STOCK OPTION AND INCENTIVE PLAN
.......................................................................................66
Principal Features of the Stock Option Plan.........................................67
Federal Income Tax Consequences.....................................................68
Awards Under the Stock Option Plan..................................................69
Executive Compensation..............................................................70
Director Compensation...............................................................73
Employment Contracts................................................................74
Compensation Committee Report on Executive Compensation.............................75
Stockholder Return Performance Presentation.........................................78
LEGAL MATTERS...............................................................................79
EXPERTS.....................................................................................79
SHAREHOLDER PROPOSALS.......................................................................79
WHERE YOU CAN FIND MORE INFORMATION.........................................................80
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APPENDICES
A Agreement and Plan of Merger and Reorganization by and between Bay
View and FMAC B Opinion of Lehman Brothers
C Opinion of Credit Suisse First Boston
D Delaware Law on Appraisal Rights
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE MEETINGS
Q. Why are the two companies proposing to merge?
A. Ourcompanies are proposing to merge because we believe that combining will
create a stronger and more diversified company that will provide
significant benefits to our shareholders and customers alike.
Q. What am I being asked to vote on?
A. Both the Bay View and FMAC shareholders are being asked to approve the
proposed merger of FMAC and Bay View. As part of the merger proposal, Bay
View shareholders are also being asked to approve issuing Bay View stock in
the merger. Bay View shareholders are also being asked to approve
increasing the number of shares reserved for issuance under Bay View's 1995
Stock Option and Incentive Plan from 2,000,000 to 2,500,000.
Q. What will I receive in the merger?
A. FMAC shareholders will be given the opportunity to elect to receive, for
each share of FMAC common stock they own, either $10.25 in cash or .5125
shares of Bay View common stock. In other words, you can elect to receive
cash for all of your shares, stock for all of your shares, or a combination
of cash and stock for your shares. However, after all the elections have
been made, the elections will be adjusted to ensure that 60% of the FMAC
shares are paid in Bay View stock and 40% of the FMAC shares are paid in
cash, and that no former FMAC shareholder owns more than 9.99% of the Bay
View common stock after the merger, other than any former FMAC shareholder
who had expressly been approved by the appropriate banking regulatory
authorities to own more than 9.99% of the Bay View common stock, or for
whom no additional approval would be necessary. The adjustments will be
made on a pro rata basis. Because of the possible adjustments to the
elections, FMAC shareholders may receive stock and/or cash in amounts that
are not consistent with their elections.
Bay View shareholders will not change their Bay View common shares as a result
of the merger.
Q. What should I do now?
A. You need to read this document and complete, sign and date the proxy card
and mail it to us in the enclosed return envelope as soon as possible. If
you sign and send the proxy card and do not indicate how you want to vote,
we will count your proxy card as a vote in favor of the merger, and in
favor of the stock option plan proposal in the case of Bay View
shareholders. The Boards of Directors of Bay View and FMAC recommend voting
FOR the merger proposal. The Board of Directors of Bay View recommends
voting FOR the stock option plan proposal.
Q. If my shares are held in "street name" by a broker, will the broker vote
the shares for me?
A. Brokers may vote shares for Bay View shareholders on the stock option plan
proposal but may not vote any Bay View or FMAC shares on the merger
proposal. You must instruct your broker to vote your shares on the merger
proposal, following the directions provided by your broker. Your failure to
instruct your broker on the merger proposal will be equivalent to voting
against the merger.
Q. Should I send in my stock certificates now?
A. No. FMAC shareholders will be sent written instructions for exchanging
stock certificates at a later date. Bay View shareholders will keep their
current stock certificates.
Q. Can I change my vote after submitting my proxy card?
A. Yes. You can change your vote at any time prior to the special meeting by
submitting a later-dated signed proxy card or by attending the meeting and
voting in person.
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Q. When do you expect the merger to be completed?
A. We hope to complete the merger in the third quarter of 1999.
Q. What should I do if I have questions?
A. If you have any questions about the merger or the meetings you should
contact:
For Bay View For FMAC
information: information:
Bay View Capital Franchise Mortgage
Corporation Acceptance Company
1840 Gateway Drive 1888 Century Park East
San Mateo, CA 94404 Third Floor
Attention: Robert J. Flax Los Angeles, CA 90067
(650) 312-7200 Attention: Kevin Burke
(800) 611-3622
This document incorporates by reference important business and financial
information about Bay View and FMAC that is not included in this document. The
information incorporated by reference is available without charge to
shareholders upon written or oral request to the persons identified above. To
ensure timely delivery of th information, your request should be received by
August 24, 1999.
<PAGE>
SUMMARY
This section briefly summarizes some of the information in this Proxy
Statement/Prospectus. Because this is a summary, it does not contain all of the
information that may be important to you. You should read the entire Proxy
Statement/Prospectus and its appendices carefully before you decide how to vote.
The Companies
Bay View Capital Corporation
1840 Gateway Drive
San Mateo, California 94404
(650) 312-7200
Bay View is the holding company for (i) Bay View Bank, N.A., a national bank,
and (ii) Bay View Securitization Corporation, a Delaware corporation formed for
the purpose of issuing asset-backed securities through a trust. Bay View also
owns all of the common securities of Bay View Capital I, a business trust formed
by Bay View for the purpose of issuing $90,000,000 of Bay View Capital I's 9.76%
Cumulative Capital Securities. Bay View Bank includes its wholly owned
subsidiaries: Bay View Acceptance Corporation, a consumer finance company; Bay
View Commercial Finance Group, a commercial finance company; MoneyCare, Inc., an
investment sales subsidiary; and Bay View Auxiliary Corporation, a trustee under
deeds of trust originated by Bay View Bank. At March 31, 1999, Bay View had
total assets of $5.8 billion, deposits of $3.3 billion and stockholders' equity
of $378 million.
On July 8, 1999, Bay View announced the pending purchase of two branches
representing approximately $125 million in deposits from Luther Burbank Savings.
Bay View will pay a 5.25% deposit premium. The transaction is expected to close
on September 25, 1999. Bay View expects these new branches in Mill Valley and
Novato, California to increase its market share ranking in Marin County from
tenth to sixth.
Franchise Mortgage Acceptance Company
1888 Century Park East
Third Floor
Los Angeles, California 90067
(800) 611-3622
FMAC is a commercial finance company engaged in the business of originating
and servicing loans to small businesses, with a primary focus on established
national and regional franchise concepts. FMAC also engages in the business of
originating and servicing multi-family income producing property loans.
Additionally, FMAC's insurance service subsidiary offers insurance products to
businesses nationwide. At March 31, 1999, FMAC had total assets of $632 million
and stockholders' equity of $152 million.
The Shareholder Meetings
Bay View Shareholders (page __)
Date, Time and Place. The Bay View Special Meeting will be held on August 31,
1999, at the main office of Bay View, 1840 Gateway Drive, Third Floor, San
Mateo, California, at 1:00 p.m., local time, unless adjourned or postponed.
Record Date. You can vote at the Bay View Special Meeting if you owned Bay
View common stock at the close of business on July 15, 1999.
Matters to be Considered. At the Bay View Special Meeting you will be asked
to adopt the merger agreement and approve issuing Bay View common stock in the
merger. You will also be asked to approve amending Bay View's 1995 Stock Option
and Incentive Plan to increase the number of shares reserved thereunder from
2,000,000 to 2,500,000.
Vote Required. The proposal to adopt the merger agreement and approve the
issuance of Bay View common stock will be passed if a majority of the
outstanding shares of Bay View common stock are voted in favor of the proposal.
The proposal to approve the amendment to the stock option plan will be passed if
a majority of the shares of common stock duly voted on the matter is voted in
favor of the proposal.
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Proxies. You can revoke your proxy before it is voted either by sending to
Bay View a revocation notice or a new proxy or by attending the Bay View Special
Meeting and voting in person. You will not revoke your proxy simply by attending
the Bay View Special Meeting.
FMAC Shareholders (page __)
Date, Time and Place. The FMAC Special Meeting will be held on August 31,
1999, at the main office of FMAC, 1888 Century Park East, Third Floor, Los
Angeles, California, at 10:00 a.m., local
time, unless adjourned or postponed.
Record Date. You can vote at the FMAC Special Meeting if you owned FMAC
common stock at the close of business on July 19, 1999.
Matter to be Considered. At the FMAC Special Meeting, you will be asked to
adopt the merger agreement.
Vote Required. The proposal to adopt the merger agreement will be passed if
a majority of the outstanding shares of FMAC common stock are voted in favor of
it.
Proxies. You can revoke your proxy before it is voted either by sending to
FMAC a revocation notice or a new proxy or by attending the FMAC Special Meeting
and voting in person. You will not revoke your proxy simply by attending the
FMAC Special Meeting.
The Merger
We have attached the merger agreement to this document as Appendix A. Please
read the merger agreement. It is the legal document that governs the
transaction.
General (page __)
We propose a merger of FMAC and Bay View, with Bay View as the surviving
publicly-traded company. Bay View's shareholders would own approximately 67% of
the combined company and FMAC's shareholders the remainder. We hope to complete
this transaction in the third quarter of 1999.
Merger Consideration (page __)
If you are a Bay View shareholder, you will not need to exchange your shares
of Bay View common stock.
If you are an FMAC shareholder, you will be given the opportunity to elect to
receive, for each share of FMAC common stock that you own, either $10.25 in cash
or .5125 shares of Bay View common stock, and the associated rights under the
Bay View Stockholder Protection Rights Agreement. In other words, you can elect
to receive cash for all of your shares, stock for all of your shares, or a
combination of cash and stock for your shares. However, after all the elections
have been made, the elections will be adjusted to ensure that 60% of the FMAC
shares are paid in Bay View stock and 40% of the FMAC shares are paid in cash,
and that no former FMAC shareholder owns more than 9.99% of the Bay View common
stock after the merger, other than any former FMAC shareholder who had expressly
been approved by the appropriate banking regulatory authorities to own more than
9.99% of the Bay View common stock, or for whom no additional approval would be
necessary. The adjustments will be made on a pro rata basis. Because of the
possible adjustments to the elections, FMAC shareholders may receive stock
and/or cash in amounts that are not consistent with their elections.
Shareholders who properly dissent from the merger will not receive shares, but
will receive cash in an amount that may be more or less than $10.25 per share.
You will need to exchange your FMAC common stock certificates for Bay View
common stock certificates or cash. We will send you the forms to do this.
The exchange ratio for the stock portion of the consideration has been fixed
at .5125. Based on the trading price for Bay View common stock on July __, 1999
($__.__ per share), the value of .5125 shares of Bay View common stock would
have been $______. The value of Bay View common stock, however, will fluctuate.
Fluctuations will result in an increase or decrease in the value of the Bay View
common stock to be received by FMAC shareholders.
3
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In addition to the merger consideration that Bay View will pay to the FMAC
shareholders, as a result of the merger Bay View will succeed to the obligations
under the "earn-out" agreement entered into between FMAC and Bankers Mutual in
connection with FMAC's 1998 acquisition of Bankers Mutual. Under this agreement,
Bay View is obligated to pay the former Bankers Mutual shareholders up to an
aggregate of $30 million through April 1, 2002 if the Bankers Mutual division
meets certain performance targets. $7.5 million of the contingent cash payments
has previously been paid to the former Bankers Mutual shareholders.
FMAC Stock Options (page __)
The options to purchase FMAC common stock under FMAC's stock option plan will
be converted into options to purchase Bay View common stock with appropriate
adjustments to the number of shares subject to the options and to the exercise
price.
Recommendations to Shareholders (page __)
Bay View. The Bay View Board of Directors has unanimously adopted the merger
agreement and the issuance of common shares in the merger and believes that the
merger and the issuance of the shares of Bay View common stock are fair to, and
in the best interests of, its shareholders. The Board of Directors has also
unanimously approved the proposed amendment to the stock option plan and
believes that the amendment is in the best interests of Bay View shareholders.
The Bay View Board therefore recommends a vote FOR adoption of the merger
proposal and the stock option plan proposal.
FMAC. The FMAC Board of Directors has unanimously adopted the merger
agreement and believes that the merger is fair to, and in the best interests of,
its shareholders. The FMAC Board therefore recommends a vote FOR adoption of the
merger agreement.
Opinions of Financial Advisors (pages ____)
Bay View. Lehman Brothers has delivered its opinion to the Bay View Board that
as of March 11, 1999, based upon and subject to the various considerations set
forth in Lehman Brothers' opinion, the consideration to be paid by Bay View in
the merger is fair to Bay View from a financial point of view. A copy of
Lehman's opinion is attached to this document as Appendix B. You should read it
completely to understand the assumptions made, matters considered and
limitations of the review made by Lehman in providing this opinion.
FMAC. Credit Suisse First Boston has delivered its opinion to the FMAC Board
that as of March 10, 1999, based upon and subject to the various considerations
set forth in CSFB's opinion, the merger consideration was fair to FMAC
shareholders from a financial point of view. A copy of CSFB's opinion is
attached to this document as Appendix C. You should read it completely to
understand the assumptions made, matters considered and limitations of the
review made by CSFB in providing this opinion.
Appraisal Rights (page __)
If you are an FMAC shareholder, Delaware law permits you to dissent from the
merger. If you dissent, the fair value of your stock may be determined by a
court and paid to you in cash. To do this, you must follow certain procedures,
including giving FMAC certain notices and not voting your shares in favor of the
merger. You will not receive any stock in Bay View if you dissent and follow all
of the required procedures. Instead, you will only receive the value of your
stock in cash as determined by a court. The relevant sections of Delaware law
governing this process are attached to this document as Appendix D.
Bay View shareholders do not have dissenters' rights with respect to the
merger.
What Needs to be Done to Complete the Merger
(page __)
The completion of the merger depends on a number of conditions being met. In
addition to compliance with the merger agreement, these conditions include:
1. Adoption of the merger agreement by both the Bay View shareholders and
FMAC shareholders.
2. The absence of any court injunction or order preventing the consummation of
the merger.
3. Approval of the merger by regulators, which approvals have been received.
4
<PAGE>
4. Receipt of tax opinions regarding the tax consequences of the merger.
5. FMAC being Year 2000 compliant for regulatory purposes.
The merger agreement also contains other conditions.
Where law permits, Bay View or FMAC could decide to complete the merger even
though one or more of the conditions in the merger agreement has not been met.
We cannot be certain when, or if, the conditions to the merger will be satisfied
or waived, or that the merger will be completed. Termination of the Merger
Agreement (page __)
We can mutually agree at any time to terminate the merger agreement prior to
completing the merger, even if the shareholders of both our companies have
approved it. Also, either of us can terminate the merger agreement if:
1. A regulatory authority does not grant an approval needed to complete the
merger.
2. Either of our shareholders do not adopt the merger agreement.
3. The other party materially breaches the merger agreement and doesn't cure
the breach within 30 days.
4. The merger has not been completed by January 15, 2000 and the terminating
party is not then in material breach of the merger agreement.
5. Certain other conditions to closing of the merger have not been
satisfied.
FMAC can also terminate the merger agreement if:
1. The FMAC Board receives a competing proposal and determines that proceeding
with the merger would violate its fiduciary duties.
2. Bay View's average common stock price during a valuation period prior to
the anticipated closing date is less than $17.50 and Bay View's average
stock price has performed 12.5 percentage points worse than a peer group
index; provided that Bay View may void such termination by increasing the
exchange ratio to a specified minimum.
Break-up Fee (page ___)
FMAC will become obligated to pay a break-up fee of $8 million to Bay View if
it receives a competing acquisition proposal and any one of the following events
occurs:
1. FMAC terminates the merger agreement because its Board of Directors
determines that to proceed would violate its fiduciary duties.
2. Bay View terminates the merger agreement because FMAC has not rejected the
competing proposal within ten days.
3. FMAC shareholders fail to approve the merger agreement.
Either Bay View or FMAC may become obligated to pay the break-up fee if it
fails to hold its shareholder meeting or changes its recommendation to its
shareholders.
Interests of Directors and Officers in the Merger That are Different From
Your Interests (page --)
Some of the FMAC directors and officers have interests in the merger that are
different from, or in addition to, their interests as shareholders in FMAC.
These interests exist because of agreements that FMAC directors and officers
have with FMAC and under terms of the merger agreement, including the following:
1. The merger agreement provides that the current intention of Bay View is
that, as of the effective time of the merger, the Board of Directors and
Credit Committee of the Bay View Bank subsidiary anticipated to conduct the
business of FMAC following the merger will include persons who are
currently officers and directors of FMAC.
2. Subject to its fiduciary duties, the Bay View Board of Directors will
nominate Wayne L. Knyal, currently President, Chief Executive Officer and a
director of FMAC, as a director of Bay View.
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3. The FMAC stock option plan provides for the accelerated vesting of stock
options and restricted stock held by officers, directors and employees of
FMAC upon FMAC shareholder approval of the merger.
4. Pursuant to the merger agreement, certain officers of FMAC, including Wayne
L. Knyal, President of FMAC, have entered into employment agreements with
FMAC, which include severance arrangements and which will be effective
through December 31, 2002, subject to automatic renewal provisions.
5. Bay View has agreed to indemnify and hold harmless FMAC's existing officers
and directors for premerger acts and omissions to the same extent such
persons are indemnified and held harmless under Delaware law and FMAC's
charter documents. Bay View has also agreed to provide directors' and
officers' liability insurance for a period of six years from the effective
time of the merger for FMAC's existing officers and directors.
The members of the Board of Directors of FMAC knew about these additional
interests, and considered them, when they approved the merger agreement.
Regulatory Approvals Required (page __)
Bay View and Bay View Bank must receive approvals from the Federal Reserve
Board and the Office of the Comptroller of the Currency to acquire and engage in
the FMAC loan and leasing activities which are considered permissible for
national banks or bank holding companies. Certain FMAC equity investments and
insurance activities not permissible for national banks or bank holding
companies must either be divested before the merger or, with regulatory
approval, within a specified period after the merger unless conformed to
permissible activities or equity investments. The Comptroller of the Currency
must also approve the contribution as capital surplus by Bay View to Bay View
Bank of the assets and liabilities of FMAC to be acquired in the merger and a
special dividend by Bay View Bank to Bay View to facilitate the consummation of
the merger.
Bay View and Bay View Bank have received the required approvals from the
Federal Reserve Board and the Comptroller of the Currency.
Material United States Federal Income Tax Consequences (page __)
It is expected that the merger will constitute a tax-free reorganization for
Federal income tax purposes and, accordingly, no gain or loss will be recognized
by FMAC shareholders on the conversion of FMAC common stock solely into Bay View
common stock by reason of the merger. Gain, if any, may be recognized by reason
of the receipt of cash in lieu of shares of Bay View common stock, whether
pursuant to an affirmative election to receive such cash or not, or by reason of
cash received in lieu of fractional shares of Bay View common stock. See "The
Merger - Material United States Federal Income Tax Consequences." FMAC
shareholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the merger.
Accounting Treatment
The merger will be accounted for as a "purchase" in accordance with generally
accepted accounting principles.
Directors of Bay View after the Merger (page ---)
Following the merger, Bay View's Board of Directors will consist of those
persons who were directors immediately before the merger and Wayne L. Knyal,
President and Chief Executive Officer of FMAC.
Other Bay View Proposal
Bay View shareholders will also be presented with a proposal to amend the
1995 Stock Option and Incentive Plan to increase the number of shares reserved
thereunder from 2,000,000 to 2,500,000. The Board of Directors of Bay View
recommends approval of the amendment to meet anticipated requirements for future
grants of stock options to FMAC employees who become Bay View employees as a
result of the merger and in connection with potential future acquisitions. Even
if approved, the amendment will not be implemented if the merger is not
completed.
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RISK FACTORS
In evaluating the merger and the merger agreement, shareholders should take
into account the following risks, as well as other information included in or
incorporated by reference into this document:
Risks Related to the Merger Consideration
FMAC shareholders could end up with less than $10.25 worth of Bay View common
stock per share of FMAC common stock.
The stock portion of the merger consideration is based upon a fixed exchange
ratio of .5125. The market value of .5125 shares of Bay View common stock will
fluctuate with changes in the market price of Bay View common stock. On _______,
1999, based on a closing price of $________, .5125 of a share of Bay View common
stock was worth $_________, which is less than the $10.25 per FMAC share to be
received in the cash portion of the merger consideration. There can be no
assurance as to the market value at the time of the merger of the stock portion
of the consideration to be received by FMAC shareholders.
FMAC shareholders may not receive merger consideration that is consistent with
their elections.
FMAC shareholders will have the opportunity to elect to receive, for each
FMAC common share they own, either $10.25 in cash or .5125 shares of Bay View
common stock. However, after all the elections have been made, the elections
will be adjusted to ensure that 60% of the FMAC shares are paid in Bay View
stock and 40% of the FMAC shares are paid in cash, and that no former FMAC
shareholder owns more than 9.99% of the Bay View common stock after the merger,
other than any former FMAC shareholder who had expressly been approved by the
appropriate banking regulatory authorities to own more than 9.99% of the Bay
View common stock, or for whom no additional approval would be necessary. The
adjustments will be made on a pro rata basis. Because of the possible
adjustments to the elections, FMAC shareholders may receive stock and/or cash in
amounts that are not consistent with their elections.
The price of Bay View's common stock may decrease rapidly and prevent
shareholders from selling their stock at a profit.
The market price of Bay View's common stock could decrease in price rapidly
at any time and prevent stockholders from selling their shares at a profit. The
market price of Bay View's common stock has fluctuated in recent years. Since
January 1, 1998 the market price has ranged from a low of $12.50 per share to a
high of $38.00 per share. Fluctuations may occur, among other reasons, in
response to:
o operating results;
o announcements by competitors;
o regulatory changes;
o economic changes;
o general market conditions; and
o legislative changes.
The trading price of Bay View's common stock could continue to be subject to
wide fluctuations in response to the factors set forth above and other factors,
many of which are beyond Bay View's control. The stock market in recent years
has experienced extreme price and trading volume fluctuations that often have
been unrelated or disproportionate to the operating performance of individual
companies. You should consider the likelihood of these market fluctuations
before investing in our stock.
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The sale of a substantial amount of Bay View common stock after the merger could
adversely affect the market price of Bay View common stock.
All of the shares of Bay View common stock that FMAC shareholders receive in
the merger may be sold immediately, except for those shares received by
affiliates of FMAC within the meaning of Rule 145 of the Securities Act of 1933,
as amended. Bay View has agreed to register under the Securities Act of 1933 for
resale the up to approximately 2,792,955 shares of Bay View common stock that
may be received by FMAX Holdings, L.L.C. in the merger, and it is anticipated
that FMAX will sell such shares after the merger. The sale of a substantial
amount of Bay View common stock after the merger could adversely affect its
market price. It could also impair the combined company's ability to raise money
through the sale of more stock or other forms of capital. In addition, the sale
of authorized but unissued shares of Bay View common stock by Bay View after the
merger could adversely affect its market price. There will be approximately 28.0
million shares of Bay View common stock outstanding after the merger, excluding
Bay View shares issuable upon the exercise of outstanding options. Bay View's
certificate of incorporation authorizes the issuance of up to 60,000,000 shares
of Bay View common stock.
Risks Related to the Acquisition of FMAC
Bay View may experience greater than expected difficulties in operating FMAC's
businesses.
The merger involves the combination of two companies that have previously
operated independently. Bay View expects to realize increased revenues, together
with other financial and operating benefits from the merger, but there can be no
assurance as to when, or the extent to which, the combined company will be able
to realize these benefits. Bay View may experience greater than expected
difficulties in operating FMAC, which could have an adverse effect on Bay View's
ability to realize the expected benefits of the merger.
There are many things that could go wrong and adversely affect the business
and profitability of the combined company. We cannot predict the full range of
post-merger problems that may occur. Some possible difficulties include:
o diversion of management's attention;
o the failure to retain key personnel of FMAC;
o the failure to satisfactorily assimilate the business culture of FMAC;
o increased competition in FMAC's businesses, including from competitors
with more financial resources than Bay View has; and
o risks associated with unanticipated events or liabilities.
Bay View may not be permitted to own some assets or operate some businesses
owned by FMAC for regulatory reasons. We may have to sell the assets or
businesses on unfavorable terms or modify business operations in a way that will
make them less profitable.
In connection with its approval of the merger, the Federal Reserve Board
has required Bay View, within the two years following the merger, to divest or
conform to regulatory requirements FMAC's businesses and activities that are
impermissible for Bay View to engage in for regulatory purposes. These affected
FMAC assets include equity interests in restaurant franchises. There can be no
assurance that FMAC or Bay View will be able to sell these assets on favorable
terms. In addition, in order to continue to engage in the insurance agency
business after the completion of the acquisition Bay View will be required to
modify FMAC's insurance agency operations, and these modifications could make
those operations less profitable to Bay View.
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The Bankers Mutual division of FMAC participates in the Fannie Mae
delegated underwriting and servicing program. Because of Bankers Mutual's
current loss sharing arrangement with Fannie Mae, under federal banking
regulations Bay View will be required to hold capital against all loans sold
under the program as if Bay View owned 100% of these loans. While FMAC has
agreed to take any actions that Bay View may request to limit Bay View's
liability under the Fannie Mae program, there can be no assurance that Bay View
and FMAC will successfully limit Bay View's potential liability under the Fannie
Mae program or otherwise limit the additional capital requirements to which Bay
View would be subject. If Bay View determines, for regulatory purposes or
otherwise, that it is in its best interests to sell the Fannie Mae servicing
portfolio, there can be no assurance that Bay View will be able to do so on
favorable terms.
FMAC is dependent on securitizations. Any impairment of FMAC's ability to
complete securitizations could have a material adverse effect on the business of
the combined company.
FMAC has historically pooled and sold through securitization substantially
all of the franchise loans which it originates, as well as many other loans.
Upon consummation of the merger, Bay View intends to retain a portion of the
commercial franchise loans for its portfolio and to sell or securitize the
remainder. Under FMAC's securitization structure, FMAC sells a pool of loans on
a non-recourse basis to a single purpose trust, which then issues to investors
securities collateralized by the loans. While FMAC's dependency on
securitizations is expected to be reduced when it operates as a subsidiary of
Bay View, any impairment in FMAC's ability to complete securitizations could
have a material adverse effect on the combined business. Factors affecting
FMAC's ability to complete securitizations of its loans include:
o conditions in the securities markets generally;
o conditions in the asset-backed securities markets specifically;
o the performance of the securities issued in connection with FMAC's
securitizations;
o the credit quality of FMAC's loans;
o compliance of FMAC's loans with the eligibility requirements for a
particular securitization;
o FMAC's ability to adequately service its loans; and
o any material negative rating agency action pertaining to certificates
issued in FMAC's securitizations.
The "gain on sale" from the sale of loans in securitizations has historically
been the largest component of FMAC's revenues, and retained interests in loan
securitizations are typically established as balance sheet assets in connection
with securitizations, based in part upon estimates of future credit losses. FMAC
has also retained subordinated securities issued in connection with its
securitization program. FMAC is currently attempting to sell these securities.
If actual credit losses on securitized loans exceed the estimates made at the
time of the securitizations, Bay View could be required to record an expense to
reduce the carrying value of the retained interests and securities classified as
available-for-sale, if any, on its balance sheet. Any expense of this type could
be material to Bay View's earnings if the credit performance of securitized
loans deteriorates significantly. At March 31, 1999, the retained interests in
loan securitizations held by FMAC totaled $30.0 million and securities
classified as available-for-sale totaled $16.7 million.
In addition, the securitization market for FMAC's loans and leases is
relatively undeveloped and may be more susceptible to market fluctuations or
other adverse changes than more developed capital markets. To the extent FMAC
makes loans and leases in new industry sectors or to different types of entities
in existing industry sectors, there is a risk that these loans and leases will
not be securitizable or will be securitizable only on terms unfavorable to FMAC.
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FMAC advances funds in connection with its securitization activities. If FMAC is
unable to recover a significant amount of these advances, it could have a
material adverse effect on Bay View's business, profitability and growth
prospects.
In connection with its securitization activity, FMAC currently services
approximately $2.8 billion in commercial franchise loans. As the servicer, FMAC
periodically advances funds, and is sometimes required to advance funds in
accordance with its servicing agreements, to the trustees of the securitizations
or directly to other parties, including the underlying franchisees/borrowers.
The advances may be the result of cash flow shortfalls attributable to
delinquent loan payments or the result of other factors. While FMAC is entitled
in accordance with its servicing agreements to recover some of these advances
prior to distributing payments to security holders, to the extent FMAC does not
recover its advances, there could be a material adverse effect on the business,
profitability and growth prospects of the combined company. Under some
circumstances, these advances are also recovered under work-out arrangements
which may include loan modifications, sale of the underlying franchise,
concessions from the franchisor, or restructuring of the securitization. In most
instances, the work-out arrangements are developed with the cooperation of the
franchisor. At March 31, 1999, FMAC had outstanding advances of approximately
$9.8 million related to its securitizations.
FMAC recently completed a loan restructuring in connection with
approximately $5 million in funds it advanced on behalf of an operator that owns
130 Pizza Hut restaurants which secure loans included in a securitization pool.
These loans were not originated by FMAC and the current operator was recruited
by FMAC to replace the original borrower. While the operator's $64 million in
loans in the securitization pool are current, the loan restructuring was
necessary to enable the operator to continue to service these loans. The loan
restructing resulted in holders of securities from this securitization pool who
are affiliated with Imperial Credit Industries, Inc. incurring losses as a
result of a $14.0 million reduction in the operator's loan balance. FMAC's
equity interest in the securitization had previously been written off. Under the
loan restructuring FMAC's advances should be repaid prior to the final payment
date of the restructured loans in 2008. This resolution could affect the current
investment ratings of the securities issued pursuant to the securitization that
includes these loans. Before completion of loan restructuring, a rating agency,
Fitch IBCA, placed all classes of notes issued under the securitization that
includes these loans on RatingAlert Negative. Fitch noted that its action was
prompted by the negative performance of the $64 million in loans that were not
originated by FMAC, does not impact any other securitizations of FMAC and was in
no way associated with FMAC in its function as servicer and/or special servicer
under the securitization. Fitch also noted that it may take further rating
action on some or all of the note classes upon completion of the loan
restructuring.
Risks Related to Bay View's Current Business Activities
As Bay View continues to transition its business to commercial banking
activities, a gradual increase in its consolidated credit risk is likely to
occur, which means that there is a greater risk that borrowers will be unable to
repay their loans from Bay View or make all required lease payments to Bay View.
Borrower defaults resulting in losses in excess of our allowance for loan and
lease losses could have a material adverse effect on our business, profitability
and financial condition.
Bay View's business strategy centers around the continued transition to
commercial banking activities and the anticipated increase of Bay View's net
interest margin. In order to realize this objective, one of Bay View's main
strategies is to replace lower-yielding single-family mortgage loans and
mortgage-backed securities with consumer and commercial loans and leases with
higher risk-adjusted returns, shorter maturities and less sensitivity to
interest rate fluctuations. These assets are funded with Bay View's low cost
deposit base. As this process takes place, a gradual increase in Bay View's
consolidated credit risk is likely to occur, which means that there is a greater
risk that borrowers will be unable to repay their loans from Bay View or make
all required lease payments to Bay View. Borrower defaults resulting in losses
in excess of Bay View's allowance for loan and lease losses could have a
material adverse effect on Bay View's business, profitability and financial
condition.
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Single-Family Mortgage Loans
Single-family mortgage loans still comprise the largest component of Bay
View's loan and lease portfolio and are secured primarily by properties located
in northern California. Bay View's concentration of these loans results in lower
yields and lower profitability for Bay View. These loans are generally made on
the basis of the borrower's ability to make repayments from his or her
employment and the value of the property securing the loan. Despite Bay View's
decision to discontinue the origination of single-family mortgage loans in 1996,
Bay View's exposure to these lower-yielding, and relatively low risk assets, has
actually increased to approximately $1.4 billion, or 31.0% of Bay View's total
gross loan and lease portfolio at March 31, 1999, from $551 million, or 22.9%,
at December 31, 1997, primarily due to the acquisition of EurekaBank.
Multi-Family Mortgage and Commercial Real Estate Loans
Multi-family mortgage and commercial real estate loans are generally
considered to be riskier than single-family mortgage loans because multi-family
mortgage and commercial real estate loans typically have larger balances to a
single borrower or group of related borrowers. In addition, the borrower's
ability to repay multi-family mortgage and commercial real estate loans
typically depends upon the successful operation of the property or business
conducted on the property securing the loan as opposed to a desire by the
borrower to continue to occupy the residence on the property securing the loan.
These loans may therefore be more adversely affected by conditions in the real
estate markets or in the economy generally. For example, if the cash flow from
the project is reduced due to leases not being obtained or renewed, the
borrower's ability to repay the loan may be impaired. Multi-family mortgage and
commercial real estate loans totaled $1.3 billion, or 30.5% of Bay View's total
gross loan and lease portfolio, at March 31, 1999. These loans represent Bay
View's second largest loan concentration and are also primarily secured by
properties located in northern California.
Motor Vehicle Loans and Leases
Because Bay View's primary focus for motor vehicle loans and leases is on the
credit quality of the customer rather than the value of the collateral, the
collectibility of a motor vehicle loan or lease is more likely than a
single-family first mortgage loan to be affected by adverse personal
circumstances. Bay View relies on the borrower's continuing financial stability,
rather than the value of the vehicle, for the repayment of a motor vehicle loan
and for payment of all required amounts under a motor vehicle lease. Because
motor vehicles usually rapidly depreciate in value, it is unlikely that a
repossessed vehicle will cover repayment of the outstanding loan balance or
unpaid amounts under the terms of the lease.
In one particular niche that Bay View operates, the typical motor vehicle
loan customer desires a longer term and/or higher relative loan amount than is
offered by many automobile financing sources. Bay View has therefore been able
to charge interest rates of 200 to 300 basis points over the rates typically
offered by traditional sources of motor vehicle financing such as banks and
captive finance companies. The higher interest rate and longer maturity of the
loans increases the risk that the borrower will be unable to repay the loan.
Bay View retains a residual interest in its motor vehicle-related operating
leased assets. The estimated fair market value of the motor vehicle at the end
of the contract term of the lease, if any, is reflected as an asset on Bay
View's balance sheet over the term of the lease. At March 31, 1999, the residual
values related to Bay View's motor vehicle-related operating leases totaled
$157.1 million. Bay View's profitability depends, to some degree, upon its
ability to realize these residual values. Realization of residual values depends
on many factors, several of which are outside Bay View's control, including
general market conditions at the time of expiration of the lease, whether there
has been unusual wear and tear on, or use of, the motor vehicle and the cost of
a comparable new motor vehicle. If, upon the expiration of a lease, Bay View
sells or refinances the underlying motor vehicle and the amount realized is less
than the recorded value of the residual interest in the motor vehicle, Bay View
will recognize a loss reflecting the difference. If Bay View fails to realize
its aggregate recorded residual values, Bay View's financial condition and
profitability could be adversely affected.
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At March 31, 1999, motor vehicles loans totaled $578.4 million, which was
approximately 13.2% of Bay View's total gross loan and lease portfolio.
Additionally, operating leased assets totaled $261.2 million at March 31, 1999.
Home Equity Loans
High loan-to-value home equity loans are subject to increased risk of
delinquency and default as compared to single-family first mortgage loans. High
loan-to-value home equity loans, which totaled $471.3 million as of March 31,
1999, are secured by a lien, generally junior in priority to a senior lien on
the borrower's home. High loan-to-value home equity loans may have, when added
to existing senior lien balances, a post-funding combined loan-to-value ratio of
up to 125% of the value of the home securing the loan. If a borrower defaults on
a high loan-to-value home equity loan, Bay View's security interest will be
subordinate to all senior lien balances. It is therefore likely that in the case
of default, the collateral for the loan will not be sufficient to cover the
principal amount of the loan. In addition, the market value of the properties
securing these loans may decline, especially in an economic slowdown or
recession. Bay View does not intend to increase its exposure to high
loan-to-value home equity loans.
Bay View's home equity loans, including high loan-to-value home equity loans,
totaled approximately $611.4 million, or 14.0% of its total gross loan and lease
portfolio, as of March 31, 1999. At March 31, 1999, the average loan-to-value
ratio of Bay View's high loan-to-value home equity loan portfolio was 114%.
Because of this loan-to-value ratio, Bay View relies principally on the
creditworthiness of the borrower for repayment of its high loan-to-value home
equity loans and receives interest on these loans at a rate which is higher than
the interest rate it receives on single-family first mortgage loans.
Commercial Loans and Leases
Bay View's commercial loans and leases, which are comprised primarily of
asset-based loans, factoring and equipment leases, entail higher risk and are
typically made on the value of the collateral provided by the borrower to secure
the loan or lease. Most often, this collateral is accounts receivable, although
at times Bay View also relies upon collateral such as inventory or machinery.
There is little additional credit support provided by the borrower for most of
these loans and leases and the probability of repayment is based almost solely
on the liquidation of the pledged collateral. As a result, in the case of loans
and leases secured by accounts receivable, the availability of funds for the
repayment of such loans and leases may be substantially dependent on the ability
of the borrower to collect amounts due from its customers. The collateral
securing other loans and leases may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business. In
addition, these loans and leases carry much higher rates of interest than those
charged by traditional small business lenders, such as commercial banks, to
compensate for the greater risk that our borrowers will be unable to repay their
loans or leases. The higher interest rates charged on these loans and leases
increase the risk that the borrower will be unable to repay the loan or lease.
Commercial loans and leases were $106.4 million, or 2.4% of Bay View's total
gross loan and lease portfolio, as of March 31, 1999.
Franchise Loans to Small and Medium-Sized Businesses
Loans to small and medium-sized businesses are generally riskier than
single-family mortgage loans. Typically, the success of a small or medium-sized
business depends on the management talents and efforts of one or two persons or
a small group of persons, and the death, disability or resignation of one or
more of these persons could have a material adverse impact on the business. In
addition, small and medium-sized businesses frequently have smaller market
shares than their competition, may be more vulnerable to economic downturns,
often need substantial additional capital to expand or compete and may
experience substantial variations in operating results, any of which may impair
a borrower's ability to repay a loan or make payments on a lease. Bay View
purchased from FMAC approximately $330 million of loans to small and
medium-sized businesses, primarily franchise operations, during the first
quarter of 1999. These loans represented 7.5% of Bay View's total gross loan and
lease portfolio at March 31, 1999. Bay View anticipates that ultimately
franchise loans may comprise up to 30% of its total consolidated assets.
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Unfavorable or worsened economic conditions or natural disasters in northern
California could significantly increase the number of borrowers unable to timely
repay their loans, and could result in a decline in the value of the properties
securing our loans, which could have a material adverse effect on us.
Bay View's current loan portfolio is concentrated in certain geographic
regions, particularly northern California. The number of borrowers unable to
repay their loans may be affected by changes in local economic and business
conditions. Unfavorable or worsened economic conditions in northern California
could significantly increase the number of borrowers unable to timely repay
their loans, and could result in a decline in the value of the properties
securing those loans, which could have a material adverse effect on Bay View. In
addition, the northern California area has been, and may in the future be,
subject to earthquakes and Bay View usually does not require its borrowers to
maintain earthquake insurance on properties securing mortgage loans.
Accordingly, earthquake damage to properties securing mortgage loans or to
properties Bay View owns could have a material adverse effect on Bay View.
Changes in interest rates could have a material adverse effect on Bay View's
profitability.
Bay View's ability to make a profit, like that of most financial
institutions, substantially depends upon its net interest income, which is the
difference between the interest income it earns on its interest-earning assets,
such as loans, and the interest expense it pays on its interest-bearing
liabilities, such as deposits. Certain assets and liabilities, however, may
react in different degrees to changes in market interest rates. Further,
interest rates on some types of assets and liabilities may fluctuate prior to
changes in broader market interest rates, while rates on other types may lag
behind. Additionally, some of Bay View's assets, such as adjustable rate
mortgages, have features, including payment and rate caps, which restrict
changes in their interest rates. As a result, Bay View's net interest margin
would be adversely impacted by a rise in interest rates where actual rates on
adjustable rate loans do not rise as rapidly as the cost of our funds.
Factors such as inflation, recession, unemployment, money supply,
international disorders, instability in domestic and foreign financial markets,
and other factors beyond Bay View's control may affect interest rates. Changes
in market interest rates will also affect the level of voluntary prepayments on
its loans and payments on its mortgage-backed securities resulting in the
receipt of proceeds that may be reinvested at a lower rate than the loan or
mortgage-backed security being prepaid. Although Bay View pursues an
asset-liability management strategy designed to control its risk from changes in
market interest rates, changes in interest rates could still have a material
adverse effect on Bay View's profitability.
The competition Bay View faces could adversely affect its profitability.
Bay View faces competition both in originating loans and leases and in
attracting deposits. The competition Bay View faces could adversely affect its
profitability. Competition in originating multi-family and commercial real
estate mortgage loans comes primarily from savings institutions, commercial
banks, mortgage bankers and insurance companies. Bay View competes for these
mortgage loans based on interest rates, types of products, loan fees charged and
the quality of customer service that it provides to borrowers. Competition in
attracting deposits comes primarily from savings institutions, commercial banks,
brokerage firms, mutual funds, credit unions and various types of investment
companies. Bay View also experiences competition for its motor vehicle loan and
leasing programs, primarily from large well-capitalized lending institutions and
finance companies, as well as from financing provided directly by automobile
manufacturers. Competition for factoring clients comes primarily from small
local factors or factors specializing in a specific industry segment, such as
trucking or personnel agencies. Competition for asset-based loans comes
primarily from small locally based commercial finance companies, large national
commercial finance companies and commercial banks. Competition for franchise
loans comes primarily from commercial banks, thrift institutions, diversified
finance companies, asset-based lenders, speciality franchise finance companies
and real estate investment trusts, among others. Due to their size, some of Bay
View's competitors may achieve economies of scale and, as a result, offer a
broader range of products and services and lower pricing than Bay View currently
offers.
13
<PAGE>
Changes in the regulatory structure or the statutes or regulations applicable to
Bay View could have a material impact on its operations.
Bay View and its subsidiaries are subject to extensive regulation,
supervision and examination by the Federal Reserve Board, the Comptroller of the
Currency and the Federal Deposit Insurance Corporation, which insures Bay View
Bank's deposits up to applicable limits. Regulatory authorities have extensive
discretion in carrying out their supervisory and enforcement responsibilities,
and regulations have been implemented which have increased capital requirements,
increased insurance premiums and resulted in increased administrative,
professional and compensation expenses. Any change in the regulatory structure
or the applicable statutes or regulations could have a material impact on Bay
View's operations. Additional legislation and regulations may be enacted or
adopted in the future which could significantly affect Bay View's powers,
authority and operations, and its competitors which, in turn, could have a
material adverse effect on its operations.
Any computer problems due to the Year 2000 issue could adversely affect Bay
View's business.
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, any of
Bay View's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000 which, in turn, could
result in system failures or miscalculations causing disruptions in the
operations of Bay View and its suppliers and customers. Any computer problems
due to the Year 2000 issue could adversely affect Bay View's business.
The potential impact of the Year 2000 issue on the financial services
industry could be material, as virtually every aspect of the industry and
processing of transactions will be affected. Due to the size of the task facing
the financial services industry and the interdependent nature of its
transactions, Bay View may be adversely affected by this problem, depending on
whether it and the entities with which it does business address the issue
successfully. The impact of the Year 2000 issue on Bay View will depend not only
on corrective actions that Bay View takes, but also on the way in which the Year
2000 issue is addressed by governmental agencies, businesses and other third
parties that provide services or data to Bay View, or receive services or data
from Bay View, or whose financial condition or operational capability is
important to Bay View.
Bay View relies upon third-party software vendors and data processing service
providers for the majority of its electronic data processing and does not
operate any proprietary programs which are critical to Bay View's operations.
Thus, the focus of Bay View is to monitor the progress of its primary software
and data processing service providers toward resolving the Year 2000 issue.
Failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect Bay View's
results of operations, liquidity and financial condition. Due to the general
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
Bay View is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on Bay View's results of operations,
liquidity and financial condition. Bay View's Year 2000 compliance program will
reduce levels of uncertainty about the Year 2000 issue including questions as to
the compliance and readiness of its material third-party providers. Bay View
believes that, with the implementation of new and/or upgraded business systems
and completion of the Year 2000 compliance program, the possibility of
significant interruptions of normal operations has been significantly reduced.
14
<PAGE>
FORWARD-LOOKING INFORMATION
Certain statements contained in or incorporated by reference into this
document are "forward-looking statements" within the meaning of the United
States Private Securities Litigation Reform Act of 1995. All forward- looking
statements involve risks and uncertainties. In particular, any statements
regarding the benefits of the merger, as well as expectations with respect to
future revenues, are subject to known and unknown risks, uncertainties and
contingencies, many of which are beyond the control of Bay View and FMAC, which
may cause actual results, performance or achievements to differ materially from
anticipated results, performance or achievements. Factors that might affect such
forward-looking statements include, among other things:
o the demand for Bay View's and FMAC's products;
o competitive factors in the businesses in which Bay View and FMAC
compete;
o changes in tax requirements, including tax rate changes, new tax laws
and revised tax law interpretations;
o adverse changes occurring in the securities markets;
o inflation and changes in the interest rate environment that reduce
margins or the fair value of financial instruments;
o general economic or business conditions, either nationally or in the
combined company's market areas, that are worse than expected;
o legislative or regulatory changes that adversely affect our combined
business;
o the timing, impact and other uncertainties of future acquisitions by
Bay View; or the success or failure in the integration of their
operations;
o the ability to enter new markets successfully and capitalize on growth
opportunities;
o technological changes, including the Year 2000 issue, that are more
difficult or expensive than we expect;
o increases in defaults by borrowers and other loan delinquencies;
o increases in Bay View's provision for losses on loans and leases;
o increased costs or other difficulties relating to Bay View's pending
acquisition of FMAC;
o the inability to sustain or improve the performance of Bay View's
subsidiaries;
o the inability to identify suitable future acquisition candidates;
o the inability to achieve the assumptions defined in Bay View's
strategic plans, including any assumptions related to both
contemplated and consummated acquisitions;
o the outcome of pending or threatened legal or regulatory disputes and
proceedings;
o credit and other risks of lending, leasing and investment activities;
and
o the inability to utilize net operating loss carryforwards.
For additional information regarding Bay View, FMAC and the combined company,
see "Where You Can Find More Information."
15
<PAGE>
SELECTED FINANCIAL DATA OF BAY VIEW
We are providing the following financial information regarding Bay View to
aid you in your analysis of the financial aspects of the merger. We derived this
information in part from Bay View's audited financial statements for 1994
through 1998. The information at or for the three-month periods ended March 31,
1999 and 1998 is unaudited and was derived from our unaudited consolidated
quarterly financial statements. However, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation at such dates and for such periods have been made. The results
of operations for the three-month period ended March 31, 1999 are not
necessarily indicative of results that may be expected for the full fiscal year.
All information is presented in accordance with generally accepted accounting
principles. The per common share data has been restated to reflect the issuance
of stock dividends. The information is only a summary and you should read it in
conjunction with Bay View's historical financial statements and related notes
contained in the annual reports and other information that Bay View has filed
with the SEC. This historical financial information has also been incorporated
into this document by reference. We have listed the documents that we
incorporate by reference under the heading "Where You Can Find More
Information."
<TABLE>
<CAPTION>
At and For the Three
Months Ended
March 31, At and For the Year Ended December 31,
--------------------------- -----------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------ ------------ ---------- ---------- ------------ -------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet
Information(1)
Total assets............... $5,763,551 $5,341,413 $5,596,232 $3,246,476 $3,300,262 $3,004,496 $3,166,529
Mortgage-backed securities. 583,247 882,773 635,389 470,261 577,613 731,378 921,680
Loans and leases, net...... 4,392,979 3,934,008 4,191,269 2,373,113 2,474,717 2,062,268 2,054,563
Deposits................... 3,343,286 3,491,957 3,269,637 1,677,135 1,763,967 1,819,840 1,707,376
Borrowings................. 1,921,787 1,416,807 1,833,116 1,355,976 1,245,537 941,465 1,219,958
Capital Securities......... 90,000 -- 90,000 -- -- -- --
Stockholders' equity....... 378,083 388,705 377,811 173,627 200,062 207,977 217,315
Selected Results of Operations
Information(1)(2)
Interest income............ $ 100,021 $ 99,063 $ 406,363 $ 242,244 $ 241,755 $ 216,463 $ 197,326
Interest expense........... (59,238) (62,129) (251,762) (154,908) (160,773) (160,547) (130,401)
------------ ------------ ---------- ----------- ----------- ----------- -----------
Net interest income........ 40,783 36,934 154,601 87,336 80,982 55,916 66,925
Provision for losses on loans
and leases............... (5,311) (660) (9,114) (1,952) (1,898) (4,284) (2,367)
Gain (loss) on sale of loans and
securities............... -- 112 1,060 925 (1,453) (2,510) (1,081)
Leasing income............. 9,658 -- 11,341 -- -- -- --
Other noninterest income... 6,309 4,091 18,671 11,830 10,017 8,652 8,619
General and administrative
expenses.................. (26,156) (27,742) (113,567) (71,913) (58,955) (57,016) (47,287)
Dividend expense on Capital
Securities................ (2,235) -- (244) -- -- -- --
Leasing expense............ (6,681) -- (7,682) -- -- -- --
SAIF recapitalization
assessment................ -- -- -- -- (11,750) -- --
Income from real estate owned,
net....................... (17) (37) 181 543 4,806 1,081 95
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
At and For the Three
Months Ended
March 31, At and For the Year Ended December 31,
--------------------------- -----------------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------ ------------ ---------- ---------- ------------ -------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Results of Operations
Information (1)(2)
Recovery of (provision for)
losses on real estate.... (17) 24 59 585 103 (749) (145)
Amortization of intangible
assets................... (2,904) (2,746) (11,372) (4,088) (2,606) (3,944) (2,418)
--------- ---------- --------- ---------- ----------- ----------- ----------
Income (loss) before income tax
expense/benefit.......... 13,429 9,976 43,934 23,266 19,246 (2,854) 22,341
Income tax (expense) benefit (6,296) (4,916) (21,215) (9,245) (8,277) 708 (7,828)
Extraordinary items, net of tax -- -- -- -- -- (2,544) --
---------- ---------- ----------- ----------- ------------ ----------- -----------
Net income (loss).......... $ 7,133 $ 5,060 $ 22,719 $ 14,021 $ 10,969 $ (4,690) $ 14,513
======== ========= ======== ======== ========= ========== ========
Earnings (loss) per diluted share:
Income (loss) before
extraordinary items..... $0.37 $0.24 $1.12 $1.06 $0.79 $(0.15) $1.01
Net income (loss)........ 0.37 0.24 1.12 1.06 0.79 (0.32) 1.01
Selected Other
Information(1)(2)
Net interest margin(3)..... 3.16% 2.90% 3.03% 2.86% 2.57% 1.86% 2.34%
Efficiency ratio(4)........ 53.70 67.44 63.88 71.85 64.79 88.30 62.60
Return on average assets(5) 0.51 0.38 0.41 0.45 0.34 (0.15) 0.49
Return on average equity(5) 7.51 5.24 5.87 7.32 5.39 (2.11) 6.79
Ratio of total equity to total 6.56 7.28 6.75 5.35 6.06 6.92 6.86
assets(6).................
Book value per share(7).... $ 20.10 $ 19.20 $ 19.77 $ 14.38 $ 14.98 $ 14.65 $ 15.16
Dividend payout ratio(8)... 26.89% 40.16% 35.57% 30.53% 38.61% (93.75)% 29.70%
Nonperforming assets(9).... $16,502 $19,468 $18,020 $15,766 $ 24,310 $38,811 $50,577
Ratio to total assets.... 0.29% 0.36% 0.32% 0.49% 0.74% 1.29% 1.60%
Troubled debt re- $ 772 $ 388 $ 777 $ 731 $ 509 $15,641 $13,948
structurings(10)........
Ratio to total assets.... 0.01% 0.01% 0.01% 0.02% 0.02% 0.52% 0.44%
</TABLE>
- ---------------------
(1) Includes the acquisitions of Bay View Credit effective June 1, 1996, Bay
View Commercial Finance Group effective April 1, 1997, Ultra Funding
effective October 1, 1997, and America First Eureka Holdings, Inc.
effective January 2, 1998.
(2) You should also review Bay View's non-GAAP performance measures contained
in our historical financial information, which is incorporated by
reference, for further discussion of net income (loss), net interest
margin, return on average assets, and return on average equity.
(3) Defined as net interest income divided by average interest-earning assets.
(4) Calculated by dividing general and administrative expenses by operating
revenues, defined as net interest income, loan fees and charges, the excess
of leasing-related rental income over leasing-related depreciation expense,
and other noninterest income, excluding securities gains and losses.
17
<PAGE>
(5) Calculated by dividing net income (loss) by average assets and average
equity, respectively. In calculating these ratios, net income for the three
months ended March 31, 1999 and March 31, 1998 has been annualized.
(6) Calculated by dividing total equity by total assets.
(7) Calculated by dividing total equity by total common shares outstanding.
(8) Calculated by dividing dividends declared by net income (loss).
(9) Defined as nonaccrual loans, real estate owned through foreclosure and
other repossessed assets. Nonaccrual loans are defined as loans 90 days or
more delinquent as to principal and interest payments (unless both are well
secured and in the process of collection) and loans less than 90 days
delinquent designated as nonperforming when we determine that the full
collection of principal and/or interest is doubtful.
(10) Defined as loans that have been modified (due to borrower financial
difficulties) to allow a stated interest rate and/or a monthly payment
lower than those prevailing in the market.
18
<PAGE>
SELECTED FINANCIAL DATA OF FMAC
We are providing the following financial information regarding FMAC to aid
you in your analysis of the financial aspects of the merger. We derived this
information in part from FMAC's audited financial statements for 1994 through
1998. The information at or for the three-month periods ended March 31, 1999 and
1998 is unaudited and was derived from FMAC's unaudited consolidated quarterly
financial statements. However, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation at such dates and for such periods have been made. The results of
operations for the three-month period ended March 31, 1999 are not necessarily
indicative of results that may be expected for the full fiscal year. All
information is presented in accordance with generally accepted accounting
principles. The information is only a summary and you should read it in
conjunction with FMAC's historical financial statements and related notes
contained in the annual reports and other information that FMAC has filed with
the SEC. This historical financial information has also been incorporated into
this document by reference. We have listed the documents that we incorporate by
reference under the heading "Where You Can Find More Information."
<TABLE>
<CAPTION>
At March 31, At December 31, Predecessor
------------------------ ---------------------------------------------- -----------------
1999 1998 1998 1997(1) 1996(1) 1995(1) 1994(1)
----------- ----------- ----------- ----------- --------- --------- ------------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Balance Sheet
Information(2)
Cash and cash equivalents....... $ 54,989 $ 61,126 $ 33,425 $ 7,335 $ -- $ -- $ 102
Securities available for sale... 16,664 2,335 16,818 22,870 39,349 -- 9,541
Loans and leases held for sale.. 251,225 478,656 325,727 343,200 98,915 181,254 --
Loans and leases held for
investment 154,329 -- 162,928 -- -- -- --
Retained interest in loan
securitizations............... 30,037 19,070 29,952 21,652 6,908 -- --
Servicing rights................ 32,545 2,126 29,905 2,213 -- -- --
Goodwill........................ 49,670 4,200 37,353 4,315 4,332 4,226 --
Accrued interest receivable..... 2,351 2,103 2,587 2,758 560 1,108 138
Other assets.................... 40,315 11,804 37,619 17,889 10,112 2,460 467
--------- --------- ----------- ---------- ----------- --------- --------
Total assets............. 632,125 581,420 676,314 422,232 160,176 189,048 10,248
Overdraft ...................... -- -- -- -- 171 445 --
Payable to Imperial Credit
Industries, Inc............... -- -- -- -- 17,728 -- --
Borrowings...................... 422,669 404,482 483,763 256,220 125,240 181,632 13,548
Deferred income taxes........... 21,221 19,383 18,045 14,160 -- -- --
Other liabilities............... 36,268 11,918 27,801 13,430 (2,580) 3,198 1,543
--------- --------- ----------- ---------- ---------- --------- -------
Total liabilities......... 480,158 435,783 529,609 283,810 145,719 185,275 15,091
Minority interest in subsidiary. 59 -- (8) -- -- -- --
Members' equity (deficit)....... -- -- -- -- $14,457 $ 3,773 $(4,843)
Total stockholders' equity...... $151,908 $145,637 $ 146,713 $138,422 -- -- --
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Predecessor
---------------------------
For the For the
Six Months Six For the Year
For the Three Ended Months Ended
Months Ended For the Year Ended December Ended December
March 31, December 31, 31, June 30, 31,
-------------------- ------------------------------ ------------ ----------- --------------
1999 1998 1998(4) 1997(1) 1996(1) 1995(1) 1995(1) 1994(1)
---------- -------- ---------- -------- -------- ----------- ----------- -------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Results of Operations
Information(2)
Revenues:
Gain on sale of loans and
leases(3) ......................... $ 11,210 $ 16,741 $ 40,146 $ 52,117 $ 18,671 $ -- $ -- $ 4,052
Net interest income ................. 2,649 4,202 17,119 5,156 1,641 239 154 37
Loan servicing income ............... 6,512 1,254 18,507 3,314 1,191 349 326 306
Trading income(3) ................... 1,641 -- -- -- -- -- -- --
Insurance services income ........... 1,127 -- -- -- -- -- -- --
Loss on transfer of loans to held for
investment ....................... -- -- (8,845) -- -- -- -- --
Other income (loss) ................. 191 (42) 650 (111) 63 -- -- 68
-------- -------- -------- -------- -------- --------
Total revenues ............... 23,330 22,155 67,577 60,476 21,566 588 480 4,463
-------- -------- -------- -------- -------- -------- -------- --------
Expenses:
Personnel ........................... 8,455 5,165 26,306 13,636 8,270 356 931 1,723
General and administrative .......... 6,283 4,553 27,460 11,119 3,972 891 1,460 3,468
-------- -------- -------- -------- -------- -------- --------
Total expenses ............... 14,738 9,718 53,766 24,755 12,242 1,247 2,391 5,191
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
minority interest in subsidiary .. 8,592 12,437 13,811 35,721 9,324 (659) (1,911) (728)
Minority interest in subsidiary ..... 67 -- (8) -- -- -- -- --
Income tax expense .................. 3,410 5,223 5,528 15,001 -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) ............ $ 5,115 $ 7,214 $ 8,291 $ 20,720 $ 9,324 $ (659) $ (1,911) $ (728)
======== ======== ======== ======== ======== ======== ======== ========
Basic income per share $0.18 $0.25 $0.29 $0.91
======== ======== ======== ========
Weighted-average basic shares
outstanding...................... 28,734 28,716 28,716 22,670
========== ========== ======== ========
Diluted income per share .......... $0.18 $0.25 $0.29 $0.91
========== ========== ======== ========
Weighted-average diluted shares
outstanding ..................... 28,737 28,805 28,976 22,670
========== ========== ======== ========
</TABLE>
- -----------------------
(1) From July 1, 1995 through November 18, 1997, FMAC qualified to be treated
as a limited liability company, which is similar to a partnership, for
federal and state income tax purposes. As a result of terminating FMAC's
LLC status upon completion of its initial public offering, FMAC was
required to record a one-time non-cash charge of $11.0 million against
historical earnings for deferred income taxes. This charge occurred in the
quarter ended December 31, 1997 and the year ended December 31, 1997. The
selected balance sheet information at December 31, 1994 and the selected
results of operations for the year ended December 31, 1994 and for the six
months ended June 30, 1995 represent FMAC's predecessor entity.
(2) Includes the acquisition of Bankers Mutual effective April 1, 1998.
(3) Gain on sale for the years ended December 31, 1998, 1997 and 1996 includes
$35.3 million, $56.2 million and $11.5 million of cash gains before hedge
gains (losses) of ($34.0) million, ($5.1) million and $0.4 million, of
which $13.4 million, $6.6 million and $7.8 million, respectively,
represented loan fees. The gain on sale of loans for the December 1995
securitization was not recognized until the first quarter of 1996. Gain on
20
<PAGE>
sale for the three months ended March 31, 1999 and 1998 includes $11.2
million and $17.5 million of cash gains before hedge losses of $1.1 million
for the three months ended March 31, 1998, of which $2.4 million and $2.4
million, respectively, represented loan fees. Prior to December 31, 1998,
FMAC deferred its hedge gains and losses and recorded them as an addition
or reduction to the gain on sale. Effective January 1, 1999, trading income
is recorded directly through operations as FMAC's financial instruments
used to hedge its loans and leases are classified as trading.
(4) Includes $34.0 million in hedge losses incurred primarily during the third
and fourth quarters of 1998.
21
<PAGE>
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following selected unaudited pro forma condensed combined financial
information is based on the historical financial information of Bay View and
FMAC and has been prepared to illustrate the effect of the merger and an
anticipated issuance of $100 million in Subordinated Notes by Bay View Bank. The
merger will be accounted for under the purchase method of accounting. The
unaudited pro forma condensed combined balance sheet information gives effect to
the merger as if it occurred on March 31, 1999. The unaudited pro forma
condensed combined statements of income give effect to the merger as if it had
occurred on January 1, 1998.
We expect that we will incur underwriting and other costs in connection with
issuing the notes which will be capitalized, and post-combination integration
expenses as a result of combining our companies which will be expensed and which
are not reflected in the pro forma information. The pro forma information, while
helpful in illustrating the financial characteristics of the combined company
under one set of assumptions, is not necessarily indicative of the results of
operations which would have occurred had Bay View and FMAC constituted a single
entity since January 1, 1998, and does not attempt to predict or suggest future
results.
The information in the following table is based on the historical financial
information that is presented in our prior filings with the SEC. We have
incorporated this material into this document by reference. See "Unaudited Pro
Forma Condensed Combined Financial Information" and "Where You Can Find More
Information."
<TABLE>
<CAPTION>
At March 31, 1999(1)
------------------------------
(Dollars in Thousands)
<S> <C>
Pro Forma Condensed Combined Balance Sheet:
Total assets............................................ $6,539,679
Long-term borrowings(2)................................. 199,453
Total stockholders' equity.............................. 565,293
</TABLE>
<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
1999(1) 1998(1)(3)
----------------- ---------------
(Dollars in Thousands,
Except Per Share Amounts)
<S> <C> <C>
Pro Forma Condensed Combined Statements of Income:
Net interest income after provision for losses on loans and
leases........................................... $34,658 $146,575
Net income......................................... 7,644 11,667
Net income per common share:
Basic......................................... 0.27 0.40
Diluted....................................... 0.27 0.39
</TABLE>
- -------------------------
(1) See "Unaudited Pro Forma Condensed Combined Financial Information" for a
description of the assumptions and adjustments used in preparing the
unaudited pro forma financial information.
(2) Represents Subordinated Notes issued by Bay View in August 1997 and
anticipated $100 million issuance of Subordinated Notes by Bay View Bank.
(3) FMAC's historical results for the year ended December 31, 1998 included
$34.0 million in hedge losses incurred primarily during the third and
fourth quarters of 1998.
22
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
OF BAY VIEW AND FMAC
The following table shows information about our net income per common share,
cash dividends declared per common share and book value per common share on a
historical and pro forma combined basis. The pro forma combined data is based on
the historical financial information of Bay View and FMAC and has been prepared
to illustrate the effect of the merger and an anticipated $100 million issuance
of Subordinated Notes by Bay View Bank. The merger will be accounted for under
the purchase method of accounting. In presenting the pro forma combined
information, we assumed that our companies had been merged as of January 1,
1998.
We expect that we will incur underwriting and other costs in connection with
issuing the notes which will be capitalized, and post-combination integration
expenses as a result of combining our companies which will be expensed and which
are not reflected in the pro forma information. The pro forma information, while
helpful in illustrating the financial characteristics of the combined company
under one set of assumptions, is not necessarily indicative of the results of
operations which would have occurred had Bay View and FMAC constituted a single
entity since January 1, 1998, and does not attempt to predict or suggest future
results.
The information in the following table is based on the historical financial
information that is presented in our prior filings with the SEC. We have
incorporated this material into this document by reference. See "Unaudited Pro
Forma Condensed Combined Financial Information" and "Where You Can Find More
Information."
<TABLE>
<CAPTION>
Equivalent
Pro Forma
Bay View FMAC Pro Forma Amount of
Historical Historical Combined(1) FMAC(2)
----------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1998
Net income per common share:
Basic .................................. $ 1.13 $ 0.29(3) $ 0.40 $ 0.21
Diluted ................................ 1.12 0.29(3) 0.39 0.20
Cash dividends declared per common
share ................................... 0.40 -- 0.40(4) 0.21
At and For the Quarter Ended March 31, 1999
Net income per common share:
Basic .................................. $ 0.37 $ 0.18 $ 0.27 $ 0.14
Diluted ................................ 0.37 0.18 0.27 0.14
Cash dividends declared per common
share ................................... 0.10 -- 0.10(4) 0.05
Book value per common share ............... 20.10 5.28 20.07 10.29
</TABLE>
- ---------------------------
(1) See "Unaudited Pro Forma Condensed Combined Financial Information" for a
description of the assumptions and adjustments used in preparing the
unaudited pro forma financial data.
(2) The equivalent pro forma amount of FMAC is calculated by multiplying the
pro forma combined data by the exchange ratio of .5125.
(3) FMAC's historical results for the year ended December 31, 1998 included
$34.0 million in hedge losses incurred primarily during the third and
fourth quarters of 1998.
(4) The pro forma cash dividends declared per common share is assumed to be the
same as Bay View's historical cash dividends declared per share.
23
<PAGE>
COMPARATIVE MARKET VALUE INFORMATION
The following table sets forth the closing prices per share and aggregate
market values of Bay View and FMAC common stock and the equivalent prices per
share and market values of FMAC common stock based on an exchange ratio of
0.5125 for the information as of March 10, 1999, the last trading day prior to
the public announcement of the proposed merger, and ______________, 1999, the
most recent date for which prices were available prior to printing this
document.
<TABLE>
<CAPTION>
Bay View FMAC FMAC
Historical Historical Equivalent
----------------- ---------------- ----------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C>
On March 10, 1999
Closing price per common share............ $20.625 $8.313 $10.570
Market value of common shares (1)......... $394,219 $239,072 $304,008
On __________________, 1999
Closing price per common share............
Market value of common shares (1).........
</TABLE>
- ---------------------
(1) Market value based on 19,113,637 Bay View common shares and 28,760,557 FMAC
common shares outstanding as of March 10, 1999, and ____________ Bay View
common shares and __________ FMAC common shares outstanding as of
_____________, 1999, excluding, in each case, shares held in treasury.
On March 10, 1999, the date preceding public announcement of the proposed
merger, the high and low sale prices of FMAC's common stock were $8.50 and
$8.1875, respectively.
Bay View common stock is traded on the New York Stock Exchange under the
symbol "BVC." Prior to April 1, 1999, Bay View was traded on the Nasdaq National
Market under the symbol "BVCC." FMAC common stock is traded on the Nasdaq
National Market under the symbol "FMAX."
THE SHAREHOLDER MEETINGS
Dates, Times and Places
Bay View. This document is being furnished to Bay View shareholders in
connection with the solicitation by the Bay View Board of Directors of proxies
to be used at the Bay View Special Meeting to be held at the main office of Bay
View, located at 1840 Gateway Drive, Third Floor, San Mateo, California, at 1:00
p.m., local time, on Tuesday, August 31, 1999.
FMAC. This document is being furnished to FMAC shareholders in connection
with the solicitation by the FMAC Board of Directors of proxies to be used at
the FMAC Special Meeting to be held at the main office of FMAC, located at 1888
Century Park East, Third Floor, Los Angeles, California, at 10:00 a.m., local
time, on Tuesday, August 31, 1999.
MATTERS TO BE CONSIDERED; VOTES REQUIRED
Bay View. Each Bay View shareholder may vote at the Bay View meeting on a
proposal to adopt the merger agreement and approve issuing Bay View common stock
in the merger. Bay View shareholders will also vote on a proposal to amend the
1995 Stock Option and Incentive Plan to increase the number of shares reserved
thereunder from 2,000,000 to 2,500,000. Each Bay View shareholder will have one
vote at the Bay View meeting for each share of Bay View common stock owned by
him or her at the close of business on July 15, 1999. To complete the merger, a
majority of the outstanding shares of Bay View common stock must vote FOR the
merger proposal. The
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stock option plan proposal will be approved if a majority of the shares of
common stock duly voted on the matter is voted in favor of the proposal. The Bay
View Board unanimously recommends that Bay View shareholders vote FOR the merger
proposal and the stock option plan proposal.
If any other action is to be taken by a vote of Bay View's shareholders, it
will be authorized by the affirmative vote of the holders of a majority of the
shares of common stock duly voted on the matter.
On the record date for the Bay View meeting, Bay View's directors and
executive officers and their affiliates owned approximately 1,231,806, or 6.27%,
of the outstanding shares of Bay View common stock, including 981,651 shares of
Bay View common stock which may be acquired upon the exercise of options which
are exercisable within 60 days of such date. On the record date for the Bay View
meeting, FMAC's directors and executive officers and their affiliates did own
any of the outstanding shares of Bay View common stock. The directors and
executive officers of Bay View have indicated that they intend to vote all
shares of Bay View common stock owned by them FOR the merger proposal.
The affirmative vote of a majority of the shares of Bay View common stock
duly voted on the matter may authorize the adjournment or postponement of the
Bay View meeting. However, no proxy that was voted against any proposal will be
voted in favor of adjournment or postponement to solicit further proxies for
such proposal.
FMAC. Each FMAC shareholder may vote at the FMAC meeting on a proposal to
adopt the merger agreement. Each FMAC shareholder will have one vote at the FMAC
meeting for each share of FMAC common stock owned by him or her at the close of
business on July 19, 1999. To complete the merger, a majority of the outstanding
shares of FMAC common stock must vote FOR the merger proposal. The FMAC Board
unanimously recommends that FMAC shareholders vote FOR the merger proposal.
If any other action is to be taken by a vote of FMAC's shareholders, it
will be authorized by a majority of the votes cast by the holders of the shares
present in person or represented by proxy at the FMAC meeting and entitled to
vote on the action.
On the record date for the FMAC meeting, FMAC's directors and executive
officers and their affiliates owned 6,169,938, or 21.5%, of the outstanding
shares of FMAC common stock, including 191,000 shares of FMAC common stock which
may be acquired upon the exercise of options which are exercisable within 60
days of such date. Bay View does not believe that on the record date for the
FMAC meeting, Bay View's directors and executive officers and their affiliates
owned any of the outstanding shares of FMAC common stock. The directors and
executive officers of FMAC have indicated that they intend to vote all shares of
FMAC common stock owned by them FOR the merger proposal.
In connection with the execution of the merger agreement, FMAX Holdings,
LLC, the owner of 10,823,492, or 36.11%, of the outstanding shares of FMAC
common stock, entered into a voting agreement with Bay View. Under the voting
agreement, FMAX Holdings has agreed not to sell any of its FMAC shares prior to
completion of the merger or termination of the merger agreement, and to vote all
of its shares for the merger proposal. Bay View and FMAX Holdings have also
entered into an election and registration agreement under which FMAX Holdings
has agreed to elect to receive cash for all of its shares of FMAC common stock
in the merger and Bay View has agreed to register for resale under the
Securities Act of 1933 the shares of Bay View common stock FMAX Holdings
receives in the merger.
The affirmative vote of a majority of the votes present in person or
represented by proxy at the FMAC meeting may authorize the adjournment or
postponement of the FMAC meeting. However, no proxy that was voted against any
proposal will be voted in favor of adjournment or postponement to solicit
further proxies for such proposal.
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VOTING OF PROXIES
All shares of Bay View common stock and FMAC common stock represented by
properly executed proxies received at or prior to the applicable meeting, and
not revoked, will be voted at that meeting in accordance with the instructions
indicated in those proxies.
Properly executed proxies which do not contain voting instructions will be
voted FOR the merger and FOR the stock option plan proposal in the case of Bay
View shareholders.
Brokers who hold shares of Bay View common stock or FMAC common stock for
customers in "street" name may vote the shares for Bay View shareholders on the
stock option plan proposal but are not authorized to vote on the merger proposal
without specific voting instructions. For purposes of determining whether the
merger proposal has received the vote of shareholders required for approval,
each "broker nonvote" and each abstention is functionally equivalent to a vote
"against" the merger proposal. For purposes of determining whether the Bay View
stock option plan proposal has received the vote of shareholders required for
approval, each "broker nonvote" will have no effect on the matter and each
abstention is functionally equivalent to a vote "against" the stock option plan
proposal. If any other matters are properly presented at a meeting for
consideration, including consideration of a motion to adjourn or postpone that
meeting to another time and/or place for the purpose of soliciting additional
proxies, the persons named in the relevant form of proxy enclosed herewith and
acting thereunder intend to vote on such matters in accordance with their best
judgment; provided, however, that no proxy voted against any proposal will be
voted in favor of adjournment or postponement to solicit further proxies for
such proposal. Neither Bay View nor FMAC knows of any other matters to be
brought before the meetings other than those referred to in this document.
Revocability of Proxies
If your shares are held in your name and not through a broker or other
nominee, then you can change your vote at any time before your proxy is voted at
the applicable meeting. You can do this in three ways: First, you can send a
written statement that you would like to revoke your proxy. Second, you can send
a new proxy card. If you are an FMAC shareholder, then you should send your
revocation or new proxy card to Raedelle Walker, Corporate Secretary, at
Franchise Mortgage Acceptance Company, 1888 Century Park East, Third Floor, Los
Angeles, California 90067. If you are a Bay View shareholder, then you should
send your revocation or new proxy card to Robert J. Flax, Secretary, at Bay View
Capital Corporation, 1840 Gateway Drive, San Mateo, California 94404.
Third, you can attend the applicable meeting and vote in person.
Record Dates; Voting Rights; Quorums
Bay View. Only holders of record of Bay View common stock at the close of
business on July 15, 1999 are entitled to receive notice of and to vote at the
Bay View meeting. As of the record date for the Bay View meeting, 18,677,637
shares of Bay View common stock were outstanding. At least 9,338,819 shares of
Bay View common stock must be represented in person or by proxy at the Bay View
meeting in order for a quorum to be present. "Broker nonvotes" and abstentions
are counted for purposes of determining a quorum.
FMAC. Only holders of record of FMAC common stock at the close of business
on July 19, 1999 are entitled to receive notice of and to vote at the FMAC
meeting. As of the record date for the FMAC meeting, 29,971,052 shares of FMAC
common stock were outstanding. At least 14,985,527 shares of FMAC common stock
must be represented in person or by proxy at the FMAC meeting in order for a
quorum to be present. "Broker nonvotes" and abstentions are counted for purposes
of determining a quorum.
Solicitation of Proxies
Each company will bear the cost of soliciting proxies from its shareholders,
provided that the companies will share equally the cost of printing this
document. Arrangements will be made with brokerage firms, nominees,
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fiduciaries, and other custodians for the forwarding of solicitation materials
to the beneficial owners of shares held of record by such persons, and each
company will reimburse such persons for their reasonable out-of-pocket expenses
in connection therewith.
Proxies may be solicited on behalf of each company by mail or personally, or
by telephone, telegraph, datagram or other forms of communication, by directors,
officers and regular employees of such company and its subsidiaries, none of
whom shall receive any additional compensation for such services, but will be
reimbursed for reasonable out-of-pocket expenses incurred in connection with
such solicitation.
ChaseMellon Shareholder Services will assist in the solicitation of proxies
by Bay View for a fee of approximately $8,500, plus reasonable out-of-pocket
expenses. FMAC has not retained a third-party to assist in the solicitation of
proxies.
Neither Bay View shareholders nor FMAC shareholders should send stock
certificates with their proxy cards.
THE MERGER
The following discussion describes the proposed merger. Because this
discussion is a summary, it may not contain all of the information that is
important to you. To understand the merger fully, and for a more complete
description of the legal terms of the merger, you should read carefully this
entire document and the other documents we have referred you to. See "Where You
Can Find More Information."
A copy of the merger agreement without any exhibits or schedules is attached
as Appendix A to this document and is incorporated by reference. We encourage
you to read the merger agreement completely and carefully as it is the legal
document that governs the merger.
General
Our Boards have unanimously approved the merger. When the merger is
completed:
o the separate corporate existence of FMAC will terminate;
o Bay View, as the surviving corporation, will succeed to all of FMAC's
assets and liabilities; o the combined company will be a Delaware
corporation called Bay View Capital Corporation; o the certificate of
incorporation and bylaws of Bay View then in effect will be the
charter documents of the combined company;
o shareholders of FMAC who receive Bay View common stock in the merger
will become shareholders of Bay View;
o Bay View's shareholders would own approximately 67% of the combined
company and FMAC's shareholders the remainder; and
o Bay View will increase its board by one member and will appoint Wayne
L. Knyal to fill the vacancy.
We hope to complete this transaction in the third quarter of 1999. Following
the merger, Bay View plans to contribute all or substantially all of the assets
and liabilities of FMAC to a subsidiary, which will carry on the business of
FMAC.
Merger Consideration
Cash/Stock Election. FMAC shareholders will receive, for each share of FMAC
common stock, either $10.25 in cash or .5125 shares of Bay View common stock,
and the associated rights under the Bay View Stockholder Protection Rights
Agreement, plus cash instead of any fractional share. The cash paid for any
fractional share will be in an amount equal to such fraction multiplied by the
closing price of Bay View common stock on the last trading day prior to the
completion of the merger.
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Example: If you own 100 shares of FMAC common stock, then after the merger
you will be entitled to receive either $1,025 or 51.25 shares of Bay View common
stock, or some combination of the cash and stock, for your 100 shares. If you
own 100 shares of Bay View common stock prior to the merger, you will continue
to hold those shares after the merger.
On _______________, 1999 the closing price of Bay View common stock was
$_____, making the value of .5125 shares of Bay View common stock equal to
$______. The closing price of FMAC common stock on that date was $_____. Because
these stock prices fluctuate, you will not know when you vote what the shares
will be worth when issued in the merger, and the market value of the shares at
the time of the merger could be higher or lower than the current market value.
You should obtain current stock price quotations for Bay View common stock and
FMAC common stock. These quotations are available from your stock broker, in
major newspapers and on the Internet.
Each share of Bay View common stock outstanding immediately prior to the
completion of the merger will remain outstanding and unchanged as a result of
the merger.
In addition to the merger consideration that Bay View will pay to the FMAC
shareholders, as a result of the merger Bay View will succeed to the obligations
under the "earn-out" agreement entered into between FMAC and Bankers Mutual in
connection with FMAC's 1998 acquisition of Bankers Mutual. Under this agreement,
Bay View is obligated to pay the former Bankers Mutual shareholders up to an
aggregate of $30 million through April 1, 2002 if the Bankers Mutual division of
FMAC meets certain performance targets. $7.5 million of the contingent cash
payments has previously been paid to the former Bankers Mutual shareholders.
Procedure for Election of Cash and/or Bay View Common Stock. FMAC
shareholders will be given the opportunity to elect whether they want $10.25 in
cash or .5125 shares of Bay View common stock for each share of FMAC common
stock they own. Bay View has selected ChaseMellon Shareholder Services to act as
the exchange agent to effect the elections. Approximately 25 days prior to the
anticipated merger completion date, the exchange agent will mail to each FMAC
shareholder of record as of five days prior to such mailing date an election
form and other transmittal materials to be used by the shareholder to elect to
receive cash or stock or a combination of both for his or her FMAC shares. For
an election form to be effective, it must be properly completed and executed by
the FMAC shareholder and returned, along with the FMAC stock certificates as to
which the election is being made, to the exchange agent by the election
deadline, which is anticipated to be the 20th day after the election form and
other material is mailed. Bay View and FMAC currently anticipate that the merger
completion date will be September 1, 1999. Based on such anticipated merger
completion date, the exchange agent would mail election forms and other
transmittal materials on approximately August 7, 1999 to each FMAC shareholder
who is a shareholder of record as of August 2, 1999. FMAC will also attempt to
cause an election form to be sent to persons who become FMAC shareholders after
August 2, 1999. In addition, based on such anticipated merger completion date,
the election deadline would be 5:00 p.m., Eastern Time, on August 27, 1999.
Any election form may be revoked or changed by the person submitting it at or
prior to the election deadline. The exchange agent will have reasonable
discretion to determine whether any election, revocation or change has been
properly or timely made and to disregard immaterial defects in the election
forms, and any good faith decisions of the exchange agent regarding such matters
will be binding and conclusive. Neither Bay View nor the exchange agent will be
under any obligation to notify any person of any defect in an election form.
The actual merger consideration that will be paid to each FMAC shareholder
upon completion of the merger may differ from the form of merger consideration
elected by such shareholder. Because under the merger agreement the aggregate
number of shares of FMAC common shares to be exchanged for shares of Bay View
common stock will be equal to 60% of the total number of FMAC common shares
issued and outstanding as of the effective time, the extent to which elections
by FMAC shareholders will be accommodated will depend upon the respective
numbers of FMAC shares designated to receive cash and Bay View common stock. If
one type of consideration is oversubscribed, the exchange agent will follow the
allocation procedures set forth in the merger agreement and described below.
Further, under the merger agreement, no former FMAC shareholder, other than
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any former FMAC shareholder who had expressly been approved by the appropriate
banking regulatory authorities to own more than 9.99% of the Bay View common
stock, or for whom no additional approval would be necessary, may beneficially
own, control or have the power to vote or dispose of more than 9.99% of the
shares of Bay View common stock issued and outstanding after the merger, which
could result in the allocation of Bay View common stock to FMAC shareholders
electing cash consideration.
Allocation. Bay View will cause the exchange agent to allocate Bay View
common stock and cash among the holders of FMAC common stock within ten business
days after the election deadline, unless the merger completion date has not yet
occurred, in which case the allocation will occur as soon thereafter as
practicable. The exchange agent will effect the allocation in accordance with
the election forms, but subject to the following:
If stock consideration is oversubscribed, each shareholder's stock elections
will be reduced pro rata and converted into cash elections until the aggregate
stock elections equal 60% of FMAC shares outstanding. If cash consideration is
oversubscribed, each shareholder's cash elections will be reduced pro rata and
converted into stock elections until the total of aggregate cash elections and
dissenting shares equals 40% of FMAC shares outstanding at the effective time.
If, after the above adjustments, any former FMAC shareholder would own more
than 9.99% of the outstanding shares of common stock of the combined company
after the merger, other than any former FMAC shareholder who had expressly been
approved by the appropriate banking regulatory authorities to own more than
9.99% of the Bay View common stock, or for whom no additional approval would be
necessary, that shareholder's stock elections will be reduced to 9.99% of the
combined company shares and that shareholder's cash elections will be
correspondingly increased. All other shareholders will then have their cash
elections converted pro rata to stock elections until the total of the aggregate
cash elections and dissenting shares again equals 40% of FMAC common shares
outstanding at the effective time.
Procedures for Exchanging Certificates. ChaseMellon Shareholder Services, as
the exchange agent, will mail, together with the election form, a transmittal
form to each FMAC shareholder of record as of five days prior to such mailing
date advising him or her of the procedure for surrendering to the exchange agent
outstanding certificates formerly representing FMAC common stock in exchange for
new certificates representing Bay View common stock and/or cash. The exchange
agent will also send a transmittal form as soon as reasonably practicable after
the completion of the merger to FMAC shareholders who did not tender their FMAC
certificates with the election form.
Upon surrender, each certificate representing FMAC common stock will be
canceled.
FMAC common stock certificates should not be returned with the enclosed proxy
and should not be forwarded to the exchange agent unless and until you receive
the transmittal form.
No interest will be paid on any cash exchanged for FMAC certificates. Until
the certificates are surrendered for shares of Bay View common stock, no
dividend or distribution payable to holders of record of Bay View common stock
will be paid to any holder of FMAC certificates. However, when those
certificates are surrendered for shares of Bay View common stock, any unpaid
dividends or distributions will be paid, without interest. After the merger is
completed, there will be no transfers on the records of FMAC of its common
stock. If a certificate formerly representing shares of FMAC common stock is
presented to Bay View or FMAC, it will be forwarded to the exchange agent for
cancellation and exchanged for Bay View common stock and/or cash.
Neither FMAC, Bay View nor the exchange agent or any other person will be
liable to any former holder of shares of FMAC common stock for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
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Treatment of Stock Options
Bay View Stock Options. The merger will not cause any changes to the price
or terms of outstanding Bay View stock options.
FMAC Stock Options. When the merger is completed, each FMAC stock option then
outstanding will be converted automatically into an option to purchase shares of
Bay View common stock. However, the number of shares subject to, and the
exercise price of, each of those FMAC stock options will be adjusted as follows:
o the number of shares of Bay View common stock subject to the new option
will be equal to the product of the number of shares of FMAC common stock
subject to the original FMAC stock option and .5125, provided that any
fractional shares of Bay View common stock resulting from such
multiplication will be rounded to the nearest whole share; and
o the exercise price per share of Bay View common stock under the new
option will be equal to the exercise price per share of FMAC common stock
under the original FMAC stock option divided by .5125, provided that the
exercise price will be rounded to the nearest whole cent.
With respect to any FMAC stock option that is an incentive stock option under
Section 422 of the United States' tax code of 1986, this adjustment will be
effected in a manner consistent with Section 424(a) of the tax code. The
duration and other terms of the new option will be the same as the original FMAC
stock option except that all references to FMAC will be deemed to be references
to Bay View. The FMAC stock options will become fully vested upon FMAC
shareholder approval of the merger.
Background of the Merger
In September 1998, Wayne L. Knyal, President and Chief Executive Officer of
FMAC, engaged the services of Credit Suisse First Boston Corporation, or CSFB,
for the purpose of assisting FMAC in identifying and evaluating available
strategic alternatives. After conducting a review of FMAC, CSFB proposed the
sale of FMAC or other possible transactions to a large number of strategic and
financial buyers. Approximately 25 prospects were contacted and eight meetings
between representatives of FMAC and potential buyers were arranged after those
potential buyers signed confidentiality agreements indicating a desire to
receive detailed information on FMAC and its assets and liabilities.
After those preliminary meetings, in November and December 1998, three
potential suitors were invited to conduct further due diligence reviews of FMAC,
and, from November 30 through December 23, 1998, detailed due diligence meetings
took place involving those potential suitors of FMAC. In addition, in December
1998, FMAC received four preliminary indications of interest concerning proposed
transactions, including: (i) a potential equity investment in FMAC by a third
party; (ii) a potential acquisition by a third party of FMAC stock held by ICII,
its largest shareholder, and (iii) two separate indications expressing interest
in acquiring a portion, but not all, of FMAC's business. On January 19, 1999,
the FMAC Board met and discussed the indications of interest regarding FMAC that
had been received to date.
In January 1999 Bay View and one additional potential strategic acquiror
expressed interest in pursuing a transaction with FMAC. FMAC invited those
additional suitors to conduct preliminary due diligence investigations of FMAC.
On January 28, 1999, Bay View and FMAC entered into a confidentiality agreement
and Bay View immediately commenced its review of FMAC and separately commenced
negotiations for the purchases of loans from FMAC.
Messrs. Knyal and Edward H. Sondker, President and Chief Executive Officer of
Bay View, held numerous discussions and negotiations during February 1999,
exploring a possible merger of FMAC with and into Bay View. On February 18,
1999, FMAC's senior management received an oral indication from representatives
of Bay View of a proposed acquisition price per share of $10.50 based upon
FMAC's commitment that FMAC would deal
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exclusively with Bay View. On February 22, 1999, Bay View and FMAC entered into
a letter agreement regarding exclusivity, pursuant to which FMAC agreed to grant
Bay View exclusivity for a period of 30 days until March 23, 1999. During the
period from February 22 to March 10, representatives of FMAC and Bay View began
negotiating the terms of a merger agreement and discussed the tax and accounting
treatment of the proposed merger; certain regulatory matters; the treatment of
employee stock options, awards and benefit plans; and employment agreements with
certain key employees of FMAC.
Each of Bay View and FMAC conducted a review of the other party's credit
portfolios and operations, as well as more general financial and legal due
diligence during the period from January 28 to March 10, 1999. During this
period the FMAC Board directed FMAC's management, legal counsel and financial
advisors to continue to pursue the proposed transaction with Bay View and FMAC
requested additional information from Bay View inasmuch as a substantial portion
of the proposed merger consideration would consist of Bay View common stock.
In addition, on February 26, 1999, Bay View purchased from FMAC a 99%
participation in 60 existing franchise development loans with a total principal
balance of approximately $60 million and with maturities from six to 18 months.
FMAC agreed to provide a 10% credit loss protection with respect to this pool of
loans. And on March 1, 1999, Bay View and FMAC entered into a flow purchase
agreement under which Bay View purchases permanent restaurant and energy
franchise loans, with original maturities from ten to 20 years, at 103.5% of
par. Through March 31, 1999, Bay View has purchased loans with a total principal
balance of $270 million under this agreement.
On March 8, 1999, FMAC's senior management, representatives of CSFB, FMAC's
legal counsel and FMAC's accountants discussed with the FMAC Board of Directors
at a special meeting of the FMAC Board an overview of the business of Bay View,
the terms and conditions of the proposed loan purchases from FMAC by Bay View,
the terms of the proposed merger, the rationale for the merger and strategic
alternatives to consider other than the proposed merger with Bay View, and
certain legal matters and tax considerations relating to the proposed
transaction. FMAC's Board reviewed in detail the terms and conditions of the
proposed merger and the conditions to closing, and discussed the fiduciary
duties of the FMAC Board and other relevant aspects of applicable law. After
considering the presentations at the meeting and subject to receipt of CSFB's
written opinion, the FMAC Board determined that the merger, upon the terms and
conditions set forth in the merger agreement, is fair to and in the best
interests of FMAC and its shareholders and unanimously approved the merger and
the merger agreement.
On March 8, 1999, Bay View's senior management, representatives of Lehman
Brothers and Bay View's legal counsel discussed with the Bay View Board of
Directors at a special meeting of the Bay View Board an overview of the business
of FMAC, the terms of the proposed merger, the rationale for the merger and
certain legal matters and tax considerations relating to the proposed
transaction. Bay View's Board reviewed in detail the terms and conditions of the
proposed merger. After considering the presentations at the meeting, the Bay
View Board determined that the merger, upon the terms and conditions set forth
in the merger agreement, is fair to and in the best interests of Bay View and
its shareholders and unanimously approved the merger and the merger agreement.
From March 8, 1999 until March 11, 1999, the parties negotiated the final
terms of the merger agreement. In connection with that negotiation, on March 10,
1999, the final amount and structure of the proposed consideration was agreed
upon. See "--Merger Consideration."
On March 11, 1999, Lehman Brothers delivered its written opinion that, as of
that date, based upon and subject to the various considerations set forth in the
Lehman Brothers opinion, from a financial point of view, the consideration to be
paid by Bay View in the merger is fair to Bay View. On March 10, 1999, CSFB
delivered its written opinion that, as of that date, based upon and subject to
the various considerations set forth in the CSFB opinion, the merger
consideration to be received by the shareholders of FMAC was fair to FMAC
shareholders from a financial point of view. See "--Opinion of Bay View
Financial Advisor" for a description of the analysis performed by Lehman
Brothers in connection with rendering its fairness opinion and "--Opinion of
FMAC Financial Advisor" for a description of the analysis performed by CSFB in
connection with rendering its fairness opinion. Copies of such fairness opinions
are attached hereto as Appendix B and Appendix C, respectively.
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Following resolution of the remaining legal issues and receipt of an executed
voting agreement signed by FMAX Holdings, LLC (see "--Interests of Directors and
Officers in the Merger that are Different from Your Interests"), each of FMAC
and Bay View executed the definitive merger agreement on March 11, 1999, and
issued a joint press release announcing the execution of the merger agreement.
Reasons for the Merger
Bay View. Since 1995, Bay View has been building a more diversified financial
services company. Bay View has successfully completed the acquisitions of Bay
View Credit (f/k/a California Thrift & Loan), an automobile lender, Bay View
Commercial Finance Group (f/k/a Concord Growth Corporation), a commercial
finance company, Ultra Funding, an automobile lender, and America First Eureka
Holdings, Inc., the thrift operations of which were merged into Bay View Bank.
Bay View had considered adding to its commercial finance capability, and was
receptive when presented with the opportunity to initiate formal discussions
with FMAC.
In negotiating the terms of the merger and in considering its recommendation
for the approval of the merger agreement and the issuance of common stock, the
Bay View Board considered a number of factors including, without limitation, the
following:
o the effectiveness of the merger in furthering Bay View's basic
strategy of building a diversified financial services company.
o the financial condition, businesses and prospects of Bay View and
FMAC; in this regard the Bay View Board considered the detailed
financial analyses, pro forma and other information with respect to
Bay View and FMAC discussed by its financial advisor, its own
knowledge of Bay View, FMAC and their respective businesses, and the
results of Bay View's due diligence investigation of FMAC's business.
o the financial presentation of its financial advisor on March 8, 1999
and the written opinion delivered on March 11, 1999, that the
consideration to be paid by Bay View in the merger was fair, from a
financial point of view, to Bay View.
o the exchange ratio and recent trading prices for Bay View common stock
and FMAC common stock.
o (A) the terms and structure of the merger, and (B) the management,
management philosophies, and strategic focus and operations of each
entity; in this regard the Bay View Board determined that each entity
is currently well managed and possesses management philosophies and a
strategic focus compatible with that of the other; that each entity
will contribute complementary business strengths resulting in a
well-diversified combined company; and that Bay View's directors,
executives officers and shareholders will have the ability to
influence and participate in the management of the combined company in
a meaningful way.
o the current and prospective economic and competitive environment
facing each entity and other financial institutions, and the
likelihood of the merger being approved by regulatory authorities.
o that the merger presents a unique opportunity to expand Bay View's
existing operations and that the merger, by creating a combined
company that will be larger and stronger than Bay View alone, will
enhance acquisition and other opportunities for growth and
diversification and will improve the competitive position of the
combined company in a consolidating industry.
o the anticipated financial impact of the merger on the combined
company's future financial performance and on Bay View shareholders,
including that the merger is expected to be $0.15 accretive to Bay
View's earnings per diluted share during the first 12 months following
the closing of the merger and $1.13 accretive to Bay View's earnings
per diluted share for the second 12 months following the closing of
the merger. Although the merger is dilutive to Bay View's pro forma
tangible book value per share, defined as Bay View's pro forma
stockholders' equity less pro forma intangible assets divided by the
pro forma number of
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Bay View's common shares outstanding following the merger, Bay View
anticipates that tangible stockholders' equity will increase following
the merger as the combined company generates earnings and as
intangible assets are amortized. The Bay View Board noted that the
combined company's ability to achieve such results would depend on
various factors, a number of which would be beyond its control,
including the regulatory environment, economic conditions,
unanticipated changes in business conditions and inflation, and that
there could be no assurance in this regard. The estimated earnings per
diluted share accretion is dependent on Bay View's ability to execute
securitizations and generate gains estimated at 2.7% of the
securitized amounts. Actual gains greater than or less than 2.7% would
impact the estimated earnings per diluted share accordingly. Further,
to the extent that Bay View's strategic plans include additional
future acquisitions, including acquisitions of depository
institutions, Bay View may elect to hold a greater level of FMAC's
loan production in its portfolio, thereby reducing the levels of
planned securitizations. While lower securitization levels would
reduce securitization gains, the higher levels of loans
held-for-investment should generate additional net interest income
prospectively.
o the opportunity to replace low yield asset run-off with higher
yielding assets.
o the ability of Bay View to fund FMAC loans at a lower rate than that
on FMAC's current funding.
o that as a subsidiary of Bay View, FMAC could potentially be less
dependent on securitizations.
o the prior experience of Bay View in effecting successful acquisitions,
including Bay View's 1998 acquisition of America First and its
subsidiary EurekaBank.
o the expectation that the merger will be tax-free for federal income
tax purposes to Bay View and its shareholders and that the merger will
be accounted for under the purchase method of accounting.
o the effects of the merger on Bay View's other constituencies,
including its senior management and other employees and the
communities and shareholders served by Bay View.
o the percentage ownership of Bay View common stock that would be held
by the current shareholders of Bay View, as a group, after the merger.
o the likelihood of obtaining regulatory approvals.
o the terms of the merger agreement and the other documents executed in
connection with the merger.
In determining to approve the merger, the Bay View Board did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing weights to different factors. At a meeting held on
March 8, 1999, and after deliberating with respect to the merger and
considering, among other things, the matters discussed above, the Bay View Board
unanimously, with eight directors present and no directors absent, approved and
adopted the merger agreement as being in the best interests of Bay View and its
shareholders. The Bay View Board is unanimous in its recommendation that holders
of Bay View common stock vote FOR the merger. There can be no assurance that the
actual results of the merger will be favorable to Bay View or its shareholders.
See "Risk Factors."
FMAC. In negotiating the terms of the merger and in considering its
recommendation for the approval of the merger agreement, the FMAC Board
considered a number of factors including, without limitation, the following:
o the terms and conditions of the proposed merger, including the premium
to be paid (approximately 23% based on the closing price of FMAC's
shares on the day prior to announcement of the merger and the
estimated blended value of the merger consideration to FMAC
shareholders).
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o the expectation that the transaction would provide tax deferral to
FMAC shareholders who receive Bay View common stock in the merger.
o information regarding historical market prices and other information
with respect to the FMAC common stock and the Bay View common stock.
o the fact that the merger would allow holders of FMAC common stock, if
they so elect, and subject to the allocation procedures contained in
the merger agreement, to retain an equity interest in the combined
entity and the prospects of positive long-term performance of Bay View
common stock.
o information concerning the business, assets, capital structure,
financial performance and condition and prospects of FMAC and Bay
View.
o the benefit of associating with the Bay View name and the ability the
merger affords FMAC to utilize the resources of the combined company
to provide banking services to FMAC customers.
o the financial presentation of FMAC's financial advisor, CSFB, on March
8, 1999 and the written opinion dated March 10, 1999 of CSFB to the
effect that, as of March 10, 1999 and based upon and subject to
certain matters stated in such opinion, the merger consideration was
fair, from a financial point of view, to FMAC shareholders.
o the increase in market capitalization and liquidity for FMAC
shareholders afforded by a combination with Bay View.
o the risks involved in FMAC continuing to be reliant upon warehouse
lines of credit as its primary source of funding and the sales of
loans through securitizations for a substantial portion of its net
income.
o the desire of FMAC to gain greater market strength and market
recognition with its customer base by combining with a larger company.
o the exchange ratio and recent trading prices for FMAC common stock and
Bay View common stock.
o the impact of the merger on employees and customers served by FMAC
following the merger.
o the likelihood of obtaining required regulatory approvals.
o FMAC's Board's assessment of FMAC's strategic alternatives to the
merger, including remaining an independent company and merging or
consolidating with a party or parties other than Bay View. o the terms
of the merger agreement and the other documents executed in connection
with the merger.
In determining to approve the merger, the FMAC Board did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing weights to different factors. At a meeting held on
March 8, 1999, and after deliberating with respect to the merger and
considering, among other things, the matters discussed above, the FMAC Board
unanimously, with eight directors present and no directors absent, approved and
adopted the merger as being in the best interests of FMAC and its shareholders.
The FMAC Board is unanimous in its recommendation that holders of FMAC common
stock vote FOR the merger. There can be no assurance that the actual results of
the merger will be favorable to FMAC or its shareholders. See "Risk Factors."
Exchange of Financial Forecasts
In the course of the discussions described in "Background of the Merger,"
FMAC provided certain internal forecasts regarding anticipated future operations
to CSFB.
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The internal financial forecasts regarding FMAC prepared by FMAC's management
reflected the following forecasted information:
<TABLE>
<CAPTION>
Fiscal Year Total Revenues Pretax Income Net Income Diluted EPS
- ----------------- -------------------- ------------------ ------------------ ------------------
(Dollars In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
1999 $136,387 $78,511 $47,107 $1.57
</TABLE>
FMAC's forecasts were prepared for internal budgeting and planning purposes
only and not with a view to public disclosure or compliance with published
guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. While presented
with numerical specificity, the forecasts are based upon a variety of
assumptions relating to the business of FMAC and are inherently subject to
significant uncertainties and contingencies that are beyond the control of the
management of FMAC, including the impact of general economic and business
conditions, the competitive environment in which FMAC operates and other
factors. See "Forward-Looking Information." Accordingly, actual results may
differ materially from those forecasted. Although the Board of FMAC was provided
with these internal financial forecasts, the forecasts were only one of many
items considered by the Board.
The inclusion of the forecasts herein should not be regarded as a
representation by FMAC or any other person that such forecasts are or will prove
to be correct. As a matter of course, FMAC does not make public projections or
forecasts of its anticipated financial position or results of operations. Except
to the extent required under applicable securities laws, FMAC does not intend to
make publicly available any update or other revisions to any of the forecasts to
reflect circumstances existing after the date of preparation of such forecasts.
Bay View did not provide any internal forecasts to Lehman Brothers in the
course of the discussions described in "--Background of the Merger."
Opinion of Bay View Financial Advisor
In connection with serving as the financial advisor to Bay View, Lehman
Brothers delivered an oral opinion to the Bay View Board on March 8, 1999 to the
effect as of such date, and based upon preliminary terms, and subject to the
final form of the merger agreement, from a financial point of view, the
consideration to be paid by Bay View in the merger is fair to Bay View. Lehman
Brothers subsequently confirmed its oral opinion by delivery of its written
opinion dated March 11, 1999 to the effect that as of such date, and based upon
assumptions made, matters considered, and limitations as set forth therein, from
a financial point of view, the consideration to be paid by Bay View in the
merger is fair to Bay View.
The full text of the Lehman opinion is attached as Appendix B to this
document and is incorporated herein by reference. Shareholders may read the
Lehman Brothers opinion for a discussion of assumptions made, matters considered
and limitations on the review undertaken by Lehman Brothers in rendering its
opinion. The summary of the Lehman Brothers opinion set forth in this document
is qualified in its entirety by reference to the full text of the Lehman
Brothers opinion.
No limitations were imposed by Bay View on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. The form and amount of the consideration to be received by FMAC's
shareholders in the transaction was determined through arm's-length negotiations
between the parties. In arriving at its opinion, Lehman Brothers did not ascribe
a specific range of value to Bay View or FMAC, but rather made its determination
as to the fairness, from a financial point of view, of the consideration to be
paid in the transaction on the basis of the financial and comparative analyses
described below. The Lehman Brothers opinion is for the use and benefit of the
Bay View Board and was rendered to the Bay View Board in connection with its
consideration of the merger. The Lehman Brothers opinion is not intended to be
and does not constitute a recommendation to any Bay View shareholder as to how
such shareholder should vote with respect to the
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transaction. Lehman Brothers was not requested to opine as to, and its opinion
does not address, Bay View's underlying business decision to proceed with or
effect the transaction.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
merger agreement and the specific terms of the transaction, (2) such publicly
available information concerning Bay View and FMAC that it believed to be
relevant to its analysis, including, without limitation, Bay View's and FMAC's
reports on Form 10-K for the year ended December 31, 1997, (3) financial and
operating information with respect to the businesses, operations and prospects
of Bay View and FMAC furnished to it by Bay View and FMAC, respectively,
including with respect to FMAC's remaining obligation relating to earn-out
payments of up to $30 million to the former shareholders of Bankers Mutual
pursuant to the terms of an asset purchase agreement between FMAC, Bankers
Mutual and such former shareholders dated as of March 9, 1998, (4) a trading
history of the common stock of Bay View from January 1, 1998 to March 5, 1999
and a comparison of that trading history with those of other companies that
Lehman Brothers deemed relevant, (5) a trading history of the common stock of
FMAC from January 1, 1998 to March 5, 1999 and a comparison of that trading
history with those of other companies that Lehman Brothers deemed relevant, (6)
a comparison of the historical financial results and present financial condition
of Bay View with those of other companies that Lehman Brothers deemed relevant,
(7) a comparison of the historical financial results and present financial
conditions of FMAC with those of other companies that Lehman Brothers deemed
relevant, (8) published estimates of third party research analysts regarding the
future financial performance of Bay View and financial projections of FMAC
prepared by the management of Bay View, (9) a comparison of the financial terms
of the proposed transaction with the financial terms of certain other recent
transactions that Lehman Brothers deemed relevant, and (10) the potential pro
forma financial impact of the proposed transaction on Bay View. In addition,
Lehman Brothers has had discussions with the managements of Bay View and FMAC
concerning their respective businesses, operations, assets, liabilities,
financial conditions, and prospects and has undertaken such other studies,
analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers has assumed and relied upon the
accuracy and completeness of the financial and other information provided to it
without assuming any responsibility for independent verification of such
information and has further relied upon the assurances of the managements of Bay
View and FMAC that they are not aware of any facts or circumstances that would
make such information inaccurate or misleading. With respect to the financial
projections of FMAC prepared by the management of Bay View, upon advice of Bay
View, Lehman Brothers has assumed that such FMAC projections have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of Bay View as to the future financial
performance of FMAC and that FMAC will perform substantially in accordance with
such projections. Lehman Brothers was not provided with, and did not have access
to, financial projections of Bay View prepared by the management of Bay View.
Accordingly, upon advice of Bay View, Lehman Brothers has assumed that the
published estimates of third party research analysts are a reasonable basis upon
which to evaluate and analyze the future financial performance of Bay View and
that Bay View will perform substantially in accordance with such estimates.
In arriving at its opinion, Lehman Brothers has not conducted a physical
inspection of the properties and facilities of Bay View or FMAC and has not made
or obtained any evaluations or appraisals of the assets of Bay View or FMAC. In
addition, Lehman Brothers is not an expert in the evaluation of loan portfolios
or allowance for loan and real estate owned losses and, upon advice of Bay View,
it has assumed that the allowances for loan and real estate owned losses
provided to it by Bay View and FMAC and used in the Lehman Brothers opinion are
in the aggregate adequate to cover all such losses. The Lehman Brothers opinion
necessarily is based upon market, economic, regulatory and other conditions as
they exist on, and can be evaluated as of, the date of its written letter.
In connection with the preparation and delivery of its opinion to the Bay
View Board, Lehman Brothers performed a variety of financial and comparative
analyses, as described below. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial and comparative analysis and the application of those methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Lehman Brothers did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative
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<PAGE>
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Lehman Brothers believes that its analyses must be considered as a
whole and that considering any portion of such analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying its opinion. In its analyses, Lehman Brothers
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of Bay View and FMAC. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold. Certain of the analyses include information presented in tabular
format. In order to fully understand the financial analyses used by Lehman
Brothers, the tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the financial analyses.
Purchase Price Ratio Analysis. Based on price per Bay View share of $20.00,
as indicated to Lehman Brothers by the management of Bay View, and a fixed
exchange ratio of 0.5125, the implied value to be received by holders of FMAC
common stock was $10.25 per share as of March 11, 1999. Based on this
transaction value per share, Lehman Brothers calculated the price-to-market,
price-to-book, and price-to-earnings multiples in the transaction. The
transaction value per share yielded a premium of 25.2% over the closing price of
FMAC common stock of $8.19 as of the close of business on March 5, 1999. This
analysis also yielded a price-to-book value multiple of 2.01x, a price-to-1998
normalized earnings (whereby FMAC's net income for the first nine months of 1998
was annualized) multiple of 12.1x, a price-to-estimated 1999 earnings multiple
of 9.3x, and a price-to-estimated 2000 earnings multiple of 6.8x based on
Institutional Broker Estimate System, or IBES, median estimates as of March 5,
1999 of FMAC's 1999 and 2000 earnings. IBES is a data services that monitors and
publishes a compilation of earnings estimates produced by selected research
analysts regarding companies of interest to institutional investors.
Selected Comparable Companies Analysis. Using publicly available information,
Lehman Brothers compared the financial performance and stock market valuation of
FMAC with the following selected finance institutions deemed relevant by Lehman
Brothers: Finova Group Inc., Heller Financial Inc., Newcourt Credit, Imperial
Credit Industries Inc., Resource America Inc., Allied Capital, Captec Net Lease
Realty, Franchise Finance Corporation and AMRESCO. Indications of such financial
performance and stock market valuation, adjusted to reflect an acquisition
premium of 20%, included the ratio of stock price to latest 12 month reported
earnings, or LTM, (10.8x for FMAC's normalized LTM earnings and a mean and
median of 16.1x and 15.1x, respectively, for the comparable companies); the
ratio of stock price to estimated 1999 earnings based on IBES estimates (8.4x
for FMAC and a mean and median of 11.9x and 12.5x, respectively, for the
comparable companies); the ratio of stock price to estimated 2000 earnings based
on IBES estimates (6.1x for FMAC and a mean and median of 10.1x and 10.3x,
respectively, for the comparable companies); and the ratio of stock price to
book value (1.80x for FMAC and a mean and median of 1.68x and 1.47x,
respectively, for the comparable companies).
Median Comparable
Ratio FMAC Companies
- --------------------------- ---------------- --------------------
Price/LTM Earnings 10.8x 15.1x
Price/1999P Earnings 8.4x 12.5x
Price/2000P Earnings 6.1x 10.3x
Price/Book Value 1.8x 1.47x
However, because of the inherent differences in the businesses, operations,
financial conditions and prospects of FMAC and the companies included in the
comparable companies, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the comparable
companies analysis, and accordingly also made qualitative judgments concerning
difference between the characteristics of the comparable companies and FMAC that
would affect the trading values of FMAC and such companies.
Selected Comparable Transactions Analysis. Using publicly available
information and IBES earnings estimates, Lehman Brothers reviewed certain terms
and financial characteristics, including the historical price-to- earnings and
price-to-book value ratio of 21 acquisition transactions which Lehman Brothers
deemed comparable to
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<PAGE>
the transaction. The comparable transactions considered by Lehman Brothers in
its analysis consisted of the following transactions, identified by
acquiror/acquiree: Associates First Capital/Fleetwood Credit, First Union/USL
Capital Rail Services, GRS Holding/AT&T Capital, Associates First Capital/USL
Capital Fleet Services, BankAmerica Leasing & Capital/USL Capital Equipment
Leasing, Mellon Bank/ USL Capital Business Equipment Finance, HFS/PHH Corp., TCF
Financial/Winthrop Resources, AMRESCO/Commercial Lending Corp., Atlas
Copco/Prime Services Inc., General Electric Capital Corp./Trans Leasing
International, General Electric Capital Corp./Woodchester Investments, Newcourt
Credit Group Inc./AT&T Capital Corp., Fidelity National Financial Inc./Granite
Financial Inc., Transamerica Commercial Finance/Cantrex Group, Firstar
Corp./Cargill Leasing Corp, GE Capital/Met Life Capital, GE Capital/Colonial
Pacific, American Express/Rockford Industries, Fleet Financial/Sanwa Business
Credit and FINOVA Group/Sirrom Capital. The values for these transactions for
the price-to-LTM earnings ratio and price-to-book value ratio, on a median basis
were 17.0x and 2.65x, respectively, and the range of values for these parameters
were from 7.8x to 42.5x and 0.7x to 9.8x, respectively, compared to 12.1x and
2.01x, respectively, for FMAC based upon the merger consideration and the
closing price of FMAC's stock on March 5, 1999.
Lehman Brothers also reviewed certain terms and financial characteristics,
including historical price-to-earnings and price-to-book value ratios of three
additional acquisition transactions of targets that securitized their assets
which Lehman Brothers deemed comparable to the transaction. The comparable
securitization transactions considered by Lehman Brothers in its analysis
consisted of the following transactions, identified by acquiror/acquiree: Green
Point Financial/BankAmerica Housing Service, Conseco Inc./Green Tree Financial
Corp., and First Union Corp./The Money Store. The values for these transactions
for the price-to-LTM earnings ratio and price-to-book value ratio, on a median
basis were 16.2x and 4.24x, respectively, and the range of values for these
parameters were from 9.0x to 24.2x and 3.23x to 5.25x, respectively, compared to
12.1x and 2.01x, respectively, for FMAC based upon the merger consideration and
the closing price of FMAC's stock on March 5, 1999.
Comparable Transactions Comparable Securitization
Ratio The Transaction (median) Transactions (median)
- ------------------- ------------------ ------------- ----------------------
Price/LTM Earnings 12.1x 17.0x 16.2x
Price/Book Value 2.01x 2.65x 4.24x
However, because the reasons for and the circumstances surrounding each of
the transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of FMAC
and the businesses, operations and prospects of the acquired companies included
in the comparable transactions and the comparable securitization transactions,
Lehman Brothers believed that it was inappropriate to, and therefore did not,
rely solely on the quantitative results of the comparable transactions analysis,
and accordingly also made qualitative judgments concerning differences between
the characteristics of those transactions and the proposed merger that would
affect the acquisition values of FMAC and such acquired companies.
Discounted Cash Flow Analysis. Lehman Brothers discounted estimated cash
flows of FMAC through the end of 2002 and an estimated terminal value of FMAC
common stock, assuming net income based on Bay View management estimates,
assuming a dividend rate sufficient to maintain a ratio of book value less
goodwill and securitization residuals-to-book assets less goodwill and
securitization residuals of 9.00%, assuming a securitization gain of 4.9% for
ongoing securitizations, and using a range of discount rates of 14% to 16%.
Lehman Brothers derived an estimate of a range of terminal values by applying
multiples ranging from 7x to 9x to estimated year 2002 net income. This
analysis, and its underlying assumptions, yielded a range of values for FMAC
common stock of approximately $11.50 to $16.50.
Discount Rate
----------------------------------------------------
Terminal Multiple 14.0% 15.0% 16.0%
-------------- ------------- --------------
7.0x $12.50 $12.00 $11.50
8.0x $14.50 $14.00 $13.50
9.0x $16.50 $16.00 $15.50
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Pro Forma Merger Analysis. Lehman Brothers analyzed the impact of the
transaction on Bay View's estimated earnings per share based on IBES estimates
for the 1999 and 2000 earnings of Bay View and based on estimates for the 1999
and 2000 earnings of FMAC as per Bay View management estimates. In connection
with this analysis, management projections for cost savings and operating
synergies from the transaction were incorporated in Lehman Brothers' analysis.
Based on such estimates, assumed growth rates, and projections of cost savings
and operating synergies, Lehman Brothers concluded that the transaction would
result in accretion of 6.2% and 10.7% to Bay View's earnings per share and cash
earnings per share, respectively, in 1999 and accretion of 53.5% and 53.2% to
Bay View's earnings per share and cash earnings per share, respectively, in
2000.
Lehman Brothers is an internationally recognized investment banking firm and,
as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Bay View Board selected Lehman
Brothers because of its expertise, reputation and familiarity with Bay View in
particular and the banking and commercial finance industry in general and
because its investment banking professionals have substantial experience in
transactions similar to this merger.
As compensation for its services as financial advisor in connection with the
transaction, Bay View has agreed to pay Lehman Brothers a fee of $600,000 in
connection with the delivery of its opinion and, additionally, Bay View has
agreed to pay Lehman Brothers a fee upon consummation of the transaction, of
$2,750,000, against which the opinion fee would be credited. In addition, Bay
View has agreed to reimburse Lehman Brothers for reasonable out-of-pocket
expenses incurred in connection with the transaction and to indemnify Lehman
Brothers for certain liabilities that may arise out of its engagement by Bay
View and the rendering of its opinion.
Lehman Brothers is acting as financial advisor to Bay View in connection with
the transaction. Lehman Brothers has also performed various investment banking
services for Bay View and FMAC in the past and has received customary fees for
such services. In the ordinary course of its business, Lehman Brothers may
actively trade in the securities of Bay View and FMAC for its own account and
for the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
Opinion of FMAC Financial Advisor
FMAC retained CSFB to act as its exclusive financial advisor in connection
with the merger. CSFB was selected by FMAC's Board of Directors to act as FMAC's
financial advisor based on CSFB's qualifications, expertise and reputation, as
well as CSFB's investment banking relationship and familiarity with FMAC.
In connection with CSFB's engagement, FMAC requested that CSFB evaluate the
fairness to the shareholders of FMAC from a financial point of view of the
consideration to be received by the shareholders of FMAC pursuant to the terms
of the merger agreement. On March 8, 1999, the Board of Directors of FMAC met to
review the proposed transaction with Bay View and the preliminary terms of the
merger agreement. During this meeting, CSFB rendered its oral opinion that,
based upon the preliminary terms, and subject to the final form of merger
agreement, CSFB believed it would be in a position to render a fairness opinion.
CSFB subsequently confirmed in writing on March 10, 1999, that, as of that date,
based upon and subject to the various considerations set forth in the CSFB
opinion, the proposed consideration to be received by the shareholders of FMAC
pursuant to the merger agreement was fair to FMAC shareholders from a financial
point of view.
The full text of the CSFB opinion, which sets forth, among other things,
assumptions made, procedures followed, matters considered, and limitations on
the scope of the review undertaken by CSFB in rendering the CSFB opinion, is
attached as Appendix C to this document and incorporated herein by reference.
FMAC shareholders are urged to, and should, read the CSFB opinion carefully and
in its entirety. The CSFB opinion addresses only the fairness of the proposed
consideration to the FMAC shareholders, from a financial point of view, as of
the date of the CSFB opinion, and does not constitute a recommendation to any
shareholder as to
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<PAGE>
how such shareholder should vote at the FMAC special meeting. The summary of the
CSFB opinion set forth in this document is qualified in its entirety by
reference to the full text of the CSFB opinion.
In preparing the CSFB opinion, CSFB performed a variety of financial and
comparative analyses, including those described below. The following summary of
CSFB's analyses is not a complete description of the analyses underlying the
CSFB opinion or the presentation made by CSFB to the FMAC Board. The preparation
of a fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial
analyses and the application of those methods to the particular circumstances,
and, therefore, it is inherently difficult to partially analyze or summarily
describe the fairness opinion. In arriving at its opinion, CSFB did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments about the significance and relevance of each
analysis and factor. Accordingly, CSFB believes that its analyses must be
considered as a whole and that selecting portions of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion.
In performing its analyses, CSFB made numerous assumptions with respect to
FMAC, Bay View, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
FMAC or Bay View. No company, transaction or business used in those analyses as
a comparison is identical to FMAC, Bay View or the proposed merger, nor is an
evaluation of the results of the analyses entirely mathematical; rather, the
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions being analyzed. Any estimates contained in the analyses performed
by CSFB do not necessarily indicate actual values or future results, which may
be significantly more or less favorable than suggested by the analyses.
Additionally, estimates of the value of businesses or securities do not purport
to be appraisals or to necessarily reflect the prices at which those businesses
or securities might actually be sold. Accordingly, the analyses and estimates
described above are inherently subject to substantial uncertainty. In addition,
the CSFB opinion and CSFB's presentation to the FMAC Board were among several
factors taken into consideration by the FMAC Board in making its determination
to approve the merger. Consequently, the CSFB analyses described below should
not be viewed as, and were not, determinative of the opinion of the FMAC Board
or FMAC management with respect to the proposed consideration or the proposed
merger.
In arriving at its opinion, CSFB reviewed certain publicly available business
and financial information relating to FMAC and Bay View, as well as a draft of
the merger agreement. CSFB also reviewed certain other information, including
financial forecasts, provided to it by FMAC and Bay View, and met with FMAC's
and Bay View's managements to discuss the business and prospects of each of FMAC
and Bay View.
CSFB also considered certain financial and stock market data of FMAC and Bay
View, and compared that data with similar data for other publicly held companies
in businesses similar to FMAC and Bay View and considered the financial terms of
certain other business combinations and other transactions which have recently
been effected. CSFB also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which it
deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the foregoing information and relied on it
being complete and accurate in all material respects. With respect to the
financial forecasts, CSFB assumed such forecasts were prepared on bases
reflecting the best currently available estimates and judgments of the
managements of each of FMAC and Bay View as to the future financial performance
of FMAC and Bay View and the cost savings and other potential synergies,
including the amount, timing and achievability thereof, anticipated to result
from the merger. In addition, CSFB was not requested to make, and did not make,
an independent evaluation or appraisal of the assets or liabilities, contingent
or otherwise, of FMAC or Bay View, nor was it furnished with any such
evaluations or appraisals. The CSFB opinion is necessarily based on financial,
economic, market and other conditions as they existed and could be evaluated on
March 10, 1999. CSFB did not express any opinion as to the actual value of the
Bay View common stock when issued to FMAC's shareholders pursuant to the merger
or the prices at which such Bay View common stock will trade subsequent to the
merger. In connection with its engagement, CSFB approached third parties to
solicit
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indications of interest in a possible acquisition of FMAC and held preliminary
discussions with certain of these parties prior to March 10, 1999.
The following is a summary of the analyses performed by CSFB in connection
with the preparation of the CSFB opinion. The summary of the analyses includes
information presented in tabular format. In order to fully understand the
analyses, the tables should be read together with the text of each summary.
Consideration of the tables alone without the full narrative description of the
analyses, including the underlying assumptions, would create a misleading or
incomplete view of the process underlying, and conclusions represented by, the
CSFB opinion.
Valuation Analysis. CSFB analyzed the premium represented by the proposed
consideration compared to values for FMAC on a stand-alone basis using two
valuation methodologies, a comparable company analysis and a discounted cash
flow analysis (without giving effect to the potential net cost savings
realizable from the merger). CSFB also analyzed the proposed consideration
compared to acquisition values for FMAC using three valuation methodologies, a
comparable companies analysis including 25% acquisition premium, a discounted
cash flow analysis (giving effect to the potential net cost savings realizable
from the merger) and an analysis of prices of recent mergers and acquisitions
involving comparable specialty finance companies. These methodologies are
discussed below.
Comparable Companies Analysis. Using publicly available information, CSFB
compared selected financial, operating and stock market data as of March 5, 1999
for FMAC to corresponding data of comparable companies. The comparable companies
selected reflect a similar commercial mortgage focus and a reliance on
securitization in the public markets as a funding source. The comparable
companies were:
WMF Group, Ltd. AMRESCO, Inc.
CB Richard Ellis Services Inc. Ocwen Financial Corp.
Based on the estimated financial data from publicly available research
analyst reports for the comparable companies on estimates of equity research
analysts, CSFB compared the enterprise values of the selected companies as
multiples of actual 1998 fiscal year earnings per share, estimated 1999 fiscal
year earnings per share and estimated 2000 fiscal year earnings per share, book
value, and tangible book value. The following table shows the low, average and
high estimated multiples of the selected companies.
Comparable Companies Analysis
Comparables
---------------------------------------------------
Valuation Metric Low Average High
- ----------------------- ---------------------------------------------------
1998A EPS ......... 5.0x 7.4x 10.3x
1999E EPS ......... 5.3x 6.8x 9.2x
2000E EPS ......... 3.7x 5.5x 7.5x
Book Value ........ 0.7x 1.2x 1.8x
Tangible Book Value 1.1x 1.7x 2.8x
CSFB then applied the multiples set forth in the table above to estimates of
1999 and 2000 FMAC earnings per share. CSFB arrived at a valuation range of
$5.50 to $9.00 per share based on the comparable companies analysis. These
estimates were based upon FMAC's financial forecast for 1999 as described in
"--Exchange of Financial Forecasts" on page __, adjusted by FMAC's management
after consultation with CSFB to reflect expected gain on sale from
securitization in 1999 lower than that in the initial financial forecast.
Discounted Cash Flow Analysis. CSFB prepared a discounted cash flow analysis
using estimates of the future after tax cash flows (dividendable net income) of
FMAC from January 1, 1999 through December 31, 2003 based upon FMAC management's
financial forecast for 1999, as adjusted. These cash flows were then discounted
to a present value using discount rates ranging from 14% to 16% chosen to
reflect different required rates of return of holders or prospective buyers of
FMAC common stock. CSFB also estimated the terminal values for FMAC
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common stock at 5 to 8 times FMAC's 2003 estimated net income. The terminal
multiples were chosen based on past and current trading multiples of comparable
companies. This discounted cash flow analysis indicated a reference range of
$6.00 to $10.25 per share for FMAC common stock. CSFB included this analysis
because it is a widely used valuation methodology, but noted that the results of
the methodology are highly dependent upon the numerous assumptions that must be
made, including earnings growth rates, dividend payout rates, terminal values
and discount rates.
Stand Alone Valuation Summary. Using the comparable companies analysis and
the discounted cash flow analysis, CSFB determined a reference range for the
implied stand alone value of FMAC to be between $6.00 and $9.00 per share. The
following table summarizes the stand alone valuation of FMAC.
Stand Alone Valuation Summary
Methodology Low High
- ------------------------ ---------- --------------
Comparable Companies $5.50 $ 9.00
Discounted Cash Flow $6.00 $10.25
Reference Range $6.00 $ 9.00
Comparable Company Analysis with 25% Control Premium. CSFB performed a
comparable companies analysis using the same data and companies as the stand
alone comparable companies analysis, but included a 25% control premium in
determining the multiple ranges for the selected companies. The following table
shows the low, average and high estimated multiples of the selected companies.
Comparable Company Analysis with 25% Control Premium
Peer Multiple
-----------------------------------------------------
Valuation Metric Low Average High
- ------------------- ------------- ---------- -------
1998A EPS ......... 6.3x 9.3x 12.8x
1999E EPS ......... 6.6x 8.5x 11.6x
2000E EPS ......... 4.6x 6.9x 9.4x
Book Value ........ 0.9x 1.5x 2.3x
Tangible Book Value 1.4x 2.1x 3.5x
CSFB determined a valuation range of $6.75 to $11.50 per share based on the
comparable companies analysis with a 25% control premium.
Discounted Cash Flow Valuation. CSFB conducted a discounted cash flow
valuation of the potential synergies achievable by Bay View in merging with
FMAC's existing operations which FMAC estimated to be cost savings equal to 10%
of overhead expenses, phased in 50% in 1999 and 100% in 2000. These cash flows
were then discounted to a present value using discount rates ranging from 14% to
16% chosen to reflect different required rates of return of holders or
prospective buyers of FMAC common stock. CSFB also estimated the terminal values
for FMAC common stock at 5 to 8 times FMAC's 2003 estimated net income. The
multiples were chosen based on past and current multiples of comparable merger
and acquisition transactions and current trading multiples of comparable
companies. CSFB arrived at a valuation range for the estimated synergies of
$1.50 to $2.50 per FMAC share.
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Comparable Acquisitions Analysis. CSFB analyzed the purchase prices and
implied transaction multiples paid in the following selected comparable
acquisitions in the consumer finance and specialty finance sector:
<TABLE>
<CAPTION>
Acquiror Target Announced
- ------------------------------ ----------------------------- ------------------------
<S> <C> <C>
The FINOVA Group Inc. Sirrom Capital Corp. January 7, 1999
Fleet Financial Group, Inc. Sanwa Business Credit Corp. November 19, 1998
General Electric Capital Corp. MetLife Capital August 17, 1998
Associates First Capital Corp. SPS Transaction Services, Inc. April 18, 1998
Fidelity National Financial, Inc. Granite Financial, Inc. November 17, 1997
Newcourt Credit Group, Inc. AT&T Capital Corp. November 5, 1997
Transamerica Corp. Whirlpool Financial Corp. September 18, 1997
TCF Financial Corp. Winthrop Resources Corp. February 14, 1997
</TABLE>
Because of the unique nature of FMAC's business, including FMAC's significant
earnings volatility, CSFB did not believe that comparing the merger to the
comparable acquisitions provided an accurate basis for judgment. However, the
FINOVA/Sirrom transaction was somewhat comparable. The implied value of FMAC
using the FINOVA/Sirrom transaction multiples as a metric for comparison is
$5.00 to $12.00 per share.
Change of Control Valuation Summary. As shown in the table below, the
valuation analyses yield an implied change of control valuation for FMAC of
between $8.00 to $12.00 per share. Given the uniqueness of FMAC relative to
other finance companies that have been sold, CSFB placed greater emphasis on the
DCF value and comparable companies valuations.
Change of Control Valuation Summary
Methodology Low - High
- ---------------------------------------------- ------------------------------
Proposed Consideration $10.25
DCF with Change of Control $7.50 - $12.75
Comparable Companies with 25% Market Premium $6.75 - $11.50
Comparable Acquisitions $5.00 - $12.00
Reference Range $8.00 - $12.00
Pro Forma Capital Ratios. CSFB analyzed the pro forma capital ratios of Bay
View upon consummating the FMAC transaction due to the importance of such ratios
from a regulatory and capitalization perspective. Bay View's Tier 1 (core)
capital ratio pro forma is expected to be 5.21%, above the "well-capitalized"
regulatory target of 5.00%.
Pro Forma Valuation Analysis. Using publicly available information, CSFB
compared selected financial, operating and stock market data as of March 5, 1999
for Bay View to corresponding data of comparable companies.
The comparable companies were:
Downey Financial Corp. Washington Federal, Inc.
First Federal Capital Corp. Washington Mutual, Inc.
PFF Bancorp, Inc. Golden West Financial Corp.
Interwest Bancorp, Inc.
CSFB compared the enterprise values of the selected companies as multiples of
actual 1998 fiscal year, estimated 1999 fiscal year and estimated 2000 fiscal
year cash and GAAP earnings per share, book value, and tangible book value. Cash
earnings are defined as revenues less expenses excluding non-cash expenses such
as
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depreciation and amortization. CSFB also estimated the Bay View multiples on a
pro forma basis, taking the merger into account. The following table shows the
multiples calculated in the pro forma valuation analysis.
<TABLE>
<CAPTION>
Pro Forma Valuation Analysis
Bay View Bay View Pro Forma Peers
---------------- ----------------------- ----------------
<S> <C> <C> <C>
Market Price to:
1998A EPS 14.3x 14.3x 12.3x
1999E EPS 13.3x 13.0x 11.6x
1999E Cash EPS 9.6x 9.1x 11.4x
2000E EPS 11.7x 10.4x 10.6x
2000E Cash EPS 8.8x 7.6x 10.5x
Book Value 1.1x 1.0x 1.7x
Tangible Book Value 1.7x 2.7x 2.0x
</TABLE>
In addition, CSFB calculated the market value and market float (the amount of
common stock not owned by directors and management or their affiliates) as of
March 5, 1999, of FMAC, Bay View and Bay View pro forma, taking into account the
merger. This analysis indicated that the merger would improve the liquidity of
stock held by FMAC shareholders due to significantly increased market
capitalization and market float.
In an engagement letter dated March 1, 1999, between CSFB and FMAC, FMAC
agreed to pay CSFB, upon the consummation of the merger, a transaction fee equal
to 1.0% of the aggregate consideration in connection with the sale of FMAC. FMAC
will also reimburse CSFB for all out-of-pocket expenses resulting from or
arising out of its engagement, including the fees and expenses of CSFB's legal
counsel. For purposes of CSFB's engagement, aggregate consideration is defined
as the total fair market value at closing of all consideration paid or payable,
or otherwise to be distributed directly or indirectly, to FMAC or FMAC's
shareholders in connection with the sale of FMAC. All consideration includes
cash, securities, property, and any other form of consideration. Assuming the
closing share price of Bay View on the closing date of the merger were to be
$20.00 (the Bay View closing stock price on March 5, 1999), the fee payable to
CSFB would be approximately $3.1 million. In addition, FMAC also agreed to
indemnify CSFB, its affiliates, the respective directors, officers, partners,
agents and employees of CSFB and its affiliates, and each person, if any,
controlling CSFB or any of its affiliates, against certain liabilities,
including liabilities under the federal securities laws.
An affiliate of CSFB currently provides a $300 million secured credit
facility to FMAC. CSFB is also currently providing merger and acquisition
services to Bay View on a separate matter. In the ordinary course of its
business, CSFB and its affiliates may actively trade the debt and equity
securities of both FMAC and Bay View for its and such affiliates' own accounts
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
Appraisal Rights
Pursuant to Section 262 of the Delaware General Corporation Law, FMAC
shareholders may dissent from the merger and elect to have the fair value of
their shares judicially determined and paid in cash, but only if the shareholder
complies with the provisions of Section 262. If more than 7% of FMAC shares
dissent, Bay View is not obligated to complete the merger. Dissenters' rights of
appraisal are not available to Bay View shareholders.
The following is a brief summary of the statutory procedures to be followed
by FMAC shareholders in order to perfect appraisal rights under Delaware law.
This summary is not intended to be complete and is qualified in its entirety by
reference to Section 262, a copy of which is attached as Appendix D to this
document.
To dissent from the merger and demand appraisal, a shareholder must satisfy
the following conditions:
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o deliver a written demand for appraisal to FMAC before the vote on the
merger;
o not vote in favor of the merger agreement (the return of a signed
proxy which does not specify a vote against the merger agreement or a
direction to abstain, will constitute a waiver of such shareholder's
right of appraisal); and
o continuously hold the FMAC shares from the date of the making of the
demand through the effective time of the merger.
If a shareholder fails to comply with any of these conditions and the merger
becomes effective, he or she will be entitled to receive the consideration
provided in the merger agreement. Failure to vote on the merger proposal will
not constitute a waiver of your appraisal rights. Voting against the merger will
not satisfy the requirement of a written demand for appraisal.
All written demands for appraisal should be addressed to: Franchise Mortgage
Acceptance Company, 1888 Century Park East, Third Floor, Los Angeles, California
90067, Attention: Raedelle Walker, Secretary, before the vote concerning the
merger agreement at the FMAC special meeting, and should be executed by, or on
behalf of, the holder of record. If FMAC common stock is owned of record in a
fiduciary capacity, as by a trustee, guardian or custodian, execution of a
demand for appraisal should be made in such capacity. If FMAC common stock is
owned of record by more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by or for all joint owners. An authorized
agent, including one or two or more joint owners, may execute the demand for
appraisal for a shareholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for the record owner. A record owner, such
as a broker, who holds FMAC common stock as a nominee for others may exercise
his or her rights of appraisal with respect to the shares held for one or more
beneficial owners, while not exercising such right for other beneficial owners.
In such case, the written demand should set forth the number of shares as to
which the record owner dissents. Where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares of FMAC common stock
in the name of such record owner.
Within ten days after the merger, Bay View must give written notice that the
merger has become effective to each shareholder of FMAC common stock who filed a
written demand for appraisal and who did not vote in favor of the merger
agreement. Any shareholder entitled to appraisal rights may, within 20 days
after the date of mailing of the notice, demand in writing from Bay View the
appraisal of his or her FMAC shares. Within 120 days after the merger, either
Bay View, or any FMAC shareholder who has complied with Section 262, may file a
petition in the Delaware Court of Chancery demanding a determination of the
value of the FMAC shares held by all shareholders entitled to appraisal. Bay
View does not presently intend to file such a petition. Inasmuch as Bay View has
no obligation to file such a petition, the failure of a shareholder to do so
within the period specified could nullify such shareholder's previous written
demand for appraisal.
If a petition for appraisal is duly filed by a shareholder and a copy is
delivered to Bay View, Bay View will then be obligated within 20 days of receipt
of such copy to provide the Court of Chancery with a duly verified list
containing the names and addresses of all shareholders who have demanded an
appraisal of their shares and with whom agreement as to the value of such shares
has not been reached. After notice to such shareholders, the Court of Chancery
is empowered to conduct a hearing to determine those shareholders who have
complied with Section 262 and who have become entitled to appraisal rights.
The Court of Chancery will then appraise the FMAC shares, determining their
fair value exclusive of any element of value arising from the accomplishment or
expectation of the merger. When the value is determined, the Court will direct
the payment by Bay View of such value, with interest thereon, simple or
compound, if the Court so determines, to the shareholders entitled to receive
the same.
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Shareholders who are considering seeking an appraisal should bear in mind
that the fair value of their FMAC shares determined under Section 262 could be
more than, the same as or less than the consideration they are to receive
pursuant to the merger agreement if they do not seek appraisal of their shares.
Costs of the appraisal proceeding may be assessed against the shareholder by
the court as the court deems equitable in the circumstances.
Failure to comply strictly with these procedures will cause the shareholder
to lose his or her appraisal rights. Consequently, any shareholder who desires
to exercise his or her appraisal rights is urged to consult a legal advisor
before attempting to exercise such rights.
Structure of the Merger
Subject to the terms and conditions of the merger agreement, and pursuant to
the Delaware General Corporation Law, when the merger becomes effective FMAC
will merge with and into Bay View, and its separate corporate existence will
cease to exist. After the merger, Bay View's shareholders would own
approximately 67% and FMAC's shareholders 33% of the combined company.
The merger will become effective at the time and date as specified in a
certificate of merger to be filed with the Delaware Secretary of State. The
closing will occur on a date specified by Bay View, but no later than 30 days
after the satisfaction or waiver of all the conditions precedent to the merger
as set forth in the merger agreement. We anticipate that the merger will be
completed during the quarter ending September 30, 1999. However, completion of
the merger could be delayed if there is a delay in obtaining the requisite
regulatory approvals or for other reasons. There can be no assurances as to if
or when such approvals will be obtained or that the merger will occur. If the
merger is not completed by January 15, 2000, the merger agreement may be
terminated by either Bay View or FMAC, unless the party that wants to terminate
the merger agreement is in material breach of any representation, warranty,
covenant or agreement contained in the merger agreement and/or related
documents. See "--What Needs to be Done to Complete the Merger" and "--
Regulatory Approvals Required."
Representations and Warranties
The merger agreement contains a number of reciprocal representations and
warranties of Bay View and FMAC as to, among other things, due incorporation and
good standing, corporate authority to enter into the contemplated transactions,
required consents and filings with governmental entities, absence of conflicts
with organizational documents and material agreements, capitalization, reports
filed with the SEC, financial statements, undisclosed liabilities, litigation,
material changes or events, compliance with laws, tax matters, intellectual
property, information supplied for use in this document, and the required
shareholder approvals.
When the merger is completed, all representations and warranties of Bay View
and FMAC will expire and terminate.
Conduct of Business
FMAC. FMAC has agreed that prior to the completion of the merger, FMAC and
its subsidiaries will conduct its business only in the usual, regular and
ordinary course of business, as heretofore conducted; and FMAC will use its
commercially reasonable efforts with respect to it and its subsidiaries to
maintain properties and assets in their present state of repair, to keep in
force all insurance policies, to preserve their business organizations, to keep
available the services of officers and key employees, to preserve relationships
with customers, investors and others with which they have business dealings and
to preserve all rights under directors' and officers' insurance policies. In
particular, FMAC has agreed that neither it nor any of its subsidiaries, without
the prior written consent of Bay View, will, subject in certain cases to
specified exceptions:
o other than subsidiaries, declare or pay any dividend or other
distribution on any of its capital stock;
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o issue any capital stock except pursuant to outstanding options or
restricted stock awards, or pursuant to options and bonus stock
previously disclosed to Bay View;
o redeem or repurchase any capital stock;
o reorganize or recapitalize;
o amend its certificate of incorporation, bylaws or other organizational
document;
o enter into or modify any employment, severance, change of control or
benefit agreements;
o except for borrowings in the ordinary course that do not have any
prepayment penalty, borrow funds or guarantee obligations;
o make any loan, other than loans on retail concepts on which FMAC
currently loans that do not exceed $10 million and that would not
increase the credit outstanding to any one borrower to more than $15
million;
o refinance or restructure any loan, except in the ordinary course of
business consistent with past practice and prudent lending practices;
o make any material changes in its underwriting or credit scoring
policies;
o except in the ordinary course of business consistent with past
practice and prudent business practices, acquire any investment
security, other than securities backed by the full faith and credit of
the United States not in the excess of $10 million and other readily
marketable securities in excess of $1 million;
o enter into or modify any agreement or commitment, other than
agreements or commitments related to loans or securities, involving an
expenditure above $250,000, except as required or desirable for the
conduct of business in the ordinary course;
o except in the ordinary course of business, place on any of its assets
or properties any mortgage, pledge, lien, charge or other encumbrance;
o cancel any material indebtedness owing to it or any claims it
possesses or waive any rights of material value;
o sell or dispose of property other than foreclosed property or loans
sold in the secondary market;
o foreclose on or take control of any real property without a phase one
environmental report;
o knowingly cause a material breach of any agreement or commitment;
o engage in any activity or transaction outside the ordinary course of
business;
o enter into or modify any futures, swap or other hedging instruments,
except in the ordinary course of business consistent with past
practices and prudent business practices;
o knowingly take any action that would materially impede or delay the
completion of the merger or the receipt of any regulatory approval or
prevent the merger from qualifying as a reorganization under Section
368 of the tax code;
o make any material changes in its pricing policies; or
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o engage in any transaction or knowingly take any action that would
render untrue in any material respect any representation or warranty
of FMAC in the merger agreement.
Notwithstanding the foregoing, FMAC is permitted to sell its leasing division
upon the written consent of Bay View, which consent shall not be unreasonably
withheld or delayed. A substantial portion of the leasing division was sold to
Federated Capital Corporation effective as of April 30, 1999. It is anticipated
that all of the assets and liabilities of the leasing division will be sold
prior to the completion of the merger.
In addition, FMAC has agreed not to encourage or facilitate any transaction
which would interfere with the merger. However, certain exceptions are permitted
to allow the FMAC Board of Directors to fulfill its fiduciary duties to FMAC's
shareholders.
Bay View. Bay View has agreed that prior to the completion of the merger, Bay
View and its subsidiaries will not, without the prior written consent to FMAC:
o other than subsidiaries, declare or pay any dividend or other
distribution on any of its capital stock, except for regular quarterly
dividends; or
o knowingly take any action that would materially impede or delay the
completion of the merger or the receipt of any regulatory approval or
prevent the merger from qualifying as a reorganization under Section
368 of the tax code.
Additional FMAC Reserves, Accruals, Charges, and Expenses. FMAC will, on a
basis mutually satisfactory to FMAC and Bay View, establish and take all such
reserves, accruals and charges and recognize, for financial accounting purposes,
such expenses and charges, provided that all conditions to our obligations to
complete the merger have been satisfied or waived and that such reserves,
accruals and charges conform with generally accepted accounting principles,
applicable laws and regulations and the requirements of governmental entities.
Additional Agreements
Impermissible Activities. FMAC has agreed to use its reasonable best
efforts to sell, transfer or otherwise dispose of, on terms satisfactory to Bay
View, any of its businesses or activities that would be impermissible for Bay
View Bank to engage in for regulatory purposes. The impermissible activities
include limited liability company equity investments in certain restaurant
franchises. There can be no assurance that such transfer or disposition can be
made upon terms favorable to FMAC and Bay View. FMAC shall also sell, transfer
or otherwise dispose of prior to the Effective Time, on terms satisfactory to
Bay View, any and all of its interests in FMAC Golf Finance Group LLC and FMAC
Star Fund, LLP, or, together, the Joint Ventures. Bay View is not obligated to
complete the merger unless FMAC disposes of the Joint Ventures prior to the
effective time of the merger, unless otherwise agreed.
FMAC Insurance Agency Business. Bay View has received the approval of the
Federal Reserve Board to continue FMAC's insurance agency activities after the
merger, provided its activities and the location of its corporate headquarters
are conformed to the banking laws within two years. The parties have agreed to
cooperate with respect to all matters to assure that Bay View will be permitted
for regulatory purposes to continue to operate FMAC's insurance agency business,
including the possible relocation of the corporate headquarters of the insurance
agency business. For the three months ended March 31, 1999, insurance brokerage
fee income related to FMAC's insurance agency business was $1.1 million.
Fannie Mae DUS Program. The Bankers Mutual division of FMAC participates in
the Fannie Mae Delegated Underwriting and Servicing Program. Pursuant to this
program, Bankers Mutual originates mortgage loans and sells them to Fannie Mae.
However, under certain circumstances involving a default on a loan sold, Bankers
Mutual, or Bay View after the merger, would be required to cover certain amounts
of any loss on such loan. In addition, because of the obligation to cover
certain losses, under federal banking regulations Bay View, after the merger,
would be required to hold capital against such sold loans as if Bay View owned
100% of the loans. FMAC has
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agreed in the merger agreement to take such actions as Bay View may request
regarding limiting Bay View's liability under the DUS program after the merger.
Such actions may include (i) negotiating with Fannie Mae a favorable amendment
to the terms of the DUS program or (ii) selling FMAC's servicing rights in the
loans sold to Fannie Mae and the attendant potential liability. FMAC, however,
is not required to take any such actions until Bay View agrees to waive any
right to terminate the merger agreement. There can be no assurance that Bay View
and FMAC will take the action necessary to limit Bay View's potential liability
under the DUS program or limit the additional capital requirements that Bay View
would be subject to. Even if Bay View's potential DUS program liability is not
limited, Bay View would be obligated to complete the merger.
Stock Listing. Bay View has agreed to list the shares of Bay View common
stock to be issued in the merger on the New York Stock Exchange. It is a
condition to the completion of the merger that such shares of Bay View common
stock be authorized for listing on the New York Stock Exchange, subject to
official notice of issuance.
Employee Benefit Plans. The FMAC employee plans will not be terminated by
reason of the merger but will continue thereafter as plans of the combined
company until such time as the former FMAC employees are integrated into Bay
View employee plans. The combined company is obligated to take all necessary
steps as soon as possible following the completion of the merger to integrate
the former FMAC employees into the Bay View employee plans, with full credit for
prior service with FMAC or any of the FMAC subsidiaries for purposes of vesting
and eligibility for participation, but not benefit accruals under any Employee
Plan, and co-payments and deductibles, and waiver of all waiting periods and
pre-existing condition exclusions or penalties.
Waiver
At any time prior to the completion of the merger, by action taken or
authorized by our Boards, each of us may, to the extent legally allowed, waive
compliance by the other party with any term, provision or condition of the
merger agreement.
Amendment
The merger agreement may be amended, whether before or after any shareholder
approval, by action taken or authorized by our Boards. However, once the merger
agreement is approved by the shareholders of either of us, no such amendment may
change the form or value of the consideration to be delivered to the holders of
FMAC common stock without the approval of the Bay View and FMAC shareholders.
Confidentiality
All information disclosed by one of us to the other, except for information
that is otherwise public, must be kept confidential and cannot be used by the
other except as contemplated by the merger agreement.
What Needs to be Done to Complete the Merger
To complete the merger, each of the following conditions must be satisfied,
unless and to the extent such conditions are waived:
o The FMAC and Bay View shareholders have approved the merger agreement.
o No federal or state court preliminary or permanent injunction or other
order preventing the completion of the merger is in effect.
o All required regulatory approvals and consents to the merger have been
received, and all applicable waiting periods have expired.
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o The registration statement relating to the Bay View common stock to be
issued in the merger has been declared effective under the Securities
Act and is not subject to any stop orders, and no proceeding for a
stop order is threatened or pending.
o Tax opinions have been obtained by Bay View from Silver, Freedman &
Taff, L.L.P. and by FMAC from Dewey Ballantine LLP to the effect that
the merger will constitute a "reorganization" under Section 368(a) of
the tax code and each of Bay View and FMAC will be a party to such
reorganization.
o The Bay View common stock to be issued to FMAC shareholders has been
approved for listing on the New York Stock Exchange, subject to
official notice of issuance.
Bay View's obligation to complete the merger is subject to the following
additional conditions which Bay View may choose to waive:
o FMAC's representations and warranties are true in all material
respects in all documents provided to Bay View as of the date of the
merger agreement and, except to the extent such representations and
warranties speak as of an earlier date, the effective time.
o FMAC has performed in all material respects its obligations under the
merger agreement.
o No governmental authority or court has taken action which would
prohibit ownership or operation of all or a portion of FMAC or compel
Bay View to dispose of all or a portion of FMAC or render any party
unable to consummate the merger.
o FMAC has not suffered a material adverse effect as defined in the
merger agreement.
o No regulatory authority has imposed any unduly burdensome condition
that would substantially deprive Bay View of the economic benefits of
the merger, as determined in the reasonable judgment of Bay View.
o Bay View has received a certificate from FMAC's president and chief
executive officer to the effect that certain conditions to the merger
have been satisfied.
o Bay View has received certain customary agreements from FMAC
affiliates regarding the resale of Bay View common stock received in
the merger.
o FMAC shares asserting dissenters' rights do not exceed 7% of the
outstanding shares of FMAC common stock.
o FMAC's consolidated shareholders' equity determined in accordance with
GAAP is not less than $150,000,000, subject to increase by the
after-tax amount of costs, fees and expenses of the merger and any
reserves, accruals or charges taken by FMAC at the request of Bay
View.
o FMAC has sold the Joint Ventures.
o FMAC has obtained consents under certain material contracts.
o FMAC is year 2000 compliant for regulatory purposes.
FMAC's obligation to complete the merger is subject to the following
additional conditions which FMAC may choose to waive:
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o Bay View's representations and warranties are true in all material
respects in all documents provided to FMAC as of the date of the
merger agreement and, except to the extent such representations and
warranties speak as of an earlier date, the effective time.
o Bay View has performed in all material respects its obligations under
the merger agreement.
o Bay View has not suffered a material adverse effect as defined in the
merger agreement.
o FMAC has received a certificate from Bay View's president and chief
executive officer to the effect that certain conditions to the merger
have been satisfied.
There can be no assurance that the requisite regulatory approvals will be
obtained to complete the merger. Also, there can be no assurance that all of the
other conditions precedent to the merger will be satisfied or waived by the
party permitted to do so. Either Bay View or FMAC may terminate the merger
agreement if the merger is not completed by January 15, 2000. However, the party
seeking to do so must not be in material breach of the merger agreement.
Termination of the Merger Agreement; Expenses
We can mutually agree at any time to terminate the merger agreement without
completing the merger, even if the shareholders of both our companies have
approved it. Also, either of us can terminate the merger agreement if:
o a governmental authority denies approval of the merger and the denial
has become final and unappealable;
o the shareholders of either company fail to approve the merger;
o the other party materially breaches the agreement and does not cure
the breach within 30 days after written notice; or
o the merger has not been consummated by January 15, 2000 and the
terminating party is not then in material breach of the merger
agreement.
Bay View can terminate the merger agreement if FMAC receives an acquisition
proposal which it does not reject within ten business days.
FMAC can terminate the merger agreement (i) if FMAC receives an acquisition
proposal on terms and conditions which the FMAC Board of Directors determines,
after receiving the advice of its outside counsel, that to proceed with the
merger will violate the fiduciary duties of the Board, or (ii) if during a
valuation period prior to the anticipated closing date Bay View's average stock
price is less than $17.50 and Bay View's stock price has performed at least 12.5
percentage points worse than a peer group index; provided Bay View may void such
termination by increasing the exchange ratio to a specified minimum.
The merger agreement provides that each of us will pay our own expenses in
connection with the merger. However, we will divide equally the payment of the
costs and expenses of printing and mailing this document, and all filing and
other fees paid to the SEC in connection with the merger.
Break-up Fee and Expense Reimbursement
Under certain circumstances, the party that terminates the merger agreement
will be obligated to pay a break-up fee of $8,000,000, in cash on demand in
immediately available funds. In this event, the fee would be the other party's
sole and exclusive remedy.
FMAC is to pay Bay View a break-up fee if:
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o FMAC terminates the merger agreement because it has received an
acquisition proposal and its Board of Directors determines that to
proceed with the merger would violate its fiduciary duties;
o Bay View terminates the merger agreement because FMAC has received an
acquisition proposal which it does not reject within ten days; or
o the merger agreement is terminated for any reason other than by FMAC
due to a material breach by Bay View and one of the following occurs:
- FMAC's Special Meeting does not take place by December 31, 1999;
- FMAC's shareholders fail to approve the merger and the FMAC Board
has not favorably recommended the merger; or
- FMAC's shareholders fail to approve the merger after receiving
another acquisition proposal.
Bay View is to pay FMAC a break-up fee if:
o the merger agreement is terminated for any reason other than by Bay
View due to a material breach by FMAC and one of the following occurs:
- Bay View's Special Meeting does not take place by December 31,
1999; or
- Bay View's shareholders fail to approve the merger and the Bay
View Board has not favorably recommended the merger.
Under certain circumstances, if the merger agreement is terminated, either of
us may be obligated to pay the other's third-party expenses related to the
merger agreement up to a maximum of $500,000. No party may receive this
reimbursement if it is in material breach of the merger agreement or if it is
entitled to a break-up fee, as described above. Either FMAC or Bay View shall be
entitled to reimbursement if its shareholders approve the merger while the other
party's shareholders do not. In addition, FMAC shall be entitled to
reimbursement if a governmental authority denies approval for the merger and the
denial is final and nonappealable, provided that such denial is not the result
in whole or in part of FMAC's failure to be year 2000 compliant for regulatory
purposes.
Regulatory Approvals Required
Under the merger agreement, the obligation of Bay View to consummate the
merger is subject to the following regulatory conditions:
o The parties shall have received all applicable regulatory approvals
and consents to consummate the merger and all required waiting periods
shall have expired.
o No regulatory authority shall impose any unduly burdensome condition
such that it would substantially deprive Bay View of the contemplated
economic benefits of the merger, as determined in the reasonable
judgment of Bay View.
Federal Reserve Board. Bay View must receive the prior approval of the
Federal Reserve Board under the Bank Holding Company Act to acquire and engage
in the activities and investments of FMAC. The Bank Holding Company Act
generally limits the activities of bank holding companies to those of banking or
managing or controlling banks and to so-called nonbanking activities that are
"so closely related to banking as to be a proper incident thereto."
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FMAC's loan and lease origination, sales and servicing activities are
nonbanking activities which have been approved as permissible for bank holding
companies. FMAC's present insurance agency activities and certain equity
investments are not permissible nonbanking activities. Bay View has received the
approval of the Federal Reserve Board to acquire these impermissible activities
and investments in the merger under a commitment to conform them to permissible
nonbanking activities or to divest them within two years.
The Federal Reserve Board considers the following factors, among other
things, in acting on a proposal by a bank holding company to acquire a company
engaged in nonbanking activities:
o The effect of the proposal on competition among entities engaged in
the proposed activities in the relevant markets.
o The public benefits that can reasonably be expected to result from the
proposal.
o The effect of the proposal on the capital adequacy of the bank holding
company and each bank involved.
o Management, internal controls, risk management systems, Year 2000
readiness or other supervisory concerns.
Bay View filed a notice to acquire FMAC with the Federal Reserve Bank of San
Francisco. Within 30 calendar days after receipt of the application, the Federal
Reserve Bank shall approve the notice or refer the notice to the Federal Reserve
Board for decision. The Federal Reserve Board has approved Bay View's notice and
there is no further Federal Reserve Board regulatory waiting period before the
merger may be consummated.
Comptroller of the Currency. Pursuant to the National Bank Act and the
regulations of the Comptroller of the Currency, Bay View Bank must receive
approvals or file notices as follows:
o Approval of the noncash contribution by Bay View to Bay View Bank's
capital surplus of substantially all of the assets and liabilities to
be acquired from FMAC in the merger.
o Approval of a special cash dividend from Bay View Bank to Bay View to
facilitate the consummation of the merger.
o File notice within ten days after the merger regarding the acquisition
and operation of FMAC's loan and lease origination, sales and
servicing business in an operating subsidiary.
o Approval to engage in the insurance agency activities of FMAC
Insurance Services, Inc. provided its operations conform to the
restrictions on insurance agency activities by national banks.
FMAC's loan and lease origination, sales and servicing activities are all
designated in the regulations of the Comptroller of the Currency as activities
eligible for the post-merger notice procedure and which may be performed in an
operating subsidiary of a national bank. Bay View Bank also meets the
Comptroller of the Currency requirements as an eligible bank for processing and
approval of applications, including being well-capitalized and having adequate
supervisory and compliance ratings, including its rating under the Community
Reinvestment Act in meeting the credit needs of the communities it serves.
Bay View Bank has submitted all necessary applications to the Western
District Office of the Comptroller of the Currency and has received all
necessary approvals. The merger can be consummated without any further
regulatory waiting period.
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Interests of Directors and Officers in the Merger that are Different from Your
Interests
In considering the recommendation of the FMAC Board with respect to the
merger, holders of shares of FMAC common stock should be aware that certain
executive officers and directors of FMAC have certain interests in the merger
that are in addition to the interests of the holders of FMAC common stock
generally. The FMAC Board has considered these interests, among other matters,
in approving the merger.
Indemnification; Insurance. Pursuant to the merger agreement, Bay View has
agreed that from and after the effective time of the merger, it will indemnify
and hold harmless the past and present employees, directors and officers of FMAC
and its subsidiaries for all acts or omissions occurring at or prior to the
effective time to the same extent such persons are indemnified and held harmless
under (i) Delaware law and (ii) FMAC's Certificate of Incorporation and Bylaws.
Bay View will provide for a period of six years from the effective time,
directors' and officers' liability insurance to provide for coverages for acts
or omissions of the type and in the amount currently covered by FMAC's existing
directors' and officers' liability insurance for acts or omissions occurring
prior to the effective time, to the extent such insurance may be purchased or
kept in full force without a material increase in premium cost of the premium
currently paid by Bay View for its directors' and officers' liability insurance.
If such insurance is not available without a material increase in such premium,
Bay View will provide, to the extent available at a cost not in excess of 200%
of the current annual premium cost, single premium tail coverage, with policy
limits equal to FMAC's existing annual coverage limits.
Directors. The merger agreement provides that, as of the effective time, the
current intention of Bay View is that the Board of Directors and Credit
Committee of the Bay View Bank subsidiary anticipated to conduct the business of
FMAC on a post-merger basis will include persons who are currently officers and
directors of FMAC.
The Board of Directors of Bay View have agreed to take all necessary
corporate action so that at the effective time, the class of directors of Bay
View with terms expiring in the year 2000 shall include Wayne L. Knyal. Subject
to its fiduciary duties, the Board of Directors of Bay View will nominate Mr.
Knyal with respect to the Annual Meeting of Shareholders of Bay View scheduled
to be held in May 2000 as a director to serve in the class of directors of Bay
View with terms expiring in the year 2002.
Stock Awards; Certain Payments. Pursuant to restricted stock award agreements
and the FMAC 1997 Stock Option, Deferred Stock and Restricted Stock Plan, or
FMAC Stock Plan, restricted stock awards granted to certain officers of FMAC
will fully vest upon FMAC shareholder approval of the merger. The shares of
stock subject to such awards will be available to such officers for sale prior
to the merger or for exchange in the merger. Pursuant to agreements with certain
of such officers, FMAC has agreed to make tax gross up payments to such officers
relating to tax liability arising under Section 280G of the tax code.
Each stock option granted under the FMAC Stock Plan shall fully vest upon
FMAC shareholder approval of the merger. To the extent such options are
exercised prior to the effective time of the merger, the shares purchased upon
exercise may be sold or exchanged in connection with the merger. Each stock
option granted under the FMAC Stock Plan that remains outstanding immediately
prior to the effective time shall, at the effective time, be converted
automatically into a right to purchase shares of Bay View common stock based
upon a formula set forth in the merger agreement. See also "-Treatment of Stock
Options." All holders of options to purchase FMAC common stock with an exercise
price above $10.25 (i.e., out-of-the money options) have been offered the
opportunity to cancel such options in exchange for an amount of cash per share
subject to option, to be paid by Bay View promptly after the merger, as follows:
$1.85, with respect to options with an exercise price of $18.00; $2.18, with
respect to options with an exercise price of $16.32; and $3.79, with respect to
options with an exercise price of $11.00.
The following table sets forth the number of FMAC stock options and
restricted stock awards held by each director and executive officer of FMAC as
of the record date for the FMAC meeting.
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<TABLE>
<CAPTION>
No. of
No. of Restricted
Name Title Options Stock Awards
- ------------------------- ------------------------------------ ----------- ----------------
<S> <C> <C> <C>
Wayne L. "Buz" Knyal President, Chief Executive Officer and
Director -- --
Kevin T. Burke Executive Vice President, Capital Markets 50,000 150,000
Peter A. Mozer Executive Vice President and Chief Credit
Officer 25,000 100,000
Raedelle Walker Executive Vice President and Chief
Financial Officer 10,000 55,000
H. Wayne Snavely Chairman of the Board, Director 40,000
Ronald V. Davis Director 40,000
Perry A. Lerner Director 40,000
Richard S. Loughlin Director 40,000
John E. Martin Director 40,000
Michael L. Matkins Director 40,000
Brad S. Plantiko Director 10,000
</TABLE>
Employment Agreements. All of the officers of FMAC, along with key members of
the sales force, are expected to be retained by Bay View following the
consummation of the merger to ensure continuity in FMAC's operations. Pursuant
to the merger agreement, certain officers of FMAC, including Mr. Knyal, have
entered into employment agreements with FMAC, which agreements will be effective
at the effective time of the merger. Such agreements will be effective through
December 31, 2002 and will automatically renew for successive one-year periods,
subject to notice of non-renewal from either party. Each officer will be paid a
base salary, subject to possible increases based upon annual review by the Board
of Directors. Additionally, each officer may earn an annual performance bonus of
up to 100% of his base salary, with such bonus guaranteed in 1999 if the officer
is employed by the Bay View subsidiary on December 31, 1999. The officers will
also participate in a long-term incentive bonus plan. In connection with the
agreements, each officer will be granted stock options to purchase Bay View
common stock and will be paid severance upon the occurrence of specified
termination events. Pursuant to such severance arrangements, if an officer is
terminated without cause, he will receive a lump sum payment equal to (i) 150%
of his then-current annual base salary, plus (ii) his annual bonus percentage
then in effect, as determined by the company at the beginning of each year in
consultation with the officer, multiplied by his then-current annual base
salary. If an officer's employment terminates due to disability (as defined in
the agreements), he will receive an amount equal to 90 days of his then-current
annual base salary. If an officer quits or is terminated for cause he will
receive no severance. If the successor entity to FMAC is subject to a change of
control and the officer is terminated by the company without cause or terminates
his employment for "good reason" (as defined in the agreements), in lieu of any
other severance payments, the officer will receive a lump sum payment equal to
(i) 200% of his then-current annual base salary plus (ii) his annual bonus
percentage then in effect multiplied by his then-current annual base salary. In
addition, the officer shall receive any unpaid annual bonus amount for any
completed calendar year. FMAC has also agreed to make tax gross up payments to
such officers relating to tax liability arising under Section 280G of the tax
code. In addition, Mr. Knyal's employment agreement provides that FMAC shall
continue to perform all of its obligations under the split dollar agreement
dated June 16, 1998. If a change of control (as defined in the employment
agreement) occurs during the term of the agreement or any extension thereof, and
while Mr. Knyal is employed by FMAC, then, at Mr. Knyal's option exercisable
within 120 days after the change of control, FMAC is required to assign its
rights under the split dollar agreement to such person or entity as Mr. Knyal
may designate and FMAC shall assign the collateral assignment of the insurance
policy referred to in the split dollar agreement to such person or entity as Mr.
Knyal may designate. FMAC entered into an agreement on June 16, 1998 with a
trust established for the benefit of Mr. Knyal and his spouse. The trust is the
owner of a life insurance policy and pursuant to the agreement a portion of the
premiums are paid by FMAC.
The directors, officers and principal shareholders of FMAC and their
associates may have had in the past, and expect to have in the future,
transactions in the ordinary course of business with Bay View and its
subsidiaries and
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affiliates. The directors, officers and principal shareholders of Bay View and
their associates may have had in the past, and expect to have in the future,
transactions in the ordinary course of business with FMAC and its subsidiaries
and affiliates. Such transactions were, and are expected to be, on substantially
the same terms as those prevailing at the time for comparable transactions with
others.
Management Following the Merger
Upon the completion of the merger, Bay View will increase its board by one
member and will appoint Wayne L. Knyal to fill the vacancy. Mr. Knyal's term as
a member of the Bay View Board will expire in the year 2000. The Bay View Board
is obligated by the merger agreement, subject to its fiduciary duties, to
nominate Mr. Knyal at the Bay View annual meeting to be held in the year 2000 to
serve as a director in the class of directors with terms expiring in the year
2002.
It is the intention of Bay View to operate FMAC's business through a wholly
owned subsidiary of Bay View Bank, which is a wholly owned direct subsidiary of
Bay View, with a Board of Directors and credit committee that would include
persons who are currently officers or directors of FMAC.
Certain Legal Proceedings
The predecessor entity to Franchise Mortgage LLC, and Mr. Knyal, among
others, were named as defendants in De Wald, et al. vs. Knyal, et al. filed on
November 15, 1996 in Los Angeles County Superior Court. The complaint sought an
accounting, monetary and punitive damages for alleged breach of contract, breach
of fiduciary duty, breach of implied covenant of good faith and fair dealing and
fraud arising from an alleged business relationship. On March 25, 1999, the
Superior Court entered an order in connection with the action, a portion of
which was stayed on March 29, 1999. The stayed portion included, among other
things, an order to dissolve Franchise Mortgage Acceptance Co., L.P., or FMACLP,
a partnership of which FLRT, Inc. is the general partner and which was formed in
1991 to originate and securitize franchise loans, and an order requiring an
accounting by FLRT, Inc. and Mr. Knyal to the limited partners of FMACLP. The
unstayed portion of the order includes a finding, among other things, that Mr.
Knyal and FLRT, Inc. breached the FMACLP partnership agreement and that the
limited partners of FMACLP have a right to a portion of the shares of FMAC owned
by FLRT, Inc. or Mr. Knyal, and of the proceeds realized from any sale of FLRT,
Inc.'s or Mr. Knyal's FMAC shares after November 1997. The order also states
that Mr. Knyal and FLRT, Inc. may not dispose of or encumber any shares of FMAC
held by either of them, and that Mr. Knyal may not dispose of or encumber any
shares of FLRT, Inc. held by him.
On April 6, 1999, a verdict was rendered in the Superior Court whereby Mr.
Knyal and FLRT, Inc. were ordered to pay approximately $24.3 million in
compensatory damages and $8 million in punitive damages for breach of fiduciary
duty and fraud. Counsel to the predecessor entity and Mr. Knyal believe that the
verdict is without basis, that reversible error occurred during the course of
the trial and in connection with the rendering of the verdict and such counsel
and Mr. Knyal intend to vigorously appeal the verdict. Although FMAC is not a
party to the action, Imperial Credit Industries, Inc., Mr. Knyal and FLRT, Inc.
have agreed to indemnify FMAC against any and all liability that FMAC and its
shareholders, other than Imperial Credit, Mr. Knyal and FLRT, Inc., may incur as
a result of this lawsuit.
Accounting Treatment
The merger will be accounted for as a "purchase" in accordance with generally
accepted accounting principles. Accordingly, the assets and liabilities of FMAC
will be recorded on the books of Bay View at their respective fair values at the
time of completion of the merger, with the excess, if any, allocated to
goodwill.
Resale of Bay View Common Stock; Restrictions on Transfer
The Bay View common stock issued to FMAC shareholders in the merger will be
freely transferable under the Securities Act, except for shares issued to FMAC
shareholders who may be deemed to be affiliates of Bay View for purposes of Rule
144 under the Securities Act or affiliates of FMAC for purposes of Rule 145
under the Securities
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Act. Persons who may be deemed to be affiliates generally include executive
officers, directors and 10% shareholders, who control, are controlled by, or are
under common control with Bay View or FMAC at the time of the special meetings,
or the combined company at or after the completion of the merger.
This document does not cover any resales of Bay View common stock to be
received by FMAC shareholders upon completion of the merger, and no person is
authorized to make use of this joint proxy statement/prospectus in connection
with any such resale.
Bay View has agreed to register for resale under the Securities Act of 1933
the shares of Bay View common stock to be received by FMAX Holdings, LLC, the
largest FMAC shareholder, and an affiliate of FMAC, upon completion of the
merger.
Material United States Federal Income Tax Consequences
The following discussion summarizes the material United States federal income
tax consequences of the merger to United States persons who hold shares of FMAC
common stock as capital assets within the meaning of the tax code, and
participate in the merger transaction. It does not purport to be a complete
analysis or description of all potential federal income tax consequences of the
merger. The discussion does not address tax consequences that may vary with, or
are contingent on, individual circumstances. In addition, it does not discuss
the tax consequences that might be relevant to FMAC shareholders subject to
special treatment under United States federal income tax law such as:
o dealers or brokers in securities;
o tax-exempt entities;
o financial institutions;
o insurance companies;
o foreign persons;
o persons that hold FMAC common stock as part of a straddle, a hedge
against currency risk, a constructive sale or conversion transaction;
and
o holders who acquired shares of FMAC common stock through the exercise
or cancellation of employee stock options or as compensation through
other means.
Further, this discussion does not address any non-income tax considerations
or describe any tax consequences arising out of the tax laws of any state, local
or foreign jurisdiction. This discussion is based on the United States' tax code
and regulations promulgated thereunder, applicable administrative rulings and
judicial precedent currently in effect, and on certain factual assumptions.
There can be no assurance that there will not be changes in the legal
authorities on which this discussion is based (which changes could be
retroactive), or that there will not be a change in the facts or the validity of
the factual assumptions underlying this discussion, that could alter or modify
the statements and conclusions below and could affect the tax consequences of
the merger.
Neither Bay View nor FMAC plans to obtain any rulings from the IRS concerning
tax issues with respect to the merger. However, consummation of the merger is
conditioned upon, among other things, each of FMAC and Bay View receiving an
opinion of its tax counsel on the date of the merger. Dewey Ballantine LLP is
acting as tax counsel to FMAC; Silver, Freedman & Taff, L.L.P. is acting as tax
counsel to Bay View. Neither company currently intends to waive receipt of an
opinion from its tax counsel as a condition to consummation of the merger.
However, if either company should make a determination to waive this condition
and will not receive an opinion from its tax counsel on the date of the merger,
the company will circulate a revised disclosure statement and resolicit proxies
to approve the merger. The opinions of tax counsel will be dated as of the date
of the merger and
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<PAGE>
will be based on the U.S. federal income tax laws in effect as of that date. The
opinions will state that, on the basis of the facts, certain representations to
be made by FMAC and Bay View, among others, and assumptions set forth in the
opinions:
o the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the tax code;
and
o Bay View and FMAC will each be a party to the reorganization within
the meaning of Section 368(b) of the tax code.
An opinion of tax counsel represents counsel's legal judgment, but has no
binding effect or official status of any kind. The IRS may assert contrary
positions. Moreover, contrary positions may be adopted by a court, if the
positions are litigated.
In order for FMAC and Bay View to receive the opinions of their tax counsel,
the FMAC shareholders must receive in the merger a significant continuing
ownership interest in Bay View in the form of Bay View common stock. Based on
the current value of the Bay View common stock as of the date of the mailing of
this document, the portion of the merger consideration consisting of Bay View
common stock (in relation to the portion consisting of cash) should qualify as a
significant continuing ownership interest within the meaning of existing legal
precedents. However, in order for FMAC and Bay View to receive the opinions of
tax counsel described above, the portion of the merger consideration consisting
of Bay View common stock must qualify as a significant continuing ownership
interest based on the value of the Bay View common stock as of the date of the
merger.
Subject to the foregoing, assuming the opinions of Dewey Ballantine LLP and
Silver, Freedman & Taff, L.L.P. are rendered to FMAC and Bay View, respectively,
the material United States federal income tax consequences of the merger to FMAC
shareholders are expected to be as follows:
o FMAC Shareholders Receiving Only Bay View Stock. If you receive only
Bay View common stock in the merger, you will not recognize gain or
loss on the conversion of your shares of FMAC common stock into shares
of Bay View common stock pursuant to the terms of the merger, except
to the extent that you receive cash in lieu of fractional shares. If
you receive cash in lieu of a fractional share of Bay View common
stock, you will recognize gain or loss equal to the difference between
the cash you receive and the part of basis of the FMAC common stock
allocated to the fractional share interest. Any such gain or loss will
generally be a capital gain or loss.
Your tax basis in the Bay View common stock you receive will be the
same as the tax basis of the shares of FMAC common stock you surrender
in the merger, less any proportionate part of your basis allocable to
any fractional share interest in Bay View common stock for which you
receive cash. Your holding period for the Bay View common stock you
receive will include the holding period of the FMAC common stock you
surrender in the merger.
o FMAC Shareholders Receiving Both Bay View Stock and Cash. You may
receive both Bay View common stock and cash in exchange for your FMAC
common stock if you elect to receive cash for only part of your FMAC
common stock and receive Bay View common stock for the remainder, or
if you elect to receive solely cash or solely Bay View common stock
and the amount of cash or Bay View common stock is subject to
proration. If you fall into this category:
o You will recognize gain, if any, in an amount equal to the lesser of
- the excess of the consideration you receive, including both
the fair market value of the Bay View common stock and cash,
over the basis of the FMAC common stock you surrender in the
merger, or
- the amount of cash you receive.
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o You will not recognize any loss.
o Your basis in the Bay View common stock you receive will be equal to
the basis of the FMAC common stock you surrender in the merger,
decreased by the amount of cash you receive, and increased by the
amount of gain, if any, you recognize, including any amount of gain
treated as a dividend as described below.
o Your holding period for the Bay View common stock you receive will
include the holding period of the FMAC common stock you surrender in
the merger.
If you own both FMAC common stock and Bay View common stock or own blocks
of FMAC common stock with different tax bases, you are urged to consult your own
tax advisors with respect to the application of the foregoing rules to your
particular situation.
If you recognize any gain by virtue of the rules described above, you will
need to know whether the character of that gain is capital or ordinary. Any gain
you recognize will be treated as capital gain unless the receipt of the cash has
the effect of the distribution of a dividend to you under Section 302 of the tax
code, as described below. Capital gain may be subject to preferential tax rates
in the case of individuals. Your capital gain will constitute long-term capital
gain if you held the FMAC common stock for more than one year prior to the date
of the merger.
Any gain that you recognize should avoid being treated as a dividend under
Section 302 of the tax code provided:
o the percentage of the outstanding Bay View stock you owned both
actually and under the constructive ownership rules of Section 318 of
the tax code, measured after giving effect to the merger, is less than
80% of the percentage of the outstanding Bay View stock that would
have been owned actually and constructively by you after the merger if
Bay View had issued solely common stock in the merger and none of the
merger consideration had been paid in cash, or
o your relative stock interest in Bay View is minimal, you exercise no
control over the affairs of Bay View, and the percentage of the
outstanding Bay View stock you owned both actually and under the
constructive ownership rules of Section 318 of the tax code, measured
after giving effect to the merger, is less (by even a small margin)
than the percentage of the outstanding Bay View stock that would have
been owned actually and constructively by you after the merger if Bay
View had issued solely common stock in the merger and none of the
merger consideration had been paid in cash.
The constructive ownership rules of Section 318 of the tax code,
mentioned above, treat you as owning (i) stock owned by certain family
members, (ii) stock owned by certain entities in which you have an
interest, and (iii) stock that could be acquired by you by the
exercise of an option or conversion right. Similarly, an entity may be
deemed to own stock that is actually owned by persons who have an
interest in the entity, such as stockholders, partners or
beneficiaries.
If your receipt of cash has the effect of the distribution of a
dividend under the foregoing rules, recognized gain will be treated as
a dividend taxable at ordinary income rates only to the extent of your
ratable share of undistributed earnings and profits immediately prior
to the merger.
o FMAC Shareholders Receiving Only Cash. If you receive solely cash in
exchange for your FMAC common stock, you will be treated as receiving
a distribution in redemption of your stock. If you fall into this
category, the cash you receive will generally be treated as a
distribution in full payment in exchange for your FMAC common stock,
and you will recognize gain or loss equal to the difference between
the amount of cash you receive and the basis in the FMAC common stock
you surrender. Such gain or loss will be capital gain or loss and will
be long-term capital gain or loss if such stock was held for more than
one year prior to the date of the merger. However, if you are not
treated as completely terminating your interest
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because of the application of the constructive ownership rules of
Section 318 of the tax code (described above), under certain
circumstances the full amount of cash you receive may be treated as a
dividend taxable at ordinary income rates to the extent of
undistributed earnings and profits immediately prior to the merger,
under Section 302 of the tax code (see discussion above).
Reporting Requirements and Backup Withholding. Each shareholder receiving Bay
View common stock as a result of the merger will be required to retain records
and file with the shareholder's federal income tax return a statement containing
facts relating to the merger.
Backup withholding at a 31% rate may apply with respect to payments received
in the merger unless the recipient (i) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact or (ii)
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A shareholder who does not provide
its correct taxpayer identification number may have to pay penalties imposed by
the IRS. Any amounts withheld under the backup withholding rules may be allowed
as a refund or a credit against the shareholder's federal income tax liability
provided that any required information is furnished to the IRS.
Because the foregoing discussion does not address foreign, state, or local
taxation and does not deal with all aspects of federal taxation, and the tax
consequences will not be the same for all shareholders, you should consult your
own tax advisor as to the specific tax consequences to you of the merger,
including tax return reporting requirements, the applicability and effect of
foreign, state, local and other tax laws and the possible effect of any proposed
changes in the tax law.
Dividends after the Merger
Although the payment of dividends by Bay View in the future will depend on
business conditions, Bay View's financial condition and earnings and other
factors, Bay View expects to declare regularly scheduled dividends consistent
with the practices of Bay View prior to the merger. The merger agreement does
not permit FMAC to declare or pay any dividend or other distribution and
restricts Bay View from declaring or paying any dividend or other distribution
in respect of its capital stock, other than its regularly scheduled dividend in
amounts as it should determine from time to time, during the period from the
date of the merger agreement until the earlier of the termination of the merger
agreement or the completion of the merger.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Combined Financial Information is
based on the historical financial statements of Bay View and FMAC and has been
prepared to illustrate the effect of the merger and an anticipated issuance of
$100 million in Subordinated Notes by Bay View Bank.
The Unaudited Pro Forma Condensed Combined Balance Sheet is as of March 31,
1999. The Unaudited Pro Forma Condensed Combined Statements of Income for the
year ended December 31, 1998 and for the three-month period ended March 31, 1999
assume that both the merger and the issuance of the Subordinated Notes occurred
as of January 1, 1998.
The Unaudited Pro Forma Condensed Combined Financial Information should be
read in conjunction with the historical financial statements and accompanying
disclosures contained in Bay View's first quarter 1999 Form 10- Q/A and 1998
Form 10-K/A and FMAC's first quarter 1999 Form 10-Q and 1998 Form 10-K/A, which
are incorporated into the document by reference.
The merger will be accounted for under the purchase method of accounting.
Under the purchase method of accounting, assets acquired and liabilities assumed
are recorded at their estimated fair values. Goodwill is generated to the extent
that the merger consideration, including certain acquisition and closing costs,
exceeds the fair value of net assets acquired. Based on the information
currently available, the merger is expected to initially generate approximately
$206 million in goodwill, excluding the $22.5 million remaining potential
obligation under the "earn-out" agreement entered into between FMAC and Bankers
Mutual in connection with FMAC's 1998 acquisition of Bankers Mutual. It is
estimated that this goodwill will be amortized on a straight-line basis over 15
years. The actual goodwill arising from the merger will be based on the merger
consideration, including certain acquisition and closing costs, and fair values
of assets and liabilities on the date the merger is consummated. No assurance
can be given that the actual goodwill amount arising from the merger or the
goodwill amortization period will not be more or less than the amount or period
currently contemplated in the Unaudited Pro Forma Condensed Combined Financial
Information.
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We expect that we will incur underwriting and other costs in connection with
issuing the Subordinated Notes which will be capitalized, and post-combination
integration expenses as a result of combining our companies which will be
expensed and which are not reflected in the Unaudited Pro Forma Condensed
Combined Financial Information. Additionally, the Unaudited Pro Forma Condensed
Combined Financial Information is based on a number of assumptions, estimates
and uncertainties including, but not limited to, estimates of the fair values of
assets acquired and liabilities assumed, the number of FMAC common shares
outstanding immediately prior to the merger consummation and estimated
acquisition and closing costs.
The Unaudited Pro Forma Condensed Combined Financial Information assumes the
issuance of approximately 9.4 million of Bay View's common shares to effect the
merger. However, the actual number of shares issued may be more or less than
this amount depending upon, among other things, the actual number of FMAC shares
outstanding immediately prior to the merger consummation.
As a result of these assumptions, estimates and uncertainties, the
accompanying Unaudited Pro Forma Condensed Combined Financial Information does
not purport to describe the actual financial condition or results of operations
that would have been achieved had the merger and the issuance of Subordinated
Notes in fact occurred on the dates indicated, nor does it purport to predict
Bay View's future financial condition or results of operations.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Bay View FMAC Debit Credit Total Bay View
-------------- -------- --------- ---------- --------- ----------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents....... $147,918 $ 54,989 $100,000 $134,033 $(34,033)(1) $ 168,874
Securities available-for-sale:
Investment securities......... 4,932 16,664 925,000 925,000 (2) 946,596
Mortgage-backed securities.... 12,783 -- -- 12,783
Securities held-to-maturity:
Investment securities......... -- -- -- --
Mortgage-backed securities.... 570,464 -- -- 570,464
Loans and leases held-for-sale.. -- 251,225 -- 251,225
Loans and leases held-for-investment,
net of allowance for losses......... 4,392,979 154,329 925,000 925,000)(2) 3,622,308
Investment in operating leased assets,
in operating leased assets, net 261,237 -- -- 261,237
Investment in stock of the FHLB of San
Francisco..................... 87,245 -- -- 87,245
Investment in stock of the Federal
Reserve Bank.................. 12,154 -- -- 12,154
Real estate owned, net.......... 2,070 -- -- 2,070
Premises and equipment, net..... 23,797 6,968 -- 30,765
Intangible assets............... 131,517 49,670 205,706 49,670 156,036 (3) 337,223
Other assets.................... 116,455 98,280 22,000 22,000 (4) 236,735
---------- -------- -------- ---------
Total Assets.................. $5,763,551 $632,125 $ 144,003 $6,539,679
========== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Liabilities
Deposits........................ $3,343,286 -- -- $3,343,286
Advances from the FHLB of San
Francisco 1,744,900 -- -- 1,744,900
Securities sold under agreements to
repurchase.................... 23,047 -- -- 23,047
Subordinated Notes, net......... 99,453 -- 100,000 100,000 (5) 199,453
Senior Debentures............... 50,000 -- -- 50,000
Other borrowings................ 4,387 422,669 -- 427,056
Other liabilities............... 30,395 57,489 8,701 8,701 (6) 96,585
---------- ---------- -------- ----------
Total Liabilities............. 5,295,468 480,158 108,701 5,884,327
Capital Securities.............. 90,000 -- -- 90,000
Minority interest in subsidiary. -- 59 -- 59
Stockholders' equity............ 378,083 151,908 151,908 187,210 35,302 (7) 565,293
--------- --------- -------- ----------
Total Liabilities and Stockholders'
Equity ..................... $5,763,551 $632,125 $144,003 $6,539,679
========== ======== ======== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Bay View FMAC Debit Credit Total Bay View
------------------ ---------- --------- --------- --------------- -------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Interest income................... $406,363 $55,439 $3,887 $ (3,887)(8) $457,915
Interest expense.................. 251,762 38,320 9,500 9,500 (9) 299,582
--------- -------- ---------- ---------
Net interest income............... 154,601 17,119 (13,387) 158,333
Provision for losses on loans and
leases ......................... 9,114 2,644 -- 11,758
----------- --------- ----------- ---------
Net interest income after provision for 145,487 14,475 (13,387) 146,575
losses............................
Noninterest income................ 31,072 50,458 -- 81,530
Noninterest expense:
General and administrative expenses 113,567 48,900 -- 162,467
Other noninterest expense....... 7,686 -- -- 7,686
Amortization of intangible assets 11,372 2,222 13,714 $2,222 11,492(10) 25,086
---------- --------- --------- ---------
Total noninterest expense..... 132,625 51,122 11,492 195,239
--------- -------- --------- --------
Income before income tax expense and
minority interest in subsidiary... 43,934 13,811 (24,879) 32,866
Minority interest in subsidiary... -- (8) -- (8)
Income tax expense................ 21,215 5,528 5,536 (5,536)(11) 21,207
---------- --------- ---------- ---------
Net income.................... $ 22,719 $ 8,291 $(19,343)(12) $ 11,667
========= ======== ======== ========
Basic earnings per share ......... $1.13 $0.29 (12) $0.40
===== ===== =====
Diluted earnings per share........ $1.12 $0.29 (12) $0.39
===== ===== =====
Weighted-average basic shares
outstanding..................... 20,035 28,716 29,395
========== ======== =========
Weighted-average diluted shares
outstanding..................... 20,335 28,976 29,695
========== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Bay View FMAC Debit Credit Total Bay View
--------------- -------- --------- -------- ------------- -----------------------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest income..................... $100,021 $ 8,986 $ 826 $ (826)(8) $108,181
Interest expense.................... 59,238 6,337 2,375 2,375 (9) 67,950
---------- -------- --------- ---------
Net interest income................. 40,783 2,649 (3,201) 40,231
Provision for losses on loans and
leases .................. 5,311 262 -- 5,573
----------- --------- --------- ---------
Net interest income after provision
for losseS ...................35,472 2,387 (3,201) 34,658
Noninterest income.................. 15,967 20,681 -- 36,648
Noninterest expense:
General and administrative expenses 26,156 13,774 -- 39,930
Other noninterest expense......... 8,950 -- -- 8,950
Amortization of intangible assets. 2,904 702 3,428 $702 2,726 (10) 6,332
----------- --------- -------- --------
Total noninterest expense....... 38,010 14,476 2,726 55,212
---------- ------- -------- ---------
Income before income tax expense and
minority interest in
subsidiary........................ 13,429 8,592 (5,927) 16,094
Minority interest in subsidiary..... -- 67 -- 67
Income tax expense.................. 6,296 3,410 1,323 (1,323)(11) 8,383
----------- -------- -------- --------
Net income...................... $ 7,133 $ 5,115 (4,604)(12) $ 7,644
========== ======= ========= ========
Basic earnings per share ........... $ 0.37 $0.18 (12) $0.27
=========== ===== =====
Diluted earnings per share.......... $ 0.37 $0.18 (12) $0.27
=========== ===== =====
Weighted-average basic shares
outstanding....................... 19,162 28,734 28,522
========== ======= =========
Weighted-average diluted shares
outstanding....................... 19,335 28,737 28,695
========== ======= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
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<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
1. Pro forma adjustments reflect the $100 million in cash proceeds to be
generated from the anticipated issuance of Subordinated Notes by Bay View
Bank and the cash portion of the merger consideration of approximately $134
million. The $134 million adjustment also includes payments for certain
acquisition and other closing costs.
2. Pro forma adjustment reflects the securitization and/or sale of a portion
of Bay View Bank's loan portfolio in connection with the restructuring of
Bay View Bank's balance sheet resulting from the FMAC acquisition as
contemplated in Bay View's applications and notices filed with its
regulatory agencies. This securitization and/or sale should reduce the
level of risk-weighted assets and generate additional excess regulatory
capital at Bay View Bank that can be upstreamed to Bay View (See also Note
5). The $925 million in proceeds is anticipated to be invested in
investment grade agency securities.
3. Pro forma adjustment reflects the excess of the merger consideration,
including certain acquisition and closing costs, over the estimated fair
value of net assets acquired (i.e., goodwill), which is initially estimated
at approximately $206 million, excluding the $22.5 million remaining
potential obligation under the "earn-out" agreement entered into between
FMAC and Bankers Mutual in connection with FMAC's 1998 acquisition of
Bankers Mutual, net of FMAC's pre-acquisition goodwill eliminated as of
March 31, 1999.
4. Pro forma adjustment reflects the $22 million estimated fair value of
non-mortgage servicing assets relating to FMAC's $2.2 billion franchise
loan servicing portfolio, excluding FMAC loans purchased by Bay View Bank.
5. Pro forma adjustments reflect the issuance of $100 million in Subordinated
Notes by Bay View Bank. It is anticipated that the proceeds from the
Subordinated Notes issuance, along with currently available excess capital
at Bay View Bank, will be upstreamed to Bay View in the form of a special
cash dividend to fund both a portion of the FMAC acquisition price and for
general corporate purposes. After the acquisition, Bay View will contribute
substantially all of the assets and liabilities of FMAC to Bay View Bank.
6. Pro forma adjustment reflects the deferred taxes relating to the purchase
accounting adjustments.
7. Pro forma adjustment reflects the estimated issuance of Bay View common
stock to the shareholders of FMAC, net of FMAC's pre-acquisition
stockholders' equity eliminated as of March 31, 1999.
8. Pro forma adjustment reflects the reduction in interest income from the
securitization and/or sale of a portion of Bay View Bank's loan portfolio,
partially offset by the interest income generated from the anticipated
reinvestment of the $925 million in proceeds in investment grade agency
securities.
9. Pro forma adjustment reflects the interest and other costs associated with
the anticipated issuance of $100 million in Subordinated Notes by Bay View
Bank (all-in cost of approximately 9.5%).
10. Pro forma adjustment reflects the amortization associated with the $206
million in goodwill estimated to be generated from the merger, excluding
the $22.5 million remaining potential obligation under the "earn-out"
agreement entered into between FMAC and Bankers Mutual in connection with
FMAC's 1998 acquisition of Bankers Mutual, net of the amortization
associated with FMAC's pre-acquisition goodwill written off as of March 31,
1999. The goodwill is assumed to be amortized on a straight-line basis over
15 years.
11. Pro forma adjustment reflects the income tax benefit associated with the
pro forma adjustments.
12. The pro forma net income and earnings per share amounts reflected herein do
not purport to be indicative of the actual results that would have been
achieved had the merger and the issuance of Subordinated Notes in fact
occurred on the dates indicated, nor do they purport to be indicative of
future results of operations. We expect that we will incur post-combination
integration costs as a result of combining our companies which are not
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reflected in the pro forma information. FMAC's historical results for the
year ended December 31, 1998 included $34.0 million in hedge losses
incurred primarily during the third and fourth quarters of 1998.
COMPARISON OF SHAREHOLDER RIGHTS
General
The rights of FMAC shareholders are governed by FMAC's Certificate of
Incorporation, its Bylaws and the laws of the State of Delaware. After the
merger, the rights of FMAC shareholders who become Bay View shareholders will be
governed by Bay View's Certificate of Incorporation, its Bylaws and the laws of
the State of Delaware. The following is a summary of the material differences
between the current rights of FMAC shareholders and those of Bay View
shareholders.
The following summary of shareholder rights is not complete. For a full
description of the rights of FMAC and Bay View shareholders, you must refer to
Delaware law, and the certificates of incorporation and bylaws of each company.
The certificates of incorporation and bylaws of each company have been filed
with the SEC and will be sent to FMAC and Bay View shareholders on request. See
"Where to Find More Information."
Capital Stock
Bay View's authorized capital stock consists of 60,000,000 shares of common
stock and 7,000,000 shares of preferred stock.
FMAC's authorized capital stock consists of 100,000,000 shares of common
stock and 10,000,000 shares of preferred stock.
Shareholder Meetings
Delaware law permits special meetings of shareholders to be called by the
Board of Directors and such other persons, including shareholders, as the
certificate of incorporation or bylaws may provide. Delaware law does not
require that shareholders be given the right to call special meetings.
The Bay View Certificate and Bylaws provide that special meetings of Bay View
may be called at any time by the chairman of the board, the president, or a
majority of the directors then in office. The FMAC Bylaws provide that special
meetings may be called only by a majority of the entire Board of Directors.
Advance Notice Requirements at Shareholder Meetings
Bay View's Bylaws require advance notice of the nomination by a shareholder
of a person for election as a director or the introduction by shareholders of
business at annual meetings of shareholders. For a nomination or proposal not
included in the proxy statement to be properly brought before an annual or
special meeting by shareholders, the secretary of Bay View must have received
written notice thereof not less than 60 days nor more than 90 days prior to the
annual meeting. The notice must contain (i) in the case of a proposal, a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business, and in the case of a nomination, as to
each person whom such shareholder proposes to nominate, all information relating
to such person that is required to be disclosed under the federal securities
laws, (ii) the name and address of the shareholder proposing such business, and
the name and address of the beneficial owner, if any, on whose behalf the
proposal is made, (iii) the class and number of shares of the Bay View stock
owned beneficially and of record, and (iv) any direct or indirect material
interest of the shareholder proposing such business and of the beneficial owner,
if any, on whose behalf the proposal is made in such business.
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The FMAC Bylaws contain similar provisions, but require that the
shareholder's notice be received not less than 90 days before the anniversary of
the previous year's annual meeting. If a special meeting includes an election of
directors, nominations must be received less than ten business days after the
notice of meeting is mailed.
Security Holder Action by Written Consent
Delaware law provides that unless otherwise provided by the certificate of
incorporation, any action that may be taken at a meeting of shareholders may be
taken without a meeting, without prior notice and without a vote, if the holders
of common stock having not less than the minimum number of votes otherwise
required to approve such action at a meeting of shareholders consent in writing.
The certificates of both Bay View and FMAC provide that shareholders may not
take action by written consent.
Cumulative Voting for Election of Directors
Under Delaware law, shareholders do not have the right to cumulate their
votes in the election of directors unless such right is granted in the
certificate of incorporation. The certificates of Bay View and FMAC do not grant
such rights.
Board of Directors
The Bay View Board of Directors consists of three classes of directors
comprised as nearly as practicable of one-third of the Board and one class of
directors is elected at each annual meeting of shareholders to serve a
three-year term. The Bay View Bylaws currently provide for an eight-member Board
of Directors. Vacancies on the Board of Directors are filled by a majority vote
of the directors then in office. The Bay View Certificate provides that
directors may be removed only for cause by a vote of the holders of a majority
of the shares entitled to vote at an election of directors.
The FMAC Board consists of eight directors who are elected to annual terms.
Vacancies on the Board of Directors are filled by a majority vote of the
directors then in office. The FMAC Bylaws provide that directors of FMAC may be
removed whether or not for cause by a vote of the holders of a majority of the
shares entitled to vote at an election of directors.
Business Combinations with Certain Persons
Section 203 of the Delaware General Corporation Law provides generally that
any person who acquires 15% or more of a corporation's voting stock, thereby
becoming an interested shareholder, may not engage in a wide range of business
combinations with the corporation for a period of three years following the date
the person became an interested shareholder, unless (i) the Board of Directors
of the corporation has approved, prior to that acquisition date, either the
business combination or the transaction that resulted in the person becoming an
interested shareholder, (ii) upon completion of the transaction that resulted in
the person becoming an interested shareholder, that person owns at least 85% of
the corporation's voting stock outstanding at the time the transaction commenced
(excluding shares owned by persons who are directors and also officers and
shares owned by employee stock plans in which participants do not have the right
to determine confidentially whether shares will be tendered in a tender or
exchange offer), or (iii) the business combination is approved by the Board of
Directors and authorized by the affirmative vote, at an annual or special
meeting and not by written consent, of at least 66 2/3% of the outstanding
voting stock not owned by the interested shareholder.
These restrictions on interested shareholders do not apply under certain
circumstances, including, but not limited to, the following (i) if the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by Section 203 of the Delaware General
Corporation Law, or (ii) if the corporation, by action of its shareholders,
adopts an amendment to its bylaws or certificate of incorporation expressly
electing not to be governed by such section.
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The Bay View Certificate contains a provision opting out of such section. The
FMAC Certificate does not contain such a provision.
Director Liability and Indemnification
Both companies' certificates provide that directors will not be personally
liable for monetary damages for breach of their fiduciary duty as directors,
except for liability (i) for any breach of the director's duty of loyalty, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for the payment of dividends, or the
repurchase or redemption of stock, in willful or negligent violation of Delaware
law, or (iv) for any transaction from which the director derived an improper
personal benefit. Both companies generally provide for indemnification of
officers and directors to the fullest extent permitted by Delaware law.
Amendment of Certificate and Bylaws
Under the Bay View Certificate, an amendment, addition, alteration, change or
repeal of any provision of the Bay View Certificate must be first proposed by
the Board of Directors of Bay View, and thereafter approved by the shareholders
by a majority of the total votes eligible to be cast at a legal meeting.
Delaware law supplies substantially the same requirements for amendment of the
FMAC certificate.
The Bay View Bylaws provide that the Bylaws may be altered, amended,
repealed, or adopted by the shareholders, by a majority of the votes cast by
shareholders of Bay View at any legal meeting, or by the Bay View Board of
Directors, by a majority vote of the entire Board of Directors. The FMAC
Certificate provides that the FMAC Bylaws may be amended by either the Board of
Directors or the shareholders.
Rights Agreement
Each share of Bay View common stock is accompanied by a conditional right to
buy an additional share of Bay View common stock for $27.50, subject to
adjustment. The rights were issued under a Shareholder Protection Rights
Agreement, dated as of July 31, 1990, between Bay View and Manufacturers Hanover
Trust Company of California, as Rights Agent. If a person (as defined in the
Rights Agreement) acquires 10% or more of the outstanding shares of Bay View
common stock, subject to certain exceptions, the rights of all other
shareholders will become exercisable. The existence of these rights may
discourage potential acquirors of Bay View. See "Where You Can Find More
Information."
FMAC has not issued any similar rights.
APPROVAL OF AMENDMENT TO BAY VIEW'S
1995 STOCK OPTION AND INCENTIVE PLAN
In 1995, the Board of Directors of Bay View adopted the 1995 Stock Option and
Incentive Plan, which was approved by Bay View's shareholders at the 1995 annual
meeting of shareholders. The Stock Option Plan provides for the grant of a
variety of long-term incentive awards to officers and employees as a means of
enhancing and encouraging the recruitment and retention of those individuals on
whom the continued success of Bay View most depends. In addition, the Stock
Option Plan gives Bay View the flexibility to award stock options to the
employees of acquired companies to more closely align their interests with the
shareholders of Bay View.
As of July 15, 1999, of the 2,000,000 shares of Bay View common stock
reserved for issuance under the Stock Option Plan, only 166,849 shares remained.
Without approval of the proposed amendment to reserve additional shares for
issuance, Bay View might soon be unable to award any options under the plan.
Importantly, without the amendment it might not be possible to award an
appropriate number of stock options to FMAC employees who become Bay View
employees in the merger. In addition, Bay View's ability to continue to acquire
companies, which the Board of Directors of Bay View believes may be in the best
interests of Bay View's shareholders, may be severely impaired if Bay View were
unable to award stock options under the plan to employees of such companies.
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The Board of Directors therefore recommends that the shareholders approve an
amendment to the Stock Option Plan in order to increase by 500,000 the number of
shares available for issuance under the Stock Option Plan to meet anticipated
requirements for future grants for both present employees and employees of
companies acquired by Bay View.
Even if approved, the amendment to the Stock Option Plan will not be
implemented if the merger is not completed.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSED AMENDMENT TO THE STOCK OPTION PLAN
Principal Features of the Stock Option Plan
Eligibility and Participation. Employees of Bay View or its affiliates are
eligible to participate in the Stock Option Plan.
Awards. The Stock Option Plan provides for the granting of stock options,
stock appreciation rights, or SARs, limited SARs and restricted stock awards.
Shares Available; Non-Transferability of Options. Pursuant to the Stock
Option Plan, 2,000,000 shares of Bay View common stock are currently reserved
for issuance. If the amendment to increase the number of shares reserved for
issuance under the Stock Option Plan is approved by shareholders, 2,500,000
shares of Bay View's common stock will be reserved for issuance. Shares may be
either authorized but unissued shares or reacquired shares held by Bay View in
its treasury. Any shares subject to an award which expires or is terminated
unexercised will again be available for issuance under the Stock Option Plan.
Generally, no award or any right or interest therein is assignable or
transferable except under certain limited exceptions set forth in the plan.
Administration. The Stock Option Plan is administered by the Stock Option
Committee of the Board of Directors of Bay View.
Stock Options. The term of stock options will not exceed ten years from the
date of grant. The Committee may grant either "Incentive Stock Options" as
defined under Section 422 of the tax code or stock options not intended to
qualify as such. In general, stock options will not be exercisable after the
expiration of their terms. Subject to certain limited exceptions, the exercise
price for the purchase of shares subject to a stock option at the date of grant
may not be less than 100% of the market value of the shares covered by the
option on that date. The exercise price must be paid in full in cash or with
shares of Bay View common stock, or a combination of both.
Concurrently with the grant of any stock option, the Stock Option Committee
may, in its discretion, authorize the grant of reload options. Reload options
are intended to align officers' and employees' financial interests with the
shareholders' interests by promoting stock retention. They become effective only
when an optionee uses "mature" shares (i.e., shares held by the optionee for at
least 12 months) to exercise an underlying option, and permit the optionee to
purchase additional shares in an amount not to exceed the amount of mature
shares used in connection with the exercise of the underlying option. No reload
option, however, may become effective after the optionee has ceased to maintain
"continuous service" with Bay View (as defined in the Stock Option Plan). Reload
options may be authorized with respect to options that are themselves granted as
reload options. The exercise price of a reload option is the market value per
share on the date the reload option becomes effective. Reload options become
fully exercisable six months from their effective date, and have a term equal to
the remaining term of the underlying option.
Stock Appreciation Rights. The committee may grant SARs at any time, whether
or not the participant then holds stock options, granting the right to receive
the excess of the market value of the shares represented by the SARs on the date
exercised over the exercise price. SARs generally will be subject to the same
terms and
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conditions and exercisable to the same extent as stock options, as described
above. Upon the exercise of a SAR, the participant will receive the amount due
in cash or shares, or a combination of both, as determined by the Stock Option
Committee. SARs may be related to stock options (i.e., tandem SARs), in which
case the exercise of one will reduce to that extent the number of shares
represented by the other.
Limited Stock Appreciation Rights. Limited SARs will be exercisable only for
a limited period in the event of a tender or exchange offer for shares of Bay
View common stock, other than by Bay View, where 25% or more of the outstanding
shares are acquired in that offer or any other offer which expires within 60
days of that offer. The amount paid on exercise of a limited SAR will be the
excess of (i) the market value of the shares on the date of exercise or (ii) the
highest price paid pursuant to the offer, over the exercise price. Payment upon
exercise of a limited SAR will be in cash. Limited SARs may be granted at the
time of, and must be related to, the grant of a stock option or SAR. The
exercise of one will reduce to that extent the number of shares represented by
the other.
Restricted Stock. The Stock Option Committee may grant restricted stock,
subject to forfeiture if the participant fails to fulfill the conditions imposed
with respect to the restricted stock. The holder of restricted stock shall have
all of the rights of a shareholder, including the right to receive dividends and
the right to vote the shares. The participant may not, however, sell, assign,
transfer, pledge or otherwise encumber any of the restricted stock during the
restricted period.
Effect of Merger and Other Adjustments. Shares as to which awards may be
granted under the Stock Option Plan, and shares then subject to awards, will be
adjusted by the Stock Option Committee in the event of any merger,
consolidation, reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of Bay View.
In the case of any merger, consolidation or combination of Bay View with or
into another entity, whereby either Bay View is not the continuing entity or its
outstanding shares are converted into or exchanged for securities, cash or
property, or any combination thereof, any participant to whom a stock option,
SAR or limited SAR has been granted will have the right upon exercise of the
option, SAR or limited SAR to an amount equal to the excess of fair market value
on the date of exercise of the consideration receivable in the merger,
consolidation or combination with respect to the shares covered or represented
by the stock option, SAR or limited SAR over the exercise price of the option
multiplied by the number of shares with respect to which the option, SAR or
limited SAR has been exercised. In addition, any stock option holder will have
the right in the case of such merger, consolidation or combination to purchase
upon exercise of the option the amount of shares of stock of the continuing
company as adjusted for the merger.
Amendment and Termination. The Board of Directors of Bay View may at any time
amend, suspend or terminate the Stock Option Plan or any portion thereof but may
not, without the prior approval of the shareholders, make any amendment which
shall (i) materially increase the benefits accruing to participants under the
plan; (ii) materially increase the number of securities which may be issued
under the plan; or (iii) materially modify the requirements as to eligibility
for participation in the plan, provided, however, that no such amendment,
suspension or termination shall impair the rights of any participant, without
his or her consent, in any award theretofore made pursuant to the Stock Option
Plan. Unless previously terminated, the Stock Option Plan shall continue in
effect for a term of ten years, after which no further awards may be granted
under the Stock Option Plan.
Federal Income Tax Consequences
Under present federal income tax laws, awards under the Stock Option Plan
will have the following consequences:
(1) The grant of an award will neither, by itself, result in the recognition of
taxable income to the participant nor entitle Bay View to a deduction at
the time of such grant.
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(2) In order to qualify as an "Incentive Stock Option," a stock option awarded
under the Stock Option Plan must meet the conditions contained in Section
422 of the tax code. The exercise of an Incentive Stock Option generally
will not, by itself, result in the recognition of taxable income to the
participant nor entitle Bay View to a deduction at the time of such
exercise. However, the difference between the exercise price and the fair
market value of the option shares on the date of exercise is an item of tax
preference which may, in certain situations, trigger the alternative
minimum tax. The favorable Incentive Stock Option tax treatment will be
lost upon the sale of the shares acquired upon the exercise of the option,
however, if such shares have not been held for one year after the date of
exercise and two years after the date of grant of the option. Provided
these applicable holding periods are satisfied, the participant will
recognize long-term capital gain or loss upon resale of the shares acquired
upon such exercise.
(3) The exercise of a stock option which is not an Incentive Stock Option will
result in the recognition of ordinary income by the participant on the date
of exercise in an amount equal to the difference between the exercise price
and the fair market value on the date of exercise of the shares acquired
pursuant to the stock option.
(4) The exercise of a SAR will result in the recognition of ordinary income by
the participant on the date of exercise in the amount of cash, and/or the
fair market value on that date of the shares, acquired pursuant to the
exercise.
(5) Holders of restricted stock will recognize ordinary income on the date that
the shares of restricted stock are no longer subject to a substantial risk
of forfeiture, in an amount equal to the fair market value of the shares on
that date. In certain circumstances, a holder may elect to recognize
ordinary income and determine such fair market value on the date of the
grant of the restricted stock. Holders of restricted stock will also
recognize ordinary income equal to their dividend or dividend equivalent
payments when such payments are received.
(6) Bay View will be allowed a deduction at the time, and in the amount of, any
ordinary income recognized by the participant under the various
circumstances described above provided that Bay View meets its federal
withholding tax obligations.
Awards Under the Stock Option Plan
The following table presents information with respect to the dollar value and
the number of awards outstanding as of July 15, 1999 under the Stock Option
Plan. The exercise price for all of the outstanding awards is the market value
of the Bay View common stock on the date of grant.
<TABLE>
<CAPTION>
Number
Value of of
Participant Options(1) Options
- ----------------------------------------------------------- ------------ ----------
<S> <C> <C>
Edward H. Sondker......................................... $1,607,500 360,000
David A. Heaberlin........................................ 653,125 210,000
Michael A. Iachelli(2).................................... --- ---
Matthew L. Carpenter...................................... 5,938 42,500
Ronald L. Reed............................................ 22,188 42,500
All current executive officers as a group................. 2,893,381 937,500
All current directors who are not executive officers,
as a group ............................................. --- ---
All employees, including all current officers who are not
executive officers, as a group........................... 766,264 781,200
</TABLE>
(1) The difference between the aggregate option exercise price and the fair
market value of the underlying shares at July 15, 1999.
(2) Mr. Iachelli resigned from Bay View effective April 7, 1999.
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Additional awards under the 1995 Stock Option Plan may be granted to eligible
participants in the future at the discretion of the Stock Option Committee.
Executive Compensation
The following table sets forth information concerning the compensation for
services in all capacities to Bay View for the years ended December 31, 1998,
1997 and 1996 of the Chief Executive Officer of Bay View and the four other most
highly compensated executive officers of Bay View during fiscal 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------- ---------------------- ---------
Name and Restricted Shares LTIP
Principal Stock Underlying Payouts All Other
Position Year Salary Bonus Award(s) Options(1) ($) Compensation
- --------------------------- ----------- ---------- ---------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward H. Sondker 1998 $375,000 $100,000 --- 50,000 --- $19,907(2)
President and Chief 1997 300,000 150,000 --- 30,000 $702,881 18,339(2)
Executive Officer 1996 287,502 143,750 --- 80,000 --- 48,977(2)
- --------------------------- ----------- --------- ---------- ----- ------- ------ ---------
David A. Heaberlin 1998 $287,500 $75,000 --- 30,000 --- $15,970(3)
Executive Vice President and
Chief Financial Officer 1997 230,833 117,500 --- 30,000 $372,862 13,277(3)
1996 205,002 82,001 --- 80,000 --- 2,719(3)
- -------------------------- ----------- --------- --------- ------- -------- -------- ----------
Michael A. Iachelli(4) 1998 $196,000 $118,125 --- 5,000 --- $13,492(5)
President, Bay View Credit 1997 208,922 48,000 --- 10,000 --- 7,704(5)
1996 99,396 147,883 --- 40,000 --- 8,761(5)
- --------------------------- ----------- -------- --------- ------ --------
Matthew L. Carpenter(6) 1998 $153,750 $82,688 --- 7,500 --- $15,257(7)
President and Chief 1997 118,750 30,000 --- 30,000 --- 10,532(7)
ExecutiveOfficer, Bay View 1996 --- --- --- --- --- ---
Commercial Finance Group
-------------------------- ------- ------- --------- ------ -------- ------ ---------
Ronald L. Reed(8) 1998 $190,000 $38,000 --- 12,500 --- $ 2,027(9)
Executive Vice President, 1997 36,782 25,000 --- 20,000 --- ---
Director of MIS and 1996 --- --- --- --- --- ---
Loan Servicing
=========================== =========== ======== ======= ========= ======== ====== ========
</TABLE>
(1) Options granted prior to June 2, 1997 have been adjusted for the
two-for-one stock split in the form of a 100% stock dividend paid on such
date.
(2) 1998: matching contribution to Mr. Sondker's account in Bay View Bank's
401(k) Plan, $5,550; life insurance premium, $120; split dollar life
insurance premium, $1,941; executive physical, $2,576; allocation to Mr.
Sondker's account in Bay View's Employee Stock Ownership Plan, or ESOP,
$9,720; 1997: matching contribution to Mr. Sondker's account in Bay View
Bank's 401(k) Plan, $4,800; life insurance premium, $4,260; split dollar
life insurance premium, $3,440; allocation to Mr. Sondker's account in Bay
View's ESOP, $5,839; 1996: matching contribution to Mr. Sondker's account
in Bay View Bank's 401(k) Plan, $4,500; life insurance premium, $4,033;
executive physical, $880; closing costs related to the sale and purchase of
Mr. Sondker's homes, $17,689; reimbursement for miscellaneous moving
expenses, $21,875.
(3) 1998: matching contribution to Mr. Heaberlin's account in Bay View Bank's
401(k) Plan, $4,800; life insurance premium, $73; split dollar life
insurance premium, $1,377; allocation to Mr. Heaberlin's account in Bay
View's ESOP, $9,720; 1997: matching contribution to Mr. Heaberlin's account
in Bay View Bank's 401(k) Plan, $4,800; life insurance premium, $73; split
dollar life insurance premium, $2,565; allocation to Mr. Heaberlin's
account in Bay View's ESOP, $5,839; 1996: matching contribution to Mr.
Heaberlin's account in Bay View Bank's 401(k) Plan, $1,050; life insurance
premium, $73; executive physical, $1,596.
(4) Mr. Iachelli joined Bay View on June 14, 1996 in connection with Bay View's
acquisition of Bay View Credit (f/k/a California Thrift and Loan). Mr.
Iachelli resigned from Bay View effective April 7, 1999.
(5) 1998: matching contribution to Mr. Iachelli's account in Bay View Bank's
401(k) Plan, $9,325; life insurance premium, $720; allocation to Mr.
Iachelli's account in Bay View Credit's ESOP, $3,447; 1997: matching
contribution to Mr. Iachelli's account in Bay View Bank's 401(k) Plan,
$4,956; life insurance premium, $240; allocation to Mr. Iachelli's account
in Bay View Credit's ESOP, $2,508; 1996: matching contribution to Mr.
Iachelli's account in Bay View Bank's 401(k) Plan, $4,750; life insurance
premium, $720; allocation to Mr. Iachelli's account in the Bay View
Credit's ESOP, $3,291.
(6) Mr. Carpenter joined Bay View on March 17, 1997 in connection with Bay
View's acquisition of Bay View Commercial Finance Group (f/k/a Concord
Growth Corporation).
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<PAGE>
(7) 1998: matching contribution to Mr. Carpenter's account in Bay View Bank's
401(k) Plan, $9,225; life insurance premium, $32; automobile allowance,
$6,000; 1997: matching contribution to Mr. Carpenter's account in Bay View
Bank's 401(k) Plan, $4,500; life insurance premium, $32; automobile
allowance, $6,000.
(8) Mr. Reed joined Bay View on October 23, 1997.
(9) 1998: matching contribution to Mr. Reed's account in Bay View Bank's 401(k)
Plan, $763; executive physical, $1,264.
The following table sets forth certain information concerning grants of stock
options pursuant to the 1995 Stock Option Plan to the named officers in 1998. No
SARs were granted in 1998.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------
Individual Grants
--------------------------------------------------------
Number of % of Total Potential Realizable
Shares Options Value at Assumed
Underlying Granted to Per Share Annual Rates of Stock
Options Employees in Exercise Expiration Price Appreciation for
Granted in Fiscal Year Price Date Option Term
---------- --------------- ----------- ------------- ------------------------
5% 10%
------ --------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Sondker 30,000(1) 5.22% $31.6875 1/22/08 $597,843 $1,515,051
20,000(2) 3.48 27.6875 7/30/08 348,250 882,535
- ------------------------------------------------------------------------------------------------------------
David A. Heaberlin 20,000(1) 3.48 31.6875 1/22/08 398,562 1,010,034
10,000(3) 1.74 31.5625 6/25/08 198,495 503,025
- ------------------------------------------------------------------------------------------------------------
Michael A. Iachelli 5,000(3) 0.87 31.5625 6/25/08 99,247 251,512
- ------------------------------------------------------------------------------------------------------------
Matthew L. Carpenter 7,500(3) 1.30 31.5625 6/25/08 148,871 377,269
- -------------------------------------------------------------------------------------------------------------
Ronald L. Reed 7,500(3) 1.30 31.5625 6/25/08 148,871 377,269
5,000(4) 0.87 17.9375 10/22/08 56,404 142,939
==============================================================================================================
</TABLE>
(1) The vesting schedule of the option is as follows: 30% on January 22, 1999,
30% on January 22, 2000 and 40% on January 22, 2001.
(2) The vesting schedule of the option is as follows: 30% on July 30, 1999, 30%
on July 30, 2000 and 40% on July 30, 2001.
(3) The vesting schedule of the option is as follows: 30% on June 25, 1999, 30%
on June 25, 2000 and 40% on June 25, 2001. As a result of his resignation
effective April 7, 1999, Mr. Iachelli's option was forfeited to Bay View.
(4) The vesting schedule of the option is as follows: 30% on October 22, 1999,
30% on October 22, 2000 and 40% on October 22, 2001.
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<PAGE>
The following table sets forth certain information concerning option
exercises during the last fiscal year and the number and value of unexercised
stock options at December 31, 1998 held by the named officers. None of the named
officers held any SARs at December 31, 1998 or exercised any SARs during 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Number of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End FY-End ($) (1)
- ---------------------- ------------ ---------------------------------------------------------------------
Name Shares
Acquired Value
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------ ---------- ------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Sondker --- --- 217,000 103,000 $1,771,000 $ 194,000
David A. Heaberlin --- --- 97,000 83,000 626,000 194,000
Michael A. Iachelli 12,000 $228,000 15,000 28,000 56,250 75,000
Matthew L. Carpenter --- --- 18,001 19,499 --- ---
Ronald L. Reed --- --- 6,001 26,499 --- 18,750
==========================================================================================================================
</TABLE>
(1) The difference between the aggregate option exercise price and the fair
market value of the underlying shares at December 31, 1998.
The following table sets forth information concerning phantom stock units and
stock options which will be awarded under Bay View's 1998-2000 Performance Stock
Plan and Supplemental Phantom Stock Unit Plan if certain performance criteria
are met by Bay View. For additional information regarding these potential
awards, see the footnotes below and "Compensation Committee Report on Executive
Compensation."
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
Performance or Other
Number of Shares, s Period Until
Name Units or Other Right Maturation or Payout
- ---------------------- ------------------- ---------------------
Edward H. Sondker 84,000(1) 1998 - 2000
84,000(2) 1998 - 2000
David A. Heaberlin 60,000(3) 1998 - 2000
60,000(4) 1998 - 2000
Michael A. Iachelli 15,000(5) 1998 - 2000
15,000(6) 1998 - 2000
Matthew L. Carpenter 15,000(7) 1998 - 2000
15,000(8) 1998 - 2000
Ronald L. Reed 15,000(9) 1998 - 2000
15,000(10) 1998 - 2000
====================== =================== ====================
(1) Represents up to 84,000 phantom stock units and stock options to purchase
up to 84,000 shares of Bay View common stock which will be awarded to Mr.
Sondker under the Performance Stock Plan if Bay View meets certain
performance criteria.
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<PAGE>
(2) Represents up to 84,000 phantom stock units which will be awarded to Mr.
Sondker under the Supplemental Plan if Bay View meets certain performance
criteria.
(3) Represents up to 60,000 phantom stock units and stock options to purchase
up to 60,000 shares of Bay View common stock which will be awarded to Mr.
Heaberlin under the Performance Stock Plan if Bay View meets certain
performance criteria. (4)Represents up to 60,000 phantom stock units which
will be awarded to Mr. Heaberlin under the Supplemental Plan if Bay View
meets certain performance criteria. (5)Represents up to 15,000 phantom
stock units and stock options to purchase up to 15,000 shares of Bay View
common stock which Mr. Iachelli was eligible to receive under the
Performance Stock Plan prior to his resignation if Bay View met certain
performance criteria. Upon his resignation, Mr. Iachelli ceased to be
eligible for these awards. (6)Represents up to 15,000 phantom stock units
which Mr. Iachelli was eligible to receive under the Supplemental Plan
prior to his resignation if Bay View met certain performance criteria. Upon
his resignation, Mr. Iachelli ceased to be eligible for these awards.
(7)Represents up to 15,000 phantom stock units and stock options to
purchase up to 15,000 shares of Bay View common stock which will be awarded
to Mr. Carpenter under the Performance Stock Plan if Bay View meets certain
performance criteria. (8)Represents up to 15,000 phantom stock units which
will be awarded to Mr. Carpenter under the Supplemental Plan if Bay View
meets certain performance criteria. (9)Represents up to 15,000 phantom
stock units and stock options to purchase up to 15,000 shares of Bay View
common stock which will be awarded to Mr. Reed under the Performance Stock
Plan if Bay View meets certain performance criteria. (10) Represents up to
15,000 phantom stock units which will be awarded to Mr. Reed under the
Supplemental Plan if Bay View meets certain performance criteria.
Director Compensation
Fees. Prior to April 1, 1999, directors' fees were paid to non-employee
directors, including the Chairman of the Board, as follows: a retainer of $1,800
per month; a fee of $1,000 per Board meeting attended, or $500 in the case of
telephonic meetings attended; a fee of $750 per committee meeting attended, or
$500 in the case of telephonic meetings attended; and an additional fee of $333
per month for the Chairman of the Audit Committee and $200 per month for the
Chairman of each other committee. In 1998, the Chairman of the Board was also
paid a Chairman's retainer of $5,000 per month. Only one fee for attendance at
Board meetings of Bay View Bank and Bay View was paid when meetings of the Bay
View Bank and Bay View Boards were held on the same day.
Effective April 1, 1999, the directors' fees for non-employee directors,
including the Chairman of the Board, were changed as follows: a monthly retainer
of $2,000 if the person is a director of either Bay View or Bay View Bank, but
not both, and a monthly retainer of $2,500 if the person is a director of both
Bay View and Bay View Bank; a fee of $1,500 per Board meeting attended, or
$1,000 in the case of telephonic meetings attended; and a fee of $1,000 per
committee meeting attended, or $500 in the case of telephonic meetings attended,
plus $400 per committee meeting for the Chairman of the Audit Committee and $250
per committee meeting for the Chairman of each other committee. No fee is paid
for attendance at any committee meeting held on the same day as a Board meeting,
except that committee Chairman fees are paid regardless of whether the committee
meeting is held on the same day as a Board meeting. The Chairman of the Board
will continue to be paid a Chairman's retainer of $5,000 per month. As was the
case prior to April 1, 1999, only one fee for attendance at Board meetings of
Bay View Bank and Bay View is paid when meetings of the Bay View Bank and Bay
View Boards are held on the same day.
Stock Option Awards. On January 30, 1998, options to purchase 10,000 shares
of Bay View common stock at an exercise price of $29.91 per share were granted
to each of Directors Collins, Foster, McKean and Roger K. Easley. (Mr. Easley
did not continue as a director of Bay View following the Annual Meeting of
Shareholders held May 27, 1999, but continued to serve as a director of Bay View
Bank.) The options became exercisable in full on July 30, 1998 and will expire
on January 30, 2008.
On February 26, 1998, options to purchase 7,000 shares of common stock at an
exercise price of $32.56 per share were granted to each of Directors Krauss and
McLin. The options became exercisable in full on August 26, 1998 and will expire
on February 26, 2008.
Information regarding stock options granted to Director Sondker, the
President and Chief Executive Officer of Bay View, is contained elsewhere in
this document in the table captioned "Option Grants in Last Fiscal Year."
Stock in Lieu of Cash Compensation Plan. In 1996, Bay View and Bay View
Bank adopted the Stock in Lieu of Cash Compensation Plan for Non-Employee
Directors. The Stock in Lieu of Cash Plan provides for the deferral
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<PAGE>
of director fees earned by non-employee directors of Bay View Bank in the form
of stock units, which are credited to accounts maintained for the non-employee
directors. At least 20% of the fees paid to non-employee directors must be
converted into stock units, and non-employee directors may elect to have up to
100% of their fees converted. The number of stock units per fee deferral is
determined by dividing the amount of fees deferred by the fair market value per
share of Bay View common stock on the deferral date.
Each non-employee director has credited to his or her stock unit account an
additional number of stock units to reflect cash dividends paid with respect to
Bay View common stock. The number of stock units is determined by multiplying
the amount of the dividend per share by the number of stock units held in the
non-employee director's stock unit account on the dividend record date. Each
stock unit account will be settled as soon as practicable following the
non-employee director's termination of service as a director, for any reason, by
delivering to the non-employee director, or his or her beneficiary, the number
of shares of Bay View common stock equal to the number of whole stock units then
credited to the non-employee director's stock unit account. The non-employee
director may elect to have such shares delivered in substantially equal annual
installments over a period not to exceed ten years; in the absence of such an
election, all of such shares will be delivered on the settlement date.
Amended Outside Directors' Retirement Plan. Bay View Bank maintains the
Amended Outside Directors' Retirement Plan for non-employee directors who retire
from Bay View Bank's Board of Directors with at least three years of service on
the Board and who were elected to Bay View Bank's Board of Directors prior to
1996. Only Directors Easley, McKean, Collins and Foster and former directors
Richard J. Quinlan and Robert L. Witt are eligible participants in the
Retirement Plan. Pursuant to the Retirement Plan, the present value of the
vested accrued benefits as of May 23, 1996 of each participant were contributed
by Bay View Bank in cash to a grantor trust administered by a third-party
trustee. The cash was then invested by the trustee in shares of Bay View common
stock purchased on the open market, which have been allocated to accounts
maintained by the trustee for the Retirement Plan participants.
The Retirement Plan provides that, in general, upon the termination of a
participant's service as a director of Bay View Bank, and Bay View, if the
participant also serves as a director of Bay View, prior to a change in control
of Bay View or Bay View Bank, the shares of Bay View common stock allocated to
the participant's account will be distributed in ten installments, with the
first installment being made within 30 days after termination of service and
each subsequent installment being made annually thereafter. A participant may
elect, within 15 days after termination of service, to instead have the shares
of stock allocated to his or her account sold by the trustee and receive the
proceeds in cash, paid in ten installments, with the first installment being
paid within 30 days after termination of service and each subsequent installment
being paid annually thereafter. The cash proceeds not immediately distributed
would be invested in permissible investments with the participant entitled to
any earnings on such investments up to a specified amount. If a participant's
service is terminated in connection with or after a change in control, the
participant will automatically receive the cash installment form of payment,
unless the Board of Directors of Bay View Bank determines prior to the change in
control to require the trustee to make a single, lump-sum cash payment of the
value of each participant's account balance immediately after such a termination
of service. A participant whose service terminates before a change in control
and who begins receiving the normal form of payment will, in the event of a
change of control, thereafter receive the cash installment form of payment for
the remaining value of his or her account.
During fiscal 1998, former directors Quinlan and Witt, each of whom ceased to
be a director of Bay View and Bay View Bank in January 1998, were paid their
first installments under the retirement plan, under the normal form of payment,
of 1,405 and 800 shares of Bay View common stock, respectively.
Employment Contracts
Bay View has employment agreements with each of Messrs. Sondker, Heaberlin,
Carpenter and Reed. Each agreement provides for an initial term of one year with
automatic renewal for an additional year on each December 31 unless Bay View or
the executive gives prior written notice that the agreement is not to be
renewed. The agreements provide for the payment of a base salary, which are
currently as follows: Mr. Sondker $425,000 per
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<PAGE>
annum; Mr. Heaberlin $330,000 per annum; Mr. Carpenter $185,000 per annum; and
Mr. Reed $220,000 per annum. The agreements provide for base salary review on
July 1 of each year and further provide that salary increases are not guaranteed
or automatic. The contracts provide for participation in an equitable manner in
employee benefits applicable to executive personnel.
In the event of termination by Bay View without cause, Messers. Sondker,
Heaberlin and Reed would be entitled to receive a lump sum severance payment of
18 months' salary, and Mr. Carpenter would be entitled to receive a severance
payment of 12 months salary. Upon a change of control of Bay View followed
within 24 months by the involuntary termination of an executive, including the
executive's relocation or a reduction in benefits or responsibilities, without
cause, the executive would be entitled to a lump sum severance payment of 200%
of annual salary. As noted elsewhere in this document, Mr. Iachelli voluntarily
terminated his employment effective April 7, 1999.
Compensation Committee Report on Executive Compensation
The Compensation and Benefits Committee of the Board of Directors has
furnished the following report on executive compensation:
Compensation Philosophy Regarding Executive Officers
The Compensation and Benefits Committee of the Board of Directors is
responsible for supervising and approving the compensation and benefits of the
executive officers of Bay View. The committee seeks to ensure that the
compensation of senior executives is consistent with the overall performance
goals of Bay View. In executing its responsibilities, the Committee considers
the three components of compensation for executive officers: (1) base salary;
(2) annual incentives; and (3) long-term incentives. The underlying goal of
corporate compensation is to tie the executive's compensation to the performance
of Bay View as a whole, and to achievement of individual objectives. This goal
is implemented by weighing the two variable compensation components, namely,
annual and long-term incentives, more heavily than base salary. Compensation
levels for base salary are intended to be competitive but slightly below the
market average. Executives can attain total compensation at above market levels
by accomplishing their individual goals at the same time that Bay View has
achieved stated corporate goals.
In 1998, the Committee retained the services of Strategic Compensation
Associates, or SCA, an independent compensation consulting firm, to
competitively assess Bay View's executive compensation programs and make
appropriate recommendations in accordance with the Committee's
pay-for-performance philosophy. SCA compiled a composite group of peer
institutions and analyzed peer group compensation data from proxy statements,
financial data, annual reports and published surveys; pay data was appropriately
adjusted to compare with Bay View's size. SCA derived market consensus levels of
total compensation for each executive position of Bay View based on experience,
responsibilities and scope of duties, and made recommendations as to appropriate
base salary and target annual and long-term incentive compensation levels. Based
on SCA's recommendations, the Committee made certain changes to existing salary
levels for executive officers of Bay View in July 1998, such that base salaries
were generally set at levels approximately 5 to 15% below market consensus for
each position. The Chairman of the Board of each of the respective subsidiaries
made determinations for salary levels for executive officers of those
subsidiaries, also based on peer data comparison provided by SCA. Ranges for
target long-term compensation for each executive position were also established
by the Committee based on SCA's recommendations.
Incentive and bonus programs for executive officers have been utilized by Bay
View for many years. Annual incentive plans for the executive officers measure
performance based upon (1) the creation of shareholder value as reflected in
certain financial measurements, (2) business unit performance; and (2)
individual performance, as measured against goals and objectives in Bay View's
business plan. The annual incentive plans for executive officers have required
that certain thresholds of corporate performance and regulatory ratings be met
prior to an executive being entitled to an incentive payment.
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<PAGE>
The 1998 Annual Senior Management Incentive Plan for the executive officers
of Bay View and Bay View Bank contained certain corporate goals which were
required to be met prior to any officer eligibility for a bonus. These
thresholds were net income of Bay View and, for officers of Bay View Bank only,
regulatory examination results, including a satisfactory Community Reinvestment
Act rating. Bay View's net income threshold calculated in accordance with terms
of the 1998 plan resulted in a maximum payment of 50% of target bonus award
levels to Bay View officers. Production subsidiary units, Bay View Credit and
Bay View Commercial Finance Group, were required to meet performance targets
based on production levels, asset quality and expense control, and such goals
were exceeded. Consequently, the named officers were entitled to payments under
the 1998 Plan as follows: Edward Sondker, $100,000; David Heaberlin, $75,000;
Ronald Reed, $38,000; Michael Iachelli, $118,125; and Matthew Carpenter,
$82,688. The bonus payments to the named officers for 1998 totaled $413,813.
In January 1998, the Committee approved a new long-term Performance Stock
Plan designed by SCA to complement Bay View's existing stock option program
through which awards are contingent on the achievement of specific performance
measures as set forth in the Performance Stock Plan. The Performance Stock Plan
was submitted to and approved by Bay View's shareholders at the May 1998 Annual
Shareholders' Meeting. In December 1998, the Committee approved a Supplemental
Phantom Stock Unit Plan, which was ratified by the Board in January 1999 (the
Performance Stock Plan and the Supplemental Plan are referred to collectively as
the Long-Term Incentive Plan). The Committee believes that the Long-Term
Incentive Plan's design will focus participants on performance measures that
will lead to the creation of value for Bay View's shareholders while providing
the participants with the opportunity to earn rewards commensurate with
performance and the creation of shareholder value. Under the terms of the
Long-Term Incentive Plan, awards are not earned unless and until certain
corporate performance measurements have been achieved. The Plan is divided into
three award tranches, with each tranche requiring the simultaneous achievement
of a minimum level of performance of net interest margin, tangible core return
on equity and transaction account mix. Upon achievement of all criteria for each
tranche, participants earn (1) phantom stock units, or PSUs, from the
Performance Stock Plan which are immediately converted to cash based on the
stock price appreciation from $36.25, the market value of the common stock on
January 1, 1998, to the market price on the last day of the quarter in which the
award is earned, (2) stock options with a grant price equal to the market value
of the common stock on the last day of the quarter with a 6-month vesting and
5-year term, and (3) PSUs from the Supplemental Plan which are immediately
converted to cash based on the stock price appreciation from $21.00, the market
price of the common stock on December 7, 1998, to the market price on the last
day of the quarter in which the award is earned but not to exceed $36.25. The
award grants to each of the named officers upon achievement of all criteria in
each tranche is as follows: Edward Sondker, 28,000 PSUs and 28,000 options per
tranche from the Performance Stock Plan and 28,000 PSUs per tranche from the
Supplemental Plan; David Heaberlin, 20,000 PSUs and 20,000 options per tranche
from the Performance Stock Plan and 20,000 PSUs per tranche from the
Supplemental Plan; Ronald Reed, 5,000 PSUs and 5,000 options per tranche from
the Performance Stock Plan and 5,000 PSUs per tranche from the Supplemental
Plan; Michael Iachelli, 5,000 PSUs and 5,000 options per tranche from the
Performance Stock Plan and 5,000 PSUs per tranche from the Supplemental Plan;
and Matthew Carpenter, 5,000 PSUs and 5,000 options per tranche from the
Performance Stock Plan and 5,000 PSUs per tranche from the Supplemental Plan.
The Committee considers the grant of stock options to executive officers to
be an important component of long-term compensation. In 1998 options were
granted to the named executive officers as follows: Mr. Sondker, 50,000 shares;
Mr. Heaberlin, 30,000 shares; Mr. Reed, 12,500 shares; Mr. Iachelli, 5,000
shares; and Mr. Carpenter, 7,500 shares. The grants were based on the
Committee's recognition of the exceptional performance of the named individuals,
their leadership skills and their ability to affect the results of Bay View, and
most importantly, the importance of retaining the named individuals because of
their impact on the future success of Bay View.
During 1997, Bay View established split-dollar life insurance policies for
Messrs. Sondker and Heaberlin. The policies were funded by the tax-free
conversion of the cash surrender value of existing policies that no longer
served a valid purpose. The new policies are owned by the executives but provide
for an assignment back to Bay View of the amount contributed by Bay View. The
assignment would be terminated upon a change of control of Bay View.
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<PAGE>
CEO Compensation
Edward H. Sondker commenced employment as Bay View's President and Chief
Executive Officer on August 1, 1995. Mr. Sondker's base salary was set at
$350,000 effective January 1, 1998, and increased to $400,000 effective July 1,
1998, as a result of recommendations made by SCA and in accordance with the
Committee's philosophy of setting base salary at slightly below peer market
average for a comparable position. Mr. Sondker's total compensation package
includes: (1) the aforementioned base salary; (2) annual incentive target award
of 50% of annual base salary based upon achievement of agreed-upon 1998
performance goals; (3) long-term compensation consisting of an option to
purchase 320,000 shares of Bay View common stock, representing cumulative grants
since his date of hire, vesting over three years; (4) PSUs and options, if
earned, under the Long-Term Incentive Plan; (5) the split-dollar life insurance
policy described above; and (6) a one year employment contract. On January 1,
1999, Mr. Sondker's employment agreement (see "-Employment Contracts") was
renewed for an additional one year term. Mr. Sondker received an annual
incentive award in the amount of $100,000, which represented 25% of his base
salary as of December 31, 1998, for achieving corporate and individual
performance goals in accordance with the terms of the Performance Stock Plan.
The Committee is satisfied that Mr. Sondker's total compensation package is
reasonable and will continue to achieve the aforementioned goals of the
Committee regarding executive compensation.
Employment Contracts
A more detailed description of the employment contracts with the named
officers is contained elsewhere in this document.
Deductibility of Executive Compensation
Federal tax laws limit the deduction a publicly-held company is allowed for
compensation paid to its chief executive officer and its four most highly
compensated executive officers. Generally, amounts in excess of $1 million,
other than performance-based compensation, paid in any tax year to a covered
executive cannot be deducted. The Committee will consider ways to maximize the
deductibility of executive compensation, while retaining the discretion the
Committee deems necessary to compensate executive officers in a manner
commensurate with performance and the competitive environment for executive
talent.
The foregoing report is furnished by Ms. Collins (Chairperson) and Messrs.
McKean and Greber.
76
<PAGE>
Stockholder Return Performance Presentation
The line graph below compares the cumulative total stockholder return on Bay
View's common stock to the cumulative total return of the Dow Jones Global-U.S.
Index and Dow Jones Savings and Loan Index* for the period December 31, 1993
through December 31, 1998. The graph assumes that $100 was invested on December
31, 1993 and that all dividends were reinvested.
[GRAPHIC OMITTED]
CUMULATIVE TOTAL RETURN
BAY VIEW CAPITAL CORPORATION, DOW JONES GLOBAL-U.S.
INDEX AND DOW JONES SAVINGS AND LOAN INDEX
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
-------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bay View 100.00 92.38 142.16 215.31 374.26 226.92
Global-U.S. Index 100.00 100.73 138.69 170.63 228.57 294.05
S&L Index 100.00 86.98 144.39 180.30 313.81 296.19
</TABLE>
- ----------
* Bay View became a bank holding company and ceased to be a savings and loan
holding company upon Bay View Bank's conversion from a federal savings bank
to a national bank on March 1, 1999.
77
<PAGE>
LEGAL MATTERS
The validity of the Bay View common stock to be issued in connection with the
merger, and certain other legal matters, will be passed upon by Silver, Freedman
& Taff, L.L.P., 1100 New York Avenue, N.W., Suite 700, Washington, D.C. 20005.
Certain legal matters will be passed upon for FMAC by Allen, Matkins, Leck,
Gamble & Mallory LLP, 1999 Avenue of the Stars, Suite 1800, Los Angeles,
California 90067 and Dewey Ballantine LLP, 333 South Hope Street, 30th Floor,
Los Angeles, California 90071.
EXPERTS
The consolidated financial statements of Bay View as of December 31, 1998,
and for the year then ended, have been incorporated by reference herein and in
the registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Bay View as of December 31, 1997,
and for the years ended December 31, 1997 and 1996, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report dated
January 26, 1998, which is incorporated by reference herein, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of FMAC as of December 31, 1998 and
1997, and for each of the years in the three-year period ended December 31,
1998, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in Bay View's proxy materials for
next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the main office of Bay View, 1840
Gateway Drive, San Mateo, California 94404, no later than December 29, 1999. Any
such proposals will be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act and, as with any shareholder proposal,
regardless of whether included in Bay View's proxy materials, Bay View's
Certificate of Incorporation and Bylaws and Delaware law. Under the proxy rules,
in the event Bay View receives notice of a shareholder proposal to take action
at the next annual meeting that is not submitted for inclusion in Bay View's
proxy materials, or is submitted for inclusion but is properly excluded from
such proxy materials, the persons named in the form of proxy sent by Bay View to
its shareholders intend to exercise their discretion to vote on such proposal in
accordance with their best judgment if notice of the proposal is not received at
the administrative office of Bay View by the deadline set forth below. Bay
View's Bylaws provide that if notice of a shareholder proposal to take action at
the next annual meeting is not received at the main office of Bay View by the
deadline, such proposal will not be recognized as a matter proper for submission
to Bay View's shareholders and will not be eligible for presentation at the
meeting. The deadline is the date 60 days prior to the date of the next annual
meeting; however, in the event that less than 70 days notice or prior public
disclosure, such as by press release or by the filing of a Current Report on
Form 8-K with the SEC, of the date of the next annual meeting is given or made
to shareholders, the deadline is the close of business on the tenth day
following the earlier of the day on which notice of the meeting was first mailed
or public announcement of the date of the meeting was first made.
If the merger takes place, FMAC will have no more annual meetings. If the
merger does not take place, any FMAC shareholder who wishes to submit a security
holder proposal for possible inclusion in the proxy statement and proxy for
FMAC's 2000 annual meeting of shareholders must do so on or before January 27,
2000. The proposal must comply with the rules and regulations of the SEC then in
effect and the bylaws of FMAC and must be transmitted to Raedelle Walker,
Secretary, Franchise Mortgage Acceptance Company, 1888 Century Park East, Third
Floor, Los Angeles, California 90067.
78
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Bay View and FMAC file annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy such information at the following public reference rooms
of the SEC:
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The filings of Bay View and FMAC with the SEC are also available
to the public from commercial retrieval services and at the world wide web site
maintained by the SEC at "http://www.sec.gov." You may also obtain copies of
such information by mail from the Public Reference Section of the SEC, at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Bay View has filed with the SEC a registration statement on Form S-4 under
the Securities Act of 1933 to register the shares of Bay View common stock to be
issued to FMAC shareholders in the merger. As permitted by the rules and
regulations of the SEC, this joint proxy statement/prospectus does not contain
all the information set forth in the registration statement and the exhibits
thereto. Such additional information may be inspected and copied as set forth
above.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be part of
this document, except for any information superseded by information contained in
this document or in later filed documents incorporated by reference in this
document. This joint proxy statement/prospectus incorporates by reference the
documents set forth below that we have previously filed with the SEC. These
documents contain important information about our companies and their finances.
All of the documents filed with the SEC by Bay View (File No. 001-14879)
pursuant to the Securities Exchange Act of 1934 since the end of its fiscal year
ended December 31, 1998 are incorporated by reference in this document. These
documents include the following:
o Bay View's Annual Report on Form 10-K for the year ended December 31,
1998, as amended on Form 10-K/A filed with the SEC on July 13, 1999.
o Bay View's Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, as amended on Form 10-Q/A filed with the SEC on July 13,
1999.
o Bay View's Current Reports on Form 8-K filed March 12 and March 19,
1999.
This document also incorporates by reference the description of the common
stock, par value $0.01 per share, of Bay View, and the associated rights under
the Bay View Stockholder Protection Rights Agreement, set forth under
"Description of Capital Stock-Common Stock," "-Section 203 of the Delaware Law"
and "-Certain Provisions of the Amended and Restated Certificate of
Incorporation and Bylaws" contained in Bay View's prospectus dated October 19,
1998, filed pursuant to Rule 424(b) of the Securities Act together with a
prospectus supplement on December 16, 1998, and incorporated in Bay View's
registration statement on Form 8-A dated March 3, 1999.
All of the documents filed with the SEC by FMAC (File No. 000-23283)
pursuant to the Exchange Act since the end of its fiscal year ended December 31,
1998 are incorporated by reference in this document. These documents include the
following:
79
<PAGE>
o FMAC's Annual Report on Form 10-K for the year ended December 31,
1998, as amended on Form 10-K/A filed with the SEC on April 22, 1999.
o FMAC's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
o FMAC's Current Report on Form 8-K filed March 12, 1999.
We are also incorporating by reference additional documents that we file
with the SEC between the date of this document and the date of the special
meetings. Such incorporation by reference by us will not be deemed to
specifically incorporate by reference the information referred to in Item
402(a)(8) of Regulation S-K.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge.
Exhibits will not be sent, however, unless those exhibits have specifically been
incorporated by reference in this document. Shareholders may obtain documents
incorporated by reference in this document by writing or telephoning the
appropriate party at the addresses and telephone numbers that follow:
Bay View Documents FMAC Documents
Bay View Capital Corporation Franchise Mortgage Acceptance Company
1840 Gateway Drive 1888 Century Park East, Third Floor
San Mateo, California 94404 Los Angeles, California 90067
Attention: Robert J. Flax Attention: Kevin Burke
(650) 312-7200 (800) 611-3622
If you would like to request documents from Bay View or FMAC, please do so
by August 24, 1999 to receive them before the special meetings.
You should rely only on the information contained or incorporated by
reference in this document. We have not authorized anyone to provide you with
information that is different from what is contained in this document. You
should not assume that the information contained in this document is accurate as
of any date other than the date of this document, and neither the mailing of
this document to shareholders nor the issuance of Bay View common stock in the
merger shall create any implication to the contrary.
Bay View supplied all information contained or incorporated by reference in
this document relating to Bay View and FMAC supplied all such information
relating to FMAC.
80
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APPENDIX A
-----------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND BETWEEN
BAY VIEW CAPITAL CORPORATION
AND
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
-----------------------------------------------
----------------
March 11, 1999
----------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER AND RELATED MATTERS.........................................2
1.1 MERGER; SURVIVING CORPORATION....................................2
1.2 EFFECTIVE TIME OF THE MERGER.....................................2
1.3 MERGER...........................................................2
1.4 CLOSING.........................................................10
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BAY VIEW............................11
2.1 ORGANIZATION....................................................11
2.2 AUTHORIZATION...................................................11
2.3 CONFLICTS.......................................................11
2.4 ANTI-TAKEOVER PROVISIONS INAPPLICABLE...........................12
2.5 CAPITALIZATION..................................................12
2.6 BAY VIEW FINANCIAL STATEMENTS; MATERIAL CHANGES.................12
2.7 BAY VIEW SUBSIDIARIES...........................................13
2.8 BAY VIEW FILINGS................................................14
2.9 BAY VIEW REPORTS................................................14
2.10 COMPLIANCE WITH LAWS............................................15
2.11 REGISTRATION STATEMENT; PROXY STATEMENT........................15
2.12 LITIGATION......................................................16
2.13 LICENSES........................................................16
2.14 TAXES...........................................................17
2.15 INSURANCE.......................................................18
2.16 LOANS; INVESTMENTS..............................................18
2.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES..............................19
2.18 COMPLIANCE WITH ENVIRONMENTAL LAWS..............................19
2.19 DEFAULTS........................................................21
2.20 OPERATIONS SINCE DECEMBER 31, 1998..............................21
2.21 UNDISCLOSED LIABILITIES.........................................21
2.22 INSIDER INTERESTS...............................................21
2.23 BROKERS AND FINDERS.............................................21
2.24 ACCURACY OF INFORMATION.........................................22
2.25 GOVERNMENTAL APPROVALS AND OTHER CONDITIONS.....................22
2.26 YEAR 2000 COMPLIANT.............................................22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FMAC................................22
3.1 ORGANIZATION. ..................................................22
3.2 AUTHORIZATION...................................................22
3.3 CONFLICTS.......................................................23
3.4 ANTI-TAKEOVER PROVISIONS INAPPLICABLE...........................23
<PAGE>
3.5 CAPITALIZATION AND STOCKHOLDERS.................................23
3.6 FMAC FINANCIAL STATEMENTS; MATERIAL CHANGES.....................24
3.7 FMAC SUBSIDIARIES...............................................24
3.8 FMAC FILINGS....................................................25
3.9 FMAC REPORTS....................................................25
3.10 COMPLIANCE WITH LAWS............................................26
3.11 REGISTRATION STATEMENT; PROXY STATEMENT.........................26
3.12 LITIGATION......................................................26
3.13 LICENSES. .....................................................27
3.14 TAXES...........................................................27
3.15 INSURANCE.......................................................28
3.16 LOANS; INVESTMENTS..............................................29
3.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES..............................33
3.18 FMAC BENEFIT PLANS..............................................33
3.19 COMPLIANCE WITH ENVIRONMENTAL LAWS..............................36
3.20 CONTRACTS AND COMMITMENTS.......................................37
3.21 DEFAULTS........................................................38
3.22 OPERATIONS SINCE DECEMBER 31, 1998..............................38
3.23 RECORDS.........................................................40
3.24 UNDISCLOSED LIABILITIES.........................................40
3.25 ASSETS..........................................................40
3.26 INDEMNIFICATION.................................................41
3.27 INSIDER INTERESTS...............................................41
3.28 REGISTRATION OBLIGATIONS........................................42
3.29 TAX AND RELATED MATTERS.........................................42
3.30 BROKERS AND FINDERS.............................................42
3.31 ACCURACY OF INFORMATION.........................................42
3.32 GOVERNMENTAL APPROVALS AND OTHER CONDITIONS.....................42
3.33 YEAR 2000 COMPLIANT.............................................42
ARTICLE IV
COVENANTS OF FMAC AND BAY VIEW........................................43
4.1 FMAC BUSINESS IN ORDINARY COURSE................................43
4.2 CERTAIN ACTIONS.................................................46
4.3 BAY VIEW BUSINESS IN ORDINARY COURSE............................47
ARTICLE V
ADDITIONAL AGREEMENTS.................................................48
5.1 INSPECTION OF RECORDS; CONFIDENTIALITY..........................48
5.2 REGISTRATION STATEMENT; STOCKHOLDER APPROVAL....................48
5.3 AGREEMENTS OF AFFILIATES........................................49
5.4 EXPENSES........................................................49
5.5 COOPERATION.....................................................49
<PAGE>
5.6 REGULATORY APPLICATIONS.........................................51
5.7 CURRENT INFORMATION.............................................51
5.8 PRESS RELEASE...................................................51
5.9 LITIGATION MATTERS..............................................51
5.10 TAX OPINION. ..................................................51
5.11 BENEFITS AND RELATED MATTERS....................................52
5.12 RESERVATION OF SHARES TO SATISFY FMAC CONTINUING
OPTIONS.........................................................52
5.13 LISTING. ......................................................52
5.14 INDEMNIFICATION: DIRECTORS' AND OFFICERS' INSURANCE.............52
5.15 REPORTS TO THE SEC..............................................54
5.16 ENVIRONMENTAL REPORTS...........................................54
5.17 IMPERMISSIBLE ACTIVITIES........................................54
5.18 POST-MERGER.....................................................54
5.19 FMAC ACKNOWLEDGMENTS............................................54
5.20 DIRECTOR OF BAY VIEW............................................54
5.21 TRANSFER OF FMAC NAME...........................................54
5.22 BAY VIEW ACKNOWLEDGMENT.........................................54
5.23 FMAC EMPLOYEES..................................................55
5.24 FINANCIAL REPORTING OBLIGATIONS AND TAX GROSS-UP
PAYMENTS........................................................55
ARTICLE VI
CONDITIONS............................................................55
6.1 CONDITIONS TO THE OBLIGATIONS OF BAY VIEW.......................55
6.2 CONDITIONS TO THE OBLIGATIONS OF FMAC...........................56
6.3 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES....................57
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER........................................58
7.1 TERMINATION.....................................................58
7.2 LIABILITIES AND REMEDIES; BREAK-UP FEE..........................61
7.3 SURVIVAL OF AGREEMENTS..........................................63
7.4 AMENDMENT.......................................................63
7.5 WAIVER..........................................................63
ARTICLE VIII
GENERAL PROVISIONS....................................................64
8.1 SURVIVAL........................................................64
8.2 NOTICES.........................................................64
8.3 APPLICABLE LAW..................................................65
8.4 HEADINGS, ETC...................................................65
8.5 SEVERABILITY....................................................65
8.6 ENTIRE AGREEMENT; BINDING EFFECT; NON-ASSIGNMENT;
COUNTERPARTS; EFFECT............................................65
<PAGE>
EXHIBIT LIST
Exhibit A - Form of Voting Agreement (excluded)
Exhibit B - Form of Affiliate Agreement (excluded)
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement")
dated March 11, 1999, is by and between BAY VIEW CAPITAL CORPORATION, a Delaware
corporation ("Bay View"), and FRANCHISE MORTGAGE ACCEPTANCE COMPANY, a Delaware
corporation ("FMAC").
A. Bay View and FMAC wish to provide for the terms and conditions of the
following described business combination in which FMAC will be merged (the
"Merger") with and into Bay View with Bay View as the surviving corporation in
the Merger.
B. The respective Boards of Directors of Bay View and FMAC expect that the
Merger, on the terms and conditions set forth herein, is in the best interests
of their stockholders and will further the business interests of their
respective corporations.
C. It is the intent of Bay View that following the Merger it shall
contribute all or substantially all of the assets and liabilities of FMAC
received by Bay View in the Merger to Bay View Bank, N.A., a national bank and a
wholly owned first-tier subsidiary of Bay View ("Bay View Bank"), which in turn
shall contribute such assets and liabilities to a newly formed wholly-owned
subsidiary of Bay View Bank ("New FMAC").
D. For federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended ("Code"), and this Agreement shall constitute a
plan of reorganization pursuant to Section 368 of the Code.
E. For accounting purposes, it is intended that the Merger shall be
accounted for as a purchase.
F. The parties hereto desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
G. Concurrently with the execution and delivery of this Agreement, and as
a condition to and inducement for Bay View to enter into this Agreement, Bay
View and FMAX Holdings, LLC have entered into a voting agreement in the form
attached hereto as Exhibit A ("Voting Agreement").
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto agree
as follows:
<PAGE>
ARTICLE I
THE MERGER AND RELATED MATTERS
1.1 MERGER; SURVIVING CORPORATION. Subject to the terms and conditions of
this Agreement, and pursuant to the provisions of the Delaware General
Corporation Law ("DGCL"), at the Effective Time (as defined in Section 1.2),
FMAC shall be merged with and into Bay View pursuant to the terms and conditions
set forth herein. Upon the consummation of the Merger, the separate corporate
existence of FMAC shall cease and Bay View shall continue as the surviving
corporation in the Merger under the laws of the state of Delaware. The name of
Bay View as the surviving corporation in the Merger shall be "Bay View Capital
Corporation". The Merger shall have the effects prescribed in the DGCL,
including that from and after the Effective Time Bay View, as the surviving
corporation in the Merger, shall possess all of the properties and rights of
FMAC, including all rights in and to the name "Franchise Mortgage Acceptance
Company".
1.2 EFFECTIVE TIME OF THE MERGER. As soon as practicable after each of the
conditions set forth in Article VI hereof have been satisfied or waived, the
parties will file, or cause to be filed, with the Delaware Secretary of State, a
certificate of merger and such other documents as they may deem necessary or
appropriate to effectuate the Merger, which certificate of merger and such other
documents shall in each case be in the form required by and executed in
accordance with the applicable provisions of the DGCL. The Merger shall become
effective at such time as is specified in the certificate of merger ("Effective
Time").
1.3 MERGER.
(a) CONVERSION OF FMAC STOCK. At the Effective Time:
(i) Each share of common stock of FMAC, $.001 par value per
share (the "FMAC Common Stock"), issued and outstanding immediately
prior thereto (except for Dissenting Shares, if applicable (as
defined in Section 1.3(e)) shall, by virtue of the Merger and
without any action on the part of the parties hereto or the holder
thereof, but subject to this Section 1.3(a), Section 1.3(c) and
Section 1.3(g), be converted into the right to receive, at the
election of the holder thereof as provided in Section 1.3(b),
either:
(1) $10.25 in cash, as adjusted pursuant to the
provisions hereinafter contained (the "Per Share Cash
Consideration"); or
(2) a number of shares of the common stock of Bay View
("Bay View Common Stock"), par value $.01 per share (and the
associated rights (the "Rights") under the Stockholder
Protection Rights Agreement dated as of July 31, 1990, as
amended, between Bay View and Manufacturers Hanover Trust
Company of California, as Rights Agent) equal to the quotient
(the "Exchange Ratio," as subject to possible adjustment as
set forth in Section 7.1(g)) of the Per Share Cash
Consideration divided by $20.00 (the "Per Share Stock
Consideration").
2
<PAGE>
The Merger Consideration (as defined below) shall be increased
(A) in an amount that the good faith estimated decrease in the
consolidated stockholders' equity of FMAC arising from financial
reporting adjustments on account of tax gross up payments or the
nondeductability of payments under Sections 162(m) or 280G of the Code
is less than $3.7 million as determined by KPMG, LLP, based upon a
value of Bay View Common Stock equal to $20.00 per share, at least
five business days prior to the date of the mailing of the Proxy
Statement (as defined in Section 2.3) and (B) in an equitable amount
reasonably determined by agreement of the parties in the event that
the number of Out-of-the-Money Options (as defined below) is less than
728,277 after adding back to such number any Out-of-the-Money Options
that have been theretofore exercised determined as of the fifth
business day prior to the mailing of the Proxy Statement. An
"Out-of-the-Money Option" means an Option with an exercise price per
share greater than or equal to $10.25. Any such increase to the Merger
Consideration shall be accomplished by increasing the Per Share Cash
Consideration by an amount equal to the quotient of the aggregate
increase divided by the sum of the number of shares of FMAC Common
Stock issued and outstanding immediately prior to the Effective Time
and the number of shares of FMAC Common Stock subject to Options (as
defined in Section 1.3(h)) immediately prior to the Effective Time.
Notwithstanding anything contained in this Agreement to the
contrary, or any holder's election, the aggregate number of shares of
FMAC Common Stock to be exchanged for shares of Bay View Common Stock
in the Merger shall be equal to 60% (rounded up) of the total number
of shares (including Dissenting Shares) of FMAC Common Stock issued
and outstanding immediately prior to the Effective Time (the "Stock
Amount"); and further provided, notwithstanding any holder's election,
the aggregate Per Share Stock Consideration to be received by any
person (or any persons presumed to be acting in concert as defined in
12 C.F.R. Section 225.41(d) (a "control group")) shall be limited so
that when such consideration is aggregated with all Bay View Common
Stock already owned by such person (or control group), such person (or
control group) will not beneficially own, control or have the power to
vote or dispose of more than 9.99% of the shares of Bay View Common
Stock issued and outstanding immediately after the Merger (the
"Beneficial Ownership Limitation").
(ii) The holders of certificates formerly representing shares of
FMAC Common Stock shall cease to have any rights as stockholders of
FMAC, except such rights, if any, as they may have pursuant to the
DGCL. Except as provided above, until certificates representing shares
of FMAC Common Stock are surrendered for exchange, the certificates
shall, after the Effective Time, represent for all purposes only the
right to receive the Per Share Cash Consideration and/or the Per Share
Stock Consideration together with the right to receive the cash value
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of any fraction of a share of Bay View Common Stock as provided below
(collectively, the "Merger Consideration").
(iii) Notwithstanding any other provision of this Agreement,
any shares of FMAC Common Stock issued and outstanding immediately
prior to the Effective Time which are then owned beneficially or of
record by Bay View or FMAC, or by any direct or indirect Subsidiary
(as hereinafter defined) of any of them, or held in the treasury of
FMAC (other than any shares of FMAC Common Stock held (A) directly
or indirectly in trust accounts, managed accounts and the like, or
otherwise held in a fiduciary capacity, that are beneficially owned
by third parties or (B) in respect of a debt previously contracted)
shall, by virtue of the Merger, be canceled without payment of any
consideration therefor and without any conversion thereof.
(iv) If between the date of this Agreement and the Effective
Time the outstanding shares of Bay View Common Stock shall have been
changed into a different number of shares or into a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, or
similar adjustment (each, a "Stock Adjustment"), the Exchange Ratio
to calculate the Per Share Stock Consideration shall be adjusted
correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(b) ELECTION PROCEDURES.
(i) An election form and other appropriate and customary
transmittal materials (the "Election Form"), which specify that
delivery shall be effected, and risk of loss and title to the
certificates theretofore representing FMAC Common Stock shall pass,
only upon proper delivery of such certificates to an exchange agent
designated by Bay View (the "Exchange Agent") shall be mailed
approximately 25 days prior to the anticipated Effective Time
("Mailing Date") to each holder of record of FMAC Common Stock as of
five business days prior to the Mailing Date (the "Election Form
Record Date"). Bay View shall cause an Election Form to be sent to
each holder of FMAC Common Stock who FMAC advises Bay View has
become a holder of FMAC Common Stock after the Election Form Record
Date. Bay View shall determine the anticipated Effective Time (the
"Anticipated Effective Time") in its sole discretion and the failure
of the Effective Time to occur at the Anticipated Effective Time
shall not affect the time periods which are established for purposes
of these election procedures.
(ii) Each Election Form shall permit the holder (or the
beneficial owner through appropriate and customary documentation and
instructions) to designate the number of shares of such holder's
FMAC Common Stock with respect to which the holder elects to receive
only the Per Share Stock Consideration ("Stock Election Shares"),
and to designate the number of shares of
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such holder's FMAC Common Stock with respect to which the holder
elects to receive only the Per Share Cash Consideration ("Cash
Election Shares").
(iii) Each Election Form shall require the holder to disclose
the number of shares of Bay View Common Stock beneficially owned by
the holder for purposes of compliance with the Bank Holding Company
Act and Regulation Y, 12 C.F.R. Part 225, thereunder.
(iv) Any FMAC Common Stock with respect to which the holder
(or the beneficial owner, as the case may be) shall not have
submitted to the Exchange Agent an effective, properly completed
Election Form on or before 5:00 p.m. on the 20th day following the
Mailing Date (or such other time and date as Bay View and FMAC may
mutually agree) (the "Election Deadline") shall be deemed to be "No
Election Shares." Any election shall have been properly made only if
the Exchange Agent shall have actually received a properly completed
Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more
certificates (or customary affidavits and indemnification regarding
the loss or destruction of such certificates or the guaranteed
delivery of such certificates) representing all shares of FMAC
Common Stock covered by such Election Form, together with duly
executed transmittal materials included in the Election Form. Any
Election Form may be revoked or changed by the person submitting a
new Election Form at or prior to the Election Deadline.
(v) Subject to the terms of this Agreement and of the Election
Form, the Exchange Agent shall have discretion to determine whether
any election, revocation or change has been properly or timely made,
to disregard immaterial defects in the Election Forms and to effect
the allocation as provided in Section 1.3(c), and any good faith
decisions of the Exchange Agent regarding such matters shall be
binding and conclusive. Neither Bay View nor the Exchange Agent
shall be under any obligation to notify any person of any defect in
any Election Form.
(c) ALLOCATION PROCEDURES. Within ten business days after the
Election Deadline, unless the Effective Time has not yet occurred, in
which case as soon thereafter as practicable, Bay View shall cause the
Exchange Agent to effect the allocation among the holders of FMAC Common
Stock of rights to receive the Per Share Stock Consideration or the Per
Share Cash Consideration in the Merger in accordance with the Election
Forms but subject to the following:
(i) STOCK ELECTIONS LESS THAN STOCK AMOUNT. If the number of
Stock Election Shares is less than the Stock Amount, then:
(A) all Stock Election Shares shall be converted into
the right to receive the Per Share Stock Consideration,
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(B) the Exchange Agent shall select first pro rata from
among the No Election Shares and then (if necessary) pro rata
from among the Cash Election Shares, a sufficient number of
shares ("Stock Designated Shares") such that the number of
shares of FMAC Common Stock that will be converted into the
right to receive the Per Share Stock Consideration equals as
closely as practicable the Stock Amount, and all Stock
Designated Shares shall be converted into the right to receive
the Per Share Stock Consideration; and
(C) the remaining shares (other than Dissenting Shares)
shall be converted into the right to receive the Per Share
Cash Consideration; or
(ii) STOCK ELECTIONS NOT LESS THAN STOCK AMOUNT. If the
number of Stock Election Shares is not less than the Stock
Amount, then:
(A) all Cash Election Shares and No Election Shares
shall be converted into the right to receive the Per Share
Cash Consideration,
(B) the Exchange Agent shall (if necessary) select from
among the Stock Election Shares on a pro rata basis, a
sufficient number of shares ("Cash Designated Shares") such
that the number of shares of FMAC Common Stock that will be
converted into the right to receive the Per Share Stock
Consideration equals as closely as practicable the Stock
Amount, and all Cash Designated Shares shall be converted into
the right to receive the Per Share Cash Consideration, and
(C) the remaining shares (other than Dissenting Shares)
shall be converted into the right to receive the Per Share
Stock Consideration.
(iii) BENEFICIAL OWNERSHIP LIMITATION. If after the above
allocation any holder of FMAC Common Stock (or any affiliated group
of such persons) has been allocated rights to receive an aggregate
of Per Share Stock Consideration in excess of the Beneficial
Ownership Limitation, such rights to receive the Per Share Stock
Consideration as are in excess of the Beneficial Ownership
Limitation shall be converted into rights to receive the Per Share
Cash Consideration, and the Exchange Agent shall select pro rata
from among the other holders of rights to receive the Per Share Cash
Consideration an equal number of rights to receive the Per Share
Cash Consideration, which rights shall be converted into rights to
receive the Per Share Stock Consideration such that after taking
into account this subsection (iii) the number of shares of FMAC
Common Stock that will be converted into a right to receive the Per
Share Stock Consideration equals as closely as practicable the Stock
Amount.
(d) RESERVATION OF SHARES. Prior to the Effective Time, the Board of
Directors of Bay View shall reserve for issuance a sufficient number of
shares of Bay View
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Common Stock for the purpose of issuing its shares to the stockholders of
FMAC in accordance herewith.
(e) DISSENTING SHARES. Any shares of FMAC Common Stock held by a
holder who dissents from the Merger in accordance with Section 262 of the
DGCL shall be herein called "Dissenting Shares." Notwithstanding any other
provision of this Agreement, any Dissenting Shares shall not, after the
Effective Time, be Cash Election Shares, Stock Election Shares or No
Election Shares or be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights
as are afforded in respect of Dissenting Shares pursuant to the DGCL.
(f) EXCHANGE PROCEDURES.
(i) Bay View shall timely deposit, or shall cause to be
deposited, with the Exchange Agent, sufficient certificates
representing Bay View Common Stock (and the associated Rights) and
sufficient cash funds to effect the exchange of Certificates for the
Per Share Stock Consideration and the Per Share Cash Consideration
to be paid pursuant to Section 1.3(c) and the aggregate amount of
cash to be paid in lieu of fractional shares pursuant to Section
1.3(g).
(ii) As soon as reasonably practicable after the Effective
Time, those holders of record of certificates formerly representing
shares of FMAC Common Stock ("Certificates") which were not tendered
in connection with an Election Form shall be instructed to tender
such Certificates to the Exchange Agent pursuant to a letter of
transmittal that Bay View shall deliver or cause to be delivered to
such holders. Such letter of transmittal shall specify that risk of
loss and title to Certificates shall pass only upon acceptance of
such Certificates by Bay View or the Exchange Agent and instructions
for surrendering the Certificates in exchange for the Merger
Consideration.
(iii) After the Effective Time, each holder of a Certificate
which has been accepted by Bay View or the Exchange Agent will be
entitled to the Merger Consideration payable in respect to the
shares represented thereby.
(iv) The Exchange Agent shall accept Certificates upon
compliance with such reasonable terms and conditions as the Exchange
Agent may impose to effect an orderly exchange thereof in accordance
with customary exchange practices. Certificates shall be
appropriately endorsed or accompanied by such instruments of
transfer as the Exchange Agent may reasonably require.
(v) On the Election Form Record Date and again at the
Effective Time, FMAC shall deliver a certified copy of a list of its
stockholders to Bay View or the Exchange Agent. After the Effective
Time, there shall be no further transfer on the records of FMAC of
Certificates, and if such Certificates are presented to Bay View for
transfer, they shall be canceled against delivery of the Merger
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Consideration. Bay View shall not be obligated to deliver the Merger
Consideration to any holder of FMAC Common Stock until such holder
surrenders the Certificates as provided herein. No interest will be
accrued or paid on the cash component of the Merger Consideration.
No dividends or distributions declared (including any redemption by
Bay View of the Rights associated therewith) will be remitted to any
person entitled to receive Bay View Common Stock under this
Agreement until such person surrenders the Certificate representing
the right to receive such Bay View Common Stock, at which time such
dividends or distributions on whole shares of Bay View Common Stock
with a record date on or after the Effective Time shall be remitted
to such person, without interest and less any taxes that may have
been imposed thereon. Following six months after the Effective Time,
the Exchange Agent shall return to Bay View any certificate for Bay
View Common Stock and cash remaining in the possession of the
Exchange Agent (together with any dividends or distributions in
respect thereof) and thereafter shareholders of FMAC shall look
exclusively to Bay View for the Merger Consideration to which they
are entitled hereunder and any amounts in respect of dividends or
distributions with respect to Bay View Common Stock.
(vi) Certificates surrendered for exchange by any person
constituting an "affiliate" of FMAC for purposes of Rule 145 under
the Securities Act of 1933, as amended, and the rules and
regulations thereunder ("Securities Act") shall not be exchanged for
certificates representing Bay View Common Stock until (A) Bay View
has received a written agreement from such person as specified in
Section 5.3 or (B) the date as such shares of Bay View Common Stock
are freely tradeable without violating the Securities Act. Neither
the Exchange Agent nor any party to this Agreement nor any affiliate
thereof shall be liable to any holder of FMAC Common Stock for any
Merger Consideration issuable or payable in the Merger paid to a
public official pursuant to applicable abandoned property, escheat
or similar laws. Bay View and the Exchange Agent shall be entitled
to rely upon the stock transfer books of FMAC to establish the
identity of those persons entitled to receive the Merger
Consideration, which books shall be conclusive with respect thereto.
In the event of a dispute with respect to ownership of shares of
FMAC Common Stock represented by any Certificate, Bay View and the
Exchange Agent shall be entitled to deposit any Merger Consideration
in respect thereof in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
(vii) If the Merger Consideration is to be issued to a person
other than a person in whose name a surrendered Certificate is
registered, it shall be a condition of issuance that the surrendered
Certificate shall be properly endorsed or otherwise in proper form
for transfer and that the person requesting such issuance shall pay
to Bay View or the Exchange Agent any required transfer or other
taxes or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable. Nothing herein shall
relieve any of the holders of
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FMAC Common Stock of any expenses associated with surrendering such
holder's Certificate or Certificates to the Exchange Agent.
(viii) In the event any Certificate shall have been lost,
stolen or destroyed, the owner of such lost, stolen or destroyed
Certificate shall deliver to Bay View or the Exchange Agent an
affidavit stating such fact, in form satisfactory to Bay View, and,
at Bay View's discretion, a bond in such reasonable sum as Bay View
or the Exchange Agent may direct as indemnity against any claim that
may be made against Bay View or FMAC or its successor or any other
party with respect to the Certificate alleged to have been lost,
stolen or destroyed. Upon such delivery, the owner shall have the
right to receive the Merger Consideration with respect to the shares
represented by the lost, stolen or destroyed Certificate and any
amounts in respect of dividends or distributions with respect to Bay
View Common Stock.
(ix) Bay View shall be entitled to deduct and withhold from
the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Certificates, such amounts as it is
required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Bay View,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Certificates in
respect of which such deduction and withholding was made.
(g) NO FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, neither certificates nor scrip for fractional shares of
Bay View Common Stock shall be issued in the Merger. Each holder who
otherwise would have been entitled to a fraction of a share of Bay View
Common Stock shall receive in lieu thereof cash (without interest) in an
amount determined by multiplying the fractional share interest to which
such holder would otherwise be entitled by the Per Share Cash
Consideration. No such holder shall be entitled to dividends, voting
rights or any other rights in respect of any fractional share.
(h) STOCK OPTIONS. Each option (an "Option") granted under the FMAC
1997 Stock Option, Deferred Stock and Restricted Stock Plan ("Option
Plan") and outstanding on the date hereof, but subject to cancellation of
Options as set forth in Section 3.5(b) (or that is granted pursuant to
Section 4.1(b)(i)(B) and set forth in Section 4.1 of the FMAC Disclosure
Schedule (as defined in Section 3.3)) that remains outstanding immediately
prior to the Effective Time shall, at the Effective Time, be converted
automatically into a right to purchase shares of Bay View Common Stock
(the "Continuing Option") in an amount and at an exercise price determined
as provided below (subject to the terms of the Option Plan):
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(i) the number of shares of Bay View Common Stock to be
subject to the Continuing Option shall be equal to the product of
the number of shares of FMAC Common Stock subject to the original
option and the Exchange Ratio, provided that any fractional share of
Bay View Common Stock resulting from such multiplication shall be
rounded to the nearest share; and
(ii) the exercise price per share of Bay View Common Stock
under the Continuing Option shall be equal to the exercise price per
share of FMAC Common Stock under the original option divided by the
Exchange Ratio, provided that such exercise price shall be rounded
to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. The duration and other terms of the Continuing
Option shall be the same as the original option, except that all
references to FMAC shall be deemed to be references to Bay View.
(i) BAY VIEW AS THE SURVIVING CORPORATION. The Certificate of
Incorporation and Bylaws of Bay View, as in effect immediately prior to the
Effective Time, shall, without any change, be the Certificate of
Incorporation and Bylaws of Bay View, as the surviving corporation in the
Merger, until either is thereafter amended in accordance with applicable
law. The directors of Bay View immediately prior to the Effective Time, and
Wayne Knyal, shall be the directors of Bay View, as the surviving
corporation in the Merger. The officers of Bay View immediately prior to
the Effective Time shall be the officers of Bay View, as the surviving
corporation in the Merger. Such directors and officers shall continue in
office until their successors are duly elected and qualified or otherwise
duly selected. The outstanding capital stock of Bay View shall continue as
the capital stock of Bay View as the surviving corporation in the Merger
and the holders thereof shall retain their present rights.
1.4 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place as soon as practicable after
satisfaction or waiver of all of the conditions set forth in Article VI hereof,
on a date and at a time and place designated in writing by Bay View, but not
later than 30 days following the satisfaction or waiver of such conditions;
provided however, such time of Closing may be extended for up to an additional
30 days by Bay View in order to implement any action to be taken pursuant to
Section 5.5(c) at the direction of Bay View. The date on which the Closing
actually occurs is herein referred to as the "Closing Date."
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF BAY VIEW
Bay View represents and warrants to FMAC that:
2.1 ORGANIZATION. Bay View is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority, corporate and otherwise, to own, operate and
lease its assets and properties and to carry on its business substantially as it
has been and is now being conducted. Bay View is duly qualified to do business
and is in good standing in each jurisdiction where the character of the assets
or properties owned or leased by it or the nature of the business transacted by
it requires that it be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect (as defined in Section 2.6) on Bay
View. Bay View has all requisite corporate power and authority to enter into
this Agreement and, subject to the adoption of this Agreement by the
stockholders of Bay View and the receipt of all requisite regulatory approvals
and the expiration of any applicable waiting periods, to consummate the
transactions contemplated hereby.
2.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly approved and authorized by the Board of Directors of Bay View, and all
necessary corporate action on its part has been taken, subject to the adoption
of this Agreement by the holders of a majority of the outstanding Bay View
Common Stock. This Agreement has been duly executed and delivered by Bay View
and constitutes the valid and binding obligation of it and is enforceable
against it, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles or doctrines.
2.3 CONFLICTS. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict with
or result in any violation, breach or termination of, or default or loss of a
material benefit under, or permit the acceleration of any obligation under, or
result in the creation of any material lien, charge or encumbrance on any of the
property or assets under, any provision of the Certificate of Incorporation or
Bylaws of Bay View or similar documents of any Bay View Subsidiary (as defined
in Section 2.7) or any mortgage, indenture, lease, agreement or other
instrument, permit, concession, grant, franchise, license, Intellectual Property
Right (as defined in Section 2.13), judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Bay View or any Bay View Subsidiary
or their respective properties, other than any such conflicts, violations or
defaults which are disclosed in Section 2.3 of that certain confidential writing
delivered by Bay View to FMAC on or prior to the date hereof (the "Bay View
Disclosure Schedule"). No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal or state governmental
authority is required by or with respect to Bay View in connection with the
execution and delivery of this Agreement or the consummation by it of the
transactions contemplated hereby except for: (i) any filings and approvals with
or from the Board of Governors of the Federal Reserve System and the Office of
the Comptroller of the Currency (the
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"OCC"); (ii) the filing by Bay View of the registration statement relating to
the Bay View Common Stock to be issued pursuant to this Agreement ("Registration
Statement") with the United States Securities and Exchange Commission ("SEC"),
and the effectiveness thereof, which Registration Statement shall include the
joint proxy statement/prospectus ("Proxy Statement") for use in connection with
the stockholders' meetings to approve the Merger (the "Stockholders' Meetings");
(iii) the filing of a certificate of merger with the Delaware Secretary of
State, and the approval thereof; (iv) any filings, approvals or no-action
letters with or from state securities authorities; and (v) any anti-trust
filings (including filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976), consents, waivers or approvals.
2.4 ANTI-TAKEOVER PROVISIONS INAPPLICABLE. No "business combination,"
"moratorium," "control share" or other state anti-takeover statute or regulation
applicable to Bay View (i) applies to the Merger, (ii) prohibits or restricts
the ability of Bay View to perform its obligations under this Agreement or its
ability to consummate the transactions contemplated hereby, (iii) would have the
effect of invalidating or voiding this Agreement or any provision hereof, or
(iv) would subject FMAC to any material impediment or condition in connection
with the exercise of any of its rights under this Agreement.
2.5 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of Bay View
consists of (i) 60,000,000 shares of Bay View Common Stock, $0.01 par
value per share, of which, as of February 28, 1999, 19,113,637 shares (and
the associated Rights) were issued and outstanding and (ii) 7,000,000
shares of preferred stock, $0.01 par value per share, of which none are
issued and outstanding. All of the issued and outstanding shares of Bay
View Common Stock are, and all of the shares of Bay View Common Stock to
be issued in the Merger will be, at the Effective Time, (i) duly and
validly authorized and issued, (ii) fully paid and non-assessable and
(iii) free from any preemptive rights of current or past stockholders. All
of the issued and outstanding shares of Bay View Common Stock will be
entitled to vote to adopt this Agreement.
(b) As of the date hereof, Bay View had 3,007,229 shares of Bay View
Common Stock reserved for issuance under its stock benefit plans for the
benefit of employees and directors of Bay View and the Bay View
Subsidiaries, pursuant to which awards covering 2,183,400 shares of Bay
View Common Stock are outstanding. Except as set forth in this Section
2.5, as of the date hereof, there are no shares of capital stock or other
equity securities of Bay View outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of Bay View, or
contracts, commitments, understandings, or arrangements by which Bay View
is or may be bound to issue additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any additional shares
of its capital stock.
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2.6 BAY VIEW FINANCIAL STATEMENTS; MATERIAL CHANGES. Bay View has
heretofore delivered to FMAC audited consolidated financial statements for the
years ended December 31, 1998 and December 31, 1997 (together the "Bay View
Financial Statements"). The Bay View Financial Statements (i) have been prepared
in all material respects in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto); and (ii) fairly present in
all material respects the consolidated financial position of Bay View as of the
dates thereof and the consolidated results of its operations, stockholders'
equity, cash flows and changes in financial position for the periods then ended.
Since December 31, 1998 to the date hereof, Bay View and the Bay View
Subsidiaries have not undergone or suffered any Material Adverse Effect (as
defined below).
As used in this Agreement, the term "Material Adverse Effect" with respect
to Bay View or FMAC means any condition, event, change or occurrence that has or
may reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), properties, business, operations or assets of such
entity taken together with its affiliated entities on a consolidated basis; it
being understood that a Material Adverse Effect shall not include: (i) a change
with respect to, or effect on, such entity and its Subsidiaries resulting from a
change in law, rule, regulation, GAAP or regulatory accounting principles, as
such would apply to the financial statements of such entity on a consolidated
basis; (ii) a change with respect to, or effect on, such entity and its
Subsidiaries resulting from expenses (such as legal, accounting and investment
bankers' fees) incurred in connection with this Agreement; (iii) a change made
with the prior written consent of the other party including, in the case of
FMAC, any financial change taken at the written request of Bay View; or (iv) in
the case of Bay View only, a change with respect to, or effect on, its
Subsidiaries resulting from changes in prevailing interest rates.
2.7 BAY VIEW SUBSIDIARIES.
(a) All of the Bay View Subsidiaries (as defined below) are listed
in Section 2.7 of the Bay View Disclosure Schedule. Except as set forth in
Section 2.7 of the Bay View Disclosure Schedule, as of the date hereof,
Bay View owns directly or indirectly all of the issued and outstanding
shares of capital stock of the Bay View Subsidiaries. As of the date
hereof, no capital stock of any of the Bay View Subsidiaries is, or may
become required to be, issued (other than to Bay View or another Bay View
Subsidiary) by reason of any options, warrants, scrip, right to subscribe
to, calls, or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of any Bay View Subsidiary. Other than as set forth in
Section 2.7 of the Bay View Disclosure Schedule, as of the date hereof
there are no contracts, commitments, understandings or arrangements
relating to the rights of Bay View to vote the capital stock or to dispose
of any Bay View Subsidiary. All of the shares of capital stock of each Bay
View Subsidiary held by Bay View or a Bay View
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Subsidiary are fully paid and non-assessable and are owned by Bay View or
another Bay View Subsidiary free and clear of any claim, lien or
encumbrance, except as disclosed in Section 2.7 of the Bay View Disclosure
Schedule.
(b) Each Bay View Subsidiary is either a bank or a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and is duly
qualified to do business and in good standing in each jurisdiction where
the character of the assets or properties owned or leased by it or the
nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified would not have a Material
Adverse Effect on Bay View. Each Bay View Subsidiary has the corporate
power and authority necessary for it to own, operate or lease its assets
and properties and to carry on its business substantially as it has been
and is now being conducted.
(c) For purposes of this Agreement, a "Bay View Subsidiary" or a
"Subsidiary" of Bay View shall mean each corporation, bank and other
entity in which Bay View owns or controls directly or indirectly 10% or
more of the outstanding equity securities; provided, however, there shall
not be included any such entity acquired in good faith through
foreclosure, or any such entity to the extent that the equity securities
of such entity are owned or controlled in a bona fide fiduciary capacity.
(d) Bay View Bank is a national bank. All eligible deposit accounts
issued by Bay View Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC") through the Savings Association Insurance Fund or
Bank Insurance Fund to the full extent permitted under applicable law.
2.8 BAY VIEW FILINGS. Bay View has previously made available to FMAC true
and correct copies of its (i) proxy statements relating to all meetings of its
stockholders (whether special or annual) during calendar years 1996, 1997, and
1998 and (ii) all other reports, as amended, or filings, as amended, required to
be filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") by Bay View with the SEC since January 1, 1996 including without
limitation on Forms 10-K, 10-Q and 8-K.
2.9 BAY VIEW REPORTS. Since December 31, 1994, each of Bay View and the
Bay View Subsidiaries has filed, and will continue to file, all reports and
statements, together with any amendment required to be made with respect
thereto, that it was, or will be required to file with the SEC, the FDIC, the
Office of Thrift Supervision, the OCC, the Federal Reserve Board, the National
Association of Securities Dealers ("NASD") and other applicable banking,
securities and other regulatory authorities. As of their respective dates (and
without giving effect to any amendments or modifications filed after the date of
this Agreement with respect to reports and documents filed before the date of
this Agreement), each of such reports and documents, including the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all of the statutes, rules and regulations enforced or promulgated by the
authority with which they were filed and did not contain any untrue statement of
a material fact or omit to
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state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Other
than normal examinations conducted by the Internal Revenue Service ("IRS"),
state and local taxing authorities, and banking regulators in the regular course
of the business of Bay View or the Bay View Subsidiaries, no federal, state or
local governmental agency, commission or other entity has initiated any
proceeding or, to the best knowledge of Bay View and Bay View Bank,
investigation into the business or operations of Bay View or the Bay View
Subsidiaries within the past two years except as set forth in Section 2.9 of the
Bay View Disclosure Schedule. There is no unresolved violation, criticism or
exception by any agency, commission or entity with respect to any report or
statement referred to herein that is material to Bay View and the Bay View
Subsidiaries as taken as a whole.
2.10 COMPLIANCE WITH LAWS.
(a) Except as disclosed in Section 2.10 of the Bay View Disclosure
Schedule, the businesses of Bay View and the Bay View Subsidiaries are
being conducted in compliance in all material respects with all laws,
ordinances and regulations of governmental authorities, including, without
limitation, federal and state securities laws, laws and regulations
relating to financial statements and reports, truth-in-lending,
truth-in-savings, usury, fair credit reporting, consumer protection,
occupational safety, fair employment practices, fair labor standards and
laws and regulations relating to employees and employee benefits, and any
statutes or ordinances relating to the properties occupied or used by Bay
View or any Bay View Subsidiary.
(b) Except as disclosed in Section 2.10 of the Bay View Disclosure
Schedule, no investigation or review by any governmental entity with
respect to Bay View or any Bay View Subsidiary is pending or, to the best
knowledge of Bay View, threatened, nor has any governmental entity
indicated to Bay View or any Bay View Subsidiary an intention to conduct
the same, other than normal regulatory examinations.
(c) Except as disclosed in Section 2.10 of the Bay View Disclosure
Schedule, since January 1, 1996 neither Bay View nor Bay View Bank has
been a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or has been subject to any order or directive by,
or has been a recipient of any extraordinary supervisory letter from, or
has adopted any board resolutions at the request of, federal or state
governmental authorities charged with the supervision or regulation of
depository institutions or depository institution holding companies or
engaged in the insurance of bank and/or savings and loan deposits
("Government Regulators"), nor has it been advised by any Government
Regulator in writing that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar
undertaking.
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2.11 REGISTRATION STATEMENT; PROXY STATEMENT. The information to be
supplied by Bay View for inclusion in the Registration Statement will not, at
the time the Registration Statement is declared effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information to be supplied by Bay View for inclusion
in the Proxy Statement will not, on the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to Bay View's or FMAC's
stockholders, at the time of the Stockholders' Meeting, and at the Effective
Time, contain any statement that, in light of the circumstances under which it
is made, is false or misleading with respect to any material fact, omits to
state any material fact necessary in order to make the statements made therein
not false or misleading, or omits to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders' Meetings that has become false or
misleading. If, at any time prior to the Effective Time, any event relating to
Bay View or any of its affiliates, officers, or directors is discovered by Bay
View that should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Bay View will promptly inform FMAC and such
amendment or supplement will be promptly filed with the SEC and, as required by
law, disseminated to the stockholders of Bay View and FMAC. Notwithstanding the
foregoing, Bay View makes no representation or warranty with respect to any
information supplied by FMAC that is contained in the Registration Statement or
the Proxy Statement. The Proxy Statement and the Registration Statement will
(with respect to Bay View) comply in all material respects as to form and
substance with the requirements of the Exchange Act, the Securities Act, and the
rules and regulations thereunder.
2.12 LITIGATION. Except as disclosed in Section 2.12 of the Bay View
Disclosure Schedule, there is no suit, action, investigation or proceeding,
legal, quasi-judicial, administrative or otherwise, pending or, to the best
knowledge of Bay View threatened, against or affecting Bay View or any Bay View
Subsidiary, or any of their respective officers, directors, employees or agents,
in their capacities as such, which if adversely determined, could reasonably be
expected to have a Material Adverse Effect on Bay View or which would affect the
ability of Bay View to consummate the transactions contemplated herein or which
is seeking to enjoin consummation of the transactions provided for herein or to
obtain other relief in connection with this Agreement or the transactions
contemplated hereby, nor is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission agency, instrumentality
or arbitrator outstanding against Bay View or any Bay View Subsidiary or any of
their respective officers, directors, employees or agents, in their capacities
as such, having, or which, insofar as reasonably can be foreseen in the future,
would have any such effect. Bay View has made available to FMAC or its financial
advisor all of its litigation letters dated on or after January 1, 1997.
2.13 LICENSES. Bay View and the Bay View Subsidiaries hold all licenses,
certificates, permits, franchises and intellectual property, including but not
limited to, patents, trademarks, service marks, trade names, copyrights and
software systems, or rights thereto (the "Intellectual Property Rights"), and
required authorizations, approvals, consents, licenses, clearances and
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orders or registrations with all appropriate federal, state or other authorities
that are material to the conduct of their respective businesses as now conducted
and as presently proposed to be conducted. Neither Bay View nor any of its
Subsidiaries has pledged, mortgaged, assigned, licensed, granted permission with
respect to or otherwise transferred any such Intellectual Property Rights to any
third party. No such Intellectual Property Right is subject to any outstanding
injunction, judgment, order, decree, ruling or charge, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand is
pending or, to the knowledge of Bay View, is threatened that challenges the
legality, validity, use or enforceability of any such Intellectual Property
Right. None of Bay View's or its Subsidiaries' rights with respect to any such
Intellectual Property Rights will be terminated, limited or otherwise affected
by its execution of this Agreement or its consummation of the transactions
contemplated by this Agreement.
2.14 TAXES.
(a) Except as disclosed in Section 2.14 of the Bay View Disclosure
Schedule, Bay View and the Bay View Subsidiaries (i) have each timely
filed all tax and information returns required to be filed (and all such
returns as filed were correct and complete in all material respects) and
(ii) have paid (or Bay View has paid on behalf of its Subsidiaries), or
have accrued on their respective books and established adequate reserves
for the payment of, all taxes for all applicable periods, including taxes
anticipated to be payable in respect of such periods. Neither Bay View nor
any Bay View Subsidiary is delinquent in the payment of any tax,
assessment or governmental charge. No deficiencies for any taxes have been
proposed, asserted or assessed against Bay View or any Bay View Subsidiary
that have not been resolved or settled, and no requests for waivers of the
time to assess any such tax are pending or have been agreed to. Except as
set forth in Section 2.14 of the Bay View Disclosure Schedule, neither Bay
View nor any Bay View Subsidiary is currently subject to audit or
examination of any of its tax returns by the IRS or any state, municipal
or other taxing authority. Neither Bay View nor any Bay View Subsidiary is
a party to any action or proceeding by any governmental authority for the
assessment or the collection of taxes. Deferred taxes of Bay View and the
Bay View Subsidiaries have been accounted for in accordance with GAAP.
(b) Bay View has not filed any consolidated federal income tax
return with an "affiliated group" (within the meaning of Section 1504 of
the Code), where Bay View was not the common parent of the group. In
connection with acquisitions heretofore made by Bay View or a Bay View
Subsidiary, Bay View is not aware of any pre-acquisition tax liability of
the acquired party or any member of the prior affiliated group of the
acquired party for which Bay View or a Bay View Subsidiary may have
liability as a successor, transferee or otherwise that has not been fully
paid. Neither Bay View nor any Bay View Subsidiary is, or has been, a
party to any tax allocation agreement or arrangement pursuant to which it
has any contingent or outstanding liability to anyone other than Bay View
or a Bay View Subsidiary.
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(c) Bay View and the Bay View Subsidiaries have each withheld
amounts from its employees, stockholders and others in compliance with the
tax withholding provisions of applicable federal, state and local laws,
have timely filed (including applicable extension periods) all federal,
state and local returns and reports for all periods for which such returns
or reports would be due with respect to income tax withholding, social
security, unemployment taxes, income and other taxes and all payments or
deposits with respect to such taxes have been timely made.
(d) For the purposes of this Agreement, the terms "tax" and "taxes"
include without limitation, any federal, state, local or foreign
governmental income, leasing, franchise, excise, gross receipts, sales,
use, occupational, employment, real property, ad valorem, personal
property or other taxes, levies, duties, imposts, assessments, fees,
charges and withholdings of any nature whatsoever, together with any
related penalties, fines, additions to tax or interest thereon.
2.15 INSURANCE. Bay View and the Bay View Subsidiaries maintain insurance
with insurers which in the best judgment of management of Bay View are sound and
reputable on their respective assets and upon their respective businesses and
operations against loss or damage, risks, hazards and liabilities as in their
judgment they deem appropriate. Bay View and the Bay View Subsidiaries maintain
in effect all insurance required to be carried by law or by any agreement by
which they are bound. All material claims under all policies of insurance
maintained by Bay View and the Bay View Subsidiaries have been filed in due and
timely fashion. Neither Bay View nor any of the Bay View Subsidiaries has,
during the past three years, had an insurance policy canceled or been denied
insurance coverage for which any of such companies has applied.
2.16 LOANS; INVESTMENTS.
(a) Except as otherwise disclosed in Section 2.16 of the Bay View
Disclosure Schedule, each loan reflected as an asset on the Bay View
Financial Statements dated as of December 31, 1998 is evidenced by
appropriate and sufficient documentation and constitutes, the legal, valid
and binding obligation of the obligor named therein, enforceable in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles or doctrines. Except as
set forth in Section 2.16 of the Bay View Disclosure Schedule, all such
loans are, and at the Effective Time will be, free and clear of any
security interest, lien, encumbrance or other charge.
(b) All guarantees of indebtedness owed to Bay View or any Bay View
Subsidiary, including but not limited to those of the Federal Housing
Administration, the Small Business Administration, and other state and
federal agencies, are valid and enforceable, except to the extent
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles or doctrines.
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(c) All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which Bay View or any
Bay View Subsidiary is a party or by which any of their properties or
assets may be bound were entered into in the ordinary course of business
and, in accordance with then-customary practice and applicable rules,
regulations and policies of regulatory authorities and with counterparties
believed to be financially responsible at the time and are legal, valid
and binding obligations and are in full force and effect. Bay View and the
Bay View Subsidiaries have duly performed in all material respects all of
their respective obligations thereunder to the extent that such
obligations to perform have accrued, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder. None of the transactions contemplated by this Agreement would
permit (i) a counterparty under any interest rate swap, cap, floor and
option agreement or any other interest rate risk management agreement or
(ii) any party to any mortgage backed security financing arrangement, to
accelerate, discontinue, terminate, or otherwise modify any such agreement
or arrangement or would require Bay View or any Bay View Subsidiary to
recognize any gain or loss with respect to such arrangement.
2.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan
losses shown on the Bay View Financial Statements as of December 31, 1998 (and
as shown on any financial statements to be delivered by Bay View to FMAC
pursuant to Section 5.7 hereof), was (and will be as of such subsequent
financial statement dates) adequate in all respects to provide for possible or
specific losses, net of recoveries relating to loans previously charged off, on
loans outstanding, and contained (or will contain) an additional amount of
unallocated reserves for unanticipated future losses at a level considered
adequate under the standards applied by applicable federal regulatory
authorities and based upon GAAP applicable to Bay View and the Bay View
Subsidiaries. To the best knowledge of Bay View, the aggregate principal amount
of loans contained (or that will be contained) in the loan portfolio of Bay View
and the Bay View Subsidiaries as of December 31, 1998 (and as of the dates of
any financial statements to be delivered by Bay View to FMAC pursuant to Section
5.7 hereof), in excess of such reserve, was (and will be) fully collectible.
2.18 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Except as set forth in Section 2.18 of the Bay View Disclosure
Schedule: (i) the operations of Bay View and each of the Bay View
Subsidiaries comply in all material respects with all applicable past and
present Environmental Laws (as defined below); (ii) none of the operations
of Bay View or any Bay View Subsidiary, no assets presently or formerly
owned or leased by Bay View or any Bay View Subsidiary and no Mortgaged
Premises or a Participating Facility (as defined below) are subject to any
judicial or administrative proceedings alleging the violation of any past
or present Environmental Law, nor are they the subject of any claims
alleging damages to health or property, pursuant to which Bay View, any
Bay View Subsidiary or any owner of a Mortgaged Premises or a
Participating Facility would be liable in law or equity; (iii) none of the
operations of Bay View or any Bay View Subsidiary, no assets presently
owned or,
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formerly owned by Bay View or any Bay View Subsidiary, and, to the best
knowledge of Bay View, no Mortgaged Premises or Participating Facility are
the subject of any federal, state or local investigation evaluating
whether any remedial action is needed to respond to a release or
threatened release of any Hazardous Substance (as defined below), or any
other substance into the environment, nor has Bay View or any Bay View
Subsidiary, or, any owner of a Mortgaged Premises or Participating
Facility been directed to conduct such investigation, formally or
informally, by any governmental agency, nor have any of them agreed with
any governmental agency or private person to conduct any such
investigation; and (iv) neither Bay View or any Bay View Subsidiary, nor,
any owner of a Mortgaged Premises or a Participating Facility has filed
any notice under any Environmental Law indicating past or present
treatment, storage or disposal of a Hazardous Substance or reporting a
spill or release of a Hazardous Substance, or any other substance into the
environment.
(b) With respect to the real property currently or formerly owned or
currently leased by Bay View or any Bay View Subsidiary ("Bay View
Premises"): (i) no part of the Bay View Premises has been used for the
generation, manufacture, handling, storage, or disposal of Hazardous
Substances; (ii) except as disclosed in Section 2.18 of the Bay View
Disclosure Schedule, the Bay View Premises do not contain, and have never
contained, an underground storage tank; and (iii) the Bay View Premises do
not contain and are not contaminated by any quantity of a Hazardous
Substance from any source. With respect to any underground storage tank
listed in Section 2.18 of the Bay View Disclosure Schedule as an exception
to the foregoing, such underground storage tank has been removed in
compliance with the Environmental Laws, and has not been the source of any
release of a Hazardous Substance into the environment, unless otherwise
set forth in Section 2.18 of the Bay View Disclosure Schedule.
(c) For purposes of this Section, "Mortgaged Premises" shall mean
each (i) real property interest (including without limitation any fee or
leasehold interest) which is encumbered or affected by any mortgage, deed
of trust, deed to secure debt or other similar document or instrument
granting to any party hereto or any of its Subsidiaries a lien on or
security interest in such real property interest and (ii) any other real
property interest upon which is situated assets or other property affected
or encumbered by any document or instrument granting to any party hereto
or any of its Subsidiaries a lien thereon or security interest therein;
provided, however, that the term "Mortgaged Premises" shall not include
one- to four-unit, single-family residences, and in the case of Bay View
and the Bay View Subsidiaries, any real property interest securing a loan
with a principal balance of less than $2,000,000. For purposes of this
Section, "Participating Facility" means any property in which any party
hereto or any of its Subsidiaries participates in the management of such
property and, where the context requires, includes the owner or operator
of such property. For purposes of this Agreement, "Hazardous Substance"
has the meaning set forth in Section 9601 of the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42
U.S.C.A., Section 9601 et seq., and also includes any substance now or
hereafter regulated by or subject to any Environmental Laws (as defined
below) and any other pollutant, contaminant, or
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waste, including without limitation, petroleum, asbestos, fiberglass,
radon, and polychlorinated biphenyls. For purposes of this Agreement,
"Environmental Laws" means all laws (civil or common), ordinances, rules,
regulations, guidelines, and orders that: (i) regulate air, water, soil,
and solid waste management, including the generation, release,
containment, storage, handling, transportation, disposition, or management
of any Hazardous Substance; (ii) regulate or prescribe requirements for
air, water, or soil quality; (iii) are intended to protect public health
or the environment; or (iv) establish liability for the investigation,
removal, or cleanup of, or damage caused by, any Hazardous Substance.
2.19 DEFAULTS. There has not been any default in any material obligation
to be performed by Bay View or any Bay View Subsidiary under any material
contract or commitment. To the best knowledge of Bay View, no other party to any
material contract or commitment is in default in any material obligation to be
performed by such party.
2.20 OPERATIONS SINCE DECEMBER 31, 1998. Between December 31, 1998 and the
date hereof, except as set forth in Section 2.20 of the Bay View Disclosure
Schedule, there has not been:
(i) any creation or assumption of indebtedness (including the
extension or renewal of any existing indebtedness, or the increase
thereof) by Bay View or any Bay View Subsidiary for borrowed money, or
otherwise, other than in the ordinary course of business, none of which is
in default; or
(ii) any change in Bay View's independent auditors or historic
methods of accounting (other than as required by GAAP or regulatory
accounting principles).
2.21 UNDISCLOSED LIABILITIES. All of the obligations or liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due, and regardless of when asserted) arising out of transactions
or events heretofore entered into, or any action or inaction, including taxes
with respect to or based upon transactions or events heretofore occurring, that
are required to be reflected, disclosed or reserved against in audited
consolidated financial statements in accordance with GAAP ("Liabilities") have,
in the case of Bay View and the Bay View Subsidiaries, been reflected, disclosed
or reserved against in the Bay View Financial Statements as of December 31, 1998
or in the notes thereto, and Bay View and the Bay View Subsidiaries have no
other Liabilities as of the date hereof except (a) Liabilities incurred since
December 31, 1998 in the ordinary course of business or (b) as disclosed in
Section 2.21 of the Bay View Disclosure Schedule.
2.22 INSIDER INTERESTS. All outstanding loans and other contractual
arrangements (including deposit relationships) between Bay View or any Bay View
Subsidiary and any of its officers, directors or employees conform to applicable
rules and regulations and requirements of all applicable regulatory agencies
which were in effect when such loans and other contractual arrangements were
entered into. Except as set forth in Section 2.22 of the Bay View Disclosure
Schedule, no officer, director or employee of Bay View or any Bay View
Subsidiary has any
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material interest in any property, real or personal, tangible or intangible,
used in or pertaining to the business of Bay View or any Bay View Subsidiary.
2.23 BROKERS AND FINDERS. Except as set forth in Section 2.23 of the Bay
View Disclosure Schedule, neither Bay View nor any Bay View Subsidiary nor any
of their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finders' fees, and no broker or finder has acted directly
or indirectly for Bay View or any Bay View Subsidiary, in connection with this
Agreement or the transactions contemplated hereby.
2.24 ACCURACY OF INFORMATION. The statements of Bay View contained in this
Agreement, the Bay View Disclosure Schedule and in any other written document
executed and delivered by or on behalf of Bay View pursuant to the terms of this
Agreement are true and correct in all material respects.
2.25 GOVERNMENTAL APPROVALS AND OTHER CONDITIONS. To the best knowledge of
Bay View, there is no reason relating specifically to Bay View or any Bay View
Subsidiary why (i) the approvals that are required to be obtained from
regulatory authorities having approval authority in connection with the
transactions contemplated hereby should not be granted, (ii) such regulatory
approvals should be subject to a condition which would differ from conditions
customarily imposed by such regulatory authorities in orders approving
acquisitions of the type contemplated hereby or (iii) any of the conditions
precedent as specified in Article VI hereof to the obligations of any of the
parties hereto to consummate the transactions contemplated hereby are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
2.26 YEAR 2000 COMPLIANT. For purposes of this Agreement, "Year 2000
Compliance" shall mean compliance by any party with all year 2000 regulatory
requirements applicable to Bay View or Bay View Bank. To the best knowledge of
Bay View, Bay View and Bay View Bank are in Year 2000 Compliance.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FMAC
FMAC represents and warrants to Bay View that:
3.1 ORGANIZATION. FMAC is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite power and authority, corporate and otherwise, to own, operate and
lease its assets and properties and to carry on its business substantially as it
has been and is now being conducted. FMAC is duly qualified to do business and
is in good standing in each jurisdiction where the character of the assets or
properties owned or leased by it or the nature of the business transacted by it
requires that it be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect
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on FMAC. FMAC has all requisite corporate power and authority to enter into this
Agreement and, subject to the adoption of this Agreement by its stockholders and
the receipt of all requisite regulatory approvals and the expiration of any
applicable waiting periods, to consummate the transactions contemplated hereby.
3.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly approved and authorized by the Board of Directors of FMAC, and all
necessary corporate action on the part of FMAC has been taken, subject to the
adoption of this Agreement by the holders of a majority of the outstanding FMAC
Common Stock. This Agreement has been duly executed and delivered by FMAC and
constitutes the valid and binding obligation of FMAC and is enforceable against
it, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles or doctrines.
3.3 CONFLICTS. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict with
or result in any violation, breach or termination of, or default or loss of a
material benefit under, or permit the acceleration of any obligation under, or
result in the creation of any material lien, charge or encumbrance on any of the
property or assets under, any provision of the Certificate of Incorporation or
Bylaws of FMAC or similar documents of any FMAC Subsidiary (as defined in
Section 3.7), any Intellectual Property Rights, judgment, order, decree,
statute, law, ordinance, rule or regulation, or any material mortgage,
indenture, lease, agreement or other material instrument, permit, concession,
grant, franchise, license, applicable to FMAC or any FMAC Subsidiary or their
respective properties, other than any such conflicts, violations or defaults
which are immaterial or are disclosed in Section 3.3 of that certain
confidential writing delivered by FMAC to Bay View on or prior to the date
hereof (the "FMAC Disclosure Schedule"). No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal or
state governmental authority is required by or with respect to FMAC in
connection with the execution and delivery of this Agreement or the consummation
by FMAC of the transactions contemplated hereby except for the filings,
approvals or waivers contemplated by Section 2.3.
3.4 ANTI-TAKEOVER PROVISIONS INAPPLICABLE. No "business combination,"
"moratorium," "control share" or other state anti-takeover statute or regulation
applicable to it, (i) applies to the Merger or to the Voting Agreement, (ii)
prohibits or restricts the ability of FMAC to perform its obligations under this
Agreement, or the ability of FMAC to consummate the transactions contemplated
hereby, (iii) would have the effect of invalidating or voiding this Agreement,
the Voting Agreement, or any provision hereof or thereof, or (iv) would subject
Bay View or FMAC to any material impediment or condition in connection with the
exercise of any of its right under this Agreement or the Voting Agreement.
3.5 CAPITALIZATION AND STOCKHOLDERS.
(a) As of the date hereof, the authorized capital stock of FMAC
consists of (i) 100,000,000 shares of FMAC Common Stock, of which
28,760,557 shares are issued and outstanding and no shares are held as
treasury shares and (ii) 10,000,000 shares of
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preferred stock, of which none are issued and outstanding. All of the
issued and outstanding shares of FMAC Common Stock have been duly and
validly authorized and issued, and are fully paid and non-assessable. None
of the outstanding shares of FMAC Common Stock has been issued in
violation of any preemptive rights of current or past stockholders or are
subject to any preemptive rights of the current or past stockholders of
FMAC. All of the issued and outstanding shares of FMAC Common Stock will
be entitled to vote to adopt this Agreement.
(b) As of the date hereof, FMAC had 2,871,562 shares of FMAC Common
Stock reserved for issuance under the Option Plan for the benefit of
employees and directors of FMAC and the FMAC Subsidiaries, pursuant to
which options covering 2,401,147 shares of FMAC Common Stock are
outstanding (the "FMAC Stock Options"), and Options covering 1,590,870
shares as identified in Section 3.5 of the FMAC Disclosure Schedule will
be canceled prior to the Effective Time and shall not otherwise be
exercisable. Except as set forth in this Section, there are no shares of
capital stock or other equity securities of FMAC outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock
of FMAC, or contracts, commitments, understandings, or arrangements by
which FMAC is or may be bound to issue additional shares of its capital
stock or options, warrants, or rights to purchase or acquire any
additional shares of its capital stock. Section 3.5 of the Disclosure
Schedule sets forth the name of the holder of each FMAC Stock Option and
the date of grant of, number of shares represented by, exercise price and
expiration of, each FMAC Stock Option.
3.6 FMAC FINANCIAL STATEMENTS; MATERIAL CHANGES. FMAC has heretofore
delivered to Bay View its preliminary audited consolidated financial statements
for the years ended December 31, 1998 and December 31, 1997 (the "Preliminary
Statements"). The audited consolidated financial statements for the years ended
December 31, 1998 and December 31, 1997 of FMAC (together the "FMAC Financial
Statements") will not be materially different from the Preliminary Statements.
The FMAC Financial Statements (i) will be prepared in all material respects in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto); and (ii) will fairly present
in all material respects the consolidated financial position of FMAC as of the
dates thereof and the consolidated results of its operations, stockholders'
equity, cash flows and changes in financial position for the periods then ended.
Since December 31, 1998 to the date hereof, FMAC and the FMAC Subsidiaries have
not undergone or suffered, and there has not occurred any event that has had or
may reasonably be expected to have, any Material Adverse Effect.
3.7 FMAC SUBSIDIARIES.
(a) All of the FMAC Subsidiaries (as defined below) are listed in
Section 3.7 of the FMAC Disclosure Schedule. Except as set forth in
Section 3.7 of the FMAC Disclosure Schedule, FMAC owns directly or
indirectly all of the ownership, profit and
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loss and all of the other beneficial ownership interests in the FMAC
Subsidiaries. Section 3.7 of the FMAC Disclosure Schedule sets forth the
ownership percentages of the FMAC Subsidiaries to the extent owned by FMAC
or an FMAC Subsidiary. Except as set forth in Section 3.7 of the FMAC
Disclosure Schedule, neither FMAC nor the FMAC Subsidiaries own directly
or indirectly any debt or equity securities, or other proprietary interest
in any other corporation, limited liability company, joint venture,
partnership, entity, association or other business. There are no options,
warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or rights to acquire, any ownership,
profit or loss or other beneficial ownership interests in any FMAC
Subsidiary. Other than as set forth in Section 3.7 of the FMAC Disclosure
Schedule there are no contracts, commitments, understandings or
arrangements relating to the rights of FMAC to vote the beneficial
ownership interests or to dispose of any FMAC Subsidiary. All securities
and interests in each FMAC Subsidiary held by FMAC or an FMAC Subsidiary
are fully paid and non-assessable and are owned by FMAC or another FMAC
Subsidiary free and clear of any claim, lien or encumbrance, except as
disclosed in Section 3.7 of the FMAC Disclosure Schedule. Neither FMAC nor
any FMAC Subsidiary is or will be liable for any contribution of any kind
to any FMAC Subsidiary.
(b) Each FMAC Subsidiary is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is formed and
is duly qualified to do business and in good standing in each jurisdiction
where the character of the assets or properties owned or leased by it or
the nature of the business transacted by it requires it to be so
qualified, except where the failure to be so qualified would not have a
Material Adverse Effect on FMAC. Each FMAC Subsidiary has the power and
authority necessary for it to own, operate or lease its assets and
properties and to carry on its business substantially as it has been and
is now being conducted.
(c) For purposes of this Agreement, a "FMAC Subsidiary" or a
"Subsidiary" of FMAC shall mean each entity in which FMAC owns or controls
directly or indirectly 10% or more of the outstanding equity securities,
ownership, profit or loss or other beneficial ownership interests;
provided, however, there shall not be included any such entity acquired in
good faith through foreclosure, or any such entity to the extent that the
equity securities of such entity are owned or controlled in a bona fide
fiduciary capacity.
3.8 FMAC FILINGS. FMAC has previously made available to Bay View true and
correct copies of its (i) proxy statements relating to all meetings of its
stockholders (whether special or annual) and (ii) all other reports, as amended,
or filings, as amended, required to be filed under the Exchange Act by FMAC with
the SEC since its incorporation including without limitation on Forms 10-K, 10-Q
and 8-K.
3.9 FMAC REPORTS. Since June 30, 1995, each of FMAC and the FMAC
Subsidiaries has filed, and will continue to file, all reports and statements,
together with any amendment required to be made with respect thereto, that it
has, or will be, required to file with the SEC, the NASD, and other regulatory
authorities. As of their respective dates (and without giving effect to any
amendments or modifications filed after the date of this Agreement with respect
to reports
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and documents filed before the date of this Agreement), each of such reports and
documents, including the financial statements, exhibits, and schedules thereto,
complied in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the authority with which they were filed
and did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. No federal,
state or local governmental agency, commission, Investor (as defined in Section
3.16) or other entity has initiated any proceeding or, to the best knowledge of
FMAC, investigation into the business or operations of FMAC or the FMAC
Subsidiaries within the past two years except as set forth in Section 3.9 or
Section 3.12 of the FMAC Disclosure Schedule. There is no unresolved violation,
criticism or exception by the SEC or other agency, commission or entity with
respect to any report or statement referred to herein that is material to FMAC
and the FMAC Subsidiaries taken as a whole.
3.10 COMPLIANCE WITH LAWS.
(a) Except as disclosed in Section 3.10 of the FMAC Disclosure
Schedule, the businesses of FMAC and the FMAC Subsidiaries are being
conducted in compliance in all material respects with all laws, ordinances
and regulations of governmental authorities, including, without
limitation, federal and state securities laws, laws and regulations
relating to financial statements and reports, truth-in-lending,
truth-in-savings, usury, fair credit reporting, consumer protection,
occupational safety, fair employment practices, fair labor standards and
laws and regulations relating to employees and employee benefits, and any
statutes or ordinances relating to the properties occupied or used by FMAC
or any FMAC Subsidiary.
(b) Except as disclosed in Section 3.10 of the FMAC Disclosure
Schedule, no investigation or review by any governmental entity with
respect to FMAC or any FMAC Subsidiary is pending or, to the best
knowledge of FMAC, threatened, nor has any governmental entity indicated
to FMAC or any FMAC Subsidiary an intention to conduct the same, other
than normal agency examinations.
3.11 REGISTRATION STATEMENT; PROXY STATEMENT. The information to be
supplied by FMAC for inclusion in the Registration Statement will not, at the
time the Registration Statement is declared effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The information to be supplied by FMAC for inclusion in the Proxy
Statement will not, on the date of the Proxy Statement (or any amendment thereof
or supplement thereto) is first mailed to Bay View's or FMAC's stockholders, at
the time of the Stockholders' Meetings, and at the Effective Time, contain any
statement that, in light of the circumstances under which it is made, is false
or misleading with respect to any material fact, omits to state any material
fact necessary in order to make the statements made therein not false or
misleading, or omits to state any material fact necessary to correct any
statement in any earlier communication with respect to the
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solicitation of proxies for the Stockholders' Meetings that has become false or
misleading. If at any time prior to the Effective Time, any event relating to
FMAC or any of its affiliates, officers or directors is discovered by FMAC that
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, FMAC will promptly inform Bay View, and such
amendment or supplement will be promptly filed with the SEC and, as required by
law, disseminated to the stockholders of Bay View and FMAC. Notwithstanding the
foregoing, FMAC makes no representation or warranty with respect to any
information supplied by Bay View that is contained in the Registration Statement
or the Proxy Statement. The Proxy Statement will (with respect to FMAC) comply
in all material respects as to form and substance with the requirements of the
Exchange Act and the rules and regulations thereunder.
3.12 LITIGATION. Except as disclosed in Section 3.12 of the FMAC
Disclosure Schedule, which Section may be updated prior to Closing, there is no
suit, action, investigation or proceeding, legal, quasi-judicial, administrative
or otherwise, pending or, to the best knowledge of FMAC threatened, against or
affecting FMAC or any FMAC Subsidiary, or any of their respective officers,
directors, employees or agents, in their capacities as such, which is seeking
equitable relief or damages in excess of $50,000 against FMAC, any FMAC
Subsidiary, or any of their respective officers, directors, employees or agents,
in their capacities as such, or which would materially affect the ability of
FMAC to consummate the transactions contemplated herein or which is seeking to
enjoin consummation of the transactions provided for herein or to obtain other
relief in connection with this Agreement or the transactions contemplated
hereby, nor is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against FMAC or any FMAC Subsidiary or any of their
respective officers, directors, employees or agents, in their capacities as
such.
3.13 LICENSES. FMAC and the FMAC Subsidiaries hold all licenses,
certificates, permits, franchises and Intellectual Property Rights and required
authorizations, approvals, consents, licenses, clearances and orders or
registrations with all appropriate federal, state or other authorities that are
material to the conduct of their respective businesses as now conducted and as
presently proposed to be conducted. Neither FMAC nor any of its Subsidiaries has
pledged, mortgaged, assigned, licensed, granted permission with respect to or
otherwise transferred any such Intellectual Property Rights to any third party.
No such Intellectual Property Right is subject to any outstanding injunction,
judgment, order, decree, ruling or charge, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is pending or, to
the knowledge of FMAC, is threatened that challenges the legality, validity, use
or enforceability of any such Intellectual Property Right. None of FMAC's or its
Subsidiaries' rights with respect to any such Intellectual Property Rights will
be terminated, limited or otherwise affected by its execution of this Agreement
or its consummation of the transactions contemplated by this Agreement.
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3.14 TAXES.
(a) Except as disclosed in Section 3.14 of the FMAC Disclosure
Schedule, FMAC and the FMAC Subsidiaries (i) have each timely filed all
tax and information returns required to be filed (and all such returns as
filed were correct and complete in all material respects), (ii) have paid
(or FMAC has paid on behalf of its Subsidiaries), or have accrued on their
respective books and established adequate reserves for the payment of all
taxes for all applicable periods, including taxes anticipated to be
payable in respect of such periods, (iii) are not delinquent in the
payment of any tax, assessment or governmental charge, and (iv) are not
subject to any proposed, asserted or assessed deficiency for taxes that
have not been resolved or settled. No requests for waivers of the time to
assess any such tax are pending or have been agreed to. Neither FMAC nor
any FMAC Subsidiary has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Except as set forth in Section 3.14 of the FMAC Disclosure Schedule,
neither FMAC nor any FMAC Subsidiary is (x) undergoing an audit or
examination of any of its tax returns by the IRS or any state, municipal
or other taxing authority or (y) a party to any action or proceeding by
any governmental authority for the assessment or the collection of taxes.
Deferred taxes of FMAC and the FMAC Subsidiaries have been accounted for
in accordance with GAAP. There are no liens for the payment of taxes on
any assets of FMAC or any of the FMAC Subsidiaries except for statutory
liens for taxes that are not past due as to payment or are being contested
in good faith in appropriate proceedings. No written claim for taxes has
been made by an authority in a jurisdiction where FMAC or any of the FMAC
Subsidiaries does not file tax returns. There are no tax rulings obtained
by FMAC or an FMAC Subsidiary, requests for rulings by FMAC or any FMAC
Subsidiary, or closing agreements to which FMAC or any FMAC Subsidiary is
a party that could affect its liability for income taxes for any period
after the Closing Date. Neither FMAC nor any of the FMAC Subsidiaries is
reporting any income pursuant to an adjustment under Section 481(a) of the
Code.
(b) FMAC has not filed any consolidated federal income tax return
with an "affiliated group" (within the meaning of Section 1504 of the
Code) where FMAC was not the common parent of the group. No FMAC
Subsidiary at any time has been a member of an affiliated group of which
FMAC was not the common parent or otherwise has any liability for taxes of
any other person under Treasury regulations section 1.1502-6 as a
transferee, successor or otherwise. Neither FMAC nor any FMAC Subsidiary
is, or has been, a party to any tax allocation agreement or arrangement
pursuant to which it has any contingent or outstanding liability. Neither
FMAC nor any FMAC Subsidiary has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply.
(c) FMAC and the FMAC Subsidiaries have each withheld amounts from
its employees, stockholders and others, in compliance with the tax
withholding provisions of applicable federal, state and local laws, have
timely filed (including applicable extension
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periods) all federal, state and local returns and reports for all periods
for which such returns or reports would be due with respect to income tax
withholding, social security, unemployment taxes, income and other taxes
and all payments or deposits with respect to such taxes have been timely
made.
3.15 INSURANCE. FMAC and the FMAC Subsidiaries maintain insurance with
insurers which in the best judgment of management of FMAC are sound and
reputable on their respective assets and upon their respective businesses and
operations against loss or damage, risks, hazards and liabilities as in their
judgment they deem appropriate. FMAC and the FMAC Subsidiaries maintain in
effect all insurance required to be carried by law or by any agreement by which
they are bound. All material claims under all policies of insurance maintained
by FMAC and the FMAC Subsidiaries have been filed in due and timely fashion.
Each of FMAC and the FMAC Subsidiaries has taken or will timely take all
requisite action (including without limitation the making of claims and the
giving of notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect to
all matters (other than matters arising in connection with this Agreement and
the transactions contemplated hereby) occurring prior to the Effective Time.
Neither FMAC nor any of the FMAC Subsidiaries has, during the past three years,
had an insurance policy canceled or been denied insurance coverage for which any
of such companies has applied.
3.16 LOANS; INVESTMENTS.
(a) The following terms shall have the meaning ascribed to them
below:
(i) "Investor" means any person or entity who has acquired
or hereinafter acquires a Loan from FMAC or any FMAC Subsidiary,
other than Bay View or any Bay View Subsidiary.
(ii) "Investor Requirements" means any outstanding
contractual, legal and regulatory obligation of FMAC or any FMAC
Subsidiary to any Investor, including but not limited to, the
representations, warranties and covenants made by FMAC or any FMAC
Subsidiary to any Investor.
(iii) "Loan" means any loan or lease at any time held,
serviced or sold by FMAC, any FMAC Subsidiary or Bankers Mutual to
the extent that FMAC or any FMAC Subsidiary could have any
liability, obligation or duties with respect thereto.
(iv) "Loans Held for Sale" means all Loans currently held and
hereinafter acquired or originated by FMAC or any FMAC Subsidiary
where beneficial ownership has not been transferred to an Investor.
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(v) "Loan Documents" means the note, mortgage, deed of
trust, security agreement, or other instrument securing the note
and the related documents for each Loan.
(vi) "Mortgage Loan" shall mean a Loan secured by a mortgage.
(vii) "Portfolio Loan" means all Loans currently owned or
hereinafter owned for investment by FMAC or any FMAC Subsidiary.
(viii)"Serviced Loans" means all Loans currently and
hereinafter serviced by FMAC or an FMAC Subsidiary for its own
account or for others.
(ix) "Servicing Requirements" means prudent practice and
industry standards together with any contractual, legal or
regulatory obligation of FMAC or any FMAC Subsidiary relating to the
Serviced Loans or any Loan previously serviced by FMAC or any FMAC
Subsidiary.
(b) Neither FMAC nor any FMAC Subsidiary has any Portfolio Loan.
All Loans owned by FMAC or any FMAC Subsidiary are Loans Held for
Sale, except Loans held as collateral for a securitization.
(c) The Loan Documents evidencing each Loan (other than Serviced
Loans that have never been owned by FMAC, an FMAC Subsidiary or Bankers
Mutual, a Mortgage Banking Corporation ("Bankers Mutual")) that is
currently outstanding constitute the legal, valid and binding obligations
of the parties thereto and are enforceable against such parties in
accordance with their terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of lending institutions or creditors generally and by
general equitable principles. No Loan is subject to any legally
enforceable right of rescission, set-off, counterclaim or defense,
including the defense of usury or, to the knowledge of FMAC, lack of legal
capacity of any borrower or guarantor, nor will the operation of any of
the terms of any Loan, or the exercise of any legally enforceable right
thereunder, render any Loan or any of the Loan Documents unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury or, to the
knowledge of FMAC, lack of legal capacity of any borrower or guarantor,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect to any Loan Held for Sale or any Loan for which
there is any recourse against, or responsibility or exposure of, FMAC or
any FMAC Subsidiary.
(d) The Loan Documents for each Loan (other than Serviced Loans that
have never been owned by FMAC, an FMAC Subsidiary or Bankers Mutual) have
been duly executed and recorded, or are in the process of being recorded,
and are in due and proper form, and the information contained therein was
true, accurate and complete in all material respects at the time such Loan
documents were executed. FMAC has at all times
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maintained the Loan Documents in all material respects in accordance with
Investor Requirements, Servicing Requirements and otherwise in accordance
with all legal and regulatory requirements and contractual obligations.
(e) Except as set forth on Schedule 3.16, all outstanding Loans sold
by FMAC, any FMAC Subsidiary or Bankers Mutual complied in all material
respects with Investor Requirements on the date of sale.
(f) FMAC and the FMAC Subsidiaries have at all times been and are in
compliance in all material respects with the Servicing Requirements
relating to the Serviced Loans and Loans previously serviced by any of
them.
(g) Except as set forth in Section 3.16(g) of the FMAC Disclosure
Schedule, neither FMAC nor any FMAC Subsidiary has any advances
outstanding with respect to any Loan, except for advances made under the
Servicing Requirements, the aggregate amount of which is not material.
(h) Neither FMAC nor any FMAC Subsidiary is in material default with
respect to any of its obligations under any Loan.
(i) Neither FMAC nor any FMAC Subsidiary is in violation in any
material respect of any applicable federal, state, or local law, statute,
ordinance, rule, regulation, order or guideline pertaining to the Loans,
its origination or production practices, or otherwise relating to its
purchase or sale of Loans or its lending business, including but not
limited to, real estate settlement procedures, fair credit reporting, and
every other prohibition against unlawful discrimination or governing
consumer credit, and also including, without limitation, the Consumer
Credit Reporting Act, Equal Credit Opportunity Act of 1975 and Regulation
B, Fair Credit Reporting Act, Truth in Lending Law, in particular,
Regulation Z as amended, the Flood Disaster Protection Act of 1973, and
state consumer credit codes and laws.
(j) Except as set forth on Schedule 3.16, all Loans securitized in a
pool, at the time of inclusion in the pool, and at the time of any pool
certification or any recertification, met all applicable guidelines for
such pool. All pools relating to Loans that require certification have
been initially certified, finally certified and/or recertified in
accordance with applicable guidelines. The principal balance outstanding
and owing on the Serviced Loans in each pool equals or exceeds the amount
owing to the corresponding security holder of such pool.
(k) All guarantees of indebtedness owed to FMAC or any FMAC
Subsidiary, including but not limited to those of the Federal Housing
Administration, the Small Business Administration, and other state and
federal agencies, are valid and enforceable, except to the extent
enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles or doctrines.
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(l) Set forth in Schedule 3.16 is a list, as of the date hereof, of
all interest rate swaps, caps, floors, and option agreements and other
interest rate risk management arrangements to which FMAC or any of its
Subsidiaries is a party or by which any of their properties or assets may
be bound. All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which FMAC or any FMAC
Subsidiary is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to the
best knowledge of FMAC, in accordance with then-customary practice and all
applicable rules and regulations and with counterparties believed to be
financially responsible at the time and are legal, valid and binding
obligations and are in full force and effect, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, receivership, conservatorship or similar laws relating to
or affecting the enforcement of creditors' rights generally, and by
general principles of equity, whether applied by a court of law or equity.
FMAC and the FMAC Subsidiaries have duly performed in all material
respects all of their respective obligations thereunder to the extent that
such obligations to perform have accrued, and to the best knowledge of
FMAC, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder. Except as set
forth in Section 3.16 of the FMAC Disclosure Schedule, none of the
transactions contemplated by this Agreement would permit: (i) a
counterparty under any interest rate swap, cap, floor and option agreement
or any other interest rate risk management agreement or (ii) any party to
any financing arrangement, including, but not limited to mortgage-backed
financing, to accelerate, discontinue, terminate or otherwise modify any
such agreement or arrangement or would require FMAC or any FMAC Subsidiary
to recognize any gain or loss with respect to such arrangement.
(m) FMAC is a Fannie Mae approved DUS lender in good standing and is
a Fannie Mae and Freddie Mac approved seller/servicer and issuer of
securities in good standing and an approved originator of multi-family
loans for Nations Bank. FMAC has not received notice from any
governmental, quasi-governmental or private agency of pending or
threatened actions or investigations which would question the status of
FMAC as an approved lender, seller/servicer or issuer of securities. To
the knowledge of FMAC, no event has occurred which, with the passage of
time or the giving of notice, or both, would result in the loss by FMAC of
its qualification as an approved lender, seller/servicer or issuer or of
FMAC as a contractor or as a person otherwise permitted to transact
business with any governmental, quasi-governmental or private agency.
(n) The terms of each Loan have not been impaired, waived, altered
or modified in any material respect from the date of its origination
except by a written instrument, which written instrument has been recorded
if recordation is necessary to protect the interests of the owner thereof.
The substance of any such waiver, alteration or modification has been
communicated to and approved in writing by: (i) the relevant Investor, to
the extent required by the relevant Investor Requirements; and (ii) the
title insurer, to the extent required by the relevant policies, and its
terms are reflected in the Loan Documents. Except as authorized by the
applicable Investor, where the Investor's authorization is required,
neither FMAC nor any FMAC Subsidiary has: (i) subordinated the lien of any
Mortgage Loan to any other mortgage or lien or given any other mortgage
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or lien equal priority with the lien of a mortgage loan; or (ii) executed
any instrument of release, cancellation or satisfaction with, in whole or
in part, respect to any Mortgage Loan.
(o) As of the date hereof, except as set forth in Schedule 3.16,
neither FMAC nor any FMAC Subsidiary is subject to any repurchase
obligation under any Loan.
(p) All escrows required to be maintained pursuant to the terms of
the Mortgage Loans have been maintained by FMAC or an FMAC Subsidiary and,
to the knowledge of FMAC, all prior servicers, in all material respects in
accordance with all applicable legal rules and Investor Requirements and
in accordance with the mortgage servicing agreements and the Loan
Documents related thereto. FMAC and the FMAC Subsidiaries have credited to
the account of mortgagors all interest required to be paid on any escrow
account. All escrow, custodial, and suspense accounts related to the owned
Mortgage Loans are held in FMAC's or an FMAC Subsidiary's name or in the
Investor's name. With respect to escrow deposits and payments which are
required to be collected, all such payments are in the possession of, or
under the control of, FMAC or an FMAC Subsidiary, and there exist no
material deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. No escrow deposits
or other charges or payments have been capitalized under any mortgage or
the related mortgage note.
(q) Neither FMAC nor any FMAC Subsidiary has received written notice
of a servicing default for any Loan, and each Loan serviced by FMAC or
FMAC Subsidiary has been properly serviced and accounted for in all
material respects in accordance with the applicable Servicing
Requirements. To the extent that any applicable legal requirement in any
jurisdiction or any Investor Requirement requires the payment of interest
on escrow accounts with respect to any particular Loan, all such interest
has been properly paid or arrangements for such payment has been made. All
amounts payable in respect of a Loan, or the property covered by a
mortgage which FMAC or any FMAC Subsidiary is responsible for paying,
directly or on behalf of a mortgagor, have, in all material respects, been
paid prior to becoming delinquent. All pools for which FMAC or any FMAC
Subsidiary is responsible are in compliance in all material respects with
all applicable Investor Requirements, procedures, rules, regulations and
guidelines.
(r) Schedule 3.16 contains a description of each Loan which, as of
the date hereof, has a balance over $1 million and a prepayment penalty
less than 5% of the principal amount.
(s) To the knowledge of FMAC, no facts currently exist with respect
to existing securitizations heretofore undertaken by FMAC that would be
reasonably likely to materially and adversely affect the ability of FMAC
or any FMAC Subsidiary to continue to do securitizations in the future in
accordance with existing practices.
3.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The reserve for losses shown on
the FMAC Financial Statements as of December 31, 1998 (and as shown on any
financial statements to be
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delivered by FMAC to Bay View pursuant to Section 5.7 hereof), was (and will be
as of such subsequent financial statement dates) adequate in all material
respects to provide for possible or specific losses, and contained (or will
contain) an additional amount of unallocated reserves for unanticipated future
losses, at a level considered adequate under GAAP and standards applied to the
speciality finance business conducted by FMAC and its Subsidiaries. To the best
knowledge of FMAC, the aggregate principal amount of all receivables including,
but not limited to, Loans and leases contained (or that will be contained) in
the Loan and lease portfolio of FMAC and the FMAC Subsidiaries as of December
31, 1998 (and as of the dates of any financial statements to be delivered by
FMAC to Bay View pursuant to Section 5.7 hereof), in excess of such reserve, was
(and will be) fully collectible.
3.18 FMAC BENEFIT PLANS.
(a) Section 3.18 of the FMAC Disclosure Schedule contains a list and
a true and correct copy (or a description with respect to any oral
employee benefit plan or arrangement that is material to the compensation
and benefit programs of FMAC), including all amendments thereto, of each
compensation, consulting, employment, termination or collective bargaining
agreement, and each stock option agreement (or form of), stock purchase,
stock appreciation right, restricted stock agreement (or form of), life,
health, accident or other insurance, bonus, deferred or incentive
compensation, severance or separation agreement or any agreement providing
any payment or benefit resulting from a change in control, profit sharing,
retirement, or other employee benefit plan, practice, policy or
arrangement of any kind, oral (excluding practices and policies) or
written, covering any employee, former employee, director or former
director of FMAC or any FMAC Subsidiary or his or her beneficiaries,
including, but not limited to, any employee benefit plans within the
meaning of Section 3(3) the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which FMAC or any FMAC Subsidiary maintains,
to which FMAC or any FMAC Subsidiary contributes, or under which any
employee, former employee, director or former director of FMAC or any FMAC
Subsidiary is covered or has benefit rights and pursuant to which any
liability of FMAC or any FMAC Subsidiary exists or is reasonably likely to
occur (the "FMAC Benefit Plans"). Except as set forth in Section 3.18 of
the FMAC Disclosure Schedule, FMAC and the FMAC Subsidiaries neither
maintain nor have entered into any FMAC Benefit Plan or other document,
plan or agreement which contains any change in control provisions or which
would cause an increase or acceleration of benefits or benefit
entitlements to employees or former employees or directors or former
directors or their respective beneficiaries by virtue of entering into
this Agreement or the consummation of the transactions contemplated by
this Agreement (a "Change in Control Benefit"). The term "FMAC Benefit
Plans" as used herein refers to all plans contemplated under the preceding
sentences of this Section 3.18, provided that the term "Plan" or "Plans"
is used in this Agreement for convenience only and does not constitute an
acknowledgment that a particular arrangement is an employee benefit plan
within the meaning of Section 3(3) of ERISA. Except as disclosed in
Section 3.18 of the FMAC Disclosure Schedule, no Benefit Plan is a
multi-employer plan within the meaning of Section 3(37) of ERISA.
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(b) Each of the FMAC Benefit Plans that is intended to be a pension,
profit sharing, stock bonus, thrift or savings plan that is qualified
under Section 401(a) of the Code ("FMAC Qualified Plans") has been
determined by the IRS to qualify under Section 401(a) of the Code, or an
application for determination of such qualification has been timely made
to the IRS prior to the end of the applicable remedial amendment period
under Section 401(b) of the Code (a copy of each such determination letter
or pending application is included in Section 3.18 of the FMAC Disclosure
Schedule) there exist no circumstances likely to adversely affect the
qualified status of any such FMAC Qualified Plan. All such FMAC Qualified
Plans established or maintained by FMAC or any of the FMAC Subsidiaries or
to which FMAC or any of the FMAC Subsidiaries contribute are in compliance
in all material respects with all applicable requirements of ERISA, and
are in compliance in all material respects with all applicable
requirements (including qualification and non-discrimination requirements
) of the Code for obtaining the tax benefits the Code thereupon permits
with respect to such FMAC Qualified Plans. Neither FMAC nor any FMAC
Subsidiary maintains, sponsors or contributes to a Qualified Plan that is
a defined benefit pension plan subject to Title IV of ERISA. All accrued
contributions and other payments required to be made by FMAC or any FMAC
Subsidiary to any FMAC Benefit Plan through December 31, 1998, have been
made or reserves adequate for such purposes as of December 31, 1998, have
been set aside therefor and will be reflected in the FMAC Financial
Statements dated as of December 31, 1998. Neither FMAC nor any FMAC
Subsidiary is in material default in performing any of its respective
contractual obligations under any of the FMAC Benefit Plans or any related
trust agreement or insurance contract, and there are no material
outstanding liabilities of any such Plan other than liabilities for
benefits to be paid to participants in such Plan and their beneficiaries
in accordance with the terms of such Plan.
(c) There is no pending or, to the best knowledge of FMAC,
threatened litigation or pending claim (other than routine benefit claims
made in the ordinary course) by or on behalf of or against any of the FMAC
Benefit Plans (or with respect to the administration of any such Plans)
now or heretofore maintained by FMAC or any FMAC Subsidiary which allege
violations of applicable state or federal law which are reasonably likely
to result in a material liability on the part of FMAC or any FMAC
Subsidiary or any such Plan.
(d) FMAC and the FMAC Subsidiaries and, to the best knowledge of
FMAC and the FMAC Subsidiaries, all other persons having fiduciary or
other responsibilities or duties with respect to any FMAC Benefit Plan are
and have since the inception of each such Plan been in substantial
compliance with, and each such Plan is and has been operated in
substantial accordance with, its provisions and in substantial compliance
with the applicable laws, rules and regulations governing such Plan,
including, without limitation, the rules and regulations promulgated by
the Department of Labor, the Pension Benefit Guaranty Corporation ("PBGC")
and the IRS under ERISA, the Code or any other applicable law.
Notwithstanding the foregoing, no representation is made with respect to
compliance by a third party insurance company. No "reportable event" (as
defined in Section 4043(b) of ERISA) has occurred with respect to any FMAC
Qualified
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Benefit Plan. Except as disclosed in Section 3.18 of the FMAC Disclosure
Schedule, neither FMAC, any FMAC Subsidiary nor any FMAC Benefit Plan has
incurred or is reasonably likely to incur any liability for any
"prohibited transactions" (as defined in Section 406 of ERISA or Section
4975 of the Code), or any material liability under Section 601 of ERISA or
Section 4980 of the Code. All FMAC Benefit Plans that are group health
plans have been operated in substantial compliance with the group health
plan continuation requirements of Section 4980B of the Code and Section
601 of ERISA.
(e) Except as set forth in Section 3.18 of the FMAC Disclosure
Schedule, neither FMAC nor any FMAC Subsidiary has made any payments,
or is or has been a party to any agreement or any FMAC Benefit Plan,
that under any circumstances could (i) obligate it or its successor to
make payments or deemed payments that are not or will not be
deductible because of Sections 162(m) or 280G of the Code or (ii)
require Bay View or any Bay View Subsidiary to record any charge or
expense therefor (or any tax gross-up payments) for financial
reporting purposes on a post-acquisition basis. Consistent herewith,
the full financial reporting expense relating to such payments, deemed
payments and tax gross-up payments shall be recorded by FMAC or the
FMAC Subsidiaries for the period prior to the Effective Time.
(f) Section 3.18 of the FMAC Disclosure Schedule, which may be
updated prior to Closing with respect to current employees of FMAC and the
FMAC Subsidiaries who receive benefits under FMAC Benefit Plan existing on
the date hereof, describes any obligation that FMAC or any FMAC Subsidiary
has to provide health or welfare benefits to retirees or other former
employees, directors or their dependents (other than rights under Section
4980B of the Code or Section 601 of ERISA), including information as to
the number of retirees, other former employees or directors and dependents
entitled to such coverage and their ages.
(g) Section 3.18 of the FMAC Disclosure Schedule lists: (i) a copy
of each option agreement relating to FMAC Stock Options described in
Section 4.1 of the FMAC Disclosure Schedule and (ii) a copy of each
agreement relating to the stock awards described in Section 4.1 of the
FMAC Disclosure Schedule.
(h) To the best knowledge of FMAC, FMAC and the FMAC Subsidiaries
have filed or caused to be filed, and will continue to file or cause to be
filed, in a timely manner all filings pertaining to each FMAC Benefit Plan
with the IRS, the Department of Labor and the PBGC, as prescribed by the
Code or ERISA, or regulations issued thereunder. To the best knowledge of
FMAC, all such filings, as amended, were complete and accurate in all
material respects as of the dates of such filings. Notwithstanding the
foregoing, no representation is made with respect to filings by a third
party insurance company.
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3.19 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Except as set forth in Section 3.19 of the FMAC Disclosure
Schedule: (i) the operations of FMAC and each of the FMAC Subsidiaries
comply in all material respects with all applicable past and present
Environmental Laws; (ii) none of the operations of FMAC or any FMAC
Subsidiary, no assets presently or formerly owned or leased by FMAC or any
FMAC Subsidiary and no Mortgaged Premises or Participating Facility are
subject to any judicial or administrative proceedings alleging the
violation of any past or present Environmental Law, nor are they the
subject of any claims alleging damages to health or property, pursuant to
which FMAC, any FMAC Subsidiary or any owner of a Mortgaged Premises or a
Participating Facility would be liable in law or equity; (iii) none of the
operations of FMAC or any FMAC Subsidiary, no assets presently owned or,
to the best knowledge of FMAC, formerly owned by FMAC or any FMAC
Subsidiary, and to the best knowledge of FMAC, no Mortgaged Premises or
Participating Facility is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond
to a release or threatened release of any Hazardous Substance, or any
other substance into the environment, nor has FMAC or any FMAC Subsidiary,
or, any owner of a Mortgaged Premises or a Participating Facility been
directed to conduct such investigation, formally or informally, by any
governmental agency, nor have any of them agreed with any governmental
agency or private person to conduct any such investigation; and (iv)
neither FMAC nor any FMAC Subsidiary, nor, any owner of a Mortgaged
Premises or a Participating Facility has filed any notice under any
Environmental Law indicating past or present treatment, storage or
disposal of a Hazardous Substance or reporting a spill or release of a
Hazardous Substance, or any other substance into the environment.
(b) With respect to the real property currently or formerly owned or
currently leased by FMAC or any FMAC Subsidiary ("FMAC Premises"): (i) no
part of the FMAC Premises has been used for the generation, manufacture,
handling, storage, or disposal of Hazardous Substances; (ii) except as
disclosed in Section 3.19 of the FMAC Disclosure Schedule, the FMAC
Premises do not contain, and have never contained, an underground storage
tank; and (iii) the FMAC Premises do not contain and are not contaminated
by any quantity of a Hazardous Substance from any source. With respect to
any underground storage tank listed in Section 3.19 of the FMAC Disclosure
Schedule as an exception to the foregoing, such underground storage tank
has been removed in compliance with the Environmental Laws, and has not
been the source of any release of a Hazardous Substance into the
environment, unless otherwise set forth in Section 3.19 of the FMAC
Disclosure Schedule.
3.20 CONTRACTS AND COMMITMENTS. Section 3.20 of the FMAC Disclosure
Schedule sets forth the following (copies of each of such documents has been
made available to Bay View)
as of the date hereof:
(a) a list of each outstanding Loan or commitment to extend credit
to any officer or director of FMAC or any FMAC Subsidiary;
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(b) a list of each contract or agreement involving goods, services
or occupancy and which (i) has a term of more than one year; (ii) cannot
be terminated on 30 days (or less) written notice without penalty; and
(iii) involves an annual expenditure by FMAC or any FMAC Subsidiary in
excess of $250,000;
(c) a list of each contract or commitment (other than FMAC Permitted
Liens as defined in Section 3.22(c) hereof) affecting ownership of, title
to, use of, or any interest in real property which is currently owned by
FMAC or any FMAC Subsidiary, and a list and description of all real
property owned or leased by FMAC or any FMAC Subsidiary;
(d) a list of all policies of insurance currently maintained by FMAC
or any FMAC Subsidiary and a list and description of all unsettled or
outstanding claims of FMAC or any FMAC Subsidiary which have been, or to
the best knowledge of FMAC, will be, filed with the companies providing
insurance coverage for FMAC or any FMAC Subsidiary (except for routine
claims for health benefits);
(e) each collective bargaining agreement to which FMAC or any FMAC
Subsidiary is a party and all affirmative action plans or programs covering
employees of FMAC or any FMAC Subsidiary, as well as all employee
handbooks, policy manuals, rules and standards of employment promulgated by
FMAC or any FMAC Subsidiary;
(f) each lease or license with respect to real or personal property or
Intellectual Property Rights, whether as lessor, lessee, licensor or
licensee, with annual rental or other payments due thereunder in excess of
$50,000 to which FMAC or any FMAC Subsidiary is a party, which does not
expire within six months from the date hereof and cannot be terminated upon
30 days (or less) written notice without penalty;
(g) all employment, consulting, financial advisory, investment
banking, and professional services contracts to which FMAC or any FMAC
Subsidiary is a party (in the case of at will employment letters and
temporary administrative help contracts only forms of each type of such
agreements are included);
(h) all judgments, orders, injunctions, court decrees or settlement
agreements arising out of or relating to the labor and employment practices
or decisions of FMAC or any FMAC Subsidiary which, by their terms, continue
to bind or affect FMAC or any FMAC Subsidiary;
(i) all orders, decrees, memorandums, agreements or understandings
with regulatory agencies binding upon or affecting the current operations
of FMAC or any FMAC Subsidiary or any of their directors or officers in
their capacities as such;
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(j) all trademarks, trade names, service marks, patents, or
copyrights, whether registered or the subject of an application for
registration, which are owned by FMAC or any FMAC Subsidiary or licensed
from a third party;
3.21 DEFAULTS. There has not been any default in any material obligation
to be performed by FMAC or any FMAC Subsidiary under any material contract or
commitment, and neither FMAC nor or any FMAC Subsidiary has waived, and will not
waive prior to the Effective Time, any material right under any material
contract or commitment. To the best knowledge of FMAC, no other party to any
material contract or commitment is in default in any material obligation to be
performed by such party.
3.22 OPERATIONS SINCE DECEMBER 31, 1998. Between December 31, 1998 and the
date hereof, except as set forth in Section 3.22 of the FMAC Disclosure
Schedule, there has not been:
(a) any increase in the compensation or benefits payable or to
become payable by FMAC or any FMAC Subsidiary to any employee, officer or
director, other than routine annual increases to rank and file employees
consistent with past practices;
(b) any payment of dividends or other distributions by FMAC to its
stockholders or any redemption by FMAC of its capital stock;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of or on any material asset, tangible or
intangible, of FMAC or any FMAC Subsidiary, except the following (each of
which, whether arising before or after the date hereof, is herein referred
to as a "FMAC Permitted Lien"): (i) liens arising out of judgments or
awards in respect of which FMAC or any FMAC Subsidiary is in good faith
prosecuting an appeal or proceeding for review and in respect of which it
has secured a subsisting stay of execution pending such appeal of
proceeding; (ii) liens for taxes, assessments, and other governmental
charges or levies, the payment of which is not past due, or as to which
FMAC or any FMAC Subsidiary is diligently contesting in good faith and by
appropriate proceeding either the amount thereof or the liability therefor
or both; (iii) deposits, liens or pledges to secure payments of worker's
compensation, unemployment insurance, pensions, or other social security
obligations, or the performance of bids, tenders, leases, contracts (other
than contracts for the payment of money), public or statutory obligations,
surety, stay or appeal bonds, or similar obligations arising in the
ordinary course of business; (iv) zoning restrictions, easements, licenses
and other restrictions on the use of real property or any interest
therein, or minor irregularities in title thereto, which do not materially
impair the use of such property or the merchantability or the value of
such property or interest therein; (v) purchase money mortgages or other
purchase money or vendor's liens or security interests (including, without
limitation, finance leases), provided that no such mortgage, lien or
security interest shall extend to or cover any other property of FMAC or
any FMAC Subsidiary other than that so purchased; and (vi) liens entered
into in the ordinary course of business in connection with (A) the sale of
Loans to third parties and (B) securitizations;
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(d) any creation or assumption of indebtedness (including the
extension or renewal of any existing indebtedness, or the increase
thereof) by FMAC or any FMAC Subsidiary for borrowed money, or otherwise,
other than in the ordinary course of business, none of which has a
prepayment penalty or is in default;
(e) the establishment of any new, modification of or amendment to,
or increase in the formula for contributions to or benefits under, any
FMAC Benefit Plan by
FMAC or any FMAC Subsidiary;
(f) any action by FMAC or any FMAC Subsidiary seeking any
cancellation of, or decrease in the insured limit under, or increase in
the deductible amount or the insured's retention (whether pursuant to
coinsurance or otherwise) of or under, any policy of insurance maintained
directly or indirectly by FMAC or any FMAC Subsidiary on any of their
respective assets or businesses, including but not by way of limitation,
fire and other hazard insurance on its assets, automobile liability
insurance, general public liability insurance, and directors' and
officers' liability insurance; and if an insurer takes any such action,
FMAC shall promptly notify Bay View;
(g) any change in FMAC's independent auditors or historic methods of
accounting (other than as required by GAAP);
(h) any purchase, whether for cash or secured or unsecured
obligations (including finance leases) by FMAC or any FMAC Subsidiary of
any fixed asset which either (i) has a purchase price individually or in
the aggregate in excess of $250,000 or (ii) is outside of the ordinary
course of business;
(i) any sale or transfer of any asset by FMAC or any FMAC Subsidiary
outside the ordinary course of business or in excess of $250,000 in the
ordinary course of business, with the exception of any sale of Loans and
marketable securities sold in the ordinary course of business at market
prices, including sales to Bay View or any Bay View Subsidiary;
(j) any cancellation or compromise of any debt to, claim by or right
of, FMAC or any FMAC Subsidiary except in the ordinary course of business
and not in a material amount;
(k) any amendment or termination of any material contract or
commitment to which FMAC or any FMAC Subsidiary is a party, other than in
the ordinary course of business;
(l) any material damage or destruction to any assets or property of
FMAC or any FMAC Subsidiary whether or not covered by insurance;
(m) any material change in the loan underwriting or credit scoring
policies or practices of FMAC or any FMAC Subsidiary;
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(n) any material transaction of business or activity undertaken by
FMAC or any FMAC Subsidiary outside the ordinary course of business
consistent with past practices; or
(o) any agreement or commitment to do any of the foregoing.
3.23 RECORDS. The record books, transfer books and stock (or other
ownership interest) ledgers of FMAC and each FMAC Subsidiary are complete and
accurate in all material respects and reflect all meetings, consents and other
material actions of the organizers, incorporators, stockholders, owners, Boards
of Directors (or similar boards) and committees of the Boards of Directors of
FMAC and each such Subsidiary, and all transactions in their respective
securities, since their respective inceptions.
3.24 UNDISCLOSED LIABILITIES. All of the Liabilities will, in the case of
FMAC and the FMAC Subsidiaries, be reflected, disclosed or reserved against (to
the extent required by GAAP) in the FMAC Financial Statements as of December 31,
1998 or in the notes thereto, and FMAC and the FMAC Subsidiaries have no other
Liabilities except (a) Liabilities incurred since December 31, 1998 in the
ordinary course of business or (b) as disclosed in Section 3.24 of the FMAC
Disclosure Schedule.
3.25 ASSETS.
(a) FMAC and the FMAC Subsidiaries have good and marketable title to
their real properties, including any leaseholds and ground leases, and
their other assets and properties, all as reflected as owned or held by
FMAC or any FMAC Subsidiary in the FMAC Financial Statements as of
December 31, 1998, and those acquired since such date, except for (i)
assets and properties disposed of since such date in the ordinary course
of business and (ii) FMAC Permitted Liens none of which, in the aggregate,
except as set forth in the FMAC Financial Statements dated December 31,
1998 or in Section 3.25 of the FMAC Disclosure Schedule, are material to
FMAC on a consolidated basis. All buildings, structures, fixtures and
appurtenances comprising part of the real properties of FMAC and the FMAC
Subsidiaries (whether owned or leased) are, in the opinion of management
of FMAC, in good operating condition, reasonable wear and tear excepted.
Title to all real property owned by FMAC and the FMAC Subsidiaries is held
in fee simple, except as otherwise noted in the FMAC Financial Statements
as of December 31, 1998 or as set forth in Section 3.25 of the FMAC
Disclosure Schedule. FMAC and the FMAC Subsidiaries have title or other
rights to its assets sufficient in all material respects for the conduct
of their respective businesses as presently conducted, and except as set
forth in the FMAC Financial Statements dated as of December 31, 1998 or in
Section 3.25 of the FMAC Disclosure Schedule, such assets are free, clear
and discharged of and from any and all liens, charges, encumbrances,
security interests and/or equities which are material to FMAC or any FMAC
Subsidiary, other than FMAC Permitted Liens.
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(b) All leases and licenses pursuant to which FMAC or any FMAC
Subsidiary, as lessee or licensee, leases or licenses real property,
personal property or Intellectual Property Rights are, to the best
knowledge of FMAC, valid, effective, and enforceable against the lessor in
accordance with their respective terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, receivership, conservatorship or similar laws relating to
or affecting the enforcement of creditors' rights generally, and by
general principles of equity, whether applied by a court of law or equity.
There is not under any of such leases or licenses any existing material
default, or any event which with notice or lapse of time, or both, would
constitute a material default, with respect to either FMAC or any FMAC
Subsidiary, or to the best knowledge of FMAC, the other party. Except as
disclosed in Section 3.25 of the FMAC Disclosure Schedule, none of such
leases involving a rental payment of more than $50,000 annually or such
licenses contains a prohibition against assignment by FMAC or any FMAC
Subsidiary, by operation of law or otherwise, or any other provision which
would preclude the surviving corporation or any FMAC Subsidiary from
possessing and using the leased premises or licensed property (including
Intellectual Property Rights) for the same purposes and upon the same
rental and other terms upon the consummation of the Merger as are
applicable to the use by FMAC or any FMAC Subsidiary as of the date of
this Agreement.
3.26 INDEMNIFICATION. To the best knowledge of FMAC, except as set forth
in Section 3.26 of the FMAC Disclosure Schedule, no action or failure to take
action by any director, officer, employee or agent of FMAC or any FMAC
Subsidiary has occurred which would give rise to indemnification from FMAC or
any FMAC Subsidiary under the corporate indemnification provisions of FMAC or
any FMAC Subsidiary in effect on the date of this Agreement.
3.27 INSIDER INTERESTS. Except as set forth in Section 3.27 of the FMAC
Disclosure Schedule, no officer, director or employee of FMAC or any FMAC
Subsidiary has any material interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of FMAC or any FMAC
Subsidiary.
3.28 REGISTRATION OBLIGATIONS. Except as set forth in Section 3.28 of the
FMAC Disclosure Schedule, neither FMAC nor any FMAC Subsidiary is under any
obligation, contingent or otherwise, which will survive the Effective Time by
reason of any agreement to register any of its securities under the Securities
Act or other federal or state securities laws or regulations.
3.29 TAX AND RELATED MATTERS. FMAC has not taken or agreed to take any
action, nor does it have knowledge of any fact or circumstance, that would (i)
materially impede or delay the consummation of the transactions contemplated by
this Agreement or the ability of the parties to obtain any approval of any
regulatory authority required for the transactions contemplated by this
Agreement or to perform their covenants and agreements under this Agreement or
(ii) prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
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3.30 BROKERS AND FINDERS. Except as set forth in Section 3.30 of the FMAC
Disclosure Schedule, neither FMAC nor any FMAC Subsidiary nor any of their
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or finders' fees, and no other broker or finder has acted directly
or indirectly for FMAC or any FMAC Subsidiary in connection with this Agreement
or the transactions contemplated hereby.
3.31 ACCURACY OF INFORMATION. The statements of FMAC contained in this
Agreement, the FMAC Disclosure Schedule and in any other written document
executed and delivered by or on behalf of FMAC pursuant to the terms of this
Agreement are true and correct in all material respects.
3.32 GOVERNMENTAL APPROVALS AND OTHER CONDITIONS. To the best knowledge of
FMAC, there is no reason relating specifically to FMAC or any of its
Subsidiaries why (i) the approvals that are required to be obtained from
regulatory authorities having approval authority in connection with the
transactions contemplated hereby should not be granted, (ii) such regulatory
approvals should be subject to a condition which would differ from conditions
customarily imposed by such regulatory authorities in orders approving
acquisitions of the type contemplated hereby or (iii) any of the conditions
precedent as specified in Article VI hereof to the obligations of any of the
parties hereto to consummate the transactions contemplated hereby are unlikely
to be fulfilled within the applicable time period or periods required for
satisfaction of such condition or conditions.
3.33 YEAR 2000 COMPLIANT. Set forth in Section 3.33 of the FMAC Disclosure
Schedule is a good faith estimate of FMAC's cost for achieving, to its
knowledge, Year 2000 Compliance in all material respects on or prior to November
15, 1999. FMAC has no reason to believe that its cost for Year 2000 Compliance
will materially exceed the amount of such good faith estimate unless FMAC, at
the request of Bay View, agrees to accelerate the timing of its Year 2000
Compliance to a date substantially prior to November 15, 1999.
ARTICLE IV
COVENANTS OF FMAC AND BAY VIEW
4.1 FMAC BUSINESS IN ORDINARY COURSE.
(a) Without the prior written consent of Bay View, FMAC shall not
declare or pay any dividend or make any other distribution with respect to
its capital stock, whether in cash, stock or other property, after the
date of this Agreement.
(b) FMAC and the FMAC Subsidiaries shall continue to carry on, after
the date hereof, their respective businesses and the discharge or
incurring of obligations and liabilities, only in the usual, regular and
ordinary course of business, as heretofore conducted, and by way of
amplification and not limitation, FMAC and each of the FMAC
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Subsidiaries will not, without the prior written consent of Bay View (or
the Chief Credit Officer of Bay View in the case of subparagraph (vii))
(which in the case of subparagraph (xx) shall not be unreasonably withheld
or delayed);
(i) issue any of its capital stock, ownership, profit and
loss, or other beneficial interests, or any options, warrants, or
other rights to subscribe for or purchase any of the foregoing,
except (A) pursuant to the FMAC Stock Options outstanding on the
date hereof and (B) restricted stock awards, stock options and bonus
stock to be awarded as fully described in Section 4.1 of the FMAC
Disclosure Schedule;
(ii) directly or indirectly redeem, purchase or otherwise
acquire any capital stock, ownership, profit and loss or other
beneficial interests of FMAC or any of the FMAC Subsidiaries;
(iii) effect a reclassification, recapitalization, split-up,
exchange of shares, readjustment or other similar change in or to
any outstanding securities or otherwise reorganize or recapitalize;
(iv) change its Certificate of Incorporation or other
organizational or governmental document;
(v) enter into, modify or renew any employment agreement,
severance agreement, change of control agreement, or plan relative
to the foregoing; or grant any increase (other than ordinary and
normal increases to rank and file employees consistent with past
practices) in the compensation or benefits payable or to become
payable to directors, officers or employees except (A) as required
by law and (B) the restricted stock awards, stock options and bonus
stock to be awarded as fully described in Section 4.1 of the FMAC
Disclosure Schedule, pay or agree to pay any bonus, or adopt or make
any change in any bonus, insurance, pension or other FMAC Benefit
Plan;
(vi) except for borrowings in the ordinary course of business
that do not have any prepayment penalty, borrow or agree to borrow
any funds, or indirectly guarantee or agree to guarantee any
obligations of others;
(vii) make or commit to make any Loan, except for Loans on
retail concepts that FMAC or any FMAC Subsidiary make Loans on as of
the date of this Agreement that do not exceed $10,000,000 and that
would not increase the aggregate credit outstanding to any one
borrower (or group of affiliated borrowers) to more than $15,000,000
(excluding for this purpose credit related to Loans that have been
sold or securitized), provided that nothing in this subparagraph
shall prohibit FMAC or any FMAC Subsidiary from honoring any
contractual obligation in existence on the date of this Agreement;
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(viii)refinance or restructure any existing Loan, except in
the ordinary course of business consistent with past practice and
prudent lending practices;
(ix) make any material changes in its policies or practices
concerning loan underwriting and credit scoring, or which persons
may approve Loans or credit scoring;
(x) except in the ordinary course of business consistent with
past practices and prudent business practices, enter into any
securities transaction for its own account or purchase or otherwise
acquire any investment security for its own account other than (A)
securities backed by the full faith and credit of the United States
or an agency thereof not in excess of $10,000,000 and (B) other
readily marketable securities not in excess of $1,000,000;
(xi) enter into, modify or extend any agreement, contract or
commitment (other than Loans or securities) involving an expenditure
in excess of $250,000 except as required or desirable for the
conduct of business in the ordinary course;
(xii) except in the ordinary course of business, place on any
of its assets or properties any mortgage, pledge, lien, charge, or
other encumbrance;
(xiii)cancel any material indebtedness owing to it or any
claims which it may possess or waive any rights of material value;
(xiv) sell or otherwise dispose of any real property or any
material amount of tangible or intangible personal property other
than (A) properties acquired in foreclosure or otherwise in the
ordinary collection of indebtedness or (B) Loans sold in the
secondary market;
(xv) foreclose upon or otherwise take title to or possession
or control of any real property without first obtaining a phase one
environmental report thereon;
(xvi) knowingly or wilfully commit any act or fail to commit
any act which will cause a material breach of any agreement,
contract or commitment;
(xvii) engage in any activity or transaction outside the
ordinary course of business;
(xviii)enter into any new, or modify, amend or extend the
terms of any existing contracts relating to the purchase or sale of
financial or other futures, or any put or call option relating to
cash, securities or commodities or any interest rate swap agreements
or other agreements relating to the hedging of interest rate
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risk, except in the ordinary course of business consistent with past
practices and prudent business practices;
(xix) knowingly take any action that would (A) materially
impede or delay the consummation of the transactions contemplated by
this Agreement or the ability of the parties hereto to obtain any
approval of any regulatory authority required for the transactions
contemplated by this Agreement or to perform its covenants and
agreements under this Agreement or (B) prevent the transactions
contemplated hereby from qualifying as a reorganization within the
meaning of Section 368 of the Code;
(xx) make any material changes in its pricing policies; or
(xxi) agree in writing or otherwise to take any of the
foregoing actions or engage in any of the foregoing activities.
Notwithstanding the foregoing, FMAC is permitted to sell the FMAC leasing
division upon the written consent of Bay View, which consent shall not be
unreasonably withheld or delayed.
(c) FMAC and the FMAC Subsidiaries shall not, without the prior
written consent of Bay View, engage in any transaction or knowingly take
any action or commit any omission that would render untrue in any material
respect any of the representations and warranties of FMAC contained in
Article III hereof, if such representations and warranties were given as
of the date of such transaction, action or omission.
(d) FMAC will, and will cause the FMAC Subsidiaries to, use their
commercially reasonable efforts to maintain their respective properties
and assets in their present state of repair, order and condition,
reasonable wear and tear excepted, and to maintain and keep in full force
and effect all policies of insurance presently in effect. FMAC will, and
will cause the FMAC Subsidiaries to, use all commercially reasonable
efforts to preserve intact their present business organization, keep
available the services of their present officers and key employees and
preserve their relationships with customers and Investors and others
having business dealings with them. FMAC will, and will cause the FMAC
Subsidiaries to, take all requisite action (including without limitation
the making of claims and the giving of notices) pursuant to its directors'
and officers' liability insurance policy or policies in order to preserve
all rights thereunder which could reasonably give rise to a claim prior to
the Effective Time.
(e) FMAC shall promptly notify Bay View in writing of the occurrence
of any matter or event known to and directly involving FMAC or any FMAC
Subsidiary that would result in any breach of this Agreement, is
reasonably likely to result in a Material Adverse Effect on FMAC or impair
the ability of FMAC to consummate the transactions contemplated herein.
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(f) FMAC shall provide to Bay View such reports on litigation
involving FMAC and each of the FMAC Subsidiaries as Bay View shall
reasonably request, provided that FMAC shall not be required to divulge
information to the extent that, in the good faith opinion of its counsel,
by doing so, it would risk waiver of the attorney-client privilege to its
detriment.
4.2 CERTAIN ACTIONS.
(a) Neither FMAC (nor any of its Subsidiaries) (i) shall solicit,
initiate, participate in discussions of, or encourage or take any other
action to facilitate (including by way of the disclosing or furnishing of
any information that it is not legally obligated to disclose or furnish)
any inquiry or the making of any proposal relating to any Acquisition
Proposal (as defined below) with respect to itself or any of its
Subsidiaries or (ii) shall (A) solicit, initiate, participate in
discussions of, or encourage or take any other action to facilitate any
inquiry or proposal, or (B) enter into any agreement, arrangement, or
understanding (whether written or oral) regarding any proposal or
transaction providing for or requiring it to abandon, terminate or fail to
consummate this Agreement, or compensating it or any of its Subsidiaries
under any of the instances described in this clause. FMAC shall immediately
instruct and otherwise use its reasonable best efforts to cause its
directors, officers, employees, agents, advisors (including, without
limitation, any investment banker, attorney, or accountant retained by it
or any of its Subsidiaries), consultants and other representatives to
comply with such prohibitions. FMAC shall immediately cease and cause to be
terminated any existing activities, discussions, or negotiations with any
parties conducted heretofore with respect to such activities.
Notwithstanding the foregoing, FMAC may provide information at the request
of or enter into negotiations with a third party with respect to an
Acquisition Proposal if the Board of Directors of FMAC determines, in good
faith after consultation with counsel, that the exercise of its fiduciary
duties to FMAC's stockholders under applicable law requires it to take such
action, and, provided further, that FMAC may not, in any event, provide to
such third party any information which it has not provided to Bay View.
FMAC shall promptly notify Bay View orally and in writing in the event it
receives any such inquiry or proposal and shall provide reasonable detail
of all relevant facts relating to such inquiries. This Section shall not
prohibit accurate disclosure by FMAC in any document (including the Proxy
Statement and the Registration Statement) or other disclosure under
applicable law if in the opinion of the Board of Directors of FMAC,
disclosure is appropriate under applicable law.
(b) "Acquisition Proposal" shall, with respect to FMAC, mean any of
the following (other than the Merger): (i) a merger or consolidation, or
any similar transaction of any entity with either FMAC or any Subsidiary of
FMAC, (ii) a purchase lease or other acquisition of a material portion of
all the assets of either FMAC or any Subsidiary of FMAC, (iii) a purchase
or other acquisition of "beneficial ownership" by any "person" or "group"
(as such terms are defined in Section 13(d)(3) of the Exchange Act)
(including by way of merger, consolidation, share exchange, or otherwise)
which
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would cause such person or group to become the beneficial owner of
securities representing 25% or more of the voting power of either FMAC or
any Subsidiary of FMAC, (iv) a tender or exchange offer to acquire
securities representing 25% or more of the voting power of FMAC, (v) a
public proxy or consent solicitation made to stockholders of FMAC seeking
proxies in opposition to any proposal relating to any of the transactions
contemplated by this Agreement, (vi) the filing of an application or
notice with any federal or state regulatory authority (which application
has been accepted for processing) seeking approval to engage in one or
more of the transactions referenced in clauses (i) through (iv) above, or
(vii) the making of a bona fide offer to the Board of Directors of FMAC by
written communication, that is or becomes the subject of public
disclosure, to engage in one or more of the transactions referenced in
clauses (i) through (v) above.
4.3 BAY VIEW BUSINESS IN ORDINARY COURSE.
(a) Without the prior written consent of FMAC, Bay View shall not
declare or pay any dividend or make any other distribution with respect to
its capital stock, whether in cash, stock or other property, after the date
of this Agreement except it may declare and pay its regular quarterly
dividends in amounts as it shall determine from time to time and may effect
any stock split in the form of a stock dividend after consultation with
FMAC.
(b) Neither Bay View nor any Bay View Subsidiary has taken or agreed
to take, or shall knowingly take, any action nor does it have knowledge of
any fact or circumstance, that would (i) materially impede or delay the
consummation of the transactions contemplated by this Agreement or the
ability of the parties hereto to obtain any approval of any regulatory
authority required for the transactions contemplated by this Agreement or
to perform its covenants and agreements under this Agreement or (ii)
prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code.
(c) Bay View shall promptly notify FMAC in writing of the occurrence
of any matter or event known to and directly involving Bay View or any Bay
View Subsidiary that would result in any breach of this Agreement, is
reasonably likely to result in a Material Adverse Effect on Bay View or
impair the ability of Bay View to consummate the transactions contemplated
herein.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 INSPECTION OF RECORDS; CONFIDENTIALITY.
(a) Bay View and its Subsidiaries, on the one hand, and FMAC and its
Subsidiaries, on the other hand, shall each afford to the other and to the
other's accountants, counsel and other representatives full access during
normal business hours, during the period prior to the Effective Time, to
all of their respective properties, books, contracts, commitments and
records, including all attorneys' responses to auditors' requests for
information, and accountants' work papers, and will permit their
respective representatives to discuss such information directly with each
other's officers, directors, employees, attorneys and accountants. Bay
View and FMAC shall each use their reasonable best efforts to furnish to
the other all other information concerning its business, properties and
personnel as such other party may reasonably request. The availability or
actual delivery of information shall not affect the representations,
warranties, covenants and agreements of the party providing such
information that are contained in this Agreement or in any certificates or
other documents delivered pursuant hereto.
(b) Each party hereto shall, and shall cause its advisors and
representatives to, (i) hold confidential all information obtained in
connection with any transaction contemplated hereby with respect to the
other party which is not otherwise public knowledge, (ii) return all
documents (including copies thereof) obtained hereunder from the other
party to such other party and (iii) use its reasonable best efforts to
cause all information obtained pursuant to this Agreement or in connection
with the negotiation of this Agreement to be treated as confidential and
not use, or knowingly permit others to use, any such information unless
such information becomes generally available to the public.
5.2 REGISTRATION STATEMENT; STOCKHOLDER APPROVAL. (a) As soon as
practicable after the date hereof, Bay View shall file the Registration
Statement with the SEC, and FMAC and Bay View shall use their reasonable best
efforts to cause the Registration Statement to become effective under the
Securities Act. Bay View will take any action required to be taken under the
applicable blue sky or securities laws in connection with the issuance of the
shares of Bay View Common Stock in the Merger. Each party shall furnish all
information concerning it and the holders of its capital stock as the other
party may reasonably request in connection with such action.
(b) Bay View shall call the Bay View Stockholders' Meeting and FMAC shall
call the FMAC Stockholders' Meeting, in each case to be held as soon as
practicable after the Registration Statement becomes effective for the purpose
of voting upon this Agreement and the Merger. The Bay View Stockholders' Meeting
and FMAC Stockholders' Meeting shall be held
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on the same date and at the same time. In connection therewith, Bay View shall
prepare the Proxy Statement and, with the approval of each of Bay View and FMAC,
the Proxy Statement shall be filed with the SEC and mailed to the stockholders
of Bay View and FMAC. The Board of Directors of Bay View shall submit for
approval of Bay View's stockholders the matters to be voted upon in order to
authorize the Merger. The Board of Directors of FMAC shall submit for approval
of FMAC's stockholders the matters to be voted upon in order to authorize the
Merger. The Board of Directors of Bay View hereby does and will recommend this
Agreement and the transactions contemplated hereby to stockholders of Bay View
and will use its reasonable best efforts to obtain any vote of the stockholders
of Bay View that is necessary for the approval and adoption of this Agreement
and consummation of the transactions contemplated hereby. The Board of Directors
of FMAC hereby does and will recommend this Agreement and the transactions
contemplated hereby to stockholders of FMAC and will use its reasonable best
efforts to obtain any vote of the stockholders of FMAC that is necessary for the
approval and adoption of this Agreement and the transactions contemplated
hereby.
5.3 AGREEMENTS OF AFFILIATES. As soon as practicable after the date of
this Agreement, FMAC shall deliver to Bay View a letter, reviewed by its
counsel, identifying all persons whom FMAC believes to be "affiliates" of FMAC
for purposes of Rule 145 under the Securities Act. FMAC shall use its reasonable
best efforts to cause each person who is so identified as an "affiliate" to
deliver to Bay View no later than ten calendar days after the date hereof, a
written agreement in the form of Exhibit B, providing that from the date of such
agreement each such person will agree not to sell, pledge, transfer or otherwise
dispose of any shares of stock of FMAC held by such person or any shares of Bay
View Common Stock to be received by such person in the Merger at any time,
except in compliance with the applicable provisions of the Securities Act and
other applicable laws and regulations. Prior to the Effective Time, FMAC shall
use its reasonable best efforts to cause each additional person who is
identified as an "affiliate" to execute a written agreement as set forth in this
Section 5.3.
5.4 EXPENSES. Each party hereto shall bear its own expenses incident to
preparing, entering into and carrying out this Agreement and to consummating the
Merger. The fee to be paid to FMAC's financial advisor, Credit Suisse First
Boston ("First Boston"), shall not be in excess of the fee provided for in the
engagement letter between FMAC and First Boston, a copy of which letter is set
forth in Section 5.4 of the FMAC Disclosure Schedule. The amount of the fees
paid or to be paid by FMAC or the FMAC Subsidiaries, collectively (or by Bay
View or New FMAC as successors), in connection with this Agreement for legal and
accounting fees, shall not exceed the amount set forth on Section 5.4 of the
FMAC Disclosure Schedule without the written consent of Bay View.
Notwithstanding the foregoing, Bay View and FMAC will share equally all third
party printing costs incurred with respect to the Registration Statement and
Proxy Statement in preliminary and final form.
5.5 COOPERATION. (a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its respective reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
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Agreement as expeditiously as possible. Each party shall, and shall cause each
of its respective Subsidiaries to, use its reasonable best efforts to obtain
consents of all third parties and regulatory authorities necessary for the
consummation of the transactions contemplated by this Agreement as expeditiously
as possible.
(b) FMAC, in conjunction with its transition team that shall meet at least
twice a month with the Bay View transition team, shall, (i) consult and
cooperate with Bay View regarding the implementation of those policies and
procedures established by Bay View for its governance and that of its
Subsidiaries including, without limitation, policies and procedures pertaining
to accounting, loan accruals and reserves, budgets, computer systems,
asset/liability management, audits, credit, human resources, treasury and legal
functions; (ii) at the request of Bay View, conform FMAC's existing policies and
procedures in respect of such matters to Bay View's policies and procedures or
in the absence of any existing FMAC policy or procedure regarding any such
function, introduce Bay View policies or procedures in respect thereof; (iii)
consult and cooperate with Bay View with respect to the pricing policies of
FMAC; (iv) consult and cooperate with Bay View with respect to determining
appropriate FMAC accruals, reserves and charges or write-down of various assets
and other appropriate charges and accounting adjustments; (v) consult and
cooperate with Bay View with respect to the amount and the timing for
recognizing for financial accounting purposes its expenses of the Merger and the
restructuring charges relating to or to be incurred in connection with the
Merger; and (vi) establish and take such reserves and accruals at such time as
Bay View shall reasonably request; PROVIDED, HOWEVER, that FMAC shall not be
required to take such action pursuant to this subpart vi more than five days
prior to the Effective Time and not until (A) Bay View agrees in writing that
all conditions to closing set forth in Article VI have been satisfied or waived
and (B) FMAC shall have received a written waiver by Bay View of its right to
terminate this Agreement; and provided, further that FMAC shall not be required
to take any such action that is not consistent with any applicable law or GAAP
and that reserves or accruals taken at the written request of Bay View may not
be a basis to assert a violation of a breach of a representation, warranty or
covenant of FMAC herein.
(c) Each party agrees to cooperate fully with the other in connection with
matters relating to liability of FMAC to Fannie Mae under the Fannie Mae DUS
Program. In addition, FMAC shall take such actions in connection therewith as
Bay View shall reasonably request; provided, however, that FMAC shall not be
required to take such actions until (i) Bay View agrees in writing that all
conditions to Closing set forth in Article VI have been satisfied or waived, and
(ii) FMAC shall have received a written waiver by Bay View of its right to
terminate this Agreement; and provided further, that FMAC shall not be required
to take any such action that is not consistent with any applicable law or Fannie
Mae guidelines and that actions taken at the written request of Bay View may not
be a basis to assert a violation or a breach of a representation, warranty or
covenant of FMAC herein.
5.6 REGULATORY APPLICATIONS. The parties shall, as soon as practicable
after the date of this Agreement, file all necessary applications with all
applicable regulatory authorities, and shall use their reasonable best efforts
to respond as promptly as practicable to all inquiries received concerning said
applications. In the event the Merger is challenged or opposed by any
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administrative or legal proceeding, whether by the United States Department of
Justice or otherwise, the determination of whether and to what extent to seek
appeal or review, administrative or otherwise, or other appropriate remedies
shall be made by mutual agreement of Bay View and FMAC. The party filing an
application shall deliver a copy thereof to the other parties hereto in advance
of filing and copies of all responses from or written communications from
regulatory authorities relating to the Merger or this Agreement (to the extent
permitted by law), and the filing party shall also deliver a final copy of each
regulatory application to the other parties promptly after it is filed with the
appropriate regulatory authority.
5.7 CURRENT INFORMATION. During the period from the date of this Agreement
to the Effective Time, each party shall promptly furnish the other with copies
of all monthly and other interim financial statements produced in the ordinary
course of business as the same become available and shall cause one or more of
its designated representatives to confer on a regular and frequent basis with
representatives of the other party. Bay View and FMAC shall deliver to each
other not later than 45 days after the end of each quarter, its Report on Form
10-Q for such quarter as filed with the SEC and each party will promptly furnish
to the other any and all other material reports filed with the SEC or any other
regulatory agency. Further, FMAC shall furnish to Bay View within ten business
days of the end of each month a description of all Loans (including, without
limitation, the name of the borrower, the loan amount and a description of the
collateral) originated by FMAC or any of its Subsidiaries during such month.
Each party shall promptly notify the other party of any material change in its
business or operations and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of material litigation involving such party or the
transactions contemplated hereby and shall keep the other party fully informed
of such events.
5.8 PRESS RELEASE. Except as may be required by law the parties shall
mutually agree to the issuance of any press release or other information to the
press or any third party for general circulation with respect to this Agreement
or the transactions contemplated hereby.
5.9 LITIGATION MATTERS. FMAC will consult with Bay View about any proposed
settlement, or any disposition of, any litigation involving amounts in excess of
$150,000.
5.10 TAX OPINION. Bay View agrees to obtain a written opinion of Silver,
Freedman & Taff, L.L.P. ("SF&T") addressed to Bay View, dated the Closing Date,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion, the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that Bay
View and FMAC each will be a party to such reorganization. In rendering such
opinion, SF&T may require and rely upon representations contained in letters
from Bay View, FMAC and others. FMAC agrees to obtain a written opinion of Dewey
Ballantine LLP ("Dewey Ballantine"), addressed to FMAC, dated the Closing Date,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that Bay
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View and FMAC each will be a party to such reorganization. In rendering its
opinion, Dewey Ballantine may require and rely upon representations contained in
letters from Bay View, FMAC and others.
5.11 BENEFITS AND RELATED MATTERS. (a) The FMAC Benefit Plans that apply
generally and uniformly to full-time employees of FMAC and/or the FMAC
Subsidiaries shall be continued after the Effective Time as plans of Bay View,
until such time as such employees are integrated into Bay View's employee
benefit plans that are available to other employees of Bay View and the Bay View
Subsidiaries on a general and uniform basis, subject to the terms and conditions
specified in such plans and to such changes therein as may be necessary to
reflect the consummation of the Merger. Bay View shall take such steps as are
necessary or required to integrate the employees of FMAC and the FMAC
Subsidiaries in Bay View employee benefit plans available to other employees of
Bay View and Bay View Subsidiaries as soon as practicable after the Effective
Time, (i) with full credit for prior service with FMAC for all purposes other
than determining the amount of benefit accruals under any defined benefit plan,
(ii) without any waiting periods, evidence of insurability, or application of
any pre-existing condition limitations (to the extent coverage is being provided
therefore under FMAC's health insurance plan), and (iii) with full credit for
claims arising prior to the Effective Time for purposes of deductibles,
out-of-pocket maximums, benefit maximums, and all other similar limitations for
the applicable plan year during which the Merger is consummated.
5.12 RESERVATION OF SHARES TO SATISFY FMAC CONTINUING OPTIONS. Bay View
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Bay View Common Stock for delivery upon exercise of
Continuing Options. As soon as practicable after the Effective Time, Bay View
shall file an appropriate registration statement with respect to the shares of
Bay View Common Stock subject to Continuing Options and shall use its reasonable
best efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
5.13 LISTING. Bay View shall use all reasonable efforts to cause the
shares of Bay View Common Stock to be issued in the Merger, and the shares of
Bay View Common Stock to be reserved for issuance upon exercise of Continuing
Options, to be approved for listing on the Nasdaq Stock Market or New York Stock
Exchange, Inc. (or such other national securities exchange or stock market on
which the Bay View Common Stock shall then be traded), subject to official
notice of issuance, prior to or as of the Closing.
5.14 INDEMNIFICATION: DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, Bay View shall indemnify,
defend and hold harmless each person who is now, or has been at any time
prior to the date hereof or who becomes prior to the Effective Time, an
officer, director or employee of FMAC or any of the FMAC Subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs,
expenses, liabilities or judgments, or amounts that are paid in settlement
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with the approval of Bay View (which approval shall not be unreasonably
withheld), of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part
out of the fact that such person is or was a director, officer or employee
of FMAC or any FMAC Subsidiary, whether pertaining to any matter existing
or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), in each case to the full extent FMAC would have been
permitted under Delaware law and its Certificate of Incorporation and
By-laws to indemnify such person (and FMAC shall pay expenses in advance
of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law upon receipt of any
undertaking required by Section 145(e) of the DGCL). Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising
before or after the Effective Time), (i) any counsel retained by the
Indemnified Parties for any period after the Effective Time shall be
reasonably satisfactory to Bay View; (ii) after the Effective Time, Bay
View shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; and
(iii) after the Effective Time, Bay View will use all reasonable efforts
to assist in the defense of any such matter, provided that Bay View shall
not be liable for any settlement of any claim effected without its written
consent, which consent, however, shall not be unreasonably withheld. Any
Indemnified Party wishing to claim indemnification under this Section
5.14, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify Bay View (but the failure so to notify Bay
View shall not relieve it from any liability which it may have under this
Section 5.14 except to the extent such failure materially prejudices Bay
View), and shall deliver to Bay View the undertaking, if any, required by
Section 145(e) of the DGCL. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
(b) Bay View shall also purchase and keep in force for six years
directors' and officers' liability insurance to provide coverage for acts
or omissions of the type and in the amount currently covered by FMAC's
existing directors' and officers' liability insurance for acts or
omissions occurring prior to the Effective Time, to the extent such
insurance may be purchased or kept in full force without any material
increase in the cost of the premium currently paid by Bay View for its
directors' and officers' liability insurance (provided that if such
insurance is not available without such a material increase, Bay View will
substitute or cause FMAC to substitute therefor to the extent available at
a cost not in excess of 200% of the current annual premium cost, single
premium tail coverage with policy limits equal to FMAC's existing annual
coverage limits).
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(c) The provisions of this Section 5.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and each
Indemnified Party's heirs
and representatives.
5.15 REPORTS TO THE SEC. On or after the Effective Time, Bay View shall
continue to file all reports and data with the SEC necessary to permit
stockholders of FMAC who may be deemed affiliates of FMAC within the meaning of
Rule 145 under the Securities Act to sell Bay View Common Stock held or received
by them in connection with the Merger pursuant to Rules 144 and 145 under the
Securities Act if they would otherwise be so entitled.
5.16 ENVIRONMENTAL REPORTS. FMAC shall cooperate with Bay View so that Bay
View may as soon as reasonably practicable obtain, at Bay View's expense, a
report of a phase one environmental investigation on all real property owned,
leased or operated by FMAC or any of the FMAC Subsidiaries. If advisable in
light of the phase one report with respect to any parcel of real property
referred to above, in the reasonable opinion of Bay View, FMAC shall also
cooperate with Bay View so that Bay View may obtain, at Bay View's expense, a
report of a phase two environmental investigation to such designated parcels.
5.17 IMPERMISSIBLE ACTIVITIES. FMAC shall use its reasonable best efforts
to sell, transfer or otherwise dispose of, on terms satisfactory to Bay View,
any of its or its Subsidiaries' businesses or activities that would be
impermissible to be engaged in by Bay View Bank, either directly or indirectly.
5.18 POST-MERGER. It is the current intention of Bay View to operate New
FMAC as a wholly owned subsidiary of Bay View Bank, with a Board of Directors
and Credit Committee of such Board that would include persons who are currently
officers or directors
of FMAC.
5.19 FMAC ACKNOWLEDGMENTS. FMAC acknowledges (i) that nothing in this
Agreement shall prohibit Bay View from, directly or indirectly, redeeming,
purchasing or otherwise acquiring any of its capital stock prior to the
Effective Time and (ii) that the parties shall cooperate with respect to (A) the
possible relocation of the corporate headquarters of the FMAC insurance
subsidiaries at or subsequent to the Effective Time and (B) all other matters to
assure that the FMAC insurance subsidiaries comply with all applicable banking
regulations for Bay View and the Bay View Subsidiaries to continue such
insurance activities at and after the Effective Time.
5.20 DIRECTOR OF BAY VIEW. The Board of Directors of Bay View shall take
all requisite corporate action so that at the Effective Time the class of
directors of Bay View with terms expiring in the year 2000 shall include Wayne
Knyal. Subject to its fiduciary duties, the Board of Directors of Bay View shall
nominate Mr. Knyal with respect to the Annual Meeting of Stockholders of Bay
View scheduled to be held in May 2000 as a director to serve in the class of
directors of Bay View with terms expiring in the year 2002.
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5.21 TRANSFER OF FMAC NAME. FMAC shall execute any instruments which Bay
View reasonably deems necessary to enable New FMAC to be incorporated with the
name Franchise Mortgage Acceptance Company.
5.22 BAY VIEW ACKNOWLEDGMENT. Bay View acknowledges that it will succeed
to the Bankers Mutual "earn-out" by operation of law.
5.23 FMAC EMPLOYEES. It is the intention of New FMAC to retain the
employees of FMAC. New FMAC shall institute a retention bonus program for up to
35 mid-level managers of FMAC to be named by FMAC upon the Closing, which
program shall provide for a retention bonus of at least three months base salary
for each manager who continues employment for his or her designated retention
period.
5.24 FINANCIAL REPORTING OBLIGATIONS AND TAX GROSS-UP PAYMENTS. FMAC shall
cause the full amount of the financial charges and expense relating to (a)
restricted stock awards, bonus stock awards and other stock awards, if any, and
(b) tax gross-up payments to be recorded on its financial books and records and
financial statements for financial reporting purposes under GAAP on a
pre-acquisition basis prior to the Closing Date. All tax gross-up payments shall
be paid by FMAC prior to the Closing Date.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO THE OBLIGATIONS OF BAY VIEW. Notwithstanding any other
provision of this Agreement, the obligations of Bay View to consummate the
Merger are subject to the following conditions precedent (except as to those
which Bay View may choose to waive):
(a) all of the representations and warranties made by FMAC in this
Agreement and in any documents or certificates provided by FMAC shall have
been true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on
and as of the Effective Time;
(b) FMAC shall have performed in all material respects all
obligations and shall have complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it prior to or at the Effective Time;
(c) there shall not have been any action taken or any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the transactions contemplated by this Agreement by any federal or state
government or governmental agency or instrumentality or court, which would
prohibit ownership or operation of all or a portion of the business or
assets of FMAC or any FMAC Subsidiary by Bay View or any Bay View
Subsidiary, or would compel Bay View or any Bay View Subsidiary to dispose
of all or a portion of the business or assets of FMAC or any FMAC
Subsidiary, as
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a result of this Agreement, or which would render any party hereto unable
to consummate the transactions contemplated by this Agreement;
(d) FMAC shall not have suffered a Material Adverse Effect;
(e) no regulatory authority shall impose any unduly burdensome
condition relating to the transactions contemplated by this Agreement such
that it would substantially deprive Bay View of the economic benefits of
the transactions contemplated by this Agreement, as determined in the
reasonable judgment of Bay View;
(f) Bay View shall have received a certificate signed by the
President and Chief Executive Officer of FMAC, dated as of the Effective
Time, certifying that based upon his best knowledge, the conditions set
forth Sections 6.1(a), (b), (d), (h), (i), (j), (k) and (l) hereof have
been satisfied;
(g) Bay View shall have received the written affiliates' agreements
described in Section 5.3 hereof;
(h) Dissenting Shares shall not exceed 7% of the issued and
outstanding FMAC Common Stock;
(i) The consolidated stockholders' equity of FMAC as of the Closing
Date determined in accordance with GAAP (the "Closing Equity") shall be no
less than $150,000,000, provided that for purposes of this provision the
Closing Equity shall be increased by the after-tax amount of (i) all
Merger related fees, costs and expenses, including, but not limited to,
the fees and expenses of First Boston pursuant to its engagement letter
set forth in Section 5.4 of the FMAC Disclosure Schedule, printing and
mailing costs, and legal and accounting fees, subject to the limitation
set forth in Section 5.4 of the FMAC Disclosure Schedule, to the extent
previously expensed, and (ii) any reserves, accruals or charges taken by
FMAC at the request of Bay View pursuant to Section 5.5(b)(vi), in each
case to the extent such amounts have reduced Closing Equity;
(j) FMAC shall have sold, transferred or otherwise disposed of, on
terms reasonably satisfactory to Bay View, all of its or its Subsidiaries'
businesses or activities that would be impermissible to be engaged in by
Bay View Bank, either directly or indirectly;
(k) FMAC shall have obtained all consents, approvals or waivers of
all persons (other than regulatory authorities) under all the material
contracts, agreements, permits, authorizations and licenses set forth on
Section 6.1(k) of the FMAC Disclosure Schedule and all such consents,
approvals or waivers shall be in full force and effect; and
(l) FMAC shall have achieved Year 2000 Compliance.
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6.2 CONDITIONS TO THE OBLIGATIONS OF FMAC. Notwithstanding any other
provision of this Agreement, the obligations of FMAC to consummate the Merger
are subject to the following conditions precedent (except as to those which FMAC
may choose to waive):
(a) all of the representations and warranties made by Bay View in
this Agreement and in any documents or certificates provided by Bay View
shall have been true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Effective Time as though
made on and as of the Effective Time;
(b) Bay View shall have performed in all material respects all of
its obligations and shall have complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it prior to or at the Effective Time;
(c) Bay View shall not have suffered a Material Adverse Effect; and
(d) FMAC shall have received a certificate signed by the President
and Chief Executive Officer of Bay View, dated as of the Effective Time,
that based upon his best knowledge, the conditions set forth in Sections
6.2(a), (b) and (c)
have been satisfied.
6.3 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES. Notwithstanding any
other provision of this Agreement, the obligations of Bay View on the one hand,
and FMAC on the other hand, to consummate the Merger are subject to the
following conditions precedent (except as to those which Bay View or FMAC may
choose to waive):
(a) this Agreement, including the Merger, shall have received the
requisite approval of the stockholders of Bay View in accordance with the
applicable provisions of the Bylaws of Bay View and the DGCL and the
requisite approval of the stockholders of FMAC in accordance with the
applicable provisions of the Bylaws of FMAC and the DGCL.
(b) no preliminary or permanent injunction or other order by any
federal or state court which prevents the consummation of the Merger shall
have been issued and shall remain in effect;
(c) the parties shall have received all applicable regulatory
approvals and consents to consummate the transactions contemplated in this
Agreement and all required waiting periods shall have expired;
(d) the Registration Statement shall have been declared effective
under the Securities Act and no stop orders shall be in effect and no
proceedings for such purpose shall be pending or threatened by the SEC
and, if the offering for sale of the Bay View Common Stock in the Merger
pursuant to this Agreement is subject to the securities laws
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of any state, the Registration Statement shall not be subject to a stop
order of any state securities authority;
(e) each party shall have received the tax opinion addressed to it
referred to in Section 5.10 of this Agreement; and
(f) the Bay View Common Stock to be issued to holders of FMAC Common
Stock shall have been approved for listing on the Nasdaq National Market
or New York Stock Exchange subject to official notice of issuance.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time:
(a) By the mutual written consent of the Boards of Directors of
Bay View and
FMAC;
(b) By Bay View or FMAC if any governmental authority has denied
approval of the Merger and such denial has become final and nonappealable;
(c) By Bay View or FMAC at any time after the (i) stockholders of
FMAC fail to approve this Agreement and the Merger by the requisite vote
at the FMAC Stockholders' Meeting or (ii) the stockholders of Bay View
fail to approve this Agreement and the Merger by the requisite vote at the
Bay View Stockholders' Meeting;
(d) By Bay View or FMAC, in the event of a material breach by the
other party of any representation, warranty, covenant or agreement
contained herein or in any schedule or document delivered pursuant hereto,
which breach cannot be or is not cured within 30 days after written notice
of such breach is given by the non-breaching party to the party committing
such breach;
(e) By Bay View or FMAC on or after January 15, 2000, in the event
the Merger has not been consummated by such date (provided, that the
terminating party is not then in material breach of any representation,
warranty, covenant or agreement contained herein or in any schedule or
document delivered pursuant thereto);
(f) By Bay View after March 24, 1999, if employment agreements
satisfactory to Bay View have not been entered into by at least the
persons named on Section 7.1(f) of the FMAC Disclosure Schedule.
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(g) By FMAC, if its Board of Directors so determines by a majority
vote of members of its entire Board, at any time during the five-day
period commencing with the Valuation Date, if the following conditions are
satisfied:
(i) the Final Bay View Price is less than
$17.50; and
(ii) the Bay View Ratio is less than the Index Ratio;
subject, however, to the following three sentences: If FMAC elects to
exercise its termination right pursuant to this Section 7.1(g), it shall
give prompt written notice to Bay View. During the seven-day period
commencing with its receipt of such notice, Bay View shall have the option
to elect to increase the Exchange Ratio to equal the lesser of: (i) the
quotient obtained by dividing (1) the product of $17.50 and the Exchange
Ratio (as then in effect) by (2) the Final Bay View Price; and (ii) the
quotient obtained by dividing (1) the product of the Index Ratio and the
Exchange Ratio (as then in effect) by (2) the Bay View Ratio. If Bay View
makes an election contemplated by the preceding sentence, within such
seven-day period, it shall give prompt written notice to FMAC of such
election and the revised Exchange Ratio, whereupon no termination shall
have occurred pursuant to this Section 7.1(g) and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange
Ratio shall have been so modified) and any references in this Agreement to
"Exchange Ratio" shall thereafter be deemed to refer to the Exchange Ratio
as adjusted pursuant to this Section 7.1(g).
For the purposes of this Section 7.1(g), the following terms shall have
the meanings indicated:
"Bay View Ratio" means the number obtained by dividing the Final Bay View
Price by $20.00.
"Index Ratio" means the number obtained by first dividing the Final Index
Price by the Initial Index Price and then subtracting from that quotient 0.125.
"Initial Index Price" means the weighted average of the Initial Prices for
each company comprising the Index Group.
"Initial Price," with respect to any company, means the closing sales price
of a share of common stock of such company, as reported on the consolidated
transaction reporting system for the market or exchange on which such common
stock is principally traded, on the trading day immediately preceding the public
announcement of this Agreement.
"Final Bay View Price" means the Final Price of Bay View Common Stock.
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"Final Index Price" means the weighted average of the Final Prices for each
company comprising the Index Group.
"Final Price," with respect to any company, means the average of the daily
closing sales prices of a share of common stock of such company, as reported on
the consolidated transaction reporting system for the market or exchange on
which such common stock is principally traded, during the period of 20 trading
days ending on the Valuation Date. If a company declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the date of this Agreement and the
Valuation Date, the prices for the common stock of such company shall be
appropriately adjusted for the purposes of determining the Final Price.
"Index Group" means the15 companies listed below, the common stock of all
of which shall be publicly traded and as to which there shall not have been a
publicly announced proposal at any time during the period beginning on the
trading day immediately preceding the public announcement of this Agreement and
ending on the Valuation Date for any such company to be acquired or for such
company to acquire another company or companies in transactions with a value
exceeding 25% of the acquiror's market capitalization. In the event that any
such company or companies are removed from the Index Group, the weights
attributed to the remaining companies will be adjusted proportionately for
purposes of determining the Final Index Price and the Initial Index Price. The
15 companies and the weights attributed to them are as follows:
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Holding Company Weighting
- --------------------------------------------------------------------
FirstFed Financial Corp. 2.76%
GreenPoint Financial Corp. 12.36
Sovereign Bancorp, Inc. 21.44
Webster Financial Corp. 4.87
Bank United Corp. 4.12
People's Bank 8.32
Downey Financial Corp. 3.68
Washington Federal Inc. 7.31
St. Paul Bancorp Inc. 5.32
PFF Bancorp Inc. 2.02
Queens County Bancorp Inc. 2.78
MAF Bancorp Inc. 3.26
TCF Financial Corp. 11.18
Harris Financial Inc. 4.39
Northwest Bancorp Inc. 6.19
"Valuation Date" means the day that is the latest of
(i) the day on which the last of the required regulatory approvals
is obtained and (ii) the day on which the last of the required stockholder
approvals has been received.
(h) by FMAC, by written notice to Bay View prior to the approval of this
Agreement and the Merger by the FMAC stockholders, if FMAC receives an
Acquisition Proposal on terms and conditions which the FMAC Board of Directors
determines, after receiving the advice of its outside counsel, that to proceed
with the Merger will violate the fiduciary duties of the Board of Directors to
FMAC's stockholders; PROVIDED, HOWEVER, that FMAC shall not be entitled to
terminate this Agreement pursuant to this clause (h) unless it shall have
provided Bay View with written notice of such a possible determination (which
written notice will inform Bay View of the material terms and conditions of the
proposal, including the identity of the proponent) and a copy not less than two
business days prior to such determination.
(i) By Bay View if FMAC receives an Acquisition Proposal and FMAC's Board
of Directors does not, within ten business days but not later than five days
prior to the FMAC Stockholders' Meeting, publicly recommend against such
proposal, provided that if the Acquisition Proposal is not made public, FMAC may
reject the Acquisition Proposal by written notice to the offeror and providing
Bay View with a copy thereof, and provided, further, that if Bay View is
entitled to terminate pursuant to this Subsection, it must give its notice of
termination during the eleventh through twentieth business days after FMAC
provides Bay View notice of its receipt of such Acquisition Proposal.
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In the event a party elects to effect any termination pursuant to Section
7.1(b) through 7.1(i) above, it shall give written notice to the other party
hereto specifying the basis for such termination and certifying that such
termination has been approved by the vote of a majority of the members of its
Board of Directors.
7.2 LIABILITIES AND REMEDIES; BREAK-UP FEE.
(a) In the event of termination of this Agreement as provided in
Sections 7.1(a) through 7.1(c), or Sections 7.1(e) through 7.1(i), this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Bay View or FMAC or their respective officers or
directors except for the obligations set forth in Section 5.1(b), Section
5.4 and Section 7.2, which obligations shall survive. Termination under
Section 7.1(e) or (f) shall also release the parties from any liability or
obligations under Sections 7.2(b) through 7.2(d). In the event of
termination of this Agreement as provided in Section 7.1(d), Section
5.1(b), Section 5.4 and Section 7.2 shall survive, and the non-breaching
party shall be entitled to such remedies and relief against the breaching
party as are available at law or in equity; provided, however, no remedy
at law or for damages shall be available to the non-breaching party on
account of a breach of representation or warranty by the breaching party
unless such breach was willful. Moreover, the non-breaching party without
terminating this Agreement shall be entitled to specifically enforce the
terms hereof against the breaching party in order to cause the Merger to
be consummated. Each party acknowledges that there is not an adequate
remedy at law to compensate the other parties relating to the
non-consummation of the Merger. To this end, each party, to the extent
permitted by law, irrevocably waives any defense it might have based on
the adequacy of a remedy at law which might be asserted as a bar to
specific performance, injunctive relief or other equitable relief.
(b) Bay View shall be entitled to a break-up fee of $8,000,000 in
cash payable on demand in immediately available funds, as its sole and
exclusive remedy, if: (i) either this Agreement is terminated by FMAC
under Section 7.1(h) or by Bay View under Section 7.1(i); or (ii) this
Agreement is terminated for any reason other than a proper termination by
FMAC under Section 7.1(d), and in the case of this subpart (ii) one of the
following events has occurred or occurs:
(i) the FMAC Stockholders' Meeting does not take place by
December 31, 1999;
(ii) the Board of Directors of FMAC fails to recommend
approval of this Agreement and the Merger to the stockholders of
FMAC, or such Board of Directors shall adversely alter or
modify its favorable recommendation of this Agreement
and the Merger to the stockholders of FMAC, and this
Agreement and the Merger are not approved by the
stockholders of FMAC by the requisite vote at the FMAC Stockholders'
Meeting; or
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(iii) an Acquisition Proposal occurs between the date hereof
and the time of the FMAC Stockholders' Meeting and this
Agreement and the Merger are not approved by the stockholders of
FMAC by the requisite vote at the FMAC Stockholders' Meeting.
In order to obtain the benefit of the break-up fee provided in this
Section 7.2(b), Bay View shall be required to execute a waiver of its
rights under Section 7.2(a) above, and shall not have taken any action to
enforce any right that it might have under Section 7.2(a).
(c) FMAC shall be entitled to a break-up fee of $8,000,000 in cash
payable on demand in immediately available funds, as its sole and
exclusive remedy, if: (i) this Agreement is terminated for any reason
other than a proper termination by Bay View under Section 7.1(d) and (ii)
one of the following events has occurred or occurs:
(i) the Bay View Stockholders' Meeting does not take place by
December 31, 1999; or
(ii) the Board of Directors of Bay View fails to recommend
approval of this Agreement and the Merger to the stockholders of Bay
View, or such Board of Directors shall adversely alter or modify its
favorable recommendation of this Agreement and the Merger to the
stockholders of Bay View, and this Agreement and the Merger are not
approved by the stockholders of Bay View by the requisite vote at
the Bay View Stockholders' Meeting.
In order to obtain the benefit of the break-up fee provided in this
Section 7.2(c), FMAC shall be required to execute a waiver of its rights
under Section 7.2(a) above, and shall not have taken any action to enforce
any right that it might have under
Section 7.2(a).
(d)(i)If FMAC is not then in material breach of this Agreement
and either:
(A) any governmental authority has denied approval of the
Merger and such denial has become final and nonappealable (provided
that such denial is not the result, in whole or in part, of FMAC's
failure to meet such authority's requirements for year 2000
compliance); or
(B) all three of the following conditions are met:
(x) the stockholders of Bay View fail to adopt this
Agreement; (y) the stockholders of FMAC adopt this
Agreement; and (z) FMAC is not then entitled to a break
up fee under Section 7.2(c),
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then upon termination of this Agreement Bay View shall reimburse FMAC for
its third party expenses relating to this Agreement and the transactions
contemplated hereby in an amount up to $500,000.
(ii) If Bay View is not then in material breach of this Agreement
and all three of the following conditions are met:
(x) the stockholders of FMAC fail to adopt this Agreement; (y)
the stockholders of Bay View adopt this Agreement; and (z) Bay
View is not then entitled to a break up fee under Section
7.2(b),
then upon termination of this Agreement FMAC shall reimburse Bay View for
its third party expenses relating to this Agreement and the transactions
contemplated hereby in an amount up to $500,000.
7.3 SURVIVAL OF AGREEMENTS. In the event of termination of this Agreement
by either Bay View or FMAC as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect except that the agreements contained in
Section 5.1(b), Section 5.4 and Section 7.2 hereof shall survive the termination
hereof.
7.4 AMENDMENT. This Agreement may be amended by the parties hereto by
action taken by their respective Boards of Directors at any time before or after
approval hereof by the stockholders of FMAC and Bay View but, after such
approval, no amendment shall be made which changes the form of consideration or
the value of the consideration to be received by the stockholders of FMAC
without the approval of the stockholders of FMAC and Bay View. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto. The parties may, without approval of their respective
Boards of Directors, make such technical changes to this Agreement, not
inconsistent with the purposes hereof as may be required to effect or facilitate
any regulatory approval or acceptance of the Merger or of this Agreement or to
effect or facilitate any regulatory or governmental filing or recording required
for the consummation of any of the transactions contemplated hereby.
7.5 WAIVER. Any term, provision or condition of this Agreement (other than
the requirement of FMAC stockholder approval) may be waived in writing at any
time by the party which is entitled to the benefits hereof. Each and every right
granted to any party hereunder, or under any other document delivered in
connection herewith or therewith, and each and every right allowed it by law or
equity, shall be cumulative and may be exercised from time to time. The failure
of a party at any time or times to require performance of any provision hereof
shall in no manner affect such party's right at a later time to enforce the
same. No waiver by any party of a condition or of the breach of any term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term, covenant,
representation or warranty of this Agreement. No investigation, review or audit
by a party of another party prior to or after the date
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hereof shall estop or prevent such party from exercising any right hereunder or
be deemed to be a waiver of any such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL. All representations, warranties, covenants, agreements and
obligations of the parties in this Agreement or in any instrument delivered to
one another by the parties pursuant to this Agreement (other than the covenants,
agreements and obligations of Bay View set forth herein which by their stated
terms are to be performed after the Effective Time) shall not survive the
Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, by facsimile
transmission or by registered or certified mail to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice) and shall be deemed to be delivered on the date so delivered:
(a) if to Bay View:
Edward H. Sondker
President and Chief Executive Officer
Bay View Capital Corporation
1840 Gateway Drive
San Mateo, California 94404
copies to:
Barry P. Taff, P.C.
Christopher R. Kelly, P.C.
Silver, Freedman & Taff, L.L.P.
ll00 New York Ave., N.W.
Washington, D.C. 20005
(b) if to FMAC:
Wayne L. Knyal
Chief Executive Officer
Franchise Mortgage Acceptance Company
1888 Century Park East
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3rd Floor
Los Angeles, California 90067
copies to:
Robert M. Smith
Dewey Ballantine LLP
333 South Hope Street
Los Angeles, California 90071
and
Michael L. Matkins
Mark J. Kelson
Allen, Matkins, Leck, Gamble & Mallory LLP
1999 Avenue of the Stars
Suite 1800
Los Angeles, California 90067
8.3 APPLICABLE LAW. This Agreement shall be construed and interpreted
according to the laws of the State of Delaware without regard to conflicts of
laws principles thereof, except to the extent that the federal laws of the
United States apply.
8.4 HEADINGS, ETC. The article headings and section headings contained in
this Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.5 SEVERABILITY. If any term, provision, covenant, or restriction
contained in this Agreement is held by a final and unappealable order of a court
of competent jurisdiction to be invalid, void, or unenforceable, then the
remainder of the terms, provisions, covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated unless the effect would be to cause this
Agreement to not achieve its essential purposes.
8.6 ENTIRE AGREEMENT; BINDING EFFECT; NON-ASSIGNMENT; COUNTERPARTS;
EFFECT. Except as otherwise expressly provided herein, this Agreement (including
the documents and instruments referred to herein) (i) constitutes the entire
agreement between the parties hereto and supersedes all other prior agreements
and undertakings, both written and oral, between the parties, with respect to
the subject matter hereof (excluding any confidentiality agreement between the
parties hereto); and (ii) is not intended to confer upon any other person any
rights or remedies hereunder except as specifically provided herein. This
Agreement shall be binding upon and inure to the benefit of the parties named
herein and their respective successors. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any
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party hereto without the prior written consent of the other party hereto. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
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The undersigned have caused this Agreement to be executed as of the day
and year first above written.
BAY VIEW CAPITAL CORPORATION
By /s/ David A. Heaberlin
--------------------------
David A. Heaberlin
Executive Vice President and Chief
Financial Officer
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
By /s/ Wayne L. Knyal
--------------------------
Wayne L. Knyal
President and Chief Executive
Officer
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FORM OF
AMENDMENT
to the
AGREEMENT AND PLAN OF REORGANIZATION
by and between
BAY VIEW CAPITAL CORPORATION
and
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
This Amendment to the Agreement and Plan of Reorganization (the
"Amendment") dated as of July __, 1999 is entered into by and between Bay View
Capital Corporation ("Bay View") and Franchise Mortgage Acceptance Company
("FMAC").
WHEREAS, Bay View and FMAC entered into that certain Agreement and Plan of
Reorganization dated as of March 11, 1999 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as set forth below.
The Agreement shall remain in full force and effect except as amended
hereby, and the definition of terms contained in the Agreement are incorporated
herein by reference. The parties do hereby amend the Agreement as follows:
1. Section 1.3(a)(i)(1) of the Agreement is hereby amended to read in its
entirety as follows:
$10.25 in cash (the "Per Share Cash Consideration"); or
2. The second paragraph of Section 1.3(a)(i)(2) of the Agreement is hereby
deleted in its entirety.
3. The third paragraph of Section 1.3 (a)(i)(2) of the Agreement is hereby
amended to read in its entirety as follows:
Notwithstanding anything contained in this Agreement to the contrary,
or any holder's election, the aggregate number of shares of FMAC
Common Stock to be exchanged for shares of Bay View Common Stock in
the Merger shall be equal to 60% (rounded up) of the total number of
shares (including Dissenting Shares) of FMAC Common Stock issued and
outstanding immediately prior to the Effective Time (the "Stock
Amount"); and further provided, notwithstanding any holder's election,
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the aggregate Per Share Stock Consideration to be received by any
person (or any persons presumed to be acting in concert as defined in
12 C.F.R. section 225.41(d) (a "control group")), other than an
Approved Holder (as defined below), shall be limited so that when such
consideration is aggregated with all Bay View Common Stock already
owned by such person (or control group), such person (control group)
will not beneficially own, control or have the power to vote or
dispose of more than 9.99% of the shares of Bay View Common Stock
issued and outstanding immediately after the Merger (the "Beneficial
Ownership Limitation"). As used herein, "Approved Holder" means any
such person or control group whose ownership of Bay View Common Stock
in an amount greater than the Beneficial Ownership Limitation has
expressly been approved by the appropriate banking regulatory
authorities on or prior to the Closing Date or for whom no additional
approval from the appropriate banking authorities would be necessary.
4. Section 1.3 (g) of the Agreement is hereby amended to read in its
entirety as follows:
No Fractional Shares. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of Bay View
Common Stock shall be issued in the Merger. Each holder who otherwise would have
been entitled to a fraction of a share of Bay View Common Stock shall receive in
lieu thereof cash (without interest) in an amount determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the closing price of Bay View Common Stock on the NYSE - Composite Transactions
List (as reported by the Wall Street Journal) on the last trading day prior to
the Effective Time. No such holder shall be entitled to dividends, voting rights
or any other rights in respect of any fractional share.
5. Section 3.18(e) of the Agreement is hereby amended to read in its
entirety as follows:
[Intentionally Omitted]
6. Section 5.17 of the Agreement is hereby amended to read in its entirety
as follows:
5.17 Impermissible Activities. FMAC shall use its reasonable best efforts
to sell, transfer or otherwise dispose of, on terms satisfactory to
Bay View, any of its or its Subsidiaries' businesses or activities
that would
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be impermissible to be engaged in by Bay View Bank, either directly or
indirectly; provided, that FMAC shall sell, transfer or otherwise dispose
of prior to the Effective Time, on terms satisfactory to Bay View, any and
all of its interests in FMAC Golf Finance Group LLC and FMAC Star Fund, LLP
(together, the "Joint Ventures").
7. Section 5.24(b) of the Agreement is hereby deleted in its entirety. In
addition, the final sentence of Section 5.24 shall be deleted.
8. Section 6.1(j) of the Agreement is hereby amended to read in its
entirety as follows:
(j) FMAC shall have sold, transferred or otherwise disposed of, on terms
satisfactory to Bay View, any and all of its interests in the Joint Ventures.
9. FMAC and Bay View hereby agree as follows:
if it shall be ultimately determined that any amount, right or benefit
paid, distributed or treated as paid or distributed to an employee of FMAC
(a "Payment") who under his or her current written employment agreement
with FMAC is entitled to a Gross-Up Payment (as hereinafter defined) would
be subject to the excise tax imposed by Section 4999 of the Code, or any
interest or penalties are incurred by any employee with respect to such
excise tax (such excise tax, together with any such interest and penalties,
collectively, the "Excise Tax"), then that employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the employee of all federal, state and local taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the employee retains an amount of the Gross-Up Payment
equal to the Excise Tax upon the Payments. Further, Bay View acknowledges
and agrees that it shall pay the entire amount of any such Gross-Up
Payments.
10. Bay View and FMAC hereby agree that the FMAC Disclosure Schedule is
hereby amended to encompass the matters referred to in the letters dated April
5, 1999, regarding the Letter Agreement between Credit Suisse First Boston
Corporation and FMAC, and June 2, 1999, regarding a repurchase obligation by
FMAC of loans sold to the mortgage REIT owned, or formerly owned, by Imperial
Credit Industries, Inc. The parties agree that no breach of the Agreement by
FMAC has been deemed to occur with respect to the omission of those matters from
the disclosure schedules.
11. Bay View and FMAC hereby acknowledge and agree that Bay View shall
offer a cash payment of to each holder of Out-of-the-Money Options (as
3
<PAGE>
defined below) in exchange for the holder's execution of an Option Cancellation
Agreement as follows: $3.79 per share with respect to options with an exercise
price of $11.00; $2.18 per share with respect to options with an exercise price
of $16.00; and $1.85 per share with respect to options with an exercise price of
$18.00. In the event a holder elects to execute the Option Cancellation
Agreement, that holder shall have no rights with respect to the holder's
Out-of-the-Money Options other than the right to receive a cash payment from Bay
View as described above. "Out-of-the-Money Options" are FMAC stock options with
a per share exercise price greater than $10.25 per share. Bay View hereby
acknowledges and agrees that it shall pay the entire amount of any cash payments
hereby incurred after the Effective Time.
12. Neither party is aware of any existing breach of any representation,
warranty or covenant made in the Agreement.
13. The second sentence of Section 5.2(b) of the Agreement is hereby
amended to read in its entirety as follows:
The Bay View Stockholders' Meeting and
the FMAC Stockholders' Meeting shall be
held on the same date.
14. This Amendment may be executed in one or more counterparts and it is
not necessary that signatures of all parties appear on the same counterpart, but
such counterparts together shall constitute but one and the same Amendment.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
BAY VIEW CAPITAL CORPORATION
By
David A. Heaberlin
Executive Vice President and
Chief Financial Officer
FRANCHISE MORTGAGE
ACCEPTANCE COMPANY
By
Wayne L. Knyal
President and Chief Executive
Officer
5
<PAGE>
APPENDIX B
March 11, 1999
Board of Directors
Bay View Capital Corporation
1840 Gateway Drive
San Mateo, CA 94404
Members of the Board:
We understand that Bay View Capital Corporation ("Bay View" or the
"Company") and Franchise Mortgage Acceptance Company ("FMAC") have entered into
a definitive merger agreement pursuant to which FMAC will merge with and into
Bay View Bank (the "Bank"), a wholly owned subsidiary of Bay View, and, upon the
effectiveness of such merger, each share of common stock of FMAC will be
converted into the right to receive 0.5125 shares of Bay View common stock (the
"Stock Consideration") or, at the election of the holders of FMAC common stock,
$10.25 in cash (the "Cash Consideration" and, together with the Stock
Consideration, the "Consideration") (the "Proposed Transaction"). In addition,
we understand that the Stock Consideration will not exceed 60% of the
Consideration. The terms and conditions of the Proposed Transaction are set
forth in more detail in the Agreement and Plan of Merger and Reorganization
dated as of March 11, 1999 (the "Agreement") among the Company, the Bank and
FMAC.
We have been requested by the Board of Directors of Bay View to render our
opinion with respect to the fairness, from a financial point of view, to Bay
View of the Consideration to be paid by the Company in the Proposed Transaction.
We have not been requested to opine as to, and our opinion does not in any
manner address, the Company's underlying business decision to proceed with or
effect the Proposed Transaction.
<PAGE>
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) such publicly available
information concerning Bay View and FMAC that we believe to be relevant to our
analysis, including, without limitation, Bay View's and FMAC's reports on Form
10-K for the year ended December 31, 1998 (3) financial and operating
information with respect to the businesses, operations and prospects of Bay View
and FMAC furnished to us by Bay View and FMAC, respectively, including with
respect to FMAC's remaining obligation with respect to earn-out payments of up
to $30 million to the former shareholders of Bankers Mutual pursuant to the
terms of an asset purchase agreement between FMAC, Bankers Mutual and such
former shareholders dated as of March 9, 1998, (4) a trading history of the
common stock of Bay View from January 1, 1998 to March 5, 1999 and a comparison
of that trading history with those of other companies that we deemed relevant,
(5) a trading history of the common stock of FMAC from January 1, 1998 to March
5, 1999 and a comparison of that trading history with those of other companies
that we deemed relevant, (6) a comparison of the historical financial results
and present financial condition of Bay View with those of other companies that
we deemed relevant, (7) a comparison of the historical financial results and
present financial conditions of FMAC with those of other companies that we
deemed relevant, (8) published estimates of third party research analysts
regarding the future financial performance of Bay View and FMAC, (9) a
comparison of the financial terms of the Proposed Transaction with the financial
<PAGE>
terms of certain other recent transactions that we deemed relevant, and (10) the
potential pro forma financial impact of the Proposed Transaction on Bay View. In
addition, we have had discussions with the managements of Bay View and FMAC
concerning their respective businesses, operations, assets, liabilities,
financial conditions, and prospects and have undertaken such other studies,
analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information provided to us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of the managements of Bay View and FMAC
that they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial projections
of FMAC prepared by the management of Bay View, upon advice of Bay View we have
assumed that such FMAC projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Bay View as to the future financial performance of FMAC and that
FMAC will perform substantially in accordance with such projections. We were not
provided with, and did not have access to, financial projections of Bay View
prepared by the management of Bay View. Accordingly, upon advice of Bay View, we
have assumed that the published estimates of third party research analysts are a
reasonable basis upon which to evaluate and analyze the future financial
performance of Bay View and that Bay View will perform substantially in
accordance with such estimates.
In arriving at our opinion, we have not conducted a physical inspection of
the properties and facilities of Bay View or FMAC and have not made or obtained
any evaluations or appraisals of the assets of Bay View or FMAC. In addition, we
are not experts in the evaluation of loan portfolios or allowance for loan and
real estate owned losses and, upon advice of the Company, we have assumed that
the allowances for loan and real estate owned losses provided to us by Bay View
and FMAC and used by us in our analysis are in the aggregate adequate to cover
all such losses. Our opinion necessarily is based upon market, economic,
regulatory and other conditions as they exist on, and can be evaluated as of,
the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Consideration to be paid
by the Company to the stockholders of FMAC in the Proposed Transaction is fair
to Bay View.
We have acted as financial advisor to Bay View in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, Bay View has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for Bay View and FMAC in the past and have received customary fees for
such services. In the ordinary course of our business, we actively trade in the
securities of Bay View and FMAC for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of Bay
View and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of Bay View as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
/s/ LEHMAN BROTHERS
<PAGE>
APPENDIX C
March 10, 1999
Board of Directors
Franchise Mortgage Acceptance Company
1888 Century Park East, 3rd Floor
Los Angeles, CA 90067
Gentlemen:
You have asked us to advise you with respect to the fairness to the stockholders
of Franchise Mortgage Acceptance Company (the "Company") from a financial point
of view of the consideration to be received by such stockholders pursuant to the
terms of the proposed Acquisition Agreement (the "Acquisition Agreement"), among
the Company and the Acquiror. The Acquisition Agreement provides for the merger
(the "Merger") of the Company with the Acquiror pursuant to which each
outstanding share of common stock, par value $0.001 per share, of the Company
will be converted into the right to receive, at the election of the holder
thereof, subject to the terms and conditions of the Acquisition Agreement,
either (i) $10.25 per share in cash, subject to the adjustments as set forth in
the Acquisition Agreement (the "Cash Consideration"), or (ii) a number of shares
of Bay View Capital Corporation (the "Acquiror" or "Bay View") common stock, par
value $0.01 per share (the "Acquiror Common Shares"), equal to the quotient of
the Cash Consideration divided by $20.00, subject to the adjustments as set
forth in the Acquisition Agreement (clauses (i) and (ii) collectively, the
"Proposed Consideration").
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to the Company and the Acquiror, as well as a
draft of the Acquisition Agreement. We have also reviewed certain other
information, including financial forecasts, provided to us or reviewed for us by
the Company and the Acquiror, and have met with the Company's and the Acquiror's
managements to discuss the business and prospects of each of the Company and the
Acquiror.
We have also considered certain financial and stock market data of the Company
and the Acquiror, and we have compared those data with similar data for other
publicly held companies in businesses similar to the Company and the Acquiror
and we have considered the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed such forecasts have been prepared on bases
reflecting the best currently available estimates and judgments of the
management of each of the Company and Bay View as to the future financial
performance of the Company and the Acquiror and cost savings and other potential
synergies (including the amount, timing and achievability thereof) anticipated
to result from the Merger. In addition, we have not been requested to make, and
have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or the Acquiror, nor have
we been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon financial,
<PAGE>
economic, market and other conditions as they exist and can be evaluated on the
date hereof. We are not expressing any opinion as to the actual value of the
Acquiror Common Shares when issued to the Company's stockholders pursuant to the
Merger or the prices at which such Acquiror Common Shares will trade subsequent
to the Merger. In connection with our engagement, we approached third parties to
solicit indications of interest in a possible acquisition of the Company and
held preliminary discussions with certain of these parties prior to the date
hereof.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services which is contingent upon the
consummation of the Merger.
In the ordinary course of our business, we and our affiliates may actively trade
the debt and equity securities of both the Company and the Acquiror for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
An affiliate of Credit Suisse First Boston currently provides a $300 million
secured credit facility to the Company. Credit Suisse First Boston is currently
providing merger and acquisition services to the Acquiror on a separate matter.
It is understood that this letter is for the information of the Company in
connection with its consideration of the Merger, does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Merger and is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus or proxy statement, or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Proposed Consideration is fair to the stockholders of the Company
from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Mark S. Maron
Mark S. Maron
Managing Director
<PAGE>
Appendix D
TEXT OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. - (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to ss.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to ss.ss.251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts
in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss.253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
<PAGE>
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to ss.228 or
ss.253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall notify
each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
<PAGE>
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
<PAGE>
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 9 of the Company's Restated Certificate of Incorporation provides
for indemnification of any director or officer of the Company against any and
all expense, liability and loss (including attorneys' fees, judgments, fines and
amounts paid in settlement) reasonably incurred or suffered by him or her in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, to the fullest extent
authorized by Delaware law, subject to certain limitations set forth in the
Restated Certificate of Incorporation. Section 9 also authorizes the Company to
purchase insurance on behalf of directors and officers against liabilities
incurred in their capacities as such.
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation's board of directors to grant indemnity under certain
circumstances to directors and officers, when made, or threatened to be made,
parties to certain proceedings by reason of such status with the corporation,
against judgments, fines, settlements and expenses, including attorneys' fees.
In addition, under certain circumstances such persons may be indemnified against
expenses actually and reasonably incurred in defense of a proceeding by or on
behalf of the corporation. Similarly, the corporation, under certain
circumstances, is authorized to indemnify directors and officers of other
corporations or enterprises who are serving as such at the request of the
corporation, when such persons are made, or threatened to be made, parties to
certain proceedings by reason of such status, against judgments, fines,
settlements and expenses, including attorneys' fees; and under certain
circumstances, such persons may be indemnified against expenses actually and
reasonably incurred in connection with the defense or settlement of a proceeding
by or in the name of such other corporation or enterprise.
Indemnification is permitted where such person acted in good faith, and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, such person had no reasonable cause to believe his or her conduct
was unlawful.
Unless ordered by a court, indemnification may be made only following a
determination that such indemnification is permissible because the person being
indemnified has met the requisite standard of conduct. Such determination may be
made (i) by the corporation's board of directors by a majority vote of directors
not at the time parties to such proceeding, even if less than a quorum; or (ii)
by a committee of such directors designated by majority vote of such directors,
even if less than a quorum; or (iii) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion; or (iv)
by the stockholders.
Section 145 also permits expenses incurred by directors and officers in
defending a proceeding to be paid by the corporation in advance of the final
disposition of such proceedings upon the receipt of an undertaking by the
director or officer to repay such amount if it is ultimately determined that he
or she is not entitled to be indemnified by the corporation against such
expenses.
Under a directors' and officers' liability insurance policy, directors and
officers of the Company are insured against certain liabilities, including
certain liabilities under the Securities Act of 1933.
Item 21. Exhibits and Financial Statement Schedules
The following exhibits are filed as part of this Registration Statement.
(a) Exhibits. See Index to Exhibits
(b) Financial Statement Schedules. Not Applicable
(c) Reports, Opinions or Appraisals. Not Applicable
II-1
<PAGE>
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) 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 in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Bay View's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(d) Bay View undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities and at that time shall be deemed to be the
initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of Bay View pursuant to the foregoing provisions, or
otherwise, Bay View 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 Bay View of expenses incurred or paid by a director, officer or
controlling person of Bay View in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
II-2
<PAGE>
controlling person in connection with the securities being registered, Bay
View 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.
(f) 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.
(g) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the Registration Statement through the date of responding to the
request.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf of the
undersigned, thereunto duly authorized, in the City of San Mateo, State of
California, on July 19, 1999.
BAY VIEW CAPITAL CORPORATION
By: /s EDWARD H. SONDKER
Edward H. Sondker, President and
Chief Executive Officer
(Duly Authorized Representative)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Edward H. Sondker and Robert J. Flax, and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-facts and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all said
attorney-in-facts and agents or their substitutes or substitute may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ EDWARD H. SONDKER Date: July 19, 1999
- ------------------------------------------------ --------------
Edward H. Sondker
President, Chief Executive Officer
and Director
(Principal Executive Officer)
/s/ DAVID A. HEABERLIN Date: July 19, 1999
- -------------------------------------------------- --------------
David A. Heaberlin
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
/s/ SCOTT H. RAY Date: July 19, 1999
- ------------------------------------------------- --------------
Scott H. Ray, Senior Vice President
and Controller (Principal Accounting Officer)
/s/ JOHN R. MCKEAN Date: July 19, 1999
- ------------------------------------------------- --------------
John R. McKean, Director
/s/ STEPHEN T. MCLIN Date: July 19, 1999
- ------------------------------------------------- --------------
Stephen T. McLin, Director
<PAGE>
/s/ W. BLAKE WINCHELL Date: July 19, 1999
- ------------------------------------------------ --------------
W. Blake Winchell, Director
/s/ ROBERT M. GREBER Date: July 19, 1999
- ------------------------------------------------ --------------
Robert M. Greber, Director
/s/ PAULA R. COLLINS Date: July 19, 1999
- ------------------------------------------------ --------------
Paula R. Collins, Director
/s/ THOMAS M. FOSTER Date: July 19, 1999
- ------------------------------------------------ --------------
Thomas M. Foster, Director
/s/ GEORGE H. KRAUSS Date: July 19, 1999
- ------------------------------------------------ ---------------
George H. Krauss, Director
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed in connection with the Registration
Statement of Bay View Capital Corporation on Form S-4, pursuant to the
requirements of Item 601 of Regulation S-K:
Exhibit
Number Description
- ------- ----------------------------------------------------------------
2 Agreement and Plan of Merger and Reorganization by and between Bay
View and FMAC (included as Appendix A to the Proxy Statement/
Prospectus filed herewith)
3.1 Restated Certificate of Incorporation of the Company, together with
Certificate of Amendment of Restated Certificate of Incorporation
(incorporated by reference to the Company's Registration Statement
on Form S-3 filed on June 20, 1997 (No. 333-29757))
3.2 By-Laws of the Company (incorporated by reference to the Company's
Current Report on Form 8-K filed on January 10, 1994
(File No. 0-17901))
4.1 Stockholder Protection Rights Agreement (the "Rights Agreement")
dated as of July 31, 1990 between the Company and Chase Mellon
Shareholder Services, L.L.C., as successor rights agent
(incorporated by reference to the Company's Registration Statement
on Form 8 filed on March 9, 1993 (Amendment No. 2 to the Company's
Registration Statement on Form 8-A filed on August 6, 1990 (File No.
0-17901)))
4.2 First Amendment to the Rights Agreement dated February 26, 1993
(incorporated by reference to the Company's Registration Statement
on Form 8 filed on March 9, 1993 (Amendment No. 2 to the Company's
Registration Statement on Form 8-A filed on August 6, 1990 (File No.
0-17901)))
4.3 Second Amendment to the Rights Agreement dated October 10, 1997
(incorporated by reference to the Company's Registration Statement
on Form 8-A12G/A filed on October 15, 1997 (Amendment No. 3 to the
Company's Registration Statement on Form 8-A filed on August 6, 1990
(File No. 0-17901)))
4.4 Third Amendment to the Rights Agreement (incorporated by reference
to the Company's Registration Statement on Form 8-A 12G/A filed on
September 29, 1998 (Amendment No. 4 to the Company's Registration
Statement on Form 8-A filed on August 6, 1990 (File No. 0-17901)))
4.5 Specimen Form of common stock certificate of the Company
(incorporated by reference to the Company's Registration Statement
on Form S-8 filed on July 26, 1991 (File No. 33-41924))
4.6 Form of Rights Certificate and Election to Exercise pursuant to
Rights Agreement (incorporated by reference to the Company's
Registration Statement on Form 8 filed on March 9, 1993 (Amendment
No. 2 to the Company's Registration Statement on Form 8-A filed on
August 6, 1990 (File No. 0-17901)))
5 Opinion and Consent of Silver, Freedman & Taff, L.L.P.
23.1 Consent of KPMG LLP with respect to Bay View
23.2 Consent of KPMG LLP with respect to FMAC
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Silver, Freedman & Taff, L.L.P. (included in Exhibit 5)
<PAGE>
Exhibit
Number Description
- ------- ----------------------------------------------------------------
23.5 Consent of Lehman Brothers
24 Power of attorney (included on signature page)
99.1 Consent of person named as a director in the Proxy Statement/
Prospectus contained herein
99.2 Form of proxy card of Bay View
99.3 Form of proxy card of FMAC
99.4 Consent of Credit Suisse First Boston
EXHIBIT 5
[Letterhead of Silver, Freedman & Taff, L.L.P.]
July 19, 1999
Board of Directors
Bay View Capital Corporation
1840 Gateway Drive
San Mateo, California 94404
Members of the Board:
We have acted as counsel to Bay View Capital Corporation (the
"Corporation") in connection with the preparation and filing with the Securities
and Exchange Commission of a registration statement on Form S-4 under the
Securities Act of 1933 (the "Registration Statement") relating to 9,500,000
shares of the Corporation's common stock, par value $0.01 per share (the "Common
Stock"), pursuant to Bay View's Agreement and Plan of Merger and Reorganization
(the "Merger Agreement") with Franchise Mortgage Acceptance Company. In this
connection, we have reviewed the Merger Agreement, the Corporation's Certificate
of Incorporation, its Bylaws, and resolutions of its Board of Directors.
Based upon the foregoing, it is our opinion that the shares of Common Stock
covered by the Registration Statement will, when and if issued and paid for in
accordance with the Merger Agreement, be legally issued, fully paid and
non-assessable shares of Common Stock of the Corporation.
We hereby consent to the inclusion of our opinion as Exhibit 5 of this
Registration Statement on Form S-4. In giving this consent, we do not admit that
we are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ SILVER, FREEDMAN & TAFF, L.L.P.
SILVER, FREEDMAN & TAFF, L.L.P.
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Bay View Capital Corporation:
We consent to the use of our report relating to the consolidated statement of
financial condition of Bay View Capital Corporation and subsidiaries as of
December 31, 1998, and the related consolidated statements of income and
comprehensive income, stockholders' equity and cash flows for the year then
ended incorporated herein by reference and to the reference to our firm under
the heading "Experts" in the Joint Proxy Statement/Prospectus.
/s/ KPMG, LLP
San Francisco, California
July 19, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Franchise Mortgage Acceptance Company:
We consent to the incorporation by reference in the registration statement on
Form S-4 of Bay View Capital Corporation of our report dated January 19, 1999,
except as to notes 22, 23, and 20 to the consolidated financial statements,
which are as of February 16, 1999, March 10, 1999, and March 29, 1999,
respectively, with respect to the consolidated balance sheets of Franchise
Mortgage Acceptance Company as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' or members' equity
and cash flows for each of the years in the three-year period ended December 31,
1998, which appears in the December 31, 1998, annual report on Form 10-K of
Franchise Mortgage Acceptance Company.
/s/ KPMG LLP
Los Angeles, California
July 16, 1999
EXHIBIT 23.3
CONSENT OF DELOITTE & TOUCHE
We consent to the incorporation by reference in this Registration Statement of
Bay View Capital Corporation on Form S-4 of our report dated January 26, 1998
appearing in the Annual Report on Form 10-K/A of Bay View Capital Corporation
for the year ended December 31, 1998 and to the reference to us under the
heading "Experts" in the Proxy, which is a part of this Registration Statement.
/s/Deloitte & Touche
San Francisco, California
July 19, 1999
EXHIBIT 23.5
CONSENT OF LEHMAN BROTHERS
We hereby consent to the use of our opinion letter dated March 11, 1999 to
the Board of Directors of Bay View Capital Corporation (the "Company") attached
as Appendix B to the Company's Joint Proxy Statement/Prospectus on Form S-4 (the
"Prospectus") and to the references to our firm in the Prospectus under the
headings "Summary - The Merger," 'Background of the Merger" and "Opinion of Bay
View Financial Advisory." In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission and we do not thereby admit that we are
experts with respect to any part of the Registration Statement under the meaning
of the term "expert" as used in the Securities Act.
LEHMAN BROTHERS, INC.
By: /s/ PHILIP R. ERLANGER
Philip R. Erlanger
Managing Director
Los Angeles, California
July 16, 1999
EXHIBIT 99.1
CONSENT
Pursuant to Rule 438 of the General Rules and Regulations under the
Securities Act of 1933, I hereby consent to being named in the Proxy
Statement\Prospectus included in the Registration Statement on Form S-4 to which
this consent is an exhibit and confirm my consent to serve as a director of Bay
View.
By: /s/ WAYNE L. KNYAL Dated: July 12, 1999
------------------------- --------------------------
Wayne L. Knyal
EXHIBIT 99.2
BAY VIEW CAPITAL CORPORATION
SPECIAL MEETING OF STOCKHOLDERS - AUGUST 31, 1999
The undersigned hereby appoints the Board of Directors of Bay View Capital
Corporation (the "Company"), with full powers of substitution, to act as
attorney and proxy for the undersigned to vote all shares of capital stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Stockholders (the "Meeting") to be held at Bay View's main offices located at
1840 Gateway Drive, San Mateo, California, on August 31, 1999 at 1:00 p.m.,
local time, and at any and all adjournments and postponements thereof, as
follows:
I. Approval and adoption of an Agreement and Plan of Merger and
Reorganization, dated March 11, 1999, as amended, by and between the
Company and Franchise Mortgage Acceptance Company and the transactions
contemplated thereby and approval of the issuance of Bay View common
stock in connection therewith.
FOR AGAINST ABSTAIN
II. Approval and adoption of an amendment to the Company's 1995 Stock
Option and Incentive Plan to increase the number of shares reserved
thereunder from 2,000,000 to 2,500,000.
FOR AGAINST ABSTAIN
In its discretion, the Board of Directors, as proxy for the undersigned, is
authorized to vote on any other business that may properly come before the
Meeting or any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR BOTH OF THE PROPOSALS LISTED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A
MAJORITY OF THE BOARD OF DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.
The Board of Directors recommends a vote "FOR" both proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this proxy). If this proxy is properly revoked as
described above, then the power of the Board of Directors to act as attorney or
proxy for the undersigned shall be deemed terminated and of no further force and
effect. (Continued and to be SIGNED on Reverse Side)
<PAGE>
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting and a Joint Proxy
Statement/Prospectus.
Dated: , 1999
----------------------------
Signature of Stockholder
----------------------------
Signature of Stockholder
Please sign exactly as your name(s)
appear(s) to the left. When signing
as attorney, executor, administrator,
trustee or guardian, please give your
full title. If shares are held
jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
EXHIBIT 99.3
FRANCHISE MORTGAGE ACCEPTANCE COMPANY
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - AUGUST 31, 1999
The undersigned hereby appoints the Board of Directors of Franchise
Mortgage Acceptance Company (the "Company"), with full powers of substitution,
to act as proxy for the undersigned to vote all shares of capital stock of the
Company which the undersigned is entitled to vote at the Special Meeting of
Stockholders (the "Meeting") to be held at the Company's main offices located at
1888 Century Park East, Third Floor, Los Angeles, California, on August 31, 1999
at 10:00 a.m., local time, and at any and all adjournments and postponements
thereof, as follows:
I. Approval and adoption of an Agreement and Plan of Merger and
Reorganization, dated March 11, 1999, as amended, by and between the
Company and Bay View Capital Corporation and the transactions contemplated
thereby.
FOR AGAINST ABSTAIN
In its discretion, the Board of Directors, as proxy for the undersigned, is
authorized to vote on any other business that may properly come before the
Meeting or any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSAL LISTED ABOVE. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A MAJORITY OF
THE BOARD OF DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
The Board of Directors recommends a vote "FOR" the proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
This proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this proxy). If this proxy is properly revoked as
described above, then the power of the Board of Directors to act as proxy for
the undersigned shall be deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting and a Joint Proxy
Statement/Prospectus.
Dated: , 1999
----------------------------
Signature of Stockholder
----------------------------
Signature of Stockholder
Please sign exactly as your name(s)
appear(s) to the left. When signing
as attorney, executor, administrator,
trustee or guardian, please give your
full title. If shares are held
jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
EXHIBIT 99.4
Board of Directors
Franchise Mortgage Acceptance Company
1888 Century Park East, 3rd Floor
Los Angeles, CA 90067
Members of the Board:
We hereby consent to the inclusion of our opinion letter, dated March 10, 1999,
to the Board of Directors of Franchise Mortgage Acceptance Company (the
"Company") in the Registration Statement of the Company on form S-4 (the
"Registration Statement") relating to the proposed Acquisition Agreement
involving the Company and Bay View Capital Corporation and references made to
such opinion in the Join Proxy Statement/Prospectus included in the Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, nor do we admit that we are
"experts"for purposes of, the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Mark S. Maron
Mark S. Maron
Managing Director
July 15, 1999
